<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 2, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
VIRAGE LOGIC CORPORATION
(EXACT NAME OF CORPORATION AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
CALIFORNIA 3674 77-0416232
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>
VIRAGE LOGIC CORPORATION
46501 LANDING PARKWAY
FREMONT, CALIFORNIA 94538
(510) 360-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
VIRAGE LOGIC CORPORATION'S PRINCIPAL EXECUTIVE OFFICES)
ADAM A. KABLANIAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
VIRAGE LOGIC CORPORATION
46501 LANDING PARKWAY
FREMONT, CALIFORNIA 94538
(510) 360-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
SARAH A. O'DOWD PETER T. HEALY
DAVID R. WILSON MARK C. EASTON
NOELLE E. COOPER CHRISTINE M. TAM
HELLER EHRMAN WHITE & MCAULIFFE LLP O'MELVENY & MYERS LLP
525 UNIVERSITY AVENUE EMBARCADERO CENTER WEST
PALO ALTO, CALIFORNIA 94301-1900 275 BATTERY STREET
TELEPHONE: (650) 324-7000 SAN FRANCISCO, CALIFORNIA 94111-3305
TELEPHONE: (415) 984-8833
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable following the effectiveness of this Registration
Statement.
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 of 1933, please check the
following box and list the Securities Act registration 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 of 1933, 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(d)
under the Securities Act of 1933, 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: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE PRICE(1)(2) FEE
- -------------------------------------------------------------------------------------------------------------------------
Common Stock, no par
value.................. $ $40,000,000 $10,560
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In accordance with Rule 457(o) under the Securities Act, the number of
shares being registered and the proposed maximum offering price per share
are not included in this table.
(2) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457 under the Securities Act of 1933, as amended.
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 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
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<PAGE> 2
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY
BE CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS
EFFECTIVE. THIS PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION MAY 2, 2000
[VIRAGE LOGIC LOGO]
SHARES
COMMON STOCK
Virage Logic Corporation is offering shares of its common stock.
This is our initial public offering and no public market currently exists for
our shares. We have applied to have our shares approved for quotation on the
Nasdaq National Market under the symbol "VIRL." We anticipate that the initial
public offering price will be between $ and $ per share.
------------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------------------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------- ----------
<S> <C> <C>
Public Offering Price....................................... $ $
Underwriting Discounts and Commissions...................... $ $
Proceeds to Virage Logic.................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
We have granted the underwriters a 30-day option to purchase up to an
additional shares of our common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to investors on , 2000.
------------------------------
ROBERTSON STEPHENS
SG COWEN
NEEDHAM & COMPANY, INC.
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE> 3
[INSIDE FRONT COVER]
Virage Logic Logo
Text: Virage Logic is creating embedded memory technologies that power the
Internet and communications infrastructure
Color Artwork: Artistic representation of a silicon embedded memory die
[INSIDE GATEFOLD]
Title on right side of page: Virage Logic The Leader in Embedded Memory
Three separate text blocks underneath the title:
Embedded memory compilers used to create system-on-a-chip designs
Software tools that enable development and reconfiguration of embedded memory
technology
Custom memory design services to support the system-on-a-chip industry
Artwork: Artistic representation of a silicon embedded memory die in the
background with pictures of the following devices arranged in a circular
pattern around the design: computer workstation, video game player,
high-definition television, DVD player, cable set-top box and digital camera.
<PAGE> 4
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF OUR COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF OUR COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
"VIRAGE LOGIC" "WE," "OUR" AND "US" REFER TO VIRAGE LOGIC CORPORATION.
THROUGH AND INCLUDING , 2000 (25 DAYS AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS THAT BUY, SELL OR TRADE IN OUR SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A
PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OF SUBSCRIPTIONS.
------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary..................................................... 4
Risk Factors................................................ 8
Use of Proceeds............................................. 17
Dividend Policy............................................. 17
Capitalization.............................................. 18
Dilution.................................................... 20
Selected Consolidated Financial Data........................ 22
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 24
Business.................................................... 33
Management.................................................. 42
Related Party Transactions.................................. 51
Principal Stockholders...................................... 53
Description of Capital Stock................................ 55
Shares Eligible for Future Sale............................. 58
Underwriting................................................ 59
Legal Matters............................................... 61
Experts..................................................... 61
Where You Can Find Additional Information................... 61
Index to Consolidated Financial Statements.................. F-1
</TABLE>
------------------------------
We have filed trademark applications with the U.S. Patent and Trademark Office
for Custom-Touch and Embed-It! All other service marks, trademarks and trade
names referred to in this prospectus are the property of their respective
owners.
2
<PAGE> 5
FORWARD-LOOKING STATEMENTS
Some of the statements under "Summary," "Risk Factors," "Use of Proceeds,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements relate to future events or our
future financial performance and involve known and unknown risks, uncertainties
and other factors that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from those
expressed or implied by any forward-looking statements. Some of these factors
are listed under "Risk Factors" and elsewhere in this prospectus. In some cases,
you can identify forward-looking statements by terminology such as "may,"
"will," "should," "expects," "plans," "anticipates," "intends," "believes,"
"estimates," "predicts," "potential," or "continue" or the negative of these
terms or other comparable terminology. These statements are only predictions.
Actual events or results may differ materially. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of these
statements. We are under no duty to update any of the forward-looking statements
after the date of this prospectus as a result of actual results, new
information, future events or otherwise.
3
<PAGE> 6
SUMMARY
The following summary highlights selected information from this prospectus
and does not contain all of the information that you should consider before
buying our shares. You should read the following summary, together with the more
detailed information and financial statements, and the notes to those financial
statements, appearing elsewhere in this prospectus. This prospectus contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from the results anticipated in these
forward-looking statements as a result of the factors described under the
heading "Risk Factors" and elsewhere in this prospectus.
OUR COMPANY
Virage Logic is a leading provider of embedded memory technologies.
Semiconductor companies integrate our embedded memory technologies in complex
system-on-a-chip devices that are critical components of digital and Internet
appliances, communications equipment and computers. Our technologies include a
full suite of memory compilers that enable multiple configurations of memory to
be embedded directly on a silicon chip. We also provide software development
tools and custom memory design services. We provide these technologies to
fabless semiconductor companies that do not own their own silicon fabrication
facilities, as well as integrated device manufacturers that manufacture their
own silicon chips. Our fabless customers include ATI Technologies, Broadcom,
Level One, Lockheed Martin, Macronix, MMC Networks, PMC-Sierra, TranSwitch and
Vitesse. Our integrated device manufacturer customers include AMD, Conexant,
Fujitsu, Hitachi, Hyundai, IBM, Matsushita, National Semiconductor, OKI, Philips
and Toshiba.
The growth of the Internet and the development of the communications
infrastructure are creating demand for communications equipment and digital
appliances, such as mobile phones, pagers, switches, routers, digital cameras
and DVD players. The system designers of these products are seeking technologies
that will permit them to decrease the size and enhance the performance of these
products. In response to this demand, semiconductor companies have developed
technologies that permit the design of entire systems, including the
microprocessor, communications, logic, graphics and memory elements, on a single
chip, or a system-on-a-chip. According to Integrated Circuit Engineering, an
independent market research firm, the system-on-a-chip market is expected to
grow from $6.7 billion in 1999 to $32.9 billion by 2004.
System-on-a-chip design depends upon quick and reliable integration of
intellectual property. The demand for high-performance computing and
communications applications and increased bandwidth for Internet applications
has made embedded memory critical in system-on-a-chip architectures. The
delivery of complex system-on-a-chip designs with high-performance,
highly-customizable embedded memory technologies in a rapid time-to-market
manner represents a significant challenge for semiconductor companies. To
address this challenge, semiconductor companies are increasingly relying on
external sources of pre-designed, silicon-proven elements from third-party
semiconductor intellectual property, or SIP, suppliers, such as Virage Logic.
We offer our customers:
- memory design expertise;
- a full suite of embedded memory technologies;
- silicon-proven solutions;
- significant time-to-market advantages;
- high-density, high-performance and ultra-low power embedded memory
technologies; and
- ease of integration with software development tools.
4
<PAGE> 7
Our objective is to be the leading supplier of embedded memory
technologies, software development tools and design service support for embedded
memory technologies to semiconductor companies for complex system-on-a-chip
designs. Key elements of our strategy include:
- leveraging endorsements of leading third-party semiconductor foundries
for our technologies;
- becoming a strategic supplier to fabless semiconductor companies;
- further penetrating the leading integrated device manufacturer market;
- continuing to innovate our existing technologies for advanced
manufacturing processes;
- expanding our research and development efforts; and
- expanding our distribution channels.
CORPORATE INFORMATION
Virage Logic Corporation was incorporated in California on November 27,
1995. Prior to completion of this offering, we intend to reincorporate in
Delaware. Our principal executive offices are located at 46501 Landing Parkway,
Fremont, California 94538. Our telephone number is (510) 360-8000. Our website
address is www.viragelogic.com. Information on our website and websites linked
to it is not intended to be a part of this prospectus.
THE OFFERING
<TABLE>
<S> <C>
Common stock offered.................................. shares
Common stock to be outstanding after this offering.... shares
Use of proceeds....................................... Research and development, sales and marketing
and general corporate purposes, including
possible acquisitions.
Proposed Nasdaq National Market symbol................ VIRL
</TABLE>
Concurrently with this offering, we anticipate selling a total of
shares of common stock in a private placement to one of our
stockholders, Crosslink Capital, Inc., or its affiliates, at a price of
$ per share. See "Description of Capital Stock -- Concurrent Private
Placement."
The number of shares of common stock to be outstanding after this offering
is based on shares outstanding as of March 31, 2000, as adjusted for a 1-for-2
reverse stock split to be consummated prior to the closing of this offering, and
excludes the following:
- 1,559,500 shares of common stock issuable upon the exercise of
outstanding options granted under our 1997 Equity Incentive Plan;
- 239,515 additional shares of common stock available for future grant
under our 1997 Equity Incentive Plan;
- 60,000 shares of common stock issuable upon the exercise of three
outstanding warrants; and
- 200,000 shares of common stock available for future purchase under our
2000 Employee Stock Purchase Plan.
5
<PAGE> 8
During April 2000, we increased the number of shares of common stock
available for issuance under our 1997 Equity Incentive Plan by 1.5 million
shares and granted options to purchase 128,500 additional shares of common stock
under this plan.
Except as otherwise noted, all information in this prospectus assumes:
- the automatic conversion of our Series A, Series B and Series C preferred
stock into common stock at the closing of this offering;
- the consummation of a 1-for-2 reverse stock split;
- the sale by us of shares of our common stock at an assumed
price of per share to Crosslink Capital, Inc., or its affiliates, in
a private placement concurrent with the closing of this offering; and
- that the underwriters do not exercise their option to purchase additional
shares in this offering.
6
<PAGE> 9
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
The consolidated statement of operations data for the years ended September
30, 1997, 1998 and 1999 are derived from our audited consolidated financial
statements appearing elsewhere in this prospectus. The consolidated balance
sheet data as of March 31, 2000 and the consolidated statement of operations
data for the period from November 27, 1995 (inception) to September 30, 1996 and
the six months ended March 31, 1999 and 2000 are unaudited. This historical
financial information may not be indicative of our future performance.
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 27,
1995
(INCEPTION) SIX MONTHS ENDED
TO YEAR ENDED SEPTEMBER 30, MARCH 31,
SEPTEMBER 30, ---------------------------- -----------------
1996 1997 1998 1999 1999 2000
------------- ------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenues........................ $ 324 $ 369 $ 1,970 $ 9,589 $3,474 $ 8,806
Gross profit.................... 238 161 1,117 7,027 2,395 6,526
Stock-based compensation........ -- -- -- 274 -- 962
Net income (loss)............... 6 (373) (851) 246 218 (556)
Net income (loss) per share:
Basic......................... $ 0.06 $(0.85) $ (0.19) $ 0.05 $ 0.05 $ (0.10)
Diluted....................... $ 0.02 $(0.85) $ (0.19) $ 0.02 $ 0.02 $ (0.10)
Shares used in computing net
income (loss) per share:
Basic......................... 94 438 4,379 5,301 4,804 5,526
Diluted....................... 376 438 4,379 11,941 10,028 5,526
Pro forma net income (loss) per
share:
Basic......................... $ 0.03 $ (0.04)
Diluted....................... $ 0.02 $ (0.04)
Shares used in computing pro
forma net income (loss) per
share:
Basic......................... 9,770 12,722
Diluted....................... 11,941 12,722
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 2000
----------------------
ACTUAL AS ADJUSTED
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<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 7,925
Working capital............................................. 10,521
Total assets................................................ 19,139
Long-term debt obligations, less current portion............ 382
Series C redeemable convertible preferred stock............. 10,104
Accumulated deficit......................................... (1,528)
Total stockholders' equity.................................. 4,107
------- --------
</TABLE>
Pro forma net income (loss) per share and shares used in computing pro
forma net income per share are calculated as if all of our outstanding shares of
Series A, Series B and Series C preferred stock were converted into shares of
our common stock on the date of their issuance. See footnote 1 of the notes to
our consolidated financial statements.
The "As Adjusted" amounts reflect the conversion of our outstanding shares
of Series A, Series B and Series C preferred stock into 7,196,276 shares of
common stock upon the completion of this offering, our sale of
shares of common stock to Crosslink Capital, Inc., or its affiliates, at an
assumed price of $ per share in a private placement concurrent with the
closing of this offering, and the issuance and sale in this offering of
shares of common stock at an assumed initial public offering
price of $ per share, after deducting underwriting discounts and commissions
and estimated offering expenses, and our receipt of the net proceeds from those
sales. See "Use of Proceeds" and "Capitalization" and "Description of Capital
Stock -- Concurrent Private Placement."
7
<PAGE> 10
RISK FACTORS
Investing in our common stock is very risky. You should carefully consider
the following risk factors and all other information contained in this
prospectus before purchasing our common stock. If any of the following risks
actually occurs, our business, financial condition or results of operations
could be materially harmed. In such event, the trading price of our common stock
could decline, and you may lose all or part of your investment. References to
"strategic partners" or "strategic relationships" are not intended to
necessarily imply any equity ownership in us by such entities.
RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY
THE TECHNOLOGY USED IN THE SEMICONDUCTOR INDUSTRY IS RAPIDLY CHANGING AND IF WE
ARE UNABLE TO DEVELOP NEW TECHNOLOGIES AND ADAPT OUR EXISTING TECHNOLOGIES TO
NEW PROCESSES, WE WILL BE UNABLE TO ATTRACT OR RETAIN CUSTOMERS.
The semiconductor industry has been characterized by an increasingly rapid
rate of development of new technologies and manufacturing processes. Our future
success depends on our ability to develop new technologies, to adapt our
existing technologies to satisfy the requirements of new processes and to
introduce these new technologies to the marketplace in a timely manner.
Announcements of new technologies or manufacturing processes may cause customers
to defer licensing our technologies until those new technologies become
available or our technologies have been adopted for that manufacturing process.
If our development efforts are not successful or are significantly delayed, we
may be unable to attract or retain customers.
Our ability to develop technical innovations involves several risks,
including:
- our ability to anticipate and respond in a timely manner to changes in
the requirements of semiconductor companies;
- the emergence of new semiconductor manufacturing processes and our
ability to enter into strategic relationships with third-party
semiconductor foundries to develop and test technologies for these new
processes and provide customer referrals;
- the significant research and development investment that is often
required before market acceptance, if any, of a particular technology;
- the possibility that even after a significant investment of our
resources, a new technology will not be accepted by the industry; and
- the introduction of new technologies by our competitors.
If we are unable to adequately address these risks, our technology will be
rendered obsolete and our business will be seriously harmed. In addition,
research and development requires a significant expense and resource commitment
and we cannot assure you that we will have the financial and other resources
necessary to develop the technologies demanded in the future, or that any
enhancements or new generations of the technologies that we develop will
generate revenues in excess of the costs of development.
OUR OPERATING RESULTS MAY FLUCTUATE SIGNIFICANTLY AND ANY FAILURE TO MEET
FINANCIAL EXPECTATIONS MAY DISAPPOINT SECURITIES ANALYSTS AND INVESTORS AND
COULD CAUSE OUR STOCK PRICE TO DECLINE.
Our quarterly operating results are likely to fluctuate in the future due
to a variety of factors, many of which are outside of our control. Because our
expenses are largely independent of our revenues in any particular period, it is
difficult to accurately forecast our operating results. As a result, if our
revenues are below expectations in any quarter, the negative effect may be
magnified by our inability to adjust spending in a timely manner to compensate
for the revenue shortfall.
8
<PAGE> 11
Factors that could cause our revenues and operating results to vary from
quarter to quarter include:
- large orders unevenly spaced over time;
- establishment or loss of strategic relationships with third-party
semiconductor foundries;
- timing of new technologies and technology enhancements by us and our
competitors;
- shifts in demand for semiconductors that incorporate our technologies;
- the impact of competition on license revenues or royalty rates;
- the cyclical nature of the semiconductor industry; and
- changes in development schedules, research and development expenditure
levels and product support by us and semiconductor companies.
As a result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and should not be relied upon as
indications of future performance. These factors may cause our operating results
to be below market analysts' expectations in some future quarters, which could
cause the market price of our stock to decline.
IF WE ARE UNABLE TO MAINTAIN EXISTING RELATIONSHIPS AND DEVELOP NEW
RELATIONSHIPS WITH THIRD-PARTY SEMICONDUCTOR FOUNDRIES, WE WILL BE UNABLE TO
VERIFY OUR TECHNOLOGIES ON THEIR PROCESSES AND SELL OUR TECHNOLOGIES TO THEIR
CUSTOMERS.
Our ability to verify our technologies for new manufacturing processes
depends on concluding development agreements with third-party foundries to
provide us with access to these processes. In addition, we rely on third-party
foundries to manufacture our silicon test chips and to provide referrals to
their customer base. If we are unable to enter into or maintain our existing
relationships with these foundries, we will be unable to verify our technologies
for their manufacturing processes. We would then be unable to sell our
technologies to fabless customers that use these foundries to manufacture their
silicon chips, which is a significant source of our revenues.
IF SEMICONDUCTOR COMPANIES DO NOT ADOPT OUR MEMORY TECHNOLOGIES AND DEMAND FOR
THEIR PRODUCTS DOES NOT CONTINUE TO INCREASE, OUR REVENUES WILL DECLINE.
Our continued success depends on the adoption and continued use of our
memory technologies by semiconductor companies and an increasing demand for
products requiring complex semiconductors and embedded memory technologies, such
as mobile phones, pagers, switches, routers, digital cameras and DVD players.
The markets for third-party semiconductor intellectual property and embedded
memory technologies have only recently begun to emerge. Our ability to achieve
sustained revenue growth and profitability in the future will depend on the
continued development of these markets and, to a large extent, on the demand for
complex semiconductors. However, the semiconductor industry is highly cyclical
and has fluctuated between significant economic downturns characterized by
diminished demand, accelerated erosion of average selling prices and production
overcapacity, as well as periods of increased demand and production capacity
constraints. These types of fluctuations in the semiconductor industry may cause
us to experience substantial period-to-period fluctuations in our operating
results. We cannot assure you that the complex semiconductor, third-party
semiconductor intellectual property and embedded memory technology markets will
continue to develop or grow at a rate sufficient to support our business. A
downturn or slower than expected growth in the semiconductor industry, a reduced
number of design starts, tightening of customers' operating budgets or continued
consolidation among our customers may seriously harm our revenues and
profitability.
9
<PAGE> 12
IF WE ARE UNABLE TO CONTINUE TO ESTABLISH RELATIONSHIPS WITH SEMICONDUCTOR
COMPANIES TO LICENSE OUR TECHNOLOGIES, OUR BUSINESS WILL BE HARMED.
We face numerous risks in entering into license agreements with
semiconductor companies on terms beneficial to our business, including:
- the lengthy and expensive process of building a relationship with a
potential licensee;
- competition with the internal design teams of semiconductor companies;
and
- the inability to persuade semiconductor companies to rely on us for
critical technology.
We cannot assure you that we will be able to maintain our current
relationships or establish new relationships with additional licensees, and any
failure by us to do so could seriously harm our business. None of our current
licensees is obligated to license new or future generations of our memory
technologies.
WE CANNOT ASSURE YOU THAT WE WILL CONTINUE TO BE PROFITABLE BECAUSE WE HAVE A
HISTORY OF LOSSES.
We have incurred significant losses in the past. Our accumulated deficit as
of March 31, 2000 was $1.5 million. We cannot assure you that we will be
profitable in any future periods. Further, you should not rely on the historical
growth of our revenues and our recent profitability as any indication of our
future operating results or prospects.
IF WE ARE UNSUCCESSFUL IN INCREASING OUR ROYALTY-BASED REVENUES, OUR REVENUES
AND PROFITABILITY MAY NOT BE AS LARGE AS WE ANTICIPATE.
We have historically generated revenues almost entirely from license fees.
In addition, we have agreements with certain third-party semiconductor foundries
to pay us royalties on their sales of silicon chips they manufacture for our
fabless customers. Beginning with our Custom-Touch 1T-SRAM and STAR mega-bit
technologies that are currently in development, in addition to collecting
royalties from third-party semiconductor foundries, we intend to increase our
royalty base by collecting royalties directly from our integrated device
manufacturer and fabless customers. We cannot assure you that we will be able to
implement agreements providing for such royalties successfully or that, when
implemented, these agreements will have the anticipated benefits. To date, we
have received limited royalty revenues. We cannot assure you that the amount of
our royalties will be significant. Our ability to forecast royalty revenues will
be limited by factors that are beyond our control, such as fluctuating sales
volumes of products that incorporate our technologies, commercial acceptance of
these products, accuracy of revenue reports and difficulties in the royalty
collection process.
WE RELY ON A SMALL NUMBER OF CUSTOMERS FOR A SUBSTANTIAL PORTION OF OUR
REVENUES.
We have been dependent on a relatively small number of customers for a
substantial portion of our annual revenues in each fiscal year, although the
customers comprising this group have changed from time to time. In fiscal 1998,
MMC Networks, National Semiconductor, PMC-Sierra, Silicon Dynamics and TeraLogic
each generated more than 10% of our revenues for a total of 62% of our revenues.
In fiscal 1999, ATI Technologies, MMC Networks, National Semiconductor and
Toshiba each generated between 10% and 18% of our revenues for a total of 56% of
our revenues. In the first half of fiscal 2000 IBM generated 10% of our
revenues. We expect a small number of companies in the aggregate to represent
between 20% to 40% of our revenues for the foreseeable future. None of our
customers is obligated to license future generations of technologies or new
technologies. As a result of this customer concentration, our revenues could be
materially and adversely affected if we lose one or more of our major customers
and are unable to replace them. There are a relatively limited number of fabless
semiconductor companies and integrated device manufacturers to which we can
license our technology and there can be no assurance that such manufacturers
will rely on third-party semiconductor intellectual property or adopt our memory
technologies for future product generations.
10
<PAGE> 13
THE EMBEDDED MEMORY TECHNOLOGY MARKET IS HIGHLY COMPETITIVE, AND WE MAY LOSE
MARKET SHARE TO LARGER COMPETITORS WITH GREATER RESOURCES AND TO COMPANIES THAT
DEVELOP THEIR OWN MEMORY TECHNOLOGIES USING INTERNAL DESIGN TEAMS.
We face competition from both existing and new suppliers of memory
technologies that may enter the market. We also compete with the internal design
teams of large, integrated device manufacturers. Many of these internal design
teams have substantial programming and design resources and are part of larger
organizations with substantial financial and marketing resources. These internal
teams may develop technologies that compete directly with our technologies or
may actively seek to license their own technologies to third parties.
Many of our existing competitors have longer operating histories, greater
brand recognition and larger customer bases, as well as greater financial and
marketing resources, than we do. This may allow them to respond more quickly
than we can to new or emerging technologies and changes in customer
requirements. It may also allow them to devote greater resources than we can to
the development and promotion of their technologies.
WE MAY BE UNABLE TO ATTRACT AND RETAIN KEY PERSONNEL WHO ARE CRITICAL TO THE
SUCCESS OF OUR BUSINESS.
We believe that one of our significant competitive advantages is the size
and quality of our engineering team. Our future success also depends on our
ability to attract and retain engineers and other highly skilled personnel and
senior managers. In addition, part of our strategy also involves the expansion
of our domestic sales force and the hiring of sales representatives in Europe.
If we are unable to increase our sales force with qualified employees, our
ability to expand our business will be adversely affected. Our employees are "at
will" and are not hired for a specified term, which may make retention difficult
in some cases. Hiring qualified technical, sales and management personnel is
difficult due to the limited number of qualified professionals and the intense
competition in our industry for these types of employees. We have in the past
experienced difficulty in recruiting and retaining qualified technical and sales
personnel and believe that our employees are recruited aggressively by our
competitors and start-up companies. Under certain circumstances, start-up
companies can offer more attractive stock option packages than we offer. As a
result, we may experience significant employee turnover. Failure to attract and
retain personnel, particularly sales and technical personnel, would make it
difficult for us to develop and market our technologies.
In addition, our business and operations are substantially dependent on the
performance of our key personnel, including Adam A. Kablanian, our President and
Chief Executive Officer, and Alexander Shubat, our Vice President of Engineering
and Chief Technology Officer. We do not maintain "key man" life insurance
policies on Mr. Kablanian or Mr. Shubat and the loss of their services could
seriously harm our business.
WE MAY BE UNABLE TO DELIVER OUR CUSTOMIZED MEMORY TECHNOLOGIES IN THE TIME-FRAME
DEMANDED BY OUR CUSTOMERS, WHICH COULD DAMAGE OUR REPUTATION AND FUTURE SALES.
A significant portion of our contracts require us to provide customized
technologies within a set delivery timetable. We have experienced delays in the
progress of certain projects in the past, and we may experience such delays in
the future. Any failure to meet significant customer milestones could damage our
reputation in our industry and harm our ability to attract new customers.
IF WE ARE UNABLE TO EFFECTIVELY MANAGE OUR GROWTH, OUR BUSINESS MAY BE HARMED.
Our future success depends on our ability to successfully manage our
growth. Our ability to manage our business successfully in a rapidly evolving
market requires an effective planning and management process. Our customers rely
heavily on our technological expertise in designing and testing our
technologies. Relationships with new customers may require significant
engineering resources. As a result, any increase in the demand for our
technologies will increase the strain on our personnel, particularly our
engineers.
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<PAGE> 14
From January 1999 to March 2000, we grew from 26 to 120 full-time
employees. This growth has placed, and is expected to continue to place,
significant strain on our managerial and financial resources as well as our
limited financial and management controls, reporting systems and procedures.
Although some new controls, systems and procedures have been implemented, our
future growth, if any, will depend on our ability to continue to implement and
improve operational, financial and management information and control systems on
a timely basis, together with maintaining effective cost controls. We cannot
assure you that our systems, procedures or controls will be adequate to support
our operations. Our inability to manage any future growth effectively would be
harmful to our revenues and profitability.
ANY ACQUISITIONS WE MAKE COULD DISRUPT OUR BUSINESS AND HARM OUR FINANCIAL
CONDITION.
We may attempt to acquire businesses or technologies that we believe are a
strategic fit with our business. We currently have no commitments or agreements
with respect to any material acquisition and no material acquisition is
currently being pursued. If we do undertake any transaction of this sort, the
process of integrating an acquired business or technology may result in
unforeseen operating difficulties and expenditures and may absorb significant
management attention that would otherwise be available for ongoing development
of our business. Moreover, we cannot assure you that the anticipated benefits of
any acquisition will be realized. Future acquisitions could result in
potentially dilutive issuances of equity securities, the incurrence of debt,
contingent liabilities or amortization of expenses related to goodwill or other
intangible assets and the incurrence of large, immediate write-offs.
IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY ADEQUATELY, WE WILL HAVE
LESS PROPRIETARY TECHNOLOGY TO LICENSE, WHICH WILL REDUCE OUR REVENUES AND
PROFITS.
Our patents, copyrights, trademarks, trade secrets and similar intellectual
property are critical to our success. We rely on a combination of patent,
trademark, copyright, mask work and trade secret laws to protect our proprietary
rights. As of April 28, 2000 we had nine pending U.S. patent applications. We
cannot be sure that patents will be issued from any patent applications
submitted, that any patents we hold will not be challenged, invalidated or
circumvented or that any claims allowed from our patents will be of sufficient
scope or strength to provide meaningful protection or any commercial advantage
to us. In addition, the laws of foreign countries may not adequately protect our
intellectual property as well as the laws of the United States.
We use licensing agreements and employee and third-party nondisclosure and
assignment agreements to limit access to and distribution of our proprietary
information and to obtain ownership of technology prepared on a work-for-hire
basis. Even though we have taken all customary industry precautions, we cannot
be sure that the steps we take to protect our intellectual property rights will
be adequate to deter misappropriation of the rights or that we will be able to
detect unauthorized uses and take immediate or effective steps to enforce our
rights. Since we also rely on unpatented trade secrets to protect some of our
proprietary technology, we cannot be certain that others will not independently
develop or otherwise acquire the same or substantially equivalent technologies
or otherwise gain access to our proprietary technology or disclose that
technology. We also cannot be sure that we can ultimately protect our rights to
our unpatented proprietary technology. In addition, third parties might obtain
patent rights to such unpatented trade secrets, which could be used to assert
infringement claims against us.
THIRD PARTIES MAY CLAIM WE ARE INFRINGING OR ASSISTING OTHERS TO INFRINGE THEIR
INTELLECTUAL PROPERTY RIGHTS, AND WE COULD SUFFER SIGNIFICANT LITIGATION OR
LICENSING EXPENSES OR BE PREVENTED FROM LICENSING OUR TECHNOLOGY.
While we do not believe that any of our technologies infringe the valid
intellectual property rights of third parties, we may be unaware of intellectual
property rights of others that may cover some of our technology. As a result,
third parties may claim we or our customers are infringing their intellectual
property rights. Our license agreements typically require us to indemnify our
customers for infringement actions related to our technologies. In addition,
because we may provide technologies that enable memories that are
12
<PAGE> 15
owned by third parties to be embedded in silicon chips, we could be made a party
to an infringement action if the chip manufacturers do not have sufficient
rights to use those memories.
Any litigation regarding patents or other intellectual property could be
costly and time-consuming, and divert our management and key personnel from our
business operations. The complexity of the technology involved makes any outcome
uncertain. If we do not prevail in any infringement action, we may be required
to pay significant damages and may be prevented from developing and licensing
some of our technology or from licensing our technology for certain
manufacturing processes unless we, or in some cases, the silicon chip
manufacturers, enter into a royalty or license agreement. In addition, if
challenging a claim is not feasible, we might be required to enter into royalty
or license agreements in order to settle a claim and continue to license or
develop our technologies. These royalty or license agreements may result in
significant expenditures. In addition, we may not be able to obtain such
agreements on terms acceptable to us or at all, and thus, may be prevented from
licensing or developing our technology.
PROBLEMS ASSOCIATED WITH INTERNATIONAL BUSINESS OPERATIONS COULD AFFECT OUR
ABILITY TO LICENSE OUR TECHNOLOGIES.
Sales to customers located outside the United States accounted for 44% of
our revenues in fiscal 1998, 46% of our revenues in fiscal 1999 and 54% of our
revenues in the six months ended March 31, 2000. We anticipate that sales to
customers located outside the United States will increase and will continue to
represent a significant portion of our total revenues in future periods. A
significant portion of our customers are referred through Taiwan Semiconductor
Manufacturing Company, or TSMC, and other semiconductor foundries on which we
rely to manufacture our test products. In addition, most of our customers that
do not own their own fabrication plants rely on TSMC or other third-party
foundries that may be outside of the United States. We also employ a significant
number of engineers in India and the Republic of Armenia. Accordingly, our
operations and revenues are subject to a number of risks associated with foreign
commerce, including the following:
- managing foreign distributors;
- staffing and managing foreign branch offices;
- political and economic instability;
- foreign currency exchange fluctuations;
- changes in tax laws and tariffs;
- timing and availability of export licenses;
- inadequate protection of intellectual property rights in some countries;
and
- obtaining governmental approvals for certain technologies.
If these risks actually materialize, our international sales may decrease,
we may be unable to manufacture our test products, we may lose customer
referrals and our customers may be unable to manufacture products using our
licensed technology.
CHANGES TO ACCOUNTING STANDARDS AND RULES COULD EITHER DELAY OUR RECOGNITION OF
REVENUES OR REDUCE THE AMOUNT OF REVENUES THAT WE MAY RECOGNIZE AT A SPECIFIC
TIME DEFERRING OR REDUCING OUR PROFITABILITY. THESE EFFECTS ON OUR REPORTED
RESULTS COULD CAUSE OUR STOCK PRICE TO BE LOWER THAN IT OTHERWISE MIGHT HAVE
BEEN.
We adopted the American Institute of Certified Public Accountants'
Statement of Position, or SOP, 97-2, "Software Revenue Recognition," and SOP
98-4, "Deferral of the Effective Date of a Provision of SOP 97-2, Software
Revenue Recognition," as of October 1, 1998. In December 1998, the American
Institute of Certified Public Accountants issued SOP 98-9, "Modification of SOP
97-2, Software Revenue Recognition, with Respect to Certain Transactions." SOP
98-9 amends SOP 98-4 to extend the deferral of the application of certain
passages of SOP 97-2 with respect to the fair value of elements in
multiple-element arrangements.
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<PAGE> 16
We implemented these provisions as of October 1, 1999. Although the adoption of
SOP 97-2, SOP 98-4 and SOP 98-9 has not had and is not expected to have a
material impact on our consolidated financial statements or results of
operations, full implementation guidelines for SOP 97-2, SOP 98-4 and SOP 98-9
have not been issued. In December 1999, the Securities and Exchange Commission
issued SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial
Statements" which summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
Additional accounting guidance or pronouncements in the future could affect the
timing of our revenue recognition in the future.
RISKS RELATED TO THE OFFERING
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS
THAT MAY NOT BE IN THE BEST INTERESTS OF OUR OTHER STOCKHOLDERS.
After this offering, our officers, directors and principal stockholders
will together control approximately % of our outstanding common stock. As a
result, these stockholders, if they act together, will be able to control our
management and affairs and all matters requiring stockholder approval, including
the election of directors and approval of significant corporate transactions.
This concentration of ownership may have the effect of delaying or preventing a
change in control and may affect the market price of our common stock. This
concentration of ownership may not be in the best interest of our other
stockholders.
OUR RESTATED CERTIFICATE OF INCORPORATION AND BYLAWS WILL CONTAIN, AND DELAWARE
LAW CONTAINS, PROVISIONS THAT COULD DISCOURAGE A TAKEOVER AND MAY NEGATIVELY
AFFECT THE MARKET PRICE OF OUR COMMON STOCK.
Our restated Certificate of Incorporation and bylaws will contain, and
Delaware law contains, provisions that might enable our management to resist a
takeover. These provisions might discourage, delay or prevent a change in the
control of our company or a change in our management. In addition, these
provisions could limit the price that investors would be willing to pay in the
future for shares of our common stock. Some of these provisions which will be
contained in our restated Certificate of Incorporation or bylaws:
- divide our board of directors into three classes with each class subject
to election every three years;
- authorize the issuance of preferred stock that can be created and issued
by our board of directors without prior stockholder approval, commonly
referred to as "blank check" preferred stock, with rights senior to those
of common stock;
- prohibit stockholder action by written consent; and
- establish advance notice requirements for submitting nominations for
election to the board of directors and for proposing matters that can be
acted upon by stockholders at a meeting.
See "Description of Capital Stock" for a more detailed description of these
provisions.
A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE.
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. Such
sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. Upon the
closing of this offering and our concurrent private placement of
shares to Crosslink Capital, Inc., or its affiliates, we will have outstanding
shares of common stock, based upon shares outstanding as of March
31, 2000, as adjusted for the 1-for-2 reverse stock split, and assuming no
exercise of outstanding options after March 31, 2000. Of these shares, the
shares sold in this offering will be freely tradable. Of the
remaining shares of common stock outstanding immediately after this offering
11,956,774 shares will be available for
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<PAGE> 17
sale in the public market 180 days after the date of this prospectus when the
lock-up agreements between the underwriters and the stockholders expire.
However, some of those sales will be subject to the volume restrictions imposed
by Rule 144 under the federal securities laws on our affiliates. We cannot
assure you that some or all of these lock-up restrictions will not be removed by
FleetBoston Robertson Stephens Inc. prior to 180 days after the closing of this
offering.
The remaining outstanding shares will become tradable upon expiration of
various holding periods under Rule 144 (subject in some cases to the volume
restrictions of that rule) or earlier and without restrictions if they are
registered under the federal securities laws. After this offering, the holders
of an aggregate of 11,917,001 shares of our common stock will have certain
registration rights, including the right to require us to register the sale of
their shares and the right to include their shares in public offerings we
undertake in the future. See "Description of Capital Stock -- Registration
Rights."
WE MAY BE UNABLE TO RAISE CAPITAL IN THE FUTURE WHEN NEEDED WHICH COULD PREVENT
US FROM GROWING.
We believe that the net proceeds from this offering, together with cash
generated by our operations, will be sufficient to meet our operating and
capital requirements for at least the next 18 months. However, we may in the
future be required to raise additional funds through public or private financing
or other arrangements. We cannot be certain that any such financing will be
available on acceptable terms, or at all, and our failure to raise capital when
needed could seriously harm our business. In addition, additional equity
financing may be dilutive to the holders of our common stock, and debt
financing, if available, may involve restrictive covenants and could result in a
substantial portion of our operating cash flow being dedicated to the payment of
principal and interest on debt. If adequate funds are not available, we may be
required to curtail our operations significantly.
OUR COMMON STOCK PRICE HAS NOT BEEN PUBLICLY TRADED, AND WE EXPECT THE PRICE OF
OUR COMMON STOCK WILL FLUCTUATE SUBSTANTIALLY.
Our common stock has not been publicly traded, and an active trading market
may not develop or be sustained after this offering. We and the representatives
of the underwriters will determine the initial public offering price. The price
at which our common stock will trade after this offering is likely to be highly
volatile and may fluctuate substantially due to factors such as:
- changes in or failure by us to meet securities analysts' expectations;
- announcements of technological innovations;
- competitive trends, including timely adoption and market acceptance of,
competing standards;
- introduction of new technologies by us or our competitors;
- developments with respect to intellectual property rights;
- conditions and trends in the semiconductor industry; and
- market perception of our growth prospects.
In addition, the stock market has from time to time experienced significant
price and volume fluctuations that have affected the market prices for the
common stock of technology companies. These broad market fluctuations may result
in a material decline in the market price of our common stock. In the past,
following periods of volatility in the market price of a particular company's
securities, securities class action litigation has often been brought against
that company. We may become involved in this type of litigation in the future.
Litigation is often expensive and diverts management's attention and resources
that are needed to successfully run our business.
15
<PAGE> 18
INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION
FOLLOWING THIS OFFERING.
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value of
$ . If the holders of outstanding options and warrants exercise those
options and warrants, you will incur further dilution. See "Dilution."
WE MAY INVEST OR SPEND THE NET PROCEEDS OF THIS OFFERING IN WAYS WITH WHICH YOU
MAY NOT AGREE.
We will retain broad discretion over the use of net proceeds from this
offering. You may not agree with how we spend the proceeds, and our use of the
proceeds may not yield a significant return or any return at all. Because of the
number and variability of factors that determine our use of the net proceeds
from this offering, our ultimate use of the proceeds may vary substantially from
our currently planned uses. See "Use of Proceeds" for a description of our
current plans for using the net proceeds from this offering.
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<PAGE> 19
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the shares of
common stock we are offering will be approximately $ million based on an
assumed initial public offering price of $ per share, after paying
underwriting discounts and commissions and offering expenses.
We currently intend to use the net proceeds for research and development,
sales and marketing and general corporate purposes. Although we have no current
plans, agreements or commitments with respect to any material acquisition, we
may, if the opportunity arises, use an unspecified portion of the net proceeds
to acquire or invest in products, technologies or companies. Our management will
have broad discretion in determining how the net proceeds should be applied. The
timing and amount of our actual expenditures will be based on many factors,
including cash flows from operations and the growth of our business.
Pending these uses, we intend to invest the funds in short-term,
investment-grade, interest-bearing securities. We cannot predict whether the
proceeds invested will yield a favorable return.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. We
anticipate that we will retain any earnings to support our operations and to
finance the growth and development of our business. In addition, we are
prohibited from paying dividends by the terms of our outstanding line of credit.
Therefore, we do not expect to pay cash dividends in the foreseeable future.
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<PAGE> 20
CAPITALIZATION
The following table sets forth our unaudited capitalization as of March 31,
2000:
- on an actual basis assuming our reincorporation into Delaware and the
consummation of a 1-for-2 reverse stock split;
- on a pro forma basis as of such date to reflect the conversion prior to
the closing of this offering of all outstanding shares of Series A and
Series B convertible preferred stock and Series C redeemable convertible
preferred stock into 7,196,276 shares of common stock and the filing of a
restated Certificate of Incorporation to increase the number of common
and preferred shares authorized; and
- on a pro forma as adjusted basis to reflect the sale of the common stock
offered by this prospectus at an assumed initial public offering price of
$ per share, after deducting the underwriting discounts and
commissions and estimated offering expenses, the sale of
shares of common stock to Crosslink Capital, Inc., or its affiliates, in
a private placement concurrent with this offering, and our receipt of the
proceeds from such sales.
<TABLE>
<CAPTION>
MARCH 31, 2000
---------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE AND
PER SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents................................... $ 7,925 $ 7,925 $
------- -------
Long-term obligations, less current portion................. 382 382
------- -------
Redeemable convertible preferred stock, $.001 par value,
5,500,000 shares authorized actual; no shares authorized
pro forma and pro forma as adjusted; 5,455,255 shares
issued and outstanding actual; no shares issued and
outstanding pro forma and pro forma as adjusted........... 10,104 --
Stockholders' equity:
Preferred stock, $.001 par value, no shares authorized
actual; 25,000,000 shares authorized pro forma and pro
forma as adjusted; no shares issued and outstanding pro
forma and pro forma as adjusted(1)..................... -- --
Convertible preferred stock, $.001 par value, 3,054,100
shares authorized actual; no shares authorized pro
forma and pro forma as adjusted; 2,979,099 shares
issued and outstanding actual; no shares issued and
outstanding pro forma and pro forma as adjusted........ 3 --
Common stock, $.001 par value, 35,000,000 shares
authorized actual; 150,000,000 shares authorized pro
forma and pro forma as adjusted; 7,488,125 shares
issued and outstanding actual; 14,684,401 shares issued
and outstanding pro forma; shares issued
and outstanding, pro forma as adjusted(1).............. 7 15
Additional paid-in capital................................ 12,046 22,145
Notes receivable from stockholders........................ (800) (800)
Deferred stock-based compensation......................... (5,621) (5,621)
Accumulated deficit....................................... (1,528) (1,528)
------- ------- --------
Total stockholders' equity........................ 4,107 14,211
------- ------- --------
Total capitalization.............................. $22,518 $22,518 $
======= ======= ========
</TABLE>
- ------------------------
(1) Upon completion of this offering, our Certificate of Incorporation will be
amended to authorize 150,000,000 shares of common stock and 25,000,000
shares of "blank check" preferred stock.
You should read this information in conjunction with the sections of this
prospectus entitled "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results
18
<PAGE> 21
of Operations" and our consolidated financial statements and related notes
thereto included elsewhere in this prospectus.
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of March 31, 2000, as adjusted
for a 1-for-2 reverse stock split to be consummated prior to the closing of this
offering, and excludes:
- 1,559,500 shares of common stock issuable as of March 31, 2000 upon
exercise of options granted under our 1997 Equity Incentive Plan;
- 239,515 additional shares of common stock available for future grant
under our 1997 Equity Incentive Plan;
- 60,000 shares of common stock issuable upon exercise of three outstanding
warrants; and
- 200,000 shares of common stock available for future purchase under our
2000 Employee Stock Purchase Plan.
During April 2000, we increased the number of shares available for grant
under our 1997 Equity Incentive Plan by 1.5 million shares and granted options
to purchase 128,500 additional shares of common stock under this plan.
To the extent that the above options and warrants are exercised, there will be
further dilution to new investors. See "Management -- Employee Benefit Plans"
for further information about our equity incentive plan and stock purchase plan.
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<PAGE> 22
DILUTION
Our pro forma net tangible book value as of March 31, 2000 was
approximately $13.9 million, or $0.95 per share. Pro forma net tangible book
value per share represents the amount of our total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding after
giving effect to the 1-for-2 reverse stock split to be consummated prior to the
closing of this offering and the automatic conversion of our Series A and Series
B convertible preferred stock and Series C redeemable convertible preferred
stock into 7,196,276 shares of our common stock. Dilution in pro forma net
tangible book value per share represents the difference between the amount per
share paid by purchasers of shares of our common stock in this offering and the
concurrent private placement and the net tangible book value per share of our
common stock immediately afterwards. After giving effect to (1) the sale of
shares of common stock offered by this prospectus at an assumed
initial offering price of $ per share and after deducting the underwriting
discounts and commissions and estimated offering expenses payable by us and (2)
the sale of shares of common stock to Crosslink Capital, Inc., or
its affiliates, in a private placement concurrent with this offering, our pro
forma net tangible book value as of March 31, 2000 would have been $ ,
or approximately $ per share. This represents an immediate increase in pro
forma net tangible book value of $ per share to existing stockholders and an
immediate dilution in pro forma net tangible book value of $ per share to
new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $ $
Pro forma net tangible book value per share as of March 31,
2000...................................................... 0.95
Increase in net tangible book value per share attributable
to new investors and investors in the concurrent private
placement.................................................
-----
Pro forma net tangible book value per share after this
offering..................................................
------
Dilution per share to new investors in this offering........
======
</TABLE>
The following table sets forth as of March 31, 2000, the total number of
shares of common stock purchased from us, the total consideration paid, and the
average price per share paid by existing stockholders and by new investors
before deducting the underwriting discounts and commissions and estimated
offering expenses payable by us, at an assumed initial public offering price of
$ per share.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.............. 14,684,401 % $14,358,996 % $0.98
Investors in the concurrent private
placement........................
New investors......................
---------- --- ----------- ----
Total............................ 100% $ 100%
========== === =========== ====
</TABLE>
The foregoing tables assume no exercise of the underwriters' overallotment
option and excludes the following shares:
- 1,799,015 shares of common stock issuable under our 1997 Equity Incentive
Plan consisting of:
- 1,559,500 shares of common stock underlying options outstanding as of
March 31, 2000 at a weighted average exercise price of $0.67 per share,
of which 548,500 were fully vested as of March 31, 2000; and
- 239,515 shares of common stock underlying options available for future
grants as of March 31, 2000;
- 15,000 shares of common stock issuable upon conversion, at an effective
conversion price of $3.80 per common share, of 30,000 shares of Series C
redeemable preferred stock issuable upon the exercise of a Series C
redeemable preferred stock warrant outstanding as of March 31, 2000;
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<PAGE> 23
- 37,500 shares of common stock issuable upon conversion, at an effective
conversion price of $1.60 per common share, of 25,000 shares of Series B
preferred stock issuable upon the exercise of a Series B preferred stock
warrant outstanding as of March 31, 2000;
- 7,500 shares of common stock issuable upon exercise of a common stock
warrant outstanding as of March 31, 2000, with an exercise price of $0.70
per share; and
- 200,000 shares of common stock available under our 2000 Employee Stock
Purchase Plan.
During April 2000, we increased the number of shares available for grant
under our 1997 Equity Incentive Plan by 1.5 million shares and granted options
to purchase 128,500 additional shares of common stock under this plan.
If these options or warrants are exercised, there will be further dilution
to new investors. See "Management -- Employee Benefit Plans" for further
information regarding our equity incentive plan and stock purchase plan.
If the underwriters exercise their over-allotment option in full, the
following will occur:
- the percentage of shares of our common stock held by existing
stockholders will decrease to approximately % of the total number of
shares of our common stock outstanding after this offering;
- the number of shares of our common stock held by new public investors
will increase to or approximately % of the total
number of shares of our common stock outstanding after this offering; and
- our pro forma net tangible book value will increase to $ per
share to existing stockholders and our pro forma net tangible book value
will be diluted by $ per share to new investors.
21
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our consolidated financial statements and the
notes thereto included elsewhere in this prospectus. The consolidated statement
of operations data for each of the fiscal years ended September 30, 1997 and
September 30, 1998 and the consolidated balance sheet data as of September 30,
1997 and 1998 have been derived from our audited consolidated financial
statements included elsewhere in this prospectus, which have been audited by
Mohler, Nixon & Williams Accountancy Corporation, independent auditors. The
consolidated statement of operations data for the fiscal year ended September
30, 1999 and the consolidated balance sheet data as of September 30, 1999 have
been derived from our audited consolidated financial statements included
elsewhere in this prospectus, which have been audited by Ernst & Young LLP,
independent auditors. The consolidated statement of operations data for the
period from November 27, 1995 (inception) through September 30, 1996 and the
six-month periods ended March 31, 1999 and 2000 and the summary consolidated
balance sheet data as of September 30, 1996 and March 31, 2000 are derived from
our unaudited consolidated financial statements and include all adjustments
consisting only of normal, recurring adjustments that we consider necessary for
a fair presentation of our financial position and results of operations for
these periods. The historical financial information may not be indicative of our
future performance. The pro forma net income (loss) per share and shares used in
computing pro forma net income (loss) per share are calculated as if all of our
preferred stock were converted into shares of our common stock on the date of
their issuance. See footnote 1 of notes to consolidated financial statements.
22
<PAGE> 25
<TABLE>
<CAPTION>
PERIOD FROM
NOVEMBER 27,
1995 SIX MONTHS ENDED
(INCEPTION) TO YEAR ENDED SEPTEMBER 30, MARCH 31,
SEPTEMBER 30, ------------------------- -----------------
1996 1997 1998 1999 1999 2000
-------------- ------ ------ ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenues......................... $324 $ 369 $1,970 $ 9,589 $ 3,474 $ 8,807
Cost of revenues................. 86 207 853 2,562 1,079 2,281
---- ------ ------ ------- ------- -------
Gross profit..................... 238 162 1,117 7,027 2,395 6,526
Operating expenses:
Research and development...... 166 256 924 2,709 966 3,014
Sales and marketing........... 24 120 622 2,373 717 1,924
General and administrative.... 43 152 411 1,202 366 1,045
Stock-based compensation...... -- -- -- 274 -- 962
---- ------ ------ ------- ------- -------
Total operating expenses......... 233 528 1,957 6,558 2,049 6,946
---- ------ ------ ------- ------- -------
Operating income (loss).......... 5 (366) (840) 469 347 (420)
Interest income.................. -- -- 16 42 25 86
Interest expense................. -- (4) (27) (91) (16) (108)
Other income (expense)........... 1 (3) -- (19) -- --
---- ------ ------ ------- ------- -------
Income (loss) before taxes....... 6 (373) (851) 400 356 (442)
Income tax provision............. -- -- -- (154) (138) (113)
---- ------ ------ ------- ------- -------
Net income (loss)................ $ 6 $ (373) $ (851) $ 246 $ 218 $ (556)
==== ====== ====== ======= ======= =======
Net income (loss) per share:
Basic......................... $(0.85) $(0.19) $ 0.05 $ 0.05 $ (0.10)
====== ====== ======= ======= =======
Diluted....................... $(0.85) $(0.19) $ 0.02 $ 0.02 $ (0.10)
====== ====== ======= ======= =======
Shares used in computing net
income (loss) per share:
Basic......................... 438 4,379 5,301 4,804 5,526
Diluted....................... 438 4,379 11,941 10,028 5,526
Pro forma net income (loss) per
share:
Basic......................... $ 0.03 $ (0.04)
======= =======
Diluted....................... $ 0.02 $ (0.04)
======= =======
Shares used in computing pro
forma net income (loss) per
share:
Basic......................... 9,770 12,722
Diluted....................... 11,941 12,722
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------------- MARCH 31,
1996 1997 1998 1999 2000
---- ---- ------- ------ ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents....................... $ 57 $ 87 $ 1,972 $1,513 $ 7,925
Working capital................................. 102 (173) 2,368 1,554 10,521
Total assets.................................... 361 273 3,265 9,050 19,139
Long-term debt obligations, less current
portion....................................... -- 23 64 454 382
Series C redeemable convertible preferred
stock......................................... -- -- -- -- 10,104
Retained earnings (accumulated deficit)......... 6 (367) (1,219) (973) (1,528)
Total stockholders' equity...................... 359 (15) 2,743 3,323 4,107
</TABLE>
23
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of
operations should be read in conjunction with the consolidated financial
statements and the notes thereto included elsewhere in this prospectus. This
discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those anticipated
in these forward-looking statements for many reasons, including the risks
described in "Risk Factors" and elsewhere in this prospectus.
OVERVIEW
Virage Logic is a leading provider of embedded memory technologies. We
license our technologies to fabless semiconductor companies and integrated
device manufacturers for the design of system-on-a-chip devices that are used in
complex, high-volume applications such as mobile phones, pagers, switches,
routers, digital cameras and DVD players. Our technologies are optimized for our
customers' manufacturing processes and are silicon-proven, or pre-tested through
actual manufacture of silicon chips. As a result, our embedded memory
technologies can be rapidly integrated into our customers' products, enabling
shorter time-to-market and allowing them to focus on their core competencies.
Revenues consist of license fees for our embedded memory technologies,
which include standard memory compilers, software development tools and custom
memory compilers. Licensing of embedded memory technologies involves a sales
cycle of three to six months. Our embedded memory technologies can be customized
for our customers' specific manufacturing processes and requirements. A custom
contract would typically call for milestone payments that are defined in the
statement of work and program schedule that accompanies a master license
agreement. Milestone deliveries generally occur over three to six months.
License revenues are recognized when persuasive evidence of an agreement
exists, delivery of the product has occurred, we have no significant remaining
obligations to perform, the fee is fixed or determinable, and collectibility is
probable. License revenues for certain software development tools are recorded
ratably over the maintenance term as vendor-specific objective evidence of the
maintenance does not exist. License revenues on custom memory compilers are
recognized using contract accounting over the period that services are performed
under the percentage-of-completion method. For such licenses, we determine our
progress-to-completion using input measures based on labor hours incurred. A
provision for estimated losses on engagements is made in the period in which the
loss becomes probable and can be reasonably estimated.
Support revenues related to standard and custom memory compilers are not
deferred over the life of the license agreement but rather an estimated cost of
support is accrued at the time license revenues are recognized. Our experience
to date indicates that the level of resource commitment for support is not
significant. In the event that support becomes a significant cost, our revenue
recognition policy would be modified to reflect the change.
Currently, license fees represent substantially all of our revenues. We
have agreements with certain third-party semiconductor foundries to pay us
royalties on their sales of silicon chips manufactured for our fabless
customers. Royalty revenues from these agreements in our most recent quarter was
$9,000. The time delays for receiving royalty revenues are due to the typical
length of time required for the customer to implement an embedded memory
technology into their design and manufacture and bring to market a product
incorporating such technology. Beginning with our Custom-Touch 1T-SRAM and STAR
megabit technologies that are currently in development, in addition to
collecting royalties from the third-party semiconductor foundries, we intend to
increase our royalty base by collecting royalties directly from our integrated
device manufacturer customers and fabless customers. To date, we have not
entered into any agreements implementing the new royalty structure.
We have been dependent on a small number of customers for a substantial
portion of our annual revenues in each fiscal year, although the customers
comprising this group have changed from time to time. In fiscal 1998, MMC
Networks, National Semiconductor, PMC-Sierra, Silicon Dynamics and TeraLogic
each
24
<PAGE> 27
generated more than 10% of our revenues. In fiscal 1999, ATI Technologies, MMC
Networks, National Semiconductor and Toshiba each generated between 10% and 18%
of our revenues. In the first half of fiscal 2000, IBM generated 10% of our
revenues. We expect a small number of companies to collectively represent
between 20% and 40% of our revenues for the next few years.
Sales to customers located outside the United States accounted for 44% of
our revenues in fiscal 1998, 46% of our revenues in fiscal 1999 and 54% of our
revenues in the six months ended March 31, 2000. Substantially all of our direct
sales representatives and field application engineers are located in the United
States and serve our customers in the United States, Canada and Europe. We plan
to use a portion of the proceeds of this offering to invest in a direct sales
network in Europe. In Japan and the rest of Asia, we use both indirect sales
through distributors, as well as direct sales through sales representatives. We
anticipate that the sales mix in the near future will change as our customer
base outside of the United States expands. All revenues to date have been
denominated in U.S. dollars.
Since our inception in November 1995, cost of revenues and our other
expense categories have progressively increased as we added personnel and
increased the level of our business activities. We intend to continue making
significant expenditures associated with general and administrative, research
and development and sales and marketing activities, and expect that these costs
of revenues and expenses will continue to be a significant percentage of
revenues in future periods.
We have experienced delays in the progress of certain projects, and may
experience similar delays in the future. These delays could result in damage to
customer relationships, under-utilization of engineering resources or a delay in
market acceptance of new technologies. Cost of revenues and expenses will be
based in part on expectations of future revenues from license fees.
We have incurred, and will incur in future periods, substantial
amortization of stock-based compensation, which represents non-cash charges
incurred as a result of the issuance of stock options to employees. These
charges are recorded based on the difference between the deemed fair value of
the common stock and the option exercise price of such options at the date of
grant. The aggregate deferred stock-based compensation at March 31, 2000 was
$6.9 million. This amount is presented as a reduction of stockholders' equity
and is being amortized using the graded-vesting method over the vesting period
of the applicable options, generally four years.
25
<PAGE> 28
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenues for certain items
in our consolidated statements of operations for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------ ----------------
1997 1998 1999 1999 2000
------ ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Revenues........................................... 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues................................... 56.2 43.3 26.7 31.1 25.9
------ ----- ----- ----- -----
Gross profit....................................... 43.8 56.7 73.3 68.9 74.1
Operating expenses:
Research and development......................... 69.4 46.9 28.3 27.8 34.2
Sales and marketing.............................. 32.5 31.6 24.7 20.6 21.9
General and administrative....................... 41.2 20.9 12.5 10.5 11.9
Stock-based compensation......................... -- -- 2.9 -- 10.9
------ ----- ----- ----- -----
Total operating expenses........................... 143.1 99.4 68.4 58.9 78.9
------ ----- ----- ----- -----
Operating income (loss)............................ (99.4) (42.7) 4.9 10.0 (4.8)
Interest expense................................... (1.1) (1.4) (1.2) 0.5 (1.2)
Interest income.................................... (0.7) 0.8 0.4 0.7 1.0
Income tax provision............................... -- -- (1.6) (4.0) (1.3)
------ ----- ----- ----- -----
Net income (loss).................................. (101.2)% (43.3)% 2.5% 6.3% (6.3)%
====== ===== ===== ===== =====
</TABLE>
SIX MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 2000
Revenues. Revenues increased 153.5% from $3.5 million for the six months
ended March 31, 1999 to $8.8 million for the six months ended March 31, 2000.
This increase was primarily attributable to license fees received from fabless
semiconductor companies resulting from the introduction of our 0.18 micron
embedded memory technologies in September 1999.
Gross Profit. Gross profit is revenues less cost of revenues. Cost of
revenues consists primarily of personnel expenses and the allocated portion of
facilities and equipment expenses. Gross profit increased 172.5% from $2.4
million for the six months ended March 31, 1999 to $6.5 million for the six
months ended March 31, 2000. Gross profit as a percentage of revenues improved
between those periods from 68.9% to 74.1%. This increase was primarily
attributable to increased licensing to fabless semiconductor companies of higher
margin embedded memory technologies that required no additional customization.
Research and Development Expense. Research and development expense includes
personnel and other costs associated with the development of successive
generations of embedded memory technologies and of new technologies. Research
and development expense increased 212.2% from $966,000 for the six months ended
March 31, 1999 to $3.0 million for the six months ended March 31, 2000. The
increase in research and development expense was primarily due to the
development of our new 0.18 micron and 0.15 micron embedded memory technologies,
as well as new technologies such as our Custom-Touch STAR, Custom-Touch 1T-SRAM
and Custom-Touch CAM. These efforts required hiring additional personnel. We
believe that continued technology development is essential for us to remain
competitive in the markets we serve.
Sales and Marketing Expense. Sales and marketing expense consists primarily
of personnel, commissions and other associated costs. Sales and marketing
expense increased 168.5% from $717,000 for the six months ended March 31, 1999
to $1.9 million for the six months ended March 31, 2000. This increase was
primarily due to additional personnel hiring and expanded sales and marketing
activities. We anticipate that sales and marketing expense will continue to
increase as we expand our sales force and target new customers for our
technologies.
General and Administrative Expense. General and administrative expense
consists primarily of personnel and other costs associated with the management
of our business. General and administrative expense
26
<PAGE> 29
increased 185.3% from $366,000 for the six months ended March 31, 1999 to $1.0
million for the six months ended March 31, 2000. This increase was primarily due
to increased personnel costs and professional fees.
Stock-Based Compensation. With respect to the grant of stock options to
employees, we recorded aggregate deferred stock-based compensation of
approximately $5.7 million for the six months ended March 31, 2000, of which
$962,000 was amortized in that period. The amount of deferred stock-based
compensation is presented as a reduction of stockholders' equity and is being
amortized using the graded-vesting method over the vesting period of the
applicable options, generally four years.
Interest Expense. Interest expense increased from $16,000 for the six
months ended March 31, 1999 to $108,000 for the six months ended March 31, 2000.
This increase was the result of an increase in our average outstanding debt and
an increase in fixed assets held under a capital lease.
Interest Income. Interest income increased from $25,000 for the six months
ended March 31, 1999 to $86,000 for the six months ended March 31, 2000. This
increase was principally due to higher average cash balances resulting from the
net proceeds of the sale of our Series C redeemable convertible preferred stock
in the first fiscal quarter of 2000.
Income Taxes Provision. The provision for income taxes was approximately
$138,000 and $113,000 for the six months ended March 31, 1999 and 2000,
respectively. The effective tax rate was 38.8% and 25.6% for the same periods
respectively. The provision for the six months ended March 31, 1999 was computed
using the actual effective rate for fiscal year 1999. Although we reported a
pretax loss for the six months ended March 31, 2000, we recorded an income tax
provision of $113,000 due to our ability to recognize only federal deferred
taxes, as state current taxes paid are not refundable.
YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999
Revenues. Our revenues for fiscal 1997, 1998 and 1999 were $369,000, $2.0
million and $9.6 million, respectively, representing growth of 434.2% from 1997
to 1998 and 386.7% from 1998 to 1999. The 1998 increase in revenues was
primarily due to increased licensing of our 0.25 micron embedded memory
technologies and custom design services. The 1999 revenue growth primarily
reflected increased license fees from our 0.25 micron embedded memory
technologies, as well as the initial shipments of our 0.18 micron technologies,
to both fabless semiconductor companies and integrated device manufacturers.
Gross Profit. Gross profit was $161,000, $1.1 million and $7.0 million for
fiscal 1997, 1998 and 1999, respectively, which represented 43.8%, 56.7% and
73.3% of revenues for those periods, respectively. Our gross profit increased
592.1% from 1997 to 1998 and 529.1% from 1998 to 1999. The increases in gross
profit and gross profit percentage for 1998 and 1999 were primarily attributable
to increased license fees from fabless semiconductor companies and integrated
device manufacturers for higher-margin embedded memory technologies that
required no additional customization.
Research and Development Expense. Research and development expense was
$256,000, $924,000 and $2.7 million for fiscal 1997, 1998 and 1999,
respectively, which represented an increase of 260.8% from 1997 to 1998 and an
increase of 193.2% from 1998 to 1999. The increases in research and development
expense for 1998 and 1999 were primarily due to increases in the number of
employees involved in research and development as we accelerated the
introduction of new technologies, particularly the 0.18 micron technologies.
Sales and Marketing Expense. Sales and marketing expense was $120,000,
$622,000 and $2.4 million for fiscal 1997, 1998 and 1999, respectively, which
represented an increase of 419.0% from 1997 to 1998 and an increase of 281.7%
from 1998 to 1999. The increases in sales and marketing expense in 1998 and 1999
were primarily due to hiring of additional personnel and expanded sales and
marketing activities related to further broadening of our customer base and
technologies.
General and Administrative Expense. General and administrative expense was
$152,000, $411,000 and $1.2 million for fiscal 1997, 1998 and 1999,
respectively, which represented an increase of 170.4% from 1997
27
<PAGE> 30
to 1998 and an increase of 192.3% from 1998 to 1999. The increases in general
and administrative expense during these periods were the result of increases in
personnel and in professional fees.
Stock-Based Compensation. With respect to the grant of stock options to
employees, we recorded aggregate stock-based compensation of $1.1 million for
fiscal 1999. The amount of stock-based compensation is presented as a reduction
of stockholders' equity and is being amortized using the graded-vesting method
over the vesting period of the applicable options, generally four years. We
amortized $274,000 in 1999.
Interest Expense. Interest expense was $4,000, $28,000 and $110,000 for
fiscal 1997, 1998 and 1999, respectively. These increases were the result of
increases in our average outstanding debt and increases in fixed assets held
under capital leases.
Interest Income. Interest income was $42,000 for fiscal 1999 principally
due to higher average cash balances, following our sale of Series B preferred
stock in July 1998.
Income Tax Provision. No provision for income taxes was recorded for fiscal
1997 and 1998, as we incurred net losses in those years. The provision for
income taxes was approximately $154,000 for fiscal 1999. The effective tax rate
for fiscal 1999 was 4.5 percentage points higher than the federal statutory rate
of 34% as we were unable to take full benefit of certain temporary differences.
28
<PAGE> 31
QUARTERLY RESULTS OF OPERATIONS
The following tables contain unaudited consolidated statement of operations
data for our six most recent quarters. The first table contains revenue and
expense data expressed in dollars, while the second table contains the same data
expressed as a percentage of our revenues for the periods indicated. This data
has been derived from unaudited consolidated financial statements that, in our
opinion, include all adjustments necessary for a fair presentation of the
information. Our quarterly results have been in the past, and in the future may
be, subject to fluctuations. As a result, we believe that results of operations
for the interim periods are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
QUARTER ENDED
-------------------------------------------------------------------
DEC. 31, MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31,
1998 1999 1999 1999 1999 2000
-------- --------- -------- --------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Revenues............................. $1,492 $1,982 $2,459 $3,655 $4,187 $4,619
Cost of revenues..................... 500 579 640 843 1,070 1,210
------ ------ ------ ------ ------ ------
Gross profit......................... 992 1,403 1,819 2,812 3,117 3,409
Operating expenses:
Research and development........... 408 557 694 1,050 1,437 1,577
Sales and marketing................ 251 466 703 953 856 1,068
General and administrative......... 149 217 258 577 585 460
Stock-based compensation........... -- -- 110 164 288 675
------ ------ ------ ------ ------ ------
Total operating expenses............. 808 1,240 1,765 2,744 3,166 3,780
------ ------ ------ ------ ------ ------
Operating income (loss).............. 184 163 54 67 (49) (371)
Interest expense..................... (7) (9) (12) (64) (74) (33)
Interest income...................... 11 14 6 11 20 65
Other income (expense)............... -- -- -- (19) -- --
------ ------ ------ ------ ------ ------
Income (loss) before taxes........... 188 168 48 (4) (103) (339)
Income tax provision (benefit)....... 73 65 18 (2) 30 83
------ ------ ------ ------ ------ ------
Net income (loss).................... $ 115 $ 103 $ 30 $ (2) $ (133) $ (422)
====== ====== ====== ====== ====== ======
AS A PERCENTAGE OF REVENUES:
Revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues..................... 33.5 29.2 26.0 23.1 25.6 26.2
------ ------ ------ ------ ------ ------
Gross profit......................... 66.5 70.8 74.0 76.9 74.4 73.8
Operating expenses:
Research and development........... 27.3 28.1 28.2 28.7 34.3 34.1
Sales and marketing................ 16.8 23.5 28.6 26.1 20.4 23.1
General and administrative......... 10.0 11.0 10.5 15.8 14.0 10.0
Stock-based compensation........... -- -- 4.5 4.5 6.9 14.6
------ ------ ------ ------ ------ ------
Total operating expenses............. 54.1 62.6 71.8 75.1 75.6 81.8
------ ------ ------ ------ ------ ------
Operating income (loss).............. 12.4 8.2 2.2 1.9 (1.2) (8.0)
Interest expense..................... (0.5) (0.4) (0.5) (1.8) (1.8) (0.7)
Interest income...................... 0.7 0.7 0.2 0.3 0.5 1.4
Other income (expense)............... -- -- -- (0.5) -- --
------ ------ ------ ------ ------ ------
Income (loss) before taxes........... 12.6 8.5 1.9 (0.1) (2.5) (7.3)
Income tax provision................. 4.8 3.3 0.7 (0.1) 0.7 1.8
------ ------ ------ ------ ------ ------
Net income (loss).................... 7.7% 5.2% 1.2% (0.1)% (3.2)% (9.1)%
====== ====== ====== ====== ====== ======
</TABLE>
29
<PAGE> 32
Over the six quarters presented, our quarterly revenues grew from $1.5
million to $4.6 million. Revenue growth over this period was the result of
increased licensing of our 0.25 micron embedded memory technologies and 0.18
micron technologies to both fabless semiconductor companies and integrated
device manufacturers.
Gross profit as a percentage of revenues increased from 66.5% for the
quarter ended December 31, 1998 to 73.8% for the quarter ended March 31, 2000.
This increase in gross profit as a percentage of revenues over the six quarters
presented was primarily due to increased licensing of higher margin embedded
memory technologies to fabless semiconductor companies that required no
additional customization. For the quarter ended September 30, 1999, our gross
profit as a percentage of revenues increased due to a greater percentage of
sales in that quarter of higher margin embedded memory technologies.
Over the last six quarters, research and development expenses increased
from $408,000 to $1.6 million as we developed new technologies and added
personnel. Sales and marketing expenses have grown over this period from
$251,000 to $1.1 million, while general and administrative expenses grew from
$149,000 to $460,000. General and administrative expenses were higher in the
fourth quarter of 1999 and the first quarter of 2000 due to expenses of
litigation that was settled in the first quarter of 2000. Since the quarter
ended June 30, 1999, we have recorded amortization of stock-based compensation
from the issuance of stock options. We anticipate recording additional
stock-based compensation and related amortization in future periods.
We have used all of our net operating loss carryforwards as we had achieved
six successive quarters of profitability, excluding stock-based compensation
charges. We expect to pay income taxes on a going forward basis.
LIQUIDITY AND CAPITAL RESOURCES
We financed our operating losses for fiscal 1997 and 1998 through the
issuance of notes, capital leases and the sale of preferred stock. We had net
income of $246,000 for fiscal 1999. We had a net loss for the six months ended
March 31, 2000 of $556,000, which was attributable primarily to a stock-based
compensation charge of $962,000 during that period. At March 31, 2000, we had
$7.9 million in cash, an increase of $6.4 million from cash held at September
30, 1999 and $6.0 million from cash held at September 30, 1998. The increase in
cash balances at March 31, 2000 was primarily due to our receipt of $9.8 million
of cash proceeds from the sale of our Series C redeemable convertible preferred
stock in the first quarter of fiscal 2000. As of March 31, 2000, we had an
accumulated deficit of $1.5 million.
We have an accounts receivable revolving line of credit with Silicon Valley
Bank that allows us to borrow up to $3.0 million. At March 31, 2000, the total
line of credit was available. The interest rate on this line of credit is prime
plus 1.0%. We also have a line of credit of $1.1 million with an equipment
leasing company. At March 31, 2000, we had utilized $464,000 of this line and
had an available balance of $636,000. The outstanding obligations under the
equipment line are due over a three-year period. The interest rate on these
borrowings is variable and dependent upon market conditions at the time a new
lease obligation is executed.
Net cash used for operating activities was $134,000 and $1.0 million for
fiscal 1997 and 1998, respectively, net cash provided by operating activities
was $17,000 for fiscal 1999, and net cash used by operating activities was $1.2
million for the first six months of fiscal 2000. The usage of cash in 1997 was
due to a net loss of $373,000, partially offset by depreciation and amortization
and favorable changes in operating assets and liabilities. The usage of cash in
1998 was due to a net loss of $851,000 and by unfavorable changes in operating
assets and liabilities, primarily accounts receivable due to revenue growth of
our embedded memory technologies. The generation of cash for 1999 was due to net
income of $246,000, depreciation of $507,000 and increases in accrued payroll
and related expenses, accrued expenses related to software purchases and
deferred revenues totaling $3.3 million. A higher accounts receivable balance of
$3.6 million, a result of a growing customer base, offset the increase in cash
for 1999. Increases in accounts receivable, income tax payments and reductions
in deferred revenues were the primary uses of cash during the first six months
of 2000.
30
<PAGE> 33
Net cash used for investing activities was $6,000, $358,000 and $1.4
million for fiscal 1997, 1998 and 1999, respectively, and $1.4 million for the
first six months of fiscal 2000. The increase in investing activities during
each of these periods was due to acquisitions of property and equipment,
primarily computer software and hardware. A portion of the fixed asset
acquisitions was financed under equipment financing arrangements in 1997 and
1998. We intend to purchase approximately $300,000 of additional capital assets,
primarily computer equipment and software, during the remainder of fiscal 2000.
Net cash provided by financing activities was $169,000, $3.3 million and
$945,000 for fiscal 1997, 1998 and 1999, respectively, and $9.0 million for the
first six months of fiscal 2000. Net cash provided by financing activities in
1997 reflects the issuance of notes in the aggregate principal amount of
$170,000. Net cash provided by financing activities in 1998 reflects the
issuance of preferred stock for an aggregate purchase price of $2.5 million and
the issuance of convertible notes in the aggregate principal amount of $772,000.
Net cash provided by financing activities in 1999 reflects borrowings under our
accounts receivable revolving line of credit of $1.0 million. Net cash provided
by financing activities in the first six months of fiscal 2000 reflects our
receipt of $9.8 million in cash proceeds from the issuance of Series C
redeemable convertible preferred stock. The increase in net cash provided by
financing activities during the first six months of fiscal 2000 was partially
offset by repayments of $1.0 million on the accounts receivable revolving line
of credit and certain repayments for capitalized lease obligations during the
first six months of 2000.
Our future capital requirements will depend on many factors, including the
rate of sales growth, market acceptance of our existing and new technologies,
the amount and timing of research and development expenditures, the timing of
the introduction of new technologies, expansion of sales and marketing efforts,
potential acquisitions and working capital, primarily accounts receivable. There
can be no assurance that additional equity or debt financing, if required, will
be available on satisfactory terms. We believe that the net proceeds of this
offering combined with existing capital resources and cash generated from
operations will be sufficient to meet our needs for the next 18 months, although
we may seek to raise additional capital during that period. However, there can
be no assurance that we will not require additional financing beyond this time
frame. Our capital and operating requirements will depend on many factors,
including the levels at which we maintain accounts receivable and increased
spending for operating expenses. Our forecast period of time through which our
financial resources will be adequate to support our operations is a
forward-looking statement that involves risks and uncertainties, and actual
results could vary materially.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes a new model for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing accounting standards. SFAS No. 133 requires that all derivatives be
recognized in the balance sheet at their fair market value, and the
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. SFAS No. 133, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging
Activities -- Deferral of Effective Date of FASB Statement No. 133," is
effective for all fiscal years beginning after June 15, 2000. We do not
currently have forward exchange contracts to hedge exposures denominated in
foreign currencies or any other derivative financial instruments for trading or
speculative purposes, but it is possible we may enter into such contracts in the
future as our international sales or operations expand.
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position, or SOP, No. 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." SOP 98-1 provides
guidance on accounting for the cost of computer software developed or obtained
for internal use and identifies the characteristics of internal-use software.
Our accounting policy with respect to accounting for computer software developed
or obtained for internal use is consistent with SOP 98-1. Software is amortized
for financial reporting purposes using the straight-line method over the
estimated useful life of three years.
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In December 1999, the Securities and Exchange Commission issued SEC Staff
Accounting Bulletin No. 101 (SAB 101). "Revenue Recognition in Financial
Statements," which summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
We believe our revenue recognition policy is in compliance with SAB 101.
QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKS
We have limited exposure to financial market risks, including changes in
foreign currency exchange rates and interest rates. A significant portion of our
customers are located in Asia, Canada and Europe. However, to date our exposure
to foreign currency exchange fluctuations has been minimal because our license
agreements provide for payment in U.S. dollars.
Our interest income and interest expense are sensitive to changes in the
general level of U.S. interest rates. An increase or decrease in interest rates
would not significantly increase or decrease interest income on cash balances
due to our cash being primarily invested in commercial paper. Due to the
short-term nature of our investments and the immaterial amount of debt
obligations, we believe that there is no material exposure to interest rate
fluctuations.
CHANGES IN ACCOUNTANTS
In 1999, we engaged Ernst & Young LLP to act as our independent auditors to
report on our financial statements for the year ended September 30, 1999. The
decision to appoint Ernst & Young LLP was approved by our board of directors.
Prior to our engagement of Ernst & Young LLP, Mohler, Nixon & Williams
Accountancy Corporation had acted as our independent auditors since 1997. Mohler
Nixon was not retained to report on our 1999 financial statements. None of
Mohler Nixon's reports on our financial statements for any of the years reported
contained an adverse opinion or disclaimer of opinion, nor were the opinions
modified as to uncertainty, audit scope or accounting principles, nor were there
any events of the type requiring disclosure under Item 304(a)(1)(v) of
Regulation S-K under the Securities Act. There were no disagreements with Mohler
Nixon, resolved or unresolved, on any matter of accounting principles or
practices, financial disclosure, or auditing scope or procedure, which, if not
resolved to Mohler Nixon's satisfaction, would have caused it to make reference
to the subject matter of the disagreement in connection with its reports.
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<PAGE> 35
BUSINESS
OVERVIEW
Virage Logic is a leading provider of embedded memory technologies.
Semiconductor companies integrate our embedded memory technologies in complex
system-on-a-chip devices that are critical components of digital and Internet
appliances, communications equipment and computers. Our technologies include a
full suite of memory compilers that enable multiple configurations of memory to
be embedded directly on a silicon chip. We also provide software development
tools and custom memory design services. We provide these technologies to both
fabless semiconductor companies that do not own their own silicon fabrication
facilities, as well as integrated device manufacturers that manufacture their
own chips. Our technologies are optimized for our customers' manufacturing
processes and silicon-proven, or pre-tested through actual manufacture of
silicon chips. Therefore, our technologies can be rapidly integrated into our
customers' devices. As a result, our technologies enable our customers to
accelerate the time to market for their new devices and allow them to focus on
their core competencies. Our fabless customers include ATI Technologies,
Broadcom, Level One, Lockheed Martin, Macronix, MMC Networks, PMC-Sierra,
TranSwitch and Vitesse. Our integrated device manufacturer customers include
AMD, Conexant, Fujitsu, Hitachi, Hyundai, IBM, Matsushita, National
Semiconductor, OKI, Philips and Toshiba.
INDUSTRY BACKGROUND
The growth of the Internet and the development of the communications
infrastructure are creating demand for communications equipment and digital
appliances, such as mobile phones, pagers, switches, routers, digital cameras
and DVD players. The system designers of these products are seeking technologies
that will permit them to decrease the size and enhance the performance of these
products. In response to this demand, semiconductor companies have developed
technologies that permit further miniaturization and improve the performance of
these products. These technologies now permit the design of entire systems,
including the microprocessor, communications, logic, graphics and memory
elements, on a single chip, or a system-on-a-chip. According to Integrated
Circuit Engineering, an independent market research firm, the system-on-a-chip
market is expected to grow from $6.7 billion in 1999 to $32.9 billion by 2004.
System-on-a-chip design depends upon quick and reliable integration of
intellectual property. Semiconductor companies manufacture these chips either at
their own facilities or at third-party fabrication facilities, or foundries. In
each case, the manufacturing process requires the integration of multiple types
of intellectual property within a single design that is laid out onto a chip.
The delivery of complex system-on-a-chip designs in a rapid time-to-market
manner represents a significant challenge for semiconductor companies. To
address this challenge, semiconductor companies are increasingly relying on
external sources of pre-designed, silicon-proven elements from third-party
semiconductor intellectual property, or SIP, suppliers. The use of proven
third-party technology allows these semiconductor companies to dedicate their
resources to their core competencies.
The demand for high-performance computing and communications applications
and increased bandwidth for Internet applications has made embedded memory
critical in system-on-a-chip architectures. Historically, integrated circuit
design was dominated by the logic functions with memory storage in separate,
external devices. Advances in process technology and the ability to embed memory
on a single chip allow the tighter coupling between the memory and logic
functions that computing and communication applications demand. As a result, the
market has shifted its use of memory. Today, it is common for a system-on-a-chip
to contain many memory types of different sizes, shapes and functionality which
typically comprise between 30-50% of a chip's area. As the system-on-a-chip
market continues to grow, there will be a significant opportunity to embed
additional memories in these designs.
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The following figure depicts a typical system-on-a-chip including its
memory technologies.
[VIRAGE LOGIC CHIP DIAGRAM]
[Diagram of the varian elements typically comprising a system-on-a-chip
including memory, microprocessor, logic, graphics and communications]
Designates memory components.
Semiconductor companies face significant challenges integrating
high-performance embedded memory technologies into their system-on-a-chip
devices in a rapid time-to-market manner. The internal design teams of
semiconductor companies lack the dedicated resources necessary to keep pace with
rapidly evolving embedded memory technologies. Suppliers of standard discrete
memory devices lack the design architecture and software tools necessary to
provide custom high-performance embedded memory technologies for system-
on-a-chip designs. Similarly, other suppliers of semiconductor intellectual
property lack the focus and expertise necessary to provide high-performance
embedded memory solutions. These factors have created a market need for
third-party intellectual property providers of embedded memory technologies that
are silicon-proven, high-performance, high-density and highly customizable.
THE VIRAGE LOGIC SOLUTION
We provide a full suite of silicon-proven embedded memory technologies as
well as software development tools and custom memory design services to
semiconductor companies. Our embedded memory technologies offer customers quick
time-to-market, high performance, high density, low-power consumption and
significant customization capability. Key benefits of our solution include:
- Memory Design Expertise. Our memory design expertise allows us to provide
our customers with leading-edge memory technologies for advanced
manufacturing processes. We have assembled a global team of over 75
engineers focused exclusively on memory design. This team includes senior
level engineers with significant expertise in various types of memory
design, including SRAM, DRAM, flash and EPROM.
- Full Suite of Embedded Memory Technologies. We offer a comprehensive
suite of technologies. We have designed embedded memory technologies for
0.35 micron, 0.25 micron and 0.18 micron
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<PAGE> 37
processes and were the first third-party intellectual property company to
deliver embedded memory technologies for the 0.15 micron process.
- Silicon-Proven Solutions. Each of our embedded memory technologies has
been customized, verified and tested for a particular manufacturing
process, or silicon-proven, before being shipped to a customer.
Silicon-proven technologies are not only designed, but also have been
laid out, manufactured, and tested on a silicon chip. This feature
enables customers to substantially reduce the risk of inoperability and
costly development delays they might experience from using in-house or
other third-party designs that are not silicon-proven. Our technologies
have been implemented by over 50 customers and in foundries that comprise
over 90% of the third-party foundry market.
- Significant Time-to-Market Advantages. We offer silicon-proven
technologies optimized for a specific manufacturing process that are
ready for integration into our customers' semiconductor design-flow
methodologies. In this manner, we eliminate our customers' needs to
design specific embedded memory technologies and thereby accelerate their
time-to-market.
- High-Density, High-Performance and Ultra-Low Power Embedded Memory
Technologies. We have recently introduced our ASAP, or area, speed and
power, embedded memory compilers that enable the generation of
high-density, high-performance and ultra-low power embedded memories in
multiple configurations. All of these technologies have been developed
using custom memory design techniques to achieve industry-leading results
in area, speed and power.
- Ease of Integration with Software Development Tools. Our memory compilers
allow our customers to generate the exact type of embedded memory needed
for an application. Our technologies are easily integrated into our
customers' semiconductor design flow methodologies. To facilitate the
integration of our technologies with other embedded memory technologies,
we also provide a complete set of embedded memory software development
tools that are compatible with leading integrated circuit design tools.
THE VIRAGE LOGIC STRATEGY
Our objective is to be the leading supplier of embedded memory
technologies, software development tools and design service support for embedded
memory technologies to semiconductor companies for complex system-on-a-chip
designs. Key elements of our strategy include the following:
- Leverage Endorsements of Leading Third-Party Foundries for Our
Technologies. We work with leading-edge third-party foundries to qualify
our embedded memory technologies for high-volume production in their
manufacturing processes. In this manner, we are in a position to provide
embedded memory technologies that are silicon-proven for a specific
foundry's manufacturing process directly to that foundry's entire
customer base.
- Become a Strategic Supplier to Fabless Semiconductor Companies. Fabless
semiconductor companies, or semiconductor companies that do not own a
fabrication facility, spend substantial sums of money purchasing
intellectual property that is silicon-proven with third-party foundries.
Since these companies lack the time and resources to develop embedded
memory technologies, which are outside of their core competencies, they
license memory technologies from us. To date, we have licensed our
technologies to many fabless semiconductor companies including ATI
Technologies, Broadcom, Level One, Lockheed Martin, Macronix, MMC
Networks, PMC-Sierra, TranSwitch and Vitesse.
- Further Penetrate the Leading Integrated Device Manufacturers
Market. Integrated device manufacturers produce the largest number of
integrated circuits and face significant cost and product differentiation
challenges. The internal memory design teams of these companies are
facing difficulties keeping pace with the increasing demand for, and
proliferation of, embedded memory technologies and the rapid innovation
of these technologies for advanced manufacturing processes. To date, we
have licensed our technologies to many leading integrated device
manufacturers including AMD, Conexant, Fujitsu, Hitachi, Hyundai, IBM,
Matsushita, National Semiconductor, OKI, Philips and Toshiba.
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- Continue to Innovate Existing Technologies for Advanced Manufacturing
Processes. As the semiconductor manufacturers develop advanced
manufacturing processes that enable increasing density and speed as well
as lower power consumption, we intend to lead the market for embedded
memory technologies designed for those processes. We have achieved the
critical mass of memory designers necessary to be first to market with
embedded memory technologies for advanced manufacturing processes. We
have designed embedded memory technologies for the 0.35 micron, 0.25
micron and 0.18 micron processes and were the first third-party
intellectual property company to deliver embedded memory technologies for
the 0.15 micron process.
- Expand our Research and Development Efforts. We intend to work with our
development partners to define the focus of our research and development
activities to best address the needs of our customers. Our development
partners include Taiwan Semiconductor Manufacturing Company, or TSMC,
United Microelectronics Corporation, or UMC, and Chartered Semiconductor
Manufacturing, or Chartered. We also intend to focus on developing new
memory architectures to support the convergence between computers,
consumer products and communications markets.
- Expand Distribution Channels. We intend to expand our existing
distribution channels by hiring a direct sales force in Europe and
increasing our direct sales force in the United States. We also intend to
continue to develop partnerships with value added resellers, or VARs and
other distributors of intellectual property and leverage their extensive
U.S. and international sales organizations.
OUR TECHNOLOGIES
We offer a full suite of technologies to semiconductor companies using
embedded memory including:
- embedded memory compilers that can generate multiple configurations of a
single type of memory in a system design, as well as preconfigured memory
technologies;
- software development tools that enable development and reconfiguration of
memory; and
- custom design services.
Our Embedded Memory Compilers and Preconfigured Memory Technologies. A
compiler is a software program that translates algorithms into physical circuit
designs. Semiconductor designers can use our memory compilers to configure
memory technologies to the desired specifications for their system-on-a-chip
designs. Semiconductor designers can use our preconfigured memory technologies
to embed predetermined shapes, sizes and types of memory in their
system-on-a-chip designs.
- Custom-Touch ASAP. These compilers are optimized for high density, high
performance and low-power consumption and can generate memories up to 512
kilobits in size. ASAP is available in as many as nine different memory
types including single- or dual-port register file, single- or dual-port
SRAM, synchronous or asynchronous SRAM, and ROM.
- Custom-Touch STAR. These compilers are optimized for area, incorporate
self-test and repair capabilities and can generate up to four megabits of
embedded memory. We expect to release this technology by year-end 2000.
- Custom-Touch 1T-SRAM. These compilers use very dense memory cells and can
generate up to eight megabits of embedded memory. They also incorporate
self-test and repair capabilities. We expect to release this technology
by year-end 2000.
- Custom-Touch CAM. Our content-addressable memory, or CAM, compilers can
be used in routers, switches and other high-bandwidth Internet
infrastructure equipment to accelerate hardware-based searches. We expect
to release this technology by mid-2000.
Our Software Development Tools. Our software development tools consist of
two primary technologies, Embed-It! Integrator and Embed-It! Architect.
Embed-It! Integrator is included within each of our embedded memory compilers to
facilitate the integration of multiple memory configurations within a
system-on-a-chip.
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Embed-It! Architect allows semiconductor design companies to develop their own
compilers. We license Embed-It! Architect independently of our compilers, but
often in conjunction with Embed-It! Integrator.
Our Custom Design Services. We offer custom memory design services for
companies that require special configurations or functionality not supported by
our compilers. This has lead to a number of circuit innovations and new
technologies such as our CAM technology.
MARKETS AND APPLICATIONS
We target markets that demand system-on-a-chip technologies with
memory-rich, high-performance and low-power architectures and rapid
time-to-market needs. Examples of the markets and applications in which our
technologies are implemented include:
- Communications and Internet Infrastructure. Communications integrated
circuits are used in the edge and the core of the Internet, including
routers, switches, DSL modems, gigabit ethernet equipment and
high-bandwidth set-top boxes.
- Digital Appliances. Digital appliances increasingly require more
functionality, Internet connectivity and low-power consumption. Our
technology can be found in video game players, mobile phones, pagers,
digital cameras, high-definition televisions, cable set-top boxes and DVD
players.
- Computers. Computation equipment such as personal computers, workstations
and servers require more complex chip sets and embedded memory to achieve
new features such as advanced 3D graphics and digital signal processing,
or DSP.
RESEARCH AND DEVELOPMENT
We believe that our future success will depend in large part on our ability
to continue developing new technologies and innovating our existing technologies
for advanced manufacturing processes. To this end, we have assembled a team of
engineers with significant experience in the design and development of embedded
memory technologies. Currently, we are focusing our research and development
efforts on developing technologies that support the latest manufacturing
processes, 0.15 micron and 0.13 micron. We are also developing new architectures
to support the emerging communications markets and the convergence between these
markets and the computer and consumer products markets.
We have entered into a memorandum of understanding with Mosys for the joint
development of our Custom-Touch 1T-SRAM Compiler that is based on Mosys'
proprietary circuit technology. This memorandum of understanding provides that
we and Mosys will each have the right to license and sell the resulting
technologies and will share equally in the licensing revenues. In connection
with this memorandum of understanding, we have also entered into an agreement
with Mosys and TSMC in which we and Mosys have agreed to develop the
Custom-Touch 1T-SRAM Compiler for TSMC's 0.18 micron and 0.15 micron processes.
In addition, all parties have agreed to jointly market this technology.
We have also entered into a memorandum of understanding with Netlogic
Systems related to the development of a memory compiler based on Netlogic's CAM
technology. These CAM technologies will complement our existing CAM technology
by allowing semiconductor companies to design a complete search engine for use
in specific applications such as voice-over Internet protocol, or VoIP. This
should allow proliferation of our CAM technologies into new applications. The
pricing model and allocation of revenues between the parties for the developed
technologies will be determined in a subsequent formal agreement.
We have entered into agreements with TSMC, UMC and Chartered relating to
the development and license of our technologies for each of these foundry's
design rules.
Under our agreement with TSMC, we will develop memory technologies for
certain TSMC manufacturing processes. Each party will own its own intellectual
property, and both parties will jointly own any jointly-developed intellectual
property. Following development, we will license the developed technologies to
third parties that manufacture their silicon chips at TSMC. In exchange for our
development, TSMC pays
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us an up-front development fee, as well as royalties based on silicon chips
manufactured at TSMC using our technologies. In addition, both we and TSMC agree
to promote these technologies.
Our agreement with UMC is similar to our agreement with TSMC. UMC does not
pay us a development fee under this agreement but pays us royalties based on
revenues from third parties that manufacture silicon chips containing our
technologies at UMC.
Our agreement with Chartered relates to the establishment of a joint
marketing and test chip and silicon verification program for technologies
developed for Chartered's design rules. Under this agreement, Chartered agrees
to provide us with test chip layout, test plans and test rules to assist in our
design of test chips and silicon verification for their manufacturing processes.
Chartered pays us royalties based on silicon chips manufactured at Chartered
using our technologies. In addition, both parties agree to provide technical,
marketing and sales support and to introduce customers as appropriate.
Our research and development costs were $256,000 in fiscal 1997, $924,000
in fiscal 1998, $2.7 million in fiscal 1999 and $3.0 million in the six months
ended March 31, 2000. We expect that these costs will increase in the future in
order to maintain a leading position as a third-party provider of semiconductor
intellectual property in the embedded memory market. As of March 31, 2000, we
had 30 employees engaged in research and development. We expect to identify and
hire additional technical personnel in fiscal year 2000 to staff our anticipated
research and development activities.
SALES AND MARKETING
We focus our sales efforts through direct sales in North America and
Europe. In Japan and the rest of Asia, we use both indirect sales through
distributors, as well as direct sales through sales representatives.
Direct Sales. We maintain a network of direct sales representatives and
field application engineers serving the United States, Asia, Canada and Europe.
Currently, all of our direct sales representatives and field application
engineers are located in the United States. We plan to use a portion of the
proceeds of this offering to establish a direct sales network in Europe. Our
sales force's primary responsibility is to secure and maintain direct account
relationships with fabless semiconductor companies and integrated device
manufacturers for the license of our technologies. Developing a license
relationship typically involves a three to six month sales cycle. In addition,
we have approximately 50 customers with which the sales force maintains existing
relationships.
We enter into license agreements with our customers for a range of embedded
memory technologies. New license agreements are required for each new process
technology generation. For our ASAP embedded memory technologies, in addition to
collecting up-front license fees from the customers, we receive royalties from
third-party foundries. For our Custom-Touch STAR and 1T-SRAM embedded memory
technologies, we expect to receive both license and royalty fees from customers,
as well as royalties from third-party foundries, once these technologies are
released. Our license agreements contain limited warranties and eliminate our
liability for consequential damages. The sales force is distributed throughout
the United States with employees in the following locations: Fremont, Boston,
Los Angeles, Austin, Phoenix and West Palm Beach.
We have developed relationships with third-party foundries, standard-cell
library companies and electronic design automation, or EDA, software vendors
that provide us with customer referrals.
- Foundries. We have entered into marketing and technology relationships
with several third-party foundries including TSMC, UMC and Chartered.
These relationships provide us with early access to new process
technologies and endorsements from their direct sales force to our mutual
customer base.
- Standard-Cell Library Companies. We have entered into joint marketing and
development relationships with library companies that sell standard cells
and input/output cells such as Avant! Corporation.
- EDA Vendors. We have entered into joint marketing agreements with major
EDA vendors including Cadence. These relationships allow us to validate
our interoperability with these EDA vendors' software design tools.
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Indirect Sales. In addition to the direct sales force, we also sell our
technologies through distributors in Japan and the rest of Asia. In Japan, we
have entered into a distributor agreement with Seiko Instruments to sell and
support our technologies. We have also entered into sales representative
agreements with Maojet Technology Corporation in Taiwan and Aralion Technology
in Korea. All of these indirect sales organizations have expertise in selling
semiconductor intellectual property and software design tools. None of these
relationships is exclusive.
CUSTOMERS
We have developed a strong customer base of semiconductor companies that
use our embedded memory technologies to design complex system-on-a-chip devices.
Purchasers of our embedded memory technologies include both fabless
semiconductor companies and integrated device manufacturers. For fabless
semiconductor customers, we license our embedded memory technologies on either a
single- or multiple- project basis. For integrated device manufacturers, we
license our embedded memory technologies on a multiple-project basis and offer
our Embed-It! software development tools as an option to develop and maintain
their own memory intellectual property on the same software platform.
The following chart provides a representative list of our major customers
by customer type.
<TABLE>
<S> <C>
---------------------------------------------------------------------------------
Fabless Semiconductor Companies ATI Technologies*, Broadcom*, Level
One*, Lockheed Martin*, Macronix, MMC
Networks*, PMC-Sierra*, TranSwitch,
Vitesse
---------------------------------------------------------------------------------
Integrated Device Manufacturers AMD, Conexant, Fujitsu, Hitachi*,
Hyundai, IBM, Matsushita*, National
Semiconductor*, OKI, Philips, Toshiba*
---------------------------------------------------------------------------------
Embed-It! Licensees Hitachi, Hyundai, Lockheed Martin,
Macronix, National Semiconductor, SIS,
TSMC, Toshiba, Winbond
---------------------------------------------------------------------------------
</TABLE>
* Indicates the ten customers that generated the highest level of
revenues for us in fiscal 1999.
We have been dependent on a small number of customers for a substantial
portion of our annual revenues in each fiscal year, although the customers
comprising this group have changed from time to time. In fiscal 1998, MMC
Networks, National Semiconductor, PMC-Sierra, Silicon Dynamics and TeraLogic,
each generated more than 10% of our revenues. In fiscal 1999, ATI Technologies,
MMC Networks and National Semiconductor and Toshiba each generated between 10%
and 18% of our revenues. In the first half of fiscal 2000 IBM generated 10% of
our revenues. We expect a small number of companies to collectively represent
between 20% and 40% of our revenues for the next few years. As our customer base
grows and the number of fabless semiconductor companies increases, we expect our
dependence on any one customer for revenues to decline. However, as our sales to
fabless semiconductor companies grow, we will become more dependent on the
availability of new manufacturing process technologies and capacity from third
party foundries.
PROPRIETARY AND INTELLECTUAL PROPERTY
We rely primarily on a combination of nondisclosure agreements and other
contractual provisions, as well as patent, trademark, trade secret and copyright
law to protect our proprietary rights. Our general policy has been to seek
patent protection for those inventions and improvements likely to be
incorporated in our technologies or otherwise expected to be of value. We have
an active program to protect our proprietary technology through the filing of
patents.
As of April 28, 2000, we had nine U.S. patent applications on file and two
draft applications in various stages of preparation for filing with the USPTO.
We intend to continue to file patent applications as appropriate in the future.
We cannot be sure, however, that our pending patent applications will be
allowed, that any issued patents will protect our intellectual property or will
not be challenged by third parties, or that
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the patents of others will not seriously harm our ability to do business. In
addition, others may independently develop similar or competing technology or
design around any of our patents.
We protect the source code of our technologies as both trade secrets and
unpublished copyrighted works. We license the object code to our customers for
limited uses and maintain contractual controls over the use of our software.
Wide dissemination of our software makes protection of our proprietary rights
difficult, particularly outside the United States.
We protect our trade secrets and other proprietary information through
nondisclosure agreements with our employees and customers and other security
measures, although others may still gain access to our trade secrets or discover
them independently.
Although we believe that our technologies do not infringe on any copyright
or other proprietary rights of third parties, from time to time, third parties,
including our competitors, may assert patent, copyright and other intellectual
property rights to technologies that are important to us.
COMPETITION
The embedded memory industry is very competitive and is characterized by
constant technological change, rapid rates of technology obsolescence and the
emergence of new suppliers. Our primary competition comes from the internal
development groups of large integrated device manufacturers that develop
embedded memory technologies for their own use. In addition, we face competition
from other third-party providers of semiconductor intellectual property, such as
Artisan Components, Avant!, Synopsys and Virtual Silicon.
As we introduce new embedded memory technologies, we will face competition
from both existing semiconductor intellectual property suppliers and new ones
entering the market. We may also face competition from semiconductor companies
that currently offer stand-alone memory technologies, such as Cypress, Hyundai,
IDT, Micron Technology and Samsung, if these companies were to make their
technologies available in embedded form. In addition, third-party foundries may
decide in the future to distribute embedded memory technologies themselves, in
addition to manufacturing chips containing third-party intellectual property.
We believe that important competitive factors in our market include:
performance; functionality; customization; length of development cycle; price;
compatibility with prevailing design methodologies; interoperability with other
devices or subsystems; ease of use; reputation for successful designs and
installed base; technical service and support; technical training;
configurability of technologies for specific designs; and regional sales and
technical support.
EMPLOYEES
As of March 31, 2000, we had 120 employees, including 17 in sales and
marketing, 30 in research and development, 63 in engineering operations and 10
in general and administrative functions. We believe that our future success will
depend in part on our continued ability to attract, hire and retain qualified
personnel. None of our employees is represented by a labor union and we believe
our employee relations are good.
FACILITIES
Our principal administrative, sales, marketing and research and development
facility occupies approximately 20,169 square feet in a building located in
Fremont, California. This facility is leased through September 2002. We also
lease additional offices in Bellevue, Washington and Lebanon, New Jersey that
are occupied mainly by research and development and engineering operations
personnel. The Bellevue office, which occupies approximately 2,318 square feet,
is leased through March 2004. The Lebanon office, which occupies approximately
968 square feet, is leased through July 2000 with additional extensions of six
months. In addition, we have development centers in the Republic of Armenia and
India. The development center in the Republic of Armenia is located in Yerevan
and it occupies approximately 3,000 square feet in a building leased through
December 2000. The development center in India is located in Noida and occupies
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approximately 2,500 square feet in a building leased through April 2002. We
believe that our existing facilities will be adequate for the next 12 months.
LEGAL PROCEEDINGS
We are not a party to any pending litigation.
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MANAGEMENT
EXECUTIVE OFFICERS, DIRECTORS AND SIGNIFICANT EMPLOYEES
The names and ages of our existing executive officers, directors and
significant employees as of April 28, 2000 are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
---- --- -----------
<S> <C> <C>
Adam A. Kablanian................ 41 President, Chief Executive Officer and Chairman of the
Board
Alexander Shubat................. 38 Vice President of Engineering and Chief Technical Officer
and Director
James R. Pekarsky................ 40 Vice President of Finance and Chief Financial Officer
Vincent F. Ratford............... 48 Vice President of Sales and Marketing
Raymond T. Leung................. 41 Vice President of Engineering Operations
Kenneth V. Rousseau.............. 42 Vice President of Software Development
William J. Palumbo............... 41 Vice President and General Manager of New Jersey Operations
Alok Singh....................... 40 Vice President and General Manager of India Operations
Richard Elkus(2)................. 65 Director
Michael L. Hackworth(1)(2)....... 59 Director
Michael Stark(1)(2).............. 44 Director
Sang Wang(1)..................... 54 Director
Yervant Zorian(1)................ 43 Director
</TABLE>
- ------------
(1) Member of the compensation committee
(2) Member of the audit committee
Adam A. Kablanian co-founded Virage Logic and has served as our President,
Chief Executive Officer and as a Director since January 1996. Prior to founding
Virage Logic, Mr. Kablanian was a Department Manager for LSI Logic, a
semiconductor integrated device manufacturer, from August 1994 to December 1995
where he was responsible for the embedded memory design division. Prior to
joining LSI Logic, he managed multi-foundry technology transfer programs as an
engineering manager at Waferscale Integration, a designer of programmable system
devices, from April 1990 to January 1994. Mr. Kablanian holds a B.A. in Physics
from the University of California at Berkeley and an M.S. in Electrical
Engineering from Santa Clara University.
Alexander Shubat co-founded Virage Logic and has served as our Vice
President of Engineering and Chief Technical Officer and as a director since
January 1996. Prior to founding Virage Logic, Dr. Shubat served as Director of
Engineering at Waferscale Integration from November 1985 to December 1995, where
he managed various groups, including design, application-specific integrated
circuit and high-speed memory. He holds seven patents and has contributed to
more than 25 publications. Dr. Shubat holds a B.S. and an M.S. in Electrical
Engineering from the University of Toronto, Canada and a Ph.D in Electrical
Engineering from Santa Clara University.
James R. Pekarsky has served as our Vice President of Finance and Chief
Financial Officer since May 1999. Prior to joining Virage Logic, Mr. Pekarsky
served as Director, General Manager in several divisions at Mentor Graphics,
where he worked from May 1997 to May 1999, including Mentor Graphics' Emulation
Division in Paris, France and Embedded Software Division in San Jose,
California. Prior to joining Mentor Graphics, Mr. Pekarsky served as the
Director of Operations of Advanced Molecular Systems, a genetics research
company, from December 1995 to May 1997. Prior to that, he held senior
management positions in finance and operations at Sclavo Diagnostics, a clinical
diagnostic company in Milan, Italy, and Bio-Rad Laboratories, a life science
research company. Mr. Pekarsky holds a B.S. in Accounting from Indiana
University of Pennsylvania and an M.B.A. in Finance from Golden Gate University.
Vincent F. Ratford has served as our Vice President of Sales and Marketing
since February 1998. Prior to joining Virage Logic, Mr. Ratford served as Chief
Operating Officer of the Microtec Division of Mentor
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<PAGE> 45
Graphics, a provider of hardware and software design solutions to semiconductor
companies, from October 1995 to December 1997. Prior to joining the Microtec
Division, he was Director of Marketing for Mentor Graphics' System Design
Division from May 1993 to October 1995. Mr. Ratford holds a B.S. in Electrical
Engineering from Northeastern University.
Raymond T. Leung has served as our Vice President of Engineering Operations
since August 1998. Prior to joining Virage Logic, Mr. Leung was Senior Director
of Mixed Signal Development at LSI Logic where he worked from June 1989 to
August 1998. He also managed the embedded memory development group at LSI Logic
and holds two patents on memory design techniques. Mr. Leung holds a B.S. in
Electrical Engineering from Columbia University and an M.S. in Electrical
Engineering from Stanford University.
Kenneth V. Rousseau has served as our Vice President of Software
Development since February 2000. Prior to joining Virage Logic, Dr. Rousseau was
Director of New Product Management at Synopsys, a supplier of electronic design
automation tools. Prior to joining Synopsys, he held various positions at
Cascade Design Automation, another supplier of electronic design automation
tools, including Chief Technologist from August 1996 to December 1996, Vice
President, Engineering from August 1994 to August 1996, Manager, Design
Technologies from June 1993 to August 1994 and Engineering Fellow from January
1993 to June 1993. He also worked in the aerospace industry at Hughes Aircraft
and TRW Electronics and Defense, as well as several semiconductor companies
including GigaBit Logic and Vitesse. Dr. Rousseau holds a B.S. in Physics and
Literature and an M.S. in Applied Physics from California Institute of
Technology and a Ph.D in Electrical Engineering from UCLA.
William J. Palumbo has served as our Vice President and General Manager of
New Jersey Operations since July 1999. Prior to joining Virage Logic, Mr.
Palumbo served as Director of the Physical Library Division for Mentor Graphics
from October 1990 to July 1999. Prior to joining Mentor Graphics, he worked in
various management positions at RCA, General Electric and Harris Semiconductor
from December 1983 to September 1990. He holds one U.S. patent and has published
numerous articles in technical and business forums. Mr. Palumbo holds a B.S. in
Electrical Engineering from Rutgers University.
Alok Singh has served as our Vice President and General Manager of India
Operations since September 1997. Prior to joining Virage Logic, Mr. Singh was
the Director of Design Automation from November 1996 to August 1997 and Manager,
Design Automation from April 1990 to October 1996 at Waferscale Integration. Mr.
Singh holds a B.S. in Electrical Engineering from the University of Glasgow,
Scotland.
Richard Elkus has served as a Director since April 2000. Since May 1997,
Mr. Elkus has served as a director of KLA-Tencor, a manufacturer of metrology
and wafer inspection equipment for the semiconductor industry. Prior to the
merger of Prometrix Corporation and Tencor in February 1994, Mr. Elkus was
Chairman and Chief Executive Officer of Prometrix which he co-founded in 1983.
He also serves on the boards of directors of Lam Research, a semiconductor
equipment company, Sopra S.A., a semiconductor equipment company, and Voyan
Technology, a broadband systems company. He holds a B.S. from Stanford
University and an M.B.A. from Dartmouth College, Tuck School of Business
Administration.
Michael L. Hackworth has served as a Director since March 2000. Since
January 1985, he has held various positions at Cirrus Logic, a supplier of
analog circuits and advanced mixed-signal chip solutions, including President
and Chief Executive Officer from January 1985 to June 1998, Chairman and Chief
Executive Officer from June 1998 to April 1999 and Chairman since April 1999. He
also serves as a Director of Cirrus Logic and Read-Rite, a manufacturer of data
storage products. Mr. Hackworth holds a B.S. in Engineering from University of
Santa Clara.
Michael Stark has served as a Director since December 1999. Since December
1998, Mr. Stark has served as Managing Director of Crosslink Capital, Inc., a
San Francisco-based venture capital firm. From 1992 to December 1998, he was a
Managing Director of Crosslink Capital, which was a business unit of Robertson
Stephens. From 1989 to 1992 he was Director of Research at Robertson Stephens.
From 1983 to 1989, Mr. Stark was a senior research analyst with Robertson
Stephens, covering the semiconductor industry. Prior to joining Robertson
Stephens in 1983, he worked in Intel's strategic planning group. He serves on
the
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<PAGE> 46
board of directors of several private companies. Mr. Stark holds a B.S. in
Engineering from Northwestern University and an M.B.A. from the University of
Michigan.
Sang Wang has served as a Director since November 1998. Since April 1999,
Dr. Wang has served as Chief Executive Officer of Nassda Corporation, a Santa
Clara based EDA company. Prior to joining Nassda, he co-founded and served as
Chief Executive Officer and Chairman of EPIC Design Technology, an EDA company,
from September 1986 to May 1999. EPIC was acquired by Synopsys in February 1997.
Dr. Wang holds a B.S. in Electrical Engineering from National Taiwan University,
an M.S. in Physics from The Ohio State University and a Ph.D in Electrical
Engineering from Stanford University.
Yervant Zorian has served as a Director since November 1997. Since November
1996, Dr. Zorian has served as Chief Technical Advisor of LogicVision. Prior to
that he served as a Distinguished Member of the Technical Staff at Lucent
Technologies, Bell Laboratories. Dr. Zorian holds a B.S. in Electrical
Engineering from the University of Aleppo, an M.Sc. in Computer Engineering from
the University of Southern California and a Ph.D in Electrical Engineering from
McGill University.
BOARD COMPOSITION
We currently have seven directors. Prior to the completion of this
offering, each director was elected to serve until the next annual meeting of
stockholders or until their successors are elected and qualified. In connection
with this offering, our board of directors will be divided into three classes of
directors serving staggered three-year terms. As a result, only one class of
directors will be elected at each annual meeting of our stockholders, with the
other classes continuing for the remainder of their respective terms. Dr. Zorian
and Dr. Wang will be designated Class I directors with terms expiring at the
annual meeting of stockholders in 2001, Dr. Shubat and Mr. Stark will be
designated Class II directors with terms expiring at the annual meeting of
stockholders in 2002, and Mr. Kablanian, Mr. Hackworth and Mr. Elkus will be
designated Class III directors with terms expiring at the annual meeting of
stockholders in 2003.
BOARD COMMITTEES
Our board of directors has an audit and a compensation committee.
Audit Committee. The audit committee was formed in April 2000 and currently
consists of Mr. Elkus, Mr. Hackworth and Mr. Stark. Mr. Elkus and Mr. Hackworth
are independent directors. Mr. Stark is not considered an independent director
due to his employment by Crosslink Capital, which beneficially owns
approximately 15% of our outstanding shares. However, our board of directors
believes that Mr. Stark's substantial experience as a securities analyst will
bring additional expertise to the audit committee. The audit committee's
responsibilities include recommending to the board of directors the independent
public accountants to conduct the annual audit of our accounts, reviewing the
scope and results of the independent audits, and reviewing and evaluating
internal accounting policies
Compensation Committee. The compensation committee was formed in April 1999
and currently consists of Dr. Wang, Dr. Zorian, Mr. Hackworth and Mr. Stark. The
compensation committee administers the 1997 equity incentive plan and the 2000
employee stock purchase plan, determines the compensation and benefits of our
officers, and establishes and reviews general policies relating to the
compensation and benefits of our officers and employees.
DIRECTOR COMPENSATION
Directors do not receive cash payment for their service on the board or any
board committee, but they are entitled to reasonable out-of-pocket expenses
incurred in connection with their attendance at board and board committee
meetings. We have granted, and expect to continue to grant, non-employee
director options to purchase shares of our common stock. In November 1998, we
granted Dr. Wang and Dr. Zorian each an option to purchase 30,000 shares at an
exercise price of $0.13 per share; in March 2000, we granted Mr. Hackworth an
option to purchase 100,000 shares of common stock at an exercise price of $2.00
per share; and in April 2000, we granted Mr. Elkus an option to purchase 47,500
shares and Dr. Zorian an option
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<PAGE> 47
to purchase 20,000 shares, each at an exercise price of $4.00 per share. Each of
these options was immediately exercisable, but the shares received upon exercise
are subject to a right to repurchase these shares. This right to repurchase
expires with respect to 25% of the shares upon the one-year anniversary of the
date of the option grant. Thereafter, the right to repurchase the remaining
shares expires ratably over the next three years, in annual installments in the
case of Dr. Wang and Dr. Zorian's 1998 grant, and in monthly installments in the
case of Mr. Hackworth, Mr. Elkus and Dr. Zorian's 2000 grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the formation of the compensation committee in April 1999, the
entire board participated in all compensation decisions. None of our executive
officers presently serves, or in the past fiscal year has served, as a member of
the board of directors or compensation committee of any other company whose
executive officers served in past fiscal year on our board of directors or
compensation committee. See "Related Party Transactions" for a description of
transactions between us and entities affiliated with the members of our
compensation committee.
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the
compensation of our chief executive officer and each of the next four most
highly compensated executive officers, whose aggregate compensation exceeded
$100,000 during the fiscal year ended September 30, 1999. We refer to these
individuals as the "named executive officers" elsewhere in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
------------
ANNUAL COMPENSATION SECURITIES
------------------- UNDERLYING
NAME AND PRINCIPAL POSITION(S) SALARY BONUS OPTIONS
------------------------------ -------- ------- ------------
<S> <C> <C> <C>
Adam A. Kablanian......................................... $147,411 $ 2,259 --
President, Chief Executive Officer and Chairman of the
Board
Alexander Shubat.......................................... $149,261 $ 2,259 --
Vice President and Chief Technical Officer
Vincent F. Ratford........................................ $144,420 $90,372(1) --
Vice President of Sales and Marketing
Raymond T. Leung.......................................... $136,876 $ 2,016 150,000(2)
Vice President of Engineering Operations
</TABLE>
- ------------
(1) Consists of sales commissions.
(2) The options to purchase these shares were exercised immediately following
grant, but the shares issued upon exercise are subject to our right of
repurchase. This right of repurchase expires with respect to 25% of the
shares on the first anniversary of the date of the option grant and
thereafter, expires with respect to the remaining shares ratably over the
next three years on a quarterly basis.
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<PAGE> 48
OPTION GRANTS IN FISCAL YEAR 1999
The following table sets forth certain information with respect to options
granted to each of our named executive officers during the fiscal year ended
September 30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED ANNUAL
NUMBER OF OPTIONS RATES OF STOCK PRICE
SECURITIES GRANTED TO EXERCISE OR APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES BASE PRICE TERM
OPTIONS IN FISCAL PER SHARE EXPIRATION ------------------------
NAME GRANTED YEAR ($/SHARE) DATE 5% 10%
---- ---------- ---------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Adam A. Kablanian....... -- -- -- --
Alexander Shubat........ -- -- -- --
Vincent F. Ratford...... -- -- -- --
Raymond T. Leung........ 150,000 12.7% $0.13 11/12/08
</TABLE>
The percentage of options granted is based upon an aggregate of 1,177,500
options we granted during the fiscal year ended September 30, 1999 to our
employees, including the named executive officers. All of these options were
granted under our 1997 Equity Incentive Plan.
In March 2000, we granted options to purchase the following number of
shares to our named executive officers: Mr. Kablanian, 150,000 shares; Mr.
Shubat, 100,000 shares; Mr. Ratford, 62,500 shares; and Mr. Leung, 62,500
shares.
The options granted to Mr. Leung and the other executive officers are
immediately exercisable, but the shares issued upon exercise are subject to a
right of repurchase. This right will expire with respect to 25% of the
underlying shares on the one-year anniversary of the date of option grant.
Thereafter, this right will expire ratably over the next three years, on a
monthly basis for the options issued in March 2000, and on a quarterly basis for
the other options issued to Mr. Leung. Each of the named executive officers,
with the exception of Mr. Leung, have exercised each of the options granted
since the beginning of the 1999 fiscal year. Mr. Leung has exercised the option
to purchase 150,000 shares granted in November 1998 but not the option granted
in March 2000. See "Related Party Transactions."
The potential realizable value amounts in the last two columns of the above
table are calculated by assuming a base price of $0.13 per share and represent
hypothetical gains that could be achieved for the respective options if
exercised and sold at the end of the option term. The assumed 5% and 10% annual
rates of stock price appreciation from the date of grant to the end of the
option term are provided in accordance with the rules of the Securities and
Exchange Commission and do not represent our estimate or projection of the
future common stock price. Actual gains, if any, on stock appreciation are
dependant on the future performance of the common stock, overall market
conditions and the option holder's continued employment through the vesting
period. This table does not take into account any actual appreciation in the
price of the common stock from the date of grant to the present.
EXERCISE OF STOCK OPTIONS
The following table sets forth certain information concerning the exercise
of stock options by each of the named executive officers during the fiscal year
ended September 30, 1999. All of these options were granted under our 1997
Equity Incentive Plan.
There was no public market for our common stock during the year ended
September 30, 1999. Accordingly, the value realized upon exercise represents the
positive spread between the exercise price of
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<PAGE> 49
stock options and the fair market value of the options on the date of exercise,
as determined by our board of directors.
<TABLE>
SHARES ACQUIRED VALUE
NAME ON EXERCISE REALIZED
- ---------------------------------------------------------- -------- --
<S> <C> <C>
Adam A. Kablanian......................................... -- --
Alexander Shubat.......................................... -- --
Vincent F. Ratford........................................ -- --
Raymond T. Leung.......................................... 150,000(1) --(2)
</TABLE>
- ------------
(1) The shares issued upon exercise of these options are subject to our right of
repurchase. This right of repurchase expires with respect to 25% of the
shares on the first anniversary of the date of the option grant and
thereafter expires ratably on a quarterly basis over the next three years
with respect to the remaining shares.
(2) These options were exercised immediately following issuance at an exercise
price that our board of directors determined to be equal to the fair market
value of our common stock.
EMPLOYMENT OFFER LETTERS AND CHANGE OF CONTROL ARRANGEMENTS
In connection with our hiring of James R. Pekarsky, our Vice President of
Finance and Chief Financial Officer, Vincent F. Ratford, our Vice President of
Sales and Marketing, and Raymond T. Leung, our Vice President of Engineering
Operations, we entered into a letter agreement with each of these officers.
Under these agreements, we agreed to pay Mr. Pekarsky an annual salary of
$150,000, Mr. Ratford an annual salary of $140,000 plus bonuses based on sales,
and Mr. Leung, an annual salary of $125,000. In addition, we agreed to allow Mr.
Pekarsky to purchase 150,000 shares of restricted stock, Mr. Ratford 300,000
shares of restricted stock, and Mr. Leung 150,000 shares of restricted stock.
These shares vest over four years. However, in the event the employment of any
of these individuals is terminated following a change of control, these shares
will generally become immediately vested. These officers' employment is for no
specified length of time, and either party has the right to terminate such
officer's employment at any time with or without cause.
EMPLOYEE BENEFIT PLANS
1997 Equity Incentive Plan
Our 1997 Equity Incentive Plan was adopted by our board of directors in
August 1997 and approved by our stockholders in August 1997. The plan was later
amended by our board of directors in February 1999 and in November 1999, and
such amendments were approved by our stockholders in February 1999 and November
1999. The plan was also amended by our board of directors in February 2000 and
April 2000, and we will seek stockholder approval of these amendments prior to
the closing of this offering. Our 1997 Equity Incentive Plan provides for the
granting to employees of incentive stock options within the meaning of Section
422 of the Internal Revenue Code and for the granting to employees, officers,
directors and consultants of nonstatutory stock options. As of March 31, 2000,
this plan provided for the issuance of a total of 3,695,140 shares of our common
stock, of these shares, 1,896,125 were issued upon exercise of stock options,
1,559,500 shares were subject to outstanding options and 239,515 shares were
available for future grants. In April 2000, our board of directors increased the
number of shares available for grant under our 1997 Equity Incentive Plan by 1.5
million shares.
Unless terminated sooner, the 1997 Equity Incentive Plan will terminate
automatically in August 2007.
Our board of directors administers the stock option plan and has the power
to determine:
- the terms of the options or stock purchases granted, including the
exercise price of the options or restricted stock grants;
- the number of shares subject to each option or restricted stock grant;
- the vesting and exercisability and payment of each option or restricted
stock grant; and
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<PAGE> 50
- the form of consideration payable upon exercise of each option or stock
purchase right.
In addition, the administrator may modify outstanding options, provided
that it may not impair the rights of any optionee without such optionee's prior
written consent.
Options and stock purchase rights granted under our 1997 Equity Incentive
Plan are generally not transferable by the optionee, and each option and stock
purchase right is exercisable during the lifetime of the optionee and only by
such optionee. Options granted under the 1997 Equity Incentive Plan must
generally be exercised within three months after the end of the optionee's
status as an employee, director or consultant of Virage Logic, or within twelve
months after such optionee's termination by death or disability, but in no event
no later than the expiration of the option's term.
The exercise price of all incentive stock options granted under the 1997
Equity Incentive Plan must be at least equal to the fair market value of the
common stock on the date of the grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of our
outstanding capital stock, the exercise price of any incentive stock option
granted must at least equal 110% of the fair market value on the grant date and
the term of such incentive stock option must not exceed five years. The term of
all other options granted under the 1997 Equity Incentive Plan may not exceed
ten years.
The 1997 Equity Incentive Plan provides that in the event that we merge
into another corporation, merge with another corporation in a merger following
which our stockholders immediately prior to such merger cease to own their
shares, or sell substantially all of our assets, each option or stock purchase
right shall be assumed or substituted for by the successor corporation. If the
outstanding options and stock purchase rights are not assumed or substituted for
by the successor corporation, the options and the stock purchase rights will
expire in accordance with the conditions that our board of directors will
determine.
2000 Employee Stock Purchase Plan
Our board of directors adopted our 2000 Employee Stock Purchase Plan in
April 2000. This plan provides our employees with an opportunity to purchase our
common stock through accumulated payroll deductions.
A total of 200,000 shares of common stock has been reserved for issuance
under this plan. In addition, this plan provides for annual increases in the
number of shares available for issuance under the plan on the first day of each
year, beginning October 1, 2001, equal to the lesser of:
- 200,000 shares;
- 0.75% of the outstanding shares of our capital stock on that date; or
- such lesser amount as may be determined by our board of directors.
Our board of directors, or a committee appointed by the board, administers
this plan. Our board or its committee has full and exclusive authority to
interpret the terms of this plan and determine eligibility. Employees are
eligible to participate in this plan if they are employed by us or any
participating subsidiary for at least 20 hours per week for at least five months
in any calendar year. However, an employee may not be granted an option to
purchase stock under the purchase plan if such employee immediately after grant
owns stock possessing five percent or more of the total combined voting power or
value of all classes of our capital stock or of any subsidiary.
The plan provides for offering periods of six months. The offering periods
will generally start on October 1 and April 1 of each year, commencing October
1, 2000, and will end on March 31 and September 30 of each year.
This plan permits participants to purchase our common stock though payroll
deductions of up to 15% of the participant's compensation, up to a maximum of
$25,000 per year, and up to a maximum of 1,500 shares per offering period.
Compensation is defined as the participant's base straight time gross earnings
and commissions, but excludes payments for overtime, shift premium payments,
incentive compensation, incentive payments, bonuses and other compensation.
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<PAGE> 51
Amounts deducted and accumulated for the participant's account are used to
purchase shares of our common stock on the last trading day of each purchase
period at a price of 85% of the lower of the fair market values of the common
stock at the beginning of the offering period and the end of the purchase
period. Participants may reduce their withholding percentage to zero at any time
during an offering period but may otherwise change their withholding percentage
on the first day of each purchase period. Participants may end their
participation at any time during an offering period, and they will be paid their
payroll deductions to date. Participation ends automatically upon termination of
employment with us.
This plan, which is intended to qualify under Section 423 of the Internal
Revenue Code of 1986, as amended, allows for favorable tax treatment of
participants. Rights granted under the plan will not be transferable by a
participant other than by will or the laws of descent and distribution.
This plan provides that if we merge with or into another corporation or
effect a sale of substantially all of our assets, a successor entity may assume
or substitute for each outstanding purchase right. If the successor entity
refuses to assume or substitute the outstanding purchase rights, the offering
period then in progress will be shortened, and a new exercise date will be set.
This plan will terminate in 2020. Our board of directors has the authority,
however, to amend or terminate this plan at any time and may apply any action
which would affect the participants' outstanding rights to purchase stock under
this plan.
Fiscal Year 2000 Executive Variable Incentive Pay Plan
In fiscal 2000, our board of directors adopted the Virage Logic Corporation
Fiscal Year 2000 Executive Variable Incentive Pay Plan, or the VIP Plan. The
purpose of the VIP Plan is to provide key employees with a variable pay plan
that links employee contribution and company performance and provides an
incentive to achieve our objectives. Eligibility under the VIP Plan is limited
to employees at the President, Vice President and director levels. Payments to
participants in the VIP Plan are linked to our revenues and operating profits in
fiscal 2000 as compared with the planned revenues and operating profits for that
year. Pursuant to the VIP Plan, participants may receive additional annual
compensation of 15% (for director-level employees) or 25% (for our President and
Vice Presidents) of their base salary if our revenues and operating profits for
fiscal 2000 are as planned, and up to 30% and 50% of the base salary,
respectively, if our revenues in fiscal 2000 are 130% or more than planned and
our operating profits in fiscal 2000 are 200% or more than planned.
Fiscal Year 2000 Employee Bonus Plan
For fiscal year 2000, we have instituted a bonus plan for our employees.
Under this plan, 10% of our pre-tax profits before deductions for deferred
compensation will be distributed quarterly to our United States employees, other
than our sales and marketing employees and participants in the Fiscal Year 2000
Executive Variable Incentive Pay Plan.
401(k) Plan
In June 1998, we implemented a Retirement Savings and Investment Plan
covering our full-time employees located in the United States. This plan is
intended to qualify under Section 401(k) of the Internal Revenue Code of 1986,
as amended, so that contributions to this plan by employees, and the investment
earnings thereon, are not taxable to employees until withdrawn. Pursuant to the
plan, employees may elect to reduce their current compensation from a minimum of
one percent of their annual compensation up to the statutory prescribed annual
limit ($10,500 in 2000) and to have the amount of reduction contributed to the
plan. We may make additional matching contributions on behalf of plan
participants on a discretionary basis, and such contributions shall vest during
a period of four years.
LIMITATION ON LIABILITY AND INDEMNITY
Upon the closing of this offering, our charter documents will provide that
we will indemnify our directors and executive officers and may indemnify our
other officers, employees and other agents to the
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<PAGE> 52
fullest extent permitted by Delaware law. Our charter documents will allow us to
enter into indemnification agreements with our directors and officers and to
purchase insurance for any person whom we are required or permitted to
indemnify. We have obtained a policy of directors' and officers' liability
insurance that insures such persons against the cost of defense, settlement or
payment of a judgment under certain circumstances.
We intend to enter into agreements with our directors and executive
officers regarding indemnification. Under these agreements, we will indemnify
them against amounts actually and reasonably incurred in connection with an
actual, or a threatened, proceeding if any of them may be made a party because
of their role as one of our directors or officers. We are obligated to pay these
amounts only if the officer or director acted in good faith and in a manner that
he or she reasonably believed to be in or not opposed to our best interests.
With respect to any criminal proceeding, we are obligated to pay these amounts
only if the officer or director had no reasonable cause to believe his or her
conduct was unlawful. The indemnification agreements also set forth procedures
that will apply in the event of a claim for indemnification thereunder.
In addition, our restated Certificate of Incorporation to be filed in
connection with this offering will provide that the liability of our directors
for monetary damages shall be eliminated to the fullest extent permissible under
Delaware law. This provision does not eliminate a director's duty of care. Each
director will continue to be subject to liability for:
- breach of the director's duty of loyalty to us;
- 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 our best
interests or our stockholders;
- any transaction from which the director derived an improper personal
benefit;
- improper transactions between the director and us; and
- for improper distributions to stockholders 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 state or federal
environmental laws.
There is no pending litigation or proceeding involving any of our directors
or officers for which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or officer.
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RELATED PARTY TRANSACTIONS
SALES OF SECURITIES
In January 1996, we issued 2,520,000 shares of common stock to each of Adam
A. Kablanian and Alexander Shubat in exchange for a total of $100 paid by each
officer. At the same time we issued 1,280,000 shares of Series A preferred stock
to Mr. Kablanian in exchange for $333,000 paid in cash and property and 38,212
shares of Series A preferred stock to Mr. Shubat in exchange for $10,000 in
property. Each share of Series A preferred stock is convertible into 1.5 shares
of common stock.
In March 1997, we subsequently repurchased 2,268,000 of the shares of
common stock issued to Mr. Kablanian and Mr. Shubat for an aggregate purchase
price of $90 paid to each officer. In August 1997, we sold 2,268,000 shares of
common stock to each of Mr. Kablanian and Mr. Shubat pursuant to Founder's
Restricted Stock Purchase Agreements, in exchange for promissory notes from each
officer in the principal amount of $39,569. These notes bear interest at a rate
of 6.29%, are secured by a pledge of the shares and are due on August 27, 2002.
In July 1998, we sold 1,448,037 shares of Series B preferred stock for a
purchase price of $2.40 per share to 21 investors. Tower Semiconductor, one of
our 5% stockholders, purchased 625,000 of these shares, Sang Wang purchased
41,666 of these shares and Kenneth Rousseau purchased 6,330 of these shares. Dr.
Wang was subsequently elected to our board of directors and Dr. Rousseau
subsequently became one of our executive officers. Each share of Series B
preferred stock is convertible into 1.5 shares of common stock.
In December 1999, we sold 5,455,255 shares of Series C preferred stock at a
purchase price of $1.90 per share to 49 investors. Affiliates of Crosslink
Capital, Inc., which then became one of our 5% stockholders, purchased 4,197,753
shares, Michael Hackworth purchased 13,157 shares and Richard Elkus purchased
26,315 shares. Mr. Stark, a managing member of Crosslink Capital, Mr. Hackworth
and Mr. Elkus were each subsequently appointed to our board of directors. Each
share of Series C preferred stock is convertible into 0.5 shares of common
stock.
In connection with the investment of its affiliates, we entered into an
agreement with Crosslink Capital, Inc. to use our reasonable best efforts to
cause the managing underwriters in this offering to offer Crosslink the right to
purchase at the offering price, the lesser of 10% of the shares of common stock
sold in this offering or shares of common stock with a total purchase price of
$3.0 million. Crosslink has agreed to waive our compliance with this agreement,
contingent upon the closing of our sale to Crosslink or its affiliates of
shares of common stock in a private placement concurrent with
this offering. See "Description of Capital Stock -- Concurrent Private
Placement."
We have granted demand registration rights to the purchasers of our Series
B and Series C preferred stock. In addition, we have granted limited rights to
Mr. Kablanian and Mr. Shubat to require us to include their shares of common
stock, including common stock issuable upon conversion of the Series A preferred
stock, in any registration effected for our own account. See "Description of
Capital Stock -- Registration Rights."
EMPLOYMENT AGREEMENTS AND OTHER COMPENSATION AGREEMENTS
We have entered into letter agreements with Mr. Pekarsky, our Vice
President of Finance and Chief Financial Officer, Mr. Ratford, our Vice
President of Sales and Marketing, and Mr. Leung, our Vice President of
Engineering Operations, which set forth certain terms of their employment with
us. See "Management -- Employment Offer Letters and Change of Control
Arrangements."
OPTION GRANTS
We have granted options to our directors and executive officers, and we
intend to grant additional options to our directors and officers in the future.
See "Management -- Director Compensation" and -- Option Grants in Fiscal Year
1999."
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<PAGE> 54
INDEMNIFICATION AGREEMENTS
We intend to enter into indemnification agreements with our directors and
executive officers. Such agreements may require us, among other things, to
indemnify our officers and directors, other than for liabilities arising from
willful misconduct of a culpable nature, and to advance their expenses incurred
as a result of any proceeding against them as to which they could be
indemnified. See "Management -- Limitation of Liability and Indemnity."
LOANS TO CERTAIN OFFICERS
In March 2000, we extended loans to Mr. Kablanian in the principal amount
of $225,000, Mr. Shubat in the principal amount of $150,000, Mr. Pekarsky in the
principal amount of $105,000, and Mr. Ratford in the principal amount of
$133,750 in order to allow them to exercise stock options. These loans are
evidenced by one or more full recourse promissory notes which are payable in
March 2005. These notes bear interest at a rate of 6.69% and are secured by a
pledge of the shares purchased. In addition, $39,569 plus accrued interest is
still outstanding under each of the promissory notes executed by Mr. Kablanian
and Mr. Shubat in August 1997.
OTHER RELATED PARTY TRANSACTIONS
In January 1999, we entered into a Development Agreement with Tower
Semiconductor, which currently owns approximately 6% of our common stock. Under
this agreement, we agreed to develop memory compilers for specified Tower
manufacturing processes. In addition, we granted Tower an exclusive perpetual
license to use these compilers and our technology to generate certain defined
modules, although we are permitted to license compilers to Tower's customers for
generating instances using a Tower fabrication process. We have performed all
development work required of us under this agreement.
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<PAGE> 55
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of our common stock as of March 31, 2000 and as adjusted to
reflect the sale of the common stock being offered by this prospectus for:
- each person who is known by us to beneficially own more than 5% of our
common stock;
- each of our directors;
- each of our named executive officers; and
- all of our executive officers and directors as a group.
Percentage of ownership is based on shares of common stock outstanding as
of March 31, 2000, giving effect to the conversion of our preferred stock into
common stock upon the closing of this offering, and shares
outstanding after this offering, assuming no exercise of the underwriters'
over-allotment options.
Beneficial ownership is calculated based on requirements of the SEC. All
shares of the common stock subject to options currently exercisable or
exercisable within 60 days after March 31, 2000 are deemed to be outstanding for
computing the percentage of ownership of the person holding such options, but
are not deemed to be outstanding for computing the percentage of ownership of
any other person. To our 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.
Unless otherwise indicated in this table, the address of each individual
listed in the table is Virage Logic Corporation, 46501 Landing Parkway, Fremont,
California 94538.
<TABLE>
<CAPTION>
PERCENT PERCENT
BEFORE AFTER
NAME OF BENEFICIAL OWNER NUMBER OFFERING OFFERING
------------------------ ---------- -------- --------
<S> <C> <C> <C>
Crosslink Capital, Inc..................................... 2,098,876(1) 14.3%
555 California Street #2350
San Francisco, CA 94104
Tower Semiconductor........................................ 937,500 6.4%
P.O. Box 619
Migdal Haemek 10556
ISRAEL
Adam A. Kablanian.......................................... 4,590,000(2) 31.3%
Alexander Shubat........................................... 2,677,318(3) 18.2%
James R. Pekarsky.......................................... 150,000(4) 1.0%
Vincent F. Ratford......................................... 362,500(5) 2.5%
Raymond T. Leung........................................... 212,500(6) 1.4%
Richard Elkus.............................................. 13,158(7) *
Michael L. Hackworth....................................... 106,579(8) *
Michael Stark.............................................. 2,098,877(9) 14.3%
Sang Wang.................................................. 99,078(10) *
Yervant Zorian............................................. 30,000(11) *
All current executive officers and directors as a group (10
persons)................................................. 10,340,010(12) 69.4%
</TABLE>
- ------------
* Less than 1%.
(1) Includes 406,727 shares held by Crosslink Omega Ventures III, L.L.C.;
634,250 shares held by Crosslink Offshore Omega Ventures III; and 56,075
shares held by Omega Bayview, L.L.C.; and 1,001,825 shares held by Crosslink
Crossover Fund III, L.P. Crosslink. Crosslink Capital, Inc. is a managing
member of each of these limited liability companies.
(2) Includes 150,000 shares subject to a right of repurchase as of March 31,
2000.
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<PAGE> 56
(3) Includes 100,000 shares subject to a right of repurchase as of March 31,
2000.
(4) All of these shares are subject to a right of repurchase as of March 31,
2000.
(5) Includes 212,500 shares subject to a right of repurchase as of March 31,
2000.
(6) Includes 93,750 shares subject to a right or repurchase as of March 31,
2000 and options to purchase 62,500 shares that are immediately
exercisable, subject to our right to repurchase the shares issued upon
exercise.
(7) Does not include an option to purchase 47,500 shares granted in April 2000.
(8) Includes 100,000 shares issuable upon exercise of an option that is
immediately exercisable, subject to our right of repurchase.
(9) Includes 406,727 shares held by Crosslink Omega Ventures III, L.L.C.;
634,250 shares held by Crosslink Offshore Omega Ventures III; and 56,075
shares held by Omega Bayview, L.L.C.; and 1,001,825 shares held by
Crosslink Crossover Fund III, L.P. Mr. Stark is a managing director of
Crosslink Capital, Inc. which is a managing member of each of these limited
liability companies. Mr. Stark disclaims beneficial ownership of these
shares except to the extent of his pecuniary interest.
(10) Includes 30,000 shares issuable upon the exercise of an option that is
immediately exercisable, subject to our right to repurchase 22,500 of the
shares issued upon exercise.
(11) Includes 30,000 shares issuable upon the exercise of an option that is
immediately exercisable, subject to our right to repurchase 22,500 of the
shares issued upon exercise. Does not include an option to purchase 20,000
shares granted in April 2000.
(12) Includes 706,250 shares subject to a right of repurchase and 222,500 shares
issuable upon the exercise of options that are immediately exercisable,
subject to our right to repurchase the shares issued upon exercise.
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<PAGE> 57
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
150,000,000 shares of common stock, $.001 par value per share, and 25,000,000
shares of undesignated preferred stock, $.001 par value per share.
The following description of our capital stock does not purport to be
complete and is subject to and qualified in its entirety by our restated
certificate of incorporation to be effective before the closing of this
offering, our bylaws and the provisions of applicable Delaware law.
COMMON STOCK
Assuming the conversion of our Series A preferred stock, Series B preferred
stock and Series C preferred stock to common stock, and the completion of a
1-for-2 reverse stock split as of March 31, 2000, there were 14,684,401 shares
of common stock outstanding. At March 31, 2000, options and warrants to purchase
1,619,500 shares of common stock were also outstanding. During April 2000, we
granted options to purchase 128,500 shares of common stock. There will be
shares of common stock outstanding (assuming no exercise of the
underwriters' overallotment option or exercise of outstanding options), after
giving effect to the sale of the shares offered by this prospectus and the
concurrent private placement of up to 10% of the number of shares included in
this offering. The holders of our common stock will be entitled to one vote for
each share held of record on all matters submitted to a vote of the
stockholders, including elections of directors. Subject to preferences that may
be applicable to any outstanding preferred stock, holders of common stock are
entitled to receive ratably any dividends declared by our board of directors out
of funds legally available for that purpose. See "Dividend Policy." In the event
of our liquidation, dissolution or winding up, the holders of our common stock
will be entitled to share ratably in all assets remaining after payment of
liabilities, subject to the prior distribution rights of any outstanding
preferred stock. Our common stock has no preemptive or conversion rights or
other subscription rights. The outstanding shares of our common stock are, and
the shares of common stock to be issued upon completion of this offering will
be, fully paid and non-assessable.
PREFERRED STOCK
Upon the completion of this offering, our board of directors will have the
authority, without further action by our stockholders, to issue up to 25,000,000
shares of preferred stock, $.001 par value, in one or more series. Our board of
directors also will have the authority to designate the rights, powers,
preferences, privileges and restrictions of each series, including dividend
rights, dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, liquidation preferences and the number of shares constituting
any series.
Issuances of preferred stock, while providing desirable flexibility in
connection with possible acquisitions and for other corporate purposes, may have
the effect of delaying, deferring or preventing a change in control of Virage
Logic without further action by the stockholders. The issuance of preferred
stock with voting and conversion rights may also adversely affect the voting
power of the holders of common stock. In certain circumstances, an issuance of
preferred stock could have the effect of decreasing the market price of our
common stock.
All outstanding shares of preferred stock will be converted to common stock
upon the completion of this offering and we currently have no plans to issue any
other shares of preferred stock.
WARRANTS
As of March 31, 2000, we had the following outstanding warrants to purchase
shares of our capital stock: (1) a warrant to purchase up to 7,500 shares of
common stock at an exercise price of $0.70 per share that was issued in
consideration for legal services; (2) a warrant to purchase up to 25,000 shares
of Series B preferred stock, convertible into 37,500 shares of common stock at
an effective conversion price of $1.60, which was issued to a consultant; and
(3) a warrant to purchase up to 30,000 shares of Series C preferred
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<PAGE> 58
stock, convertible into 15,000 shares of common stock at an effective conversion
price of $3.80 per share, which was issued to Silicon Valley Bank as
consideration for our credit line.
REGISTRATION RIGHTS
After this offering, the holders of 11,917,001 shares of common stock will
be entitled to rights with respect to the registration of such shares under the
Securities Act. If we propose to register our common stock under the Securities
Act in connection with the public offering of common stock, then these holders
are entitled to notice of the registration and to include shares of common stock
in the registration at our expense. In addition, six months after the closing of
this offering, holders of 4,899,683 shares have the right to demand on up to
three separate occasions that we register their shares for resale at our expense
on any form of SEC registration statement available to us. These holders may
also require us to file additional registration statements on Form S-3 to
register their shares for resale. All of these registration rights are limited
by the terms and conditions of our agreements with these stockholders, including
the right of the underwriters of an offering to limit the number of shares
included in such registration.
CONCURRENT PRIVATE PLACEMENT
In connection with our sale of shares of Series C preferred stock to
affiliates of Crosslink Capital, Inc., we entered into an agreement with
Crosslink to use our reasonable best efforts to cause the managing underwriters
in our initial public offering to offer Crosslink the right to purchase shares
in that offering. See "Related Party Transactions -- Sales of Securities."
Crosslink has agreed to waive our compliance with this agreement, contingent
upon the closing of our sale to Crosslink or its affiliates of
shares of common stock in a private placement concurrent with this offering. We
anticipate that the holders of these shares will be entitled to the same rights
with respect to the registration of these shares under the Securities Act as our
holders of Series B and C preferred stock. See "-- Registration Rights."
DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS
We are currently incorporated in the State of California. Prior to the
closing of the offering, we intend to reincorporate in the State of Delaware.
Provisions of Delaware law and our charter documents could have an
anti-takeover effect and may delay, discourage or prevent a tender offer or
takeover attempt that a stockholder might consider to be in its best interests,
including attempts that might result in a premium being paid over the market
price of our common stock.
Section 203. We will be subject to the provisions of Section 203 of the
Delaware law. In general, this statute prohibits a publicly-held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder unless, subject to exceptions, the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale, or other transaction
resulting in a financial benefit to the stockholder. Generally, an "interested
stockholder" is a person who, together with affiliates and associates, owns, or
within three years prior, did own, 15% or more of the corporation's voting
stock. These provisions may have the effect of delaying, deferring or preventing
a change in control of Virage Logic without further action by the stockholders.
Board of Directors. Our restated Certificate of Incorporation and bylaws
will provide that, subject to any rights of holders of preferred stock to elect
additional directors under specified circumstances, the number of directors will
be fixed from time to time exclusively by resolution of the board of directors.
The directors, other than those who may be elected by the holders of preferred
stock, will be divided into three classes, as nearly equal in number as
possible. Each director will hold office until such person's successor is duly
elected and qualified. In addition, subject to any rights of holders of
preferred stock, newly created directorships resulting from any increase in the
number of directors and any vacancies on the board of directors resulting from
death, resignation, disqualification, removal or other cause will be filled by
the affirmative vote of a
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<PAGE> 59
majority of the remaining directors then in office, even if less than a quorum,
and not by the stockholders. No decrease in the number of directors constituting
the board of directors will shorten the term of any incumbent director. Subject
to the rights of holders of preferred stock, generally any director may be
removed from office only for cause by the affirmative vote of the holders of at
least a majority of our outstanding common stock.
These provisions would preclude a third-party from removing incumbent
directors and simultaneously gaining control of our board of directors by
filling the vacancies created by removal with its own nominees. Under the
classified board provision described above, it would take at least two elections
of directors for any individual or group to gain control of our board of
directors. Accordingly, these provisions could discourage a third party from
initiating a proxy contest, making a tender offer or otherwise attempting to
gain control of Virage Logic.
No Stockholder Action By Written Consent; Special Meetings. Our restated
Certificate of Incorporation will provide that stockholders may only take action
at a duly called annual or special meeting and not by written consent. At the
same time our bylaws will provide that special meetings of stockholders may be
called only by the chairman of the board or the president, by any officer at the
request in writing of a majority of the directors or by the holders of at least
25% of our outstanding shares. These provisions may delay consideration of a
stockholder proposal until the next annual meeting.
Advance Notice Procedures. Our bylaws will provide for an advance notice
procedure for the nomination, other than by or at the direction of our board of
directors, of candidates for election as directors as well as for other
stockholder proposals to be considered at annual meetings of stockholders.
Charter Amendments. Our restated Certificate of Incorporation will provide
that the affirmative vote of at least 75% of our board of directors or the
holders of at least 80% of our outstanding common stock is required to amend,
repeal or adopt any provision inconsistent with the foregoing provisions of the
restated Certificate of Incorporation. Our bylaws will also provide that they
may be altered, amended or repealed only by the affirmative vote of directors
constituting not less than a majority of the entire board of directors (if
effected by action of the board of directors) or by the affirmative vote of the
holders of at least 80% of the voting power of all classes of outstanding
capital stock, voting together as a single class (if effected by action of the
stockholders).
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is .
The Transfer Agent's address and telephone number are ,
( ) - .
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<PAGE> 60
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this offering, we will have outstanding
shares of common stock. Of these shares, the
shares sold in this offering (plus any shares issued upon exercise of the
underwriters' over-allotment option) will be freely tradable without restriction
under the Securities Act, unless purchased by "affiliates" of Virage Logic. The
remaining shares are "restricted securities" within the meaning
of Rule 144 under the Securities Act of 1933. These restricted securities
generally may not be sold in the absence of an effective registration statement
under the Securities Act, other than in accordance with Rule 144 or another
exemption from registration.
Our officers, directors and substantially all holders of our capital stock
and vested stock options have entered into lock-up agreements under which they
have agreed not to offer or sell any shares of our common stock for a period of
180 days after the date of this prospectus without the prior written consent of
FleetBoston Robertson Stephens Inc. See "Underwriting." These individuals or
entities may request that FleetBoston Robertson Stephens Inc. consider an early
release from their lock-up agreements. FleetBoston Robertson Stephens Inc. may,
at any time and without notice, grant an early release for shares subject to
these lock-up agreements. Following the lock-up period, these shares will not be
eligible for sale in the public market without registration under the Securities
Act unless such sales meet the applicable conditions and restrictions of Rule
144 or Rule 701, as described below.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares of our common stock for at least one year is entitled to sell in any
three-month period a number of shares that does not exceed the greater of 1.0%
of the number of shares of our common stock then outstanding (which will equal
approximately shares immediately after this offering) or the
average weekly trading volume of our common stock during the four calendar weeks
preceding the sale. Sales under Rule 144 are also subject to certain manner of
sale provisions and notice requirements and to the availability of current
public information about Virage Logic. Persons who are not affiliates and have
held our shares for at least two years are not subject to the volume and manner
of sale restrictions. Outstanding shares that were issued upon the exercise of
options issued pursuant to a written compensatory plan to directors, officers,
employees, advisors and consultants may also be sold under the resale provisions
of Rule 701, which permits nonaffiliates to sell their Rule 701 shares without
having to comply with the public information, holding periods, volume limitation
or notice provisions of Rule 144, and permits affiliates to sell their Rule 701
shares without having to comply with Rule 144's holding period restrictions, in
each case commencing 90 days after the date of this prospectus (subject to the
additional restrictions imposed by the lock-up agreements).
We also intend to file a registration statement under the Securities Act as
soon as practicable following this offering to register shares of
common stock issuable upon the exercise of outstanding stock options or reserved
for issuance under our stock option plans or employee purchase plan. After the
effective date of such registration statement, these shares will be available
for sale in the open market subject to the lock-up agreements described above
and, for our affiliates, to the conditions and restrictions of Rule 144.
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<PAGE> 61
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., SG Cowen Securities Corporation and Needham
& Company, Inc., have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of our common stock indicated opposite their names below. The
underwriters are committed to purchase and pay for all these shares if any are
purchased.
<TABLE>
<CAPTION>
NUMBER
UNDERWRITERS OF SHARES
------------ ---------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
SG Cowen Securities Corporation.............................
Needham & Company, Inc......................................
---------
Total.....................................................
=========
</TABLE>
We have been advised that the underwriters propose to offer the shares of
our common stock to the public at the initial public offering price located on
the cover page of this prospectus and to certain dealers at that price less a
concession of not in excess of $ per share, of which $ may be
reallowed to other dealers. After the initial public offering, the public
offering price, concession and reallowance to dealers may be reduced by the
representatives. No reduction will change the amount of proceeds to be received
by us as indicated on the cover page of this prospectus. Our common stock is
offered by the underwriters as stated herein, subject to receipt and acceptance
by them and subject to their right to reject any order in whole or in part.
Before this offering, there has been no public market for our common stock.
Consequently, the initial public offering price for our common stock offered by
this prospectus will be determined through negotiations between us and the
representatives of the underwriters. Among the factors to be considered in such
negotiations are prevailing market conditions, our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.
The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.
In December 1999, two employees of FleetBoston Robertson Stephens Inc. each
purchased 13,157 shares of Series C preferred stock, two employees of SG Cowen
Securities Corporation purchased 13,157 shares and 26,315 shares of Series C
preferred stock, respectively, and one employee of Needham & Company, Inc.
purchased 10,526 shares of our Series C preferred stock.
Over-Allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of our common stock at the same
price per share as we will receive for the shares that the
underwriters have agreed to purchase. To the extent that the underwriters
exercise this option, each of the underwriters will have a firm commitment to
purchase approximately the same percentage of additional shares that the number
of shares of our common stock to be purchased by it shown in the above table
represents as a percentage of the shares offered by this prospectus. If
purchased, the additional shares will be sold by the underwriters on the same
terms as those on which the shares are being sold. We will be
obligated, under this option, to sell shares to the extent the option is
exercised. The underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of our common
stock offered by this prospectus.
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Underwriting Discounts and Commissions. The following table shows the per
share and total underwriting discounts and commissions to be paid by us to the
underwriters. This information is presented assuming either no exercise or full
exercise by the underwriters of their over-allotment option.
<TABLE>
<CAPTION>
TOTAL
---------------------------------
WITHOUT
PER SHARE OVER-ALLOTMENTS OVER-ALLOTMENTS
--------- --------------- ---------------
<S> <C> <C> <C>
Underwriting discounts and commissions.......... $ $ $
</TABLE>
We estimate expenses payable by us in connection with this offering, other
than underwriting discounts and commissions referred to above, will be
approximately $ .
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including liabilities
under the Securities Act of 1933 and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-Up Agreements. Each of our executive officers, directors and
substantially all of our other stockholders and optionholders have agreed with
the representatives for a period of 180 days after the date of this prospectus,
subject to certain exceptions, not to offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to any
shares of common stock, any options or warrants to purchase any shares of our
common stock, or any securities convertible into or exchangeable for shares of
our common stock owned as of the date of this prospectus or thereafter acquired
directly from us by such holders or with respect to which they have or hereafter
acquire the power of disposition, without the prior written consent of
FleetBoston Robertson Stephens Inc. However, FleetBoston Robertson Stephens Inc.
may, in its sole discretion and at any time without notice, release all or any
portion of the securities subject to the lock-up agreements. There are no
agreements between the representatives and any of our stockholders providing
consent by the representatives to the sale of shares prior to the expiration of
the lock-up period.
In addition, we have agreed that during the 180-day lock-up period, we will
not, without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions:
- consent to the disposition of any shares held by stockholders subject to
lock-up agreements prior to the expiration of the lock-up period; or
- issue, sell, contract to sell, or otherwise dispose of, any shares of our
common stock, any options or warrants to purchase any shares of our
common stock or any securities convertible into, exercisable for or
exchangeable for shares of our common stock other than our sale of shares
in this offering, our issuance of common stock upon the exercise of
currently outstanding options, and our issuance of incentive awards under
our stock incentive plans. See "Shares Eligible for Future Sale."
Listing. We have applied to have our shares approved for quotation on the
Nasdaq National Market under the symbol "VIRL."
Stabilization. The representatives have advised us that, under Regulation M
under the Securities Exchange Act, certain persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of our common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for, or the purchase of, the common stock on behalf
of the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for, or the purchase
of, our common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the representatives to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by such underwriter or syndicate
member is purchased by the representatives in a syndicate covering transaction
and has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that these transactions may be
effected on the Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
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Directed Share Program. At our request, the underwriters have reserved up
to shares of common stock to be issued by us and offered hereby
for sale, at the initial public offering price, to directors, officers,
employees, other business associates and related persons of Virage Logic. The
number of shares of our common stock available for sale to the general public
will be reduced to the extent that these individuals purchase all or a portion
of these reserved shares. Any reserved shares that are not purchased will be
offered by the underwriters to the general public on the same basis as the
shares of common stock offered by this prospectus. We have agreed to indemnify
those certain underwriters against certain liabilities and expenses, including
liabilities under the Securities Act, in connection with the sales of directed
shares.
Conflicts of Interests. From time to time, the underwriters may perform
investment banking or other services for us in the future.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Heller Ehrman White & McAuliffe LLP, Palo Alto, California. Certain legal
matters in connection with this offering will be passed upon for the
underwriters by O'Melveny & Myers LLP, San Francisco, California.
EXPERTS
Ernst & Young LLP, independent auditors, has audited our consolidated
financial statements and schedule at September 30, 1999, and for the year ended
September 30, 1999. The information under the caption "Selected Consolidated
Financial Data" at September 30, 1999 and for the year ended September 30, 1999,
included in this prospectus and elsewhere in the registration statement, have
been derived from consolidated financial statements audited by Ernst & Young
LLP. We have included our consolidated financial statements and schedule in this
prospectus and elsewhere in the registration statement in reliance on Ernst &
Young LLP's report, given on their authority as experts in accounting and
auditing.
Mohler, Nixon & Williams Accountancy Corporation, independent auditors,
have audited our consolidated financial statements and schedule at September 30,
1997 and 1998 and for the years then ended, as set forth in their report. We
have included our consolidated financial statements and schedule in the
prospectus and elsewhere in the registration statement in reliance on Mohler,
Nixon & Williams Accountancy Corporation's report, given upon the authority of
such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the shares of our
common stock offered by this prospectus. This prospectus does not contain all of
the information set forth in the registration statement or the exhibits and
schedules to that registration statement. For further information with respect
to Virage Logic and the common stock, we refer you to the registration
statement, including the exhibits and schedules. Statements made in this
prospectus concerning the contents of any contract or other document are not
necessarily complete. Please refer to the copy of the document filed as an
exhibit to the registration statement for a more complete description.
Each statement is qualified in all respects by reference to the exhibit.
You may inspect the registration statement without charge and obtain copies of
all or any part by paying certain fees at the SEC's public reference facilities
at 450 Fifth Street, N.W., Washington, D.C. 20549, and its regional offices at
Seven World Trade Center, 13th Floor, New York, NY 10048, and the Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Please call the Securities and Exchange Commission at 1-800-SEC-0330 for further
information on the operation of the public reference rooms. Our Securities and
Exchange Commission filings, including the registration statement, are also
available to you on the SEC's web site at http://www.sec.gov. As a result of
this offering, we will become subject to the information and reporting
requirements of the Exchange Act, and, in accordance therewith, will file
periodic reports, proxy statements and other information with the SEC. We intend
to furnish our stockholders with annual reports containing audited consolidated
financial statements.
61
<PAGE> 64
VIRAGE LOGIC CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Ernst & Young LLP, Independent Auditors........... F-2
Report of Mohler, Nixon & Williams Accountancy Corporation,
Independent Auditors...................................... F-3
Consolidated Balance Sheets................................. F-4
Consolidated Statements of Operations....................... F-5
Consolidated Statement of Redeemable Convertible Preferred
Stock and Stockholders' Equity (Deficit).................. F-6
Consolidated Statements of Cash Flows....................... F-7
Notes to Consolidated Financial Statements.................. F-8
</TABLE>
F-1
<PAGE> 65
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Virage Logic Corporation
We have audited the accompanying consolidated balance sheet of Virage Logic
Corporation as of September 30, 1999, and the related consolidated statements of
operations, redeemable convertible preferred stock and stockholders' equity
(deficit), and cash flows for the year then ended. The consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with auditing standards generally
accepted in the United States. 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Virage Logic Corporation at September 30, 1999, and the consolidated results of
its operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States.
San Jose, California
November 1, 1999
- --------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon the completion of
the reincorporation of Virage Logic Corporation in Delaware as described in Note
9 of the Notes to Consolidated Financial Statements.
/s/ ERNST & YOUNG LLP
San Jose, California
May 1, 2000
F-2
<PAGE> 66
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
and Stockholders of
Virage Logic Corporation
We have audited the accompanying consolidated balance sheets of Virage
Logic Corporation as of September 30, 1997 and 1998, and the related
consolidated statements of operations, redeemable convertible preferred stock
and stockholders' equity and cash flows for the years then ended. These
consolidated 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Virage Logic Corporation as of September 30, 1997 and 1998, and the consolidated
results of its operations, redeemable convertible preferred stock and
stockholders' equity and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
MOHLER, NIXON & WILLIAMS
Accountancy Corporation
Campbell, California
February 18, 2000
- --------------------------------------------------------------------------------
The foregoing is in the form that will be signed upon the completion of the
reincorporation of Virage Logic Corporation in Delaware as described in Note 9
of the Notes to Consolidated Financial Statements.
Campbell, California
May 1, 2000
/s/ MOHLER, NIXON & WILLIAMS
Accountancy Corporation
F-3
<PAGE> 67
VIRAGE LOGIC CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
SEPTEMBER 30, EQUITY
------------------------- MARCH 31, AT MARCH 31,
1998 1999 2000 2000
----------- ----------- ----------- --------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 1,971,762 $ 1,512,757 $ 7,925,191
Accounts receivable, net.................................. 668,747 4,262,705 5,071,928
Costs in excess of related billings on uncompleted
contracts............................................... -- 331,875 342,938
Prepaid expenses and other................................ 185,147 719,284 830,928
Prepaid taxes............................................. -- -- 896,213
----------- ----------- -----------
Total current assets.................................... 2,825,656 6,826,621 15,067,198
Property, equipment and leasehold improvements, net......... 438,983.... 1,963,536 3,541,178
Intangible assets, net of amortization of $24,632 at March
31, 2000.................................................. -- -- 270,953
Deferred tax assets......................................... -- 260,000 260,000
----------- ----------- -----------
Total assets............................................ $ 3,264,639 $ 9,050,157 $19,139,329
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 203,336 $ 261,006 $ 574,812
Accrued payroll and related expenses...................... 139,247 604,791 1,064,498
Accrued expenses.......................................... 32,727 1,069,077 1,466,907
Credit line payable....................................... -- 1,000,000 --
Current portion of capital lease obligations.............. 47,364 179,041 284,939
Deferred revenue.......................................... 35,008 1,834,999 1,155,492
Income taxes payable...................................... -- 323,787 --
----------- ----------- -----------
Total current liabilities............................... 457,682 5,272,701 4,546,648
Long-term portion of capital lease obligations.............. 64,308 454,127 381,936
----------- ----------- -----------
Total liabilities....................................... 521,990 5,726,828 4,928,584
Commitments
Series C redeemable convertible preferred stock, $.001 par
value, 5,500,000 shares authorized, 5,455,255 shares
issued and outstanding at March 31, 2000 (aggregate
liquidation preference $10,364,984), no shares issued and
outstanding pro forma..................................... -- -- 10,104,044
Stockholders' equity:
Convertible preferred stock, $.001 par value 3,711,063
shares authorized at September 30, 1998 and 1999 and
3,054,100 shares authorized at March 31, 2000, issuable
in series
Series A:
Designated shares -- 1,531,063
Issued and outstanding shares -- 1,531,062 (none pro
forma)
Aggregate liquidation preference of $400,679........ 1,531 1,531 1,531 $ --
Series B:
Designated shares -- 2,180,000 at September 30, 1998
and 1999, 1,523,037 at March 31, 2000
Issued and outstanding shares -- 1,448,037 (none pro
forma)
Aggregate liquidation preference of $3,475,288........ 1,448 1,448 1,448 --
Common stock, $.001 par value:
Authorized shares -- 30,000,000 at September 30, 1998
and 1999, 35,000,000 at March 31, 2000 (150,000,000
pro forma)
Issued and outstanding shares -- 5,618,250, 5,668,875
and 7,488,125 at September 30, 1998 and 1999, and
March 31, 2000, respectively (14,684,401 pro forma)... 5,618 5,669 7,488 14,684
Additional paid-in capital................................ 4,081,789 5,209,283 12,045,995 22,145,822
Notes receivable from stockholders........................ (79,138) (79,138) (800,390) (800,390)
Receivable from stockholder............................... (50,000) -- -- --
Deferred stock-based compensation......................... -- (842,799) (5,621,111) (5,621,111)
Accumulated deficit....................................... (1,218,599) (972,665) (1,528,260) (1,528,260)
----------- ----------- ----------- -----------
Total stockholders' equity.......................... 2,742,649 3,323,329 4,106,701 $14,210,745
----------- ----------- ----------- ===========
Total liabilities and stockholders' equity.......... $ 3,264,639 $ 9,050,157 $19,139,329
=========== =========== ===========
</TABLE>
See accompanying notes.
F-4
<PAGE> 68
VIRAGE LOGIC CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30, SIX MONTHS ENDED MARCH 31,
----------------------------------- ---------------------------
1997 1998 1999 1999 2000
--------- ---------- ---------- ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $ 368,800 $1,970,040 $9,588,946 $3,474,139 $8,806,487
Cost of revenues.................. 207,407 853,047 2,562,357 1,079,097 2,280,968
--------- ---------- ---------- ---------- ----------
Gross profit...................... 161,393 1,116,993 7,026,589 2,395,042 6,525,519
Operating expenses:
Research and development........ 256,099 924,065 2,709,340 965,602 3,014,292
Sales and marketing............. 119,763 621,602 2,372,880 716,739 1,924,481
General and administrative...... 151,994 411,038 1,201,645 366,197 1,044,814
Stock-based compensation........ -- -- 274,105 -- 962,324
--------- ---------- ---------- ---------- ----------
Total operating expenses..... 527,856 1,956,705 6,557,970 2,048,538 6,945,911
--------- ---------- ---------- ---------- ----------
Operating income (loss)........... (366,463) (839,712) 468,619 346,504 (420,392)
Interest income................... -- 16,372 41,928 25,303 85,841
Interest expense.................. (4,227) (27,835) (90,807) (15,709) (107,644)
Other income (expense)............ (2,711) -- (19,506) -- --
--------- ---------- ---------- ---------- ----------
Income (loss) before taxes........ (373,401) (851,175) 400,234 356,098 (442,195)
Income tax provision.............. -- -- (154,300) (138,000) (113,400)
--------- ---------- ---------- ---------- ----------
Net income (loss)................. $(373,401) $ (851,175) $ 245,934 $ 218,098 $ (555,595)
========= ========== ========== ========== ==========
Basic net income (loss) per
share........................... $ (0.85) $ (0.19) $ 0.05 $ 0.05 $ (0.10)
========= ========== ========== ========== ==========
Diluted net income (loss) per
share........................... $ (0.85) $ (0.19) $ 0.02 $ 0.02 $ (0.10)
========= ========== ========== ========== ==========
Pro forma basic net income (loss)
per share....................... $ 0.03 $ (0.04)
========== ==========
Pro forma diluted net income
(loss) per share................ $ 0.02 $ (0.04)
========== ==========
</TABLE>
See accompanying notes.
F-5
<PAGE> 69
VIRAGE LOGIC CORPORATION
CONSOLIDATED STATEMENT OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SERIES C
REDEEMABLE CONVERTIBLE SERIES A CONVERTIBLE SERIES B CONVERTIBLE
PREFERRED STOCK PREFERRED STOCK PREFERRED STOCK COMMON STOCK
----------------------- -------------------- -------------------- --------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996..... -- $ -- 1,356,424 $1,356 -- $ -- 7,560,000 $ 7,560
Repurchase of common stock from
founders....................... -- -- -- -- -- -- (6,804,000) (6,804)
Issuance of common stock to
founders for notes............. -- -- -- -- -- -- 4,536,000 4,536
Net loss......................... -- -- -- -- -- -- -- --
--------- ----------- --------- ------ --------- ------ ---------- -------
Balance at September 30, 1997..... -- -- 1,356,424 1,356 -- -- 5,292,000 5,292
Issuance of common stock for cash
and services................... -- -- -- -- -- -- 300,000 300
Exercise of stock options by
employees...................... -- -- -- -- -- -- 26,250 26
Issuance of preferred stock for
debt conversion and/or cash,
net of issuance costs of
$51,094........................ -- -- 123,507 124 1,448,037 1,448 -- --
Issuance of preferred stock for
services....................... -- -- 51,131 51 -- -- -- --
Net loss......................... -- -- -- -- -- -- -- --
--------- ----------- --------- ------ --------- ------ ---------- -------
Balance at September 30, 1998..... -- -- 1,531,062 1,531 1,448,037 1,448 5,618,250 5,618
Exercise of stock options by
employees...................... -- -- -- -- -- -- 50,625 51
Issuance of warrants to third
parties for services........... -- -- -- -- -- -- -- --
Repayment from stockholder....... -- -- -- -- -- -- -- --
Deferred stock-based
compensation................... -- -- -- -- -- -- -- --
Amortization of stock-based
compensation................... -- -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- -- --
--------- ----------- --------- ------ --------- ------ ---------- -------
Balance at September 30, 1999..... -- -- 1,531,062 1,531 1,448,037 1,448 5,668,875 5,669
Issuance of redeemable preferred
stock (unaudited).............. 5,455,255 10,104,044 -- -- -- -- -- --
Exercise of stock options by
employees (unaudited).......... -- -- -- -- -- -- 1,819,250 1,819
Issuance of warrants to
nonemployees (unaudited)....... -- -- -- -- -- -- -- --
Deferred stock-based compensation
(unaudited).................... -- -- -- -- -- -- -- --
Amortization of stock-based
compensation (unaudited)....... -- -- -- -- -- -- -- --
Net loss (unaudited)............. -- -- -- -- -- -- -- --
--------- ----------- --------- ------ --------- ------ ---------- -------
Balance at March 31, 2000
(unaudited)...................... 5,455,255 $10,104,044 1,531,062 $1,531 1,448,037 $1,448 7,488,125 $ 7,488
========= =========== ========= ====== ========= ====== ========== =======
<CAPTION>
NOTES RETAINED
ADDITIONAL PAID- RECEIVABLE RECEIVABLE DEFERRED EARNINGS TOTAL
IN FROM FROM STOCK-BASED (ACCUMULATED STOCKHOLDER'S
CAPITAL STOCKHOLDERS STOCKHOLDER COMPENSATION DEFICIT) EQUITY (DEFICIT)
---------------- ------------ ----------- ------------ ------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at September 30, 1996..... $ 344,054 $ -- $ -- $ -- $ 5,977 $ 358,947
Repurchase of common stock from
founders....................... 6,534 -- -- -- -- (270)
Issuance of common stock to
founders for notes............. 74,602 (79,138) -- -- -- --
Net loss......................... -- -- -- -- (373,401) (373,401)
----------- --------- -------- ----------- ----------- ----------
Balance at September 30, 1997..... 425,190 (79,138) -- -- (367,424) (14,724)
Issuance of common stock for cash
and services................... 58,934 -- -- -- -- 59,234
Exercise of stock options by
employees...................... 432 -- -- -- -- 458
Issuance of preferred stock for
debt conversion and/or cash,
net of issuance costs of
$51,094........................ 3,546,153 -- (50,000) -- -- 3,497,725
Issuance of preferred stock for
services....................... 51,080 -- -- -- -- 51,131
Net loss......................... -- -- -- -- (851,175) (851,175)
----------- --------- -------- ----------- ----------- ----------
Balance at September 30, 1998..... 4,081,789 (79,138) (50,000) -- (1,218,599) 2,742,649
Exercise of stock options by
employees...................... 4,090 -- -- -- -- 4,141
Issuance of warrants to third
parties for services........... 6,500 -- -- -- -- 6,500
Repayment from stockholder....... -- -- 50,000 -- -- 50,000
Deferred stock-based
compensation................... 1,116,904 -- -- (1,116,904) -- --
Amortization of stock-based
compensation................... -- -- -- 274,105 -- 274,105
Net income....................... -- -- -- -- 245,934 245,934
----------- --------- -------- ----------- ----------- ----------
Balance at September 30, 1999..... 5,209,283 (79,138) -- (842,799) (972,665) 3,323,329
Issuance of redeemable preferred
stock (unaudited).............. -- -- -- -- -- --
Exercise of stock options by
employees (unaudited).......... 1,064,076 (721,252) -- -- -- 344,643
Issuance of warrants to
nonemployees (unaudited)....... 32,000 -- -- -- -- 32,000
Deferred stock-based compensation
(unaudited).................... 5,740,636 -- -- (5,740,636) -- --
Amortization of stock-based
compensation (unaudited)....... -- -- -- 962,324 -- 962,324
Net loss (unaudited)............. -- -- -- -- (555,595) (555,595)
----------- --------- -------- ----------- ----------- ----------
Balance at March 31, 2000
(unaudited)...................... $12,045,995 $(800,390) $ -- $(5,621,111) $(1,528,260) $4,106,701
=========== ========= ======== =========== =========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE> 70
VIRAGE LOGIC CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED SEPTEMBER 30, MARCH 31,
------------------------------------- -------------------------
1997 1998 1999 1999 2000
--------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)..................................... $(373,401) $ (851,175) $ 245,934 $ 218,098 $ (555,595)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization....................... 5,806 55,191 507,101 155,985 593,620
Loss on disposal of property and equipment.......... -- -- 19,506 -- --
Amortization of intangible assets................... 106,490 133,113 -- -- 24,632
Issuance of warrants for services................... -- -- 6,500 6,500 32,000
Amortization of stock-based compensation............ -- -- 274,104 -- 962,324
Bad debt expense.................................... -- -- 43,000 -- 8,000
Changes in operating assets and liabilities:
Accounts receivable............................... 44,250 (666,747) (3,636,958) (1,039,418) (817,223)
Other current assets.............................. 5,143 (181,885) -- -- --
Prepaid expenses.................................. -- -- (534,137) (420,339) (905,942)
Costs in excess of billings on uncompleted
contracts....................................... -- -- (331,875) -- (11,063)
Deferred tax assets............................... -- -- (260,000) -- --
Accounts payable.................................. 48,521 154,815 57,670 (53,997) 313,806
Accrued payroll and related expenses.............. 25,624 111,723 465,544 106,340 459,707
Accrued expenses.................................. 3,558 164,390 1,036,350 1,066,762 187,830
Deferred revenue.................................. -- 35,008 1,799,991 171,637 (679,507)
Income taxes payable.............................. -- -- 323,787 135,716 (323,787)
--------- ----------- ----------- ----------- -----------
Net cash provided by (used in) operating activities... (134,009) (1,045,567) 16,517 347,284 (711,198)
INVESTING ACTIVITIES
Purchase of property, plant, and equipment............ (5,851) (358,478) (1,420,160) (1,064,910) (1,876,305)
--------- ----------- ----------- ----------- -----------
Net cash used in investing activities................. (5,851) (358,478) (1,420,160) (1,064,910) (1,876,305)
FINANCING ACTIVITIES
Proceeds from issuance of notes....................... 170,000 771,960 -- -- --
Proceeds from issuance of redeemable convertible
preferred stock..................................... -- -- -- -- 9,819,044
Proceeds from issuance of common stock................ -- 2,527,598 4,141 -- 344,642
Repayment from stockholder............................ -- -- 50,000 50,000 --
Repurchase of common stock............................ (270) -- -- -- --
Borrowings (repayments) under line of credit.......... -- -- 1,000,000 -- (1,000,000)
Principal payments on capital lease obligations....... (569) (10,464) (109,504) (63,636) (163,749)
--------- ----------- ----------- ----------- -----------
Net cash provided by (used in) financing activities... 169,161 3,289,094 944,637 (13,636) 8,999,937
--------- ----------- ----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents......................................... 29,301 1,885,049 (459,005) (731,262) 6,412,434
Cash and cash equivalents at beginning of period...... 57,412 86,713 1,971,762 1,971,762 1,512,757
--------- ----------- ----------- ----------- -----------
Cash and cash equivalents at end of period............ $ 86,713 $ 1,971,762 $ 1,512,757 $ 1,240,500 $ 7,925,191
========= =========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest................................ $ 867 $ 18,627 $ 65,156 $ 15,710 $ 107,644
Cash paid for income taxes............................ $ -- $ -- $ 35,013 $ 16,600 $ 1,333,400
SUPPLEMENTAL SCHEDULES OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Capital lease obligations incurred for the purchase of
equipment........................................... $ 35,000 $ 88,000 $ 631,000 $ 167,000 $ 197,000
Warrants issued for services.......................... $ -- $ -- $ 6,500 $ 6,500 $ 32,000
</TABLE>
See accompanying notes.
F-7
<PAGE> 71
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Description of Business
Virage Logic Corporation (the Company) was incorporated in California in
November 1995. The Company provides embedded memory technologies for use in
complex system-on-a-chip applications that become critical components of
electronic products. The embedded memory technologies include memory compilers,
software development tools and custom memory design services.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its wholly owned subsidiary, Virage Logic International (VLI), a
California corporation. Currently, VLI conducts international operations in
India and the Republic of Armenia. All intercompany accounts and transactions
have been eliminated in the accompanying consolidated financial statements. To
date, operations in India and the Republic of Armenia have been immaterial.
Foreign Currency Transactions
Foreign currency transactions at foreign operations are measured using the
U.S. dollar as the functional currency. Accordingly, monetary accounts
(principally cash and cash equivalents, accounts receivable, accounts payable
and accrued liabilities) are remeasured using the foreign exchange rate at the
balance sheet date. Accounts related to operations and non-monetary balance
sheet items are remeasured at the rate in effect at the date of transaction. The
effects of foreign currency remeasurement are reported in current operations and
were immaterial for all periods presented.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Unaudited Interim Consolidated Financial Information
The financial information at March 31, 2000 and for the six months ended
March 31, 1999 and 2000 is unaudited, but has been prepared on the same basis as
the annual financial statements and, in the opinion of management includes all
adjustments (consisting only of normal recurring adjustments), that the Company
considers necessary for a fair presentation of consolidated financial position
at that date and its consolidated results of operations and cash flows for those
periods. Operating results for the six-month period ended March 31, 2000 are not
necessarily indicative of results that may be expected for any future periods.
Revenue Recognition
The Company's revenues are derived from licenses for its embedded memory
technologies, which include standard memory compilers, software development
tools and custom memory compilers. Standard memory compilers and software
development tools include a bundled license of software and related maintenance.
Custom memory compilers typically include a bundled license of software,
maintenance and customization of the software for the customer's specific
applications.
For each arrangement, the Company determines whether persuasive evidence of
an agreement exists, delivery of the product has occurred, there are no
significant remaining company obligations, the fee is fixed
F-8
<PAGE> 72
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
or determinable, and collectibility is probable. If any of these criteria are
not met, revenue recognition is deferred until such time as the criteria are
met.
For standard memory compiler arrangements that consist solely of a license
and maintenance, the Company recognizes the maintenance and the license fee
together upon delivery of the software in accordance with paragraph 59 of SOP
97-2, "Software Revenue Recognition." Accordingly, the Company does not defer
maintenance revenues over the life of the license arrangement but rather accrues
the estimated cost of support at the time license revenues are recognized. This
revenue recognition methodology is based on the following set of circumstances:
a. The maintenance period is one year and is included with the license fee.
b. These standard memory compiler products are not support intensive, and
support costs to date have not been significant.
c. Maintenance includes upgrades or modifications specifically related to
the foundry process, which are rare and to date only one such upgrade
has been provided.
Software development tool arrangements include either a perpetual license
with telephone support or a term license with telephone support and the rights
to unspecified upgrades on a when-and-if available basis. The Company recognizes
the maintenance (telephone support) and the license fees together for perpetual
licenses upon the delivery of the software in accordance with paragraph 59 of
SOP 97-2 and accordingly accrues the estimated cost of support. For term
licenses and related maintenance, the Company does not have vendor specific
evidence for maintenance and accordingly recognizes the entire fee over the
maintenance period.
Revenues from custom memory compilers involve customization to the
functionality of the software and are recognized using contract accounting over
the period that services are performed under the percentage-of-completion
method. For all license and service agreements accounted for using the
percentage-of-completion method, the Company determines progress-to-completion
using input measures based on labor hours incurred. A provision for estimated
losses on engagements is made in the period in which the loss becomes probable
and can be reasonably estimated. Costs incurred in advance of billings are
recorded as costs in excess of related billings on uncompleted contracts.
Customer billing occurs in accordance with contract terms. Customer
advances and amounts billed to customers in excess of revenue recognized are
recorded as deferred revenues.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents are invested in money market funds and commercial paper with a major
financial institution.
The Company has classified all investments as available-for-sale.
Available-for-sale securities are carried at fair market value based on quoted
market prices with unrealized gains and losses, net of tax, reported in
stockholders' equity. Realized gains and losses and declines in value judged to
be other than temporary on available-for-sale securities are included in
interest income.
The Company invests its excess cash in high-quality, short-term debt
instruments, all of which have an original maturity of three months or less. At
March 31, 2000 and September 30, 1998 and 1999, cost approximated fair value for
all cash equivalents. Interest and dividends on the investments are included in
interest income.
F-9
<PAGE> 73
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Unrealized holding gains and losses on available-for-sale securities at
September 30, 1998, 1999 and March 31, 2000 and gross realized gains and losses
on sales of available-for-sale securities for the years ended September 30,
1997, 1998 and 1999 and for the six-month periods ended March 31, 1999 and 2000
were not significant.
Cash equivalents as of September 30, 1998, 1999 and March 31, 1999
consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED
------------------------ MARCH 31,
1998 1999 2000
---------- ---------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Money market funds............................. $ 2,505 $ 560,947 $ 703,144
Commercial paper............................... 995,744 746,816 5,917,083
U.S. Treasury Bills............................ 499,945 -- --
---------- ---------- ----------
Total available-for-sale securities.......... $1,498,194 $1,307,763 $6,620,227
========== ========== ==========
</TABLE>
Fair Value of Other Financial Instruments
The carrying values and estimated fair values of the Company's other
financial instruments are as follows at September 30:
<TABLE>
<CAPTION>
1998 1999
-------------------------- ----------------------------
CARRYING ESTIMATED FAIR CARRYING ESTIMATED FAIR
VALUE VALUE VALUE VALUE
-------- -------------- ---------- --------------
<S> <C> <C> <C> <C>
Line of credit................... -- -- $1,000,000 $1,000,000
Capital leases................... $111,672 $111,672 $ 633,168 $ 633,168
</TABLE>
The fair value of the Company's obligations under lines of credit and
capital leases are based on current rates offered to the Company for similar
debt instruments of the same remaining maturities.
Property and Equipment
Property and equipment are recorded at cost net of accumulated depreciation
and amortization. Depreciation and amortization are provided on a straight-line
basis over the useful lives of the assets, generally the shorter of the lease
term or three years.
Accounting for Internal-Use Computer Software
In March 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" (SOP 98-1). SOP 98-1 provides
guidance on accounting for the costs of computer software developed or obtained
for internal use and identifies the characteristics of internal-use software.
The Company's accounting policy with respect to accounting for computer software
developed or obtained for internal use is consistent with SOP 98-1. The Company
has purchased and capitalized approximately $297,000 and $1.4 million for the
years ended September 30, 1998 and 1999, respectively, and $3.0 million for the
six months ended March 31, 2000 of internal use software. Software is amortized
for financial reporting purposes using the straight-line method over the
estimated useful life of three years.
F-10
<PAGE> 74
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Intangible Assets
Intangible assets are being amortized on a straight line basis over their
estimated useful life of three years.
Accounting for Stock Options
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB Opinion No. 25), and related
interpretations in accounting for its employee stock options because, as
discussed in Note 4, the alternative fair value accounting provided for under
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS 123), requires the use of option valuation models that were
not developed for use in valuing employee stock options. Under APB Opinion No.
25, when the exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant, no compensation
expense is recognized. As permitted under SFAS 123, the Company has elected to
follow APB Opinion No. 25 and related interpretations in accounting for
stock-based awards to employees and to adopt the "disclosure only" alternative
describe in SFAS 123.
Stock options or warrants granted to non-employees are accounted for in
accordance with SFAS 123 and the Emerging Issues Task Force Consensus No. 96-18,
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services." The fair value of
such options or warrants is determined using the Black-Scholes model.
Business Risks and Concentration of Credit Risk
The Company operates in the competitive semiconductor industry, which has
been characterized by rapid technological change, short product life cycles, and
cyclical market patterns. Significant technological changes in the industry
could adversely affect operating results.
The Company markets and sells its technology to a narrow base of customers,
which are primarily located in the United States, Canada and Japan. The Company
performs ongoing credit evaluations of its customers' financial condition, and
generally, no collateral is required. All Company billings are made in U.S.
dollars.
Customer Concentrations
A limited number of customers have historically accounted for a substantial
portion of the Company's revenues.
F-11
<PAGE> 75
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Customers that accounted for at least 10% of total revenues were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
SEPTEMBER 30, ENDED
-------------------- MARCH 31,
1997 1998 1999 2000
---- ---- ---- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
National Semiconductor.............................. -- 11% 18% *
PMC-Sierra.......................................... -- 14% * *
ATI Technologies.................................... -- -- 18% *
Toshiba............................................. -- * 10% *
IBM................................................. -- -- -- 10%
MMC Networks........................................ -- 11% 10% *
Silicon Dynamics.................................... -- 13% * --
TeraLogic........................................... -- 13% * *
SanDisk............................................. 42% -- -- --
Xilinx.............................................. 13% -- -- --
Equator Technologies................................ 18% -- -- --
HPL................................................. 14% -- -- --
Tower Semiconductor................................. 13% * * *
</TABLE>
- ------------
(*) Represents less than 10% of revenues.
Advertising Expense
The cost of advertising is expensed as incurred. Advertising costs totaled
approximately $46,000, $34,000, $130,000 and $60,000 for the years ended
September 30, 1997, 1998, 1999 and the six months ended March 31, 2000,
respectively.
Research and Development
In accordance with Statement of Financial Accounting Standards No. 86,
"Accounting for Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as incurred
until technological feasibility has been established. The Company believes its
current process for developing software is essentially completed concurrently
with the establishment of technological feasibility which is evidenced by a
working model; accordingly, software costs incurred after the establishment of
technological feasibility have not been material and, therefore, have been
expensed.
Net Income (Loss) Per Share
Basic and diluted net income (loss) per share is presented in conformity
with Statement of Financial Accounting Standards No. 128, "Earnings Per Share"
(SFAS 128). Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, common stock and convertible preferred stock issued or granted
for nominal consideration prior to the anticipated effective date of the
Company's initial public offering must be included in the calculation of basic
and diluted net income (loss) per common share as if they had been outstanding
for all periods presented.
In accordance with SFAS 128, basic and diluted net income (loss) per share
have been computed using the weighted average number of shares of common stock
outstanding during the period, less weighted average shares outstanding that are
subject to repurchase by the Company. Pro forma basic and diluted net income
F-12
<PAGE> 76
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
(loss) per share, as presented in the statements of operations, have been
computed as described above and also gives effect, under Securities and Exchange
Commission guidance, to the conversion of the convertible preferred stock (using
the if-converted method) from the original date of issuance.
The following table presents the computation of basic and diluted and pro
forma basic and diluted net income (loss) per share (in thousands, except per
share amounts):
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
-------------------------- ----------------
1997 1998 1999 1999 2000
------ ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Net income (loss)................................... $ (373) $ (851) $ 246 $ 218 $ (556)
====== ======= ======= ====== =======
Basic:
Weighted average shares of common stock
outstanding.................................... 1,184 5,559 5,632 5,618 6,097
Less weighted average shares subject to
repurchase..................................... (746) (1,180) (331) (814) (571)
------ ------- ------- ------ -------
Shares used in computing basic net income (loss)
per share...................................... 438 4,379 5,301 4,804 5,526
====== ======= ======= ====== =======
Basic net income (loss) per share................... $(0.85) $ (0.19) $ 0.05 $ 0.05 $ (0.10)
====== ======= ======= ====== =======
Diluted:
Effect of dilutive securities:
Shares used above.............................. 438 4,379 5,301 4,804 5,526
Employee stock options and unvested common
stock outstanding............................ -- -- 2,171 755 --
Convertible preferred stock.................... -- -- 4,469 4,469 --
------ ------- ------- ------ -------
Shares and assumed conversions used in
computing diluted net income (loss) per
share........................................ 438 4,379 11,941 10,028 5,526
====== ======= ======= ====== =======
Diluted net income (loss) per share................. $(0.85) $ (0.19) $ 0.02 $ 0.02 $ (0.10)
====== ======= ======= ====== =======
Pro forma:
Shares used above................................. 5,301 5,526
Pro forma adjustment to reflect weighted average
effect of the assumed conversion of convertible
preferred stock................................ 4,469 7,196
------- -------
Shares used in computing pro forma basic net
income (loss) per share........................ 9,770 12,722
======= =======
Pro forma basic net income (loss) per share......... $ 0.03 $ (0.04)
======= =======
Pro forma diluted:
Effect of diluted securities:
Shares used to compute pro forma basic net
income (loss) per share adjusted for the add
back of shares subject to repurchase......... 9,770 12,722
Employee stock options and unvested common
stock outstanding............................ 2,171 --
------- -------
Shares used in computing pro forma diluted net
income (loss) per share...................... 11,941 12,722
======= =======
Pro forma diluted net income (loss) per share....... $ 0.02 $ (0.04)
======= =======
</TABLE>
F-13
<PAGE> 77
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Comprehensive Income
In June 1997, the Financial Accounting Standards Board released Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
(SFAS 130). SFAS 130 established standards for the reporting and display of
comprehensive income and its components and was effective for fiscal 1999. The
Company had no items, other than net income (loss), of other comprehensive
income to report in any of the periods presented.
Segment Information
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures about Segments of an
Enterprise and Related Information" (SFAS 131), which establishes standards for
reporting information about operating segments in annual financial statements.
The Company operates only in one segment, the embedded memory technology
business.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities" (SFAS 133), which provides a
comprehensive and consistent standard for the recognition and measurement of
derivatives and hedging activities. SFAS 133, as amended by SFAS No. 137,
"Accounting for Derivative Instruments and Hedging Activities -- Deferral of
Effective Date of FASB Statement No. 133," is effective for fiscal years
beginning after June 15, 2000. The Company will assess the impact of SFAS 133 if
such activities are undertaken.
In December 1999, the Securities and Exchange Commission (SEC) issued SEC
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
(SAB 101). SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
The Company believes its revenue recognition policy is in compliance with SAB
101.
2. LEASE OBLIGATIONS
The Company leases certain computer equipment and software under long-term
capital leases. The Company has a line of credit with an equipment leasing
company under which it can enter into leases totaling $1,100,000. At September
30, 1999 approximately $464,000 of this line had been utilized. The Company has
also entered into other capital lease arrangements not subject to the line.
Capitalized costs of approximately $122,000 and $753,000 are included in
property and equipment at September 30, 1998 and 1999, respectively. Accumulated
depreciation amounted to approximately $16,000 and $173,000 at September 30,
1998 and 1999.
The Company leases its facilities under operating leases. The agreements
provide for a rent escalation each year. Rent expense under operating leases was
approximately $15,000, $70,000 and $230,000 for the years ended September 30,
1997, 1998 and 1999, respectively.
F-14
<PAGE> 78
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Aggregate future minimum lease payments under capital leases and operating
leases as of September 30, 1999 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- ----------
<S> <C> <C>
Year ending September 30,
2000...................................................... $ 279,695 $ 440,715
2001...................................................... 276,586 414,316
2002...................................................... 182,866 414,008
2003...................................................... 104,818 75,300
2004...................................................... -- 56,475
--------- ----------
Total minimum lease and principal payments.................. 843,965 $1,400,814
==========
Less: Amount representing interest.......................... (210,797)
---------
Present value of future lease payments...................... 633,168
Less: Current portion of capital lease obligations.......... (179,041)
---------
Long-term portion of capital lease obligations.............. $ 454,127
=========
</TABLE>
3. PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Property, equipment and leasehold improvements consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, SIX MONTHS
---------------------- ENDED
1998 1999 MARCH 31, 2000
-------- ---------- --------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures........................ $ 50,627 $ 197,861 $ 293,082
Computers and equipment....................... 143,749 840,888 1,353,314
Software...................................... 296,732 1,414,635 2,974,725
Leasehold improvements........................ 8,872 73,776 77,302
-------- ---------- -----------
499,980 2,527,160 4,698,423
Less accumulated depreciation................. (60,997) (563,624) (1,157,245)
-------- ---------- -----------
$438,983 $1,963,536 $ 3,541,178
======== ========== ===========
</TABLE>
Depreciation expense related to property, equipment and leasehold
improvements totaled $5,806, $55,191, $507,101, $155,985 and $593,620 for the
years ended September 30, 1997, 1998 and 1999 and the six months ended March 31,
1999 and 2000, respectively.
F-15
<PAGE> 79
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
4. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
The Company is authorized to issue 3,711,063 shares of convertible
preferred stock, designated in series. A summary of convertible preferred stock
is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30, 1999
---------------------------
SHARES ISSUED AGGREGATE
SHARES AND NONCUMULATIVE LIQUIDATION LIQUIDATION
AUTHORIZED OUTSTANDING DIVIDEND PREFERENCE PREFERENCE
---------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Series A............. 1,531,063 1,531,062 $0.02 $0.2617 $ 400,679
Series B............. 2,180,000 1,448,037 $0.17 $2.4000 3,475,288
--------- --------- ----------
3,711,063 2,979,099 $3,875,967
========= ========= ==========
</TABLE>
All preferred stockholders have the same voting rights as common
stockholders. Each share of Series A and B preferred stock has a number of votes
equal to the number of shares of common stock into which it is convertible.
Changes to the rights or preferences of preferred stockholder securities,
increases in authorized preferred stock, issuances of securities with
preferences over preferred stockholder securities, entering into a liquidation
transaction, and changing the number of directors on the board of directors
require at least 55% approval from the preferred stockholders.
In the event of any voluntary or involuntary liquidation of the Company,
Series A and B preferred stockholders are entitled to a liquidation preference
per share as shown above plus any declared but unpaid dividends, all in
preference to the holders of the common stock. If upon the occurrence of such
event, the assets and funds distributed among the holders of the preferred stock
shall be insufficient to permit the payment to such holders, then the entire
assets and funds of the corporation legally available for distribution shall be
distributed ratably among the holders of Series A and B preferred stock in
proportion to the aggregate preferential amount each such holder is otherwise
entitled to receive. Upon the completion of the distribution, the holders of the
common stock will ratably receive any and all remaining assets of the Company.
The holders of preferred stock are entitled to receive dividends when and
if declared by the board of directors. The dividends are payable in preference
and priority to any payment of any dividend on common stock of the Company. Such
dividends are not mandatory or cumulative, and no rights or interest accrues to
the holders of preferred stock. No dividends have been declared to date.
The holders of Series A and B preferred stock have the right, at any time
after the date of issuance, to convert each of their shares into common shares.
The conversion ratio is two-to-three as of September 30, 1999 and March 31, 2000
after adjusting for the one-for-two reverse stock split as described in Note 9.
The preferred stock automatically converts into shares of common stock at the
conversion price in effect upon the earlier of (i) the closing of an
underwritten public offering registered under the Securities Act of 1933, as
amended, covering the offer and sale of common stock at a public offering price
of not less than $12.00 per share (adjusted for stock dividends, stock split, or
recapitalizations) with aggregate cash proceeds to the Company of at least
$25,000,000; or (ii) the date specified by written consent or agreement of the
holders of not less than 55% of the outstanding shares of preferred stock.
Common Stock
The Company is authorized to issue up to 30,000,000 shares of common stock.
As of September 30, 1999, 5,668,875 shares of common stock were issued and
outstanding.
F-16
<PAGE> 80
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
At September 30, 1999, common stock was reserved for issuance as follows:
<TABLE>
<S> <C>
Conversion of outstanding preferred stock................... 4,468,648
Exercise of outstanding stock options....................... 2,058,000
Shares of common stock available for grant under the 1997
Equity Incentive Plan..................................... 865,125
Exercise of warrants........................................ 45,000
---------
7,436,773
=========
</TABLE>
Founders' Shares
In August 1997, the Company issued 4,536,000 shares of common stock at
$0.017 per share to the founders of the Company in exchange for full-recourse
notes receivable of $79,138. The founders' shares are subject to adjustment for
certain events, including mergers, stock dividends, stock splits and other
events.
As of September 30, 1999, all founders' shares were vested, and hence, no
shares were subject to repurchase by the Company.
The notes bear interest at 6.29% per annum and are due and payable in
August 2002. The notes are full recourse, and in addition, each of the founders
has pledged the common stock, 4,536,000 shares of common stock in aggregate, as
collateral to secure the obligations under the notes.
1997 Equity Incentive Plan
The Company's 1997 Equity Incentive Plan (the Plan) provides for the
granting of incentive stock options and nonstatutory stock options as determined
by the board of directors. Under the terms of the Plan, the exercise price of
incentive stock options will not be less than 100% of the fair market value of
the shares on the date of grant, and the exercise price of nonstatutory stock
options will not be less than 85% of the fair market value of the shares on the
date of grant. The exercise price of incentive stock options and nonstatutory
stock options granted to an employee or a service provider, who, at the time of
grant, owns stock representing more than 10% of the voting power of all classes
of the stock of the Company, shall be no less than 110% of the fair market value
of the common stock on the date of grant. All option grants shall be exercisable
immediately or may be exercisable within the times or upon the events determined
by the board of directors. The term of each option grant will be no more than
ten years. However, in the case of an incentive stock option issued to an
optionee who, at the time of grant, owns stock representing more than 10% of the
voting power of all classes of the stock of the Company, the term of the option
will be no more than five years. All shares that are issued under the Plan are
subject to repurchase by the Company at the original exercise price until the
underlying options have vested. At September 30, 1999, 56,719 shares issued
under the Plan were subject to repurchase.
Rights to immediately purchase stock may also be granted under the Plan
with terms, conditions, and restrictions determined by the board of directors.
Except for shares purchased by officers, directors and consultants, shares
acquired through stock purchase rights vest over a period not to exceed five
years with 20% vesting each year. Any unvested shares acquired are subject to
repurchase by the Company. At September 30, 1999, no shares were subject to
repurchase by the Company.
F-17
<PAGE> 81
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Information with respect to the Plan is summarized as follows:
<TABLE>
<CAPTION>
SHARES NUMBER OF WEIGHTED
AVAILABLE OPTIONS AVERAGE
FOR GRANT OUTSTANDING EXERCISE PRICE
---------- ----------- --------------
<S> <C> <C> <C>
Beginning authorization........................ 1,500,000 -- $ --
Options granted.............................. (60,000) 60,000 $0.017
---------- ----------
Balance at September 30, 1997.................. 1,440,000 60,000 $0.017
Additional options authorized................ -- -- --
Options granted.............................. (1,045,500) 1,045,500 $ 0.10
Options exercised............................ -- (26,250) $0.017
Options canceled............................. 56,250 (56,250) $0.017
---------- ----------
Balance at September 30, 1998.................. 450,750 1,023,000 $ 0.10
Additional options authorized................ 1,500,000 -- --
Options granted.............................. (1,177,500) 1,177,500 $ 0.30
Options exercised............................ -- (50,625) $ 0.08
Options canceled............................. 91,875 (91,875) $ 0.14
---------- ----------
Balance at September 30, 1999.................. 865,125 2,058,000 $ 0.20
Additional options authorized (unaudited).... 695,140 -- --
Options granted (unaudited).................. (1,385,625) 1,385,625 $ 1.19
Options exercised (unaudited)................ -- (1,819,250) $ 0.56
Options canceled (unaudited)................. 64,875 (64,875) $ 0.19
---------- ----------
Balance at March 31, 2000 (unaudited).......... 239,515 1,559,500 $ 0.67
========== ==========
</TABLE>
The following table summarizes information about stock options outstanding
and exercisable at September 30, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND EXERCISABLE
---------------------------------------------------
WEIGHTED
NUMBER AVERAGE
AS OF REMAINING
SEPTEMBER 30, CONTRACTUAL LIFE
EXERCISE PRICE 1999 (IN YEARS) EXERCISE PRICE
-------------- ------------- ---------------- --------------
<S> <C> <C> <C>
$0.02........................................... 322,500 7.95 $0.02
$0.14........................................... 960,000 8.64 $0.14
$0.24........................................... 534,750 9.37 $0.24
$0.70........................................... 240,750 9.66 $0.70
---------
Total........................................ 2,058,000 8.84 $0.20
=========
</TABLE>
Pro forma information regarding net income is required by SFAS 123, which
also requires that the information be determined as if the Company has accounted
for its employee stock options granted during the year ended September 30, 1999
under the fair value method of SFAS 123. The fair value for options was
estimated at the date of grant using the minimum value method with the following
weighted average assumptions: a risk-free interest rate of 6.40% for 1997 and
5.50% for 1998 and 1999, no dividend yield for all years, and a weighted average
expected option life of five years.
The difference between the reported net income (loss) and the pro forma net
income (loss) for the years ended September 30, 1997, 1998 and 1999 was not
material.
F-18
<PAGE> 82
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
The options' weighted average grant-date fair value, which is the value
assigned to the options under SFAS 123, was $0.01, $0.05 and $0.08 for options
granted during 1997, 1998 and 1999, respectively.
The pro forma impact of options on the net income for the year ended
September 30, 1999 is not representative of the effects on net income (loss) for
future years, as future years will include the effects of options vesting as
well as the impact of multiple years of stock option grants. The full effect of
SFAS 123 will not be fully reflected until 2001.
Warrants
In February 1999, the Company issued a warrant to purchase 25,000 shares of
Series B convertible preferred stock at $2.40 per share in connection with
professional services. The warrant vests over four years and expires February
21, 2004. The fair value of the warrant was approximately $6,500 and was
expensed during the year. The Company determined the fair value of the warrant
using the Black-Scholes valuation model assuming a fair value of the Company's
Series B convertible preferred stock of $2.40, a risk-free interest rate of
5.16%, a volatility factor of 80% and a life of five years. The vesting period
of this warrant was amended in January 2000 such that the warrant became fully
vested at that time. Accordingly, the warrant was remeasured to fair value in
January 2000 and resulted in additional expense of $32,000 for the six months
ended March 31, 2000.
In July 1999, the Company issued a warrant to purchase 7,500 shares of
common stock at $0.70 per share in connection with professional services. The
warrant vests over four years and expires on July 15, 2004. The Company
determined the fair value of the warrant using the Black-Scholes valuation model
assuming a fair value of the Company's common stock of $0.70, a risk-free
interest rate of 5.92%, a volatility factor of 80% and a life of five years. The
value of the vested portion of the warrant was immaterial during fiscal 1999.
The vesting period of the warrant was amended in January 2000 such that the
warrant became fully vested at that time. The Company determined that the fair
value as remeasured in January 2000 was immaterial.
Restricted Common Stock
During 1998, the Company sold 300,000 shares of restricted common stock to
a consultant for a total aggregate purchase of $59,234, consisting of cash in
the amount of $5,234 and services valued at $54,000. In the event the consultant
ceases providing services to the Company through the termination of its
consulting agreement, the Company has the right to repurchase the stock at the
original purchase price. The right to repurchase the shares by the Company
lapses as follows: 30,000 shares on the date of sale, 45,000 shares on March 21,
1998, and 6,250 shares for each full month thereafter. On September 30, 1998,
the right to repurchase 112,500 shares had lapsed and the remaining 187,500
unvested shares were held in escrow. In November 1999, the Company removed all
vesting restrictions so that the Company shall no longer have the right to
repurchase any shares at cost if the consultant ceases to render service.
Stock-Based Compensation
During the year ended September 30, 1999 and the six months ended March 31,
2000, the Company issued stock options to employees with exercise prices that it
believed represented the fair value of the options. Subsequent to the
commencement of the Company's initial public offering process, the Company
reevaluated the fair value of its common stock options as of March 2000.
Accordingly, in connection with such stock option grants, during the year ended
September 30, 1999 and the six-month period ended March 31, 2000, the Company
recorded stock-based compensation of $1,116,904 and $5,740,636, respectively.
This deferred compensation represents the difference between the grant price and
the deemed
F-19
<PAGE> 83
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
fair value for financial statement reporting purposes of the Company's common
stock options granted during these periods. Deferred compensation expense is
being amortized using the graded vesting method, in accordance with SFAS 123 and
SFAS Interpretation No. 28, over the vesting period of each respective option,
generally four years. Under the graded vesting method, each option grant is
separated into portions based on their vesting terms which results in
acceleration of amortization expense for the overall award. The accelerated
amortization pattern results in expensing approximately 59% of the total award
in year one, 25% in year two, 12% in year three and 4% in year four.
5. LINE OF CREDIT
During July 1999, the Company entered into a line of credit with a
financial institution, which expires during January 2001. The line of credit is
limited such that the Company may not borrow in excess of $3,000,000 or 80% of
eligible receivables. Borrowings under the line of credit bear interest at the
bank's prime rate plus 1% per annum (9.25% at September 30, 1999) and are
subject to the Company's compliance with certain financial covenants. At
September 30, 1999 and March 31, 2000, the Company was in compliance with the
covenants. The line of credit is secured by all the rights, title of the assets
and intellectual property of the Company. As of September 30, 1999, the Company
had approximately $1,000,000 outstanding under the line of credit, and no amount
outstanding as of March 31, 2000.
In connection with the line of credit agreement, the Company issued a
warrant for 30,000 shares of Series C preferred stock (see Note 9). The warrant
is exercisable at any time prior to its expiration on July 28, 2004. Upon the
closing of the Series C preferred stock round in December 1999, the Company
determined the fair value of the warrant using the Black-Scholes valuation model
assuming a fair value of the Series C preferred stock of $1.90, a risk free
interest rate of 6.22%, a volatility factor of 80%, and a life of five years.
The resulting value of $29,700 is being amortized to expenses over the term of
the line of credit.
6. RELATED PARTY TRANSACTIONS
In June 1999, the Company extended a loan of $150,000 bearing interest of
9% per annum, to a stockholder of the Company in return for a note receivable.
In March 2000, the note was repaid.
The Company sells products and services to certain companies that are also
stockholders of Virage Logic Corporation. All transactions were conducted at
arm's length. In 1999, sales to these stockholders amounted to $450,500. As of
September 30, 1999, $110,000 included in accounts receivable was due from these
stockholders.
7. INCOME TAXES
Due to operating losses and the inability to recognize the benefits
therefrom, there is no provision for income taxes for the years ended September
30, 1997 and 1998.
F-20
<PAGE> 84
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
The provision for income taxes for the year ended September 30, 1999
consists of the following:
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30, 1999
------------------
<S> <C>
Federal:
Current................................................... $ 355,500
Deferred.................................................. (260,000)
State:
Current................................................... 800
Deferred.................................................. --
Foreign:
Current................................................... 58,000
Deferred.................................................. --
---------
Total....................................................... $ 154,300
=========
</TABLE>
The provision for income taxes differs from the amount of income taxes
determined by applying the U.S. statutory federal rate primarily due to the
benefit of prior year net operating losses, research and development credits,
and the adjustment of the valuation allowance.
The income tax expense differed from the amounts computed by applying the
U.S. statutory federal income tax rate (34%) to pretax income (loss) as a result
of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1997 1998 1999
--------- --------- --------
<S> <C> <C> <C>
Computed expected tax (benefit)........... $(126,956) $(289,400) $136,080
Current year net operating losses and/or
temporary differences for which no tax
benefit is recognized................... 126,956 289,400 122,000
State taxes............................... -- -- --
Foreign taxes............................. -- -- 58,000
R&D credit................................ -- -- (93,968)
Other..................................... -- -- (67,812)
--------- --------- --------
Total income tax provision $ -- $ -- $154,300
========= ========= ========
</TABLE>
There were no provisions for income taxes for fiscal 1997 and 1998 because
the Company generated net losses in those years. The provision for income taxes
for the six months ended March 31, 1999 was calculated using the actual
effective tax rate for fiscal 1999, while the provision for income taxes for the
six months ended March 31, 2000 has been calculated using the estimated
effective tax rate for fiscal 2000.
F-21
<PAGE> 85
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Significant components of the Company's deferred tax assets are as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------
1997 1998 1999
-------- --------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Net operating losses.................... $ 50,000 $ 300,000 $ --
Deferred revenue........................ -- -- 431,000
Other................................... -- -- 292,000
-------- --------- ---------
Total deferred tax assets................. 50,000 300,000 723,000
Valuation allowance..................... (50,000) (285,000) (407,000)
-------- --------- ---------
Net deferred tax assets................... -- 15,000 316,000
Deferred tax liabilities:
Depreciation............................ -- -- (49,000)
Other................................... -- (15,000) (7,000)
-------- --------- ---------
Net deferred tax assets................... $ -- $ -- $ 260,000
======== ========= =========
</TABLE>
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109), provides
for the recognition of deferred tax assets if realization of such assets is more
likely than not. Because of the uncertainty of future earnings, a full valuation
allowance was provided at September 30, 1997 and 1998. Although the Company
generated net income in fiscal 1999, management has determined that the
valuation allowance continues to be necessary. The net valuation allowance
increased by $50,000, $235,000 and $122,000 during the years ended September 30,
1997, 1998 and 1999, respectively.
8. BUSINESS SEGMENT INFORMATION
The Company operates in one business segment, the sale of embedded memory
technologies, which it sells to fabless semiconductor companies as well as
integrated device manufacturers.
The Chief Executive Officer has been identified as the Chief Operating
Decision Maker (CODM) because he has final authority over resource allocation
decisions and performance assessment. The CODM does not receive discrete
financial information about the individual components.
Revenues by geographic region were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEPTEMBER 30, ENDED
------------------------------------ MARCH 31,
1997 1998 1999 2000
-------- ---------- ---------- ----------
UNAUDITED
<S> <C> <C> <C> <C>
Revenues:
United States............................ $321,300 $1,100,040 $5,168,885 $4,056,079
Asia..................................... 47,500 870,000 1,842,959 3,436,052
Other.................................... -- -- 2,577,102 1,314,356
-------- ---------- ---------- ----------
Total................................. $368,800 $1,970,040 $9,588,946 $8,806,487
======== ========== ========== ==========
</TABLE>
F-22
<PAGE> 86
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
9. SUBSEQUENT EVENTS (UNAUDITED)
Redeemable Convertible Preferred Stock
On December 23, 1999, the Company authorized 5,500,000 and issued 5,455,255
shares of redeemable convertible preferred stock designated as Series C at $1.90
per share. The holders of the Series C preferred stock may request redemption of
their shares, plus all declared but unpaid cumulative dividends. The redemption
may be requested prior to or on November 30, 2003 and must be paid in cash
within three years from the date that a written request from the majority of
Series C preferred shareholders is received.
In the event of a voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of the Series C preferred stock are
entitled to receive the liquidation preference of $1.90 per share amount, plus
all declared but unpaid cumulative dividends, prior and in preference to the
holders of the Series A and Series B preferred stock and common stock.
Each share of Series C preferred stock is convertible into 0.5 shares of
common stock. Upon completion of an initial public offering all shares are
automatically converted to common stock and the holders of these shares will not
be paid the redemption premium.
Holders of Series C preferred stock vote equally with holders of common
stock on an as-if-converted basis.
Acquisition of Assets
On December 1, 1999, the Company purchased Mentor Graphics Corporation's
(MGC) Physical Libraries Business for 150,000 shares of the Company's Series C
preferred stock valued at approximately $285,000. In addition, the Company
assumed MGC's license arrangements with customers of the Physical Libraries
Business resulting in an obligation of approximately $210,000. The transaction
was accounted for as a purchase and the Company recorded approximately $269,000
and $27,000 related to the workforce and the customer list, respectively. The
assembled workforce and customer list are being amortized over three years.
Additionally, as part of the purchase agreement with MGC, the Company is
committed to purchase $1,000,000 of software licenses through June 30, 2001. The
Company purchased and capitalized $500,000 of such software licenses on December
28, 1999 which are being amortized over three years.
For the three month period ended March 31, 2000, amortization of the
intangible assets and the software amortization was approximately $25,000 and
$42,000, respectively.
Initial Public Offering
In January 2000, the board of directors of the Company authorized the
Company to proceed with an initial public offering of its common stock. If the
offering is consummated as presently anticipated, all of the outstanding
preferred stock will automatically convert into common stock. The unaudited pro
forma stockholders' equity at March 31, 2000 gives effect to the conversion of
all outstanding shares of all preferred stock outstanding at March 31, 2000 into
7,196,276 shares of common stock upon the completion of the offering.
Delaware Reincorporation
In April 2000, the board of directors authorized the reincorporation of the
Company in the State of Delaware. The par value of the preferred and common
stock is $.001 per share. The Company's reincorporation has been reflected in
the September 30, 1997, 1998 and 1999 and March 31, 2000 financial statements.
F-23
<PAGE> 87
VIRAGE LOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF MARCH 31, 2000 AND FOR THE SIX MONTHS
ENDED MARCH 31, 1999 AND 2000 IS UNAUDITED)
Reserve Stock Split and Capitalization Change
In April 2000, the board of directors authorized a one-for-two reverse
stock split of the Company's common stock. The related common stock and
per-share data in the accompanying financial statements has been retroactively
stated to reflect the reverse stock split.
2000 Employee Stock Purchase Plan
In April 2000, the Company's board of directors approved the adoption of
the 2000 Employee Stock Purchase Plan (the Purchase Plan). A total of 200,000
shares of common stock has been reserved for issuance under this plan. On each
October 1, starting in 2001, the number of shares will be automatically
increased by the lesser of 0.75% of the then outstanding shares of common stock
or 200,000 shares. Each offering period will consist of six months. The initial
offering period is expected begin on October 1, 2000 and will end on March 31
and September 30 of each year following.
The Purchase Plan permits eligible employees to purchase common stock
through payroll deductions, which may not exceed 15% of the participant's
compensation, at a price equal to 85% of the fair market value of the Company's
common stock at the beginning of each offering period or at the end of each
purchase period. Employees who work at five months in any calendar year and at
least 20 hours per week are eligible to participate in the Purchase Plan.
Stockholders who own more than 5% of outstanding common stock are excluded from
participating in the Purchase Plan. Each eligible employee is limited to
purchase no more than 1,500 shares per offering period and no more than $25,000
of stock per year.
Fiscal Year 2000 Executive Variable Incentive Pay Plan
In November 1999, the Company's board of directors approved the adoption of
the Virage Logic Fiscal Year 2000 Executive Variable Incentive Pay Plan (the VIP
Plan). The VIP Plan limits eligibility to employees at the President and Vice
President levels and to members of the board of directors. Payments to
participants in the VIP Plan are connected to the Company's fiscal year 2000
revenue and operating results as compared to the planned results. Eligible
participants may receive an additional compensation of 15% to 50% of base
salary, depending on the Company's financial results.
Fiscal Year 2000 Employee Bonus Plan
For fiscal year 2000, the Company instituted a bonus plan for its United
States employees, other than sales and marketing employees and participants in
the Fiscal Year 2000 Executive Variable Incentive Pay Plan. Under this plan, 10%
of pretax profits before deductions for deferred compensation will be
distributed quarterly. Approximately $65,000 of bonuses were expensed in the six
months ended March 31, 2000.
F-24
<PAGE> 88
[INSIDE BACK COVER]
Virage Logic Logo
Text:
Partners:
Cadence
Chartered
Mosys
Nurlogic
Synopsis
TSMC
UMC
<PAGE> 89
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
The following table sets forth all expenses to be paid by us in connection
with the sale of the common stock being registered, other than the underwriting
discounts and commissions All amounts shown are estimates except for the
registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
AMOUNT
TO BE PAID
----------
<S> <C>
Registration fee............................................ $ 10,560
NASD filing fee.............................................
Nasdaq National Market......................................
Blue sky qualification fees and expenses....................
Printing and engraving expenses.............................
Legal fees and expenses.....................................
Accounting fees and expenses................................
Transfer agent and registrar fees...........................
Miscellaneous expenses......................................
----------
Total..................................................... $
==========
</TABLE>
- ------------
* To be supplied by amendment.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. Our restated Certificate of Incorporation
and bylaws will provide that we will indemnify our directors and executive
officers to the full extent permitted by Delaware General Corporation Law,
including in circumstances in which indemnification is otherwise discretionary
under Delaware law and may indemnify other officers, employees and agents. In
addition, we intend to enter into separate indemnification agreements with our
directors that would require us, among other things, to indemnify them against
certain liabilities which may arise by reason of their status or service (other
than liabilities arising from willful misconduct of a culpable nature). The
indemnification provisions in our restated Certificate of Incorporation and
bylaws and the indemnification agreement to be entered into between us and our
directors may be sufficiently broad to permit indemnification of our officers
and directors for liabilities (including reimbursement of expenses incurred)
arising under the Securities Act. We also intend to maintain director and
officer liability insurance, if available on reasonable terms, to insure our
directors and officers against the cost of defense, settlement or payment of a
judgment under certain circumstances. In addition, the underwriting agreement
filed as Exhibit 1.1 to this Registration Statement provides for indemnification
by the underwriters of the Company and our officers and directors for certain
liabilities arising under the Securities Act, or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
In the past three years we have sold and issued the following securities:
1. In July 1997, we issued 4,536,000 shares of common stock to two
officers and directors for an aggregate consideration of $79,138.
2. In October 1997, we issued 123,507 shares of Series A preferred stock
to HPL, Inc. for an aggregate consideration of $123,507.
3. In November 1997, we issued 300,000 shares of common stock to a
consultant for an aggregate consideration of $59,234.
II-1
<PAGE> 90
4. In March 1998, we issued 51,131 shares of Series A preferred stock to a
service provider for an aggregate consideration of $51,131.
5. In July 1998, we sold 1,448,037 shares of Series B preferred stock to
21 investors for an aggregate consideration of $3,475,312.
6. In February 1999, we issued a warrant to purchase up to 25,000 shares
of Series B preferred stock at an exercise price of $2.40 to one
consultant.
7. In July 1999, we issued a warrant to purchase up to 30,000 shares of
Series C preferred stock at an exercise price of $1.90 per share to
Silicon Valley Bank in connection with a Loan and Security Agreement.
8. In December 1999, we sold 5,455,255 shares of Series C preferred stock
to 49 investors for an aggregate consideration of $10,365,041.
9. In July 1999, we issued a warrant to purchase up to 7,500 shares of
common stock for an aggregate exercise price of $5,250 in consideration
for legal services.
10. As of April 10, 2000, we have issued, and there remain outstanding,
options to purchase an aggregate of 1,298,000 shares of common stock
with exercise prices ranging from $0.01 to $1.00 per share. As of April
10, 2000 options to purchase 2,157,375 have been exercised for
aggregate consideration of .
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
The issuances of securities described in Item 15(1) through 15(9) were
deemed to be exempt from registration under the Securities Act in reliance on
Section 4(2) of the Securities Act and Regulation D promulgated thereunder as
transactions by an issuer not involving a public offering. The issuances of
securities described in Item 15(10) were deemed to be exempt from registration
under the Securities Act in reliance of Rule 701 promulgated thereunder as
transactions pursuant to compensatory benefit plans approved by the registrant's
board of directors and Regulation D promulgated under the Securities Act as
transactions by an issuer not involving a public offering. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in connection
with any distribution thereof and appropriate legends were affixed to the share
certificates and other instruments issued in such transactions. All recipients
either received adequate information about us or had access, through employment
or other relationships, to such information.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Amended and Restated Bylaws
3.3 Amended and Restated Certificate of Incorporation to be
effective upon closing
3.4 Amended and Restated Bylaws to be effective upon closing
4.1* Specimen Common Stock Certificate
4.2 Restated and Amended Investors' Rights Agreement among
Virage Logic and certain stockholders dated December 3, 1999
5.1* Opinion of Heller Ehrman White & McAuliffe LLP
10.1 1997 Equity Incentive Plan, as amended
10.2 Form of Option Agreement under 1997 Equity Incentive Plan
10.3 2000 Employee Stock Purchase Plan
10.4 Virage Logic Corporation Fiscal Year 2000 Executive Variable
Incentive Pay Plan
</TABLE>
II-2
<PAGE> 91
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.5 Form of Indemnification Agreement
10.6 Form of Secured Full Recourse Promissory Note granted by
each of Adam Kablanian and Alexander Shubat on August 27,
1997
10.7 Form of Stock Pledge Agreement dated August 27, 1999 between
the Company and each of Adam Kablanian and Alexander Shubat
10.8 Form of Secured Full Recourse Promissory Note granted by
each of Adam Kablanian, Alexander Shubat, Vincent Ratford,
and James Pekarsky in March 2000
10.9 Form of Stock Pledge Agreement, dated March 2000 between the
Company and each of Adam Kablanian, Alexander Shubat,
Vincent Ratford and James Pekarsky
10.10 Asset Purchase Agreement between Mentor Graphics Corporation
and Virage Logic dated as of December 1, 1999
10.11 Loan and Security Agreement between Silicon Valley Bank,
Virage Logic and VLI dated as of July 28, 1999
10.12 # Distribution Agreement between Seiko Instruments Inc. and
Virage Logic dated as of October 1, 1998
10.13 # Development and Licensing Agreement between Taiwan
Semiconductor Manufacturing Co. Ltd. and Virage Logic dated
as of March 3, 1999
10.14 # Joint Marketing and Technical Support Agreement between
Chartered Semiconductor Manufacturing Ltd. and Virage Logic
dated as of November 14, 1997
10.15 # Memory Compiler Licensing Agreement between United
Microelectronics Corporation and Virage Logic
10.16 # Memorandum of Understanding for Jointly-Developed 1T-SRAM
Technology Memory Compilers between Virage Logic and Mosys,
Inc. dated July 1, 1999
10.17 # Memorandum of Understanding for Custom-Touch 1T-SRAM Memory
Compiler for TSMC 0.18mm and 0.15mm Logic Process between
Taiwan Semiconductor Manufacturing Co. Ltd., Mosys, Inc. and
the Company
10.18 Memorandum of Understanding between Virage Logic and
Netlogic
10.19 Industrial Space Lease between Renco Bayside Investors and
Virage Logic dated as of March 17, 1999
10.20 Office Service Agreement between HQ Global Workplaces, Inc.
and Virage Logic dated as of August 3,1999
10.21 Office Lease between Morris Piha Real Estate Services, Inc.
and Virage Logic dated as of March 25, 1999
10.22 Master Lease Agreement among Leasing Technologies
International, Inc., Virage Logic and VLI dated as of
February 12, 1999
10.23 Employment Offer Letter to Vincent Ratford dated February 1,
1998
10.24 Employment Offer Letter to Raymond Leung dated August 6,
1998
10.25 Employment Offer Letter to James Pekarsky dated April 5,
1999
10.26 Employment Offer Letter to Kenneth Rousseau dated January
18, 2000
16.1 Letter from Mohler, Nixon & Williams Accountancy Corporation
re change in certifying accountant
23.1* Consent of Integrated Circuit Engineering
23.2 Consent of Ernst & Young LLP, independent auditors
23.3 Consent of Mohler, Nixon & Williams Accountancy Corporation,
independent auditors
23.4 Consent of Heller Ehrman White & McAuliffe LLP (included in
Exhibit 5.1)*
24.1 Power of Attorney (included on the signature page of this
registration statement)
27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
# Confidential treatment requested.
II-3
<PAGE> 92
(b) FINANCIAL STATEMENT SCHEDULE.
Schedule II -- Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
ITEM 17. UNDERTAKINGS
The undersigned 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 by the Registrant for liabilities arising under
the Securities Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the provisions referenced in Item 14 of
this Registration Statement or otherwise, the Registrant has been advised that
in the opinion of the Commission such indemnification is against public policy
as expressed in the Securities 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 hereunder, 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 Securities Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
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 Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
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 the time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 93
VIRAGE LOGIC CORPORATION
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS AND DEDUCTIONS BALANCE AT
OF PERIOD EXPENSES WRITE-OFFS END OF PERIOD
---------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Period from November 27, 1995 (inception to
September 30, 1996)........................ $-- $-- $-- $--
Year ended September 30, 1997................ $-- $-- $-- $--
Year ended September 30, 1998................ $-- $-- $-- $--
Year ended September 30, 1999................ $-- $43 $-- $43
</TABLE>
- ------------------------------
<PAGE> 94
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Palo Alto, California, on the 26th
day of April, 2000.
VIRAGE LOGIC CORPORATION
By: /s/ ADAM A. KABLANIAN
------------------------------------
Adam A. Kablanian
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Adam A. Kablanian and James R.
Pekarsky, and each of them acting individually, as his true and lawful
attorneys-in-fact and agents, each with full power of substitution, for him in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) increasing
the number of securities for which registration is sought), and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, with full power of each to act alone, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this 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/ ADAM A. KABLANIAN President, Chief Executive Officer and Chairman of April 26, 2000
- -------------------------------- the Board (Principal Executive Officer)
Adam A. Kablanian
/s/ JAMES R. PEKARSKY Vice President and Chief Financial Officer (Principal April 26, 2000
- -------------------------------- Financial and Accounting Officer)
James R. Pekarsky
Director April , 2000
- --------------------------------
Richard Elkus
/s/ MICHAEL HACKWORTH Director April 26, 2000
- --------------------------------
Michael Hackworth
Director April , 2000
- --------------------------------
Dr. Alexander Shubat
/s/ MICHAEL STARK Director April 26, 2000
- --------------------------------
Michael Stark
Director April , 2000
- --------------------------------
Dr. Sang Wang
/s/ DR. YERVANT ZORIAN Director April 26, 2000
- --------------------------------
Dr. Yervant Zorian
</TABLE>
<PAGE> 95
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement
3.1 Amended and Restated Articles of Incorporation
3.2 Amended and Restated Bylaws
3.3 Amended and Restated Certificate of Incorporation to be
effective upon closing
3.4 Amended and Restated Bylaws to be effective upon closing
4.1* Specimen Common Stock Certificate
4.2 Restated and Amended Investors' Rights Agreement among
Virage Logic and certain stockholders dated December 3, 1999
5.1* Opinion of Heller Ehrman White & McAuliffe LLP
10.1 1997 Equity Incentive Plan, as amended
10.2 Form of Option Agreement under 1997 Equity Incentive Plan
10.3 2000 Employee Stock Purchase Plan
10.4 Virage Logic Corporation Fiscal Year 2000 Executive Variable
Incentive Pay Plan
10.5 Form of Indemnification Agreement
10.6 Form of Secured Full Recourse Promissory Note granted by
each of Adam Kablanian and Alexander Shubat on August 27,
1997
10.7 Form of Stock Pledge Agreement dated August 27, 1999 between
the Company and each of Adam Kablanian and Alexander Shubat
10.8 Form of Secured Full Recourse Promissory Note granted by
each of Adam Kablanian, Alexander Shubat, Vincent Ratford,
and James Pekarsky in March 2000
10.9 Form of Stock Pledge Agreement, dated March 2000 between the
Company and each of Adam Kablanian, Alexander Shubat,
Vincent Ratford and James Pekarsky
10.10 Asset Purchase Agreement between Mentor Graphics Corporation
and Virage Logic dated as of December 1, 1999
10.11 Loan and Security Agreement between Silicon Valley Bank,
Virage Logic and VLI dated as of July 28, 1999
10.12 # Distribution Agreement between Seiko Instruments Inc. and
Virage Logic dated as of October 1, 1998
10.13 # Development and Licensing Agreement between Taiwan
Semiconductor Manufacturing Co. Ltd. and Virage Logic dated
as of March 3, 1999
10.14 # Joint Marketing and Technical Support Agreement between
Chartered Semiconductor Manufacturing Ltd. and Virage Logic
dated as of November 14, 1997
10.15 # Memory Compiler Licensing Agreement between United
Microelectronics Corporation and Virage Logic
10.16 # Memorandum of Understanding for Jointly-Developed 1T-SRAM
Technology Memory Compilers between Virage Logic and Mosys,
Inc. dated July 1, 1999
10.17 # Memorandum of Understanding for Custom-Touch 1T-SRAM Memory
Compiler for TSMC 0.18mm and 0.15mm Logic Process between
Taiwan Semiconductor Manufacturing Co. Ltd., Mosys, Inc. and
the Company
10.18 Memorandum of Understanding between Virage Logic and
Netlogic
10.19 Industrial Space Lease between Renco Bayside Investors and
Virage Logic dated as of March 17, 1999
10.20 Office Service Agreement between HQ Global Workplaces, Inc.
and Virage Logic dated as of August 3,1999
10.21 Office Lease between Morris Piha Real Estate Services, Inc.
and Virage Logic dated as of March 25, 1999
10.22 Master Lease Agreement among Leasing Technologies
International, Inc., Virage Logic and VLI dated as of
February 12, 1999
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------- -----------------------
<C> <S>
10.23 Employment Offer Letter to Vincent Ratford dated February 1,
1998
10.24 Employment Offer Letter to Raymond Leung dated August 6,
1998
10.25 Employment Offer Letter to James Pekarsky dated April 5,
1999
10.26 Employment Offer Letter to Kenneth Rousseau dated January
18, 2000
16.1 Letter from Mohler, Nixon & Williams Accountancy Corporation
re change in certifying accountant
23.1* Consent of Integrated Circuit Engineering
23.2 Consent of Ernst & Young LLP, independent auditors
23.3 Consent of Mohler, Nixon & Williams Accountancy Corporation,
independent auditors
23.4 Consent of Heller Ehrman White & McAuliffe LLP (included in
Exhibit 5.1)*
24.1 Power of Attorney (included on the signature page of this
registration statement)
27.1 Financial Data Schedule
</TABLE>
- ------------
* To be filed by amendment.
# Confidential treatment requested.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED ARTICLES OF INCORPORATION
Adam Kablanian and Alexander Shubat certify that:
1. They are the President and Secretary, respectively, of Virage Logic
Corporation, a California corporation.
2. The Articles of Incorporation of the corporation, as amended to the
date of the filing of this certificate, including amendments set forth herein
but not separately filed (and with the omissions required by Section 910 of the
California Corporations Code), are restated in their entirety as set forth in
Exhibit "1" attached hereto and made a part hereof by this reference.
3. The Restated Articles of Incorporation set forth herein have been
duly approved by the Board of Directors of the corporation.
4. The amendments to the Articles of Incorporation included in the
Restated Articles of Incorporation set forth herein (other than omissions
required by Section 910 of the Corporations Code) have been duly approved by the
required vote of the shareholders of the corporation in accordance with Sections
902 and 903 of the California Corporations Code. The corporation has two classes
of stock, and the number of outstanding shares is 11,356,500 shares of Common
Stock and 2,979,099 shares of Preferred Stock, consisting of 1,531,062 shares of
Series A Preferred Stock and 1,448,037 shares of Series B Preferred Stock. The
number of shares voting in favor of the Restated Articles of Incorporation set
forth herein equaled or exceeded the vote required. The percentage vote required
was more than 50% of the outstanding shares of Common Stock, more than 50% of
the outstanding shares of Series A Preferred Stock, more than 50% of the
outstanding shares of Series B Preferred Stock, and more than 55% of the
outstanding shares of Preferred Stock.
<PAGE> 2
We further declare under penalty of perjury under the laws of the State
of California that the matters set forth in this certificate are true and
correct of our own knowledge.
Dated: November 23, 1999 /s/
--------------------------------------
Adam Kablanian, President
/s/
--------------------------------------
Alexander Shubat, Secretary
<PAGE> 3
EXHIBIT "1"
---------------------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
VIRAGE LOGIC CORPORATION
-----------------------------
ARTICLE I
The name of the corporation is Virage Logic Corporation.
ARTICLE II
The purpose of the corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of California other than the banking business, the trust company business or
the practice of a profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
The liability of the directors of the corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
Unless applicable law otherwise provides, any amendment, repeal or modification
of this Article III shall not adversely affect any right or protection of a
director under this Article III that existed at or prior to the time of such
amendment, repeal or modification.
ARTICLE IV
The corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) through bylaw
provisions, by agreements with agents, vote of shareholders or disinterested
directors or otherwise, in excess of the indemnification otherwise permitted by
Section 317 of the California Corporations Code, subject only to the applicable
limits on such excess indemnification set forth in Section 204 of the California
Corporations Code. Unless applicable law otherwise provides, any amendment,
repeal or modification of any provision of this Article IV shall not adversely
affect any contract or other right to indemnification of an agent of the
corporation that existed at or prior to the time of such amendment, repeal or
modification.
ARTICLE V
This corporation is authorized to issue two classes of shares,
designated "Common Stock" and "Preferred Stock," respectively, both of which
shall have no par value. The number of shares of Common Stock authorized to be
issued is 35,000,000 shares. The number of shares
<PAGE> 4
of Preferred Stock authorized to be issued is 8,554,099 shares, 1,531,062 of
which are designated as "Series A Preferred Stock," 1,523,037 of which are
designated as "Series B Preferred Stock," and 5,500,000 of which are designated
as "Series C Preferred Stock."
ARTICLE VI
The rights, preferences, privileges and restrictions granted to and
imposed on the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Common Stock are as follows:
1. DEFINITIONS. For purposes of this Article VI, the following
definitions apply:
1.1 "BOARD" shall mean the Board of Directors of the Company.
1.2 "COMPANY" shall mean this corporation.
1.3 "COMMON STOCK" shall mean the Common Stock, no par value, of
the Company.
1.4 "COMMON STOCK DIVIDEND" shall mean a stock dividend declared
and paid on the Common Stock that is payable in shares of Common Stock.
1.5 "COMMON STOCK EVENT" shall mean (i) the issue by the Company
of additional shares of Common Stock as a dividend or other distribution
on outstanding Common Stock, (ii) a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock,
or (iii) a combination of the outstanding shares of Common Stock into a
smaller number of shares of Common Stock.
1.6 "DIVIDEND RATE" shall mean $0.02 per share per annum for the
Series A Preferred Stock, $0.17 per share per annum for the Series B
Preferred Stock, and $0.13 per share per annum for the Series C
Preferred Stock, each as appropriately adjusted to reflect Common Stock
Events.
1.7 "ORIGINAL ISSUE DATE" shall mean the date on which the first
share of Series C Preferred Stock is issued by the Company.
1.8 "ORIGINAL ISSUE PRICE" shall mean $0.2617 per share for the
Series A Preferred Stock, $2.40 per share for the Series B Preferred
Stock, and $1.90 per share for the Series C Preferred Stock, each as
appropriately adjusted to reflect Common Stock Events.
1.9 "PERMITTED REPURCHASES" shall mean the repurchase by the
Company of shares of Common Stock held by employees, officers,
directors, consultants, independent contractors, advisors, or other
persons performing services for the Company or a Subsidiary that are
subject to restricted stock purchase agreements or stock option exercise
agreements under which the Company has the option to repurchase such
shares: (i) at cost, upon the occurrence of certain events, such as the
termination of employment
2
<PAGE> 5
or services; or (ii) at any price pursuant to the Company's exercise of
a right of first refusal to repurchase such shares.
1.10 "PREFERRED STOCK" shall mean the Series A Preferred Stock,
the Series B Preferred Stock, and the Series C Preferred Stock,
collectively.
1.11 "SERIES A PREFERRED STOCK" shall mean the Series A Preferred
Stock, no par value, of the Company.
1.12 "SERIES B PREFERRED STOCK" shall mean the Series B Preferred
Stock, no par value, of the Company.
1.13 "SERIES C PREFERRED STOCK" shall mean the Series C Preferred
Stock, no par value, of the Company.
1.14 "SUBSIDIARY" shall mean any corporation of which at least
fifty percent (50%) of the outstanding voting stock is at the time owned
directly or indirectly by the Company or by one or more of such
subsidiary corporations.
2. DIVIDEND RIGHTS.
2.1 Dividend Preference. In each calendar year, the holders of
the then outstanding Preferred Stock shall be entitled to receive, when, as and
if declared by the Board, out of any funds and assets of the Company legally
available therefor, noncumulative dividends (with respect to the Series A
Preferred Stock and Series B Preferred Stock) or cumulative dividends (with
respect to the Series C Preferred Stock) at the annual Dividend Rate for each
such series of Preferred Stock, prior and in preference to the payment of any
dividends on the Common Stock in such calendar year (other than a Common Stock
Dividend). No dividends (other than a Common Stock Dividend) shall be paid, with
respect to the Common Stock during any calendar year unless dividends in the
total amount of the annual Dividend Rate for the Series A Preferred Stock and
Series B Preferred Stock, and dividends in the total amount of the cumulative
Dividend Rate for the Series C Preferred Stock, shall have first been paid or
declared and set apart for payment to the holders of the Preferred Stock during
that calendar year; provided, however, that this restriction shall not apply to
Permitted Repurchases. Payments of any dividends to the holders of Preferred
Stock shall be paid pro rata, on an equal priority, pari passu basis according
to their respective dividend preferences as set forth herein. Dividends on the
Series A Preferred Stock and Series B Preferred Stock shall not be mandatory or
cumulative, and no rights or interest shall accrue to the holders of the Series
A Preferred Stock or Series B Preferred Stock by reason of the fact that the
Company shall fail to declare or pay dividends on the Series A Preferred Stock
or Series B Preferred Stock in the amount of the respective annual Dividend Rate
for each such series or in any other amount in any calendar year or any fiscal
year of the Company, whether or not the earnings of the Company in any calendar
year or fiscal year were sufficient to pay such dividends in whole or in part.
Subject to the terms and conditions of Section 4, dividends on the Series C
Preferred Stock shall not be mandatory, and the only right or interest that
shall accrue to holders of Series C Preferred Stock by reason that the Company
shall fail to declare or pay dividends in the amount of the respective annual
3
<PAGE> 6
Dividend Rate for such series or in any other amount in any calendar year or
fiscal year, whether or not the earnings of the Company were sufficient to pay
such dividends in whole or in part, shall be that if in any subsequent calendar
or fiscal year the Company chooses to pay a dividend, then the dividend
preference for Series C Preferred Stock shall include the annual Dividend Rate
for each calendar or fiscal year for which the dividend was not paid.
2.2 Participation Rights. If, after dividends in the full
preferential amounts specified in Section 2.1 for the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock have been paid or declared
and set apart in any calendar year of the Company, the Board shall declare
additional dividends out of funds legally available therefor in that calendar
year, then such additional dividends shall be declared pro rata on the Common
Stock, the Series B Preferred Stock and the Series C Preferred Stock on a pari
passu basis according to the number of shares of Common Stock held by such
holders, where each holder of shares of Series B Preferred Stock and Series C
Preferred Stock is to be treated for this purpose as holding the greatest whole
number of shares of Common Stock then issuable upon conversion of all shares of
Series B Preferred Stock and Series C Preferred Stock held by such holder
pursuant to Section 6.
2.3 Non-Cash Dividends. Whenever a dividend provided for in this
Section 2 shall be payable in property other than cash, the value of such
dividend shall be deemed to be the fair market value of such property as
determined in good faith by the Board.
2.4 No Payment on Conversion. If the Company shall have declared
but unpaid dividends with respect to any Preferred Stock upon its conversion as
provided in Section 6, then all such declared but unpaid dividends on such
converted shares shall be cancelled.
3. LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the funds and
assets that may be legally distributed to the Company's shareholders (the
"AVAILABLE FUNDS AND ASSETS") shall be distributed to shareholders in the
following manner:
3.1 Series C Preferred Stock. The holder of each share of Series
C Preferred Stock then outstanding shall be entitled to be paid, out of the
Available Funds and Assets (and prior and in preference to any payment or
distribution setting apart of any payment or distribution of any Available Funds
and Assets on Shares of Series A Preferred Stock, Series B Preferred Stock or
Common Stock), an amount per share equal to the Original Issue Price of the
Series C Preferred Stock plus an amount equal to declared but unpaid cumulative
dividends thereon, to and including the date full payment of such amount shall
be tendered to the holders of the Series C Preferred Stock with respect to such
liquidation, dissolution or winding up. If upon any liquidation, dissolution or
winding up of the Company, the Available Funds and Assets to be distributed to
the holders of the Series C Preferred Stock shall be insufficient to permit the
payment to such shareholders of their full preferential amount described in this
subsection, then all of the Available Funds and Assets shall be distributed
among the holders of the then outstanding Series C Preferred Stock pro rata
according to the number of outstanding shares of Series C Preferred Stock held
by each holder thereof.
4
<PAGE> 7
3.2 Series A and Series B Preferred Stock. Subject to payment in
full of the liquidation preference of the Series C Preferred Stock as provided
above, the holders of each share of Series A Preferred Stock and Series B
Preferred Stock then outstanding shall be entitled to be paid, out of the
Available Funds and Assets, and prior and in preference to any payment or
distribution (or any setting apart of any payment or distribution) of any
Available Funds and Assets on any shares of Common Stock, an amount per share
equal to the Original Issue Price for each such series of Preferred Stock,
respectively, plus all declared but unpaid dividends thereon. If upon any
liquidation, dissolution or winding up of the Company the Available Funds and
Assets shall be insufficient to permit the payment to holders of the Series A
Preferred Stock and Series B Preferred Stock of their full preferential amounts
described in this subsection, then all the Available Funds and Assets shall be
distributed among the holders of the then outstanding Series A Preferred Stock
and Series B Preferred Stock pro rata, on an equal priority, pari passu basis,
according to the amount of their full respective liquidation preferences as set
forth herein.
3.3 Remaining Assets. If there are any Available Funds and Assets
remaining after the payment or distribution (or the setting aside for payment or
distribution) to the holders of the Preferred Stock of their full preferential
amounts described above in Sections 3.1 and 3.2, then all such remaining
Available Funds and Assets shall be distributed pro rata among the holders of
the then outstanding Common Stock and the holders of the then outstanding Series
C Preferred Stock on an as converted basis, according to the number of shares of
Common Stock and Series C Preferred Stock held by each holder thereof; provided,
however, that the holders of the Series C Preferred Stock will not participate
over the amount obtained by multiplying the number of shares of Series C
Preferred Stock held by each holder by the Series C Preferred Stock Original
Issue Price by 3.0. After such distribution has been paid to all holders of
Series C Preferred Stock and Common Stock, then the holders of then outstanding
Common Stock shall be entitled to receive all the remaining Available Funds and
Assets (if any) pro rata according to the number of outstanding shares of Common
Stock then held by each of them.
3.4 Merger or Sale of Assets. A (i) consolidation, merger, share
exchange or other transaction or series of related transactions of the Company
in which the holders of the Company's outstanding shares immediately before such
consolidation, merger, share exchange or other transaction or series of related
transactions do not, immediately after such consolidation, merger, share
exchange or other transaction or series of related transactions, retain stock
representing a majority of the voting power of the surviving corporation; or
(ii) a sale, conveyance, lease or other disposition of all or substantially all
of the assets of the Company, shall each be deemed to be a liquidation,
dissolution or winding up of the Company as those terms are used in this Section
3 and shall sometimes be referred to herein as a "LIQUIDATION TRANSACTION."
3.5 Non-Cash Consideration. If any assets of the Company
distributed to shareholders in connection with any liquidation, dissolution, or
winding up of the Company (including a Liquidation Transaction) are other than
cash, then the value of such assets shall be their fair market value as
determined by the Board, except that any securities to be distributed to
shareholders in a liquidation, dissolution, or winding up of the Company
(including a Liquidation Transaction) shall be valued as follows:
5
<PAGE> 8
(a) The method of valuation of securities not subject to
investment letter or other similar restrictions on free marketability shall be
as follows:
(i) if the securities are then traded on a national
securities exchange or the Nasdaq National Market (or a similar national
quotation system), then the value shall be deemed to be the average of
the closing prices of the securities on such exchange or system over the
30-day period ending three (3) days prior to the distribution; and
(ii) if actively traded over-the-counter, then the
value shall be deemed to be the average of the closing bid prices over
the 30-day period ending three (3) days prior to the distribution; and
(iii) if there is no active public market, then the
value shall be the fair market value thereof, as determined in good
faith by the Board.
(b) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in
subparagraphs (a)(i),(ii) or (iii) of this subsection to reflect the approximate
fair market value thereof, as determined in good faith by the Board.
4. REDEMPTION.
4.1 Mandatory Redemption of Series C Preferred Stock. Subject to
the terms and conditions of this subsection, to the extent that any outstanding
shares of Series C Preferred Stock have not been redeemed or converted into
Common Stock prior to November 30, 2003, the Company shall upon receiving at
least thirty (30) days prior to November 30, 2003, a written request for the
redemption of all the Series C Preferred Stock under this Section 4.1 signed by
the holders of a majority of the then outstanding shares of Series C Preferred
Stock, redeem, on November 30, 2003 and on each successive anniversary, a number
of shares of Series C Preferred Stock equal to at least 33 1/3 % of the shares
of Series C Preferred Stock that are outstanding on the date the Company
receives such written redemption request from any source of funds legally
available therefor at the redemption price therefor described in this
subsection, until all outstanding shares of Series C Preferred Stock have been
redeemed or converted to Common Stock as provided in Section 6; provided,
however, that the Company, at its sole option and discretion, may redeem greater
numbers (including all) of the outstanding shares of Series C Preferred Stock,
at the redemption price set forth in this subsection at any time on or after
November 30, 2003 to the extent permitted by law. The redemption price for each
share of Series C Preferred Stock shall be an amount equal to the Original Issue
Price for the Series C Preferred Stock plus the amount of all declared and
unpaid cumulative and other dividends thereon.
If upon any redemption date scheduled under this subsection for the redemption
of Series C Preferred Stock, the funds and assets of the Company legally
available to redeem such stock shall be insufficient to redeem all shares of
Series C Preferred Stock then scheduled to be redeemed, then any such unredeemed
shares shall be carried forward and shall be redeemed (together with
6
<PAGE> 9
any other shares of Series C Preferred Stock then scheduled to be redeemed) at
the next such scheduled redemption date to the full extent of legally available
funds of the Company at such time, and any such unredeemed shares shall continue
to be so carried forward until redeemed. Shares of Series C Preferred Stock
which are subject to redemption hereunder but which have not been redeemed due
to insufficient legally available funds and assets of the Company shall continue
to be outstanding and entitled to all dividend, liquidation, conversion and
other rights, preferences, privileges and restrictions of the Series C Preferred
Stock until such shares have been converted or redeemed.
4.2 Partial Redemption. No redemption shall be made under this
Section 4 of only a part of the then outstanding Series C Preferred Stock,
unless the Company shall effect such redemption pro rata among all holders of
then outstanding Series C Preferred Stock according to the number of shares held
by each holder thereof on the applicable Redemption Date.
4.3 Redemption Notice. At least twenty (20) but no more than
sixty (60) days prior to the date fixed for any redemption of Series C Preferred
Stock (the "REDEMPTION DATE"), written notice shall be mailed by the Company,
postage prepaid, to each holder of record (at the close of business on the
business day next preceding the day on which notice is given) of the Series C
Preferred Stock to be redeemed, at the address last shown on the records of the
Company for such holder or given by the holder to the Company for the purpose of
notice or, if no such address appears or is given, at the place where the
principal executive office of the Company is located, notifying such holder of
the redemption to be effected, specifying the subsection hereof under which such
redemption is being effected, the Redemption Date, the applicable redemption
price, the number of such holder's shares of Series C Preferred Stock to be
redeemed, the place at which payment may be obtained and the date on which such
holder's conversion rights (as set forth in Section 6) as to such shares
terminate (which date shall in no event be earlier than three (3) days' prior to
the Redemption Date) and calling upon such holder to surrender to the Company,
in the manner and at the place designated, the certificate or certificates
representing the shares to be redeemed (the "REDEMPTION NOTICE").
Notwithstanding the foregoing, only one Redemption Notice need be given for a
redemption effected pursuant to subsection 4.1, provided such redemption notice
identifies all scheduled redemption dates and provided that each new transferee
who acquires shares of Series C Preferred Stock after such shares are first to
be redeemed under subsection 4.1 shall be given a similar Redemption Notice
before redemption of any such holder's shares of Series C Preferred Stock under
subsection 4.1.
4.4 Surrender of Certificates. On or before each designated
Redemption Date, each holder of Preferred Stock to be redeemed shall (unless
such holder has previously exercised his right to convert such shares of
Preferred Stock into Common Stock as provided in Section 6 below), surrender the
certificate(s) representing such shares of Preferred Stock to be redeemed to the
Company, in the manner and at the place designated in the Redemption Notice, and
thereupon the redemption price for such shares shall be payable to the order of
the person whose name appears on such certificate(s) as the owner thereof, and
each surrendered certificate shall be cancelled and retired. If less than all of
the shares represented by such certificate are redeemed, then the Company shall
promptly issue a new certificate representing the unredeemed shares.
7
<PAGE> 10
4.5 Effect of Redemption. If the Redemption Notice shall have
been duly given, and if on the Redemption Date the redemption price is either
paid or made available for payment through the deposit arrangements specified in
subsection 4.6 below, then notwithstanding that the certificates evidencing any
of the shares of Preferred Stock so called for redemption shall not have been
surrendered, all cumulative and other dividends with respect to such shares
shall cease to accrue after the Redemption Date, such shares shall not
thereafter be transferred on the Company's books and the rights of all of the
holders of such shares with respect to such shares shall terminate after the
Redemption Date, except only the right of the holders to receive the redemption
price without interest upon surrender of their certificate(s) therefor.
4.6 Deposit of Redemption Price. On or prior to the Redemption
Date, the Company may, at its option, deposit with a bank or trust company in
California having a capital and surplus of at least $100,000,000, as a trust
fund, a sum equal to the aggregate redemption price for all shares of Preferred
Stock called for redemption and not yet redeemed, with irrevocable instructions
and authority to the bank or trust company to pay, on or after the Redemption
Date, the redemption price to the respective holders upon the surrender of their
share certificates. From and after the date of such deposit, the shares so
called for redemption shall be redeemed. The deposit shall constitute full
payment of the shares to their holders, and from and after the date of the
deposit, the shares shall be deemed to be no longer outstanding, all dividends
with respect to such shares shall cease to accrue and the holders thereof shall
cease to be shareholders with respect to such shares and shall have no rights
with respect thereto except the right to receive from the bank or trust company
payment of the redemption price of the shares, without interest, upon surrender
of their certificates therefor, and the right to convert such shares as provided
in Section 6 below. Any funds so deposited and unclaimed at the end of one (1)
year from the Redemption Date shall be released or repaid to the Company, after
which time the holders of shares called for redemption who have not claimed such
funds shall be entitled to receive payment of the redemption price only from the
Company.
5. VOTING RIGHTS.
5.1 Common Stock. Each holder of shares of Common Stock shall be
entitled to one (1) vote for each share thereof held.
5.2 Preferred Stock. Each holder of shares of Preferred Stock
shall be entitled to the number of votes equal to the number of whole shares of
Common Stock into which such shares of Preferred Stock could be converted
pursuant to the provisions of Section 6 below at the record date for the
determination of the shareholders entitled to vote on such matters or, if no
such record date is established, the date such vote is taken or any written
consent of shareholders is solicited.
5.3 General. Subject to the foregoing provisions of this Section
5, each holder of Preferred Stock shall have full voting rights and powers equal
to the voting rights and powers of the holders of Common Stock, and shall be
entitled to notice of any shareholders' meeting in accordance with the bylaws of
the Company (as in effect at the time in question) and applicable
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<PAGE> 11
law, and shall be entitled to vote, together with the holders of Common Stock,
with respect to any question upon which holders of Common Stock have the right
to vote, except as may be otherwise provided by applicable law. Except as
otherwise expressly provided herein or as required by law, the holders of
Preferred Stock and the holders of Common Stock shall vote together and not as
separate classes.
5.4 Board of Directors Election and Removal.
(a) Election. The authorized number of directors may be
varied from time to time by resolution of the Board of Directors, provided that
the minimum authorized number shall be not less than four (4) and the maximum
authorized number shall not be more than seven (7). The holders of the Series C
Preferred Stock, voting as a separate series (with cumulative voting rights as
among themselves in accordance with Section 708 of the California Corporations
Code), shall be entitled to elect two (2) directors of the Company; and (ii) the
holders of the Preferred Stock and the Common Stock, voting together as a single
class (with cumulative voting rights as among themselves in accordance with
Section 708 of the California Corporations Code) shall be entitled to elect the
remaining directors of the Company.
(b) Quorum; Required Vote.
(i) Quorum. At any meeting held for the purpose of
electing directors, the presence, in person or by proxy, (A) of the holders of a
majority of the shares of the Series C Preferred Stock then outstanding shall
constitute a quorum of Series C Preferred Stock for the election of directors to
be elected solely by the holders of the Series C Preferred Stock, and (B) of
holders of Preferred Stock and Common Stock representing a majority of the
voting power of all the then-outstanding shares of Preferred Stock and Common
Stock shall constitute a quorum for the election of directors to be elected
jointly by the holders of the Preferred Stock and the Common Stock.
(ii) Required Vote. With respect to the election of
any director or directors by the holders of the outstanding shares of a
specified series of stock given the right to elect such director or directors
pursuant to subsection 5.4(a) above (the "SPECIFIED STOCK"), that candidate or
those candidates (as applicable) shall be elected who either: (i) in the case of
any such vote conducted at a meeting of the holders of such Specified Stock,
receive the highest number of affirmative votes of the outstanding shares of
such Specified Stock, up to the number of directors to be elected by such
Specified Stock; or (ii) in the case of any such vote taken by written consent
without a meeting, are elected by the unanimous written consent of the holders
of shares of such Specified Stock, except that, if such vote is to fill a
vacancy on the Board other than a vacancy created by removal of a director, such
vacancy may be filled by election by the written consent of the holders of a
majority of the outstanding shares of such Specified Stock.
(c) Vacancy. If there shall be any vacancy in the office
of a director elected by the holders of any Specified Stock pursuant to
subsection 5.4(a), then a successor to hold office for the unexpired term of
such director may be elected by either: (i) the remaining director or directors
(if any) in office that were so elected by the holders of such Specified Stock,
by the affirmative vote of a majority of such directors (or by the sole
remaining director elected by
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<PAGE> 12
the holders of such Specified Stock if there be but one), or (ii) the required
vote of holders of the shares of such Specified Stock specified in subsection
5.4(b)(ii) above that are entitled to elect such director under subsection
5.4(a).
(d) Removal. Subject to Section 303 of the California
Corporations Code, any director who shall have been elected to the Board by the
holders of any Specified Stock pursuant to subsection 5.4(a) or by any director
or directors elected by holders of any Specified Stock as provided in subsection
5.4(c), may be removed during his or her term of office, either with or without
cause, by, and only by, the affirmative vote of shares representing a majority
of the voting power of all the outstanding shares of such Specified Stock
entitled to vote, given either at a meeting of such shareholders duly called for
that purpose or pursuant to a written consent of shareholders without a meeting,
and any vacancy created by such removal may be filled only in the manner
provided in subsection 5.4(c).
(e) Procedures. Any meeting of the holders of any
Specified Stock, and any action taken by the holders of any Specified Stock by
written consent without a meeting, in order to elect or remove a director under
this subsection 5.4, shall be held in accordance with the procedures and
provisions of the Company's Bylaws, the California Corporations Code and
applicable law regarding shareholder meetings and shareholder actions by written
consent, as such are then in effect (including but not limited to procedures and
provisions for determining the record date for shares entitled to vote).
(f) Termination. Notwithstanding anything in this
subsection 5.4 to the contrary, the provisions of this subsection 5.4 shall
cease to be of any further force or effect upon the earlier to occur of: (i) the
merger or consolidation of the Company with or into any other corporation or
corporations if such consolidation or merger is approved by the shareholders of
the Company in compliance with applicable law and the Articles of Incorporation
and Bylaws of the Company; or (ii) a sale of all or substantially all of the
Company's assets; (iii) the first date on which all shares of Series C Preferred
Stock have been redeemed or converted.
6. CONVERSION RIGHTS. The outstanding shares of Preferred Stock shall be
convertible into Common Stock as follows:
6.1 Optional Conversion.
(a) At the option of the holder thereof, each share of
Preferred Stock shall be convertible, at any time or from time to time, into
fully paid and nonassessable shares of Common Stock as provided herein.
(b) Each holder of Preferred Stock who elects to convert
the same into shares of Common Stock shall surrender the certificate or
certificates therefor, duly endorsed, at the office of the Company or any
transfer agent for the Preferred Stock or Common Stock, and shall give written
notice to the Company at such office that such holder elects to convert the same
and shall state therein the number of shares of Preferred Stock being converted.
Thereupon the Company shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of Common Stock to
which such holder is entitled upon
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<PAGE> 13
such conversion. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the certificate
or certificates representing the shares of Preferred Stock to be converted, and
the person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date. If a holder of Preferred Stock plans to convert
shares of Preferred Stock into Common Stock in connection with an offer of
shares of Common Stock being registered pursuant to the Securities Act of 1933,
as amended, such conversion may, at the option of such holder, be conditioned
upon the effectiveness of such registration and the closing of the sale of such
registered shares pursuant to such offering, and such conversion shall be deemed
to occur immediately prior to such closing.
6.2 Automatic Conversion.
(a) Each share of Preferred Stock shall automatically be
converted into fully paid and nonassessable shares of Common Stock, as provided
herein: (i) immediately prior to the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement filed under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
for the account of the Company in which the aggregate public offering price
(after deduction of underwriters' discounts and commissions) equals or exceeds
$25,000,000 and the public offering price per share of which equals or exceeds
$6.00 per share after deduction of underwriters' discounts and commissions (such
price per share of Common Stock to be appropriately adjusted to reflect Common
Stock Events); or (ii) upon the Company's receipt of the written consent of the
holders of not less than fifty-five percent (55%) of the then outstanding shares
of Preferred Stock to the conversion of all then outstanding Preferred Stock
under this Section 6.
(b) Upon the occurrence of any event specified in
subparagraph 6.2(a)(i) or (ii) above, the outstanding shares of Preferred Stock
shall be converted into Common Stock automatically without the need for any
further action by the holders of such shares and whether or not the certificates
representing such shares are surrendered to the Company or its transfer agent;
provided, however, that the Company shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Preferred Stock are either delivered to
the Company or its transfer agent as provided below, or the holder notifies the
Company or its transfer agent that such certificates have been lost, stolen or
destroyed and executes an agreement satisfactory to the Company to indemnify the
Company from any loss incurred by it in connection with such certificates. Upon
the occurrence of such automatic conversion of the Preferred Stock, the holders
of Preferred Stock shall surrender the certificates representing such shares at
the office of the Company or any transfer agent for the Preferred Stock or
Common Stock. Thereupon, there shall be issued and delivered to such holder
promptly at such office and in its name as shown on such surrendered certificate
or certificates, a certificate or certificates for the number of shares of
Common Stock into which the shares of Preferred Stock surrendered were
convertible on the date on which such automatic conversion occurred.
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<PAGE> 14
6.3 Conversion Price. Each share of Preferred Stock shall be
convertible in accordance with subsection 6.1 or subsection 6.2 above into the
number of shares of Common Stock which results from dividing the Original Issue
Price for such series of Preferred Stock by the conversion price for such series
of Preferred Stock that is in effect at the time of conversion (the "CONVERSION
PRICE"). The initial Conversion Price for the Series A Preferred Stock shall be
$0.0833, the initial Conversion Price for the Series B Preferred Stock shall be
$0.80, and the initial Conversion Price for the Series C Preferred Stock shall
be the Original Issue Price of the Series C Preferred Stock.
6.4 Adjustment Upon Common Stock Event. Upon the occurrence of a
Common Stock Event, the Conversion Price of the Series A Preferred Stock, the
Conversion Price of the Series B Preferred Stock, and the Conversion Price of
the Series C Preferred Stock shall, simultaneously with such occurrence, be
adjusted by multiplying the Conversion Price of such series of Preferred Stock
in effect immediately prior to such Common Stock Event by a fraction, (i) the
numerator of which shall be the number of shares of Common Stock issued and
outstanding immediately prior to such Common Stock Event, and (ii) the
denominator of which shall be the number of shares of Common Stock issued and
outstanding immediately after such Common Stock Event, and the product so
obtained shall thereafter be the Conversion Price for such series of Preferred
Stock, until further adjustment hereunder. The Conversion Price for a series of
Preferred Stock shall be readjusted in the same manner upon the occurrence of
each subsequent Common Stock Event.
6.5 Adjustments for Other Dividends and Distributions. If at any
time or from time to time after the Original Issue Date the Company pays a
dividend or makes another distribution to the holders of the Common Stock
payable in securities of the Company other than shares of Common Stock, then in
each such event provision shall be made so that the holders of the Series A
Preferred Stock, the Series B Preferred Stock, and the Series C Preferred Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable upon conversion thereof, the amount of securities of the
Company which they would have received had their Preferred Stock been converted
into Common Stock on the date of such event (or such record date, as applicable)
and had they thereafter, during the period from the date of such event (or such
record date, as applicable) to and including the conversion date, retained such
securities receivable by them as aforesaid during such period, subject to all
other adjustments called for during such period under this Section 6 with
respect to the rights of the holders of the Preferred Stock or with respect to
such other securities by their terms.
6.6 Adjustment for Reclassification, Exchange and Substitution.
If at any time or from time to time after the Original Issue Date the Common
Stock issuable upon the conversion of the Series A Preferred Stock, the Series B
Preferred Stock, and the Series C Preferred Stock is changed into the same or a
different number of shares of any class or classes of stock, whether by
recapitalization, reclassification or otherwise (other than by a Common Stock
Event or a stock dividend, reorganization, merger, consolidation or sale of
assets provided for elsewhere in this Section 6), then in any such event each
holder of Series A Preferred Stock, Series B Preferred Stock, and Series C
Preferred Stock shall have the right thereafter to convert
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<PAGE> 15
such stock into the kind and amount of stock and other securities and property
receivable upon such recapitalization, reclassification or other change by
holders of the number of shares of Common Stock into which such shares of Series
A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock could
have been converted immediately prior to such recapitalization, reclassification
or change, all subject to further adjustment as provided herein or with respect
to such other securities or property by the terms thereof.
6.7 Sale of Shares Below Conversion Price.
(a) Adjustment Formula. If at any time or from time to
time after the Original Issue Date the Company issues or sells, or is deemed by
the provisions of this subsection 6.7 to have issued or sold, Additional Shares
of Common Stock (as hereinafter defined), otherwise than in connection with a
Common Stock Event as provided in subsection 6.4, a dividend or distribution as
provided in subsection 6.5 or a recapitalization, reclassification or other
change as provided in subsection 6.6, for an Effective Price (as hereinafter
defined) that is less than the Conversion Price for the Series B Preferred Stock
or the Series C Preferred Stock in effect immediately prior to such issuance or
sale, then, and in each such case, the Conversion Price for such series of
Preferred Stock shall be reduced, as of the close of business on the date of
such issuance or sale, to the price obtained by multiplying such Conversion
Price by a fraction:
(i) The numerator of which shall be the sum of (A)
the number of Common Stock Equivalents Outstanding (as hereinafter defined)
immediately prior to such issue or sale of Additional Shares of Common Stock
plus (B) the quotient obtained by dividing the Aggregate Consideration Received
(as hereinafter defined) by the Company for the total number of Additional
Shares of Common Stock so issued or sold (or deemed so issued and sold) by the
Conversion Price for such series of Preferred Stock in effect immediately prior
to such issue or sale; and
(ii) The denominator of which shall be the sum of
(A) the number of Common Stock Equivalents Outstanding immediately prior to such
issue or sale plus (B) the number of Additional Shares of Common Stock so issued
or sold (or deemed so issued and sold).
(b) Certain Definitions. For the purpose of making any
adjustment required under this subsection 6.7:
(i) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued by the Company, whether or not subsequently
reacquired or retired by the Company, other than: (A) shares of Common Stock
issued or issuable upon conversion of Series A Preferred Stock, Series B
Preferred Stock, or Series C Preferred Stock; (B) a cumulative total of
7,390,281 shares of Common Stock (or options, warrants or rights therefor)
issued since the Company's adoption of the 1997 Equity Incentive Plan to
employees, officers, or directors of, or contractors, consultants or advisers
to, the Company or any Subsidiary pursuant to stock purchase or stock option
plans, stock bonuses or awards, warrants, contracts or other arrangements that
are approved by the Board (such number of shares to be calculated net of any
repurchases of such shares by the Company and net of any such expired or
terminated
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<PAGE> 16
options, warrants or rights and to be proportionally adjusted to reflect any
subsequent Common Stock Event); and (C) shares of Common Stock (or options,
warrants, or rights therefor) which are issued to equipment lessors, landlords,
financial institutions and other providers of goods and services to the Company
pursuant to agreements or other arrangements approved by the Board; provided,
that at the time of each such issuance, such shares of Common Stock (or options,
warrants, or rights therefor), together with all like issuances since the
Original Issue Date (net of any repurchases of such shares by the Company and
net of any such expired or terminated options, warrants or rights), shall not
exceed one and five tenths percent (1.5%) of the Common Stock Equivalents
Outstanding (as hereinafter defined) at the time of such issuance;
(ii) The "AGGREGATE CONSIDERATION RECEIVED" by the
Company for any issue or sale (or deemed issue or sale) of securities shall (A)
to the extent it consists of cash, be computed at the gross amount of cash
received by the Company before deduction of any underwriting or similar
commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale and without deduction of any expenses payable
by the Company; (B) to the extent it consists of property other than cash, be
computed at the fair value of that property as determined in good faith by the
Board; and (C) if Additional Shares of Common Stock, Convertible Securities or
Rights or Options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration which covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or Rights or Options.
(iii) "COMMON STOCK EQUIVALENTS OUTSTANDING" shall
mean the number of shares of Common Stock that is equal to the sum of (A) all
shares of Common Stock of the Company that are outstanding at the time in
question, plus (B) all shares of Common Stock of the Company issuable upon
conversion of all shares of Preferred Stock or other Convertible Securities that
are outstanding at the time in question, plus (C) all shares of Common Stock of
the Company that are issuable upon the exercise of Rights or Options that are
outstanding at the time in question assuming the full conversion or exchange
into Common Stock of all such Rights or Options that are Rights or Options to
purchase or acquire Convertible Securities into or for Common Stock.
(iv) "CONVERTIBLE SECURITIES" shall mean stock or
other securities directly or indirectly convertible into or exchangeable for
shares of Common Stock.
(v) The "EFFECTIVE PRICE" of Additional Shares of
Common Stock shall mean the quotient determined by dividing the total number of
Additional Shares of Common Stock issued or sold, or deemed to have been issued
or sold, by the Company under this subsection 6.7, into the Aggregate
Consideration Received, or deemed to have been received, by the Company under
this subsection 6.7, for the issue of such Additional Shares of Common Stock;
and
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<PAGE> 17
(vi) "RIGHTS OR OPTIONS" shall mean warrants,
options or other rights to purchase or acquire shares of Common Stock or
Convertible Securities.
(c) Deemed Issuances. For the purpose of making any
adjustment to the Conversion Price of the Series B Preferred Stock or the Series
C Preferred Stock required under this subsection 6.7, if the Company issues or
sells any Rights or Options or Convertible Securities and if the Effective Price
of the shares of Common Stock issuable upon exercise of such Rights or Options
and/or the conversion or exchange of Convertible Securities (computed without
reference to any additional or similar protective or antidilution clauses) is
less than the Conversion Price then in effect for the Series B Preferred Stock
or the Series C Preferred Stock, then the Company shall be deemed to have
issued, at the time of the issuance of such Rights or Options or Convertible
Securities, that number of Additional Shares of Common Stock that is equal to
the maximum number of shares of Common Stock issuable upon exercise or
conversion of such Rights or Options or Convertible Securities upon their
issuance and to have received, as the Aggregate Consideration Received for the
issuance of such shares, an amount equal to the total amount of the
consideration, if any, received by the Company for or in connection with the
grant or issuance of such Rights or Options or Convertible Securities, plus, in
the case of such Rights or Options, the minimum amounts of consideration, if
any, payable to the Company upon the exercise in full of such Rights or Options,
plus, in the case of Convertible Securities, the minimum amounts of
consideration, if any, payable to the Company (other than by cancellation of
liabilities or obligations evidenced by such Convertible Securities) upon the
conversion or exchange thereof; provided that:
(i) if the minimum amounts of such consideration
cannot be ascertained, but are a function of antidilution or similar protective
clauses, then the Company shall be deemed to have received the minimum amounts
of consideration without reference to such clauses;
(ii) if the minimum amount of consideration payable
to the Company upon the exercise of Rights or Options or the conversion or
exchange of Convertible Securities is reduced over time or upon the occurrence
or non-occurrence of specified events other than by reason of antidilution or
similar protective adjustments, then the Effective Price shall be recalculated
using the figure to which such minimum amount of consideration is reduced; and
(iii) if the minimum amount of consideration
payable to the Company upon the exercise of such Rights or Options or the
conversion or exchange of Convertible Securities is subsequently increased, then
the Effective Price shall again be recalculated using the increased minimum
amount of consideration payable to the Company upon the exercise of such Rights
or Options or the conversion or exchange of such Convertible Securities.
No further adjustment of the Conversion Price, adjusted upon the issuance of
such Rights or Options or Convertible Securities, shall be made as a result of
the actual issuance of shares of Common Stock on the exercise of any such Rights
or Options or the conversion or exchange of
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<PAGE> 18
any such Convertible Securities. If any such Rights or Options or the conversion
rights represented by any such Convertible Securities shall expire without
having been fully exercised, then the Conversion Price as adjusted upon the
issuance of such Rights or Options or Convertible Securities shall be readjusted
to the Conversion Price which would have been in effect had an adjustment been
made on the basis that the only shares of Common Stock so issued were the shares
of Common Stock, if any, that were actually issued or sold on the exercise of
such Rights or Options or rights of conversion or exchange of such Convertible
Securities, and such shares of Common Stock, if any, were issued or sold for the
consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all
such Rights or Options, whether or not exercised, plus the consideration
received for issuing or selling all such Convertible Securities actually
converted or exchanged, plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by
such Convertible Securities) on the conversion or exchange of such Convertible
Securities, provided that such readjustment shall not apply to prior conversions
of Preferred Stock.
6.8 Certificate of Adjustment. In each case of an adjustment or
readjustment of the Conversion Price for a series of Preferred Stock, the
Company, at its expense, shall cause its Chief Financial Officer to compute such
adjustment or readjustment in accordance with the provisions hereof and prepare
a certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
the Preferred Stock at the holder's address as shown in the Company's books.
6.9 Fractional Shares. No fractional shares of Common Stock shall
be issued upon any conversion of Preferred Stock. In lieu of any fractional
share to which the holder would otherwise be entitled, the Company shall pay the
holder cash equal to the product of such fraction multiplied by the Common
Stock's fair market value as determined in good faith by the Board as of the
date of conversion.
6.10 Reservation of Stock Issuable Upon Conversion. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Preferred Stock, such number of its shares of Common Stock as
shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Preferred Stock; and if at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then outstanding shares of the Preferred Stock, the
Company will take such corporate action as may, in the opinion of its counsel,
be necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
6.11 Notices.
(a) Notices of Record Date. In the event that the Company
shall propose at any time:
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<PAGE> 19
(i) to declare any dividend or distribution upon
its Common Stock, whether in cash, property, stock or other securities, whether
or not a regular cash dividend and whether or not out of earnings or earned
surplus;
(ii) to offer for subscription pro rata to the
holders of any class or series of its stock any additional shares of stock of
any class or series or any other similar rights;
(iii) to effect any reclassification or
recapitalization of its Common Stock outstanding which results in a change in
the Common Stock; or
(iv) a Liquidation Transaction;
Then, in connection with each such event, the Company shall send a written
notice, pursuant to this Section 6.11, to the holders of Preferred Stock as
follows: (A) at least ten (10) days prior to the date on which a record shall be
taken for such dividend, distribution or subscription offer (and specifying the
date on which the holders of the Common Stock shall be entitled thereto) or for
determining rights to vote on the matters referred to in clauses (i) and (ii)
above; and (B) in the case of the matters referred to in clauses (iii) and (iv)
above, at least 10 days prior to the date when the same shall take place and
specifying the date on which the holders of the Common Stock shall be entitled
to exchange their Common Stock for securities or other property deliverable upon
the occurrence of such event or the record date for the determination of such
holders if such record date is earlier. The notice required by this Section
6.11(a) may be waived in writing by the holders of fifty-five percent (55%) of
the Preferred Stock then outstanding.
(b) Notice Effectiveness. Any notice required by the
provisions of this Section 6 to be given to the holders of shares of the
Preferred Stock shall be deemed given upon the earlier of actual receipt or
deposit in the United States mail, by certified or registered mail, return
receipt requested, postage prepaid, addressed to each holder of record at the
address of such holder appearing on the books of the Company.
6.12 No Impairment. The Company shall not avoid or seek to avoid
the observance or performance of any of the terms to be observed or performed
hereunder by the Company, but shall at all times in good faith assist in
carrying out all such action as may be reasonably necessary or appropriate in
order to protect the conversion rights of the holders of the Preferred Stock
against impairment.
7. Restrictions and Limitations.
7.1 Class Protective Provisions. So long as any shares of
Preferred Stock remain outstanding, the Company shall not, without the approval,
by vote or written consent, of the holders of fifty-five percent (55%) of the
Preferred Stock then outstanding, voting as a single class:
(1) amend its Articles of Incorporation in any manner that
would alter or change any of the rights, preferences, privileges or restrictions
of the Preferred Stock,
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<PAGE> 20
provided that the affirmative vote or written consent of holders of not less
than a majority of the outstanding shares of Series C Preferred Stock are
required to alter or change adversely the rights, preferences or privileges of
the Series C Preferred;
(2) amend its Articles of Incorporation in any other
manner that would materially and adversely affect the rights, preferences and
privileges of any series of Preferred Stock, provided that the affirmative vote
or written consent of holders of not less than a majority of the outstanding
shares of Series C Preferred Stock are required to alter or change adversely the
rights, preferences or privileges of the Series C Preferred;
(3) reclassify any outstanding shares of securities of the
Company into shares having rights, preferences or privileges senior to or on a
parity with any series of Preferred Stock, provided that the affirmative vote or
written consent of holders of not less than a majority of the outstanding shares
of Series C Preferred Stock are required to alter or change adversely the
rights, preferences or privileges of the Series C Preferred;
(4) authorize or issue any other stock having rights or
preferences senior to or on a parity with any series of Preferred Stock as to
dividend rights or liquidation preferences, provided that the affirmative vote
or written consent of holders of not less than a majority of the outstanding
shares of Series C Preferred Stock are required to alter or change adversely the
rights, preferences or privileges of the Series C Preferred;
(5) enter into a Liquidation Transaction (as defined in
Section 3.4 above); provided that notwithstanding anything to the contrary
herein, if the aggregate proceeds of such Liquidation Transaction to the
Company's shareholders amount to $20,000,000 or less, then the approval, by vote
or written consent, of the holders of a majority of the Series B Preferred Stock
and a majority of the Series C Preferred Stock then outstanding, each voting as
a separate series, shall also be required;
(6) liquidate, dissolve or wind up its affairs;
(7) declare or pay any dividends (other than dividends
payable solely in shares of its own Common Stock) on or declare or make any
other distribution (other than Permitted Repurchases), directly or indirectly,
on account of any shares of Common Stock now or hereafter outstanding; or
(8) amend the Company's By-laws to change the authorized
number of members of its Board of Directors.
8. MISCELLANEOUS
8.1 No Reissuance of Preferred Stock. No share or shares of
Preferred Stock acquired by the Company by reason of redemption, purchase,
conversion or otherwise shall be reissued, and all such shares shall be
canceled, retired and eliminated from the shares which the Company shall be
authorized to issue.
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8.2 Consent to Certain Transactions. Each holder of shares of
Preferred Stock shall, by virtue of its acceptance of a stock certificate
evidencing Preferred Stock, be deemed to have consented, for purposes of
Sections 502, 503 and 506 of the California Corporations Code, to all Permitted
Repurchases.
------------------------------------------------
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<PAGE> 1
EXHIBIT 3.2
CERTIFICATION OF BYLAWS
OF
VIRAGE LOGIC CORPORATION
(A CALIFORNIA CORPORATION)
KNOW ALL BY THESE PRESENTS:
I, Alex Shubat, certify that I am Secretary of Virage Logic Corporation,
a California corporation (the "Company"), that I am duly authorized to make and
deliver this certification and that the attached Bylaws are a true and correct
copy of the Bylaws of the Company in effect as of the date of this certificate.
Dated: December 3, 1999
/S/ ALEX SHUBAT
-------------------------------
Alex Shubat, Secretary
<PAGE> 2
BYLAWS
OF
VIRAGE LOGIC CORPORATION
(A CALIFORNIA CORPORATION)
(AS ADOPTED ON AUGUST 27, 1997
AND AMENDED THROUGH NOVEMBER 22, 1999)
<PAGE> 3
BYLAWS
OF
VIRAGE LOGIC CORPORATION
A California Corporation
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I OFFICES........................................................................... 1
Section 1.1 Principal Office...................................................... 1
Section 1.2 Other Offices......................................................... 1
ARTICLE II DIRECTORS........................................................................ 1
Section 2.1 Exercise of Corporate Powers.......................................... 1
Section 2.2 Number................................................................ 1
Section 2.3 Need Not Be Shareholders.............................................. 2
Section 2.4 Compensation.......................................................... 2
Section 2.5 Election and Term of Office........................................... 2
Section 2.6 Vacancies............................................................. 2
Section 2.7 Removal............................................................... 3
Section 2.8 Powers and Duties..................................................... 3
ARTICLE III MEETINGS OF DIRECTORS........................................................... 5
Section 3.1 Place of Meetings..................................................... 6
Section 3.2 Regular Meetings...................................................... 6
Section 3.3 Special Meetings...................................................... 6
Section 3.4 Notice of Special Meetings............................................ 6
Section 3.5 Quorum................................................................ 6
</TABLE>
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<PAGE> 4
BYLAWS
OF
VIRAGE LOGIC CORPORATION
A California Corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 3.6 Conference Telephone.................................................. 7
Section 3.7 Waiver of Notice and Consent.......................................... 7
Section 3.8 Action Without a Meeting.............................................. 7
Section 3.9 Committees............................................................ 7
ARTICLE IV COMMITTEES....................................................................... 7
Section 4.1 Appointment and Procedure............................................. 8
Section 4.2 Executive Committee Powers............................................ 8
Section 4.3 Powers of Other Committees............................................ 8
Section 4.4 Limitations on Powers of Committees................................... 8
ARTICLE V OFFICERS.......................................................................... 8
Section 5.1 Election and Qualifications........................................... 9
Section 5.2 Term of Office and Compensation....................................... 9
Section 5.3 Chief Executive Officer............................................... 9
Section 5.4 Chairman of the Board................................................. 10
Section 5.5 President............................................................. 10
Section 5.6 President Pro Tem..................................................... 10
Section 5.7 Vice President........................................................ 10
Section 5.8 Secretary............................................................. 10
Section 5.9 Chief Financial Officer............................................... 11
</TABLE>
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<PAGE> 5
BYLAWS
OF
VIRAGE LOGIC CORPORATION
A California Corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 5.10 Instruments in Writing................................................ 12
ARTICLE VI INDEMNIFICATION.................................................................. 12
Section 6.1 Indemnification of Directors and Officers............................. 12
Section 6.2 Advancement of Expenses............................................... 12
Section 6.3 Non-Exclusivity of Rights............................................. 13
Section 6.4 Indemnification Contracts............................................. 13
Section 6.5 Effect of Amendment................................................... 13
ARTICLE VII MEETINGS OF, AND REPORTS TO, SHAREHOLDERS....................................... 13
Section 7.1 Place of Meetings..................................................... 13
Section 7.2 Annual Meetings....................................................... 14
Section 7.3 Special Meetings...................................................... 14
Section 7.4 Notice of Meetings.................................................... 14
Section 7.5 Consent to Shareholders' Meetings..................................... 15
Section 7.6 Quorum................................................................ 15
Section 7.7 Adjourned Meetings.................................................... 15
Section 7.8 Voting Rights......................................................... 16
Section 7.9 Action by Written Consents............................................ 16
Section 7.10 Election of Directors................................................. 17
Section 7.11 Proxies............................................................... 17
</TABLE>
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<PAGE> 6
BYLAWS
OF
VIRAGE LOGIC CORPORATION
A California Corporation
TABLE OF CONTENTS (CONT'D)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 7.12 Inspectors of Election................................................ 17
Section 7.13 Annual Reports........................................................ 18
ARTICLE VIII SHARES AND SHARE CERTIFICATES.................................................. 18
Section 8.1 Shares Held By the Company............................................ 18
Section 8.2 Certificates for Shares............................................... 18
Section 8.3 Lost Certificates..................................................... 19
Section 8.4 Restrictions on Transfer of Shares.................................... 19
ARTICLE IX CONSTRUCTION OF BYLAWS WITH REFERENCE TO PROVISIONS OF LAW....................... 20
Section 9.1 Bylaw Provisions Construed as Additional and Supplemental to
Provisions of Law..................................................... 20
Section 9.2 Bylaw Provisions Contrary to or Inconsistent with Provisions of
Law................................................................... 20
ARTICLE X CERTIFICATION, ADOPTION, AMENDMENT OR REPEAL OF BYLAWS........................... 20
Section 10.1 By Shareholders....................................................... 20
Section 10.2 By the Board of Directors............................................. 20
Section 10.3 Certification and Inspection of Bylaws................................ 20
</TABLE>
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<PAGE> 7
BYLAWS
OF
VIRAGE LOGIC CORPORATION
(a California corporation)
As Adopted August 27, 1997
and Amended through November 22, 1999
ARTICLE I
OFFICES
Section 1.1 Principal Office. The principal executive office for the
transaction of the business of this corporation (the "Company") shall be located
at such place as the Board of Directors may from time to time decide. The Board
of Directors is hereby granted full power and authority to change the location
of the principal executive office from one location to another.
Section 1.2 Other Offices. One or more branch or other subordinate
offices may at any time be fixed and located by the Board of Directors at such
place or places within or outside the State of California as it deems
appropriate.
ARTICLE II
DIRECTORS
Section 2.1 Exercise of Corporate Powers. Except as otherwise provided
by these Bylaws, by the Articles of Incorporation of the Company or by the laws
of the State of California now or hereafter in force, the business and affairs
of the Company shall be managed and all corporate powers shall be exercised by
or under the ultimate direction of a board of directors (the "Board of
Directors").
Section 2.2 Number. The authorized number of directors of the Company
shall initially be seven (7). The authorized number of directors may be varied
from time to time by resolution of the Board of Directors, provided that the
minimum authorized number shall be not less than four (4) and the maximum
authorized number shall not be more than seven (7). Until
<PAGE> 8
changed by an amendment of this Section by the shareholders of the Company, the
authorized number of directors of the Company may be varied by the Board of
Directors, as opposed to being fixed, within the range of the minimum and the
maximum authorized numbers of directors provided above.
Section 2.3 Need Not Be Shareholders. The directors of the Company need
not be shareholders of this Company.
Section 2.4 Compensation. Directors and members of committees may
receive such compensation, if any, for their services as may be fixed or
determined by resolution of the Board of Directors. Nothing herein contained
shall be construed to preclude any director from serving the Company in any
other capacity and receiving compensation therefor.
Section 2.5 Election and Term of Office. The directors shall be elected
annually by the shareholders at the annual meeting of the shareholders. The term
of office of the directors shall begin immediately after their election and
shall continue until the next annual meeting of the shareholders and until their
respective successors are elected. A reduction of the authorized number of
directors shall not shorten the term of any incumbent director or remove any
incumbent director prior to the expiration of such director's term of office.
Section 2.6 Vacancies. A vacancy or vacancies on the Board of Directors
shall exist:
(a) in the case of the death of any director; or
(b) in the case of the resignation or removal of any director; or
(c) if the authorized number of directors is increased; or
(d) if the shareholders fail, at any annual meeting of shareholders at
which any director is elected, to elect the full authorized number of directors
at that meeting.
The Board of Directors may declare vacant the office of a director if he or she
is declared of unsound mind by an order of court or convicted of a felony or if,
within 60 days after notice of his or her election, he or she does not accept
the office. Any vacancy, except for a vacancy created by removal of a director
as provided in Section 2.7 hereof, may be filled by a person selected by a
majority of the remaining directors then in office, whether or not less than a
quorum, or by a sole remaining director. Vacancies occurring in the Board of
Directors by reason of removal of directors shall be filled only by approval of
shareholders. The shareholders may elect a director at any time to fill any
vacancy not filled by the directors. Any such election by the written consent of
shareholders, other than to fill a vacancy created by removal, requires the
consent of shareholders holding a majority of the outstanding shares entitled to
vote. If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders shall constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of 5% or more of the total number of shares at that time having the right to
vote for such directors may call a special meeting of shareholders to be held to
elect the entire Board of Directors. The term of office of any director then in
office shall terminate upon the
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<PAGE> 9
election of such director's successor. Any director may resign effective upon
giving written notice to the Chairman of the Board, if any, the President, the
Secretary or the Board of Directors, unless the notice specifies a later time
for the effectiveness of such resignation. After the notice is given and if the
resignation is effective at a future time, a successor may be elected or
appointed to take office when the resignation becomes effective.
Section 2.7 Removal. The entire Board of Directors or any individual
director may be removed from office without cause by an affirmative vote of
shareholders holding a majority of the outstanding shares entitled to vote. If
the entire Board of Directors is not removed, however, then no individual
director shall be removed if the votes cast against removal of that director,
plus the votes not consenting in writing to such removal, would be sufficient to
elect that director if voted cumulatively in an election at which the following
were true:
(a) the same total number of votes were cast, or, if such action is
taken by written consent, all shares entitled to vote were voted; and
(b) the entire number of directors authorized at the time of the
director's most recent election were then being elected.
If any or all directors are so removed, new directors may be elected at
the same meeting or at a subsequent meeting. If at any time a class or series of
shares is entitled to elect one or more directors under authority granted by the
Articles of Incorporation, the provisions of this Section 2.7 shall apply to the
vote of that class or series and not to the vote of the outstanding shares as a
whole.
Section 2.8 Powers and Duties. Without limiting the generality or extent
of the general corporate powers to be exercised by the Board of Directors
pursuant to Section 2.1 of these Bylaws, it is hereby provided that the Board of
Directors shall have full power with respect to the following matters:
(a) To purchase, lease and acquire any and all kinds of property, real,
personal or mixed, and at its discretion to pay therefor in money, in property
and/or in stocks, bonds, debentures or other securities of the Company.
(b) To enter into any and all contracts and agreements which in its
judgment may be beneficial to the interests and purposes of the Company.
(c) To fix and determine and to vary from time to time the amount or
amounts to be set aside or retained as reserve funds or as working capital of
the Company or for maintenance, repairs, replacements or enlargements of its
properties.
(d) To declare and pay dividends in cash, shares and/or property out of
any funds of the Company at the time legally available for the declaration and
payment of dividends on its shares.
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<PAGE> 10
(e) To adopt such rules and regulations for the conduct of its meetings
and the management of the affairs of the Company as it may deem proper.
(f) To prescribe the manner in which and the person or persons by whom
any or all of the checks, drafts, notes, bills of exchange, contracts and other
corporate instruments shall be executed.
(g) To accept resignations of directors; to declare vacant the office of
a director as provided in Section 2.6 hereof; and, in case of vacancy in the
office of directors, to fill the same to the extent provided in Section 2.6
hereof.
(h) To create offices in addition to those for which provision is made
by law or these Bylaws; to elect and remove at pleasure all officers of the
Company, fix their terms of office, prescribe their titles, powers and duties,
limit their authority and fix their salaries in any way it may deem advisable
that is not contrary to law or these Bylaws.
(i) To designate one or more persons to perform the duties and exercise
the powers of any officer of the Company during the temporary absence or
disability of such officer.
(j) To appoint or employ and to remove at pleasure such agents and
employees as it may see fit, to prescribe their titles, powers and duties, limit
their authority and fix their salaries in any way it may deem advisable that is
not contrary to law or these Bylaws.
(k) To fix a time in the future, which shall not be more than 60 days
nor less than 10 days prior to the date of the meeting nor more than 60 days
prior to any other action for which it is fixed, as a record date for the
determination of the shareholders entitled to notice of and to vote at any
meeting, or entitled to receive any payment of any dividend or other
distribution, or allotment of any rights, or entitled to exercise any rights in
respect of any other lawful action; and in such case only shareholders of record
on the date so fixed shall be entitled to notice of and to vote at the meeting
or to receive the dividend, distribution or allotment of rights or to exercise
the rights, as the case may be, notwithstanding any transfer of any shares on
the books of the Company after any record date fixed as aforesaid. The Board of
Directors may close the books of the Company against transfers of shares during
the whole or any part of such period.
(l) To fix and locate from time to time the principal office for the
transaction of the business of the Company and one or more branch or other
subordinate offices of the Company within or without the State of California; to
designate any place within or without the State of California for the holding of
any meeting or meetings of the shareholders or the Board of Directors, as
provided in Sections 3.1 and 7.1 hereof; to adopt, make and use a corporate
seal, and to prescribe the forms of certificates for shares and to alter the
form of such seal and of such certificates from time to time as in its judgment
it may deem best, provided such seal and such certificates shall at all times
comply with the provisions of law now or hereafter in effect.
(m) To authorize the issuance of shares of stock of the Company in
accordance with the laws of the State of California and the Articles of
Incorporation.
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<PAGE> 11
(n) Subject to the limitation provided in Section 10.2 hereof, to adopt,
amend or repeal from time to time and at any time these Bylaws and any and all
amendments thereof.
(o) To borrow money, make guarantees of indebtedness or other
obligations of third parties (except to the extent such guarantees are not
permitted by Section 2.8(p) of these Bylaws, Section 315 of the California
Corporations Code (or any successor provision) or other applicable law) and
incur indebtedness on behalf of the Company, including the power and authority
to borrow money from any of the shareholders, directors or officers of the
Company; and to cause to be executed and delivered therefor in the corporate
name promissory notes, bonds, debentures, deeds of trust, mortgages, pledges (or
other transfers of property as security or collateral for a debt), or other
evidences of debt and securities therefor; and the note or other obligation
given for any indebtedness of the Company, signed officially by any officer or
officers thereunto duly authorized by the Board of Directors, shall be binding
on the Company.
(p) To approve a loan of money or property to any officer or director of
the Company or of any parent or subsidiary company, to guarantee the obligation
of any such officer or director or to approve an employee benefit plan
authorizing such a loan or guarantee to any such officer or director, but only
if (i) the loan or guarantee is made pursuant to a transaction, plan or
agreement (including a stock purchase plan or agreement or stock option plan or
agreement) permitted by Section 408 of the California Corporations Code; or (ii)
the transaction, or an employee benefit plan authorizing such loans or
guarantees after disclosure of the right under such plan to include officers or
directors thereunder, is approved by any vote of the shareholders of the Company
then required under Section 315 of the California Corporations Code (or any
successor provision) or other then applicable law; provided however, that
notwithstanding the foregoing, if the Company has outstanding shares held of
record by 100 or more persons (determined as provided in Section 605 of the
California Corporations Code or any successor provision) on the date of approval
by the Board of Directors of a loan or guarantee to an officer of the Company,
and this Section 2.8(p) has been approved by, the outstanding shares (as defined
in Section 152 of the California Corporations Code or any successor provision),
then the Board of Directors alone (without the need for any further approval by
the Company's shareholders) may, by a vote of the Board of Directors sufficient
for approval without counting the vote of any interested director or directors,
approve such a loan or guarantee to an officer of the Company, whether or not
such officer is a director, or an employee benefit plan authorizing such a loan
or guarantee to an officer of the Company, if the Board of Directors determines
(without counting the vote of any interested director or directors) that such
loan, guarantee or plan may reasonably be expected to benefit the Company.
(q) Generally to do and perform every act and thing whatsoever that may
pertain to the office of a director or to a board of directors.
ARTICLE III
MEETINGS OF DIRECTORS
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<PAGE> 12
Section 3.1 Place of Meetings. Meetings (whether regular, special or
adjourned) of the Board of Directors of the Company shall be held at the
principal executive office of the Company or at any other place within or
outside the State of California which may be designated from time to time by
resolution of the Board of Directors or which is designated in the notice of the
meeting.
Section 3.2 Regular Meetings. Regular meetings of the Board of Directors
shall be held after the adjournment of each annual meeting of the shareholders
(which regular directors' meeting shall be designated the "Regular Annual
Meeting") and at such other times as may be designated from time to time by
resolution of the Board of Directors. Notice of the time and place of all
regular meetings shall be given in the same manner as for special meetings,
except that no such notice need be given if (a) the time and place of such
meetings are fixed by the Board of Directors or (b) the Regular Annual Meeting
is held at the principal executive office of this Corporation and on the date
specified by the Board of Directors.
Section 3.3 Special Meetings. Special meetings of the Board of Directors
may be called at any time by the Chairman of the Board, if any, or the
President, or any Vice President, or the Secretary or by any two or more
directors.
Section 3.4 Notice of Special Meetings. Special meetings of the Board of
Directors shall be held upon no less than 4 days' notice by mail or 48 hours'
notice delivered personally or by telephone, including a voice messaging system
or other system or technology designed to record and communicate messages,
telegraph, facsimile, electronic mail, or other electronic means to each
director. Notice need not be given to any director who signs a waiver of notice
or a consent to holding the meeting or an approval of the minutes thereof,
whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to such
director. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting. Any oral notice
given personally or by telephone may be communicated either to the director or
to a person at the home or office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. A
notice or waiver of notice need not specify the purpose of any meeting of the
Board of Directors. If the address of a director is not shown on the records of
the Company and is not readily ascertainable, notice shall be addressed to him
or her at the city or place in which meetings of the directors are regularly
held. If a meeting is adjourned for more than 24 hours, notice of any
adjournment to another time or place shall be given prior to the time of the
adjourned meeting to all directors not present at the time of adjournment.
Section 3.5 Quorum. A majority of the authorized number of directors
constitutes a quorum of the Board of Directors for the transaction of business.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present is the act of the Board of
Directors subject to provisions of law relating to interested directors and
indemnification of agents of the Company. A majority of the directors present,
whether or not a quorum is present, may adjourn any meeting to another time and
place. A meeting at which a
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<PAGE> 13
quorum is initially present may continue to transact business notwithstanding
the withdrawal of directors, if any action taken is approved by at least a
majority of the required quorum for such meeting.
Section 3.6 Conference Telephone. Members of the Board of Directors may
participate in a meeting through use of conference telephone, electronic video
screen communication, or other communications equipment. Participation in a
meeting pursuant to this Section constitutes presence in person at that meeting
if
(a) each member participating in the meeting can communicate with all of
the other members concurrently;
(b) each member is provided the means of participating in all matters
before the Board of Directors, including the capacity to propose, or to
interpose an objection, to a specific action to be taken by the Company; and
(c) the Company adopts and implements some means of verifying that
(i) a person communicating by telephone, electronic video screen,
or other communications equipment is a director entitled to participate in the
Board of Directors meeting; and
(ii) all statements, questions, actions, or votes were made by
that director and not by another person not permitted to participate as a
director.
Section 3.7 Waiver of Notice and Consent. The transactions of any
meeting of the Board of Directors, however called and noticed or wherever held,
shall be as valid as though had at a meeting duty held after regular call and
notice if a quorum is present, and if, either before or after the meeting, each
of the directors not present signs a written waiver of notice, a consent to
holding such meeting or an approval of the minutes thereof All such waivers,
consents and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Section 3.8 Action Without a Meeting. Any action required or permitted
by law to be taken by the Board of Directors may be taken without a meeting, if
all members of the Board of Directors shall individually or collectively consent
in writing to the taking of such action. Such written consent or consents shall
be filed with the minutes of the proceedings of the Board of Directors. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors at a duly held meeting.
Section 3.9 Committees. The provisions of this Article apply also to
committees of the Board of Directors and action by such committees.
ARTICLE IV
COMMITTEES
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<PAGE> 14
Section 4.1 Appointment and Procedure. The Board of Directors may, by
resolution adopted by a majority of the authorized number of directors, appoint
from among its members one or more committees, including without limitation an
executive committee, an audit committee and a compensation committee, of two or
more directors. Each committee may make its own rules of procedure subject to
Section 3.9 hereof, and shall meet as provided by such rules or by a resolution
adopted by the Board of Directors (which resolution shall take precedence). A
majority of the members of the committee shall constitute a quorum, and in every
case the affirmative vote of a majority of all members of the committee shall be
necessary to the adoption of any resolution.
Section 4.2 Executive Committee Powers. During the intervals between the
meetings of the Board of Directors, the Executive Committee, if any, in all
cases in which specific directions shall not have been given by the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the Company in
such manner as the Executive Committee may deem best for the interests of the
Company.
Section 4.3 Powers of Other Committees. Other committees shall have such
powers as are given them in a resolution of the Board of Directors.
Section 4.4 Limitations on Powers of Committees. No committee shall have
the power to act with respect to:
(a) any action for which the laws of the State of California also
require shareholder approval or approval of the outstanding shares;
(b) the filling of vacancies on the Board of Directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the Board
of Directors or on any committee;
(d) the amendment or repeal of these Bylaws or the adoption of new
Bylaws;
(e) the amendment or repeal of any resolution of the Board of Directors
which by its express terms is not amendable or repealable;
(f) a distribution to the shareholders of the Company, except at a rate
or in a periodic amount or within a price range as set forth in the Articles of
Incorporation or determined by the Board of Directors; and
(g) the appointment of other committees of the Board of Directors or the
members thereof.
ARTICLE V
OFFICERS
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<PAGE> 15
Section 5.1 Election and Qualifications. The officers of the Company
shall consist of a President and/or a Chief Executive Officer, a Secretary, a
Chief Financial Officer and such other officers, including, but not limited to,
a Chairman of the Board of Directors, one or more Vice Presidents, a Treasurer,
and Assistant Vice Presidents, Assistant Secretaries and Assistant Treasurers,
as the Board of Directors shall deem expedient, who shall be chosen in such
manner and hold their offices for such terms as the Board of Directors may
prescribe. Any number of offices may be held by the same person. Any Vice
President, Assistant Treasurer or Assistant Secretary, respectively, may
exercise any of the powers of the President, the Chief Financial Officer or the
Secretary, respectively, as directed by the Board of Directors, and shall
perform such other duties as are imposed upon him or her by these Bylaws or the
Board of Directors.
Section 5.2 Term of Office and Compensation. The term of office and
salary of each of said officers and the manner and time of the payment of such
salaries shall be fixed and determined by the Board of Directors and may be
altered by said Board of Directors from time to time at its pleasure, subject to
the rights, if any, of any officer under any contract of employment. Any officer
may resign at any time upon written notice to the Company, without prejudice to
the rights, if any, of the Company under any contract to which the officer is a
party. If any vacancy occurs in any office of the Company, the Board of
Directors may appoint a successor to fill such vacancy.
Section 5.3 Section 5.3 Chief Executive Officer. Subject to the control
of the Board of Directors and such supervisory powers, if any, as may be given
by the Board of Directors, the powers and duties of the Chief Executive Officer
of the Company are:
(a) To act as the general manager and, subject to the control of the
Board of Directors, to have general supervision, direction and control of the
business and affairs of the Company.
(b) To preside at all meetings of the shareholders and, in the absence
of the Chairman of the Board of Directors or if there be no Chairman, at all
meetings of the Board of Directors.
(c) To call meetings of the shareholders and meetings of the Board of
Directors to be held at such times and, subject to the limitations prescribed by
law or by these Bylaws, at such places as he or she shall deem proper.
(d) To affix the signature of the Company to all deeds, conveyances,
mortgages, leases, obligations, bonds, certificates and other papers and
instruments in writing which have been authorized by the Board of Directors or
which, in the judgment of the Chief Executive Officer, should be executed on
behalf of the Company; to sign certificates for shares of stock of the Company;
and, subject to the direction of the Board of Directors, to have general charge
of the property of the Company and to supervise and control all officers, agents
and employees of the Company.
The President shall be the Chief Executive Officer of the Company unless
the Board of Directors shall designate the Chairman of the Board or another
officer to be the Chief Executive
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<PAGE> 16
Officer. If there is no President, then the Chairman of the Board shall be the
Chief Executive Officer.
Section 5.4 Chairman of the Board. The Chairman of the Board of
Directors, if there be one, shall have the power to preside at all meetings of
the Board of Directors and shall have such other powers and shall be subject to
such other duties as the Board of Directors may from. time to time prescribe.
Section 5.5 President. Subject to the supervisory powers of the Chief
Executive Officer, if not the President, and to such supervisory powers as may
be given by the Board of Directors to the Chairman of the Board, if one is
elected, or to any other officer, the President shall have the general powers
and duties of management usually vested in the office of president of a
corporation and shall have such other powers and duties as may be prescribed by
the Board of Directors or these Bylaws.
Section 5.6 President Pro Tem. If neither the Chairman of the Board of
Directors, the President, nor any Vice President is present at any meeting of
the Board of Directors, a President pro tem may be chosen by the directors
present at the meeting to preside and act at such meeting. If neither the
President nor any Vice President is present at any meeting of the shareholders,
a President pro tem may be chosen by the shareholders present at the meeting to
preside at such meeting.
Section 5.7 Vice President. The titles, powers and duties of the Vice
President or Vice Presidents, if any, shall be as prescribed by the Board of
Directors. In case of the resignation, disability or death of the President, the
Vice President, or one of the Vice Presidents, shall exercise all powers and
duties of the President. If there is more than one Vice President, the order in
which the Vice Presidents shall succeed to the powers and duties of the
President shall be as fixed by the Board of Directors.
Section 5.8 Secretary. The powers and duties of the Secretary are:
(a) To keep a book of minutes at the principal executive office of the
Company, or such other place as the Board of Directors may order, of all
meetings of its directors and shareholders with the time and place of holding of
such meeting, whether regular or special, and, if special, how authorized, the
notice thereof given, the names of those present at directors' meetings, the
number of shares present or represented at shareholders' meetings and the
proceedings thereof.
(b) To keep the seal of the Company and to affix the same to all
instruments which may require it.
(c) To keep or cause to be kept at the principal executive office of the
Company, or at the office of the transfer agent or agents, a record of the
shareholders of the Company, giving the names and addresses of all shareholders
and the number and class of shares held by each, the number and date of
certificates issued for shares and the number and date of cancellation of every
certificate surrendered for cancellation.
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<PAGE> 17
(d) To keep a supply of certificates for shares of the Company, to fill
in all certificates issued, and to make a proper record of each such issuance;
provided that, so long as the Company shall have one or more duly appointed and
acting transfer agents of the shares, or any class or series of shares, of the
Company, such duties with respect to such shares shall be performed by such
transfer agent or transfer agents.
(e) To transfer upon the share books of the Company any and all shares
of the Company; provided that, so long as the Company shall have one or more
duly appointed and acting transfer agents of the shares, or any class or series
of shares, of the Company, such duties with respect to such shares shall be
performed by such transfer agent or transfer agents, and the method of transfer
of each certificate shall be subject to the reasonable regulations of the
transfer agent to whom the certificate is presented for transfer and, if the
Company then has one or more duly appointed and acting registrars, subject to
the reasonable regulations of the registrar to which a new certificate is
presented for registration; and, provided further, that no certificate for
shares of stock shall be issued or delivered or, if issued or delivered, shall
have any validity whatsoever until and unless it has been signed or
authenticated in the manner provided in Section 8.2 hereof
(f) To make service and publication of all notices that may be necessary
or proper in connection with meetings of the Board of Directors of the
shareholders of the Company. In case of the absence, disability, refusal or
neglect of the Secretary to make service or publication of any notices, then
such notices may be served and/or published by the President or a Vice
President, or by any person thereunto authorized by either of them, or by the
Board of Directors, or by the holders of a majority of the outstanding shares of
the Company.
(g) Generally to do and perform all such duties as pertain to such
office and as may be required by the Board of Directors.
Section 5.9 Chief Financial Officer. The powers and duties of the Chief
Financial Officer are:
(a) To supervise and control the keeping and maintaining of adequate and
correct accounts of the Company's properties and business transactions,
including accounts of its assets, liabilities, receipts, disbursements, gains,
losses, capital, surplus and shares. The books of account shall at all
reasonable times be open to inspection by any director.
(b) To have the custody of all funds, securities, evidences of
indebtedness and other valuable documents of the Company and, at his or her
discretion, to cause any or all thereof to be deposited for the account of the
Company with such depository as may be designated from time to time by the Board
of Directors.
(c) To receive or cause to be received, and to give or cause to be
given, receipts and acquittances for monies paid in for the account of the
Company.
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<PAGE> 18
(d) To disburse, or cause to be disbursed, all funds of the Company as
may be directed by the President or the Board of Directors, taking proper
vouchers for such disbursements.
(e) To render to the President or to the Board of Directors, whenever
either may require, accounts of all transactions as Chief Financial Officer and
of the financial condition of the Company.
(f) Generally to do and perform all such duties as pertain to such
office and as may be required by the Board of Directors.
Section 5.10 Instruments in Writing. All checks, drafts, demands for
money, notes and written contracts of the Company shall be signed by such
officer or officers, agent or agents, as the Board of Directors may from time to
time designate. No officer, agent, or employee of the Company shall have the
power to bind the Company by contract or otherwise unless authorized to do so by
these Bylaws or by the Board of Directors.
ARTICLE VI
INDEMNIFICATION
Section 6.1 Indemnification of Directors and Officers. The Company shall
indemnify each person who was or is a party, or is threatened to be made a
party, to any threatened, pending or completed action or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding") by reason of
the fact that such person is or was a director or officer of the Company, or is
or was serving at the request of the Company as a director or officer of another
foreign or domestic corporation, partnership, joint venture, trust or other
enterprise, or was a director or officer of a foreign or domestic corporation
which was a predecessor corporation of the Company or of another enterprise at
the request of such predecessor corporation, to the fullest extent permitted by
the California Corporations Code, against all expenses, including, without
limitation, attorneys' fees and any expenses of establishing a right to
indemnification, judgments, fines, settlements and other amounts actually and
reasonably incurred in connection with such Proceeding, and such indemnification
shall continue as to a person who has ceased to be such a director or officer,
and shall inure to the benefit of the heirs, executors and administrators of
such person; provided however that the Company shall indemnify any such person
seeking indemnity in connection with a Proceeding (or part thereof) initiated by
such person only if such Proceeding (or part thereof) was authorized by the
Board of Directors of the Company.
Section 6.2 Advancement of Expenses. The Company shall pay all expenses
incurred by such a director or officer in defending any Proceeding as they are
incurred in advance of its final disposition; provided, however, that the
payment of such expenses incurred by a director or officer in advance of the
final disposition of a Proceeding shall be made only upon receipt by the Company
of an agreement by or on behalf of such director or officer to repay such amount
if it shall be determined ultimately that such person is not entitled to be
indemnified under this Article VI or otherwise; and provided further that the
Company shall not be required to advance
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any expenses to a person against whom the Company brings an action, alleging
that such person committed an act or omission not in good faith or that involved
intentional Misconduct or a knowing violation of law, or that was contrary to
the best interest of the Company, or derived an improper personal benefit from a
transaction.
Section 6.3 Non-Exclusivity of Rights. The rights conferred on any
person in this Article VI shall not be deemed exclusive of any other rights that
such person may have or hereafter acquire under any statute, by law, agreement,
vote of shareholders or disinterested directors or otherwise, both as to action
in an official capacity and as to action in another capacity while holding such
office. Additionally, nothing in this Article VI shall limit the ability of the
Company, in its discretion, to indemnify or advance expenses to persons whom the
Company is not obligated to indemnify or advance expenses to pursuant to this
Article VI.
Section 6.4 Indemnification Contracts. The Board of Directors is
authorized to cause the Company to enter into a contract with any director,
officer, employee or agent of the Company, or any person serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, providing for
indemnification rights equivalent to or, if the Board of Directors so
determines, greater than (to the extent permitted by the Company's Articles of
Incorporation and the California Corporations Code) those provided for in this
Article VI.
Section 6.5 Effect of Amendment. Any amendment, repeal or modification
of any provision of this Article VI shall be prospective only, and shall not
adversely affect any right or protection conferred on a person pursuant to this
Article VI and existing at the time of such amendment, repeal or modification.
ARTICLE VII
MEETINGS OF, AND REPORTS TO, SHAREHOLDERS
Section 7.1 Place of Meetings. Meetings (whether regular, special or
adjourned) of the shareholders of the Company shall be held at the principal
executive office for the transaction of business of the Company, or at any place
within or outside the State of California which may be designated by written
consent of all the shareholders entitled to vote thereat, or which may be
designated by resolution of the Board of Directors. Any meeting shall be valid
wherever held if held by the written consent of all the shareholders entitled to
vote thereat, given either before or after the meeting and filed with the
Secretary of the Company.
Section 7.2 Annual Meetings. The annual meetings of the shareholders
shall be held at the place provided pursuant to Section 7.1 hereof and at such
time in a particular year as may be designated by written consent of all the
shareholders entitled to vote thereat or which may be designated by resolution
of the Board of Directors of the Company. Said annual meetings shall be held for
the purpose of the election of directors, for the making of reports of the
affairs of the Company and for the transaction of such other business as may
properly come before the meeting.
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Section 7.3 Special Meetings. Special meetings of the shareholders for
any purpose or purposes whatsoever may be called at any time by the President,
the Chairman of the Board of Directors or by the Board of Directors, or by two
or more members thereof, or by one or more holders of shares entitled to cast
not less than 10% of the votes at the meeting. Upon request in writing sent by
registered mail to the Chairman of the Board of Directors, President, Vice
President or Secretary, or delivered to any such officer in person, by any
person entitled to call a special meeting of shareholders, it shall be the duty
of such officer forthwith to cause notice to be given to the shareholders
entitled to vote that a meeting will be held at a time requested by the person
or persons calling the meeting, which (except where called by the Board of
Directors) shall be not less than 35 days nor more than 60 days after the
receipt of such request. If the notice is not given within 20 days after receipt
of the request, the person entitled to call the meeting may give the notice.
Notices of meetings called by the Board of Directors shall be given in
accordance with Section 7.4.
Section 7.4 Notice of Meetings. Notice of any meeting of shareholders
shall be given in writing not less than 10 (or, if sent by third-class mail, 30)
nor more than 60 days before the date of the meeting to each shareholder
entitled to vote thereat by the Secretary or an Assistant Secretary, or such
other person charged with that duty, or if there be no such officer or person,
or in case of his or her neglect or refusal, by any director or shareholder. The
notice shall state the place, date and hour of the meeting and (a) in the case
of a special meeting, the general nature of the business to be transacted, and
no other business may be transacted, or (b) in the case of the annual meeting,
those matters which the Board of Directors, at the time of the mailing of the
notice, intends to present for action by the shareholders, but any proper matter
may be presented at the meeting for such action, except that notice must be
given or waived in writing of any proposal relating to approval of contracts
between the Company and any director of the Company, amendment of the Articles
of Incorporation, reorganization of the Company or winding up of the affairs of
the Company. The notice of any meeting at which directors are to be elected
shall include the names of nominees intended at the time of the notice to be
presented by the Board of Directors for election. Notice of a shareholders'
meeting or any report shall be given to any shareholder, either (a) personally
or (b) by first-class mail, or, in case the Company has outstanding shares held
of record by 500 or more persons on the record date for the shareholders'
meeting, notice may be sent by third-class mail, or other means of written
communication, charges prepaid, addressed to such shareholder at such
shareholder's address appearing on the books of the Company or given by such
shareholder to the Company for the purpose of notice. If a shareholder gives no
address or no such address appears on the books of the Company, notice shall be
deemed to have been given if sent by mail or other means of written
communication addressed to the place where the principal executive office of the
Company is located, or if published at least once in a newspaper of general
circulation in the county in which such office is located. The notice or report
shall be deemed to have been given at the time when delivered personally or
deposited in the United States mail, postage prepaid, or sent by other means of
written communication and addressed as hereinbefore provided. An affidavit or
declaration of delivery or mailing of any notice or report in accordance with
the provisions of this Section 7.4, executed by the Secretary, Assistant
Secretary or any transfer agent, shall be prima facie evidence of the- giving of
the notice or report. If any notice or report addressed to the shareholder at
the address of such shareholder appearing on the books of the
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Company is returned to the Company by the United States Postal Service marked to
indicate that the United States Postal Service is unable to deliver the notice
or report to the shareholder at such address, all future notices or reports
shall be deemed to have been duly given without further mailing if the same
shall be available for the shareholder upon written demand of the shareholder at
the principal executive office of the Company for a period of one year from the
date of the giving of the notice or report to all other shareholders.
Section 7.5 Consent to Shareholders' Meetings. The transactions of any
meeting of shareholders, however called and noticed, and wherever held, are as
valid as though they had taken place at a meeting duly held after regular call
and notice, if the following conditions are met:
(a) a quorum is present, either in person or by proxy, and
(b) either before or after the meeting, each of the shareholders
entitled to vote, who was not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of such meeting or an approval of
the minutes thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes of the meeting.
Attendance of a person at a meeting shall constitute both a waiver of
notice of and presence at such meeting, except: (a) when the person objects, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened; or (b) when the person expressly
makes an objection at some time during the meeting to the consideration of
matters required by law to be included in the notice but not so included.
Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of shareholders need be specified in any written
waiver of notice, consent to the holding of the meeting or approval of the
minutes thereof, except as to approval of contracts between the Company and any
of its directors, amendment of the Articles of Incorporation, reorganization of
the Company or winding up the affairs of the Company.
Section 7.6 Quorum. The presence in person or by proxy of the holders of
a majority of the shares entitled to vote at any meeting of the shareholders
shall constitute a quorum for the transaction of business. Shares shall not be
counted to make up a quorum for a meeting if voting of such shares at the
meeting has been enjoined or for any reason they cannot be lawfully voted at the
meeting. Shareholders present at a duly called or held meeting at which a quorum
is present may continue to transact business until adjournment notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, if any action
taken (other than adjournment) is approved by at least a majority of the shares
required to constitute a quorum. Except as provided herein, the affirmative vote
of a majority of the shares represented and voting at a duly held meeting at
which a quorum is present (which shares voting affirmatively also constitute at
least a majority of the required quorum) shall be the act of the shareholders,
unless the vote of a greater number or voting by classes is required.
Section 7.7 Adjourned Meetings. Any shareholders' meeting, whether or
not a quorum is present, may be adjourned from time to time by the vote of a
majority of the shares,
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the holders of which are either present in person or represented by proxy
thereat, but, except as provided in Section 7.6 hereof, in the absence of a
quorum, no other business may be transacted at such meeting. When a meeting is
adjourned for more than 45 days or if after adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each shareholder of record entitled to vote at a meeting. Except as
aforesaid, it shall not be necessary to give any notice of the time and place of
the adjourned meeting or of the business to be transacted thereat other than by
announcement at the meeting at which such adjournment is taken. At any adjourned
meeting the shareholders may transact any business which might have been
transacted at the original meeting.
Section 7.8 Voting Rights. Only persons in whose names shares entitled
to vote stand on the stock records of the Company at:
(a) the close of business on the business day immediately preceding the
day on which notice is given; or
(b) if notice is waived, at the close of business on the business day
immediately preceding the day on which the meeting is held; or
(c) if some other day be fixed for the determination of shareholders of
record pursuant to Section 2.8(k) hereof, then on such other day, shall be
entitled to vote at such meeting.
The record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, when no prior action by the Board
of Directors has been taken, shall be the day on which the first written consent
is given. In the absence of any contrary provision in the Articles of
Incorporation or in any applicable statute relating to the election of directors
or to other particular matters, each such person shall be entitled to one vote
for each share.
Section 7.9 Action by Written Consents. Any action which may be taken at
any annual or special meeting of shareholders may be taken without a meeting and
without prior notice, if a consent in writing, setting forth the action so
taken, shall be signed by holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Unless the consents of all shareholders entitled to vote have been
solicited in writing, the Company shall provide notice of any shareholder
approval obtained without a meeting by less than unanimous written consent to
those shareholders entitled to vote but who have not yet consented in writing at
least 10 days before the consummation of the following actions authorized by
such approval: (a) contracts between the Company and any of its directors; (b)
indemnification of any person; (c) reorganization of the Company; or (d)
distributions to shareholders upon the winding-up of the affairs of the Company.
In addition, the Company shall provide, to those shareholders entitled to vote
who have not consented in writing, prompt notice of the taking of any other
corporate action approved by the shareholders without a meeting by less than
unanimous written consent. All notices given hereunder shall conform to the
requirements of Section 7.4 hereto and applicable law. When written consents are
given with respect to any shares, they shall be given by and accepted from the
persons in whose names such
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shares stand on the books of the Company at the time such respective consents
are given, or their proxies. Any shareholder giving a written consent (including
any shareholder's proxy holder, or a transferee of the shares or a personal
representative of the shareholder, or their respective proxy holders) may revoke
the consent by a writing. This writing must be received by the Company prior to
the time that written consents of the number of shares required to authorize the
proposed action have been filed with the Secretary of the Company. Such
revocation is effective upon its receipt by the Secretary of the Company.
Notwithstanding anything herein to the contrary, and subject to Section 305(b)
of the California Corporations Code, directors may not be elected by written
consent except by unanimous written consent of all shares entitled to vote for
the election of directors.
Section 7.10 Election of Directors. Every shareholder entitled to vote
at any election of directors of the Company may cumulate such shareholder's
votes and give one candidate a number of votes equal to the number of directors
to be elected multiplied by the number of votes to which the shareholder's
shares are normally entitled, or distribute the shareholder's votes on the same
principle among as many candidates as such shareholder thinks fit. No
shareholder, however, may cumulate such shareholder's votes for one or more
candidates unless such candidate's or candidates' names have been placed in
nomination prior to the voting and the shareholder has given notice at the
meeting, prior to voting, of such shareholder's intention to cumulate such
shareholder's votes. If any one shareholder has given such notice, all
shareholders may cumulate their votes for candidates in nomination. The
candidates receiving the highest number of affirmative votes of the shares
entitled to be voted for them up to the number of directors to be elected by
such shares shall be declared elected. Votes against the director and votes
withheld shall have no legal effect. Election of directors need not be by ballot
except upon demand made by a shareholder at the meeting and before the voting
begins.
Section 7.11 Proxies. Every person entitled to vote or execute consents
shall have the right to do so either in person or by one or more agents
authorized by a written proxy. executed by such person or such person's duly
authorized agent and filed with the Secretary of the Company. No proxy shall be
valid (a) after revocation thereof, unless the proxy is specifically made
irrevocable and otherwise conforms to this Section and applicable law, or (b)
after the expiration of eleven months from the date thereof, unless the person
executing it specifies therein the length of time for which such proxy is to
continue in force. Revocation may be effected by a writing delivered to the
Secretary of the Company stating that the proxy is revoked or by a subsequent
proxy executed by the person executing the prior proxy and presented to the
meeting, or as to any meeting by attendance at the meeting and voting in person
by the person executing the proxy. A proxy is not revoked by the death or
incapacity of the maker unless, before the vote is counted, a written notice of
such death or incapacity is received by the Secretary of the Company. In
addition, a proxy may be revoked, notwithstanding a provision making it
irrevocable, by a transferee of shares without knowledge of the existence of the
provision unless the existence of the proxy and its irrevocability appears on
the certificate representing such shares.
Section 7.12 Inspectors of Election. Before any meeting of shareholders,
the Board of Directors may appoint any persons other than nominees for office as
inspectors of election. This
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appointment shall be valid at the meeting and at any subsequent meeting that is
a continuation of the meeting at which the persons were originally appointed to
be inspectors. If no inspectors of election are so appointed, the Chairman of
the meeting may, and on the request of any shareholder or a shareholder's proxy
shall, appoint inspectors of election at the meeting. The number of inspectors
shall be either one or three. If inspectors are appointed at a meeting on the
request of one or more shareholders or proxies, the holders of a majority of
shares or their proxies present at the meeting shall determine whether one or
three inspectors are to be appointed. If any person appointed as inspector fails
to appear or fails or refuses to act, the Chairman of the meeting may, and upon
the request of any shareholder or a shareholder's proxy shall, appoint a person
to fill that vacancy. These inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the shares represented at the meeting, the existence of a quorum, and the
authenticity, validity, and effect of proxies;
(b) receive votes, ballots, or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
(g) do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.
Section 7.13 Annual Reports. Provided that the Company has 100 or fewer
shareholders, the making of annual reports to the shareholders is dispensed with
and the requirement that such annual reports be made to shareholders is
expressly waived, except as may be directed from time to time by the Board of
Directors or the President.
ARTICLE VIII
SHARES AND SHARE CERTIFICATES
Section 8.1 Shares Held By the Company. Shares in other companies
standing in the name of the Company may be voted or represented and all rights
incident thereto may be exercised on behalf Of the Company by any officer of the
Company authorized to do so by resolution of the Board of Directors.
Section 8.2 Certificates for Shares. There shall be issued to every
holder of shares in the Company a certificate or certificates signed in the name
of the Company by the Chairman or Vice Chairman of the Board or the President or
a Vice President and by the Chief Financial
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Officer or an Assistant Treasurer or the Secretary or any Assistant Secretary,
certifying the number of shares and the class or series of shares owned by the
shareholder. Any or all of the signatures on the certificate may be facsimile.
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the Company with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
Section 8.3 Lost Certificates. Where the owner of any certificate for
shares of the Company claims that the certificate has been lost, stolen or
destroyed, a new certificate shall be issued in place of the original
certificate if the owner (a) so requests before the Company has notice that the
original certificate has been acquired by a bona fide purchaser and (b)
satisfies any reasonable requirements imposed by the Company, including without
limitation the filing with the Company of an indemnity bond or agreement in such
form and in such amount as shall be required by the President or a Vice
President of the Company. The Board of Directors may adopt such other provisions
and restrictions with reference to lost certificates, not inconsistent with
applicable law, as it shall in its discretion deem appropriate.
Section 8.4 Restrictions on Transfer of Shares.
(a) Before any shareholder of the Company may sell, assign, gift, pledge
or otherwise transfer any shares of the Company's capital stock, such
shareholder shall first notify the Company in writing of such transfer and such
transfer may not be effected unless and until legal counsel for the Company has
concluded that such transfer, when effected as proposed by such shareholder (i)
will comply with all applicable provisions of any applicable state and federal
securities laws, including but not limited to the Securities Act of 1933, as
amended, and the California Corporate Securities Law of 1968, as amended, and
(ii) will not jeopardize, terminate or adversely affect the Company's status as
an S Corporation, if applicable, as that tern is defined in the Internal Revenue
Code of 1986, as amended. The Company may require that certificates representing
shares of stock of the Company be endorsed with a legend describing the
restrictions set forth in this Section.
(b) If (i) any two or more shareholders of the Company shall enter into
any agreement abridging, limiting or restricting the rights of any one or more
of them to sell, assign, transfer, mortgage, pledge, hypothecate or transfer on
the books of the Company any or all of the shares of the Company held by them,
and if a copy of said agreement shall be filed with the Company, or if (ii)
shareholders entitled to vote shall adopt any Bylaw provision abridging,
limiting or restricting the rights of any shareholders mentioned above, then,
and in either of such events, all certificates of shares of stock subject to
such abridgments, limitations or restrictions shall have a reference thereto
endorsed thereon by an officer of the Company and such certificates shall not
thereafter be transferred on the books of the Company except in accordance with
the terms and provisions of such as the case may be; however, no restriction
shall be binding with respect to shares issued prior to adoption of the
restriction unless the holders of such shares voted in favor of, or consented in
writing to, the restriction.
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ARTICLE IX
CONSTRUCTION OF BYLAWS WITH
REFERENCE TO PROVISIONS OF LAW
Section 9.1 Bylaw Provisions Construed as Additional and Supplemental to
Provisions of Law. All restrictions, limitations, requirements and other
provisions of these Bylaws shall be construed, insofar as possible, as
supplemental and additional to all provisions of law applicable to the subject
matter thereof and shall be fully complied with in addition to the said
provisions of law unless such compliance shall be illegal.
Section 9.2 Bylaw Provisions Contrary to or Inconsistent with Provisions
of Law. Any article, section, subsection, subdivision, sentence, clause or
phrase of these Bylaws which, upon being construed in the manner provided in
Section 9.1 hereof, shall be contrary to or inconsistent with any applicable
provision of law, shall not apply so long as said provisions of law shall remain
in effect, but such result shall not affect the validity or applicability of any
other portion of these Bylaws, it being hereby declared that these Bylaws, and
each article, section, subsection, subdivision, sentence, clause or phrase
thereof, would have been adopted irrespective of the fact that any one or more
articles, sections, subsections, subdivisions, sentences, clauses or phrases is
or are illegal.
ARTICLE X
CERTIFICATION, ADOPTION, AMENDMENT
OR REPEAL OF BYLAWS
Section 10.1 By Shareholders. Bylaws may be adopted, amended or repealed
by the vote or written consent of holders of a majority of the outstanding
shares entitled to vote. Bylaws specifying or changing a fixed number of
directors or the maximum or minimum number of directors or changing from a fixed
to a variable board or vice versa may be adopted only by the shareholders.
Section 10.2 By the Board of Directors. Subject to the right of
shareholders to adopt, amend or repeal Bylaws, and other than a Bylaw or
amendment thereof specifying or changing a fixed number of directors or the
maximum or minimum number of directors or changing from a fixed to a variable
board or vice versa, these Bylaws may be adopted, amended or repealed by the
Board of Directors. A Bylaw adopted by the shareholders may restrict or
eliminate the power of the Board of Directors to adopt, amend or repeal Bylaws.
Section 10.3 Certification and Inspection of Bylaws. The Company shall
keep at its principal executive office the original or a copy of these Bylaws as
amended or otherwise altered to date, which shall be open to inspection by the
shareholders at all reasonable times during office hours.
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Exhibit 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
VIRAGE LOGIC CORPORATION
FIRST. The name of the corporation is Virage Logic Corporation.
SECOND. The address of the registered office of the corporation in the State of
Delaware is 15 East North Street, City of Dover, County of Kent. The name of its
registered agent at such address is Incorporating Services Ltd.
THIRD. The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of the State of Delaware.
FOURTH. The total number of shares of all classes of capital stock which the
corporation shall have authority to issue is One Hundred Seventy Five Million
(175,000,000) shares, comprised of One Hundred Fifty Million (150,000,000)
shares of Common Stock with a par value of $0.001 per share (the "Common Stock")
and Twenty Five Million (25,000,000) shares of Preferred Stock with a par value
of $0.001 per share (the "Preferred Stock").
A description of the respective classes of stock and a statement of the
designations, preferences, voting powers (or no voting powers), relative,
participating, optional or other special rights and privileges and the
qualifications, limitations and restrictions of the Preferred Stock and Common
Stock are as follows:
A. PREFERRED STOCK
The Preferred Stock may be issued in one or more series at such time or
times and for such consideration or considerations as the board of directors may
determine. Each series shall be so designated as to distinguish the shares
thereof from the shares of all other series and classes. Except as may be
expressly provided in this Certificate of Incorporation, including any
certificate of designations for a series of Preferred Stock, different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purpose of voting by classes.
<PAGE> 2
The board of directors is expressly authorized, subject to the
limitations prescribed by law and the provisions of this Certificate of
Incorporation, to provide for the issuance of all or any shares of the Preferred
Stock, in one or more series, each with such designations, preferences, voting
powers (or no voting powers), relative, participating, optional or other special
rights and privileges and such qualifications, limitations or restrictions
thereof as shall be stated in the resolution or resolutions adopted by the board
of directors to create such series, and a certificate of designations setting
forth a copy of said resolution or resolutions shall be filed in accordance with
the General Corporation Law of the State of Delaware. The authority of the board
of directors with respect to each such series shall include without limitation
of the foregoing the right to specify the number of shares of each such series
and to authorize an increase or decrease in such number of shares and the right
to provide that the shares of each such series may be: (i) subject to redemption
at such time or times and at such price or prices; (ii) entitled to receive
dividends (which may be cumulative or non-cumulative) at such rates, on such
conditions, and at such times, and payable in preference to, or in such relation
to, the dividends payable on any other class or classes or any other series;
(iii) entitled to such rights upon the dissolution of, or upon any distribution
of the assets of, the corporation; (iv) convertible into, or exchangeable for,
shares of any other class or classes of stock, or of any other series of the
same or any other class or classes of stock of the corporation at such price or
prices or at such rates of exchange and with such adjustments, if any; (v)
entitled to the benefit of such limitations, if any, on the issuance of
additional shares of such series or shares of any other series of Preferred
Stock; or (vi) entitled to such other preferences, powers, qualifications,
rights and privileges, all as the board of directors may deem advisable and as
are not inconsistent with law and the provisions of this Certificate of
Incorporation. The number of authorized shares of Preferred Stock may be
increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a majority of the Common
Stock, without a vote of the holders of the Preferred Stock, or of any series
thereof, unless a vote of such holder is required pursuant to the terms of any
Preferred Stock designation.
B. COMMON STOCK
1. Relative Rights of Preferred Stock and Common Stock. All preferences, voting
powers, relative, participating, optional or other special rights and
privileges, and qualifications, limitations, or restrictions of the Common
Stock are expressly made subject and subordinate to those that may be fixed
with respect to any shares of the Preferred Stock.
2. Voting Rights. Except as otherwise required by law or this Certificate of
Incorporation, each holder of Common Stock shall have one vote in respect of
each share of stock held by such holder of record on the books of the
corporation for the election of directors and on all matters submitted to a
vote of stockholders of the corporation; provided, however, that, except as
otherwise required by law, holders of
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Common Stock shall not be entitled to vote on any amendment to this
Certificate of Incorporation (including any certificate of designations
relating to any series of Preferred Stock) that relates solely to the terms
of one or more outstanding series of Preferred Stock if the holders of such
affected series are entitled, either separately or together as a class with
the holders of one or more other such series, to vote thereon pursuant to
this Certificate of Incorporation (including any certificate of designations
relating to any series of Preferred Stock).
3. Dividends. Subject to the preferential rights of the Preferred Stock, the
holders of shares of Common Stock shall be entitled to receive, when and if
declared by the board of directors, out of the assets of the corporation
which are by law available therefor, dividends payable either in cash, in
property or in shares of capital stock.
4. Dissolution, Liquidation or Winding Up. In the event of any dissolution,
liquidation or winding up of the affairs of the corporation, after
distribution in full of the preferential amounts, if any, to be distributed
to the holders of shares of Preferred Stock, holders of Common Stock shall
be entitled, unless otherwise provided by law or this Certificate of
Incorporation, including any certificate of designations for a series of
Preferred Stock, to receive all of the remaining assets of the corporation
of whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
FIFTH. The corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers conferred by
the laws of the State of Delaware:
A. BOARD OF DIRECTORS
(a) The number of directors which shall constitute the whole Board of
Directors of this corporation shall be determined in accordance with the bylaws
of the corporation.
(b) Nomination of candidates for election to the Board of Directors
shall be made as provided in the bylaws of the corporation.
(c) The Board of Directors shall be and is divided into three classes:
Class I, Class II and Class III, which shall be as nearly equal in number as
possible. Each director shall serve for a term ending on the date of the third
annual meeting of stockholders following the annual meeting at which the
director was elected; provided, however, that each initial director in Class I
shall hold office until the annual
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meeting of stockholders in 2001; each initial director in Class II shall hold
office until the annual meeting of stockholders in 2002; and each initial
director in Class III shall hold office until the annual meeting of stockholders
in 2003. Notwithstanding the foregoing provisions of this Article, each director
shall serve until his successor is duly elected and qualified or until his
death, resignation or removal.
(d) Directors may be removed only for cause by the affirmative vote of
at least a majority of the outstanding shares of capital stock entitled to vote
in an election of directors.
(e) In the event of any increase or decrease in the authorized number of
directors, the newly created or eliminated directorships resulting from such
increase or decrease shall be apportioned by the Board of Directors among the
three classes of directors so as to maintain such classes as nearly equal as
possible. No decrease in the number of directors constituting the Board of
Directors shall shorten the term of any incumbent director.
(f) Newly created directorships resulting from any increase in the
number of directors and any vacancies on the Board of Directors resulting from
death, resignation, disqualification, removal or other cause shall be filled by
the affirmative vote of a majority of the remaining directors then in office
(and not by stockholders), even though less than a quorum of the Board of
Directors. Any director elected in accordance with the preceding sentence shall
hold office for the remainder of the full term of the class of directors in
which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified.
(g) The provisions set forth in this Article 6 may not be amended or
repealed in any respect without (i) the affirmative vote of not less than 75
percent of the Board of Directors; or (ii) the affirmative vote of not less than
80 percent of the outstanding shares of capital stock of the corporation
entitled to vote in an election of directors.
B. The board of directors of the corporation is expressly authorized:
(i) To make, alter or repeal the bylaws of the corporation. Amendment of
the bylaws shall require an affirmative vote of a majority of the Whole Board
(as defined herein) or the affirmative vote of the holders of at least 80% of
the voting power of all the then outstanding shares entitled to vote.
(ii) To authorize and cause to be executed mortgages and liens upon the
real and personal property of the corporation.
(iii) To set apart out of any of the funds of the corporation available
for dividends a reserve or reserves for any proper purpose and to abolish any
such reserve in the manner in which it was created.
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(iv) By a majority of the board, to designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The board may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member of any committee.
The bylaws may provide that in the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not such member or members constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
or in the bylaws of the corporation, shall have and may exercise all the powers
and authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation
(except that a committee may, to the extent authorized in the resolution or
resolutions providing for the issuance of shares of stock adopted by the board
of directors as provided in Section 151(a) of the General Corporation Law of the
State of Delaware, fix any of the preferences or rights of such shares relating
to dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of such shares for, shares
of any other class or classes or any other series of the same or any other class
or classes of stock of the corporation), adopting an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of the
State of Delaware, recommending to the stockholders the sale, lease or exchange,
of all or substantially all of the corporation's property and assets,
recommending to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or amending the bylaws of the corporation; and,
unless the resolution or bylaws expressly so provided, no such committee shall
have the power or authority to declare a dividend, to authorize the issuance of
stock, or to adopt a certificate of ownership and merger pursuant to Section 253
of the General Corporation Law of the State of Delaware.
(v) When and as authorized by the stockholders in accordance with
statute, to sell, lease or exchange all or substantially all of the property and
assets of the corporation, including its good will and its corporate franchises,
upon such terms and conditions and for such consideration, which may consist in
whole or in part of money or property, including shares of stock in, and/or
other securities of, any other corporation or corporations, as its board of
directors shall deem expedient and for the best interests of the corporation.
C. Elections of directors need not be by written ballot unless the
bylaws of the corporation shall so provide.
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D. The books of the corporation may be kept at such place within or
without the State of Delaware as the bylaws of the corporation may provide or as
may be designated from time to time by the board of directors of the
corporation.
E. Special meetings of stockholders of the corporation may be called
only (1) by the President, Chairman of the Board or board of directors acting
pursuant to a resolution adopted by a majority of the Whole Board or (2) by the
holders of not less than twenty five percent of all the shares entitled to cast
votes at the meeting. For purposes of this Certificate of Incorporation, the
term "Whole Board" shall mean the total number of authorized directors whether
or not there exist any vacancies in previously authorized directorships.
F. At any time when the corporation has more than one stockholder of any
class of capital stock, no action required to be taken or which may be taken at
any annual or special meeting of the stockholders of such class of capital stock
of the corporation may be taken without a meeting, and the power of stockholders
to consent in writing, without a meeting, to the taking of any action is
specifically denied.
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SEVENTH. Whenever a compromise or arrangement is proposed between this
corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or classes of creditors, and/or
of the stockholders or classes of stockholders of this corporation, as the case
may be, to be summoned in such manner as the said court directs. If a majority
in number representing three-fourths in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this corporation as a consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
EIGHTH. A director of this corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended hereafter
to authorize corporate action further eliminating or limiting the personal
liability of directors, then the liability of a director of the corporation
shall be eliminated or limited to the fullest extent permitted by the Delaware
General Corporation Law, as so amended.
Any repeal or modification of the foregoing paragraph by the
stockholders of the corporation shall not adversely affect any right or
protection of a director of the corporation existing at the time of repeal or
modification.
NINTH.
A. RIGHT TO INDEMNIFICATION FOR DIRECTORS AND OFFICERS
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the fact
that he or she or a person of whom he
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or she is the legal representative, is or was a director or officer of the
corporation or, in such person's capacity as a director or officer of the
corporation, is or was serving at the request of the corporation as a director
or officer, employee or agent of another corporation, or of a partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether the basis of such proceeding is alleged action in an
official capacity as a director or officer or in any other capacity while
serving as a director or officer, shall be indemnified and held harmless by the
corporation to the fullest extent authorized by the Delaware General Corporation
Law, as the same exists or may hereafter be amended, (but, in the case of such
amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than said Law permitted the corporation
to provide prior to such amendment) against all expenses, liability and loss
(including attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such person in connection therewith and such indemnification shall continue as
to a person who has ceased to be a director or officer of the corporation and
shall inure to the benefit of his or her heirs, executors and administrators;
provided, however, that the corporation shall indemnify any such person seeking
indemnity in connection with an action, suit or proceeding (or part thereof)
initiated by such person only if such action, suit or proceeding (or part
thereof) was authorized by the board of directors of the corporation. Such right
shall be a contract right and shall include the right to be paid by the
corporation expenses incurred in defending any such proceeding in advance of its
final disposition; provided, however, that the payment of such expenses incurred
by a director or officer of the corporation in his or her capacity as a director
or officer and not in any other capacity in which service was or is rendered by
such person while a director or officer (including without limitation, service
to an employee benefit plan) in advance of the final disposition of such
proceeding, shall be made only upon delivery to the corporation of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it should be determined ultimately that such director or officer
is not entitled to be indemnified under this Section or otherwise.
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B. RIGHT OF CLAIMANT TO BRING SUIT
If a claim under Paragraph A of Article NINTH is not paid in full by the
corporation within ninety (90) days after a written claim has been received by
the corporation, the claimant may at any time thereafter bring suit against the
corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to this corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the corporation to indemnify the claimant for the amount
claimed, but the burden of proving such a defense shall be on the corporation.
Neither the failure of the corporation (including its board of directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he or she has met the applicable standard of
conduct set forth in the Delaware General Corporation Law, nor an actual
determination by the corporation (including its board of directors, independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that claimant has not met the applicable standard of conduct.
C. NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by Paragraphs A and B of Article
NINTH shall not be exclusive of any other right which such persons may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
D. PERMISSIVE INDEMNIFICATION
The corporation may, if approved by the board of directors, indemnify
and hold harmless any other person who was or is made a party or is threatened
to be made a party to or is involved in any proceeding, by reason of the fact
that he or she or a person of whom he or she is the legal representative, is or
was an employee or agent of the corporation or is or was serving at the request
of the corporation as a director or officer, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, to the extent
permitted by the Delaware General Corporation Law, as the same exists or may be
amended, against all expenses, liability and loss (including attorneys' fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by such person in connection
therewith.
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E. INSURANCE
The corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the corporation or
another corporation, partnership, joint venture, trust or other enterprise
against, any expense, liability or loss reasonably incurred or suffered by such
person in connection with his or her service as a director, officer, employee or
agent of such entity, whether or not the corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
TENTH. The corporation reserves the right to amend or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon a stockholder
herein are granted subject to this reservation; provided, however, that,
notwithstanding any other provision of this Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no vote, but in
addition to any vote of the holders of any class or series of the stock of this
Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least 80% of the voting power of all of
the then outstanding shares of the capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to amend or repeal this Article TENTH, or Article SIXTH.
Virage Logic Corporation
By: /s/ Adam Kablanian
- -----------------------------
Adam Kablanian,
President and
Chief Executive Officer
ATTEST:
/s/
- -----------------------------
--------------,
Secretary
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Exhibit 3.4
VIRAGE LOGIC CORPORATION
AMENDED AND RESTATED
BYLAWS
- --------------------------------------------------------------------------------
ARTICLE I.
STOCKHOLDERS
SECTION 1. ANNUAL MEETING.
(1) An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix.
(2) Nominations of persons for election to the Board of Directors of the
Corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders (a) pursuant to the
Corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any stockholder of the Corporation who was a stockholder of
record at the time of giving of the notice provided for in Article I of these
bylaws, who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Article I of these bylaws.
(3) For nominations or other business to be properly brought before an
annual meeting by a stockholder pursuant to Section (1)(2)(c) of these bylaws,
the stockholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a stockholder's notice shall be
delivered to the Secretary at the principal executive offices of the Corporation
not less than 120 days prior to the anniversary of the mailing date of the proxy
materials for the previous year's annual meeting; provided, however, that in the
event that the date of the annual meeting is advanced by more than 30 days or
delayed by more than 60 days from the date contemplated at the time of the
previous year's proxy statement or if the Corporation did not hold an annual
meeting in the previous year, notice by the stockholder to be timely must be so
delivered not earlier than the 150th day prior to such annual meeting and not
later than the 10th day following the day on which public announcement of the
date of such meeting is first made. Such stockholder's notice shall set forth
(a) as to each person whom the stockholder proposes to nominate for election or
reelection as a director all information relating to such person that is
required to be disclosed in solicitations of proxies for election of directors,
or is otherwise required, in each case pursuant to Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") (including such
person's written consent to being named in the proxy statement as a nominee and
to serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the
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meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such stockholder and the beneficial owner,
if any, on whose behalf the proposal is made; and (c) as to the stockholder
giving the notice and the beneficial owner, if any, on whose behalf the
nomination or proposal is made (i) the name and address of such stockholder, as
they appear on the Corporation's books, and of such beneficial owner and (ii)
the class and number of shares of the Corporation which are owned beneficially
and of record by such stockholder and such beneficial owner.
(4) Notwithstanding anything in the second sentence of paragraph (3) of
this Section 1 to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the Corporation at least 100
days prior to the first anniversary of the preceding year's annual meeting, a
stockholder's notice required by Article I of these bylaws shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the 10th day following the day on which such public announcement is
first made by the Corporation.
(5) Only such persons who are nominated in accordance with the
procedures set forth in these bylaws shall be eligible to serve as directors and
only such business shall be conducted at an annual meeting of stockholders as
shall have been brought before the meeting in accordance with the procedures set
forth in these bylaws. The chairman of the meeting shall have the power and duty
to determine whether a nomination or any business proposed to be brought before
the meeting was made in accordance with the procedures set forth in these
bylaws. The chairman of the meeting shall have the power and duty to determine
whether a nomination or any business proposed to be brought before the meeting
was made in accordance with the procedures set forth in these bylaws and, if any
proposed nomination or business is not in compliance with these bylaws, to
declare that such defective proposed business or nomination shall be
disregarded.
(6) For purposes of these bylaws, "public announcement" shall mean
disclosure in a press release reported by the Dow Jones News Service, Associated
Press or a comparable national news service or in a document publicly filed by
the Corporation with the Securities and Exchange Commission pursuant to Section
13, 14 or 15(d) of the Exchange Act.
(7) Notwithstanding the foregoing provisions of Article I of these
bylaws a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Article. Nothing in these bylaws shall be deemed to
affect any rights of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
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SECTION 2. SPECIAL MEETINGS.
Special meetings of the stockholders, other than those required by
statute, may be called at any time by the President or Chairman of the Board, by
the Board of Directors pursuant to a resolution approved by a majority of the
whole Board of Directors and by the holders of not less than twenty five percent
of all the shares entitled to cast votes at the meeting. The Board of Directors
may postpone or reschedule any previously scheduled special meeting.
Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
Corporation's notice of meeting.
SECTION 3. NOTICE OF MEETINGS.
Written notice of the place, date, and time, and in the case of special
meetings, the purpose, of all meetings of the stockholders shall be given, not
less than 10 nor more than 60 days before the date on which the meeting is to be
held, to each stockholder entitled to vote at such meeting, except as otherwise
provided herein or required by law (meaning, here and hereinafter, as required
from time to time by the Delaware General Corporation Law or the Certificate of
Incorporation of the Corporation).
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at such stockholder's address as it appears on the records of the
Corporation. An affidavit of the Secretary or an Assistant Secretary or of the
transfer agent of the Corporation that the notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein.
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any adjourned meeting is more than 30
days after the date for which the meeting was originally noticed, or if a new
record date is fixed for the adjourned meeting, written notice of the place,
date, and time of the adjourned meeting shall be given in conformity herewith.
At any adjourned meeting, any business may be transacted which might have been
transacted at the original meeting.
SECTION 4. QUORUM.
At any meeting of the stockholders, the holders of a majority of all of
the shares of the stock entitled to vote at the meeting, present in person or by
proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law. Where a
separate vote by a class or classes is required, a
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majority of the shares of such class or classes present in person or
represented by proxy shall constitute a quorum entitled to take action with
respect to the vote on that matter.
If a quorum shall fail to attend any meeting, the chairman of the
meeting may adjourn the meeting to another place, date, or time.
SECTION 5. ORGANIZATION.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the Chairman of the Board or, in his or her absence,
the Chief Executive Officer of the Corporation or, in his or her absence, such
person as may be chosen by the holders of a majority of the shares entitled to
vote who are present, in person or by proxy, shall call to order any meeting of
the stockholders and act as chairman of the meeting. In the absence of the
Secretary of the Corporation, the secretary of the meeting shall be such person
as the chairman appoints.
SECTION 6. CONDUCT OF BUSINESS.
The chairman of any meeting of stockholders shall determine the order of
business and the procedure at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The chairman shall have the power to adjourn the meeting to another place, date
and time. The date and time of the opening and closing of the polls for each
matter upon which the stockholders will vote at the meeting shall be announced
at the meeting.
SECTION 7. PROXIES AND VOTING.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing or by a
transmission permitted by law filed in accordance with the procedure established
for the meeting. Any copy, facsimile telecommunication or other reliable
reproduction of the writing or transmission created pursuant to this paragraph
may be substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could be
used, provided that such copy, facsimile telecommunication or other reproduction
shall be a complete reproduction of the entire original writing or transmission.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or by his or her proxy, a
stock vote shall be taken. Every stock vote shall be taken by ballots, each of
which shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
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The Corporation may, and to the extent required by law, shall, in
advance of any meeting of stockholders, appoint one or more inspectors to act at
the meeting and make a written report thereof. The Corporation may designate one
or more persons as alternate inspectors to replace any inspector who fails to
act. If no inspector or alternate is able to act at a meeting of stockholders,
the person presiding at the meeting may, and to the extent required by law,
shall, appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspector with strict impartiality and
according to the best of his ability. Every vote taken by ballots shall be
counted by a duly appointed inspector or inspectors.
All elections shall be determined by a plurality of the votes cast, and
except as otherwise required by the Certificate of Incorporation, these bylaws
or by law, all other matters shall be determined by a majority of the votes cast
affirmatively or negatively.
SECTION 8. STOCK LIST.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least 10 days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The stock list shall also be kept at the place of the meeting during the
whole time thereof and shall be open to the examination of any such stockholder
who is present. This list shall presumptively determine the identity of the
stockholders entitled to vote at the meeting and the number of shares held by
each of them.
SECTION 9. WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law or of the Certificate of Incorporation or these
bylaws, a written waiver, signed by the person entitled to notice, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a person at a meeting shall constitute a waiver of notice of such
meeting, except when the person attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors need be
specified in any written waiver of notice unless so required by the Certificate
of Incorporation or these bylaws.
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ARTICLE II.
BOARD OF DIRECTORS
SECTION 1. NUMBER, ELECTION AND TERM OF DIRECTORS.
Subject to the rights of the holders of any series of preferred stock to
elect directors under specified circumstances, the number of directors shall be
fixed from time to time exclusively by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of directors then in
office.
SECTION 2. NEWLY CREATED DIRECTORSHIPS AND VACANCIES.
Subject to applicable law newly created directorships resulting from any
increase in the number of directors and any vacancies on the Board of Directors
resulting from death, resignation, disqualification, removal or other cause
shall be filled by the affirmative vote of a majority of the remaining directors
then in office (and not by stockholders), even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the new directorship was created or the vacancy occurred and
until such director's successor shall have been elected and qualified. No
decrease in the number of authorized directors constituting the entire Board of
Directors shall shorten the term of any incumbent director.
SECTION 3. REGULAR MEETINGS.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
SECTION 4. SPECIAL MEETINGS.
Special meetings of the Board of Directors may be called by the Chairman
of Board, the President or by two or more directors then in office and shall be
held at such place, on such date, and at such time as they or he or she shall
fix. Notice of the place, date, and time of each such special meeting shall be
given each director by whom it is not waived by mailing written notice not less
than five days before the meeting or by telephone or by telegraphing or telexing
or by facsimile transmission of the same not less than 24 hours before the
meeting. Unless otherwise indicated in the notice thereof, any and all business
may be transacted at a special meeting.
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SECTION 5. QUORUM.
At any meeting of the Board of Directors, a majority of the total number
of the whole Board shall constitute a quorum for all purposes. If a quorum shall
fail to attend any meeting, a majority of those present may adjourn the meeting
to another place, date, or time, without further notice or waiver thereof.
SECTION 6. PARTICIPATION IN MEETINGS BY CONFERENCE TELEPHONE.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
SECTION 7. CONDUCT OF BUSINESS.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
SECTION 8. POWERS.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or privileges
on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as it
may determine, of written obligations of every kind, negotiable or non
negotiable, secured or unsecured, and to do all things necessary in connection
therewith;
(4) To remove any officer of the Corporation with or without cause, and
from time to time to devolve the powers and duties of any officer upon any other
person for the time being;
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(5) To confer upon any officer of the Corporation the power to appoint,
remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock option, stock purchase, bonus
or other compensation plans for directors, officers, employees and agents of the
Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with these
bylaws, for the management of the Corporation's business and affairs.
SECTION 9. COMPENSATION OF DIRECTORS.
Unless otherwise restricted by the Certificate of Incorporation, the
Board of Directors shall have the authority to fix the compensation of the
directors. The directors may be paid their expenses, if any, of attendance at
each meeting of the Board of Directors and may be paid a fixed sum for
attendance at the meeting of the Board of Directors or paid a stated salary or
paid other compensation as director. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
SECTION 10. WAIVER OF NOTICE.
Whenever notice is required to be given under any provision of the
Delaware General Corporation Law, the certificate of incorporation, or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when such person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or these bylaws.
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ARTICLE III.
COMMITTEES
SECTION 1. COMMITTEES OF THE BOARD OF DIRECTORS.
The Board, by a majority of the board, may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member of any
committee. In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not such member or members constitute a quorum, may
unanimously appoint another member of the board of directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise all the powers and authority of the board of
directors in the management of the business and affairs of the corporation, and
may authorize the seal of the corporation to be affixed to all papers which may
require it; but no such committee shall have the power or authority in reference
to amending the Certificate of Incorporation (except that a committee may, to
the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the board of directors as provided in
Section 151(a) of the General Corporation Law of the State of Delaware, fix any
of the preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), adopting an agreement of merger or consolidation under Sections
251 or 252 of the General Corporation Law of the State of Delaware, recommending
to the stockholders the sale, lease or exchange, of all or substantially all of
the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or amending the
bylaws of the corporation; and, unless the resolution expressly so provided, no
such committee shall have the power or authority to declare a dividend, to
authorize the issuance of stock, or to adopt a certificate of ownership and
merger pursuant to Section 253 of the General Corporation Law of the State of
Delaware.
SECTION 2. CONDUCT OF BUSINESS.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required bylaw. Adequate provision shall be made
for notice to members of all meetings; a majority of the members shall
constitute a quorum unless the committee shall consist of one (1) or two (2)
members, in which event one (1) member shall constitute a quorum; and all
matters shall be determined by a majority vote of the members present. Action
may be taken by any committee without a meeting if all members thereof consent
thereto
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in writing, and the writing or writings are filed with the minutes of the
proceedings of such committee.
ARTICLE IV.
OFFICERS
SECTION 1. GENERALLY.
The officers of the corporation shall consist of a Chief Executive
Officer or President, one or more Vice Presidents, a Secretary and a Chief
Financial Officer. The Corporation may also have, at the discretion of the Board
of Directors, a Chairman of the Board and such other officers as may from time
to time be appointed by the Board of Directors. Officers shall be elected by the
Board of Directors, which shall consider that subject at its first meeting after
every annual meeting of stockholders. Each officer shall hold office until his
or her successor is elected and qualified or until his or her earlier
resignation or removal. Any number of offices may be held by the same person.
The salaries of officers elected by the Board of Directors shall be fixed from
time to time by the Board of Directors or by such officers as may be designated
by resolution of the Board.
SECTION 2. CHAIRMAN OF THE BOARD.
The Chairman of the Board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to the
Chairman of the Board, by the Board of Directors or as may be prescribed by
these bylaws. If there is no president and no one has been appointed chief
executive officer, then the chairman of the board shall also be the chief
executive officer of the Corporation and shall have the powers and duties
prescribed in Section 3 below.
SECTION 3. PRESIDENT AND CHIEF EXECUTIVE OFFICER.
The Chief Executive Officer, or in the absence of the Chief Executive
Officer, the President, shall, subject to the provisions of these bylaws and to
the direction of the Board of Directors, have the responsibility for the general
management and control of the business and affairs of the Corporation and shall
perform all duties and have all powers which are commonly incident to the office
of chief executive or which are delegated to him or her by the Board of
Directors. He or she shall have power to sign all stock certificates, contracts
and other instruments of the Corporation which are authorized and shall have
general supervision and direction of all of the other officers, employees and
agents of the Corporation. If the offices of Chief Executive Officer and
President are held by different individuals, the President shall have such other
powers and duties as may be delegated to him or her by the Board of Directors.
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SECTION 4. VICE PRESIDENT.
Each Vice President shall have such powers and duties as may be
delegated to him or her by the Board of Directors. One Vice President shall be
designated by the Board to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
SECTION 5. CHIEF FINANCIAL OFFICER.
The Chief Financial Officer shall have the responsibility for
maintaining the financial records of the Corporation. He or she shall make such
disbursements of the funds of the Corporation as are authorized and shall render
from time to time an account of all such transactions and of the financial
condition of the Corporation. The Chief Financial Officer shall also perform
such other duties as the Board of Directors may from time to time prescribe.
SECTION 6. SECRETARY.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
SECTION 7. DELEGATION OF AUTHORITY.
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
SECTION 8. REMOVAL.
Any officer of the Corporation may be removed at any time, with or
without cause, by the Board of Directors.
SECTION 9. ACTION WITH RESPECT TO SECURITIES OF OTHER CORPORATIONS.
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other Corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other Corporation.
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ARTICLE V.
STOCK
SECTION 1. CERTIFICATES OF STOCK.
Each stockholder shall be entitled to a certificate signed by, or in the
name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer,
certifying the number of shares owned by him or her. Any or all of the
signatures on the certificate may be by facsimile.
SECTION 2. TRANSFERS OF STOCK.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these bylaws,
an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefor.
SECTION 3. RECORD DATE.
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders, or to receive payment of
any dividend or other distribution or allotment of any rights or to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board of Directors may, except as
otherwise required by law, fix a record date, which record date shall not
precede the date on which the resolution fixing the record date is adopted and
which record date shall not be more than 60 nor less than 10 days before the
date of any meeting of stockholders, nor more than 60 days prior to the time for
such other action as hereinbefore described; provided, however, that if no
record date is fixed by the Board of Directors, the record date for determining
stockholders entitled to notice of or to vote at a meeting of stockholders shall
be at the close of business on the day next preceding the day on which notice is
given or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held, and, for determining
stockholders entitled to receive payment of any dividend or other distribution
or allotment of rights or to exercise any rights of change, conversion or
exchange of stock or for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts a resolution
relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
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SECTION 4. LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
SECTION 5. REGULATIONS.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
ARTICLE VI.
NOTICES
SECTION 1. NOTICES.
Except as otherwise specifically provided herein or required by law, all
notices required to be given to any stockholder, director, officer, employee or
agent shall be in writing and may in every instance be effectively given by hand
delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, recognized overnight delivery service or by sending such notice by
facsimile, receipt acknowledged, or by prepaid telegram or mailgram. Any such
notice shall be addressed to such stockholder, director, officer, employee or
agent at his or her last known address as the same appears on the books of the
Corporation. The time when such notice is received, if hand delivered, or
dispatched, if delivered through the mails or by telegram or mailgram, shall be
the time of the giving of the notice.
SECTION 2. WAIVERS.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
Attendance at any meeting shall constitute waiver of notice except attendance
for the sole purpose of objecting to the timeliness of notice.
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ARTICLE VII.
MISCELLANEOUS
SECTION 1. FACSIMILE SIGNATURES.
In addition to the provisions for use of facsimile signatures elsewhere
specifically authorized in these bylaws, facsimile signatures of any officer or
officers of the Corporation may be used whenever and as authorized by the Board
of Directors or a committee thereof.
SECTION 2. CORPORATE SEAL.
The Board of Directors may provide a suitable seal containing the name
of the Corporation, which seal shall be in the charge of the Secretary. If and
when so directed by the Board of Directors or a committee thereof, duplicates of
the seal may be kept and used by the Treasurer or by an Assistant Secretary or
Assistant Treasurer.
SECTION 3. RELIANCE UPON BOOKS, REPORTS AND RECORDS.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
or her duties, be fully protected in relying in good faith upon the books of
account or other records of the Corporation and upon such information, opinions,
reports or statements presented to the Corporation by any of its officers or
employees, or committees of the Board of Directors so designated, or by any
other person as to matters which such director or committee member reasonably
believes are within such other person's professional or expert competence and
who has been selected with reasonable care by or on behalf of the Corporation.
SECTION 4. FISCAL YEAR.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
SECTION 5. TIME PERIODS.
In applying any provision of these bylaws which requires that an act be
done or not be done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
SECTION 6. INSURANCE.
The Corporation may maintain insurance, at its expense, to protect
itself and any director, officer, employee or agent of the Corporation or
another corporation,
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partnership, joint venture, trust or other enterprise against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the Delaware
General Corporation Law.
ARTICLE VIII.
AMENDMENTS
In furtherance and not in limitation of the powers conferred by law, the
Board of Directors is expressly authorized to make, alter, amend and repeal
these bylaws subject to the power of the holders of capital stock of the
Corporation to alter, amend or repeal these bylaws. Notwithstanding any other
provision of these bylaws or any provision of law which might otherwise permit a
lesser vote or no vote, but in addition to any affirmative vote of the holders
of any particular class or series of the capital stock of the Corporation
required by law, these bylaws or the Certificate of Incorporation, the
affirmative vote of the holders of at least 80 percent of the voting power of
all of the then-outstanding shares entitled to vote generally in the election of
directors, voting together as a single class, shall be required to make, alter,
amend or repeal any provision of these bylaws.
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EXHIBIT 4.2
VIRAGE LOGIC CORPORATION
RESTATED AND AMENDED INVESTORS' RIGHTS AGREEMENT
This Restated and Amended Investors' Rights Agreement (this "AGREEMENT")
is made and entered into as of December 3, 1999 by and among Virage Logic
Corporation, a California corporation (the "COMPANY"), the persons and entities
listed on Exhibit A attached hereto (the "INVESTORS") and the persons listed on
Exhibit B attached hereto (the "SHAREHOLDERS").
RECITALS
A. Certain of the Investors (the "PRIOR INVESTORS") are holders of
outstanding shares of the Company's Series B Preferred Stock ("SERIES B STOCK")
issued by the Company to such Prior Investors pursuant to a Series B Preferred
Stock Purchase Agreement by and among the Company and the Prior Investors dated
July 7, 1998, as amended from time to time (the "SERIES B AGREEMENT"), and have
also been granted certain information and registration rights and rights of
first refusal under an Investors' Rights Agreement by and among the Company and
the Series B Investors dated July 7, 1998 (the "PRIOR RIGHTS AGREEMENT").
B. Certain investors (the "SERIES C INVESTORS") have agreed to purchase
shares of the Company's Series C Preferred Stock ("SERIES C STOCK") pursuant to
a certain Series C Preferred Stock Purchase Agreement by and among the Company
and such Series C Investors dated of even date herewith, as amended from time to
time (the "SERIES C AGREEMENT"). The Series C Agreement provides that as a
condition to the Series C Investors' purchase of Series C Stock thereunder, the
Company will enter into this Agreement and the Series C Investors will be
granted the rights set forth herein.
C. The Company and the undersigned parties hereto desire to enter into
this Agreement in order to amend, restate and replace the Prior Investors'
rights and obligations under the Prior Rights Agreement with the rights and
obligations set forth in this Agreement. Section 4.2 of the Prior Rights
Agreement provides that the Prior Rights Agreement may be amended by the written
consent of the holders of a majority of the "Investors' Shares" (as defined in
Section 4.2 of the Prior Rights Agreement) and the undersigned parties to this
Agreement hold a majority of the Investors' Shares, as defined in the Prior
Rights Agreement.
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. INFORMATION RIGHTS.
1.1 Financial Information. The Company covenants and agrees that,
commencing on the date of this Agreement, for so long as any Investor holds at
least 300,000 shares of Series B Stock issued under the Series B Agreement
and/or 300,000 shares of Series C Stock issued under the Series C Agreement
and/or the equivalent number (on an as-converted
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basis) of shares of Common Stock of the Company issued upon the conversion of
such shares of Series B Stock or Series C Stock ("CONVERSION STOCK") the Company
will:
(a) Annual Reports. Furnish to such Investor, as soon as
practicable and in any event within 90 days after the end of each fiscal year of
the Company, annual financial statements including a consolidated Balance Sheet
as of the end of such fiscal year, a consolidated Statement of Income and a
consolidated Statement of Cash Flows of the Company and its subsidiaries for
such year, and a Statement of Shareholders' Equity for such year, setting forth
in each case in comparative form the figures from the Company's previous fiscal
year (if any), all prepared in accordance with generally accepted accounting
principles and practices and audited by nationally recognized independent
certified public accountants; provided that notwithstanding the foregoing, with
respect to the initial audited annual financial statements of the Company to be
furnished hereunder, the Company shall have 180 days to furnish such financial
statements to such Investor, and
(b) Quarterly Reports. Furnish to such Investor as soon as
practicable, and in any case within forty-five (45) days of the end of each
fiscal quarter of the Company (except the last quarter of the Company's fiscal
year), quarterly unaudited financial statements, including an unaudited Balance
Sheet, an unaudited Statement of Income and an unaudited Statement of Cash
Flows;
1.2 Confidentiality. Each Investor agrees to hold all information
received pursuant to this Section 1 in confidence, and not to use or disclose
any of such information to any third party, except to the extent such
information may be made publicly available by the Company.
1.3 Termination of Certain Rights. The Company's obligations
under Section 1.1 above will terminate upon the closing of the Company's initial
public offering of Common Stock pursuant to an effective registration statement
filed under the U.S. Securities Act of 1933, as amended (the "Securities Act").
2. REGISTRATION RIGHTS.
2.1 Definitions. For purposes of this Section 2:
(a) Registration. The terms "REGISTER," "REGISTRATION" and
"REGISTERED" and refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act, and the
declaration or ordering of effectiveness of such registration statement.
(b) Demand Registrable Securities. The term "DEMAND
REGISTRABLE SECURITIES" means: (1) all the shares of Common Stock of the Company
issued or issuable upon the conversion of any shares of Series B Stock issued
under the Series B Agreement or any shares of Series C Stock issued under the
Series C Agreement as such agreement(s) may hereafter be amended from time to
time; and (2) any shares of Common Stock of the Company issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
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which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, all such shares of Common Stock described in
clause (1) of this subsection (b); excluding in all cases, however, any Demand
Registrable Securities sold by a person in a transaction in which rights under
this Section 2 are not assigned in accordance with this Agreement or any Demand
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
(c) Demand Registrable Securities. The number of shares of
"DEMAND REGISTRABLE SECURITIES THEN OUTSTANDING" shall mean the number of shares
of Common Stock which are Demand Registrable Securities and (1) are then issued
and outstanding or (2) are then issuable pursuant to the exercise or conversion
of then outstanding and then exercisable options, warrants or convertible
securities.
(d) Additional Registrable Securities. The term
"ADDITIONAL REGISTRABLE SECURITIES" means: (1) all the shares of Common Stock of
the Company issued or issuable upon the conversion of the shares of Series A
Stock now held by the Shareholders and set forth in Exhibit B attached hereto;
(2) the shares of Common Stock now held by the Shareholders and set forth in
Exhibit B attached hereto (the shares of Series A Stock and Common Stock held by
the Shareholders are sometimes referred to herein as the "SHAREHOLDERS'
SHARES"); and (3) any shares of Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, all such shares of Common Stock described in
clause (1) or (2) of this subsection (d); excluding in all cases, however, any
Additional Registrable Securities sold by a person in a transaction in which
rights under this Section 2 are not assigned in accordance with this Agreement
or any Additional Registrable Securities sold to the public or sold pursuant to
Rule 144 promulgated under the Securities Act.
(e) Registrable Securities. "REGISTRABLE SECURITIES" shall
mean Demand Registrable Securities and Additional Registrable Securities.
(f) Holder. For purposes of this Section 2 and Sections 3
and 4 hereof, the term "HOLDER" means any person owning of record Registrable
Securities that have not been sold to the public or pursuant to Rule 144
promulgated under the Securities Act or any assignee of record of such
Registrable Securities to whom rights under this Section 2 have been duly
assigned in accordance with this Agreement; provided, however, that for purposes
of this Agreement, a record holder of shares of Series A Stock, Series B Stock,
or Series C Stock convertible into such Registrable Securities shall be deemed
to be the Holder of such Registrable Securities; provided, further, that a
holder of Additional Registrable Securities (as defined in Section 2.1(d)) shall
not be a Holder with respect to such Additional Registrable Securities for
purposes of Sections 2.2, 2.4 or 3 of this Agreement; and provided, further,
that the Company shall in no event be obligated to register shares of Series A
Stock, Series B Stock, or Series C Stock and that Holders of Registrable
Securities will not be required to convert their shares of Series A Stock,
Series B Stock, or Series C Stock into Common Stock in order to exercise the
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registration rights granted hereunder, until immediately before the closing of
the offering to which the registration relates.
(g) Form S-3. The term "FORM S-3" means such form under
the Securities Act as is in effect on the date hereof or any successor
registration form under the Securities Act subsequently adopted by the SEC which
permits inclusion or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
(h) SEC. The term "SEC" OR "COMMISSION" means the U.S.
Securities and Exchange Commission.
2.2 DEMAND REGISTRATION.
(a) Request by Holders. If the Company shall receive at
any time after the earlier of (i) July 5, 2002, or (ii) six (6) months after the
effective date of the Company's initial public offering of its securities
pursuant to a registration filed under the Securities Act, a written request
from the Holders of at least 2,100,000 shares (on a common equivalent basis) of
the Demand Registrable Securities that the Company file a registration statement
under the Securities Act covering the registration of Demand Registrable
Securities pursuant to this Section 2.2, then the Company shall, within ten (10)
business days of the receipt of such written request, give written notice of
such request "REQUEST NOTICE") to all Holders, and effect, as soon as
practicable, the registration under the Securities Act of all Demand Registrable
Securities which Holders request to be registered and included in such
registration by written notice given by such Holders to the Company within
twenty (20) days after receipt of the Request Notice, subject only to the
limitations of this Section 2.2; provided that the Demand Registrable Securities
requested by all Holders to be registered pursuant to such request must either
(i) be at least fifty percent (50%) of all Demand Registrable Securities then
outstanding or (ii) have an anticipated aggregate public offering price (before
any underwriting discounts and commissions) of not less than $5,000,000 (or
$10,000,000 if such requested registration is the initial public offering of the
Company's stock registered under the Securities Act).
(b) Underwriting. If the Holders initiating the
registration request under this Section 2.2 ("INITIATING HOLDERS") intend to
distribute the Demand Registrable Securities covered by their request by means
of an underwriting, then they shall so advise the Company as a part of their
request made pursuant to this Section 2.2 and the Company shall include such
information in the written notice referred to in subsection 2.2(a). In such
event, the right of any Holder to include his Demand Registrable Securities in
such registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Demand Registrable Securities in
the underwriting (unless otherwise mutually agreed by a majority in interest of
the Initiating Holders and such Holder) to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
enter into an underwriting agreement in customary form with the managing
underwriter or underwriters selected for such underwriting by the Company.
Notwithstanding any other provision of this Section 2.2, if the underwriter(s)
advise(s) the Company in writing that marketing factors require a limitation of
the number of securities to be underwritten then the Company shall so advise all
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<PAGE> 5
Holders of Demand Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of Demand Registrable Securities
that may be included in the underwriting shall be reduced as required by the
underwriter(s) and allocated among the Holders of Demand Registrable Securities
on a pro rata basis according to the number of Demand Registrable Securities
then outstanding held by each Holder requesting registration (including the
Initiating Holders); provided, however, that the number of shares of Demand
Registrable Securities to be included in such underwriting and registration
shall not be reduced unless all other securities of the Company are first
entirely excluded from the underwriting and registration. Any Demand Registrable
Securities excluded and withdrawn from such underwriting shall be withdrawn from
the registration.
(c) Limitations. The Company is obligated to effect only
two (3) such registrations pursuant to this Section 2.2. The Company shall not
be obligated to effect a registration pursuant to this Section 2.2 during the
six month period commencing with the effective date of any registration of the
Company filed under the Securities Act.
(d) Deferral. Notwithstanding the foregoing, if the
Company shall furnish to Holders requesting the filing of a registration
statement pursuant to this Section 2.2, a certificate signed by the President or
Chief Executive Officer of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its shareholders for such registration statement to be filed and
it is therefore essential to defer the filing of such registration statement,
then the Company shall have the right to defer such filing for a period of not
more than 120 days after receipt of the request of the Initiating Holders;
provided, however, that the Company may not utilize this right more than once in
any twelve (12) month period.
(e) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.2, including without limitation all
registration and qualification fees, printers and accounting fees, fees and
disbursements of counsel for the Company, and the reasonable fees and
disbursements of one counsel for the selling Holders (but excluding
underwriters' discounts and commissions), shall be borne by the Company. Each
Holder participating in a registration pursuant to this Section 2.2 shall bear
such Holder's proportionate share (based on the total number of shares sold in
such registration other than for the account of the Company) of all discounts,
commissions or other amounts payable to underwriters or brokers in connection
with such offering and the fees and disbursements of any counsel for the
participating Holders. Notwithstanding the foregoing, the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to this Section 2.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Demand Registrable Securities to be
registered, unless the Holders of a majority of the Demand Registrable
Securities then outstanding agree to forfeit their right to one (1) demand
registration pursuant to this Section 2.2 (in which case such right shall be
forfeited by all Holders of Demand Registrable Securities); provided, further,
however, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business, or prospects of the Company
not known to the Holders at the time of their request for such registration and
have withdrawn their request for registration with reasonable promptness after
learning of such
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<PAGE> 6
material adverse change, then the Holders shall not be required to pay any of
such expenses and shall retain their rights pursuant to this Section 2.2.
2.3 Piggyback Registrations. The Company shall notify all Holders
of Registrable Securities in writing at least thirty (30) days prior to filing
any registration statement under the Securities Act for purposes of effecting a
public offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to any registration
under Section 2.2 or Section 2.4 of this Agreement or to any employee benefit
plan or a corporate reorganization) and will afford each such Holder an
opportunity to include in such registration statement all or any part of the
Registrable Securities then held by such Holder. Each Holder desiring to include
in any such registration statement all or any part of the Registrable Securities
held by such Holder shall, within twenty (20) days after receipt of the
above-described notice from the Company, so notify the Company in writing, and
in such notice shall inform the Company of the number of Registrable Securities
such Holder wishes to include in such registration statement. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(a) Underwriting. If a registration statement under which
the Company gives notice under this Section 2.3 is for an underwritten offering,
then the Company shall so advise the Holders of Registrable Securities. In such
event, the right of any such Holder's Registrable Securities to be included in a
registration pursuant to this Section 2.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their Registrable Securities through such
underwriting shall enter into an underwriting agreement in customary form with
the managing underwriter or underwriter(s) selected for such underwriting.
Notwithstanding any other provision of this Agreement, if the managing
underwriter determine(s) in good faith that marketing factors require a
limitation of the number of shares to be underwritten, then the managing
underwriter(s) may exclude shares (including Registrable Securities) from the
registration and the underwriting, and the number of shares that may be included
in the registration and the underwriting shall be allocated, first to
shareholders exercising any demand registration rights, second to the Company,
third, to each of the Holders requesting inclusion of their Demand Registrable
Securities in such registration statement on a pro rata basis based on the total
number of Demand Registrable Securities then held by each such Holder, and
fourth to each of the Holders requesting inclusion of their Additional
Registrable Securities in such registration statement on a pro rata basis based
on the total number of Additional Registrable Securities then held by each such
Holder; provided, however, that the right of the underwriters to exclude shares
from the registration and underwriting as described above shall be restricted so
that the number of Demand Registrable. Securities included in any such
registration is not reduced below twenty-five percent (25%) of the shares
included in the registration except for a registration relating to the Company's
initial public offering, from which all Demand Registrable Securities may be
excluded. If any Holder
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<PAGE> 7
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw therefrom by written notice to the Company and the underwriter,
delivered at least ten (10) business days prior to the effective date of the
registration statement. Any Registrable Securities excluded or withdrawn from
such underwriting shall be excluded and withdrawn from the registration. For any
Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "Holder", and any pro rata
reduction with respect to such "Holder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "Holder", as defined in this sentence.
(b) Expenses. All expenses incurred in connection with a
registration pursuant to this Section 2.3 (excluding underwriters' and brokers'
discounts and commissions), including, without limitation all federal and "blue
sky" registration and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company.
2.4 Form S-3 Registration. In case the Company shall receive from
any Holder or Holders of Demand Registrable Securities a written request or
requests that the Company effect a registration on Form S-3 and any related
qualification or compliance with respect to all or a part of the Demand
Registrable Securities owned by such Holder or Holders, then the Company will:
(a) Notice. Promptly give written notice of the proposed
registration and the Holder's or Holders' request therefor, and any related
qualification or compliance, to all other Holders of Demand Registrable
Securities; and
(b) Registration. As soon as practicable, effect such
registration and all such qualifications and compliances as may be so requested
and as would permit or facilitate the sale and distribution of all or such
portion of such Holder's or Holders' Demand Registrable Securities as are
specified in such request, together with all or such portion of the Demand
Registrable Securities of any other Holder or Holders joining in such request as
are specified in a written request given within twenty (20) days after receipt
of such written notice from the Company; provided, however, the Company shall
not be obligated to effect any such registration, qualification or compliance
pursuant to this Section 2.4:
(1) if Form S-3 is not available for such offering;
(2) if the Holders, together with the holders of any
other securities of the Company entitled to inclusion in such
registration, propose to sell Demand Registrable Securities and such
other securities (if any) at an aggregate price to the public of less
than $1,000,000 (after deduction of commissions and expenses);
(3) if the Company shall furnish to the Holders a
certificate signed by the President or Chief Executive Officer of the
Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously
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<PAGE> 8
detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement no more than once during any twelve month period for a period
of not more than 120 days after receipt of the request of the Holder or
Holders under this Section 2.4;
(4) if the Company has, within the six (6) month period
immediately preceding the date of such request, already effected one (1)
registration on Form S-3 for the Holders pursuant to this Section 2.4;
or
(5) in any particular jurisdiction in which the Company
would be required to qualify to do business or to execute a general
consent to service of process in effecting such registration,
qualification or compliance.
Subject to the foregoing, the Company shall file a Form S-3 registration
statement covering the Demand Registrable Securities and other securities so
requested to be registered pursuant to this Section 2.4 as soon as practicable
after receipt of the request or requests of the Holders for such registration.
(c) Expenses. The Company shall pay all expenses incurred
in connection with each registration requested pursuant to this Section 2.4
(excluding underwriters' or brokers' discounts and commissions), including
without limitation all filing, registration and qualification, printers' and
accounting fees and the reasonable fees and disbursements of one counsel for the
selling Holder or Holders and counsel for the Company.
(d) Not Demand Registration. Form S-3 registrations shall
not be deemed to be demand registrations as described in Section 2.2 above.
2.5 Obligations of the Company. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use reasonable, diligent
efforts to cause such registration statement to become effective, and,
upon the request of the Holders of a majority of the Registrable
Securities registered thereunder, keep such registration statement
effective for up to ninety (90) days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement.
(c) Furnish to the Holders such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the
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<PAGE> 9
disposition of the Registrable Securities owned by them that are
included in such registration.
(d) Use reasonable, diligent efforts to register and qualify the
securities covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify to
do business or to file a general consent to service of process in any
such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter(s) of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of
any event as a result of which the prospectus included in such
registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities, on the date that such
Registrable Securities are delivered to the underwriters for sale, if
such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes
effective, (i) an opinion, dated as of such date, of the counsel
representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten
public offering and reasonably satisfactory to a majority in interest of
the Holders requesting registration, addressed to the underwriters, if
any, and to the, Holders requesting registration of Registrable
Securities and (ii) a "comfort" letter dated as of such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities.
2.6 Furnish Information. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2, 2.3 or
2.4 that the selling Holders shall furnish to the Company such information
regarding themselves, the Registrable Securities held by them, and the intended
method of disposition of such securities as shall be required to timely effect
the registration of their Registrable Securities.
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<PAGE> 10
2.7 Delay of Registration. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 2.
2.8 Indemnification. In the event any Registrable Securities are
included in a registration statement under Sections 2.2, 2.3 or 2.4:
(a) By the Company. To the extent permitted by law, the
Company will indemnify and hold harmless each Holder, the partners, officers and
directors of each Holder, any underwriter (as defined in the Securities Act) for
such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Securities Exchange Act of 1934,
as amended, (the "1934 ACT"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereof) arise
out of or are based upon any of the following statements, omissions or
violations (each a "VIOLATION"):
(i) any untrue statement or alleged untrue statement of
a material fact contained in such registration statement, including any
preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto;
(ii) the omission or alleged omission to state therein
a material fact required to be stated therein, or necessary to make the
statements therein not misleading; or
(iii) any violation or alleged violation by the Company
of the Securities Act, the 1934 Act, any federal or state securities law
or any rule or regulation promulgated under the Securities Act, the 1934
Act or any federal or state securities law in connection with the
offering covered by such registration statement;
and the Company will reimburse each such Holder, partner, officer or director,
underwriter or controlling person for any legal or other expenses reasonably
incurred by them, as incurred, in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
indemnity agreement contained in this subsection 2.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
(b) By Selling Holders. To the extent permitted by law,
each selling Holder will indemnify and hold harmless the Company, each of its
directors, each of its officers who have signed the registration statement, each
person, if any, who controls the Company
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<PAGE> 11
within the meaning of the Securities Act, any underwriter and any other Holder
selling securities under such registration statement or any of such other
Holders partners, directors or officers or any person who controls such Holder
within the meaning of the Securities Act or the 1934 Act, against any losses,
claims, damages or liabilities (joint or several) to which the Company or any
such director, officer, controlling person, underwriter or other such Holder,
partner or director, officer or controlling person of such other Holder may
become subject under the Securities Act, the 1934 Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder expressly
for use in connection with such registration; and each such Holder will
reimburse any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder,
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this subsection 2.8(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld, and provided further that the total amounts payable in indemnity by a
Holder under this Section 2.8(b) in respect of any Violation shall not exceed
the net proceeds received by such Holder in the registered offering out of which
such Violation arises.
(c) Notice. Promptly after receipt by an indemnified party
under this Section 2.8 of notice of the commencement of any action (including
any governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 2.8,
deliver to the indemnifying party a written notice of the commencement thereof
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential conflict of interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such
action, shall relieve such indemnifying party of any liability to the
indemnified party under this Section 2.8, but the omission so to deliver written
notice to the indemnifying party will not relieve it of any liability that it
may have to any indemnified party otherwise than under this Section 2.8.
(d) Defect Eliminated in Final Prospectus. The foregoing
indemnity agreements of the Company and Holders are subject to the condition
that, insofar as they relate to any Violation made in a preliminary prospectus
but eliminated or remedied in the amended prospectus on file with the SEC at the
time the registration statement in question becomes effective or the amended
prospectus filed with the SEC pursuant to SEC Rule 424(b) (the "FINAL
PROSPECTUS"), such indemnity agreement shall not inure to the benefit of any
person if a copy of
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<PAGE> 12
the Final Prospectus was furnished to the indemnified party and was not
furnished to the person asserting the loss, liability, claim or damage at or
prior to the time such action is required by the Securities Act.
(e) Contribution. In order to provide for just and
equitable contribution to joint liability under the Securities Act in any case
in which either (i) any Holder exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 2.8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 2.8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 2.8; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by and sold under the registration statement bears to the public
offering price of all securities offered by and sold under such registration
statement, and the Company and other selling Holders are responsible for the
remaining portion; provided, however, that, in any such case, (A) no such Holder
will be required to contribute any amount in excess of the public offering price
of all such Registrable Securities offered and sold by such Holder pursuant to
such registration statement; and (B) no person or entity guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person or entity who was not guilty of
such fraudulent misrepresentation.
(f) Survival. The obligations of the Company and Holders
under this Section 2.8 shall survive the completion of any offering of
Registrable Securities in a registration statement, and otherwise.
2.9 "MARKET STAND-OFF." Each Holder hereby agrees that it shall
not, to the extent requested by the Company or an underwriter of securities of
the Company, sell or otherwise transfer or dispose of any Registrable Securities
or other shares of stock of the Company then owned by such Holder (other than to
donees or partners of the Holder who agree to be similarly bound) for up to one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided however that:
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers securities
to be sold on its behalf to the public in an underwritten offering but
not to Registrable Securities sold pursuant to such registration
statement; and
(b) all executive officers and directors of the Company
then holding Common Stock of the Company enter into similar agreements.
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In order to enforce the foregoing covenant, the Company shall have the right to
place restrictive legends on the certificates representing the shares subject to
this Section and to impose stop transfer instructions with respect to the
Registrable Securities and such other shares of stock of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.
2.10 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Registrable Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to:
(a) Make and keep public information available, as
those terms are understood and defined in Rule 144 under the Securities
Act, at all times after the effective date of the first registration
under the Securities Act filed by the Company for an offering of its
securities to the general public;
(b) Use reasonable, diligent efforts to file with the
Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the 1934 Act (at any time
after it has become subject to such reporting requirements); and
(c) So long as a Holder owns any Registrable
Securities, to furnish to the Holder forthwith upon request a written
statement by the Company as to its compliance with the reporting
requirements of said Rule 144 (at any time after 90 days after the
effective date of the first registration statement filed by the Company
for an offering of its securities to the general public), and of the
Securities Act and the 1934 Act (at any time after it has become subject
to the reporting requirements of the 1934 Act), a copy of the most
recent annual or quarterly report of the Company, and such other reports
and documents of the Company as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a
Holder to sell any such securities without registration (at any time
after the Company has become subject to the reporting requirements of
the 1934 Act).
2.11 TERMINATION OF THE COMPANY'S OBLIGATIONS. The Company shall
have no obligations pursuant to Sections 2.2 through 2.4 with respect to: (i)
any request or requests for registration made by any Holder on a date more than
five (5) years after the closing date of the Company's initial public offering;
or (ii) any Registrable Securities proposed to be sold by a Holder in a
registration pursuant to Section 2.2, 2.3 or 2.4 if, in the opinion of counsel
to the Company addressed in writing to the Holder, all such Registrable
Securities proposed to be sold by a Holder may be sold in a three-month period
without registration under the Securities Act pursuant to Rule 144 under the
Securities Act.
3. RIGHT OF FIRST REFUSAL.
3.1 GENERAL. For so long as any Investor holds at least 100,000
shares of Series B Stock issued under the Series B Agreement and/or at least
300,000 shares of Series C
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Stock issued under the Series C Agreement and/or the equivalent number (on an
as-converted basis) of shares of Conversion Stock (each such Investor being
hereinafter referred to as a "RIGHTS HOLDER"), such Rights Holder shall have the
right of first refusal to purchase such Rights Holders Pro Rata Share (as
defined below), of all (or any part) of any "New Securities" (as defined in
Section 3.2) that the Company may from time to time issue or offer to sell after
the date of this Agreement. A Rights Holders "PRO RATA SHARE" for purposes of
this right of first refusal is the ratio of (a) the number of Demand Registrable
Securities as to which such Rights Holder is the Holder (and/or is deemed to be
the Holder under Section 2.1(f)), to (b) the number of "COMMON STOCK EQUIVALENTS
Outstanding," which shall be the sum of (i) the total number of shares of Common
Stock then outstanding plus (ii) the total number of shares of Common Stock
issuable upon conversion of all shares of Preferred Stock or other securities
convertible into or exchangeable for shares of Common Stock that are then
outstanding plus (iii) the total number of shares of Common Stock that are
issuable upon the exercise of then outstanding warrants, options or other rights
to purchase or acquire (x) shares of Common Stock or (y) securities convertible
into or exchangeable for shares of Common Stock (assuming the full conversion or
exchange into Common Stock of all such warrants, options or other rights to
purchase or acquire securities convertible into or exchangeable for shares of
Common Stock).
3.2 NEW SECURITIES. "NEW SECURITIES" shall mean any Common Stock
or Preferred Stock of the Company, whether now authorized or not, and rights,
options or warrants to purchase such Common Stock or Preferred Stock, and
securities of any type whatsoever that are, or may become, convertible or
exchangeable into such Common Stock or Preferred Stock; provided however, that
the term "New Securities" does not include:
(i) a cumulative total from inception up to 7,390,281
shares of the Company's Common Stock (and/or options or warrants
therefor) issued to employees, officers, directors, contractors,
advisors or consultants of the Company pursuant to incentive agreements
or plans approved by the Board of Directors of the Company;
(ii) any shares of Series C Preferred Stock issued
under the Series C Agreement, as such agreement may be amended;
(iii) any securities issuable upon conversion of or
with respect to any then outstanding shares of Series A Stock, Series B
Stock, or Series C Stock of the Company;
(iv) any securities issuable upon exercise or
conversion of any securities, if such securities were first offered to
the Rights Holders hereunder,
(v) shares of the Company's Common Stock or Preferred
Stock issued in connection with any stock split or stock dividend;
(vi) securities offered by the Company to the public
pursuant to a registration statement filed under the Securities Act;
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<PAGE> 15
(vii) shares of Common Stock (or options, warrants, or
rights therefor) which are issued to equipment lessors, landlords,
financial institutions and other providers of goods and services to the
Company pursuant to agreements or other arrangements approved by the
Board; provided, that at the time of each such issuance, such shares of
Common Stock (or options, warrants, or rights therefor), together with
all like issuances since the date of this Agreement (net of any
repurchases of such shares by the Company and net of any such expired or
terminated options, warrants or rights), shall not exceed one and five
tenths percent (1.5%) of the Common Stock Equivalents Outstanding at the
time of such issuance;
(viii) securities issued pursuant to the acquisition of
another corporation or entity by the Company by consolidation, merger,
purchase of all or substantially all of the assets, or other
reorganization in which the Company acquires, in a single transaction or
Series of related transactions, all or substantially all of the assets
of such other corporation or entity or fifty percent (50%) or more of
the voting power of such other corporation or entity or fifty percent
(50%) or more of the equity ownership of such other entity.
3.3 PROCEDURES. In the event that the Company proposes to
undertake an issuance of New Securities, it shall give to each Rights Holder
written notice of its intention to issue New Securities (the "NOTICE"),
describing the type of New Securities and the price and the general terms upon
which the Company proposes to issue such New Securities. Each Rights Holder
shall have ten (10) days from the date of mailing of any such Notice to agree in
writing to purchase such Rights Holder's Pro Rata Share of such New Securities
for the price and upon the general terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased (not to exceed such Rights Holders Pro Rata Share). If any
Rights Holder fails to so agree in writing within such ten (10) day period to
purchase such Rights Holder's full Pro Rata Share of an offering of New
Securities (a "NONPURCHASING HOLDER"), then such Nonpurchasing Holder shall
forfeit the right hereunder to purchase that part of his Pro Rata Share of such
New Securities that he did not so agree to purchase and the Company shall
promptly give each Rights Holder who has timely agreed to purchase his full Pro
Rata Share of such offering of New Securities (a "PURCHASING HOLDER") written
notice of the failure of any Nonpurchasing Holder to purchase such Nonpurchasing
Rights Holder's full Pro Rata Share of such offering of New Securities (the
"OVERALLOTMENT NOTICE"). Each Purchasing Holder shall have a right of
overallotment such that such Purchasing Holder may agree to purchase a portion
of the Nonpurchasing Holders' unpurchased Pro Rata Shares of such offering on a
pro rata basis according to the relative Pro Rata Shares of the Purchasing
Rights Holders, at any time within five (5) days after receiving the
Overallotment Notice.
3.4 FAILURE TO EXERCISE. In the event that the Rights Holders
full to exercise in full the right of first refusal within such ten (10) plus
five (5) day period, then the Company shall have 90 days thereafter to sell the
New Securities with respect to which the Rights Holders' rights of first refusal
hereunder were not exercised, at a price and upon general terms not materially
more favorable to the purchasers thereof than specified in the Company's Notice
to the
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<PAGE> 16
Rights Holders. In the event that the Company has not issued and sold the New
Securities within such 90 day period, then the Company shall not thereafter
issue or sell any New Securities without again first offering such New
Securities to the Rights Holders pursuant to this Section 3.
3.5 TERMINATION. This right of first refusal shall terminate (i)
immediately before the closing of the first underwritten sale of Common Stock of
the Company to the public pursuant to a registration statement filed with, and
declared effective by, the SEC under the Securities Act, covering the offer and
sale of Common Stock to the public at an offering price of at least $6.00 per
share (such offering price being subject to proportional adjustment to reflect
subdivisions, combinations, stock dividends and similar transactions affecting
the number of outstanding shares of Common Stock) for an aggregate gross public
offering price (calculated after deduction of underwriters' discounts and
commissions) of at least $25,000,000, or (ii) upon (a) the acquisition of all or
substantially all the assets of the Company or (b) an acquisition of the Company
by another corporation or entity by consolidation, merger or other
reorganization in which the holders of the Company's outstanding voting stock
immediately prior to such transaction own, immediately after such transaction,
securities representing less than fifty percent (50%) or more of the voting
power of the corporation or other entity surviving such transaction pursuant to
this Section 3.
4. ASSIGNMENT AND AMENDMENT.
4.1 ASSIGNMENT. Notwithstanding anything herein to the contrary:
(a) Information Rights; Refusal Rights. The rights of an
Investor under Sections 1.1 or 3 hereof may be assigned only to a party who
acquires from an Investor (or an Investor's permitted assigns) at least that
number of shares of Series B Stock, Series C Stock and/or an equivalent number
(on an as-converted basis) of shares of Conversion Stock described in Sections
1.1 or 3 hereof, respectively.
(b) Registration Rights. The registration rights of a
Holder under Section 2 hereof may be assigned to a person who either (i)
acquires at least 100,000 shares of Demand Registrable Securities, (ii) acquires
at least 100,000 shares of Additional Registrable Securities, (iii) acquires all
of the Demand Registrable Securities or Additional Registrable Securities owned
by the transferor, or (iv) is a partner or retired partner of a transferor that
is a partnership, or a shareholder of a transferor that is a corporation, or the
estate of any such partner or shareholder, or (with respect to a transfer by
gift, will or intestate succession) is the spouse, lineal descendant or ancestor
of a transferor who is a natural person (or a trust for any of the foregoing);
provided, however, that the Company is given written notice by the assigning
party at the time of such assignment gating the name and address of the assignee
and identifying the securities of the Company as to which the rights are being
assigned; and provided further that any such assignee shall receive such
assigned rights subject to all the terms and conditions of this Agreement,
including without limitation the provisions of this Section 4.
4.2 AMENDMENT OF RIGHTS. Subject to Section 4.3, any provision of
this Agreement may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the
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<PAGE> 17
Company and Investors (and/or any of their permitted successors or assigns)
holding shares of Series B Stock, Series C Stock and/or Conversion Stock
representing and/or convertible into a majority of all the Investors' Shares (as
defined below); provided, however, that the piggyback registration rights
granted to the Shareholders under Section 2.3 of this Agreement may not be
eliminated or materially and adversely changed without the additional written
consent of persons holding a majority of the Shareholders' Shares and/or shares
of Common Stock issued upon conversion thereof (calculated on an as converted to
Common Stock basis); and provided further that the grant to third parties of
piggyback registration rights under Section 2.3 hereof on a pari passu basis
with the piggyback registration rights of the Shareholders' Shares under Section
2.3 shall not be deemed to be a material and adverse change to the piggyback
registration rights of the Shareholders under this Agreement. As used herein,
the term "INVESTORS' SHARES" shall mean the shares of Common Stock then issuable
upon conversion of all then outstanding shares of Series B Stock issued under
the Series B Agreement, plus all then outstanding shares of Series C Stock
issued under the Series C Agreement, plus all then outstanding shares of
Conversion Stock that were issued upon the conversion of any shares of Series B
Stock issued under the Series B Agreement, plus all then outstanding shares of
Conversion Stock that were issued upon the conversion of any shares of Series C
Stock issued under the Series C Agreement. Any amendment or waiver effected in
accordance with this Section 4.2 shall be binding upon each Investor, each
Holder, each permitted successor or assignee of such Investor or Holder and the
Company.
4.3 NEW INVESTORS. Notwithstanding anything herein to the
contrary, if pursuant to Section 2.2 of the Series C Agreement, additional
parties may purchase shares of Series C Stock as "New Investors" thereunder,
then each such New Investor shall become a party to this Agreement as an
"Investor" hereunder, without the need any consent, approval or signature of any
Investor when such New Investor has both: (i) purchased shares of Series C Stock
under the Series C Agreement and paid the Company all consideration payable for
such shares and (ii) executed one or more counterpart signature pages to this
Agreement as an "Investor", with the Company's consent.
5. ADDITIONAL COVENANTS.
5.1 DEBT INCURRED. The Company shall obtain the written consent
of holders of fifty-five percent (55%) of the Series A Stock, Series B Stock,
and Series C Stock, voting together as a single class, which consent shall not
be unreasonably withheld, prior to incurring any indebtedness for money borrowed
in excess of $500,000; provided that such restriction shall not apply to lines
of credit with commercial banks and equipment leases entered into by the
Company. This covenant shall terminate upon the same terms and conditions set
forth in Section 3.5 hereto.
5.2 EQUITY ISSUANCE. From the date of this Agreement until
January 1, 2000, the Company shall obtain the written consent of holders of
fifty-five percent (55%) of the Series A Stock, Series B Stock, and Series C
Stock, voting together as a single class, which consent shall not be
unreasonably withheld, prior to issuing any equity securities of the Company (or
options, warrants or rights therefor) to either Shareholder.
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<PAGE> 18
6. GENERAL PROVISIONS.
6.1 NOTICES. Any notice, request or other communication required
or permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or if deposited in the U.S. mail by registered or
certified mail, return receipt requested, postage prepaid, as follows:
(a) if to an Investor, at such Investors respective
address as set forth on Exhibit A hereto.
(b) if to the Company, at 46501 Landing Parkway,
Fremont, CA 94538.
(c) if to a Shareholder, at such Shareholder's address
as set forth on Exhibit B hereto.
Any party hereto (and such party's permitted assigns) may by notice so given
change its address for future notices hereunder. Notice shall conclusively be
deemed to have been given when personally delivered or when deposited in the
mail in the manner set forth above.
6.2 ENTIRE AGREEMENT. This Agreement, together with all the
Exhibits hereto, constitutes and contains the entire agreement and understanding
of the parties with respect to the subject matter hereof and supersedes the
Prior Rights Agreement and any and all prior negotiations, correspondence,
agreements, understandings, duties or obligations between the parties respecting
the subject matter hereto. This Agreement will amend and restate the Prior
Rights Agreement to read as set forth herein, when parties having the right to
so amend and restate the Prior Rights Agreement have duly executed it.
6.3 GOVERNING LAW. This Agreement shall be governed by and
construed exclusively in accordance with the internal laws of the State of
California as applied to agreements among California residents entered into and
to be performed entirely within California, excluding that body of law relating
to conflict of laws and choice of law.
6.4 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, then such provision(s) shall be
excluded from this Agreement and the balance of this Agreement shall be
interpreted as if such provision(s) were so excluded and shall be enforceable in
accordance with its terms.
6.5 THIRD PARTIES. Nothing in this Agreement, express or implied,
is intended to confer upon any person, other than the parties hereto and their
successors and assigns, any rights or remedies under or by reason of this
Agreement.
6.6 SUCCESSORS AND ASSIGNS. Subject to the provisions of Section
4.1, the provisions of this Agreement shall inure to the benefit of, and shall
be binding upon, the successors and permitted assigns of the parties hereto.
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6.7 CAPTIONS. The captions to sections of this Agreement have
been inserted for identification and reference purposes only and shall not be
used to construe or interpret this Agreement.
6.8 COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
6.9 COSTS AND ATTORNEYS' FEES. In the event that any action, suit
or other proceeding is instituted concerning or arising out of this Agreement or
any transaction contemplated hereunder, the prevailing party shall recover all
of such party's costs and attorneys' fees incurred in each such action, suit or
other proceeding, including any and all appeals or petitions therefrom.
6.10 ADJUSTMENTS FOR STOCK SPLITS, ETC. Wherever in this
Agreement there is a reference to a specific number of shares of Common Stock or
Preferred Stock of the Company of any class or series, then, upon the occurrence
of any subdivision, combination or stock dividend of such class or Series of
stock, the specific number of shares so referenced in this Agreement shall
automatically be proportionally adjusted to reflect the affect on the
outstanding shares of such class or Series of stock by such subdivision,
combination or stock dividend.
6.11 AGGREGATION OF STOCK. All shares held or acquired by
affiliated entities or persons shall be aggregated together for the purpose of
determining the availability of any rights under this Agreement.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
THE COMPANY:
VIRAGE LOGIC CORPORATION
By: /s/ ADAM KABLANIAN
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Adam Kablanian, President
THE SHAREHOLDERS:
/s/ ADAM KABLANIAN /S/ ALEXANDER SHUBAT
- ------------------------------- -----------------------------
Adam Kablanian Alexander Shubat
THE INVESTORS:
By:
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[Sign Here]
Name:
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[Please Print]
Title:
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[Please Print (if applicable)]
Company Name:
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[Please Print (if applicable)]
[SIGNATURE PAGE TO RESTATED AND AMENDED INVESTORS' RIGHTS AGREEMENT]
<PAGE> 1
Exhibit 10.1
VIRAGE LOGIC CORPORATION
1997 EQUITY INCENTIVE PLAN
AS ADOPTED AND AMENDED THROUGH
FEBRUARY 10, 2000
1. PURPOSE. The purpose of this Plan is to provide incentives to attract,
retain and motivate eligible persons whose present and potential contributions
are important to the success of the Company, its Parent and Subsidiaries, by
offering them an opportunity to participate in the Company's future performance
through awards of Options and Restricted Stock. Capitalized terms not defined in
the text are defined in Section 22. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and 17, the
total number of Shares reserved and available for grant and issuance pursuant to
this Plan will be 7,390,281 Shares or such lesser number of Shares as permitted
under Section 260.140.45 of Title 10 of the California Code of Regulations.
Subject to Sections 2.2 and 17, Shares will again be available for grant and
issuance in connection with future Awards under this Plan that: (a) are subject
to issuance upon exercise of an Option but cease to be subject to such Option
for any reason other than exercise of such Option or (b) are subject to an Award
that otherwise terminates without Shares being issued. At all times the Company
will reserve and keep available a sufficient number of Shares as will be
required to satisfy the requirements of all Awards granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of outstanding
shares of the Company's Common Stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
this Plan, (b) the Exercise Prices of and number of Shares subject to
outstanding Options, and (c) the Purchase Prices of and number of Shares subject
to other outstanding Awards will be proportionately adjusted, subject to any
required action by the Board or the shareholders of the Company and compliance
with applicable securities laws; provided, however, that fractions of a Share
will not be issued but will either be paid in cash at Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only
to employees (including officers and directors who are also employees) of the
Company or of a Parent or Subsidiary of the Company. All other Awards may be
granted to employees, officers, directors and consultants of the Company or any
Parent or Subsidiary of the Company; provided such consultants render bona fide
services not in connection with the offer and sale of securities in a
capital-raising transaction. A person may be granted more than one Award under
this Plan.
<PAGE> 2
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee will have full power to implement and carry out this Plan. Without
limitation, the Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement and
any other agreement or document executed pursuant to this
Plan;
(b) prescribe, amend and rescind rules and regulations relating
to this Plan;
(c) select persons to receive Awards;
(d) determine the form and terms of Awards;
(e) determine the number of Shares or other consideration
subject to Awards;
(f) determine whether Awards will be granted singly, in
combination with, in tandem with, in replacement of, or as
alternatives to, other Awards under this Plan or awards
under any other incentive or compensation plan of the
Company or any Parent or Subsidiary of the Company;
(g) grant waivers of Plan or Award conditions;
(h) determine the vesting, exercisability and payment of Awards;
(i) correct any defect, supply any omission, or reconcile any
inconsistency in this Plan, any Award, any Award Agreement,
any Exercise Agreement or any Restricted Stock Purchase
Agreement;
(j) determine whether an Award has been earned, and
(k) make all other determinations necessary or advisable for the
administration of this Plan.
4.2 Committee Discretion. Any determination made by the Committee
with respect to any Award will be made in its sole discretion at the time of
grant of the Award or, unless in contravention of any express term of this Plan
or Award, and subject to Section 5.9, at any later time, and such determination
will be final and binding on the Company and on all persons having an interest
in any Award under this Plan. The Committee may delegate to one or more officers
of the Company the authority to grant an Award under this Plan.
5. OPTIONS. The Committee may grant Options to eligible persons and will
determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOS") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan will be
evidenced by an Award Agreement which will expressly identify the Option as an
ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2 Date of Grant. The date of grant of an Option will be the date on
which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
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<PAGE> 3
5.3 Exercise Period. Options may be exercisable immediately (subject
to repurchase pursuant to Section 11 of this Plan) or may be exercisable within
the times or upon the events determined by the Committee as set forth in the
Stock Option Agreement governing such Option; provided, however, that no Option
will be exercisable after the expiration of ten (10) years from the date the
Option is granted, and further that no ISO granted to a person who directly or
by attribution owns more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary of
the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after the expiration
of five (5) years from the date the ISO is granted. The Committee also may
provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as
the Committee determines. Subject to earlier termination of the Option as
provided herein, each Participant who is not an officer, director or consultant
of the Company or of a Parent or Subsidiary of the Company and does not have
annual compensation of $60,000 or more shall have the right to exercise an
Option granted hereunder at the rate of at least twenty percent (20%) per year
over five (5) years from the date such Option is granted. Subject to earlier
termination of the Option as provided for herein, each Participant who is an
officer, director or consultant of the Company or of a Parent or Subsidiary of
the Company or has annual compensation of $60,000 or more shall have the right
to exercise an Option granted hereunder at the rate of at least 20% per year
over five (5) years from the later of (A) the date when all other Options
granted to the Participant by the Company have become exercisable in full, and
(B) the date when the Company's repurchase right has lapsed in full with regard
to all other shares of restricted stock held by Participant.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant and (ii) the Exercise Price of any
Option granted to a Ten Percent Shareholder Will not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 7 of this Plan.
5.5 Method of Exercise. Options may be exercised only by delivery to
the Company of a written stock option exercise agreement (the "EXERCISE
AGREEMENT") in a form approved by the Committee (which need not be the same for
each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to Sections
17 and 18 and notwithstanding the exercise periods set forth in the Stock Option
Agreement, exercise of an Option will always be subject to the following:
(a) If the Participant is Terminated for any reason except
death, Disability or for Cause, then the Participant may
exercise such Participant's Options only to the extent that
such Options are exercisable upon the Termination Date no
later than three (3) months after the Termination Date (or
within such shorter time period, not less than thirty (30)
days, or within such longer time period, not exceeding five
(5) years, after the Termination Date as may be determined
by the Committee, with any exercise beyond three (3) months
after the Termination Date deemed to be an NQSO) but in any
event, no later than the expiration date of the Options.
(b) If the Participant is Terminated because of Participant's
death or Disability (or the Participant dies within three
(3) months after a Termination other than because of
Participant's Disability or Cause), then Participant's
Options may be exercised only to the extent that such
Options are exercisable by Participant on the Termination
Date and must be exercised by Participant (or Participant's
legal representative or authorized assignee) no later than
twelve (12) months after the Termination Date (or within
such shorter time period, not less than six (6)
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<PAGE> 4
months, or within such longer time period, not exceeding
five (5) years, after the Termination Date as may be
determined by the Committee, with any exercise beyond (a)
three (3) months after the Termination Date when the
Termination is for any reason other than the Participants
death or disability, within the meaning of Section 22(e)(3)
of the Code, or (b) twelve (12) months after the Termination
Date when the Termination is for Participant's disability,
within the meaning of Section 22(e)(3) of the Code, deemed
to be an NQSO) but in any event no later than the expiration
date of the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such Participant's
Termination Date, or at such later time and on such
conditions as are determined by the Committee.
5.7 Limitations on Exercise. The Committee may specify a reasonable
minimum number of Shares that may be purchased on any exercise of an Option,
provided that such minimum number will not prevent Participant from exercising
the Option for the full number of Shares for which it is then exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value (determined
as of the date of grant) of Shares with respect to which ISOs are exercisable
for the first time by a Participant during any calendar year (under this Plan or
under any other incentive stock option plan of the Company or any Parent or
Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of
Shares on the date of grant with respect to which ISOs are exercisable for the
first time by a Participant during any calendar year exceeds $100,000, then the
Options for the first $100,000 worth of Shares to become exercisable in such
calendar year will be ISOs and the Options for the amount in excess of $100,000
that become exercisable in that calendar year will be NQSOs. In the event that
the Code or the regulations promulgated thereunder are amended after the
Effective Date (as defined in Section 18 below) to provide for a different limit
on the Fair Market Value of Shares permitted to be subject to ISOs, then such
different limit will be automatically incorporated herein and will apply to any
Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may modify,
extend or renew outstanding Options and authorize the grant of new Options in
substitution therefor, provided that any such action may not, without the
written consent of a Participant, impair any of such Participant's rights under
any Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered will be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of this Plan for
Options granted on the date the action is taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision in this
Plan, no term of this Plan relating to ISOs will be interpreted, amended or
altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company
to sell to an eligible person Shares that are subject to restrictions. The
Committee will determine to whom an offer will be made, the number of Shares the
person may purchase, the Purchase Price, the restrictions to which the Shares
will be subject, and all other terms and conditions of the Restricted Stock
Award, subject to the following:
6.1 Form of Restricted Stock Award. All purchases under a Restricted
Stock Award made pursuant to this Plan will be evidenced by an Award Agreement
("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form (which need
not be the same for each Participant) as the Committee will from time to time
approve, and will comply with and be subject to the terms and conditions of this
Plan. The Restricted Stock Award will be accepted by the Participant's execution
and delivery of the Restricted Stock Purchase Agreement and full payment for the
Shares to the Company within thirty (30) days from the date the Restricted Stock
Purchase Agreement is delivered to the person. If such person does not execute
and deliver the Restricted Stock Purchase Agreement along
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<PAGE> 5
with full payment for the Shares to the Company within thirty (30) days, then
the offer will terminate, unless otherwise determined by the Committee.
6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a
Restricted Stock Award will be determined by the Committee and will be at least
85% of the Fair Market Value of the Shares on the date the Restricted Stock
Award is granted or at the time the purchase is consummated, except in the case
of a sale to a Ten Percent Shareholder, in which case the Purchase Price will be
100% of the Fair Market Value on the date the Restricted Stock Award is granted
or at the time the purchase is consummated. Payment of the Purchase Price must
be made in accordance with Section 7 of this Plan.
6.3 Restrictions. Restricted Stock Awards may be subject to the
restrictions set forth in Section 11 of this Plan or such other restrictions not
inconsistent with the California Corporations Code.
7. PAYMENT FOR SHARE PURCHASES.
7.1 Payment. Payment for Shares purchased pursuant to this Plan may
be made in cash (by check) or, where expressly approved for the Participant by
the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares that either: (1) have been owned by
Participant for more than six (6) months and have been paid
for within the meaning of SEC Rule 144 (and, if such shares
were purchased from the Company by use of a promissory note,
such note has been fully paid with respect to such shares);
or (2) were obtained by Participant in the public market;
(c) by tender of a full recourse promissory note having such
term as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the
Company will not be entitled to purchase Shares with a
promissory note unless the note is adequately secured by
collateral other than the Shares;
(d) by waiver of compensation due or accrued to the Participant
for services rendered;
(e) with respect only to purchases upon exercise of an Option,
and provided that a public market for the Company's stock
exists:
(1) through a "same day sale" commitment from the
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby the Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased to pay for the Exercise Price, and whereby
the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to
the Company; or
(2) through a "margin" commitment from the Participant and
an NASD Dealer whereby the Participant irrevocably
elects to exercise the Option and to pledge the Shares
so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
7.2 Loan Guarantees. The Committee may help the Participant pay for
Shares purchased under this Plan by authorizing a guarantee by the Company of a
third-party loan to the Participant.
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<PAGE> 6
8. WITHHOLDING TAXES.
8.1 Withholding Generally . Whenever Shares are to be issued in
satisfaction of Awards granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Awards are to be made in cash, such payment will be net of an
amount sufficient to satisfy federal, state, and local withholding tax
requirements.
8.2 Stock Withholding. When, under applicable tax laws, a Participant
incurs tax liability in connection with the exercise or vesting of any Award
that is subject to tax withholding and the Participant is obligated to pay the
Company the amount required to be withheld, the Committee may in its sole
discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee for such elections and be in writing in a form
acceptable to the Committee.
9. PRIVILEGES OF STOCK OWNERSHIP.
9.1 Voting and Dividends. No Participant will have any of the rights
of a shareholder with respect to any Shares until the Shares are issued to the
Participant. After Shares are issued to the Participant, the Participant will be
a shareholder and have all the rights of a shareholder with respect to such
Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such
Shares are Restricted Stock, then any new, additional or different securities
the Participant may become entitled to receive with respect to such Shares by
virtue of a stock dividend, stock split or any other change in the corporate or
capital structure of the Company will be subject to the same restrictions as the
Restricted Stock, provided, further, that the Participant will have no right to
retain such stock dividends or stock distributions with respect to Unvested
Shares that are repurchased pursuant to Section 11. The Company will comply with
Section 260.140.1 of Title 10 of the California Code of Regulations with respect
to the voting rights of Common Stock.
9.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Awards outstanding, or as otherwise required or permitted under
Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company will not be required to provide such
financial statements to key employees whose services in connection with the
Company assure them access to equivalent information.
10. TRANSFERABILITY. Awards granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Award will be exercisable only by the Participant or Participants
legal representative and any elections with respect to an Award, may be made
only by the Participant or Participants legal representative.
11. RESTRICTIONS ON SHARES.
11.1 Right of First Refusal. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, unless
otherwise not permitted by the California Corporations Code, provided, that such
right of that such right of first refusal terminates upon the Company's initial
public offering of Common Stock pursuant an effective registration statement
filed under the Securities Act.
11.2 Right of Repurchase. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Award Agreement a
right to repurchase Unvested Shares held by a Participant for cash and/or
cancellation of purchase money indebtedness following such Participant's
Termination at any time within the later of ninety (90) days after the
Participant's Termination Date and the date the Participant purchases Shares
under the Plan at the Participant's Exercise Price or Purchase Price, as the
case may be, provided, that unless
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<PAGE> 7
the Participant is an officer, director or consultant of the Company or of a
Parent or Subsidiary of the Company, or has annual compensation of $60,000 or
more, such right of repurchase lapses at the rate of at least twenty percent
(20%) per year over five (5) years from: (A) the date of grant of the Option or
(B) in the case of Restricted Stock, the date the Participant purchases the
Shares, and provided further, that if Participant is an officer, director or
consultant of the Company or of a Parent or Subsidiary of the Company or has
annual compensation of $60,000 or more, such right of repurchase shall lapse at
the rate of at least twenty percent (20%) per year over five (5) years from the
later of (A) the date when all other Options granted to the Participant by the
Company have become exercisable in full, and (B) the date when the Company's
repurchase right has lapsed in full with regard to all other shares of
restricted stock held by Participant.
12. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
13. ESCROW, PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from
time to time, authorize the Company, with the consent of the respective
Participants, to issue new Awards in exchange for the surrender and cancellation
of any or all outstanding Awards. The Committee may at any time buy from a
Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including restricted stock) or other consideration, based
on such terms and conditions as the Committee and the Participant may agree.
15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be
effective unless such Award is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Award and also on the date of exercise or other issuance. Notwithstanding
any other provision in this Plan, the Company will have no obligation to issue
or deliver certificates for Shares under this Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) compliance with any exemption, completion of any
registration or other qualification of such Shares under any state or federal
law or ruling of any governmental body that the Company determines to be
necessary or advisable. The Company will be under no obligation to register the
Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock
exchange or automated quotation system, and the Company will have no liability
for any inability or failure to do so.
16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
Cause.
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<PAGE> 8
17. CORPORATE TRANSACTIONS.
17.1 Assumption or Replacement of Awards by Successor. In the event of
(a) a dissolution or liquidation of the Company, (b) a merger or consolidation
in which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the Awards granted under this Plan are assumed, converted or
replaced by the successor corporation, which assumption, conversion or
replacement will be binding on all Participants), (c) a merger in which the
Company is the surviving corporation but after which the shareholders of the
Company immediately prior to such merger (other than any shareholder which
merges with the Company in such merger, or which owns or controls another
corporation which merges, with the Company in such merger) cease to own their
shares or other equity interests in the Company, or (d) the sale of all or
substantially all of the assets of the Company, any or all outstanding Awards
may be assumed, converted or replaced by the successor corporation (if any),
which assumption, conversion or replacement will be binding on all Participants.
In the alternative, the successor corporation may substitute equivalent Awards
or provide substantially similar consideration to Participants as was provided
to shareholders (after taking into account the existing provisions of the
Awards). The successor corporation may also issue, in place of outstanding
Shares of the Company held by the Participant, substantially similar shares or
other property subject to repurchase restrictions and other provisions no less
favorable to the Participant than those which applied to such outstanding Shares
immediately prior to such transaction described in this Subsection 17.1. In the
event such successor corporation (if any) refuses to assume or substitute
Awards, as provided above, pursuant to a transaction described in this
Subsection 17.1, then notwithstanding any other provision in this Plan to the
contrary, such Awards will expire on such transaction at such time and on such
conditions as the Board will determine.
17.2 Other Treatment of Awards. Subject to any greater rights granted
to Participants under the foregoing provisions of this Section 17, in the event
of the occurrence of any transaction described in Section 17.1, any outstanding
Awards will be treated as provided in the applicable agreement or plan of
merger, consolidation, dissolution, liquidation or sale of assets.
17.3 Assumption of Awards by the Company. The Company, from time to
time, also may substitute or assume outstanding awards granted by another
company, whether in connection with an acquisition of such other company or
otherwise, by either (a) granting an Award under this Plan in substitution of
such other company's award or (b) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award
granted under this Plan. Such substitution or assumption will be permissible if
the holder of the substituted or assumed award would have been eligible to be
granted an Award under this Plan if the other company had applied the rules of
this Plan to such grant. In the event the Company assumes an award granted by
another company, the terms and conditions of such award will remain unchanged
(except that the exercise price and the number and nature of shares issuable
upon exercise of any such option will be adjusted appropriately pursuant to
Section 424(a) of the Code). In the event the Company elects to grant a new
Option rather than assuming an existing option, such new Option may be granted
with a similarly adjusted Exercise Price.
18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become
effective on the date that it is adopted by the Board (the "EFFECTIVE DATE").
This Plan will be approved by the shareholders of the Company (excluding Shares
issued pursuant to this Plan), consistent with applicable laws, within twelve
(12) months before or after the Effective Date. Upon the Effective Date, the
Board may grant Awards pursuant to this Plan; provided, however, that: (a) no
Option may be exercised prior to initial shareholder approval of this Plan; (b)
no Option granted pursuant to an increase in the number of Shares approved by
the Board shall be exercised prior to the time such increase has been approved
by the shareholders of the Company; (c) in the event that initial shareholder
approval is not obtained within the time period provided herein, all Awards
granted hereunder shall be canceled, any Shares issued pursuant to any Award
shall be canceled and any purchase of Shares issued hereunder shall be
rescinded; and (d) Awards granted pursuant to an increase in the number of
Shares approved by the Board which increase is not timely approved by
shareholders shall be canceled, any Shares issued pursuant to any such Awards
shall be canceled, and any purchase of Shares subject to any such Award shall be
rescinded. In the event that initial shareholder approval is not obtained within
twelve (12) months before or after the date this Plan is adopted by the Board,
all Awards granted hereunder will be canceled, any Shares issued pursuant to any
Award will be canceled and any purchase of Shares hereunder will be rescinded.
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<PAGE> 9
19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.
20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9, the Board
may at any time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Award Agreement or instrument to be executed
pursuant to this Plan; provided, however, that the Board will not, without the
approval of the shareholders of the Company, amend this Plan in any manner that
requires such shareholder approval pursuant to the California Corporations Code
or the Code or the regulations promulgated thereunder as such provisions apply
to ISO plans.
21. NONEXCLUSIVE OF THE PLAN. Neither the adoption of this Plan by the
Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this
Plan, and such arrangements may be either generally applicable or applicable
only in specific cases.
22. DEFINITIONS. As used in this Plan, the following terms will have the
following meanings:
"AWARD" means any award under this Plan, including any Option or
Restricted Stock Award.
"AWARD AGREEMENT" means, with respect to each Award, the signed
written agreement between the Company and the Participant setting forth the
terms and conditions of the Award.
"BOARD" means the Board of Directors of the Company.
"CAUSE" means Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, any willful perpetration by the Participant of a common law fraud,
(ii) the Participant's commission of an act of personal dishonesty which
involves personal profit in connection with the Company or any other entity
having a business relationship with the Company, (iii) any material breach by
the Participant of any provision of any agreement or understanding between the
Company or any Parent or Subsidiary of the Company and the Participant regarding
the terms of the Participant's service as an employee, director or consultant to
the Company or a Parent or Subsidiary of the Company, including without
limitation, the willful and continued failure or refusal of the Participant to
perform the material duties required of such Participant as an employee,
director or consultant of the Company or a Parent or Subsidiary of the Company,
other than as a result of having a Disability, or a breach of any applicable
invention assignment and confidentiality agreement or similar agreement between
the Company and the Participant, (iv) Participant's disregard of the policies of
the Company or any Parent or Subsidiary of the Company so as to cause loss,
damage or injury to the property, reputation or employees of the Company or a
Parent or Subsidiary of the Company, or (v) any other misconduct by the
Participant which is materially injurious to the financial condition or business
reputation of, or is otherwise materially injurious to, the Company or a Parent
or Subsidiary of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITTEE" means the committee appointed by the Board to administer
this Plan, or if no committee is appointed, the Board.
"COMPANY" means Virage Logic Corporation, or any successor
corporation.
"DISABILITY" means a disability, whether temporary or permanent,
partial or total, as determined by the Committee.
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<PAGE> 10
"EXERCISE PRICE" means the price at which a holder of an Option may
purchase the Shares issuable upon exercise of the Option.
"FAIR MARKET VALUE" means, as of any date, the value of a share of the
Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the
date of determination as reported in The Wall Street Journal;
(b) if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of
determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as
reported in The Wall Street Journal;
(c) if such Common Stock is publicly traded but is not quoted on the
Nasdaq National Market nor listed or admitted to trading on a
national securities exchange, the average of the closing bid and
asked prices on the date of determination as reported by The Wall
Street Journal (or, if not so reported, as otherwise reported by
any newspaper or other source as the Board may determine); or
(d) if none of the foregoing is applicable, by the Committee in good
faith.
"OPTION" means an award of an option to purchase Shares pursuant to
Section 5.
"PARENT" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the Company if each of such corporations other
than the Company owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
"PARTICIPANT" means a person who receives an Award under this Plan.
"PLAN" means this Virage Logic Corporation 1997 Equity Incentive Plan,
as amended from time to time.
"PURCHASE PRICE" the price at which a Participant may purchase
Restricted Stock.
"RESTRICTED STOCK" means Shares purchased pursuant to a Restricted
Stock Award.
"RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section
6.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of the Company's Common Stock reserved for
issuance under this Plan, as adjusted pursuant to Sections 2 and 17, and any
successor security.
"SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
"TERMINATION" or "TERMINATED" means, for purposes of this Plan with
respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the
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<PAGE> 11
Committee, provided that such leave is for a period of not more than ninety (90)
days unless reinstatement (or, in the case of an employee with an ISO,
reemployment) upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to formal policy adopted from
time to time by the Company and issued and promulgated in writing. In the case
of any Participant on (i) sick leave, (ii) military leave or (iii) an approved
leave of absence, the Committee may make such provisions respecting suspension
of vesting of the Award while on leave from the Company or a Parent or
Subsidiary of the Company as it may deem appropriate, except that in no event
may an Option be exercised after the expiration of the term set forth in the
Stock Option Agreement. The Committee will have sole discretion to determine
whether a Participant has ceased to provide services and the effective date on
which the Participant ceased to provide services (the "TERMINATION DATE").
"UNVESTED SHARES" means `Unvested Shares' as defined in the Award
Agreement.
"VESTED SHARES" means `Vested Shares' as defined in the Award
Agreement.
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EXHIBIT 10.2
NO.
------------
VIRAGE LOGIC CORPORATION
1997 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Virage Logic Corporation, a California corporation (the "COMPANY"), and
the participant named below (the "PARTICIPANT"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1997 Equity
Incentive Plan (the "PLAN").
PARTICIPANT:
--------------------------------------------------
SOCIAL SECURITY NUMBER:
--------------------------------------------------
ADDRESS:
--------------------------------------------------
TOTAL OPTION SHARES:
--------------------------------------------------
EXERCISE PRICE PER SHARE:
--------------------------------------------------
DATE OF GRANT:
--------------------------------------------------
FIRST VESTING DATE:
--------------------------------------------------
EXPIRATION DATE:
--------------------------------------------------
(unless earlier terminated under Section 5.6 of the
Plan)
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (this "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above as Total Option Shares (the "SHARES") at the
Exercise Price Per Share set forth above (the "EXERCISE PRICE"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" (the "ISO") within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE").
2. EXERCISE PERIOD AND VESTING SCHEDULE.
<PAGE> 2
2.1 Exercise Period and Vesting Schedule of Option. This
Option is immediately exercisable although the Shares issued upon exercise of
the Option will be subject to the restrictions on transfer and Repurchase Option
set forth in Section 8 and 9 below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of the Company, the Shares
issuable upon exercise of this Option shall not vest with respect to any of the
Shares until _____________ (the "First Vesting Date"); (b) on the First Vesting
Date the Option shall vest as to ______________ percent (_ %) of the Shares; and
(c) thereafter each year on the anniversary of the First Vesting Date the Option
shall vest as to an additional ____ percent (_%) of the Shares until this Option
is vested with respect to 100% of the Shares. If application of the vesting
percentage causes a fractional share, such share shall be rounded down to the
nearest whole share. Notwithstanding any provision in the Plan or this Agreement
to the contrary, Options for Unvested Shares (as defined in Section 2.2 of this
Agreement will not be exercisable on or after Participant's Termination Date.
[ALTERNATIVE #2: MONTHLY VESTING SCHEDULE
2.2 Exercise Period and Vesting Schedule of Option. This
Option is immediately exercisable although the Shares issued upon exercise of
the Option will be subject to the restrictions on transfer and Repurchase Option
set forth in Section 8 and 9 below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of the Company, the Shares
issuable upon exercise of this Option shall not vest with respect to any of the
Shares until _________________ (the "First Vesting Date"); (b) on the First
Vesting Date the Option shall vest as to ______ percent (_ %) of the Shares; and
(c) thereafter at the end of each full succeeding month the Option will become
vested and as to an additional ____ percent (_%) of the Shares until the Shares
are vested with respect to one hundred percent (100%) of the Shares. If
application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share for each month except for the
last month in such vesting period, at the end of which last month this Option
shall become exercisable for the full remainder of the Shares.]
[ALTERNATIVE #3: VESTING SCHEDULE]
2.3 Exercise Period and Vesting Schedule of Option. This
Option is immediately exercisable although the Shares issued upon exercise of
the Option will be subject to the restrictions on transfer and Repurchase Option
set forth in Section 8 and 9 below. Provided Participant continues to provide
services to the Company or any Subsidiary or Parent of the Company, the Shares
issuable upon exercise of this Option shall not vest with respect to any of the
Shares until _________________ (the "First Vesting Date"); (b) on the First
Vesting Date the Option shall vest as to _____ percent (__ %) of the Shares; and
(c) thereafter the Option shall become vested as to additional portions of the
Shares as follows:
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Cumulative
On or after: But before: Number
- ----------- ---------- of vested shares:
----------------
____________, 20__ ___________, 20___ _____________
____________, 20__ ___________, 20___ _____________
____________, 20__ ___________, 20___ _____________
____________, 20__ ___________, 20___ _____________
____________, 20__ ___________, 20___ _____________
Total Option Shares: _____________
2.4 Vesting of Options. Shares that are vested pursuant to
the schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."
2.5 Expiration. The Option shall expire on the Expiration
Date set forth above or earlier as provided in Section 3 below or pursuant to
Section 5.6 of the Plan.
3. TERMINATION
3.1 Termination for Any Reason Except Death, Disability or
Cause. If Participant is Terminated for any reason, except death, Disability or
for Cause, the Option, to the extent (and only to the extent) that it would have
been exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant (or
Participant dies within three (3) months of Termination when Termination is for
any reason other than Participant's Disability or for Cause), the Option, to the
extent that it is exercisable by Participant on the Termination Date, may be
exercised by Participant (or Participant's legal representative) no later than
twelve (12) months after the Termination Date, but in any event no later than
the Expiration Date. Any exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section 22(e)(3) of the
Code; or (ii) twelve (12) months after the Termination Date when the termination
is for Participant's disability, within the meaning of Section 22(e)(3) of the
Code, is deemed to be an NQSO.
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<PAGE> 4
3.3 Termination for Cause. If Participant is Terminated
for Cause, then the Option will expire on Participant's Termination Date, or at
such later time and on such conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as the case
may be) must deliver to the Company an executed stock option exercise agreement
in the form attached hereto as Exhibit A, or in such other form as may be
approved by the Committee from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, inter alia, (i) Participant's election to exercise the Option,
(ii) the number of Shares being purchased, (iii) any restrictions imposed on the
Shares and (iv) any representations, warranties and agreements regarding
Participant's investment intent and access to information as may be required by
the Company to comply with applicable securities laws. If someone other than
Participant exercises the Option, then such person must submit documentation
reasonably acceptable to the Company verifying that such person has the legal
right to exercise the Option.
4.2 Limitations on Exercise. The Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. The Option
may not be exercised as to fewer than one hundred (100) Shares unless it is
exercised as to all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied
by full payment of the Exercise Price for the shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock
that (i) either (A) have been owned by Participant
for more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with
respect to such shares); or (B) were obtained by
Participant in the open public
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market; and (ii) are clear of all liens, claims,
encumbrances or security interests;
(c) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing
interest at a rate sufficient to avoid imputation of
income under Sections 483 and 1274 of the Code;
provided, however, that Participants who are not
employees or directors of the Company shall not be
entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral
other than the Shares;
(d) by waiver of compensation due or accrued to Participant
for services rendered;
(e) provided that a public market for the Company's stock
exists: (i) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of the
National Association of Securities Dealers (an "NASD
DEALER") whereby Participant irrevocably elects to
exercise the Option and to sell a portion of the Shares
so purchased sufficient to pay for the total Exercise
Price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the total
Exercise Price directly to the Company, or (ii) through
a "margin" commitment from Participant and an NASD
Dealer whereby Participant irrevocably elects to
exercise the Option and to pledge the Shares so
purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount
of the total Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the
Company; or
(f) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares
upon exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's
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authorized assignee, or Participant's legal representative, and shall deliver
certificates representing the Shares with the appropriate legends affixed
thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (i) the date two
(2) years after the Date of Grant, and (ii) the date one (1) year after transfer
of such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. COMPLIANCE WITH LAWS AND REGULATIONS. The exercise of the
Option and the issuance and transfer of Shares shall be subject to compliance by
the Company and Participant with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
on which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the SEC, any state securities commission or
any stock exchange to effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant or in the event of Participant's incapacity, by Participant's legal
representative. The terms of the Option shall be binding upon the executors,
administrators, successors and assigns of Participant.
8. COMPANY'S REPURCHASE OPTION FOR UNVESTED SHARES. The Company,
or its assignee, shall have the option to repurchase Participant's Unvested
Shares (as defined in Section 2.2 of this Agreement) on the terms and conditions
set forth in the Exercise Agreement (the "REPURCHASE OPTION") if Participant is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Participant's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Unvested Shares may not be
sold or otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of
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first refusal to purchase the Vested Shares to be sold or transferred on the
terms and conditions set forth in the Exercise Agreement (the "RIGHT OF FIRST
REFUSAL"). The Company's Right of First Refusal will terminate when the
Company's securities become publicly traded.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of
the Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
10.1 Exercise of ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the Fair Market Value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for federal alternative minimum tax purposes and may subject
the Participant to the alternative minimum tax in the year of exercise.
10.2 Exercise of Nonqualified Stock Option. If the Option
does not qualify as an ISO, there may be a regular federal and California income
tax liability upon the exercise of the Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If Participant is a current or former employee
of the Company, the Company may be required to withhold from Participant's
compensation or collect from Participant and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
10.3 Disposition of Shares. The following tax consequences
may apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two (2) years
after the Date of Grant, any gain realized on disposition of the Shares will be
treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held
for more than twelve (12) months after the date of the transfer of the Shares
pursuant to the
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exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long term capital gain.
(c) Withholding. The Company may be required to
withhold from the Participant's compensation or collect from the Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.
10.4 Section 83(b) Election for Unvested Shares. With
respect to Unvested Shares, which are subject to the Repurchase Option, unless
an election is filed by the Participant with the Internal Revenue Service (and,
if necessary, the proper state taxing authorities), within 30 days of the
purchase of the Unvested Shares, electing pursuant to Section 83(b) of the Code
(and similar state tax provisions, if applicable) to be taxed currently on any
difference between the Exercise Price of the Unvested Shares and their Fair
Market Value on the date of purchase, there may be a recognition of taxable
income (including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of the
Unvested Shares at the time they cease to be Unvested Shares, over the Exercise
Price of the Unvested Shares.
11. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any
of the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
12. INTERPRETATION. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
13. ENTIRE AGREEMENT. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to the
subject matter hereof
14. NOTICES. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
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15. SUCCESSORS AND ASSIGNS. The Company may assign any of its
rights under this Agreement, including its rights to purchase Shares under the
Repurchase Option and the Right of First Refusal. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and Participant's heirs, executors,
administrators, legal representatives, successors and assigns.
16. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with 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. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such provision
will be enforced to the maximum extent possible and the other provisions will
remain fully effective and enforceable.
17. ACCEPTANCE. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate, effective as of the Date of Grant.
VIRAGE LOGIC CORPORATION PARTICIPANT
By:
------------------------- --------------------------------
(Signature)
- ---------------------------- ---------------------------------
(Please print name) (Please print name)
- ---------------------------- ---------------------------------
(Please print tile)
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EXHIBIT 10.3
VIRAGE LOGIC CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
1. Purpose.
This Plan is intended to allow Employees of the Company and its
Designated Subsidiaries to purchase Common Stock through accumulated Payroll
deductions.
2. Defined Terms.
The meanings of defined terms (generally, capitalized terms) in this
Plan are provided in Section 23 ("Glossary").
3. Eligibility.
(a) Participation. Any person who is an Employee on an Offering Date
shall be eligible to participate in this Plan during the corresponding Offering
Period.
(b) No Participation by Five-Percent Stockholders. Notwithstanding
Section 3(a), an Employee shall not participate in this Plan during an Offering
Period if immediately after the grant of a Purchase Right on the Offering Date,
the Employee (or any other person whose stock would be attributed to the
Employee under Section 424(d) of the Code) would own stock possessing five
percent or more of the total combined voting power or value of all classes of
stock of the Company or of any Subsidiary. For this purpose, an Employee is
treated as owning stock that he or she could purchase by exercise of Purchase
Rights or other options.
4. Offering Periods.
Except as otherwise determined by the Administrator:
(a) the first Offering Period under this Plan shall begin on October 1,
2000 and shall end on March 31, 2001;
(b) a new Offering Period shall begin on the first business day of each
April and October while this Plan is in effect;
(c) the duration of each Offering Period (other than the first Offering
Period) shall be six months (measured from the first business day of the first
month to the last business day of the sixth month); and
(d) an Offering Period shall terminate on the first date that no
Participant is enrolled in it.
5. Participation.
<PAGE> 2
(a) An Employee may become a Participant in this Plan by completing a
subscription agreement, in such form as the Administrator may approve from time
to time, and delivering it to the Administrator by 1 p.m. Pacific time on the
applicable Offering Date, unless another time for filing the subscription
agreement is set by the Administrator for all Employees with respect to a given
Offering Period. The subscription agreement shall authorize Payroll deductions
pursuant to this Plan and shall have such other terms as the Administrator may
specify from time to time.
(b) At the end of an Offering Period, each Participant in the Offering
Period who remains an Employee shall be automatically enrolled in the next
succeeding Offering Period (a "Re-enrollment") unless, in a manner and at a time
specified by the Administrator, but in no event later than 1 p.m. Pacific time
on the Offering Date of such succeeding Offering Period, the Participant
notifies the Administrator in writing that the Participant does not wish to be
re-enrolled. Re-enrollment shall be at the withholding percentage specified in
the Participant's most recent subscription agreement. No Participant shall be
automatically re-enrolled whose participation has terminated by operation of
Section 10.
6. Payroll Deductions.
(a) Payroll deductions under this Plan shall be in whole percentages,
from a minimum of 1% up to a maximum of 15%, as specified by the Participant in
his or her subscription agreement in effect on the first day of an Offering
Period. Payroll deductions for a Participant shall begin with the first payroll
payment date of the Offering Period and shall end with the last payroll payment
date of the Offering Period, unless sooner terminated by the Participant as
provided in Section 10.
(b) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code, a Participant's payroll deduction may be
decreased to zero percent (0%) at any time during an Offering Period. Payroll
deductions shall recommence at the rate provided in such Participant's
subscription agreement at the beginning of the first Offering Period that is
scheduled to end in the following calendar year, unless terminated by the
Participant as provided in Section 10 hereof.
(c) A Participant's Payroll deductions shall be credited to his or her
account under this Plan. A Participant may not make any additional payments into
his or her account.
(d) A Participant may reduce his or her Payroll deductions by any whole
percentage (but not below 1%) at any time during an Offering Period, effective
15 days after the Participant files with the Administrator a new subscription
agreement authorizing the change. A Participant may change his or her Payroll
deductions during an Offering Period, effective the first business day after a
Purchase Date, by delivering a new subscription agreement authorizing the change
to the Administrator by 1 p.m. Pacific time on the effective date of the
increase.
7. Purchase Rights.
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(a) Grant of Purchase Rights. On the Offering Date of each Offering
Period, the Participant shall be granted a Purchase Right to purchase on the
Purchase Date of such Offering Period up to a number of shares of Common Stock
determined by dividing (i) such Participant's payroll deductions accumulated on
or prior to such Purchase Date and retained in the Participant's account as of
the Purchase Date by (ii) the applicable Purchase Price; provided that in no
event shall a Participant be entitled to purchase during such Offering Period
more than 1,500 shares of Common Stock (subject to adjustment pursuant to
Section 17 hereof).
(b) Terms of Purchase Rights. Except as otherwise determined by the
Administrator, each Purchase Right shall have the following terms:
(i) The per-share Purchase Price of the shares subject to a
Purchase Right shall be 85% of the lower of the fair market value of a
share of Common Stock on (a) the Offering Date on which the Purchase
Right was granted and (b) the Purchase Date. The fair market value of
the Common Stock on a given date shall be the closing price as reported
in the Wall Street Journal; provided, however, that if there is no
public trading of the Common Stock on that date, then fair market value
shall be determined by the Administrator in its discretion.
(ii) Payment for shares purchased by exercise of Purchase Rights
shall be made only through Payroll deductions under Section 6.
(iii) Upon purchase or disposition of shares acquired by exercise
of a Purchase Right, the Participant shall pay, or make provision
satisfactory to the Administrator for payment of, all tax (and similar)
withholdings that the Administrator determines, in its discretion, are
required due to the acquisition or disposition, including without
limitation any such withholding that the Administrator determines in its
discretion is necessary to allow the Company and its Subsidiaries to
claim tax deductions or other benefits in connection with the
acquisition or disposition.
(iv) During his or her lifetime, a Participant's Purchase Right
is exercisable only by the Participant.
(v) Purchase Rights will in all respects be subject to the terms
and conditions of this Plan, as interpreted by the Administrator from
time to time.
8. Purchase of Shares.
(a) Each then-outstanding Purchase Right shall be exercised
automatically on each Purchase Date, following addition to the Participant's
account of that day's Payroll deductions, to purchase the maximum number of full
shares of Common Stock at the applicable Purchase Price using the Participant's
accumulated Payroll deductions.
(b) The shares purchased upon exercise of a Purchase Right shall be
deemed to be transferred to the Participant on the Purchase Date.
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9. Registration and Delivery of Share Certificates.
(a) Shares purchased by a Participant under this Plan will be registered
in the name of the Participant, or in the name of the Participant and his or her
spouse, or in the name of the Participant and joint tenant(s) (with right of
survivorship), as designated by the Participant.
(b) As soon as administratively feasible after each Purchase Date, the
Company shall deliver to the Participant a certificate representing the shares
purchased upon exercise of a Purchase Right. If approved by the Administrator in
its discretion, the Company may instead (i) deliver a certificate (or
equivalent) to a broker for crediting to the Participant's account or (ii) make
a notation in the Participant's favor of non-certificated shares on the
Company's stock records.
10. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all, but not less than all, the Payroll
deductions credited to his or her account under this Plan before a Purchase Date
by giving written notice to the Administrator, in a form the Administrator
prescribes from time to time, at least 15 days before the Purchase Date. Payroll
deductions will then cease as to the Participant, no purchase of shares will be
made for the Participant on the Purchase Date, and all Payroll deductions then
credited to the Participant's account will be refunded promptly.
(b) Upon termination of a Participant's Continuous Employment for any
reason, including retirement or death, all Payroll deductions credited to the
Participant's account will be promptly refunded to the Participant or, in the
case of death, to the person or persons entitled thereto under Section 14, and
the Participant's Purchase Right will automatically terminate.
(c) A Participant's withdrawal from an offering will not affect the
Participant's eligibility to participate in a succeeding offering or in any
similar plan that may be adopted by the Company.
11. Use of Funds; No Interest.
Amounts withheld from Participants under this Plan shall constitute
general funds of the Company, may be used for any corporate purpose, and need
not be segregated from other funds. No interest shall accrue on a Participant's
Payroll deductions.
12. Number of Shares Reserved.
(a) The following numbers of shares of Common Stock are reserved for
issuance under this Plan, and such number may be issued at any time before
termination of this Plan:
(i) Beginning the date of approval of this Plan by the
stockholders of the Company, 200,000 shares of Common Stock; and
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(ii) Beginning the first business day of each fiscal year
starting October 1, 2001 or after, the lesser of an additional (A)
200,000 shares of Common Stock, (B) 0.75% of the outstanding shares of
capital stock on such date, or (C) an amount determined by the Board.
(b) If the total number of shares that would otherwise be subject to
Purchase Rights granted on an Offering Date exceeds the number of shares then
available under this Plan (after deduction of all shares for which Purchase
Rights have been exercised or are then exercisable), the Administrator shall
make a pro-rata allocation of the available shares in a manner that it
determines to be as uniform and equitable as practicable. In such event, the
Administrator shall give written notice of the reduction and allocation to each
Participant.
(c) The Administrator may, in its discretion, transfer shares reserved
for issuance under this Plan into a plan or plans of similar terms, as approved
by the Board, providing for the purchase of shares of Common Stock to employees
of Subsidiaries designated by the Board that do not (or do not thereafter)
participate in this Plan. Such additional plans may, without limitation, provide
for variances from the terms of this Plan to take into account special
circumstances (such as foreign legal restrictions) affecting the employees of
the designated Subsidiaries.
13. Administration.
This Plan shall be administered by the Board or by such directors,
officers, and employees of the Company as the Board may select from time to time
(the "Administrator"). All costs and expenses incurred in administering this
Plan shall be paid by the Company, provided that any taxes applicable to an
Employee's participation in this Plan may be charged to the Employee by the
Company. The Administrator may make such rules and regulations as it deems
necessary to administer this Plan and to interpret any provision of this Plan.
Any determination, decision, or action of the Administrator in connection with
the construction, interpretation, administration, or application of this Plan or
any right granted under this Plan shall be final, conclusive, and binding upon
all persons, and no member of the Administrator shall be liable for any such
determination, decision, or action made in good faith.
14. Designation of Beneficiary.
(a) A Participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the Participant's account under
this Plan in the event of the Participant's death.
(b) A designation of beneficiary may be changed by the Participant 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 this Plan who is living at
the time of the Participant's death, the Administrator shall deliver such shares
and/or cash to the executor or administrator of the Participant's estate, or if
no such executor or administrator has been appointed (to the Administrator's
knowledge), the 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
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spouse, dependent, or relative is known to the Administrator, then to such other
person as the Administrator may designate.
15. Transferability.
Neither Payroll deductions credited to a Participant's account nor any
rights with regard to the exercise of a Purchase Right or to receive shares
under this 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) by the Participant. Any such attempt at assignment,
transfer, pledge, or other disposition shall be without effect, except that the
Administrator may treat such act as an election to withdraw funds in accordance
with Section 10.
16. Reports.
Individual accounts will be maintained for each Participant in this
Plan. Statements of account will be given to participating Employees promptly
following each Purchase Date, setting forth the amounts of Payroll deductions,
per-share purchase price, number of shares purchased, and remaining cash
balance, if any.
17. Adjustments upon Changes in Capitalization.
(a) Subject to any required action by the stockholders of the Company,
the number of shares of Common Stock covered by each unexercised Purchase Right
and the number of shares of Common Stock authorized for issuance under this Plan
but not yet placed under a Purchase Right (collectively, the "Reserves"), as
well as the price per share of Common Stock covered by each unexercised Purchase
Right, shall be proportionately adjusted for any change 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 change in
the number of shares of Common Stock effected without receipt of consideration
by the Company (not counting shares issued upon conversion of convertible
securities of the Company as "effected without receipt of consideration"). Such
adjustment shall made by the Board and 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 consequent adjustment shall be made with respect to, the number
or price of shares of Common Stock subject to a Purchase Right.
(b) In the event of the proposed dissolution or liquidation of the
Company, the then-current Offering Period will terminate immediately before the
consummation of the proposed action, unless otherwise provided by the Board. In
the event of a proposed sale of all or substantially all of the Company's
assets, or the merger of the Company with or into another corporation (if the
Company's stockholders own less than 50% of the total outstanding voting power
in the surviving entity or a parent of the surviving entity after the merger),
each Purchase Right under this Plan shall be assumed or an equivalent purchase
right shall be substituted by the successor corporation or a parent or
subsidiary of the successor corporation, unless the successor corporation does
not agree to assume the Purchase Rights or to substitute equivalent purchase
rights, in which case the Board may, in lieu of such assumption or substitution,
accelerate the
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exercisability of Purchase Rights and allow Purchase Rights to be exercisable as
to shares as to which they would not otherwise be exercisable, on terms and for
a period that the Board determines in its discretion. To the extent that the
Board accelerates exercisability of Purchase Rights as described above, it shall
promptly so notify all Participants in writing.
(c) The Board may, in its discretion, also make provision for adjusting
the Reserves, as well as the price per share of Common Stock covered by each
outstanding Purchase Right, if the Company effects one or more reorganizations,
recapitalizations, rights offerings, or other increases or reductions of shares
of its outstanding Common Stock, or if the Company consolidates with or merges
into any other corporation, in a transaction not otherwise covered by this
Section 17.
18. Amendment or Termination.
(a) The Board may at any time terminate or amend this Plan. No amendment
may be made without prior approval of the stockholders of the Company (obtained
in the manner described in Section 20) if it would increase the number of shares
that may be issued under this Plan.
(b) The Board may elect to terminate any or all outstanding Purchase
Rights at any time, except to the extent that exercisability of such Purchase
Rights has been accelerated pursuant to Section 17(b). If this Plan is
terminated, the Board may also elect to terminate Purchase Rights upon
completion of the purchase of shares on the next Purchase Date or to permit
Purchase Rights to expire in accordance with their terms (with participation to
continue through such expiration dates). If Purchase Rights are terminated
before expiration, any funds contributed to this Plan that have not been used to
purchase shares shall be refunded to Participants as soon as administratively
feasible.
19. Notices.
All notices or other communications by a Participant to the Company or
the Administrator under or in connection with this Plan shall be deemed to have
been duly given when received in the form specified by the Administrator at the
location, or by the person, designated by the Administrator for that purpose.
20. Stockholder Approval.
This Plan shall be submitted to the stockholders of the Company for
their approval within 12 months after the date this Plan is adopted by the
Board.
21. Conditions upon Issuance of Shares.
(a) Shares shall not be issued with respect to a Purchase Right unless
the exercise of such Purchase Right and the issuance and delivery of such shares
pursuant thereto complies with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the rules and
7
<PAGE> 8
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.
(b) As a condition to the exercise of a Purchase Right, the Company may
require the person exercising such Purchase Right to represent and warrant at
the time of any such exercise that the shares are being purchased only for
investment and without any present intention to sell or distribute such shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned applicable provisions of law.
22. Term of Plan.
This Plan shall become effective upon the earlier of its adoption by the
Board or its approval by the stockholders of the Company as described in Section
20. It shall continue in effect for a term of 20 years unless sooner terminated
under Section 18.
23. Glossary. The following definitions apply for purposes of this Plan:
(a) "Administrator" means the Board or the persons appointed by the
Board to administer this Plan pursuant to Section 13.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" means the Common Stock of the Company.
(e) "Company" means Virage Logic Corporation, a Delaware corporation.
(f) "Continuous Employment" means the absence of any interruption or
termination of service as an Employee. Continuous Employment shall not be
considered interrupted in the case of a leave of absence agreed to in writing by
the Company, provided that either (i) the leave does not exceed 90 days or (ii)
re-employment upon expiration of the leave is guaranteed by contract or statute.
(g) "Designated Subsidiaries" means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion to participate
in this Plan.
(h) "Employee" means any person, including an officer, who is
customarily employed for at least 20 hours per week and five months per year by
the Company or one of its Designated Subsidiaries. Whether an individual
qualifies as an Employee shall be determined by the Administrator, in its sole
discretion, by reference to Section 3401(c) of the Code and the regulations
promulgated thereunder; unless the Administrator makes a contrary determination,
the Employees of the Company shall, for all purposes of this Plan, be those
individuals who satisfy the customary employment criteria set forth above and
are carried as employees by the Company or a Designated Subsidiary for regular
payroll purposes.
8
<PAGE> 9
(i) "Offering Date" means the first business day of an Offering Period.
(k) "Offering Period" means a period established by the Administrator
pursuant to Section 4 during which Payroll deductions are accumulated from
Participants and applied to the purchase of Common Stock.
(l) "Participant" means an Employee who has elected to participate in
this Plan pursuant to Section 5.
(m) "Payroll" means all regular, straight-time gross earnings, exclusive
of payments for overtime, shift premium, incentive compensation or payments,
bonuses, and commissions.
(m) "Plan" means this Virage Logic Corporation 2000 Employee Stock
Purchase Plan.
(n) "Purchase Date" means the March 31 or September 30 that occurs
during an Offering Period.
(o) "Purchase Right" means a right to purchase Common Stock granted
pursuant to Section 7.
(p) "Subsidiary" means, from time to time, any corporation, domestic or
foreign, of which not less than 50% of the voting shares are held by the Company
or another Subsidiary of the Company.
9
<PAGE> 1
EXHIBIT 10.4
VIRAGE
LOGIC
VIRAGE LOGIC CORPORATION
FY2000 EXECUTIVE
VARIABLE INCENTIVE PAY PLAN
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1: POLICIES & PRACTICES................................................. 1
Purpose.............................................................. 1
Previous Plans....................................................... 1
Eligibility Scope.................................................... 1
Participation Targets................................................ 1
Enrollment........................................................... 2
New Hires............................................................ 2
Internal Transfers................................................... 2
Promotion Outside Focal.............................................. 2
Plan Metrics......................................................... 2
Plan Changes......................................................... 2
Reorganizations...................................................... 2
Payment Cycles....................................................... 3
VIP Calculations..................................................... 3
Terminations- Voluntary and Involuntary.............................. 3
Leaves of Absence-Medical/Family/Personal/Sabbatical................. 4
Communication........................................................ 4
Exceptions........................................................... 4
Plan Amendments...................................................... 4
Roles................................................................ 4
Section 2: Variable Incentive Pay Plans......................................... 5
Appendix "A"......................................................... 5
VIP Enrollment Sheet................................................. 7
</TABLE>
-i-
<PAGE> 3
SECTION 1: POLICIES & PRACTICES
PURPOSE
To enhance shareholder value by promoting strong linkages between
employee contributions and company performance.
To provide a variable pay plan that directly supports the achievement of
company annual business objectives.
PREVIOUS PLANS
Virage Logic Variable Incentive Pay Plan in effect prior to the FY2000
plan does not apply to results achieved in FY2000.
ELIGIBILITY SCOPE
The following exempt job types with pay grades equal to or higher than
E08 are eligible to participate in the FY2000 Wage Logic Variable Incentive Pay
Plan:
E09 President, VIP's
E08 Directors
Participants may NOT be enrolled in more than one plan at a time.
Participants must be employed as of the plan payout date with a
performance rating of New in Job, Consistently Meets Peer Performance, or
Consistently Exceeds Peer Performance to be eligible for payout. Employees on
Performance Improvement Plans as of the plan payout date are not eligible for
VIP payout.
- State and Federal taxes are withheld at the supplemental rate
- 401(k) contributions are deducted, if applicable.
PARTICIPATION TARGETS
<TABLE>
<CAPTION>
PAY LEVEL PERCENT OF BASE PAY REQUIRE/OPTIONAL
--------- ------------------- ----------------
<S> <C> <C>
E08 15% Required
E09 25% Required
</TABLE>
<PAGE> 4
ENROLLMENT
Annual enrollment is completed at the beginning of the Fiscal Plan year.
If there is no enrollment sheet on file with Corporate Compensation for the
FY2000 plan, no portion of the variable component will be paid for FY2M
performance.
All new VIP participants as of the Focal will be enrolled effective
April 1, 1999. An enrollment sheet for new participants must be completed and
forwarded to compensation within 30 days of the Focal effective date.
Any increase in participation level at Focal will be effective April 1,
1999 and does not require a new enrollment form.
NEW HIRES
New employees with VIP participation as part of the hire offer will be
eligible effective the first of the month following effective date of hire. An
enrollment sheet must be completed and forwarded to compensation within 30 days
of the hire date.
INTERNAL TRANSFERS
Not-applicable
PROMOTION OUTSIDE FOCAL
When promoted from a non-eligible pay level to a pay level eligible for
VIP, VIP (if elected by the manager when optional) is effective the first of the
month following the promotion effective date. A new enrollment sheet must be
completed and forwarded to compensation within 30 days of the promotion date.
PLAN METRICS
All annual VIP targets are set by executive management, and are subject
to change during the plan year.
PLAN CHANGES
In the event of a material change to an existing plan (to be determined
by the Corporate Compensation Committee), the plan administrator will coordinate
distribution of new plans and enrollment forms to the affected participants.
REORGANIZATIONS
The Corporate Compensation Committee will make the final decision
regarding plain champs due to reorganizations.
2
<PAGE> 5
PAYMENT CYCLES
Annual VIP payouts are paid by October 31st following the end of the
fiscal plan year.
VIP CALCULATIONS
VIP payouts are calculated based on individual target dollars and
achievement of plan objectives. Individual target dollars are determined on an
ongoing basis throughout the plan year. If individual base pay or VIP percentage
changes, target dollars change. The VIP Plan is intended to recognize group
performance. Individual payouts are non-discretionary below E09 (or equivalent)
pay grade.
Calculation Example:
<TABLE>
<CAPTION>
Base VIP
Date Action Target Pay Percentage Calculation Dollars
<S> <C> <C> <C> <C> <C> <C>
October I Plan Year Begins 100.000 15% 15,000 - 12 3,750
mo. X 3 mo.
April I Focal Pay Change 105,000 15% 15,750 - 12 7.875
mo. X 6 mo.
July I Promotion 130.0"00 25 10,833 - 12 2,708
mo. X 3 Mo.
Total Annual Target Dollars 14,333
</TABLE>
(CERTAIN ONE-TIME CHARGES; MAY BE EXCLUDED. THE UNPLANNED FINANCIAL
IMPACTS OF ACQUISITIONS AND DIVESTITURES WILL NOT BE INCLUDED FOR THE YEW IN
WHICH THEY WERE ACQUIRED. THE BOARD OF DIRECTORS WILL REVIEW YEAR-END RESULTS TO
ENSURE CONSISTENCY WITH BUSINESS EXPECTATIONS. THE CORPORATE COMPENSATION
COMMITTEE WILL REVIEW PAYOUTS ON AN ANNUAL BASIS).
TERMINATIONS-VOLUNTARY AND INVOLUNTARY
To be eligible for payout under any FY2000 VIP plan, the participant
must be a Virage Logic employee, or an employee of a subsidiary or branch office
of Virage Logic Corporation as of the payout date.
3
<PAGE> 6
In the event of an employee's death, participation in any VIP plan will
continue for 30 days following the date of death, or the end of the plan year,
whichever occurs first. Earned prorated VIP payments will be paid to the
employee's estate after the end of the plan year according to the standard
payout schedule.
LEAVES OF ABSENCE-MEDICAL/FAMILY/PERSONAL/SABBATICAL
Before a personal leave begins, employees must use all accrued PTO hours
until depleted. Once PTO hours are depleted, employees will be placed on an
unpaid leave status. VIP payout calculations will include time charged to PTO.
VIP Payouts for employees with leaves of absence less than or equal 90 days
during FY2000 will not be prorated to exclude the leave of absence.
VIP payouts for employees with unpaid leaves of absence over 90 days in
duration during FY2000 will be prorated to exclude the entire leave of absence.
COMMUNICATION
VIP plan participation is communicated to participants by HR and the
employees' manager at the beginning of the Plan year. Performance objectives are
communicated to participants by the CFO and the Departmental Managers with
approval of the CFO, as soon as the annual targets are finalized. The CFO on a
quarterly basis communicates updates on progress toward objectives to
participants.
EXCEPTIONS
Unique situations that were not anticipated in this document may require
an adjustment to variable compensation. The Corporate Compensation Committee
must approve all exceptions.
PLAN AMENDMENTS
This plan reflects company structure at time of plan approval. Virage
Logic reserves the right to amend this plan at any time with reasonable notice.
ROLES
<TABLE>
<CAPTION>
CORPORATE COMPENSATION COMMITTEE PLAN ADMINISTRATOR
-------------------------------- ------------------
<S> <C>
Adarn KabLanian Renae Hogan
Alex Shubat
James R. Pekarsky
</TABLE>
4
<PAGE> 7
SECTION 2: VARIABLE INCENTIVE PAY PLANS
<TABLE>
<S> <C>
Plan Type: 50% Revenue / 50% Operating Profit
Plan Number: 1001
Plan Purpose: The purpose of the Virage Logic VIP plan is to link employee
contributions and company performance.
FY2000 Eligibility: Employees in Pay Grades E08 - E09
Plan Metric: Payout will be determined on achievement of
corporate performance as measured by FY2000 planned
revenue and pre-tax Income for the year. Operating
Profit Dollars will be adjusted for unusual accounting
items as directed by the Board of Directors.
Revenue Payout Table: Payout is based on the following table. Performance and payout above
Plan is capped at 2X. The payout is interpolated; payout will be
rounded to the nearest whole percent. Individual quarterly payments
will be calculated as follows: (employee's salary paid during the
quarter X employees' VIP percentage X payout %).
</TABLE>
<TABLE>
<CAPTION>
*Plan Is Capped at 2X payout
------------------------------------------------------------------------
Qtr. Revenue Targets ($M)
Revenue as a
% of Plan Q1'00 Q2'00 Q3'00 Q4'00 YTD Payout %
-------------- ------- -------- -------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
130% 6.7 6.5 7.2 7.9 27.3 200%
124% 5.5 6.2 6.8 7.6 26.0 180%
118% 5.2 5.9 6.5 7.2 24.8 160%
112% 4.9 5.6 6.2 6.8 23.5 140%
106% 4.7 5.3 5.8 6.5 22.3 120%
100% 4.4 5.0 5.5 6.1 21.0 100%
98% 4.3 4.9 5.4 6.0 20.6 67%
94% 4.1 4.7 5.2 5.7 19.7 33%
89% 3.9 4.5 4.9 5.4 18.7 20%
85% 3.7 4.3 4.7 5.2 17.9 15%
80% 3.5 4.0 4.4 4.9 16.8 10%
<80% 0%
</TABLE>
<TABLE>
<S> <C>
Operating Profit Payout is based on the following table. Performance and payout above
Payout Table: Plan is capped at 2X. The payout is interpolated; payout will be
rounded to the nearest whole percent. Individual quarterly payments
will be calculated as follows: (employee's salary paid during the
quarter X employees' VIP percentage X payout %).
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
PLAN IS CAPPED AT 2X PAYOUT
------------------------------------------------------------------------
QTR. PROFIT TARGETS ($M)
OPERATING PROFIT AS
A % OF PLAN Q1'00 Q2'00 Q3'00 Q4'00 YTD PAYOUT %
--------------------- ------- ------- ------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
200% 0.6 0.8 1.2 2.2 4.8 200%
190% 0.6 0.8 1.1 2.1 4.6 190%
180% 0.5 0.7 1.1 2.0 4.3 180%
170% 0.5 0.7 1.0 1.9 4.1 170%
160% 0.5 0.6 1.0 1.8 3.8 160%
150% 0.5 0.6 0.9 1.7 3.6 160%
140% 0.4 0.6 0.8 1.5 3.4 140%
130% 0.4 0.5 0.8 1.4 3.1 130%
120% 0.4 0.6 0.7 1.3 2.9 120%
110% 0.3 0.4 0.7 1.2 2.6 110%
100% 0.3 0.4 0.6 1.1 2.4 100%
98% 0.3 0.4 0.6 1.1 2.3 67%
94% 0.3 0.4 0.6 1.0 Z2 33%
85% 0.3 0.4 0.5 1.0 2.1 20%
80% 0.3 0.3 0.5 0.9 2.0 15%
80% 0.2 0.3 0.5 0.9 1.9 10%
0%
</TABLE>
<TABLE>
<S> <C>
Special Note: The minimum operating profit % (excluding extraordinary charges) must
be met first to qualify for the revenue accelerator otherwise the
revenue payout caps at 100%. There will be no VIP payout if the
company incurs an operating pre-tax loss for FY2000.
</TABLE>
6
<PAGE> 1
EXHIBIT 10.5
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") is effective as of the
___ day of __________ ____, by and between Virage Logic Corporation., a Delaware
corporation (the "Company"), and _______________, an individual ("Indemnitee").
BACKGROUND
A. Indemnitee is [an officer and] a member of the Board of Directors of
the Company and, in that capacity, performs a valuable service for the Company.
For a variety of reasons, including the frequency, magnitude and often baseless
nature of claims and actions brought against corporate directors and officers
generally, it is difficult for corporations to attract and retain highly
competent persons as directors and officers. In addition, there exists
uncertainty, both as to matters of "substance" and "procedure," about the
protection against such claims provided by statutory, charter and bylaw
provisions and through "director and officer" insurance.
B. The Company's Certificate of Incorporation also provides for
indemnification of, and advancement of expenses to, the directors and officers
of the Company to the maximum extent authorized by the Delaware General
Corporation Law, as amended (the "DGCL"), and, together with the DGCL, permits,
by its nonexclusive nature, the establishment of indemnification agreements
between the Company and its directors and officers.
C. In order to induce Indemnitee to continue to serve as [an officer
and] a member of the Board of Directors and to clarify the specific procedure
for addressing indemnification matters if and as they arise, the Company and the
Indemnitee hereby agree to contractual indemnification arrangements on the terms
set forth in this Agreement.
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS. For purposes of this Agreement, the following terms have
the following meanings:
a. "Agent" means any person (i) who is or was a director,
officer, employee or other agent of the Company or (ii) who is or was serving at
the request of the Company, or otherwise as a result of that person's
relationship with the Company, as a director, officer, employee or other agent
of another foreign or domestic corporation or of any partnership, joint venture,
trust or other enterprise (including, without limitation, service with respect
to employee benefit plans).
b. "Change in Control" shall be deemed to have occurred if
(i) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended), other than a trustee or other
fiduciary holding securities under an
<PAGE> 2
employee benefit plan of the Company or a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, becomes the "beneficial
owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of
securities of the Company representing 20% or more of the total voting power
represented by the Company's then outstanding Voting Securities, or (ii) during
any period of two consecutive years, individuals who at the beginning of such
period constitute the Board of Directors of the Company and any new director
whose election by the Board of Directors or nomination for election by the
Company's stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the beginning of
the period or whose election or nomination for election was previously so
approved, cease for any reason to constitute a majority thereof, or (iii) the
stockholders of the Company approve a merger or consolidation of the Company
with any other corporation, other than a merger or consolidation which would
result in the Voting Securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into Voting Securities of the surviving entity) at least 80% of the
total voting power represented by the Voting Securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
the stockholders of the Company approve a plan of complete liquidation of the
Company or an agreement for the sale or disposition by the Company (in one
transaction or a series of transactions) of all or substantially all of the
Company's assets.
c. "Disinterested Director" means a director of the
Company who neither is nor was a party to the Proceeding in respect of which
indemnification is sought under this Agreement or otherwise.
d. "Expenses" includes any and all direct and indirect
costs (including, without limitation, attorneys' fees and disbursements, court
costs, fees and expenses of witnesses, experts, professional advisers and
private investigators, arbitration expenses, costs of attachment, appeal or
similar bonds, travel expenses, duplicating, printing and binding costs,
telephone charges, postage, delivery service fees, and any and all other
disbursements or out-of-pocket expenses) actually and reasonably incurred by or
on behalf of Indemnitee in connection with either (i) the investigation,
defense, settlement or appeal of, or being a witness or participant in, a
Proceeding (including preparing for any of the foregoing) or (ii) the
establishment or enforcement of any right to indemnification under this
Agreement or otherwise or any right to recovery under any liability insurance
policy maintained by the Company; provided, however, that "Expenses" shall not
include any judgments, fines or amounts paid in settlement.
e. "Independent Counsel" means a law firm or attorney that
neither is presently nor in the past two years has been retained to represent:
(i) the Company or Indemnitee in any matter material to the Company or
Indemnitee, or (ii) any other party to the Proceeding in respect of which
indemnification is sought under this Agreement or
2
<PAGE> 3
otherwise. In addition, the term "Independent Counsel" does not include any law
firm or attorney who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the
Company or Indemnitee in an action to determine Indemnitee's right to
indemnification under this Agreement or otherwise.
f. "Liabilities" means liabilities and losses of any type
whatsoever, including, without limitation, judgments, fines, excise taxes and
penalties (including, without limitation, ERISA excise taxes and penalties) and
amounts paid in settlement (including all interest, assessments and other
charges paid or payable in connection with or in respect of such liabilities and
losses), actually incurred by Indemnitee in connection with or as a result of a
Proceeding.
g. "Potential Change in Control" shall be deemed to have
occurred if (i) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control; (ii) any person
(including the Company) publicly announces an intention to take or to consider
taking actions which, if consummated, would constitute a Change in Control;
(iii) any person, other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or a corporation owned, directly
or indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company, who is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 9.5% or more of the combined voting power of the Company's then
outstanding Voting Securities, increases such person's beneficial ownership of
such securities by five percentage points or more over the initial percentage of
such securities; or (iv) the Board of Directors of the Company adopts a
resolution to the effect that, for purposes of this Agreement, a Potential
Change in Control has occurred.
h. "Proceeding" means any threatened, pending or completed
action, suit or proceeding (including any inquiry, hearing, arbitration
proceeding or alternative dispute resolution mechanism), whether civil,
criminal, administrative or investigative (including any action by or in the
right of the Company), to which Indemnitee is or was a party, witness or other
participant, or is threatened to be made a party, witness or other participant,
by reason of the fact that Indemnitee is or was an Agent, or by reason of
anything done or not done by Indemnitee in that capacity or in any other
capacity while serving as an Agent, whether before or after the date of this
Agreement. "Proceeding" shall not include any Proceeding initiated by Indemnitee
(other than as contemplated by Sections 3(d) or 6 of this Agreement) unless such
Proceeding was authorized or consented to by the Board of Directors of the
Company.
i. "Voting Securities" means any securities of the Company
which vote generally in the election of directors.
3
<PAGE> 4
2. AGREEMENT TO INDEMNIFY. Subject to the terms and conditions of, and
in accordance with the procedures set forth in, this Agreement, the Company
shall hold Indemnitee harmless and indemnify Indemnitee (and Indemnitee's spouse
as provided below), to the fullest extent permitted by the provisions of the
DGCL and other applicable law, from and against all Expenses and Liabilities,
including, without limitation, Expenses and Liabilities arising from any
Proceeding brought by or in the right of the Company or its stockholders. The
Company and Indemnitee intend that this Agreement provide for indemnification in
excess of that expressly required, granted or permitted by statute, including,
without limitation, any indemnification provided by the Company's Certificate of
Incorporation or Bylaws, or by vote of its stockholders or directors, or by
applicable law. If, after the date hereof, the DGCL or any other applicable law
is amended to permit or authorize indemnification of, or advancement of defense
expenses to, Indemnitee to a greater extent than is permitted on the date
hereof, references in this Agreement to the DGCL or any other applicable law
shall be deemed to refer to the DGCL or such applicable law as so amended.
3. PROCEDURAL MATTERS.
a. INITIAL REQUEST. Whenever Indemnitee believes that, in a
specific case, Indemnitee is then entitled to indemnification under this
Agreement or under the Company's Certificate of Incorporation or Bylaws, the
DGCL or otherwise, Indemnitee shall submit a written notice to the Company
requesting an authorization and determination by the Company to that effect. The
notice shall describe the matter giving rise to the request and be accompanied
by all appropriate supporting documentation reasonably available to Indemnitee.
b. DETERMINATION AND PAYMENT. The Company shall make a
determination about Indemnitee's entitlement to indemnification in the specific
case no later than 90 days after receipt of Indemnitee's request. In making that
determination, the person or persons making the determination shall presume that
Indemnitee met any applicable standard of conduct required for indemnification,
unless the Company shall have affirmatively shown by clear and convincing
evidence that Indemnitee did not meet that standard. The determination shall be
made by the Board of Directors by a majority vote of a quorum consisting of
Disinterested Directors. If such a quorum is not obtainable, or, even if
obtainable, a quorum of Disinterested Directors so directs, the determination
shall be made by Independent Counsel in a written opinion obtained at the
Company's expense. Notwithstanding the foregoing, if there has been a Change in
Control (other than a Change in Control which has been approved by a majority of
the Company's Board of Directors who were directors immediately prior to such
Change in Control), the determination shall be made by Independent Counsel in a
written opinion obtained at the Company's expense. If the person or persons
empowered to make the determination either: (i) affirmatively makes a
determination of Indemnitee's entitlement to indemnification or (ii) fails to
make any determination at all within the 90-day period,
4
<PAGE> 5
indemnification shall be considered as authorized and proper in the
circumstances, and Indemnitee shall be absolutely entitled to such
indemnification, and shall receive payment as promptly as practicable, in the
absence of any misrepresentation of a material fact by Indemnitee in the request
for indemnification, or a specific determination by a court of competent
jurisdiction that all or any part of such indemnification is prohibited by
applicable law. If the person or persons empowered to make the determination
find that the Indemnitee is not entitled to indemnification, the Indemnitee
shall have the right to apply to a court of competent jurisdiction for the
purpose of enforcing Indemnitee's right to indemnification pursuant to this
Agreement. The termination of any Proceeding by judgment, order, settlement,
arbitration award, conviction or upon a plea of nolo contendere or its
equivalent shall not, of itself, create a presumption that Indemnitee did not
act in good faith and in a manner which Indemnitee reasonably believed to be in
or not opposed to the best interests of the Company, or that, with respect to
any criminal Proceeding, Indemnitee had reasonable cause to believe Indemnitee's
conduct was unlawful.
c. ADVANCEMENT OF EXPENSES. If so requested in a writing by
Indemnitee accompanied by appropriate supporting documentation, the Company
shall, within ten days after receipt of the request, advance funds for the
payment of Expenses, whether that request is made before or after the final
disposition of a Proceeding (including, without limitation, any criminal
Proceeding or any Proceeding brought by or in the right of the Company or its
stockholders), unless there has been a final determination that Indemnitee is
not entitled to indemnification for those Expenses. If required by law at the
time of the advance, the payment of the advance shall be conditioned upon the
receipt from Indemnitee of an undertaking (which need not be secured) to repay
the advance to the extent that it is ultimately determined that Indemnitee is
not entitled to such indemnification by the Company. Any dispute concerning the
advancement of Expenses may, at the election of the Indemnitee, be resolved by
arbitration before an arbitrator selected by Indemnitee and approved by the
Company. If the parties cannot agree on a single arbitrator, then the claim
shall be heard by a panel of three arbitrators, with one selected by Indemnitee,
one selected by the Company and one selected jointly by the foregoing two
arbitrators. Each of the arbitrators shall be a litigation or corporate attorney
with experience in the field of officer and director indemnification. The
arbitrators shall be selected within (15) days after demand for arbitration and
shall render a decision within (45) days after selection, unless good cause is
shown for requiring a longer decision period. The Company shall act in utmost
good faith to provide timely information to the arbitrators and to ensure
Indemnitee a full opportunity to defend against the Company's claim that
Indemnitee is not entitled to an advance of Expenses. The Company shall
indemnify Indemnitee against all Expenses incurred by Indemnitee under the
dispute resolutions proceedings set forth in this Subsection 3(c), unless a
court of competent jurisdiction finds that each of the claims and/or defenses by
Indemnitee in the action or proceeding for which an advance is sought was
frivolous or made in bad faith.
5
<PAGE> 6
d. ENFORCEMENT. If Indemnitee has not received a determination of
entitlement to indemnification or an advance, as the case may be, within the
applicable time periods for such actions specified in this Agreement, or if it
has been determined that Indemnitee substantively would not be permitted to be
indemnified in whole or in part under applicable law, Indemnitee shall be
entitled to commence an action in any court of competent jurisdiction (including
the court in which the Proceeding (as to which Indemnitee seeks indemnification)
is or was pending) (i) in the former case, seeking enforcement of Indemnitee's
rights under this Agreement or otherwise, or seeking an initial determination by
the court, or (ii) in the latter case, challenging any such determination or any
aspect thereof, including the legal or factual bases therefor. The Company
hereby consents to service of process and to appear generally in any such
proceeding. It shall be a defense to any such action that applicable law does
not permit the Company to indemnify Indemnitee for the amount claimed. In any
such action, the Company shall have the burden of proving that indemnification
or advances are not proper in the circumstances of the specific case. Neither
the failure of the Company to have made a determination prior to the
commencement of such action that indemnification is proper under the
circumstances because Indemnitee has met the standard of conduct under
applicable law, nor an actual determination by the Company that Indemnitee has
not met such standard of conduct, shall be a defense to the action or create a
presumption that Indemnitee has not met that standard of conduct. The Company
shall indemnify Indemnitee for Expenses incurred by Indemnitee in connection
with the successful establishment or enforcement, in whole or in part, by
Indemnitee of Indemnitee's right to indemnification or advances.
e. NOTICE BY INDEMNITEE AND DEFENSE OF PROCEEDINGS. Indemnitee
shall promptly notify the Company in writing upon being served with any summons,
citation, subpoena, complaint, indictment, information or other document
relating to any matter which may give rise to a claim for indemnification under
this Agreement or otherwise; provided, however, that a failure of Indemnitee to
provide that notice shall relieve the Company from liability only if and to the
extent that the failure materially prejudices the Company's ability to
adequately defend Indemnitee in the Proceeding. With respect to any Proceeding
as to which Indemnitee so notifies the Company:
i. The Company shall be entitled to participate at its own
expense.
ii. Except as otherwise provided below, the Company,
jointly with any other indemnifying party similarly notified, shall be entitled
to assume the defense of such Proceeding, with counsel reasonably satisfactory
to Indemnitee. After notice from the Company to Indemnitee of the Company's
election to assume the defense, the Company shall not be liable to Indemnitee
under this Agreement for any Expenses subsequently incurred by Indemnitee, other
than as provided below. Indemnitee shall have the right to employ
6
<PAGE> 7
Indemnitee's own counsel in that Proceeding, but the fees and expenses of such
counsel incurred after notice from the Company of its election so to assume the
defense shall be borne by Indemnitee, except to the extent that (x) the
employment of counsel by Indemnitee has been authorized by the Company, (y)
Indemnitee has reasonably concluded that there may be a conflict of interest
between the Company and Indemnitee in the conduct of the defense of such
Proceeding or that counsel selected by the Company may not be adequately
representing Indemnitee, or (z) the Company has not in fact employed counsel to
assume the defense of such Proceeding. In those cases, the fees and expenses of
Indemnitee's own counsel shall be paid by the Company.
iii. Neither the Company nor Indemnitee shall unreasonably
withhold its or his or her consent to any proposed settlement. The Company has
no obligation to indemnify and hold Indemnitee harmless under this Agreement for
any amounts paid in settlement of any Proceeding effected without its written
consent. The Company shall not settle any Proceeding in any manner which would
impose any penalty or limitation on Indemnitee without Indemnitee's written
consent.
f. CHANGE IN CONTROL. If there is a Change in Control (other than
a Change in Control which has been approved by a majority of the Company's Board
of Directors who were directors immediately prior to such Change in Control),
then with respect to all matters thereafter arising concerning the rights of
Indemnitee to indemnification and advances under this Agreement or otherwise,
the Company shall seek legal advice only from Independent Counsel selected by
Indemnitee and approved by the Company, which approval shall not be unreasonably
withheld. Such Independent Counsel, among other things, shall render its written
opinion to the Company and Indemnitee as to whether and to what extent
Indemnitee would be permitted to be indemnified under applicable law. The
Company shall pay the reasonable fees and expenses of such Independent Counsel.
4. NONEXCLUSIVITY. The indemnification provided by this Agreement is not
exclusive of or inconsistent with any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation or Bylaws, any other agreement,
any vote of stockholders or directors, the DGCL, or otherwise, both as to action
in Indemnitee's official capacity and otherwise. If and to the extent that a
change in the DGCL (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under the
Company's Certificate of Incorporation or Bylaws or under this Agreement, it is
the intent of the parties hereto that Indemnitee shall enjoy by this Agreement
the greater benefits so afforded by such change.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled to indemnification
by the Company for some or a portion of Expenses or Liabilities but not for the
total amount, the Company shall nevertheless indemnify Indemnitee for the
portion of such Expenses
7
<PAGE> 8
and Liabilities to which Indemnitee is entitled to be indemnified. Moreover,
notwithstanding any other provision of this Agreement, to the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
Proceeding or in defense of any claim, issue or matter therein, including
dismissal without prejudice, Indemnitee shall be indemnified against all
Expenses incurred by Indemnitee in connection therewith.
6. LIABILITY INSURANCE. To the extent the Company maintains an insurance
policy or policies providing directors' and officers' liability insurance,
Indemnitee shall be covered by such policy or policies, in accordance with its
or their terms, to the maximum extent of the coverage available for any Company
director or officer, as the case may be. If Indemnitee serves as a fiduciary of
any employee benefit plan of the Company or any of its subsidiary or affiliated
corporations, then to the extent that the Company maintains an insurance policy
or policies providing fiduciaries' liability insurance, Indemnitee shall be
covered by such policy or policies in accordance with its or their terms, to the
maximum extent of the coverage available for any fiduciary. In the event of a
Potential Change in Control, the Company shall maintain in force any and all
insurance policies then maintained by the Company providing directors' and
officers' liability insurance or fiduciaries' liability insurance, in respect of
Indemnitee, for a period of six years thereafter. Upon notice to the Company,
either from Indemnitee or from any other source, of the commencement or threat
of commencement of any Proceeding or matter which may give rise to a claim for
indemnification of Indemnitee and which may be covered by any insurance policy
maintained by the Company, the Company shall promptly give notice to the insurer
in accordance with the procedures prescribed by such policy and shall thereafter
take all necessary or appropriate action to cause such insurer to pay, to or on
behalf of Indemnitee all Liabilities and Expenses payable under such policy with
respect to such Proceeding or matter. The Company shall indemnify Indemnitee for
Expenses incurred by Indemnitee in connection with any successful action brought
by Indemnitee for recovery under any insurance policy referred to in this
Section 6 and shall advance to Indemnitee the Expenses of such action in the
manner provided in Section 3(c) above.
7. OTHER SOURCES. Indemnitee shall not be required to exercise any
rights Indemnitee may have against any other parties (for example, under an
insurance policy purchased by Indemnitee, the Company or any other person or
entity) before Indemnitee exercises or enforces Indemnitee's rights under this
Agreement. However, to the extent the Company actually indemnifies Indemnitee or
advances Indemnitee funds in respect of Expenses, the Company shall be entitled
to enforce any such rights which Indemnitee may have against third parties.
Indemnitee shall assist the Company in enforcing those rights if it pays
Indemnitee's costs and expenses of doing so. If Indemnitee is actually
indemnified or advanced Expenses by any such third party, then, for so long as
Indemnitee is not required to disgorge the amounts so received, to that extent
the Company shall be relieved of its obligation to indemnify Indemnitee or to
advance Expenses.
8
<PAGE> 9
8. CERTAIN RELATIONSHIPS. The obligations and rights created under this
Agreement shall not be affected by any amendment to the Company's Certificate of
Incorporation or Bylaws or any other agreement or instrument to which Indemnitee
is not a party, and shall not diminish any other rights which Indemnitee now or
in the future has against the Company or any other person or entity.
9. SEVERABILITY. If any provision of this Agreement is determined to be
unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the Company and Indemnitee. In any
event, the remaining provisions of this Agreement shall remain enforceable to
the maximum extent possible.
10. CONTRIBUTION. If the indemnification provided in Section 2 of this
Agreement is unavailable, then, in respect of any Proceeding in which the
Company is jointly liable with Indemnitee (or would be if joined in the
Proceeding), the Company shall contribute to the amount of Expenses and
Liabilities as appropriate to reflect: (i) the relative benefits received by the
Company, on the one hand, and Indemnitee, on the other hand, from the
transaction from which the Proceeding arose, and (ii) the relative fault of the
Company, on the one hand, and of Indemnitee, on the other, in connection with
the events which resulted in such Expenses and Liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company, on the one
hand, and of Indemnitee, on the other, shall be determined by reference to,
among other things, the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent the circumstances resulting in
such Expenses and Liabilities. The Company agrees that it would not be just and
equitable if contribution pursuant to this Section 10 were determined by pro
rata allocation or any other method of allocation which does not take account of
the equitable considerations described in this Section 10.
11. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state without giving effect to the
principles of conflicts of laws. This Agreement is intended to be an agreement
of the type contemplated by Section 145(f) of the DGCL.
12. NOTICES. All notices and other communications under this Agreement
shall be in writing and shall be given by personal or courier delivery,
confirmed facsimile or telex transmission or first class mail, and shall be
deemed to have been duly given upon receipt if personally delivered or delivered
by courier, on the date of transmission if transmitted by facsimile or telex, or
three days after mailing if mailed, to the addresses set forth below:
9
<PAGE> 10
If to Indemnitee:
---------------------
---------------------
---------------------
If to the Company:
Virage Logic Corporation
46501 Landing Park
Fremont, CA 94538
Attn: President
or to such other address as either party may designate by notice to the other
from time to time.
13. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
14. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's spouse, estate, heirs, executors, administrators,
personal or legal representatives and assigns. The Company shall require any
successor corporation (whether by merger, consolidation, or otherwise) by
written agreement in form and substance satisfactory to Indemnitee, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no such succession had
taken place.
15. AMENDMENT AND WAIVER. This Agreement may not be amended except by a
writing executed by both the Company and Indemnitee. No waiver of any provision
of this Agreement shall be effective unless in writing and signed by the party
to be charged therewith. A waiver of, or a failure to insist on, complete
compliance with any provision of this Agreement shall not be construed as a
waiver of a subsequent or different non-compliance, breach or default of that or
any other provision of this Agreement.
16. ACKNOWLEDGMENT. The Company expressly acknowledges that it has
entered into this Agreement and assumed the obligations imposed on the Company
under this Agreement in order to induce Indemnitee to serve or to continue to
serve as a director or officer and acknowledges that Indemnitee is relying on
this Agreement in serving or continuing to serve in such capacity. The Company
further agrees to stipulate in any court proceeding that the Company is bound by
all of the provisions of this Agreement.
17. PERIOD OF LIMITATIONS. No legal action shall be brought and no cause
of action shall be asserted by or in the right of the Company against
Indemnitee, estate, heirs, executors, administrators or personal or legal
representatives after the expiration of
10
<PAGE> 11
two years from the date of accrual of such cause of action, and any claim or
cause of action of the Company shall be extinguished and deemed released unless
asserted by the timely filing of a legal action within such two-year period;
provided, however, that if any shorter period of limitations is otherwise
applicable to any such cause of action, such shorter period shall govern.
18. DURATION OF AGREEMENT. This Agreement shall continue in effect for
so long as Indemnitee is subject to any possible Proceeding, regardless of
whether Indemnitee continues to serve as an Agent.
19. ENTIRE AGREEMENT. This document contains the final, complete and
exclusive statement of the agreement between the Company and Indemnitee with
respect to the subject matter of this Agreement and supersedes any prior or
contemporaneous understandings, agreements, communications, correspondence or
representations by or between the parties, whether written or oral, relating to
the subject matter of this Agreement.
11
<PAGE> 12
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date set forth in its first paragraph.
VIRAGE LOGIC CORPORATION
By:
----------------------------------------
Title:
-------------------------------------
-------------------------------------------
, Indemnitee
----------------
12
<PAGE> 1
EXHIBIT 10.6
SECURED FULL RECOURSE PROMISSORY NOTE
Milpitas, California
$[_________] August 27, 1997
1. OBLIGATION. In exchange for the issuance to the undersigned
("Purchaser") of [______] shares (the "Shares") of the Common Stock of Virage
Logic Corporation, a California corporation (the "Company"), receipt of which is
hereby acknowledged, Purchaser hereby promises to pay to the order of the
Company on or before August 27, 2002 at the Company's principal place of
business at 1641 A South Main Street, Milpitas, California 95035, or at such
other place as the Company may direct, the principal sum of
[______________________________] ($[__________]) together with interest
compounded semi-annually on the unpaid principal at the rate of Six and
Twenty-Nine Hundredths percent (6.29%).which rate is not less than the minimum
rate established pursuant to Section 1274(d) of the Internal Revenue Code of
1986, as amended, on the earliest date on which there was a binding contract in
writing for the purchase of the Shares; however that the rate at which interest
will accrue on unpaid principal under this Note will not exceed the highest rate
permitted by applicable law.
2. SECURITY. Payment of this Note is secured by a security interest in the
Shares granted to the Company by Purchaser under a Stock Pledge Agreement dated
of even date herewith between the Company and Purchaser (the "Pledge
Agreement"). This Note is being tendered by Purchaser to the Company as the
purchase price of the Sham pursuant to that certain Founder's Restricted Stock
Purchase Agreement between Purchaser and the Company dated of even date with
this Note (the "Purchase Agreement").
3. DEFAULT: ACCELERATION OF OBLIGATION. Purchaser will be deemed to be in
default under this Note and the principal sum of this Note, together with all
interest accrued thereon, will immediately become due and payable in full: (a)
upon Purchaser's failure to make any payment when due under this Note; (b) in
the event Purchaser ceases to be employed by the Company (as defined in the
Purchase Agreement) for any reason; (c) upon any transfer of any of the Shares
(other than transfers exempt from the Company's Right of First Refusal (as
defined in the Purchase Agreement) pursuant to Section 6(f) of the Purchase
Agreement); (d) upon the filing by or against Purchaser of any voluntary or
involuntary petition in bankruptcy or any petition for relief under the federal
bankruptcy code or any other state or federal law for the relief of debtors, or
(e) upon the execution by Purchaser of an assignment for the benefit of
creditors or the appointment of a receiver, custodian, trustee or similar party
to take possession of Purchaser's assets or property.
4. REMEDIES ON DEFAULT. Upon any default of Purchaser under this Note, the
Company will have, in addition to its rights and remedies under this Note and
the Pledge Agreement, full recourse against any real, personal, tangible or
intangible assets of Purchaser, and may pursue any legal or equitable remedies
that arc available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING PERIOD
SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE
<PAGE> 2
COMMISSION WELL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE
UNTIL EITHER (A) THE PURCHASE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY
OTHER PROPERTY ACCEPTED BY THE COMPANY, OR (B) TIES NOTE IS SECURED BY
COLLATERAL, OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH,
HAVING A FAIR MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN
OUTSTANDING OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or interest due under tins Note
may be made at any time without penalty. Unless otherwise agreed in writing by
the Company, all payments will be made in lawful tender of the United States and
will be applied first to the payment of accrued interest and the remaining
balance of such payment, if any, will then be applied to the payment of
principal. If Purchaser prepays all or a portion of the principal amount of this
Note, Purchaser intends that the Shares paid for by the portion of principal so
paid will continue to be held in pledge under the Pledge Agreement to serve as
independent collateral for the outstanding portion of this Note for the purpose
of commencing the holding period under Rule 144(d) of the Securities and
Exchange Commission with respect to other Shares purchased with this Note.
7. GOVERNING LAW: WAIVER. The validity, construction and performance of
this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.
- ------------------------------------- ----------------------------------------
Purchaser's Name [type or print] Purchaser's Signature
[SIGNATURE PAGE TO SECURED FULL RECOURSE PROMISSORY NOTE]
<PAGE> 1
EXHIBIT 10.7
STOCK PLEDGE AGREEMENT
This Agreement is made and entered into as of August 27, 1997 between
Virage Logic Corporation, a California corporation (the "Company"), and
[______________] ("Pledgor").
RECITALS
A. In exchange for Pledgor's Secured Full Recourse Promissory
Note to the Company of even date herewith (the "Note"), the Company has issued
and sold to Pledgor [__________] shares of its common stock (the "Shares")
pursuant to the terms and conditions of that certain Founder's Restricted Stock
Purchase Agreement between the Company and Pledgor of even date herewith (the
"Purchase Agreement").
B. Pledgor has agreed that repayment of. the Note will be
secured by the pledge of the Shares pursuant to this Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the
provisions of the California Commercial Code, Pledgor hereby grants to the
Company, and the Company hereby accepts, a first and present security interest
in the Shares as collateral to secure the payment of Pledgor's obligation to the
Company under the Note. Pledgor herewith delivers to the Company common stock
certificate No. C-[_], representing all the Shares, together with one stock
power for each certificate in the form attached as an Exhibit to the Purchase
Agreement, duly executed (with the date and number of shares left blank) by
Pledgor and Pledgor's spouse, if any. For purposes of this Agreement, the Shares
pledged to the Company hereby, together with any additional collateral pledged
pursuant to Section 5 hereof, will hereinafter be collectively referred to as
the "Collateral" Pledgor agrees that the Collateral pledged to the Company will
be deposited with and held by the Escrow Holder (as defined in the Purchase
Agreement) and that, notwithstanding anything to the contrary in the Purchase
Agreement, for purposes of carrying out the provisions of this Agreement, Escrow
Holder will act solely for the Company as its agent and not as a fiduciary.
2. REPRESENTATIONS AND WARRANTIES. Pledgor hereby
represents and warrants to the Company that Pledgor has good tide (both record
and beneficial) to the Collateral, free and clear of a claims, pledges, security
interests, liens or encumbrances of every nature whatsoever, and that Pledgor
has the right to pledge and grant the Company the security interest in the
Collateral granted under this Agreement. Pledgor further agrees that, until the
entire principal sum and all accrued interest due under the Note has been paid
in M, Purchaser will not, without the Company's prior written consent, (i) sell,
assign or transfer, or attempt to sell, assign or transfer, any of the
<PAGE> 2
Collateral, or (h) grant or create, or attempt to grant or create, any security
interest, lien, pledge, claim or other encumbrance with respect to any of the
Collateral.
3. RIGHTS ON DEFAULT. In the event of default (as
defined in the Note) by Pledgor under the Note, the Company will have hill power
to sell, assign and deliver the whole or any part of the Collateral at any
broker's exchange or elsewhere, at public or private sale, at the option of the
Company, in order to satisfy any part of the obligations of Pledgor now existing
or hereinafter arising under the Note. On any such sale, the Company or its
assigns may purchase all or any part of the Collateral. In addition, at its sole
option, the Company may elect to retain all the Collateral in full satisfaction
of Pledgor's obligation under the Note, in accordance with the provisions and
procedures set forth in the California Commercial Code.
4. ADDITIONAL REMEDIES. The rights and remedies granted
to the Company herein upon default under the Note will be in addition to all the
rights, powers and remedies of the Company under the California Commercial Code
and applicable law and such rights, powers and remedies will be exercisable by
the Company with respect to all of the Collateral. Pledgor agrees that the
Company's reasonable expenses of holding the Collateral, preparing it for resale
or other disposition, and selling or otherwise disposing of the Collateral,
including attorneys' fees and other legal expenses, will be deducted from the
proceeds of any sale or other disposition and will be included in the amounts
Pledgor must tender to redeem the Collateral. All rights, powers and remedies of
the Company will be cumulative and not alternative. Any forbearance or failure
or delay by the Company in exercising any right, power or remedy hereunder will
not be deemed to be a waiver of any such right, power or remedy and any single
or partial exercise of any such right, power or remedy hereunder will not
preclude the further exercise thereof.
5. DIVIDENDS, VOTING. All dividends hereinafter declared
on or payable with respect to the Collateral during the term of this pledge
(excluding only ordinary cash dividends, which will be payable to Pledgor so
long as Pledgor is not in default under the Note) will be immediately delivered
to the Company to be held in pledge under this Agreement. Notwithstanding this
Agreement, so long as Pledgor owns the Shares and is not in default under the
Note, Pledgor will be entitled to vote any shares comprising the Collateral,
subject to any proxies granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of
this pledge, any stock dividend, reclassification, readjustment, stock split or
other change is declared or made with respect to the Collateral, or if warrants
or any other rights, options or securities are issued in respect of the
Collateral, then all new, substituted and/or additional shares or other
securities issued by reason of such change or by reason of the exercise of such
warrants, rights, options or securities, will be immediately pledged to the
Company to be held under the terms of this Agreement in the same manner as the
Collateral is held hereunder.
<PAGE> 3
7. RIGHTS UNDER PURCHASE AGREEMENT. Pledgor understands
and agrees that the Company's rights to repurchase the Collateral under the
Purchase Agreement will continue for the periods and on the terms and conditions
specified in the Purchase Agreement, whether or not the Note has been paid
during such period of time, and that to the extent that the Note is not paid
during such period of time, the repurchase by the Company of the Collateral may
be made by way of cancellation of all or any part of Pledgor's indebtedness
under the Note.
8. REDELIVERY OF COLLATERAL. Upon payment in full of the
entire principal sum and all accrued interest due under the Note, and subject to
the terms and conditions of the Purchase Agreement, the Company will immediately
redeliver the Collateral to Pledgor and this Agreement will terminate; provided
however that all rights of the Company to retain possession of the Shares
pursuant to the Purchase Agreement will survive termination of this Agreement.
9. SUCCESSORS AND ASSIGNS. This Agreement will inure to
the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
10. GOVERNING LAW; SEVERABILITY. This Agreement will be
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of law relating to conflicts of law. Should one
or more of the provisions of this Agreement be determined by a court of law to
be illegal or unenforceable, the other provisions nevertheless will remain
effective and will be enforceable.
11. MODIFICATION: ENTIRE AGREEMENT. This Agreement will
not be amended without the written consent of both parties hereto. This
Agreement and Section 8 of the Purchase Agreement constitute the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersede all prior agreements and understandings related to such subject
matter.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
COMPANY PLEDGOR
By:
--------------------------------- ------------------------------------
[Signature]
Name:
------------------------------------
[Please Print Name]
Its:
<PAGE> 1
EXHIBIT 10.8
SECURED FULL RECOURSE PROMISSORY NOTE
Fremont, California
$[ ] [ ], 2000
Reference is made to that certain Stock Option Exercise Agreement (the
"PURCHASE AGREEMENT") of even date herewith, by and between the undersigned (the
"PURCHASER") and Virage Logic Corporation, a California corporation (the
"COMPANY"), issued to Purchaser under the Company's 1997 Equity Incentive Plan
(the "PLAN"). This Secured Full Recourse Promissory Note (the "NOTE") is being
tendered by Purchaser to the Company as the total purchase price of the Shares
(as defined below) pursuant to the Purchase Agreement.
1. OBLIGATION. In exchange for the issuance to the Purchaser pursuant to
the Purchase Agreement of [ ] shares of the Company's Common Stock (the
"SHARES"), receipt of which is hereby acknowledged, Purchaser hereby promises to
pay to the order of the Company on or before [ ], 2005, at the Company's
principal place of business located at 465 10 Landing Pkwy., California 94538,
or at such other place as the Company may direct, the principal sum of One
Hundred Fifty Thousand Dollars ($[ ]) together with interest compounded
annually on the unpaid principal at the rate of six and sixty-nine hundredths
percent (6.69%), which rate is not less than the minimum rate established
pursuant to Section 1274(d) of the Internal Revenue Code of 1986, as amended, on
the earliest date on which there was a binding contract in writing for the
purchase of the Shares; provided, however, that the rate at which interest will
accrue on unpaid principal under this Note will not exceed the highest rate
permitted by applicable law. All payments hereunder shall be made in lawful
tender of the United States.
2. SECURITY. Performance of Purchaser's obligations under this Note is
secured by a security interest in the Shares granted to the Company by Purchaser
under a Stock Pledge Agreement dated of even date herewith between the Company
and Purchaser (the "PLEDGE AGREEMENT").
3. EVENTS OF DEFAULT. Purchaser will be deemed to be in default under
this Note upon the occurrence of any of the following events (each an "EVENT OF
DEFAULT"): (i) upon Purchaser's failure to make any payment when due under this
Note; (ii) Purchaser is Terminated (as defined in the Plan); (iii) the failure
of any representation or warranty in the Pledge Agreement to have been true, the
failure of Purchaser to perform any obligation under the Pledge Agreement, or
upon any other material breach by the Purchaser of the Pledge Agreement; (iv)
any voluntary or involuntary transfer of any of the Shares or any interest
therein (except a transfer to the Company); (v) upon the filing regarding the
Purchaser of any voluntary or involuntary petition for relief under the United
States Bankruptcy Code or the initiation of any proceeding under federal law or
law of any other jurisdiction for the general relief of debtors; or (vi) upon
the execution by Purchaser of an assignment for the benefit of creditors or the
<PAGE> 2
appointment of a receiver, custodian, trustee or similar party to take
possession of Purchaser's assets or property.
4. ACCELERATION; REMEDIES ON DEFAULT. Upon the occurrence of any Event
of Default, at the option of the Company, all principal and other amounts owed
under this Note shall become immediately due and payable without notice or
demand on the part of the Company, and the Company will have, in addition to its
rights and remedies under this Note, the Pledge Agreement, full recourse against
any real, personal, tangible or intangible assets of Purchaser, and may pursue
any legal or equitable remedies that are available to it.
5. RULE 144 HOLDING PERIOD. PURCHASER UNDERSTANDS THAT THE HOLDING
PERIOD SPECIFIED UNDER RULE 144(d) OF THE SECURITIES AND EXCHANGE COMMISSION
WILL NOT BEGIN TO RUN WITH RESPECT TO SHARES PURCHASED WITH THIS NOTE UNTIL
EITHER (i) THE EXERCISE PRICE OF SUCH SHARES IS PAID IN FULL IN CASH OR BY OTHER
PROPERTY ACCEPTED BY THE COMPANY, OR (ii) THIS NOTE IS SECURED BY COLLATERAL,
OTHER THAN THE SHARES THAT HAVE NOT BEEN FULLY PAID FOR IN CASH, HAVING A FAIR
MARKET VALUE AT LEAST EQUAL TO THE AMOUNT OF PURCHASER'S THEN OUTSTANDING
OBLIGATION UNDER THIS NOTE (INCLUDING ACCRUED INTEREST).
6. PREPAYMENT. Prepayment of principal and/or other amounts owed under
this Note may be made at any time without penalty. Unless otherwise agreed in
writing by the Company, each payment will be applied to the extent of available
funds from such payment in the following order: (i) first to the accrued and
unpaid costs and expenses under the Note or the Pledge Agreement, (ii) then to
accrued but unpaid interest, and (iii) lastly to the outstanding principal.
7. GOVERNING LAW; WAIVER. The validity, construction and performance of
this Note will be governed by the internal laws of the State of California,
excluding that body of law pertaining to conflicts of law. Purchaser hereby
waives presentment, notice of non-payment, notice of dishonor, protest, demand
and diligence.
8. ATTORNEYS' FEES. If suit is brought for collection of this Note,
Purchaser agrees to pay all reasonable expenses, including attorneys' fees,
incurred by the holder in connection therewith whether or not such suit is
prosecuted to judgment.
IN WITNESS WHEREOF, Purchaser has executed this Note as of the date and
year first above written.
Purchaser's Name Purchaser's Signature
- ------------------------------- ------------------------------
Purchaser's Name Purchaser's Signature
[Signature page to Virage Logic Corporation Secured Full Recourse Promissory
Note]
<PAGE> 1
EXHIBIT 10.9
STOCK PLEDGE AGREEMENT
This Stock Pledge Agreement (the "PLEDGE AGREEMENT") is made and entered
into as of March 1, 2000 between Virage Logic Corporation, a California
corporation (the "COMPANY"), and Alexander Shubat (the "PLEDGOR"). Capitalized
terms that are not defined herein shall have the meanings ascribed to them in
the Secured Full Recourse Promissory Note of even date herewith delivered by
Pledgor to the Company (the "NOTE").
RECITALS
A. In exchange for delivery of the Note to the Company, the Company has
issued and sold to Pledgor [ ] shares of its Common Stock (the "SHARES")
pursuant to the terms and conditions of that certain Purchase Agreement.
B. Pledgor has agreed that repayment of the Note will be secured by the
pledge of the Shares pursuant to this Pledge Agreement.
NOW, THEREFORE, the parties agree as follows:
1. CREATION OF SECURITY INTEREST. Pursuant to the provisions of
the California Commercial Code, Pledgor hereby grants to the Company, and the
Company hereby accepts, a first and present security interest in (i) the Shares,
(ii) all Dividends (as defined in Section 5 hereof), and (iii) all Additional
Securities (as defined in Section 6 hereof), to secure payment of the Note and
performance of all Pledgor's obligations under this Pledge Agreement. Pledgor
herewith delivers to the Company Common Stock certificate(s) No(s).
_____________, representing all the Shares, together with one or more stock
power(s) for each certificate so delivered in the form attached as an Exhibit to
the Purchase Agreement, duly executed (with the date and number of shares left
blank) by Pledgor and Pledgor's spouse, if any. For purposes of this Pledge
Agreement, the Shares, all Dividends, and all Additional Securities will
hereinafter be collectively referred to as the "COLLATERAL." Pledgor agrees that
the Collateral will be deposited with and held by the Escrow Holder (as defined
in the Purchase Agreement) and that, notwithstanding anything to the contrary in
the Purchase Agreement, for purposes of carrying out the provisions of this
Pledge Agreement, Escrow Holder will act solely for the Company as its agent.
2. REPRESENTATIONS AND WARRANTIES AND COVENANTS REGARDING
COLLATERAL. Pledgor hereby represents and warrants to the Company that Pledgor
has good title (both record and beneficial) to the Collateral, free and clear of
all claims, pledges, security interests, liens or encumbrances of every nature
whatsoever, and that Pledgor has the right to pledge and grant the
<PAGE> 2
Company the security interest in the Collateral granted under this Pledge
Agreement. Pledgor further agrees that, until all sums due under the Note have
been paid in full, and all of Purchaser's obligations under this Pledge
Agreement have been performed, Purchaser will not, without the Company's prior
written consent, (i) sell, assign or transfer, or attempt to sell, assign or
transfer, any of the Collateral, or (ii) grant or create, or attempt to grant or
create, any security interest, lien, pledge, claim or other encumbrance with
respect to any of the Collateral or (iii) suffer or permit to continue upon any
of the Collateral during the term of this Pledge Agreement, an attachment, levy,
execution or statutory lien.
3. RIGHTS ON DEFAULT. Upon an occurrence of an Event of Default
under the Note, the Company will have full power to sell, assign and deliver or
otherwise dispose the whole or any part of the Collateral at any broker's
exchange or elsewhere, at public or private sale, at the option of the Company,
in order to satisfy any part of the obligations of Pledgor now existing or
hereinafter arising under the Note or under this Pledge Agreement. On any such
sale, the Company or its assigns may purchase all or any part of the Collateral.
In addition, at its sole option, the Company may elect to retain all the
Collateral in full satisfaction of Pledgor's obligation under the Note, in
accordance with the provisions and procedures set forth in the California
Uniform Commercial Code. Pledgor agrees at the Company's request, to cooperate
with the Company in connection with the disposition of any and all of the
Collateral and to execute and deliver any documents which the Company shall
reasonably request to permit disposition of the Collateral.
4. ADDITIONAL REMEDIES. The rights and remedies granted to the
Company herein upon an Event of Default will be in addition to all the rights,
powers and remedies of the Company under the California Uniform Commercial Code
and applicable law and such rights, powers and remedies will be exercisable by
the Company with respect to all of the Collateral. Pledgor agrees that the
Company's reasonable expenses of holding the Collateral, preparing it for resale
or other disposition, and selling or otherwise disposing of the Collateral,
including attorneys' fees and other legal expenses, will be deducted from the
proceeds of any sale or other disposition and will be included in the amounts
Pledgor must tender to redeem the Collateral. All rights, powers and remedies of
the Company will be cumulative and not alternative. Any forbearance or failure
or delay by the Company in exercising any right, power or remedy hereunder will
not be deemed to be a waiver of any such right, power or remedy and any single
or partial exercise of any such right, power or remedy hereunder will not
preclude the further exercise thereof.
5. DIVIDENDS; VOTING. All dividends hereinafter declared on or
payable with respect to any Collateral during the term of this Pledge Agreement
(excluding only ordinary cash dividends, which will be payable to Pledgor so
long as no Event of Default has occurred under the Note) (the "DIVIDENDS") will
be immediately delivered to the Company to be held in pledge under this Pledge
Agreement. Notwithstanding this Pledge Agreement, so long as Pledgor owns the
Shares and no Event of Default has occurred under the Note, Pledgor will be
entitled to vote any shares comprising the Collateral, subject to any proxies
granted by Pledgor.
6. ADJUSTMENTS. In the event that during the term of this Pledge
Agreement, any stock dividend, reclassification, readjustment, stock split or
other change is declared or made with respect to the Collateral, or if warrants
or any other rights, options or securities are issued in respect of the
Collateral, (the "ADDITIONAL SECURITIES") then all new, substituted and/or
additional
<PAGE> 3
shares or other securities issued by reason of such change or by reason of the
exercise of such warrants, rights, options or securities, will be (if delivered
to Pledgor, immediately surrendered to the Company and) pledged to the Company
to be held under the terms of this Pledge Agreement as and in the same manner as
the Collateral is held hereunder.
7. RIGHTS UNDER PURCHASE AGREEMENT; SETOFF. Pledgor understands
and agrees that the Company's rights to repurchase the Collateral under the
Purchase Agreement, if any, will continue for the periods and on the terms and
conditions specified in the Purchase Agreement, whether or not the Note has been
paid in full during such period of time, and that to the extent that the Note is
not paid in full during such period of time, the repurchase by the Company of
the Collateral may be made by way of cancellation of all or any part of
Pledgor's indebtedness under the Note.
8. REDELIVERY OF COLLATERAL; NO RELEASE FOR PARTIAL PAYMENT.
(a) Until all obligations of Pledgor under the Note and
under this Pledge Agreement have been satisfied in full, all Collateral will
continue to be held in pledge under this Pledge Agreement. If Pledgor prepays
all or a portion of the principal amount of the Note, the portion of the Shares
for which such pre-payment would represent the purchase price under the Purchase
Agreement (the "PAID SHARES") will be treated as independent collateral for the
remaining balance of the Note for the purpose of commencing the holding period
under Rule 144(d) of the Securities and Exchange Commission with respect to
other Shares purchased with the Note.
(b) Upon performance of all Pledgor's obligations under
the Note and this Pledge Agreement, and subject to the terms and conditions of
the Purchase Agreement, the Company will immediately redeliver the Collateral to
Pledgor and this Pledge Agreement will terminate; provided, however, that all
rights of the Company to retain possession of the Shares pursuant to the
Purchase Agreement will survive termination of this Pledge Agreement.
9. FURTHER ASSURANCES. Pledgor shall, at the Company's request,
execute and deliver such further documents and take such further actions as the
Company shall reasonably request to perfect and maintain the Company's security
interest in the Collateral, or in any part thereof
10. SUCCESSORS AND ASSIGNS. This Pledge Agreement will inure to
the benefit of the respective heirs, personal representatives, successors and
assigns of the parties hereto.
11. GOVERNING LAW; SEVERABILITY. This Pledge Agreement will be
governed by and construed in accordance with the internal laws of the State of
California, excluding that body of law relating to conflicts of law. Should one
or more of the provisions of this Pledge Agreement be determined by a court of
law to be illegal or unenforceable, the other provisions nevertheless will
remain effective and will be enforceable.
12. MODIFICATION; ENTIRE AGREEMENT. This Pledge Agreement will
not be amended without the written consent of both parties hereto. This Pledge
Agreement, together with the Note constitute the entire agreement of the parties
hereto with respect to the subject
<PAGE> 4
matter hereof and supersedes all prior agreements and understandings related to
such subject matter.
IN WITNESS WHEREOF, the parties hereto have executed this Pledge
Agreement as of the date and year first above written.
VIRAGE LOGIC CORPORATION PLEDGOR
By:
------------------------------- -------------------------------
(Signature)
Adam Kablanian
- ---------------------------------- -------------------------------
(Please print name) (Please print name)
President and CEO
- ----------------------------------
(Please print title)
[Signature page to Virage Logic Corporation Stock Pledge Agreement]
<PAGE> 1
EXHIBIT 10.10
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of the 1st
day of December, 1999, by and between Virage Logic Corporation, a California
corporation ("Buyer"), and Mentor Graphics Corporation, an Oregon corporation
("MGC").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Assets.
1.1 Purchase and Sale. Subject to the terms and conditions of this
Agreement, and for the consideration herein stated, at the Closing (as defined
below), MGC agrees to sell, license, convey, assign, transfer and deliver to
Buyer, and Buyer agrees to purchase and accept from MGC, the following assets
(the "Assets") related to the business currently conducted by the Physical
Libraries Division of MGC (the "Business"):
(a) All of the furniture, fixtures and equipment owned by MGC and
currently assigned to the Business as listed on SCHEDULE 1.1(a), provided that
items listed on SCHEDULE 1.1(a) that are not actually located at the Business
office at 15 Independence Blvd, Warren, New Jersey 07059 (the "Business
Premises") are not included in the Assets;
(b) A non-exclusive, royalty-free, perpetual, worldwide license,
subject to the payment terms set forth in Section 1.3, to use the source code
version of the files listed in SCHEDULE 1.1(b), which are contained in the MGC
products also listed in SCHEDULE 1.1(b), for the purpose of making, licensing
and distributing, through Buyer's sales channel, distributors and third party
OEM agreements, Buyer's own physical libraries and only such Buyer products
specifically required for the use of such physical libraries (the "License").
The License excludes any MGC software that is subject to license under Section
1.1(c) or is not listed by file name in SCHEDULE 1.1(b). Subject to MGC's
election, within 30 days after written notice of a specific or potential action,
not to defend or prosecute the intellectual property rights granted in this
Section, MGC agrees that Buyer shall have the right, authority and power, with
respect to the code licensed as it exists on the date of Closing, to assert and
enforce such rights worldwide, including the right to bring any and all suits
and proceedings under or involving such rights. MGC also grants Buyer the
nonexclusive, royalty-free, perpetual, worldwide right to use the intellectual
property of MGC, including copyrights, copyright applications, rights of
reproduction, patent applications, rights of priority, patents, trademarks and
trade secrets, associated with the files listed in SCHEDULE 1.1(b) and necessary
for the productization of these files as intended by the License. In particular,
MGC grants Buyer the nonexclusive, perpetual, worldwide right to reproduce the
trademarks listed in SCHEDULE 1.1(b) as necessary for the sole purpose of
allowing Buyer to fully promote and market the products resulting from use of
the licensed files (the "Companion IP
<PAGE> 2
License"). The License, the Companion IP License and the MGC software license
described in Section 1.1 (c) are nevertheless revocable if the Buyer defaults on
the payment terms set forth in Section 1.3. The License and the Companion IP
License are non-transferable, subject to the condition that, in the event of an
acquisition of all or substantially all of the assets or a change in control of
ownership of Buyer, Buyer shall request the written consent of MGC to a transfer
of the License and the Companion IP License to Buyer's successor in interest and
such consent shall not be unreasonably withheld. Buyer acknowledges that MGC and
its licensors, without limitation, retain all title to and ownership of the
source code, as well as any intellectual property rights underlying or
associated with the files and MGC products listed in SCHEDULE 1.1(b), including,
without limitation, all copyrights, copyright applications, rights of
reproduction, patent applications, rights of priority, patents, trademarks and
trade secrets. Buyer further acknowledges that, subject to the conditions of
Section 6.6, MGC and its licensors may continue to use, including developing and
incorporating as part of technology contained in products that do not compete
with products similar to those listed in SCHEDULE 1.1(b), or license to third
parties, including customers of services provided by MGC, the same source code,
and intellectual property rights underlying or associated with the files and MGC
products listed in SCHEDULE 1.1(b), for any purpose;
(c) A nonexclusive, nontransferable, perpetual, royalty-free license
as provided in EXHIBIT A-1, subject to the payment terms set forth in Section
1.3, to use and copy the object code version of the MGC software listed in
SCHEDULE 1.1(c) in making, selling and distributing Buyer's own physical
libraries;
(d) A nonexclusive, nontransferable, perpetual, temporary,
royalty-free license as provided in EXHIBIT A-2, subject to the payment terms
set forth in Section 1.3, to use and copy the object code version of the MGC
software listed in SCHEDULE 1.1(d) in performing Buyer's obligations under
Sections 1.3 and 6 and to support Buyer's customers;
(e) A list of all customers in the current installed base of the
products will be provided within 30 days after Closing, provided that Buyer does
not solicit support services for the MGC products listed in SCHEDULE 1.1(b) from
MGC support customers currently under support agreements for those MGC products
until 60 days prior to the expiration of those support agreements, provided that
nothing shall prohibit Buyer from providing support services if requested by any
such customer; and
(f) Subject to Section 6.2, any software licensed by MGC from a third
party and used in the Business, provided such software is listed on SCHEDULE
1.1(f) and the license is determined by MGC to be transferable to Buyer without
further obligation or payment of any additional fees by MGC.
1.2 Excluded Assets. The Assets shall not include any assets that are
not specifically described in Section 1.1. Such excluded assets shall include,
but not be
2
<PAGE> 3
limited to, any leased equipment, any accounts receivable and any rights under
existing purchase orders or other customer contracts. Buyer acknowledges that
workstations used by employees of the Business are leased by MGC under
nontransferable leases, and that such workstations will be returned to the
lessors following the Closing.
1.3 Purchase Price. The purchase price payable by Buyer for the Assets
shall be the following:
(a) $ 1,000,000, payable by (i) issuance of a standard commercial
purchase order for the purchase of a net amount of $500,000.00 worth of licenses
to MGC's standard commercial software products that do no contain third party
software (based on a 25% discount from list price), with the delivery of such
software products to be completed by December 28, 1999; and (ii) issuance,
within 18 months from the date of this Agreement, an additional standard
commercial purchase order for the purchase of a net amount of $500,000.00 worth
of licenses to MGC's standard commercial software products that do not contain
third party software (based on a 25% discount from list price), with the
delivery of such software products to be completed on or before June 30, 2001;
(b) 150,000 shares of Series C Preferred Stock of Buyer delivered to
MGC at the closing of Buyer's anticipated venture capital financing involving
the issuance of Series C Preferred Stock (the "Series C Financing"), which Buyer
anticipates will be sold in such financing for $1.90 per share, which shares
shall be in the form delivered to other investors not affiliated with Buyer in
connection with such closing. In connection with the Series C Financing, MGC
shall receive all of the contractual rights received by the other investors in
the Series C Financing on an equal basis with such investors, subject to MGC's
execution of the documents signed by such investors. If the Series C Financing
does not occur by December 31, 1999, Buyer shall issue to MGC as of December 31,
1999, 150,000 shares of Series B Preferred Stock of Buyer and shall grant to MGC
all of the contractual rights received by the Series B investors on an equal
basis with such investors, subject to MGC's execution of the documents
previously signed by such investors;
(c) As of the Closing, Buyer hereby agrees to perform all
obligations of MGC under all customer contractual commitments of MGC related to
the parts listed in SCHEDULE 1.1(b), including all open contracts for delivery
of products or services (for which Buyer will be reimbursed as provided in
Section 6.3), all outstanding support contracts, subject to the software support
responsibilities described in EXHIBIT B, and all warranty obligations, subject
to the software support responsibilities described in EXHIBIT B and the
requirements of Section 6.4; and
(d) Buyer agrees to complete development of two instances of Memory
and Cache for MGC's PowerPC software programs for UMC .18(micron) at no cost to
MGC. These instances shall be developed according to the specifications provided
in SCHEDULE
3
<PAGE> 4
1.3(d) and shall be completed by December 31, 1999. Buyer further agrees to
complete development of a second set of instances (probably TSMC .1(micron)) at
no cost to MGC according to the specifications provided in SCHEDULE 13(d) no
later than 12 weeks after MGC's written request to begin development.
1.4 Employees. Effective as of the close of business on the date of the
Closing, MGC shall terminate the employment of the employees of the Business
listed on SCHEDULE 1.4. Buyer shall extend immediately to a minimum of 20 of
such employees an offer of employment, beginning on November 30, 1999, on
substantially the same terms and conditions as were in effect prior to the
Closing. To assist in the transition and relocation of such employees, MGC
agrees to make the existing space of the Business available for up to 60 days
after the execution of this Agreement. Employees of the Business not hired by
Buyer will be severed in accordance with MGC employment policy. All costs
related to the severance of MGC employees will be paid by MGC.
1.5 Instruments of Conveyance and Transfer. The conveyance, assignment,
transfer and delivery of the Assets shall be effected by MGC's execution and
delivery to Buyer, at the Closing, of a bill of sale in substantially the form
of the Assignment and Bill of Sale attached hereto as EXHIBIT C. MGC agrees
that, at any time and from time to time on and after the Closing, it will, upon
the request of Buyer and without further consideration, take all steps
reasonably necessary to place Buyer in possession and operating control of the
Assets, and will do, execute, acknowledge and deliver, or will cause to be done,
executed, acknowledged and delivered, all further acts, deeds, assignments,
conveyances, transfers, powers of attorney or assurances as reasonably required
to sell, assign, convey, transfer, grant, assure and confirm to Buyer all of the
Assets, or to vest in Buyer good, valid and marketable title to the Assets.
1.6 Closing. The purchase and sale of the Assets shall take place at the
offices of MGC, 8005 SW Boeckman Road, Wilsonville, Oregon at 5:00 P.M. on
December 1, 1999, or at such other time and place as Buyer and MGC agree upon
orally or in writing (which time and place are designated as the "Closing").
1.7 Dismissal of Lawsuits Against Buyer. Promptly following the Closing,
MGC shall dismiss with prejudice the two pending lawsuits against Buyer and all
named individuals in the Superior Court of New Jersey and the United States
District Court in the Northern District of California (collectively, the
"Lawsuits").
2. Representations and Warranties of Buyer. Buyer represents and warrants to MGC
that:
2.1 Organization and Good Standing. Buyer is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California and has all requisite corporate power and authority to carry on its
business as now conducted and as proposed to be conducted.
4
<PAGE> 5
2.2 Authorization. All corporate action on the part of Buyer, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, and the performance of all obligations of Buyer
hereunder, has been taken or will be taken prior to the Closing, and this
Agreement constitutes a valid and legally binding obligation of Buyer,
enforceable in accordance with its terms, except insofar as the enforceability
thereof may be limited by bankruptcy and other laws of general application
affecting the rights and remedies of creditors or by the application of
equitable principles of general application when equitable remedies are sought.
2.3 Litigation. Except for the Lawsuits, there is no action, suit,
proceeding or investigation pending or currently threatened against Buyer which
questions the validity of this Agreement or the right of Buyer to enter into it,
or to consummate the transactions contemplated hereby, or which might result,
either individually or in the aggregate, in any material adverse changes in the
assets, condition, affairs or prospects of Buyer, financially or otherwise, or
any change in the current equity ownership of Buyer, nor to Buyer's knowledge is
there any valid basis for any of the foregoing.
2.4 Compliance with Other Instruments. Buyer is not in violation or
default of any provisions of its Restated Articles of Incorporation or Bylaws or
of any instrument, judgment, order, writ, decree or contract to which it is a
party or by which it is bound or, to its knowledge, of any provision of federal
or state statute, rule or regulation applicable to Buyer. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of Buyer.
3. Representations, Warranties and Agreements of MGC. MGC hereby represents,
warrants and agrees that:
3.1 Organization and Good Standing. MGC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Oregon and
has all requisite corporate power and authority to carry on its business as now
conducted and as proposed to be conducted.
3.2 Authorization. All corporate action on the part of MGC, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, and the performance of all obligations of MGC
hereunder, has been taken or will be taken prior to the Closing, and this
Agreement constitutes a valid and legally binding obligation of MGC, enforceable
in accordance with its terms, except insofar as the enforceability thereof may
be limited by bankruptcy and other laws of general application affecting the
rights and remedies of creditors or by the application of equitable principles
of general application when equitable remedies are sought.
5
<PAGE> 6
3.3 Litigation. There is no action, suit, proceeding or investigation
pending or currently threatened against MGC which questions the validity of this
Agreement or the right of MGC to enter into it, or to consummate the
transactions contemplated hereby.
3.4 Compliance with Other Instruments. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not result in any violation or default of any
provisions of its Restated Articles of Incorporation or Bylaws or of any
instrument, judgment, order, writ, decree or contract to which it is a party or
by which it is bound or, to its knowledge, of any provision of federal or state
statute, rule or regulation applicable to MGC, or be in conflict with or
constitute, with or without the passage of time and giving of notice, either a
default under any such provision, instrument, judgment, order, writ, decree or
contract or an event which results in the creation of any lien, charge or
encumbrance upon any assets of MGC.
3.5 Purchase Entirely for Own Account. The Series C or Series B
Preferred Stock to be received by MGC and the Common Stock issuable upon
conversion or exercise thereof (collectively, the "Securities") will be acquired
for investment for MGC's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and MGC has no present
intention of selling, granting any participation in, or otherwise distributing
the same.
3.6 Accredited Investor. MGC is an "accredited investor" within the
meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.7 Restricted Securities. MGC understands that the Securities it is
purchasing are characterized as "restricted securities" under the federal
securities laws inasmuch as they are being acquired from Buyer in a transaction
not involving a public offering and that under such laws and applicable
regulations such securities may be resold without registration only in certain
limited circumstances. In this connection, MGC represents that it is familiar
with Rule 144 promulgated under the Act as presently in effect and understands
the resale limitations imposed thereby and by the Act.
3.8 Legends. It is understood that the certificate(s) evidencing the
Securities may bear one or more legends which are placed on certificates for the
same class of securities which are issued to the other holders thereof relating
to the sale, pledge, transfer or hypothecation thereof, with respect to the
Securities Act of 1933, Blue Sky laws, Buyer's Restated Articles of
Incorporation or other laws, regulations or instruments applicable thereto.
3.9 No Defaults. To the best of MGC's knowledge, no default exists on
the part of MGC under any agreement with its customers related to the provision
of products or services of the Business, no other person has alleged in writing
that MGC is in default
6
<PAGE> 7
or has committed an anticipatory breach under any such agreement and there is no
default on the part of any other party under any such agreement.
3.10 No Obligation. MGC is under no legally binding obligation to sell
the Business to Artisan Components, Inc.
4. Conditions of MGC's Obligations at Closing. The obligations of MGC under
subsection 1.1 of this Agreement are subject to the fulfillment on or before the
Closing of each of the following conditions:
4.1 Representations and Warranties. The representations and warranties
of Buyer contained in Section 2 shall be true on and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the date of such Closing.
4.2 Performance. Buyer shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
4.3 Compliance Certificate. The President of Buyer, shall deliver to MGC
at the Closing a certificate dated as of the Closing certifying that, to the
best of his knowledge and belief, the conditions specified in Sections 4.1 and
4.2 have been fulfilled.
4.4 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to MGC,
and MGC shall have received all such counterpart original and certified or other
copies of such documents as it may reasonably request.
5. Conditions of Buyer's Obligations at Closing. The obligations of Buyer to MGC
under this Agreement are subject to the fulfillment on or before the Closing of
each of the following conditions:
5.1 Representations and Warranties. The representations and warranties
of MGC contained in Section 3 shall be true on and as of the Closing with the
same effect as though such representations and warranties had been made on and
as of the Closing.
5.2 Performance. MGC shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing.
5.3 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance to
Buyer, and Buyer shall
7
<PAGE> 8
have received all such counterpart original and certified or other copies of
such documents as it may reasonably request.
6. Covenants.
6.1 News Releases. Neither party will issue any news release or other
public announcement describing the transactions contemplated by this Agreement
(including the Exhibits) except with the prior approval of an authorized
representative of the other party, which consent will not be unreasonably
withheld, and except that MGC may make any announcement MGC reasonably believes
to be necessary to comply with its disclosure obligations as a public company.
6.2 Transfer of Third-Party Software. Any third-party software listed in
SCHEDULE 1.1(f) that is off-the-shelf software covered by a shrink-wrap license
agreement shall be transferred to Buyer in accordance with the license terms.
With respect to any other third-party software listed in SCHEDULE 1.1(f), MGC
shall reasonably cooperate with Buyer in arranging for Buyer's rights to use any
such software, but Buyer shall be primarily responsible for any negotiations or
discussions with representatives of the software vendors; provided, however,
that MGC shall not be obligated to take any action that would adversely affect
MGC's rights under any license of software that it continues to use, and any
incremental cost associated with Buyer's use of the software shall be paid by
Buyer.
6.3 Outstanding Customer Commitments. MGC agrees to remit to Buyer all
revenue and royalties received from its customers for services rendered by Buyer
pursuant to Buyer's agreement to perform all obligations of MGC, under all open
contracts for delivery of products or services and all outstanding support
contracts, related to the parts listed in SCHEDULE 1.1(b), provided that no
remittance shall be made for services related to all backlog for delivery of
products or services existing as of the Closing. Following the Closing, MGC will
issue one or more purchase orders to Buyer which will set forth the milestones
and due dates for each of the open contracts and the portion of the resulting
payments from MGC's customers to be paid to Buyer upon meeting such milestones.
Payment from MGC for each milestone will not be made until the MGC customer has
provided MGC with a signed letter of acceptance and promise to pay for services
provided by Buyer. Buyer will make every effort to meet the due dates. Failure
on Buyer's part that results in inability of MGC to collect any amount from
MGC's customers on the open contracts will result in a dollar-for-dollar
reduction in the total amount payable under this Section 6.3. MGC will use
reasonable efforts to assist and cooperate with Buyer in the transfer of
Business assets to and assumption of Business obligations by Buyer as provided
by the Agreement. MGC shall retain any liability or obligation with respect to
the Business other than those assumed by Buyer under Sections 1.3 and 6.
8
<PAGE> 9
6.4 Support Responsibilities and Service Standards. The parties shall
perform the software support responsibilities described in EXHIBIT B. Buyer will
use sound and professional principles and practices in accordance with generally
accepted industry standards in the performance of services pursuant to Section
1.3(C) and EXHIBIT B. The performance of Buyer's personnel will reflect their
best professional knowledge, skill and judgment. Any designs or products
resulting from Buyer's services will conform materially to all applicable
specifications. Any software delivered by Buyer, excluding any portion thereof
that was not developed by Buyer, under this Agreement will be able to accurately
process date data, if any, (including but not limited to calculating, comparing,
and sequencing) from, into, and between the twentieth and twenty-first centuries
including leap year calculations. If any failure to meet the requirements
contained in this Section 6.4 appears within one year after the services are
accepted by MGC or MGC's customers, Buyer will again perform at its sole expense
the services directly affected by such failure. If Buyer is unable to re-perform
services to MGC's satisfaction, Buyer shall refund to MGC the fees paid to Buyer
by MGC for such services. Buyer's obligation for defective or negligently
performed services shall be limited to the cost of re-performing such services.
To the best of Buyer's knowledge the services and any designs or products
resulting from such services will not violate or in any way infringe upon the
rights of third parties, including property, contractual, employment, trade
secrets, proprietary information and non-disclosure rights, or any trademark,
copyright or patent rights. The services shall not be in violation of any
applicable law, rule or regulation. Buyer will comply with all Federal, state
and local laws regarding business permits, certificates and licenses that may be
required to carry out the services to be performed under this Agreement.
6.5 Non-solicitation. For a period of two years after the date of this
Agreement, Buyer will not directly or indirectly, solicit or encourage to leave
the employ of MGC or of any of its affiliates, any employee of MGC or any of its
affiliates.
6.6 Non-compete. MGC agrees to discontinue all marketing and sales of
products similar to or the same as those listed on SCHEDULE 1.1(b) for a period
of one year after the Closing.
7. Miscellaneous.
7.1 Survival of Warranties. The warranties, representations and
covenants of Buyer and MGC contained in or made pursuant to this Agreement shall
survive the execution and delivery of this Agreement and the Closing and shall
in no way be affected by any investigation of the subject matter thereof made by
or on behalf of MGC or Buyer.
7.2 Successors and Assigns. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties. No party
hereto may voluntarily or
9
<PAGE> 10
involuntarily assign such party's interest under this Agreement without the
prior written consent of the other party. Nothing in this Agreement, express or
implied, is intended to confer upon any party other than the parties hereto or
their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of Oregon.
7.4 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given upon personal delivery to the party to be notified or upon deposit with
the United States Post Office, by first class mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
the signature page hereof, or at such other address as such party may designate
by ten (10) days' advance written notice to the other parties.
7.7 Finder's Fee. Each party represents that it neither is nor will be
obligated for any finders' fee or commission in connection with this
transaction.
7.8 Expenses. Irrespective of whether the Closing is effected, Buyer and
MGC shall each pay all costs and expenses that they incur with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Restated Articles of Incorporation, the prevailing party
shall be entitled to recover reasonable attorneys' fees, costs and necessary
disbursements as fixed by the trial court and, if any appeal is taken from the
decision of the trial court, reasonable attorneys' fees, costs and disbursements
as fixed by the appellate court in addition to any other relief to which such
party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of Buyer and MGC.
7.10 Severability. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, such provision shall be excluded from
this
10
<PAGE> 11
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
VIRAGE LOGIC CORPORATION
By /s/
-----------------------------------------
Title President & CEO
-------------------------------------
Address: 46824 Lakeview Blvd.
Fremont, CA 94538
(510) 360-8025
MENTOR GRAPHICS CORPORATION
By /s/ DEAN FREED
----------------------------------------
Title Vice President and General Counsel
Address: 8005 SW Boeckman Road
Wilsonville, OR 97070
(503) 685-7000
11
<PAGE> 12
SCHEDULE 11.(a)
LIST OF CAPITAL ASSETS
NOTE: List is based on results of August 1999 physical inventory
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
MAIN
NUMBER CAP.DATE NAME SERIAL NUMBER LOCATION INV.#
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1500398 10/28/1997 VP800, Infocus Projector WARREN
2000842 03/01/1993 POWERBOOK 160 XB6312278F7 WARREN
2001799 01/23/1995 SONY 17" MONITOR S017129117E WARREN
2001801 01/23/1995 SONY 17" MONITOR S017129362G WARREN
2002625 02/01/1996 SONY I7" MONITOR SAN JOSE
2003020 04/01/1996 SONY 17" MONITOR WARREN
2003357 10/01/1996 TOSHIBA TECRA 500CDT 7617609 WARREN 37678
2003707 03/01/1997 TOSHIBA TECRA 730CDT 1740820 WARREN 37971
2003707 05/01/1997 Desk Station 5+ WARREN
2003707 05/01/1997 SONY 17" Color Monitor 017132968M WARREN
2003707 05/01/1997 Matrox Millenium 4mb WRAM Card WARREN
2003707 05/01/1997 Ethernet card/ Keyboard/ Mouse WARREN
2003708 03/01/1997 TOSHIBA TECRA 730CDT 12638352 WARREN 41668
2003709 03/01/1997 TOSHIBA TECRA 730CDT 1740458 AUSTIN 41581
2003866 05/01/1997 TOSHIBA TECRA 730XCDT 3720039 WARREN 42644
16MB/2.1 GB CD-rom
2003866 05/01/1997 MEMORY UPG 32MB WARREN
2003866 05/01/1997 Ethernet/ Fax-Modem/ Carrying Case WARREN
2003896 05/14/1997 TOSHIBA TECRA 730XCDT/16mb/2.1gb/Cd-rom/ 3723307 WARREN 41572
2003896 05/14/1997 32mb upg/Ethernet Card/ Fax-Modem Card WARREN
2003922 04/01/1997 TOSHIBA TECRA 740CDT P166 16MB/2.1GB 2717095 WARREN 41888
2003922 04/01/1997 64MB UPG/ETHERNET/FAX/MODEM/ 17" MONITOR/ WARREN
2003922 05/05/1997 SONY I7" Color Monitor 017134177G WARREN
2004488 10/07/1997 TOSHIBA PORTEGE 660CDT P150 16MB/1.3GB/C 0272255-3 WALTHAM 42581
2004488 10/07/1997 16MB UPG, ETHERNET CARD, FAX/MODEM WALTHAM
2004663 12/03/1997 Gateway 2000 E3110-300 19", 64mb, 4gb, c 8536472 WARREN 45770
2005189 06/01/1998 Desktop E3110 300mHz 128mb RAM 4gb SCSI 9421721 WARREN 53321
2005190 06/01/1998 Desktop E3110 300mHz 128mb RAM 4gb SCSI 9421723 WARREN 53057
2005191 06/17/1998 Desktop E3110 300mHz 128mb RAM 4gb SCSI 9554473 WARREN 53036
2005230 06/08/1998 Gateway 2000 300mhz/21"/64mb/8.4gb/cd 9554465 WARREN 53315
2005231 06/08/1998 Gateway 300mhz/21"/64mb/8.4gb/cd 9554473 WARREN 45126
2005429 08/19/1998 External 4.5GB disk 1.84722E+11 WARREN 53725
2200125 08/01/1990 SPARCSTNI+ 16/19 104MB 023FI798 WARREN 53322
2200146 09/01/1990 SPARSTNI 8/19 104MB 939F0759 WARREN 36047
2200146 12/01/1995 CYCLE-85 CPU'S WARREN
2200376 12/01/1990 SPARCSTATION 936F1363 WARREN 43014
2200376 12/01/1995 CYCLE - 85 CPU'S WARREN
2200380 12/01/1990 SPARCSTATION 011F2418 WARREN 43097
</TABLE>
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C> <C>
2200380 12/01/1995 CYCLE - 85 CPU'S WARREN
2200396 12/01/1995 CYCLE - 85 CPU'S 049F4043 WARREN
2200412 12/13/1990 SPARCSYSTEM 300 W/32MB MEMORY 319F0828 WARREN 43105
2200412 12/01/1995 CYCLE - 85 CPU'S WARREN
2200429 12/01/1995 CYCLE - 85 CPU'S 043F1513 WARREN
2200537 12/01/1995 CYCLE - 85 CPU'S 012F1148 WARREN
2200774 05/15/1991 4/75GX-32/19 207MB 115F1125 WARREN 43009
2200867 06/17/1991 4/75GX-32/19 207MB 115F1616 WARREN 43046
2201352 04/06/1992 SBUS MEMORY 32MB UP WARREN
2201387 04/06/1992 SUN SPARC 1 TO SPARC 2 UPG 298F2941 WARREN 43022
2201387 04/06/1992 ENT 424M:B DISK WARREN
2201457 05/01/1992 4/75 GX-32/19 424MB-P43 208F1157 WARREN 43026
2201457 05/18/1992 SIMM MEM 16MB (2) WARREN
2201499 06/01/1992 SUN 4/75 SPARC 218F0305 WARREN 53041
2201834 01/25/1993 710C-32/19\ 6206A02816 WARREN 43012
2201834 12/01/1994 64MB MEMORY HP710 WARREN
2202112 04/19/1993 715/50C-32/19 525MB 6323A31143 WARREN 43007
2202112 07/03/1995 HP715/50>715/100 UPGRAD WARREN
2202369 09/02/1993 S10-30 334F1158 WARREN 43039
2203583 07/11/1994 SparC20/51 TLTRBOGX PLUS 424F4179 WARREN 43030
2203583 07/26/1994 64NM MEMORY WARREN
2203647 10/17/1994 SPARC20/51 20" COLOR 32MB 1GB 441F3154 WARREN 43036
2203647 12/01/1994 CD ROM & INTER FLOPPY WARREN
2203648 10/17/1994 SPARC20/51 20" COLOR 32MB 1GB 441F1604 WARREN 43034
2203648 12/01/1994 CD ROM & INTERNAL FLOPPY WARREN
2203649 10/17/1994 SPARC20/51 20" COLOR 32MB 1GB 441F3158 WARREN 43032
2203649 12/01/1994 CD ROM & INTERNAL FLOPPY WARREN
2203650 10/17/1994 SPARC20/51 20" COLOR 32MB GB 441F3159 WARREN 43017
2203650 12/01/1994 CD ROM & INTERNAL FLOPPY WARREN
2203678 12/01/1994 SUN SPARC20/61, 20" COLOR,32MB 446F0252 WARREN 43107
2203678 12/01/1994 64MB MEMORY FOR SPARC 20 WARREN
2203679 12/01/1994 SUN SPARC20/61, 20" COLOR,32MB 523F0BAO SCHAUMBURG 21384
2203679 12/01/1994 64MB MEMORY FOR SPARC 20 SCHAUMBURG
2203681 12/01/1994 64MB MEMORY FOR SPARC 20 WARREN
2203798 01/01/1996 EXT 9GB DISK -SPARC10 WARREN 36074
2203850 02/06/1995 20" COLOR SUN MONITOR 9438FC1474 WARREN 36007
2204021 03/13/1995 SPARC20 MODEL 61 503F3458 WARREN 36002
2204025 03/13/1995 SPARC20 MODEL 61 505F0701 WARREN 36009
2204034 04/03/1995 SPARC20/61 512F01LO WARREN 36027
2204143 05/01/1995 SPARC20 MODEL 61 502F2486 WARREN 53334
2204150 05/01/1995 SPARC20 MODEL 61 503F2036 WARREN 17117
2205528 02/05/1998 Sun 9gb External Disk Drive 649G1742 WARREN 42042
2205529 02/05/1998 Sun 14gb/8rmm External Tape Drive 745G2351 WARREN 42043
2205531 02/05/1998 Sun External DDS-3 Tape Drive 802G2751 WARREN 42045
2205744 04/15/1991 4/75GX-32/19 207mb 111F1997 WARREN 43027
4000817 05/27/1997 MICRON Vetix LXI Server Package B 6606441 WARREN 36112
4300806 06/01/1996 MMAC-PLUS ETHERNET SMARTSWITCH WARREN
4300851 12/01/1996 MMAC-PLUS ETHERNET SMART SW MD INGO DEAN WARREN
</TABLE>
<PAGE> 14
SCHEDULE 1.1(b)
FILES, MG4C PRODUCTS AND MG4C TRADEMARKS
A. FILES. The source code files are those contained in the directory names
listed below by application, excluding code listed in Schedule 1.1(C).
Cell Builder: /nj/builder_toddg/cellb/
Memory Model Builder: /nj/lib_builder4/mmb/
Memory Builder Mozart: /nj/lib_builder4/mozart/
Datapath Builder: /nj/builder_toddg/dpbldr/
HDLP: /nj/lib_builder4/hdlp/
Timing Builder: /nj/builder_toddg/timeb/
Memory Builder in GDT: /nj/lib_builder3/mb/
Memory Builder in IC station: /nj/bldr7/membldr/
Memory Builder in Design Architect: /nj/lib_builder2/memarch-dev
Library files
ts35 (Tower)
ts50 (Tower)
umc25
umc18
csm35 (Chartered)
csm.25 (Chartered)
tsmc35
tsmc25
<PAGE> 15
B. MGC PRODUCTS
<TABLE>
<CAPTION>
MGC Part
Number Description
- -------- -----------
<S> <C>
57325 Cell Builder Ap SW
51591 Cell Builder Op SW
57344 Datapath Builder Op Sw
57343 Leaf Cell Toolkit Op SW
202702 MB Conductor User-mode Stn SW
202700 MB Mozart User-mode Stn SW
57342 MB/GDT User-mode Ap SW
67305 MB/ICS User-mode Ap SW
53761 Memory Bldr Delivery Op SW
53760 Memory Bldr Developer Ap SW
202701 Memory Builder Conductor Stn SW
202699 Memory Builder Mozart Ap SW
44200 Memory Builder Op SW
57327 Memory Builder/DA Op SW
57326 Memory Builder/GDT Op SW
57328 Memory Builder/ICS Op SW
57329 Memory Designer Stn SW
67306 Memory Model Builder Ap SW
202795 MMB Estimation-Only Ap SW
67988 MMB User-mode Ap SW
202963 Off-the-Shelf Physical Library
61989 Physical Libr Cust Design
202525 Test Structure Builder Ap SW
57330 Timing Builder Op SW
204072 UMC .18 Design Kit Ap IP
204076 UMC .18 Design Kit/Generator Stn
204074 UMC .18 Physical Lib/Generator Stn
204026 UMC .18 Physical Library Ap IP
204073 UMC .25 Design Kit Ap IP
204077 UMC .25 Design Kit/Generator Stn
204075 UMC .25 Physical Lib/Generator Stn
204027 UMC .25 Physical Library Ap IP
202678 UMC Physical Library Royalty
67852 ViewCreator Stn SW
</TABLE>
<PAGE> 16
C. MGC TRADEMARKS RELATED TO MGC PRODUCTS.
Cell Builder(TM)
Datapath Builder (TM)
Leaf Cell Toolkit (TM)
Memory Builder(TM)
Memory Builder Conductor(TM)
Memory Builder Mozart(TM)
Memory Model Builder(TM)
Timing Builder (TM)
ViewCreator(TM)
<PAGE> 17
EXHIBIT A-1
MGC SOFTWARE LICENSE
1. Definitions.
The following definitions shall apply to this Agreement:
"Buyer Products" means all software applications and tools related to the
license grant to Buyer under Section 1.1(b) of the Agreement that Buyer
distributes to its customers.
(b) "MGC Software" means the object code version of the software
components listed in SCHEDULE 1.1(c).
(c) "Buyer Product Customers" means those customers purchasing Buyer
Products from Buyer.
2. License Provisions.
2.1 License. MGC grants to Buyer a worldwide, nonexclusive,
nontransferable, royalty-free license to use, bundle or integrate MGC Software
and copy and sublicense the resulting products in object code form to Buyer
Product Customers. Buyer shall not pay any fees related to the license granted
to the MGC Software or for any related sublicenses. MGC shall deliver the MGC
Software within ten business days of the Closing.
2.2 Restrictions on Use. The following conditions apply to this grant:
(a) All software provided by MGC to Buyer is trade secret or
confidential information of MGC or its licensors. Buyer shall not make such
software available in any form to any person other than Buyer's employees whose
job performance requires such access and to Buyer Product Customers as
authorized by this Agreement. Buyer shall take appropriate action to protect the
confidentiality of such software and to ensure that any person permitted access
to such software does not provide or disclose it to others. Buyer shall not
reverse-assemble, reverse-compile, or otherwise reverse-engineer any such
software, in whole or in part. The provisions of this Section 2.2 shall survive
the termination or expiration of this Agreement.
(b) Buyer may copy MGC Software only as reasonably necessary to
support the authorized use. Buyer shall reproduce in all copies of MGC Software
all notices and legends included in MGC Software as received from MGC and shall
affix to the copy medium and the container housing the medium all notices and
legends affixed to the medium or container received from MGC. All copies of MGC
Software, whether provided by MGC or made by Buyer or customer licensee, shall
remain the property of MGC or its licensors. Buyer shall maintain a record of
the number and location of all
<PAGE> 18
copies of MGC Software made by Buyer, including MGC Software that have been
merged with other software. Buyer shall promptly make such records available to
MGC upon request.
(c) Buyer shall sublicense MGC Software to customers under the same
license terms that Buyer uses to protect and license its own software products.
(d) MGC Software may only be used to develop, sublicense and support
of Buyer Products. MGC Software may not be used to develop products which
compete with other MGC products. MGC Software may only be distributed as built
into object code executable Buyer Products.
2.3 Proprietary Markings. All copies of the MGC Software reproduced or
distributed by or for Buyer will incorporate copyright and other proprietary
notices in the same manner as in the copy provided to Buyer by MGC.
2.4 Other Material. Except for the MGC Software in SCHEDULE 1.1(c), MGC
shall have no obligation to deliver any material Buyer under this EXHIBIT A-1.
3. DISCLAIMER OF WARRANTY. REGARDLESS OF ANY OTHER PROVISION OF THIS AGREEMENT,
BUYER AGREES THAT MGC SOFTWARE IS PROVIDED "AS IS" AND MGC MAKES NO WARRANTIES
WITH RESPECT TO LOANED SOFTWARE, EITHER EXPRESS OR IMPLIED, INCLUDING ANY
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
4. LIMITATION OF LIABILITY. MGC IS NOT LIABLE FOR ANY PROPERTY DAMAGE, PERSONAL
INJURY, LOSS OF PROFITS, INTERRUPTION OF BUSINESS, OR FOR ANY OTHER SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF
WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
5. MGC's Title. Title to all MGC Software and copies, all patents and
copyrights, and all specifications, designs, programs, utilities and trademarks
provided by MGC shall remain with MGC. Except as specifically granted by the
terms of this license, Buyer shall have no right to sell, license or transfer
any software under this EXHIBIT A-1 without the express written consent of MGC.
<PAGE> 19
SCHEDULE 1.1(c)
LIST OF MENTOR GRAPHICS SOFTWARE
GDT Installation Files
ind/fib/lxinit-m
ind/lib/ledinit.m
ind/lib/ledlib.ma
ind/fib/lxlib.ma
ind/lib/ge_10.4.ma
ind/lib/ghitlib.ma
ind/lib/*.bdf ind/lib/hpfont
ind/lib/sunfont
ind/apps/DATABASE.m
ind/apps/database/database.ma md/apps/ACAP.m
ind/apps/CIF.m ind/apps/GDS.m
ind/apps/GRID.m ind/apps/SDL
ind/apps/acap
ind/apps/acap2 ind/apps/cif
ind/apps/util ind/config/led.menu
ind/config/postscript.setup
ind/config/postscript_colors
ind/config/printer_configuration
SCSMACH/gdtwait.text
SCSMACH/gex.text
SCSMACH/xwv11.text
<PAGE> 20
GDT / Misc. Header, Library, and Object Files
1. HEADER FILES
ind/include/gdtg1obal.h
ind/include/larglist.h
ind/include/ldefs.h
ind/include/ledintf.h
ind/include/ltech.h
ind/include/lx.h
ind/include/li.h
ind/include/lxcommon.h
ind/include/lstruct.h
ind/include/led.h
ind/include/sdl.h
ind/include/path.h
(B) LIBRARY ARCHIVE FILES
SCSMACH/lib/libpub.a
SCSMACH/lib/ledin.a
SCSMACH/lib/libcroute.a
SCSMACH/lib/flm.a
(C) OBJECT FILES
SCSMACH/lib/Iroute.o
SCSMACH/fib/Iflm.o
SCSMACH/lib/li.o
SCSMACH/lib/li_dummy.0
SCSMACH/lib/foreach.Ici.o
SCSMACH/lib/lx.o
SCSMACH/lib/acap_space.o
SCSMACH/lib/libnlt.o
SCSMACH/lib/lcparser.0
SCSMACH/lib/ledname.ici.o
SCSMACH/lib/leddraw.Ici.o
SCSMACH/lib/lrc.o
SCSMACH/lib/lcompact.o
SCSMACH/lib/itogds.o
SCSMACH/lib/scan_util.o
SCSMACH/lib/genlib.x11.o
<PAGE> 21
Imports for Builder Software
dc/eddm
ele/release
ele/genie_docs
fw/base
fw/ele
fw/readmedia
ic/icgraph
mf/mgcerr
mf/olh
<PAGE> 22
EXHIBIT A-2
MENTOR GRAPHICS SOFTWARE LICENSE
FOR PROVISION OF SERVICES AND SUPPORT
1. License Provisions.
1.1 License. MGC grants to Buyer a nonexclusive, nontransferable,
royalty-free license, for a term of three years from the date of Closing, to use
certain MGC software, including regularly scheduled updates and fixes for
critical problems, loaned to Buyer (Loaned Software) and which is required for
the exclusive purposes of performing Buyer's responsibilities under Sections 1.3
and 6 of the Agreement and for providing support to Buyer's customers. Loaned
Software is listed in SCHEDULE 1.1(d). For each loan MGC will identify in
writing to Buyer the Loaned Software, authorized location and the term of the
loan.
1.2 Restrictions on Use. The following conditions apply to this grant:
(a) All software provided by MGC to Buyer is trade secret or
confidential information of MGC or its licensors. Buyer shall not make such
software available in any form to any person other than Buyer's employees whose
job performance requires such access and to Buyer's customers as authorized by
this Agreement. Buyer shall take appropriate action to protect the
confidentiality of such software and to ensure that any person permitted access
to such software does not provide or disclose it to others. Buyer shall not
reverse-assemble, reverse-compile, or otherwise reverse-engineer any such
software, in whole or in part. The provisions of this Section 1.2 shall survive
the termination or expiration of this Agreement.
(b) Buyer may copy MGC Software only as reasonably necessary to
support the authorized use. Buyer shall reproduce in all copies of MGC Software
all notices and legends included in MGC Software as received from MGC and shall
affix to the copy medium and the container housing the medium all notices and
legends affixed to the medium or container received from MGC. All copies of MGC
Software, whether provided by MGC or made by Buyer or customer licensee, shall
remain the property of MGC or its licensors. Buyer shall maintain a record of
the number and location of all copies of MGC Software made by Buyer, including
MGC Software that have been merged with other software. Buyer shall promptly
make such records available to MGC upon request.
(c) Buyer shall sublicense MGC Software to customers under the same
license terms that Buyer uses to protect and license its own software products.
(d) Upon termination or expiration of this license grant, Buyer
shall promptly destroy or return Loaned Software to Mentor Graphics.
<PAGE> 23
2. DISCLAIMER OF WARRANTY. REGARDLESS OF ANY OTHER PROVISION OF THIS AGREEMENT,
BUYER AGREES THAT LOANED SOFTWARE IS PROVIDED "AS IS" AND MGC MAKES NO
WARRANTIES WITH RESPECT TO LOANED SOFTWARE, EITHER EXPRESS OR IMPLIED, INCLUDING
ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
3. LIMITATION OF LIABILITY. MGC IS NOT LIABLE FOR ANY PROPERTY DAMAGE, PERSONAL
INJURY, LOSS OF PROFITS, INTERRUPTION OF BUSINESS, OR FOR ANY OTHER SPECIAL,
CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVER CAUSED, WHETHER FOR BREACH OF
WARRANTY, CONTRACT, TORT (INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.
4. MGC's Title. Title to all MGC software and copies, all patents and
copyrights, and all specifications, designs, programs, utilities and trademarks
provided by MGC shall remain with MGC. Except as specifically granted by the
terms of this license, Buyer shall have no right to sell, license or transfer
any software under this Agreement without the express written consent of MGC.
<PAGE> 24
SCHEDULE 1.1(d)
LIST OF MENTOR GRAPHICS SOFTWARE
FOR PROVISION OF SERVICES AND SUPPORT
Calibre & xCalibre
Datapath Compiler
Design Architect
DFT
Eldo
Flextest & Fastscan & DFT Advisor
GDT
HotPlot
ICGen
IC Station
Lsim
Mach-TA &
Mach-PA & Simwave
Mbist Architect
Model-Sim
QuickPath
QuickSim
SST Velocity
<PAGE> 25
SCHEDULE 1.3(d)
DEVELOPMENT SPECIFICATION
POWERPC MEMORY DELIVERABLES DOCUMENT
TLB
Cache Memories
0.- GENERALS
TLB : Translation Lookaside Buffer: 1 Block
Caches : Byte Write Memories with latched output: 4 Blocks
256x128
256x51
512x 128
512x51
1.- FUNCTION
For TLB and Caches: Matching Original Verilog model.
For TLB: similar to IBM Documentation "6SF TLB Macro
Description" without Built-in test features
2.- PROCESS AND OPERATING CONDITIONS
Worst Operating Conditions: 85C junction, 1.62 V, slow process.
(UMC 0.18 version)
Other operating conditions to be determined for other processes
3.- GDSII
Passing Calibre DRC.
All cells included
Same mapping numbers as UMC18 Standard cell Library. Power rings
included in Layout.
3 Layers Metal.
4.- LEF FOOTPRINT
Targeting Cadence Silicon Ensemble Place & Route.
Same layer names as UMC18 lib.
5.- DRC EXCEPTIONS
Need Description of DRC Exceptions List of cells not to check
Errors to ignore.
6.- SPICE NETLIST
Passing Calibre LVS.
<PAGE> 26
SCHEDULE 1.1(f)
LIST OF THIRD-PARTY SOFTWARE
3000370 VHDL TECH GP STD DEV KIT
3000424 ADVANEDGE OPTIMA SOFTWARE
3000431 PATHMILL, SINGLEUSER/FLOATING
3000459 PRECEDENCE VERILOG LSIM F-LIC
3000472 POWERMILL FLOATING & INTERFACE
3000475 PRECEDENCE VERILOG COLSIM
3000494 PATHMILL SINGLE/FLOATING LIC
3000523 VTRAN - Vector Translation Software
3000532 PRECEDENCE VHDL COLSIM (FLOATING LICENSE
3000547 SW Turbowave waveform viewer, floating
3000593 Dream Layout Porting Software by Sagante
3000824 Rahpael Software - floating license
3000825 VTRAN - Source III Software
3000903 JavaStar JSRI 8-113-T889 Software
3000946 Motive Software
3000947 SimWave Software
* Including all other Third-Party Software that is not part of the above list
but physically located at the PLD Division that is being used by the PLD group
for the purpose of development and support.
<PAGE> 27
EXHIBIT B
SOFTWARE SUPPORT RESPONSIBILITIES
Software support related activities for MGC customers under support contracts
("Support Customers") covering the MGC products listed on SCHEDULE 1.1(b) ("MGC
Products") will be provided by MGC and Buyer as described below until all
applicable current support contracts have expired.
1. Definitions. The following definitions shall apply to this Exhibit.
1.1 "Backup Support" means the party responsible for all Error
Corrections, New Versions and product enhancements. The Backup Support party is
responsible for providing software and documentation New Version masters and
copies for distribution to Support Customers.
1.2 "Documentation Updates" means Error Corrections, updates, and
changes to documentation which keep it current with the MGC Products and
specifications. Buyer will provide core documentation and Documentation Updates
for shipment on CD directly to Support Customers.
1.3 "Error Correction" means the development of a Workaround, Fix or New
Version of MGC Products which brings the product back into specification or
allows the MGC Products to be reasonably convenient to use within the Support
Customer's environment.
1.4 "First Line Support" means responding to the initial request for
support determining the product being used, and as appropriate, routing the
issue to the Primary Support provider for resolution.
1.5 "Fix" means a change required in the MGC Products to make the
product perform in accordance with specifications or to correct a Product
Deficiency. A Fix may be provided by telephone, facsimile, or software patch.
1.6 "New Version" means a new version of MGC Products or portions of MGC
Products and related documentation, which is distributed to Support Customers
and is intended to provide Fixes, Error Corrections, new features, performance
enhancements, and increased reliability, performance, or capacity.
1.7 "Primary Support," means taking responsibility for the customer
issue, communicating regular status updates, using reasonable efforts to
determine the cause of the problem, or reproducing the problem, if possible, and
working directly with Support Customers on a Product Report if required to
resolve the problem. In addition, the Primary Support provider will:
<PAGE> 28
(a) explain product usage; or
(b) identify product problems and resolve or provide Workarounds or
Fixes; or
(c) ensure that the resolution of the Product Report or enhancement
request is satisfactory to the customer;
(d) track and close all issues with Support Customers; and
(e) provide all New Versions to Support Customers.
1.8 "Product Deficiency" means a problem reported by Support Customers
or MGC where the behavior of the MGC Products is not as predicted by the MGC
Product functional specification or documentation, but which significantly
impact product usage. Product Deficiencies may include bugs, non-compliance with
standards, or problems which make the software inconsistent or inconvenient to
use, performance significantly less than competitors, or capacity significantly
less than competitors.
1.9 "Product Report" means the form of documentation describing a
request for Error Correction.
1.10 "Support Services Sales" means selling support services to Support
Customers, including accepting a purchase order as applicable.
1.11 "Workaround" means an alternative method to use MGC Products to
avoid Product Deficiencies. Workarounds provided to Support Customers and MGC
will include a description of the symptoms of the problem fixed.
2. Support Responsibility Matrix. Support related activities for MGC Products
will be provided by the parties as follows:
<TABLE>
<CAPTION>
Support Activity Party
---------------- -----
<S> <C>
Error Correction Buyer
Documentation Updates Buyer
First Line Support MGC
Primary Support Buyer
Backup Support Buyer
</TABLE>
3. MGC's responsibilities. First Line Support for Support Customers will be
provided by MGC regional Support Centers.
4. Buyer's Responsibilities. Buyer shall provide Primary and Backup Support to
MGC. Buyer's support engineers will attempt to diagnose all incoming Product
Reports,
<PAGE> 29
provide Fixes or Workarounds and additional engineering of MGC Products to solve
problems Support shall include, without limitation, diagnostics,
troubleshooting, operation and service recommendations and answers to general
technical inquiries. Buyer's North American technical support telephone number
is (877) 360-6690. The support line shall be available between 9:00 am. and 5:00
p.m. Pacific Time excluding weekends and holidays. International technical
support shall be available as agreed by the parties. In addition:
4.1 Notification of Product Deficiencies. Buyer shall acknowledge
receipt of notification of Product Deficiencies within four working hours of
such notice. Buyer shall have the capability to receive files electronically via
email and FTP from Support Customers.
4.2 Test Cases. Any test case provided by MGC on behalf of a Support
Customer shall be disclosed to Buyer pursuant to the terms of Section 2.1 of the
Agreement.
4.3 Product Deficiency, Workarounds. Buyer shall report all known
Product Deficiencies and provide their Workarounds to Support Customers in
written or electronic form as soon as such Workarounds are available.
4.4 New Versions. Buyer shall provide New Versions of MGC Products to
Support Customers as soon as such versions are available. Each New Version of
the MGC Products shall be provided on mutually agreed to media or by electronic
means and shall include release notes, a listing of all Product Deficiencies and
Product Reports fixed, a listing of all open Product Deficiencies and Product
Reports, and a listing of all enhancements included in the New Version.
4.5 Correction of Errors. Buyer will use best efforts to design, code
and implement programming changes and modifications to correct reproducible
errors in order to bring the software into conformance with the specifications
and performance standards.
4.6 Priority. The priority of an error will determine the response time
requirements. Buyer shall use its reasonable best efforts to correct all bugs or
Product Deficiencies in accordance with the resolution times described below:
(a) Critical. Within two business days of notification and receipt
of file, Buyer will: (i) provide a Workaround or Fix; or (ii) if the Fix cannot
be provided within two business days, propose a date, subject to MGC's approval,
when a Fix will be provided; and in any event, (iii) provide a Fix to the
Support Customer within 30 calendar days; and (iv) fix the Product Deficiency in
the next available New Version.
<PAGE> 30
(b) High. Within 14 calendar days of notification and receipt of
file, Buyer will: (i) communicate the commitment to a Workaround or Fix
availability within 14 calendar days of notification, and (ii) deliver the Fix
in the next available New Version to the Support Customer within 60 calendar
days; or (iii) provide a Workaround or Fix within 60 calendar days and fix the
Product Deficiency in the next available New Version.
(c) Medium. Within four weeks of notification and receipt of file,
Buyer will: (i) communicate the commitment to a Workaround or Fix and New
Version availability; and (ii) deliver to such commitment.
(d) Low. Within six weeks of notification and receipt of file, Buyer
will: (i) communicate the commitment to a Workaround or Fix and New Version
availability; and (ii) deliver to such commitment.
4.7 Problem Priority. For purposes of this Exhibit, the priority level
which indicates the impact of the problem on the Support Customer is defined
below:
(a) Critical. The problem prevents use of MGC Products where use of
MGC Products is on Support Customer's critical path, no Workaround exists for
the problem, and use is mission critical to the customer.
(b) High. The problem prevents use of MGC Products where use of MGC
Products will soon be on Support Customer's critical path and no Workaround
exists for the problem. If this problem is not corrected in a timely fashion, it
may become Critical.
(c) Medium. The problem impairs use of MGC Products where use of MGC
Products (i) is on Support Customer's critical path, a Workaround exists and the
Workaround process is tedious (impacts productivity); or (ii) the problem
prevents use of MGC Products not on Support Customer's critical path, and no
Workaround exists. In either case, there is a significant impact on productivity
and the problem is seen by the Support Customer as a major inconvenience or a
large number of Support Customers is affected or the problem is chronic.
(d) Low. The problem impacts productivity and is seen by the Support
Customer as a minor inconvenience and an acceptable Workaround exists for the
problem. Other descriptors may include: nuisance; easily worked around;
annoyance; trivial; or the likelihood of running into it elsewhere is very low
and it is not a severe problem.
4.8 Failure to Comply. If Buyer does not comply with this Section 4
within a reasonable time, MGC shall have the right to suspend support payments
to Buyer.
<PAGE> 31
SCHEDULE 1.4
LIST OF EMPLOYEES
<TABLE>
<CAPTION>
Name
- ---------------------------------------------
Last First
- ---- ------
<S> <C>
Ahmed Imtiaz
Au Su
Brown Stuart
Caporossi James
Chen David
Chen Jijun
Chen Thomas
Chintamaneni Prakash
Choi Yong-Moon
Cooper Carolina
Dean Ingo
Hendershot Julie
Hoggar Daniel
Hossain Razak
Jiang Ning
Kaplan Mark
Kumar C K Niranjan
Lee Kyongsu,
Liu Min
McComas Christopher
Nowicki Chester
Oporto Ernest
Pan Jindong
Patent Paul
Perkalis Stephen
Rahman Mohammad
Salerno Carmine
Schondorf Alison
Teslenko Leonard
Thukral Rahul
Walton Michael
Wang Mingli
Zhang Xian-quan
</TABLE>
<PAGE> 32
EXHIBIT C
ASSIGNMENT AND BILL OF SALE
Pursuant to the Asset Purchase Agreement dated November __, 1999 (the
"Agreement") between Virage Logic Corporation, a California corporation
("Buyer"), and Mentor Graphics Corporation, an Oregon corporation ("MGC"), for
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, MGC does hereby sell, transfer, convey, grant and assign the
Assets (as defined in the Agreement) to.
MGC hereby transfers the foregoing Assets free and clear of all liens,
claims and encumbrances of every type whatsoever. This instrument will vest in
Buyer good and marketable title to the foregoing Assets, free and clear of all
liens, claims and encumbrances.
IN WITNESS WHEREOF, MGC has caused this Assignment and Bill of Sale to
be executed and delivered effective as of the close of business on the __ day of
November, 1999.
MENTOR GRAPHICS CORPORATION
By:
---------------------------
Title:
-------------------------
<PAGE> 1
EXHIBIT 10.11
================================================================================
LOAN AND SECURITY AGREEMENT
VIRAGE LOGIC CORPORATION
VIRAGE LOGIC INTERNATIONAL
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1 ACCOUNTING AND OTHER TERMS............................................ 4
2 LOAN AND TERMS OF PAYMENT............................................. 4
2.1 Credit Extensions............................................... 4
2.2 Overadvances.................................................... 5
2.3 Interest Rate, Payments......................................... 5
2.4 Fees............................................................ 5
3 CONDITIONS OF LOANS................................................... 5
3.1 Conditions Precedent to Initial Credit Extension................ 5
3.2 Conditions Precedent to all Credit Extensions................... 5
4 CREATION OF SECURITY INTEREST......................................... 6
4.1 Grant of Security Interest...................................... 6
5 REPRESENTATIONS AND WARRANTIES........................................ 6
5.1 Due Organization and Authorization.............................. 6
5.2 Collateral...................................................... 6
5.3 Litigation...................................................... 6
5.4 No Material Adverse Change in Financial Statements.............. 6
5.5 Solvency........................................................ 6
5.6 Regulatory Compliance........................................... 7
5.7 Subsidiaries.................................................... 7
5.8 Full Disclosure................................................. 7
6 AFFIRMATIVE COVENANTS................................................. 7
6.1 Government Compliance........................................... 7
6.2 Financial Statements, Reports, Certificates..................... 7
6.3 Inventory; Returns.............................................. 8
6.4 Taxes........................................................... 8
6.5 Insurance....................................................... 8
6.6 Primary Accounts................................................ 8
6.7 Financial Covenants............................................. 8
6.8 Further Assurances.............................................. 8
7 NEGATIVE COVENANTS.................................................... 9
7.1 Dispositions.................................................... 9
7.2 Changes in Business, Ownership, Management or
Business Locations.............................................. 9
7.3 Mergers or Acquisitions......................................... 9
7.4 Indebtedness.................................................... 9
7.5 Encumbrance..................................................... 9
7.6 Distributions; Investments...................................... 9
7.7 Transactions with Affiliates.................................... 9
7.8 Subordinated Debt............................................... 10
7.9 Compliance...................................................... 10
8 EVENTS OF DEFAULT..................................................... 10
8.1 Payment Default................................................. 10
8.2 Covenant Default................................................ 10
8.3 Material Adverse Change......................................... 10
8.4 Attachment...................................................... 10
8.5 Insolvency...................................................... 11
8.6 Other Agreements................................................ 11
8.7 Judgments....................................................... 11
8.8 Misrepresentations.............................................. 11
9 BANK'S RIGHTS AND REMEDIES............................................ 11
9.1 Rights and Remedies............................................. 11
9.2 Power of Attorney............................................... 12
9.3 Accounts Collection............................................. 12
9.4 Bank Expenses................................................... 12
9.5 Bank's Liability for Collateral................................. 12
9.6 Remedies Cumulative............................................. 12
9.7 Demand Waiver................................................... 12
10 NOTICES AND WAIVERS................................................... 13
10.1 Notices......................................................... 13
10.2 Subrogation and Similar Rights.................................. 13
10.3 Waivers of Notice............................................... 13
10.4 Subrogation Defenses............................................ 14
10.5 Right to Settle, Release........................................ 14
11 CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER............................ 14
12 GENERAL PROVISIONS.................................................... 14
12.1 Successors and Assigns.......................................... 14
12.2 Indemnification................................................. 15
12.3 Time of Essence................................................. 15
12.4 Severability of Provision....................................... 15
12.5 Amendments in Writing, Integration.............................. 15
12.6 Counterparts.................................................... 15
12.7 Survival........................................................ 15
12.8 Confidentiality................................................. 15
12.9 Attorneys' Fees, Costs and Expenses............................. 15
13 DEFINITIONS........................................................... 16
13.1 Definitions..................................................... 16
</TABLE>
<PAGE> 3
THIS LOAN AND SECURITY AGREEMENT dated July 28, 1999, between SILICON
VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and VIRAGE LOGIC CORPORATION and VIRAGE LOGIC INTERNATIONAL
("Borrower") provides the terms on which Bank will lend to Borrower and Borrower
will repay Bank. The parties agree as follows:
1. ACCOUNTING AND OTHER TERMS
Accounting terms not defined in this Agreement will be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
"financial statements" includes the notes and schedules. The terms "including"
and "includes" always mean "including (or includes) without limitation," in this
or any Loan Document This Agreement shall be construed to impart upon Bank a
duty to act reasonably at all times.
2. LOAN AND TERMS OF PAYMENT
2.1 CREDIT EXTENSIONS.
Borrower will pay Bank the unpaid principal amount of all Credit
Extensions and interest on the unpaid principal amount of the Credit Extensions.
2.1.1 REVOLVING ADVANCES.
(a) Bank will make Advances not exceeding (i) the lesser of (A) the
Committed Revolving Line minus the Cash Management Services Sublimit or (B) the
Borrowing Base, minus (ii) the amount of all outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit). Amounts borrowed under
this Section may be repaid and reborrowed during the term of this Agreement.
(b) To obtain an Advance, Borrower must notify Bank by facsimile or
telephone by 3:00 p.m. Pacific time on the Business Day the Advance is to be
made. Borrower must promptly confirm the notification by delivering to Bank the
Payment/Advance Form attached as Exhibit B. Bank will credit Advances to
Borrower's deposit account. Bank may make Advances under this Agreement based on
instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become
due. Bank may rely on any telephone notice given by a person whom Bank believes
is a Responsible Officer or designee. Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.
(c) The Committed Revolving Line terminates on the Revolving Maturity
Date, when all Advances are immediately payable.
<PAGE> 4
2.1.2 LETTERS OF CREDIT.
Bank will issue or have issued Letters of Credit for Borrower's account
not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing
Base minus (ii) the outstanding principal balance of the Advances minus the Cash
Management Sublimit; however, the face amount of outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve) may not exceed $150,000. Each Letter of Credit will have an expiry date
of no later than 180 days after the Revolving Maturity Date, but Borrower's
reimbursement obligation will be secured by cash on terms acceptable to Bank at
any time after the Revolving Maturity Date if the term of this Agreement is not
extended by Bank. Borrower agrees to execute any further documentation in
connection with the Letters of Credit as Bank may reasonably request.
2.1.3 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to $150,000 for Bank's Cash Management Services, which
may include merchant services, direct deposit of payroll, business credit card,
and check cashing services identified in various cash management services
agreements related to such services (the "Cash Management Services"). All
amounts Bank pays for any Cash Management Services will be treated as Advances
under the Committed Revolving Line.
2.2 OVERADVANCES.
If Borrower's Obligations under Section 2.1.1 and 2.1.2 exceed the lesser
of either (i) the Committed Revolving Line minus the Cash Management Sublimit or
(ii) the Borrowing Base, Borrower must immediately pay Bank the excess or if
Borrower's obligations under 2.1.2 and 2.1.3 exceed $150,000.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding principal
balance at a per annum rate of 1 percentage points above the Prime Rate. After
an Event of Default, Obligations accrue interest at 5 percent above the rate
effective immediately before the Event of Default. The interest rate increases
or decreases when the Prime Rate changes. Interest is computed on a 360 day year
for the actual number of days elapsed.
(b) Payments. Interest due on the Committed Revolving Line is payable on
the 27th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number _________________ for principal and interest payments
owing or any amounts Borrower owes Bank. Bank will promptly notify Borrower when
it debits Borrower's accounts. These debits are not a set-off. Payments received
after 12:00 noon Pacific time are considered received at the opening of business
on the next Business Day. When a payment is due on a day that is not a Business
Day, the payment is due the next Business Day and additional fees or interest
accrue.
2
<PAGE> 5
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of $22,500
due on the Closing Date; and
(b) Bank Expenses. All Bank Expenses (including reasonable attorneys' fees
and reasonable expenses) incurred through and after the date of this Agreement,
are payable when due.
3. CONDITIONS OF LOANS
3.1 CONDITIONS PRECEDENT TO INITIAL CREDIT EXTENSION.
Bank's obligation to make the initial Credit Extension is subject to the
condition precedent that it receive the agreements, documents and fees it
requires.
3.2 CONDITIONS PRECEDENT TO ALL CREDIT EXTENSIONS.
Bank's obligations to make each Credit Extension, including the initial
Credit Extension, is subject to the following:
(a) timely receipt of any Payment/Advance Form; and
(b) the representations and warranties in Section 5 must be materially
true on the date of the Payment/Advance Form and on the effective date of each
Credit Extension and no Event of Default may have occurred and be continuing, or
result from the Credit Extension. Each Credit Extension is Borrower's
representation and warranty on that date that the representations and warranties
of Section 5 remain true.
4. CREATION OF SECURITY INTEREST
4.1 GRANT OF SECURITY INTEREST.
Borrower grants Bank a continuing security interest in all presently
existing and later acquired Collateral to secure all Obligations and performance
of each of Borrower's duties under the Loan Documents. Except for Permitted
Liens, any security interest will be a first priority security interest in the
Collateral. Bank may place a "hold" on any deposit account pledged as
Collateral. If this Agreement is terminated, Bank's lien and security interest
in the Collateral will continue until Borrower fully satisfies its Obligations.
5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants as follows:
3
<PAGE> 6
5.1 DUE ORGANIZATION AND AUTHORIZATION.
Borrower and each Subsidiary is duly existing and in good standing in its
state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be qualified, except where the failure to do so could
not reasonably be expected to cause a Material Adverse Change.
The execution, delivery and performance of the Loan Documents have been
duly authorized, and do not conflict with Borrower's formation documents, nor
constitute an event of default under any material agreement by which Borrower is
bound. Borrower is not in default under any agreement to which or by which it is
bound in which the default could cause reasonably be expected to cause a
Material Adverse Change.
5.2 COLLATERAL.
Borrower has good title to the Collateral, free of Liens except Permitted
Liens. The Accounts are bona fide, existing obligations, and the service or
property has been performed or delivered to the account debtor or its agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has no notice of any actual or imminent Insolvency Proceeding of any
account debtor whose accounts are an Eligible Account in any Borrowing Base
Certificate. All Inventory is in all material respects of good and marketable
quality, free from material defects.
5.3 LITIGATION.
Except as shown in the Schedule, there are no actions or proceedings
pending or, to the knowledge or Borrower's Responsible Officers and legal
counsel, threatened by or against Borrower or any Subsidiary in which a likely
adverse decision could reasonably be expected to cause a Material Adverse
Change.
5.4 NO MATERIAL ADVERSE CHANGE IN FINANCIAL STATEMENTS.
All consolidated financial statements for Borrower, and any
Subsidiary, delivered to Bank fairly present in all material respects Borrower's
consolidated financial condition and Borrower's consolidated results of
operations. There has not been any material deterioration in Borrower's
consolidated financial condition since the date of the most recent financial
statements submitted to Bank.
5.5 SOLVENCY.
The fair salable value of Borrower's assets (including goodwill minus
disposition costs) exceeds the fair value of its liabilities; the Borrower is
not left with unreasonably small capital after the transactions in this
Agreement and Borrower is able to pay its debts (including trade debts) as they
mature.
4
<PAGE> 7
5.6 REGULATORY COMPLIANCE.
Borrower is not an "investment company' or a company "controlled" by an
"investment company" under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower's or any Subsidiary's properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower's knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted, except where the failure to do so could not reasonably be
expected to cause a Material Adverse Change.
5.7 SUBSIDIARIES.
Borrower does not own any stock, partnership interest or other equity
securities except for Permitted Investments.
5.8 FULL DISCLOSURE.
No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such
written certificates and written statements to Bank) contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements contained in the certificates or statements not misleading. It
being recognized by Bank that the projections and forecasts provided by Borrower
in good faith and based upon reasonable assumptions are not viewed as facts and
that actual results during the period or periods covered by such projections and
forecasts may differ from the projected and forecasted results.
6. AFFIRMATIVE COVENANTS
Borrower will do all of the following:
6.1 GOVERNMENT COMPLIANCE.
Borrower will maintain its and all Subsidiaries' legal existence and good
standing in its jurisdiction of formation and maintain qualification in each
jurisdiction in which the failure to so qualify would reasonably be expected to
cause a material adverse effect on Borrower's business or operations. Borrower
will comply, and have each Subsidiary
5
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comply, with all laws, ordinances and regulations to which it is subject,
noncompliance with which could have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change.
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) as soon as available, but no later
than 30 days after the last day of each month and quarter, a company prepared
consolidated balance sheet and income statement covering Borrower's consolidated
operations during the period, in a form and certified by a Responsible Officer
acceptable to Bank (ii) as soon as available, but no later than 120 days after
the last day of Borrower's fiscal year, audited consolidated financial
statements prepared under GAAP, consistently applied, together with an
unqualified opinion on the financial statements from an independent certified
public accounting firm reasonably acceptable to Bank; (iii) a prompt report of
any legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of $100,000 or
more; and (iv) budgets, sales projections, operating plans or other financial
information Bank reasonably requests.
(b) Within 30 days after the last day of each month, Borrower will deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form
of Exhibit C, with aged listings of accounts receivable and accounts payable.
(c) Within 30 days after the last day of each month and quarter, Borrower
will deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit D.
(d) Bank has the right to audit Borrower's Collateral at Borrower's
expense, but the audits will be conducted no more often than every 6 months
unless an Event of Default has occurred and is continuing.
6.3 INVENTORY; RETURNS.
Borrower will keep all Inventory in good and marketable condition, free
from material defects. Returns and allowances between Borrower and its account
debtors will follow Borrower's customary practices as they exist at execution of
this Agreement. Borrower must promptly notify Bank of all returns, recoveries,
disputes and claims, that involve more than $50,000.
6.4 TAXES.
Borrower will make, and cause each Subsidiary to make. timely payment of
all material federal, state, and local taxes or assessments and will deliver to
Bank, on demand, appropriate certificates attesting to the payment.
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6.5 INSURANCE.
Borrower will keep its business and the Collateral insured for risks and
in amounts, as Bank may reasonably request. Insurance policies will be in a
form, with companies, and in amounts that are satisfactory to Bank in Bank's
reasonable discretion. All property policies will have a lender's loss payable
endorsement showing Bank as an additional loss payee and all liability policies
will show the Bank as an additional insured and provide that the insurer must
give Bank at least 20 days notice before canceling its policy. At Bank's
request, Borrower will deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy will, at Bank's option, be
payable to Bank on account of the Obligations.
6.6 PRIMARY ACCOUNTS.
Borrower will maintain its primary depository and operating accounts with
Bank.
6.7 FINANCIAL COVENANTS.
Borrower will maintain as of the last day of each month unless otherwise
noted:
(i) Quick Ratio. A ratio of Quick Assets to Current Liabilities of at
least 1.30 to 1.00.
(ii) Profitability. Borrower will be profitable on a quarterly basis.
6.8 FURTHER ASSURANCES.
Borrower will execute any further instruments and take further action as
Bank reasonably requests to perfect or continue Bank's security interest in the
Collateral or to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
Borrower will not do any of the following without Bank's prior written
consent which will not be unreasonably withheld:
7.1 DISPOSITIONS.
Convey, sell, lease, transfer or otherwise dispose of (collectively
"Transfer"), or permit any of its Subsidiaries to Transfer, all or any part of
its business or property, other than Transfers (i) of Inventory in the ordinary
course of business; (ii) of non-exclusive licenses and similar arrangements for
the use of the property of Borrower or its Subsidiaries in the ordinary course
of business; or (iii) of worn-out or obsolete Equipment.
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7.2 CHANGES IN BUSINESS, OWNERSHIP, MANAGEMENT OR BUSINESS LOCATIONS.
Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto or have a material change in its ownership or management (other than the
sale of Borrower's equity securities in a public offering or to venture capital
investors approved by Bank) of greater than 25%. Borrower will not, without at
least 30 days prior written notice, relocate its chief executive office or add
any new offices or business locations.
7.3 MERGERS OR ACQUISITIONS.
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or
property of another Person, except where (i) no Event of Default has occurred
and is continuing or would result from such action during the term of this
Agreement and (ii) result in a decrease of more than 25% of Tangible Net Worth.
A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
7.4 INDEBTEDNESS.
Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 ENCUMBRANCE.
Create, incur, or allow any Lien on any of its property, or assign or
convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest granted
here, subject to Permitted Liens.
7.6 DISTRIBUTIONS; INVESTMENTS.
Directly or indirectly acquire or own any Person, or make any Investment
in any Person, other than Permitted Investments, or permit any of its
Subsidiaries to do so. Pay any dividends or make any distribution or payment or
redeem, retire or purchase any capital stock.
7.7 TRANSACTIONS WITH AFFILIATES.
Directly or indirectly enter or permit any material transaction with any
Affiliate except transactions that are in the ordinary course of Borrower's
business, on terms less favorable to Borrower than would be obtained in an arm's
length transaction with a non-affiliated Person.
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7.8 SUBORDINATED DEBT.
Make or permit any payment on any Subordinated Debt, except under the
terms of the Subordinated Debt or amend any provision in any document relating
to the Subordinated Debt without Bank's prior written consent.
7.9 COMPLIANCE.
Become an "investment company" or a company controlled by an "investment
company," under the Investment Company Act of 1940 or undertake as one of its
important activities extending credit to purchase or carry margin stock, or use
the proceeds of any Credit Extension for that purpose; fail to meet the minimum
funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
could reasonable be expected to have a material adverse effect on Borrower's
business or operations or would reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so.
8. EVENTS OF DEFAULT
Any one of the following is an Event of Default:
8.1 PAYMENT DEFAULT.
If Borrower fails to pay any of the Obligations within 3 days after their
due date. During the additional period the failure to cure the default is not an
Event of Default (but no Credit Extension will be made during the cure period);
8.2 COVENANT DEFAULT.
If Borrower does not perform any obligation in Section 6 or violates any
covenant in Section 7 or does not perform or observe any other material term,
condition or covenant in this Agreement, any Loan Documents, or in any agreement
between Borrower and Bank and as to any default under a term, condition or
covenant that can be cured, has not cured the default within 10 days after it
occurs, or if the default cannot be cured within 10 days or cannot be cured
after Borrower's attempts within 10 day period, and the default may be cured
within a reasonable time, then Borrower has an additional period (of not more
than 30 days) to attempt to cure the default. During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions
will be made during the cure period);
8.3 MATERIAL ADVERSE CHANGE.
(i) If there occurs a material impairment in the perfection or priority of
the Bank's security interest in the Collateral or in the value of such
Collateral (other than
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normal depreciation) which is not covered by adequate insurance or (ii) if the
Bank determines, based upon information available to it and in its reasonable
judgment, that there is a reasonable likelihood that Borrower will fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.
8.4 ATTACHMENT.
If any material portion of Borrower's assets is attached, seized, levied
on, or comes into possession of a trustee or receiver and the attachment seizure
or levy is not removed in 10 days, or if Borrower is enjoined, restrained, or
prevented by court order from conducting a material part of its business or if a
judgment or other claim becomes a Lien on a material portion of Borrower's
assets, or if a notice of lien, levy, or assessment is filed against any of
Borrower's assets by any government agency and not paid within 10 days after
Borrower receives notice. These are not Events of Default if stayed or if a bond
is posted pending contest by Borrower (but no Credit Extensions will be made
during the cure period);
8.5 INSOLVENCY.
If Borrower becomes insolvent or if Borrower begins an Insolvency
Proceeding or an Insolvency Proceeding is begun against Borrower and not
dismissed or stayed within 30 days (but no Credit Extensions will be made before
any Insolvency Proceeding is dismissed);
8.6 OTHER AGREEMENTS.
If there is a default in any agreement between Borrower and a third party
that gives the third party the right to accelerate any Indebtedness exceeding
$100,000 or that could cause a Material Adverse Change;
8.7 JUDGMENTS.
If a money judgment(s) in the aggregate of at least $50,000 is rendered
against Borrower and is unsatisfied and unstayed for 10 days (but no Credit
Extensions will be made before the judgment is stayed or satisfied); or
8.8 MISREPRESENTATIONS.
If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or
representation in this Agreement or in any writing delivered to Bank or to
induce Bank to enter this Agreement or any Loan Document.
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9. BANK'S RIGHTS AND REMEDIES
9.1 RIGHTS AND REMEDIES.
When an Event of Default occurs and continues Bank may, without notice or
demand, do any or all of the following:
(a) Declare all Obligations immediately due and payable (but if an Event
of Default described in Section 8.5 occurs all Obligations are immediately due
and payable without any action by Bank);
(b) Stop advancing money or extending credit for Borrower's benefit under
this Agreement or under any other agreement between Borrower and Bank;
(c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable;
(d) Make any payments and do any acts it considers necessary or reasonable
to protect its security interest in the Collateral. Borrower will assemble the
Collateral if Bank requires and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of
any part of the Collateral, and pay, purchase, contest or compromise any Lien
which appears to be prior or superior to its security interest and pay all
expenses incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank's rights or remedies;
(e) Apply to the Obligations any (i) balances and deposits of Borrower it
holds, or (ii) any amount held by Bank owing to or for the credit or the account
of Borrower;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for
sale, advertise for sale, and sell the Collateral; and
(g) Dispose of the Collateral according to the Code.
9.2 POWER OF ATTORNEY.
Effective only when an Event of Default occurs and continues, Borrower
irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name
on any checks or other forms of payment or security; (ii) sign Borrower's name
on any invoice or bill of lading for any Account or draft against account
debtors, (iii) make, settle, and adjust all claims under Borrower's insurance
policies; (iv) settle and adjust disputes and claims about the Accounts directly
with account debtors, for amounts and on terms Bank determines reasonable; and
(v) transfer the Collateral into the name of Bank or a third party as the Code
permits. Bank may exercise the power of attorney to sign Borrower's name on any
documents necessary to perfect or continue the perfection of any security
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interest regardless of whether an Event of Default has occurred. Bank's
appointment as Borrower's attorney in fact, and all of Bank's rights and powers,
coupled with an interest, are irrevocable until all Obligations have been fully
repaid and performed and Bank's obligation to provide Credit Extensions
terminates.
9.3 ACCOUNTS COLLECTION.
When an Event of Default occurs and continues, Bank may notify any Person
owing Borrower money of Bank's security interest in the funds and verify the
amount of the Account. Borrower must collect all payments in trust for Bank and,
if requested by Bank, immediately deliver the payments to Bank in the form
received from the account debtor, with proper endorsements for deposit.
9.4 BANK EXPENSES.
If Borrower fails to pay any amount or furnish any required proof of
payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the
policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and
immediately due and payable, bearing interest at the then applicable rate and
secured by the Collateral. No payments by Bank are deemed an agreement to make
similar payments in the future or Bank's waiver of any Event of Default.
9.5 BANK'S LIABILITY FOR COLLATERAL.
If Bank complies with reasonable banking practices and Section 9-207 of
the Code, it is not liable for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other person. Borrower bears all risk of loss, damage or destruction of the
Collateral.
9.6 REMEDIES CUMULATIVE.
Bank's rights and remedies under this Agreement, the Loan Documents, and
all other agreements are cumulative. Bank has all rights and remedies provided
under the Code, by law, or in equity. Bank's exercise of one right or remedy is
not an election, and Bank's waiver of any Event of Default is not a continuing
waiver. Bank's delay is not a waiver, election, or acquiescence. No waiver is
effective unless signed by Bank and then is only effective for the specific
instance and purpose for which it was given.
9.7 DEMAND WAIVER.
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default nonpayment at maturity, release,
compromise,
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settlement extension, or renewal of accounts, documents, instruments, chattel
paper, and guarantees held by Bank on which Borrower is liable.
10. NOTICES AN WAIVERS
10.1 NOTICES.
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below.
If to Borrower: VIRAGE LOGIC CORPORATION
46501 Landing Parkway
Fremont CA 94538
Attn: ____________________
FAX: 510-360-8099
and to: VIRAGE LOGIC INTERNATIONAL
46501 Landing Parkway
Fremont CA 94538
Attn: ____________________
FAX: 510-360-8099
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054-1191
Attn: Terri Auwaerter
FAX: (408) 496-2415
10.2 SUBROGATION AND SIMILAR RIGHTS.
Notwithstanding any other provision of this Agreement or any other Loan
Document, each Borrower irrevocably waives all rights that it may have at law or
in equity (including, without limitation, any law subrogating the Borrower to
the rights of Bank under the Loan Documents) to seek contribution,
indemnification, or any other form of reimbursement from any other Borrower, or
any other Person now or hereafter primarily or secondarily liable for any of the
Obligations, for any payment made by the Borrower with respect to the
Obligations in connection with the Loan Documents or otherwise and all rights
that it might have to benefit from, or to participate in, any security for the
Obligations as a result of any payment made by the Borrower with
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respect to the Obligations in connection with the Loan Documents or otherwise.
Any agreement providing for indemnification, reimbursement or any other
arrangement prohibited under this Section 102 shall be null and void. If any
payment is made to a Borrower in contravention of this Section 102, such
Borrower shall hold such payment in trust for Bank and such payment shall be
promptly delivered to Bank for application to the Obligations, whether matured
or unmatured.
10.3 WAIVERS OF NOTICE.
Each Borrower waives notice of acceptance hereof; notice of the existence,
creation or acquisition of any of the Obligations; notice of an Event of
Default; notice of the amount of the Obligations outstanding at any time; notice
of intent to accelerate; notice of acceleration; notice of any adverse change in
the financial condition of any other Borrower or of any other fact that might
increase the Borrower's risk; presentment for payment demand; protest and notice
thereof as to any instrument default; and all other notices and demands to which
the Borrower would otherwise be entitled. Each Borrower waives any defense
arising from any defense of any other Borrower, or by reason of the cessation
from any cause whatsoever of the liability of any other Borrower. Bank's failure
at any time to require strict performance by any Borrower of any provision of
the Loan Documents shall not waive, alter or diminish any right of Bank
thereafter to demand strict compliance and performance therewith. Nothing
contained herein shall prevent Bank from foreclosing on the Lien of any deed of
trust mortgage or other security instrument or exercising any rights available
thereunder, and the exercise of any such rights shall not constitute a legal or
equitable discharge of any Borrower. Each Borrower also waives any defense
arising from any act or omission of Bank that changes the scope of the
Borrower's risks hereunder. Each Borrower hereby waives any right to assert
against Bank any defense (legal or equitable), setoff, counterclaim, or claims
that such Borrower individually may now or hereafter have against another
Borrower or any other Person liable to Borrower with respect to the Obligations
in any manner or whatsoever.
10.4 SUBROGATION DEFENSES.
Each Borrower hereby waives any defense based on impairment or destruction
of its subrogation or other rights against any other Borrower and waives all
benefits which might otherwise be available to it under California Civil Code
Sections 2809, 2810, 2819, 2839, 2845, 2848, 2850, 2899 and 3433 and California
Code of Civil Procedure Sections 580a, 580b, 580d and 726, as those statutory
provisions are now in effect and hereafter amended, and under any other similar
statutes now and hereafter in effect.
10.5 RIGHT TO SETTLE, RELEASE.
(a) The liability of Borrowers hereunder shall not be diminished by (i)
any agreement, understanding or representation that any of the Obligations is or
was to be guaranteed by another Person or secured by other property, or (ii) any
release or
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unenforceability, whether partial or total, or rights, if any, which Borrower
may now or hereafter have against any other Person, including another Borrower,
or property with respect to any of the Obligations.
(b) Without notice to any Borrower and without affecting the liability of
any Borrower hereunder, Bank may (i) compromise, settle, renew, extend the time
for payment, change the manner or terms of payment, discharge the performance
of, decline to enforce, or release all or any of the Obligations with respect to
a Borrower, (ii) grant other indulgences to a Borrower in respect of the
Obligations, (iii) modify in any manner any documents, relating to the
Obligations with respect to a Borrower, (iv) release, surrender or exchange any
deposits or other property securing the Obligations, whether pledged by a
Borrower or any other Person, or (v) compromise, settle, renew, or extend the
time for payment, discharge the performance of, decline to enforce, or release
all or any obligations of any guarantor, endorser or other Person who is now or
may hereafter be liable with respect to any of the Obligations.
11. CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER
California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of
the State and Federal courts in Santa Clara County, California.
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12. GENERAL PROVISIONS
12.1 SUCCESSORS AND ASSIGNS.
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. Borrower may not assign this Agreement or any
rights under it without Bank's prior written consent which may be granted or
withheld in Bank's discretion. Bank has the right, without the consent of or
notice to Borrower, to sell, transfer, negotiate, or grant participation in all
or any part of, or any interest in, Bank's obligations, rights and benefits
under this Agreement.
12.2 INDEMNIFICATION.
Borrower will indemnify, defend and hold harmless Bank and its officers,
employees, and agents against (a) all obligations, demands, claims, and
liabilities asserted
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by any other party in connection with the transactions contemplated by the Loan
Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from,
following, or consequential to transactions between Bank and Borrower (including
reasonable attorneys fees and expenses), except for losses caused by Bank's
gross negligence or willful misconduct.
12.3 TIME OF ESSENCE.
Time is of the essence for the performance of all obligations in this
Agreement.
12.4 SEVERABILITY OF PROVISION.
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.
12.5 AMENDMENTS IN WRITING, INTEGRATION.
All amendments to this Agreement must be in writing and signed by Borrower
and Bank. This Agreement represents the entire agreement about this subject
matter, and supersedes prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement merge into this Agreement and
the Loan Documents.
12.6 COUNTERPARTS.
This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and
delivered, are an original, and all taken together, constitute one Agreement.
12.7 SURVIVAL.
All covenants, representations and warranties made in this Agreement
continue in full force while any Obligations remain outstanding. The obligations
of Borrower in Section 12.2 to indemnify Bank will survive until all statutes of
limitations for actions that may be brought against Bank have run.
12.8 CONFIDENTIALITY.
In handling any confidential information, Bank will exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made (i) to Bank's subsidiaries or affiliates
in connection with their business with Borrower, (ii) to prospective transferees
or purchasers of any interest in the loans, (iii) as required by law,
regulation, subpoena, or other order, (iv) as required in connection with Bank's
examination or audit and (v) as Bank considers appropriate exercising remedies
under this Agreement. Confidential information does not include information that
either:
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(a) is in the public domain or in Bank's possession when disclosed to
Bank, or becomes part of the public domain after disclosure to Bank; or (b) is
disclosed to Bank by a third party, if Bank does not know that the third party
is prohibited from disclosing the information.
12.9 ATTORNEYS' FEES, COSTS AND EXPENSES.
In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party will be entitled to recover its reasonable
attorneys' fees and other reasonable costs and expenses incurred, in addition to
any other relief to which it may be entitled.
13. DEFINITIONS
13.1 DEFINITIONS.
In this Agreement:
"ACCOUNTS" are all existing and later arising accounts, contract rights,
and other obligations owed Borrower in connection with its sale or lease of
goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"ADVANCE" or "ADVANCES" is a loan advance (or advances) under the
Committed Revolving Line.
"AFFILIATE" of a Person is a Person that owns or controls directly or
indirectly the Person, any Person that controls or is controlled by or is under
common control with the Person, and each of that Person's senior executive
officers, directors, partners and, for any Person that is a limited liability
company, that Person's managers and members.
"BANK EXPENSES" are all audit fees and expenses and reasonable costs and
expenses (including reasonable attorneys' fees and expenses) for preparing,
negotiating. administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).
"BORROWER'S BOOKS" are all Borrower's books and records including ledgers,
records regarding Borrower's assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any
equipment containing the information.
"BORROWING BASE" is (i) 80% of Eligible Accounts as determined by Bank
from Borrower's most recent Borrowing Base Certificate.
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"BUSINESS DAY" is any day that is not a Saturday, Sunday or a day on which
the Bank is closed.
"CASH MANAGEMENT SERVICES" are defined in Section 2.1.3.
"CLOSING DATE" is the date of this Agreement.
"CODE" is the California Uniform Commercial Code.
"COLLATERAL" is the property described on Exhibit A.
"COMMITTED REVOLVING LINE" is an Advance of up to $3,000,000.
"CONTINGENT OBLIGATION" is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but "Contingent
Obligation" does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.
"CREDIT EXTENSION" is each Advance, Letter of Credit or any other
extension of credit by Bank for Borrower's benefit.
"CURRENT LIABILITIES" are the aggregate amount of Borrower's Total
Liabilities which mature within one (1) year.
"ELIGIBLE ACCOUNTS" are Accounts in the ordinary course of Borrower's
business that meet all Borrower's representations and warranties in Section 5;
but Bank may change eligibility standards by giving Borrower notice. Unless Bank
agrees otherwise in writing, Eligible Accounts will not include:
(a) Accounts that the account debtor has not paid within 90 days of
invoice date;
(b) Accounts for an account debtor, 50% or more of whose Accounts have not
been paid within 90 days of invoice date. At Borrower's request Bank may
consider as eligible current accounts due from a debtor with past due
payments so
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long as those accounts represent receivables on a separate contract and so
long as the delinquency is related to "testing on silicon";
(c) Credit balances over 90 days from invoice date;
(d) Accounts for an account debtor, including Affiliates, whose total
obligations to Borrower exceed 25% of all Accounts, for the amounts that
exceed that percentage, unless the Bank approves in writing;
(e) Accounts for which the account debtor does not have its principal
place of business in the United States except for Eligible Foreign
Accounts;
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department agency, or instrumentality;
(g) Accounts for which Borrower owes the account debtor, but only up to
the amount owed (sometimes called "contra" accounts, accounts payable,
customer deposits or credit accounts);
(h) Accounts for demonstration or promotional equipment, or in which goods
are consigned, sales guaranteed, sale or return, sale on approval, bill
and hold, or other terms if account debtor's payment may be conditional;
(i) Accounts for which the account debtor is Borrower's Affiliate,
officer, employee, or agent except Tower Semiconductor LTD, Aspec
Technology, Inc. and Credence Systems Corporation;
(j) Accounts in which the account debtor disputes liability or makes any
claim and Bank believes there may be a basis for dispute (but only up to
the disputed or claimed amount), or if the Account Debtor is subject to an
Insolvency Proceeding, or becomes insolvent, or goes out of business; (k)
Accounts for which Bank reasonably determines collection to be doubtful.
"ELIGIBLE FOREIGN ACCOUNTS" are Accounts for which the account debtor does
not have its principal place of business in the United States but are: (1)
covered by credit insurance satisfactory to Bank, less any deductible; or (2)
supported by letter(s) of credit advised and negotiated by Bank or (3) that Bank
approves in writing, or (4) accounts owing from Seiko, Philips, Toshiba,
Fujitsu, Sony, Hitachi, Tower Semiconductor and Siemens (Infineon).
"EQUIPMENT" is all present and future machinery, equipment tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
19
<PAGE> 22
"ERISA" is the Employment Retirement Income Security Act of 1974, and its
regulations.
"GAAP" is generally accepted accounting principles.
"INDEBTEDNESS" is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.
"INSOLVENCY PROCEEDINGS" are proceedings by or against any Person under
the United States Bankruptcy Code, or any other bankruptcy or insolvency law,
including assignments for the benefit of creditors, compositions, extensions
generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.
"INVENTORY" is present and future inventory in which Borrower has any
interest including merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products intended for sale or
lease or to be furnished under a contract of service, of every kind and
description now or later owned by or in the custody or possession, actual or
constructive, of Borrower, including inventory temporarily out of its custody or
possession or in transit and including returns on any accounts or other proceeds
(including insurance proceeds) from the sale or disposition of any of the
foregoing and any documents of title.
"INVESTMENT" is any beneficial ownership of (including stock, partnership
interest or other securities) any Person, or any loan, advance or capital
contribution to any Person.
"LETTER OF CREDIT" is defined in Section 2.1.2.
"LIEN" is a mortgage, lien, deed of trust charge, pledge, security
interest or other encumbrance.
"LOAN DOCUMENTS" are, collectively, this Agreement, any note, or notes or
guaranties executed by Borrower or Guarantor, and any other present or future
agreement between Borrower and/or for the benefit of Bank in connection with
this Agreement all as amended, extended or restated.
"MATERIAL ADVERSE CHANGE" is defined in Section 8.3.
"OBLIGATIONS" are debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, including cash management services,
letters of credit and foreign exchange contracts, if any and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank.
20
<PAGE> 23
"PERMITTED INDEBTEDNESS" is:
(a) Borrower's indebtedness to Bank under this Agreement or any
other Loan Document;
(b) Indebtedness existing on the Closing Date and shown on the
Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business; and
(e) Indebtedness secured by Permitted Liens.
"PERMITTED INVESTMENTS" are:
(a) Investments shown on the Schedule and existing on the Closing
Date; and
(b) (i) marketable direct obligations issued or unconditionally guaranteed
by the United States or its agency or any State maturing within 1 year from its
acquisition, (ii) commercial paper maturing no more than 1 year after its
creation and having the highest rating from either Standard & Poors Corporation
or Moody's Investors Service, Inc., and (iii) Bank's certificates of deposit
issued maturing no more than 1 year after issue.
"PERMITTED LIENS" are:
(a) Liens existing on the Closing Date and shown on the Schedule
or arising under this Agreement or other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or
levies, either not delinquent or being contested in good faith and for which
Borrower maintains adequate reserves on its Books, if they have no priority over
any of Bank's security interests;
(c) Purchase money Liens (i) on Equipment acquired or held by Borrower or
its Subsidiaries incurred for financing the acquisition of the Equipment, or
(ii) existing on equipment when acquired, if the Lien is confined to the
property and improvements and the proceeds of the equipment;
(d) Leases or subleases and licenses or sublicenses granted in the
ordinary course of Borrower's business and any interest or title of a lessor,
licensor or under any lease or license, if the leases, subleases, licenses and
sublicenses permit granting Bank a security interest;
(e) Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (c), but any extension,
renewal or replacement
21
<PAGE> 24
Lien must be limited to the property encumbered by the existing Lien and the
principal amount of the indebtedness may not increase.
"PERSON" is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company association, trust, unincorporated
organization, association, corporation, institution, public benefit corporation,
firm, joint stock company, estate, entity or government agency.
"PRIME RATE" is Bank's most recently announced "prime rate," even if it is
not Bank's lowest rate.
"QUICK ASSETS" is, on any date, the Borrower's consolidated, unrestricted
cash, cash equivalents, net billed accounts receivable and investments with
maturities of fewer than 12 months determined according to GAAP.
"RESPONSIBLE OFFICER" is each of the Chief Executive Officer, the
President. the Chief Financial Officer and the Controller of Borrower.
"REVOLVING MATURITY DATE" is July 27, 2000.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's debt to Bank (and identified as subordinated by Borrower and Bank).
"SUBSIDIARY" is for any Person, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.
"TANGIBLE NOT WORTH" is, on any date, the consolidated total assets of
Borrower and its Subsidiaries minus, (i) any amounts attributable to (a)
goodwill, (b) intangible items such as unamortized debt discount and expense,
Patents, trade and service marks and names, Copyrights and research and
development expenses except prepaid expenses, and (c) reserves not already
deducted from assets, and (ii) Total Liabilities.
"TOTAL LIABILITIES" is on any day, obligations that should, under GAAP, be
classified as liabilities on Borrower's consolidated balance sheet, including
all Indebtedness, and current portion Subordinated Debt allowed to be paid, but
excluding all other Subordinated Debt.
22
<PAGE> 25
BORROWER:
VIRAGE LOGIC CORPORATION
By: /s/ GEORGE RASSAM
-----------------------------------
Title: Controller
VIRAGE LOGIC INTERNATIONAL
By: /s/ GEORGE RASSAM
-----------------------------------
Title: Controller
BANK:
SILICON VALLEY BANK
By: /s/ TERRI AUWAERTER
-----------------------------------
Title: Vice President
-----------------------------------
23
<PAGE> 26
EXHIBIT A
The Collateral consists of all of Borrower's right title and interest in
and to the following:
All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, servicemarks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
All documents, cash, deposit accounts, securities, securities
entitlements, securities accounts, investment property, financial assets,
letters of credit certificates of deposit instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter
<PAGE> 27
acquired; all claims for damages by way of any past present and future
infringement of any of the foregoing; and
All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof.
2
<PAGE> 28
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M.. P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:_______________
FAX#: (408) 496-2426 TIME:_______________
- --------------------------------------------------------------------------------
FROM: VIRAGE LOGIC CORPORATION and VIRAGE LOGIC INTERNATIONAL
---------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
------------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
----------------------------------------------------------
PHONE NUMBER:
------------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
---------------- ------------------------------------
<TABLE>
<CAPTION>
REQUESTED TRANSACTION TYPE REQUESTED DOLLAR AMOUNT
- -------------------------- -----------------------
<S> <C>
PRINCIPAL INCREASE (ADVANCE) $_______________
PRINCIPAL PAYMENT (ONLY) $_______________
INTEREST PAYMENT (ONLY) $_______________
PRINCIPAL AND INTEREST (PAYMENT) $_______________
</TABLE>
OTHER INSTRUCTIONS:
------------------------------------------------------------
- --------------------------------------------------------------------------------
All Borrower's representations and warranties in the Loan and Security Agreement
are true, correct and complete in all material respects on the date of the
telephone request for and Advance confirmed by this Borrowing Certificate; but
those representations and warranties expressly referring to another date shall
be true, correct and complete in all material respects as of that date.
BANK USE ONLY
- --------------------------------------------------------------------------------
TELEPHONE REQUEST:
The following person is authorized to request the loan payment transfer/Loan
advance on the advance designated account and is known to me.
- --------------------------------- --------------------------------------
Authorized Requester Phone #
- --------------------------------- --------------------------------------
Received By (Bank) Phone #
---------------------------------
Authorized Signature (Bank)
<PAGE> 29
EXHIBIT C
BORROWING BASE CERTIFICATE
- --------------------------------------------------------------------------------
Borrower:
VIRAGE LOGIC CORPORATION and VIRAGE LOGIC Bank: Silicon Valley Bank
INTERNATIONAL 3003 Tasman Drive
Santa Clara, CA 95054
Commitment Amount: $3,000,000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ___ $________________
2. Additions (please explain on reverse) $________________
3. TOTAL ACCOUNTS RECEIVABLE $________________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $________________
5. Balance of 50% over 90 day accounts* $________________
6. Credit balances over 90 days $________________
7. Concentration Limits $________________
8. Foreign Accounts** $________________
9. Governmental Accounts $________________
10. Contra Accounts $________________
11. Promotion or Demo Accounts $________________
12. Intercompany/Employee Accounts*** $________________
13. Other (please explain on reverse) $________________
14. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $________________
15. Eligible Accounts (#3 minus #14) $________________
16. LOAN VALUE OF ACCOUNTS (80% of #15) $________________
* Other than those that Bank approves
** Seiko, Philips, Toshiba. Fujitsu, Sony,
Hitachi, Tower Semiconductor and Siemens
(Infineon) eligible Foreign
*** Other than Tower Semiconductor LTD. Aspec
Technology, Inc. and Credence Systems Corporation
BALANCES
17. Maximum Loan Amount $________________
18. Total Funds Available [Lesser of #17 or (#16)] $________________
19. Present balance owing on Line of Credit $________________
20. Outstanding under Sublimits (LC) $________________
21. RESERVE POSITION (#18 minus #19 and #20) $________________
</TABLE>
The undersigned represents and warrants that this is true, complete and correct,
and that the information in this Borrowing Base Certificate complies with the
representations and warranties in the Loan and Security Agreement between the
undersigned and Silicon Valley Bank
COMMENTS:
VIRAGE LOGIC CORPORATION
By:
----------------------------------
Authorized Signer
<PAGE> 30
VIRAGE LOGIC INTERNATIONAL
By:
----------------------------------
Authorized Signer
2
<PAGE> 31
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA 95054
FROM: VIRAGE LOGIC CORPORATION AND VIRAGE LOGIC INTERNATIONAL
The undersigned authorized officers of VIRAGE LOGIC CORPORATION and VIRAGE
LOGIC INTERNATIONAL ("Borrower") certify that under the terms and conditions of
the Loan and Security Agreement between Borrower and Bank (the "Agreement), (i)
Borrower is in complete compliance for the period ending ____________________
with all required covenants except as noted below and (ii) all representations
and warranties in the Agreement are true and correct in all material respects on
this date. Attached are the required documents supporting the certification. The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes. The Officer
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement and that compliance is determined not just at the date this
certificate is delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
REPORTING COVENANT REQUIRED COMPLIES
- ------------------ ------------------------ --------
<S> <C> <C> <C>
Monthly financial statements + CC Monthly within 30 days Yes No
Annual (Audited) FEY within 120 days Yes No
A/R & A/P Aging Monthly within 30 days Yes No
AIR Audit Initial and Semi-Annual Yes No
Borrowing Base Certificate Monthly within 30 days Yes No
</TABLE>
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
- ------------------ -------- --------- -------------
<S> <C> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.30:1.00 ____:1.00 Yes No
Profitability: Quarterly $_______ Yes No
</TABLE>
COMMENTS REGARDING EXCEPTIONS: See Attached.
BANK USE ONLY
Received By:______________________
AUTHORIZED SIGNER
Date:_____________________________
Verified:_________________________
AUTHORIZED SIGNER
Date:_____________________________
Compliance Status: Yes No
<PAGE> 32
Sincerely,
VIRAGE LOGIC CORPORATION
- ------------------------------------
Signature
- ------------------------------------
Title
- ------------------------------------
Date
VIRAGE LOGIC INTERNATIONAL
- ------------------------------------
Signature
- ------------------------------------
Title
- ------------------------------------
Date
2
<PAGE> 33
NEGATIVE PLEDGE AGREEMENT
This Negative Pledge Agreement is made as of July 28, 1999 by and between
VIRAGE LOGIC CORPORATION and VIRAGE LOGIC INTERNATIONAL "Borrower") and Silicon
Valley Bank ("Bank").
In connection with, among other documents, the Loan and Security Agreement (the
"Loan Documents") being concurrently executed herewith between Borrower and
Bank, Borrower agrees as follows:
1. Borrower shall not sell, transfer, assign, mortgage, pledge, lease,
grant a security interest in, or encumber any of Borrower's
intellectual property, including, without limitation, the following:
a. Any and all copyright rights. copyright applications,
copyright registrations and like protections in each work or
authorship arid derivative work thereof whether published or
unpublished and whether or not the same also constitutes a
trade secret, now or hereafter existing, created, acquired or
held;
b. All mask works or similar rights available for the protection
of semiconductor chips. now owned or hereafter acquired;
c. Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software
products now or hereafter existing, created, acquired or held;
d. Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
e. All patents, patent applications and like protections
including, without limitation, improvements, divisions,
continuations, renewals, reissues, extensions and
continuations-in-part of the some, including without
limitation the patents and patent applications;
f. Any trademark and servicemark rights. whether registered or
not. applications to register and regulation of the same and
like protections, and the entire goodwill of the business of
Borrower connected with and symbolized by such trademarks.
including without limitation;
g. Any and all claims for damages by way of past, present and
future infringements of any of the rights included above, with
the right but not the obligation, to sue for and collect such
damages for said use or infringement of the intellectual
property rights certified above;
<PAGE> 34
h. All licenses or other rights to use any of the Copyrights,
Patents, Trademarks or Mask Works, and all license fees and
royalties arising from such use to the extent permitted by
such license or rights; and
i. All amendments, extensions, renewals and extensions of any of
the Copyrights, Trademarks, Patents, or Mask Works; and
j. All proceeds and products of the foregoing. including without
limitation all payments under insurance or any indemnity or
warranty payable in respect of any of the foregoing;
2. It shall be an event of default under the Loan Documents between
Borrower and Bank if there is a breach of any term of this Negative
Pledge Agreement.
3. Capitalized terms used but not otherwise defined herein shall have
the same meaning as in the Loan Documents.
BORROWER:
VIRAGE LOGIC CORPORATION
By: /s/
--------------------------------------
Name: George Rassam
--------------------------------------
Title: Controller
--------------------------------------
VIRAGE LOGIC INTERNATIONAL
By: /s/
--------------------------------------
Name: George Rassam
--------------------------------------
Title: Controller
--------------------------------------
BANK:
SILICON VALLEY BANK
By: /s/
--------------------------------------
Name: Terri Auwaerter
--------------------------------------
Title: Vice President
--------------------------------------
2
<PAGE> 35
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE STOCK
Corporation: VIRAGE LOGIC CORPORATION, a California corporation
Number of Shares: 30,000
Class of Stock: Series C Preferred provided, however, if the Series C round does
not close on or before July 27, 2000 then the Class of Stock shall be that of
Series B Preferred
Initial Exercise Price: $3.35 per share
Issue Date: July 28, 1999
Expiration Date: July 28, 2004
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for
other good and valuable consideration, SILICON VALLEY BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of the
class of securities (the "Shares") of the corporation (the "Company") at the
initial exercise price per Share (the "Warrant Price") all as set forth above
and as adjusted pursuant to Article 2 of this Warrant subject to the provisions
and upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
duty executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 12, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 Conversion Right. In lieu of exercising this Warrant as specified in
Section 1.1, Holder may from time to time convert this Warrant. in whole or in
part into a number of Shares determined by dividing (a)the aggregate fair market
value of the Shares or other sea otherwise issuable upon exercise of this
Warrant minus the aggregate Warrant Price of such Shares by (b) the fair market
value of one Share. The fair market value of the Shares shall be determined
pursuant to Section 1.4.
1.3 Intentionally Omitted
<PAGE> 36
1.4 Fair Market Value. If the Shares are traded in a public market, the
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking firm to undertake such valuation. If the valuation of such investment
banking firm is greater than that determined by the Board of Directors, then all
fees and expenses of such investment banking firm shall be paid by the Company.
In all other circumstances, such fees and expenses shall be paid by Holder.
1.5 Delivery of Certificate and New Warrant. Promptly after Holder
exercises or converts this Warrant the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
1.6 Replacement of Warrants. On receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, on surrender and cancellation of this Warrant,
the Company shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
1.7 Repurchase on Sale, Merger, or Consolidation of the Company.
1.7.1. "Acquisition". For the purpose of this Warrant,
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
1.7.2. Assumption of Warrant. Upon the closing of any Acquisition
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on its common stock (or the Shares if the Shares are securities other
than common stock)
2
<PAGE> 37
payable in common stock, or other securities, subdivides the outstanding common
stock into a greater amount of common stock, or, if the Shares are securities
other than common stock, subdivides the Shares in a transaction that increases
the amount of common stock into which the Shares are convertible, then upon
exercise of this Warrant, for each Share acquired. Holder shall receive, without
cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the
dividend or subdivision occurred.
2.2 Reclassification, Exchange or Substitution. Upon any
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant, Holder shall be entitled to receive, upon exercise
or conversion of this Warrant the number and kind of securities and property
that Holder would have received for the Shares if this Warrant had been
exercised immediately before such reclassification, exchange, substitution. or
other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassification, exchanges, substitutions,
or other events.
2.3 Adjustments for Combinations. Etc. If the outstanding shares are
combined or consolidated, by or otherwise, into a lesser number of shares, the
Warrant Price shall be proportionately increased.
2.4 Adjustments for Diluting Issuances. The Warrant Price and the number
of Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth on Exhibit A in the event of Diluting Issuances (as defined on Exhibit A).
2.5 No Impairment. The Company shall not by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as
3
<PAGE> 38
described above that adversely affects Holder's rights under this Warrant the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.
2.6 Fractional Shares. No fractional shares shall be issuable upon
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant the Company shall
eliminate such fractional share interest by paying an Holder amount computed by
multiplying the fractional interest by the fair market value of a full share.
2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 Representations and Warranties. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of
this Warrant is not greater than (i) the price per share at which the Shares
were last issued in an arms-length transaction in which at least $500,000 of the
Shares were sold and (ii) the fair market value of the Shares as of the date of
this Warrant.
(b) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(c) The Capitalization table attached hereto is true and correct.
3.2 Notice of Certain Events. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash.
property. stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rate to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock, (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license. or convey all or substantially all of its assets, or to
4
<PAGE> 39
liquidate, dissolve or wind up; or (e) offer holders of registration rights the
opportunity to participate in an underwritten public offering of the company's
securities for cash, then, in connection with each such event. the Company shall
give Holder (1) at least 20 days prior written notice of the date on which a
record will be taken for such dividend. distribution, or subscription rights
(and specifying the date on which On holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.
3.3 Information Rights. So long as the Holder holds this Warrant and/or
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within 90 days after the end of each fiscal
year of the Company. the annual audited financial statements of the Company
certified by independent public accountants of recognized standing and (c) such
other financial statements required under and in accordance with any loan
documents between Holder and the Company (or if there are no such requirements
[or if the subject loan(s) no longer are outstanding]), then within 45 days
after the end of each of the first three quarters of each fiscal year, the
Company's quarterly, unaudited financial statements.
3.4 Registration Under Securities Act of 1933, as amended. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
4.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date set forth above.
4.2 Legends. This Warrant and the Shares (and the securities issuable.
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO
RULE 144 OR AN OPINION OF COUNSEL
5
<PAGE> 40
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.
4.3 Compliance with Securities Laws on Transfer. This Warrant and the
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly. upon conversion of the Shares, if any) may not be
transformed or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company. as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c). Holder represents that it has compiled with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.
4.4 Transfer Procedure. Subject to the provisions of Section 4.3 Holder
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly. upon
conversion of the Shares, if any) at any time to Silicon Valley Bancshares or
The Silicon Valley Bank Foundation, or, to any other transferee by giving the
Company notice of the portion of the Warrant being transferred setting forth the
name. address and taxpayer identification number of the transferee and
surrendering this Warrant to the Company for resistance to the transferee(s)
(and Holder if applicable). Unless the Company is filing financial information
with the SEC pursuant to the Securities Exchange Act of 1934, the Company shall
have to right to refuse to transfer any portion of this Warrant to any person
who directly competes with the Company.
4.5 Notices. All notices and other communications from the Company to
the Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or such holder from time to time. All notices to
be provided under this Warrant shall be send to the following address:
Silicon Valley Bank
Attn: Treasury Department HG100
3003 Tasman Drive
Santa Clara, CA 95054
4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought
6
<PAGE> 41
4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
4.8 Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
"COMPANY"
VIRAGE LOGIC CORPORATION
By: /s/ ALEX SHUBAT
-----------------------------------------
Name: Alex Shubat
---------------------------------------
(Print)
Title: Chairman of the Board, President or
Vice President
By: /s/ GEORGE RASSAM
-----------------------------------------
Name: George Rassam
---------------------------------------
(Print)
Title: Chief Financial Officer, Secretary,
Assistant Treasurer or Assistant
Secretary
7
<PAGE> 42
APPENDIX I
NOTICE OF EXERCISE
1. The undersigned hereby elects to purchase _____ shares of the
Common/Preferred Series [Strike one] Stock of VIRAGE LOGIC CORPORATION pursuant
to the terms of the attached Warrant and tenders herewith payment of the
purchase price of such shares in full.
or
1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to __________ of the Shares covered by the Warrant.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned or in such other name as is specified below:
----------------------------------
(Name)
----------------------------------
==================================
(Address)
3. The undersigned represents 4 is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.
------------------------------------
(Signature)
- ------------------
(Date)
<PAGE> 43
EXHIBIT A
Anti-Dilution Provisions
(For Preferred Stock or Common Stock Warrants Where
Anti-Dilution Protection is Inadequate or Non-existent)
In the event of the issuance (a "Diluting Issuance") by the Company,
after the Issue Date of the Warrant, of securities at a price per share less
than the Warrant Price, or, if the Shares are common stock, less than the then
conversion price of the Company's Series ___ Preferred Stock, then the number of
shares of common stock issuable upon conversion of the Shares, or if the Shares
are common stock, the number of Shares issuable upon exercise of the Warrant
shall be adjusted as a result of Diluting Issuances in accordance with the
Holder's standard form of Anti-Dilution Agreement in effect on the Issue Date.
Under no circumstances shall the aggregate Warrant Price payable by the
Holder upon exercise of the Warrant increase as a result of any adjustment
arising from a Diluting Issuance.
<PAGE> 44
EXHIBIT B
REGISTRATION RIGHTS
The Shares (if common stock), or the common stock issuable upon
Conversion of the Shares, shall be deemed registrable securities or otherwise
entitled to "piggy back" registration rights in accordance with the terms of the
following agreement (the "Agreement") between the Company and its investor(s):
---------------------------------------------------
[Identify Agreement by date, title and parties.
If no Agreement exists, indicate by "none".]
The Company agrees that no amendments will be made to the Agreement
which would have an adverse impact on Holders registration rights thereunder
without the consent of Holder. By acceptance of the Warrant to which this
Exhibit B is attached, Holder shall be deemed to be a party to the Agreement,
unless Holder otherwise elects not to become or to cease being a party thereto.
If no Agreement exists, then the Company and the Holder shall enter into
Holder's standard form of Registration Rights Agreement as in effect on the
Issue Date of the Warrant.
<PAGE> 45
INTERCREDITOR AGREEMENT
(COLLATERAL SHARING)
This INTERCREDITOR AGREEMENT is made by and between Silicon Valley Bank
("Bank") and Matsco Financial Corporation ("Matsco").
RECITALS
A. Virage Logic Corporation and Virage Logic International
(collectively, "Borrower") has borrowed funds from MATSCO (the "Lease") pursuant
to a Master Lease Agreement dated as of ________________ (the "Lease"). The
Lease Agreement is secured by all of Borrower's personal property, including
that certain leased equipment as more particularly described on Exhibit W
together with all cash and insurance proceeds of such equipment (the "Leased
Equipment"), pursuant to a Lease Agreement.
B. Borrower has requested that Bank lend Borrower funds pursuant to that
certain Loan and Security Agreement dated July 28, 1999. The Loan and Security
Agreement is to be secured by, among other things, a first security interest in
all Borrower's assets. Bank is willing to make such loan (the "Bank Loan").
provided MATSCO subordinates its security interest in all of Borrower's personal
property, with the exception of the Leased Equipment to the security interest of
Bank. MATSCO is willing to subordinate its interest in accordance with the terms
of this Agreement
C. MATSCO subordinates its security interest in all of Borrower's
personal property, except for the Leased Equipment, to the security interest of
Bank. MATSCO is willing to subordinate its interest in accordance with the terms
of this Agreement
NOW THEREFORE, the parties agree as follows:
1. Bank Collateral. As used in this Agreement 1110h Collateral means the
following: all assets of Borrower set forth on Exhibit "B" hereto, excluding,
however, the Leased Equipment.
2. MATSCO Collateral. As used in this Agreement, "MATSCO Collateral"
means the Leased Equipment described on Exhibit "A." ("Collateral" as used in
this Agreement shall mean MATSCO Collateral or Bank Collateral, as the case may
be.)
3. Subordination.
(a) All security interests now or hereafter acquired by Bank in
Bank Collateral shall at all times be prior and superior to any security
interest or other interest or claim now hold or hereafter acquired by MATSCO in
Bank Collateral. (MATSCO and Bank are sometimes referred to herein as the
"Lenders.")
<PAGE> 46
(b) All security interests now or hereafter acquired by MATSCO in
the MATSCO Collateral shall at all times be prior and superior to any security
interest ownership interest or other interest or claim now held or hereafter
acquired by Bank in MATSCO Collateral.
(c) The priorities specified in this Agreement shall be
applicable irrespective of the time or order of attachment or perfection of any
security interest or the time or order of fling of any financing statements or
other documents. or the giving of any notices of purchase money security
interests or other notices. or possession of any Collateral, or any statutes,
rules or law. or court decisions to the contrary.
4. Termination Statements.
(a) MATSCO agrees to execute and deliver to Bank, promptly upon
Bank's request, appropriate UCC termination statements or partial releases with
respect to any Bank Collateral being sold or otherwise disposed of in connection
with the liquidation of Borrower's assets upon or after the declaration of a
default or an event of default by Bank under any present or future instrument or
agreement between the Borrower and Bank. The proceeds of any Bank Collateral so
sold or disposed of shall be applied, after the deduction of any and all costs
relating to such sale or disposition (including attorneys' fees, advertising
costs and auctioneer's fees) to any and all outstanding present or future
indebtedness, liabilities, guaranties or other obligations of the Borrower to
Bank (the "Bank Obligations") in such order as Bank may, in its discretion,
determine and, only if all Bank Obligations have been indefeasibly paid in full,
then to all or any part of the present or future indebtedness, liabilities,
guaranties or other obligations of the Borrow to MATSCO (the "MATSCO
Obligations") in such order as MATSCO may, in its discretion, determine.
5. Remedies. MATSCO shall not collect, take possession of, foreclose
upon, or exercise any other rights or remedies with respect to Bank Collateral,
judicially or nonjudicially, or attempt to do any of the foregoing, without the
prior written consent of Bank, which shall be a matter of Bank's sole
discretion. Bank shall not collect, take possession of, foreclose upon, or
exercise any other rights or remedies with respect to MATSCO Collateral,
judicially or nonjudicially, or attempt to do any of the foregoing, without the
prior written consent of MATSCO. which shall be a matter of MATSCO's sole
discretion.
6. Bankruptcy Financing. In the event of any financing of the Borrower
by MATSCO or Bank during any bankruptcy, arrangement or reorganization of the
Borrower, each Lender agrees that the other's "Secured Obligations" shall
Include without limitation all Indebtedness. liabilities and obligations
incurred by the Borrower in any such proceeding, and the other's "Collateral"
shall include without limitation all Collateral arising during any such
proceeding, and this Agreement shall continue to apply during any such
proceeding.
2
<PAGE> 47
7. No Contest. Neither Bank nor MATSCO shall contest the validity,
perfection, priority or enforceability of any lion or security interest granted
to the other, and each agrees to cooperate in the defense of any action
contesting the validity, perfection, priority or enforceability of such lions or
security interest at the cost of the party defending such action.
8. Revivor. If, after payment of the Bank Obligations, the Borrower
thereafter becomes liable to Bank on account of the Bank Obligations, or any
payment made on the Bank Obligations shall for any reason be required to be
returned or refunded by AWL this Agreement shall thereupon in all respects
become effective with respect to such subsequent or reinstated Bank Obligations,
without the necessity of any further act or agreement between Bank and MATSCO,
if, after payment of the MATSCO Obligations, the Borrower thereafter becomes
liable to MATSCO on account of the MATSCO Obligations, or any payment made on
the MATSCO Obligations shall for any reason be required to be returned or
refunded by MATSCO, this Agreement shall thereupon in all respects become
effective with respect to such subsequent or reinstated MATSCO Obligations,
without the necessity of any further act or agreement between MATSCO and Bank.
9. Waiver of Jury Trial. MATSCO AND BANK EACH HEREBY WAIVER THE RIGHT TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO: (i) THIS AGREEMENT; OR (ii) ANY OTHER PRESENT OR FUTURE
INSTRUMENT OR AGREEMENT BETWEEN MATSCO AND BANK RELATING TO THE BORROWER, OR
(III) ANY CONDUCT, ACTS OR OMISSIONS OF MATSCO OR BANK OR ANY OF THEIR
DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS
AFFILIATED WITH MATSCO OR BANK, RELATING TO BORROWER, IN EACH OF THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.
10. General. Bank and MATSCO are not in any manner to be construed to be
Partners or joint venturers or to have any other legal relationship other than
as expressly set forth in written agreements between them. Bank and MATSCO each
agrees to execute all such documents and instruments and take all such actions
as the other shall reasonably request in order to carry out the purposes of this
Agreement, including without limitation appropriate amendments to Financing
Statements executed by the Borrower in favor of Bank or MATSCO in order to refer
to this Agreement (but this Agreement shall remain fully effective
notwithstanding any failure to execute any additional documents, instruments, or
amendments). Bank and MATSCO each represents and warrants to the other that it
has not heretofore transferred to assigned any Financing Statement naming the
Borrower as and it as debtor secured party, and that it will not do so without
first notifying the other in writing, and delivering a copy of this Agreement to
the proposed transferee or assignee, and obtaining the acknowledgment of the
proposed transferee or assignee that the transfer or assignment is subject to
all of the terms of this Agreement This Agreement is solely for the benefit of
MATSCO and Bank and the successors and
3
<PAGE> 48
assigns, and neither the Borrower nor any other person shall have any right,
benefit, priority or interest under, or because of the existence of, this
Agreement This Agreement sets forth in full the terms of agreement between Bank
and MATSCO with respect to the subject matter hereof, and may not be modified or
amended, nor may any rights hereunder be waived, except in a writing signed by
Bank and MATSCO. In the event of any litigation between the parties based upon
or arising out of this Agreement, the prevailing party shall be entitled to
recover all of its costs and expenses (including without limitation attorneys'
fees) from the non-prevailing party. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns, and shall be
construed in accordance with, and governed by, the taws of the State of
California. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which shall constitute the same
instrument.
IN WITNESS WHEREOF. the undersigned have executed this Intercreditor
Agreement as of July 28,1999.
MATSCO FINANCIAL CORPORATION
By:
---------------------------------------
Title:
------------------------------------
SILICON VALLEY BANK
By:
---------------------------------------
Title:
------------------------------------
4
<PAGE> 49
BORROWER'S CONSENT AND AGREEMENT
Borrower consents to the terms of this Intercreditor Agreement and
agrees not to take any actions inconsistent therewith. Borrower shall obtain
satisfactory Lender's Loss Payable Endorsements naming both Bank and MATSCO, as
their interests may appear, with respect to policies which insure Collateral
hereunder, or with such other designation as Bank and MATSCO may agree. Borrower
agrees to execute all such documents and instruments and take all such actions
as Bank or MATSCO shall reasonably request in order to carry out the purposes of
this Agreement including without limitation appropriate amendments to financing
statements.
"Borrower"
VIRAGE LOGIC CORPORATION
By:
---------------------------------------
Title:
------------------------------------
VIRAGE LOGIC INTERNATIONAL
By:
---------------------------------------
Title:
------------------------------------
<PAGE> 50
CORPORATE BORROWING RESOLUTION
Borrower: VIRAGE LOGIC INTERNATIONAL Bank: Silicon Valley Bank
46501 Landing Parkway Fremont, CA 94538 3003 Tasman Drive
Santa Clara, CA 95054
-1191
I, the Secretary or Assistant Secretary of VIRAGE LOGIC INTERNATIONAL
("Borrower"), CERTIFY that Borrower is a corporation existing under the laws of
the State of California.
I certify that at a meeting of Borrower's Directors (or by other authorized
corporate action) duly held the following resolutions were adopted.
It is resolved that any one of the following officers of Borrower, whose name,
title and signature is below:
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
Alex Shubat VP Engineering, CTO /s/ ALEX SHUBAT
- ------------------------ -------------------------- --------------------
George Rassam Controller /s/ GEORGE RASSAM
- ------------------------ -------------------------- --------------------
- ------------------------ -------------------------- --------------------
- ------------------------ -------------------------- --------------------
may act for Borrower and:
BORROW MONEY. Borrow money from Silicon Valley Bank ("Bank").
EXECUTE LOAN DOCUMENTS. Execute any loan documents Bank requires.
GRANT SECURITY. Grant Bank a security interest in any of Borrower's
assets.
NEGOTIATE ITEMS. Negotiate or discount all draft, trade acceptances,
promissory notes, or other indebtedness in which Borrower has an interest and
receive cash or otherwise use the proceeds.
LETTERS OF CREDIT. Apply for letters of credit from Bank.
FOREIGN EXCHANGE CONTRACTS. Execute spot or forward foreign exchange
contracts.
ISSUE WARRANTS. Issue warrants for Borrowers stock.
FURTHER ACTS. Designate other individuals to request advances, pay fees
and costs and execute other documents or agreements (including documents or
agreement that waive Borrowers right to a jury trial) they think necessary to
effectuate these Resolutions.
<PAGE> 51
Further resolved that all acts authorized by these Resolutions and performed
before they were adopted are ratified. These Resolutions remain in effect and
Bank may rely on them until Bank receives written notice of their revocation.
I certify that the persons listed above are Borrower's officers with the titles
and signatures shown following their names and that these resolutions have not
been modified are currently effective.
CERTIFIED TO AND ATTESTED BY:
X /s/ ALEX SHUBAT
------------------------------------------
Secretary or Assistant Secretary
X
------------------------------------------
NOTE: In case the Secretary or other certifying officer is designated by the
foregoing resolutions as one of the signing officers, this resolution should
also be signed by a second Officer or Director of Borrower.
2
<PAGE> 1
EXHIBIT 10.12
*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
DISTRIBUTION AGREEMENT
This AGREEMENT is made and entered into as of the October 1st 1998,
(hereinafter called "Effective Date") by and between Seiko Instruments Inc. a
corporation organized and existing under the laws of Japan, and having its
registered office at 1-8 Nakase, Mihama-ku, Chiba-shi, Chiba 261 Japan
(hereinafter called "SII"), and Virage Logic Corporation, a corporation
organized and existing under the laws of California, and having its registered
office at 46824 Lakeview Blvd., Fremont, CA. 94538 USA (hereinafter called
"VIRAGE").
1. Definition
1.1 As used in this Agreement, "Agreement" shall mean this agreement
and all attachments and addendum hereto.
As used in this Agreement, "SLA" shall mean software license
agreement which is concluded between SII and SII's customers
according to Article 3 hereof.
As used in this Agreement, "Maintenance Agreement" shall mean
software maintenance agreement which is concluded between SII and
SII's customers according to Article 13 hereof. As used in this
Agreement, "LOI" shall mean the document which is concluded on
March 11th 1998, between SII and VIRAGE for the purpose of
confirming the mutual intent of the parties for the distribution
of Product(s) in Japan.
As used in this Agreement, "Product(s)" shall mean the software
set forth in Appendix A hereto which SII is authorized by VIRAGE
hereunder and its derivatives to sell and market in Japan.
2. Distribution Rights. VIRAGE shall grant SII the non-exclusive right to
market and distribute Products and to provide customers with technical
support in Japan.
3. SLA. SII shall conclude and execute with its customers for the
Product(s) a Japanese version of the attached and VIRAGE approved SLA
with its customers when SII sells Products to customers. VIRAGE
recognizes, as authorized, the standard SLA prepared by SII which is
written in Japanese and shall be governed by and interpreted in
accordance with the laws of Japan. SII shall use no other form of SLA
without VIRAGE prior written consent, which shall nor be unreasonably
withheld. SII shall indemnify and hold VIRAGE harmless from all losses,
damages, costs (including reasonable attorney's fees) and expenses from
any license or warranty term which was nor authorized by VIRAGE in
writing.
4. Term of Agreement. This Agreement, unless terminated in accordance with
Article 17 hereof, shall continue for a period of three (3) years from
Effective Date, and shall be automatically renewed and continued one (1)
year thereafter on a year-to-year basis unless either party gives at
least thirty (30) days prior written notice to terminate this Agreement
-1-
<PAGE> 2
to the other party before the expiration of the original term or
extension period of this Agreement.
5. Responsibilities of VIRAGE
5.1 VIRAGE shall provide quantities of Products sufficient to meet
the requirements of SII.
5.2 VIRAGE agrees to provide, free of charge, product training for
SII personnel at VIRAGE offices as well as technical support to
aid in SII's sales of Products.
5.3 VIRAGE agrees to provide and distribute to SI, free of charge,
two copies of the latest released version of each Product
considered for demonstration, evaluation and technical purposes.
These copies shall nor be used for sales, or for internal SSI
design.
6. Responsibilities of 511
6.1 SII agrees to make its best efforts to promote the distribution
of Products in Japan and to provide its customers with such
support as set forth in Article 6.3 hereof
6.2 SII shall nor represent any other manufacturers of devices,
components or other products which are competitive with those
manufactured by VIRAGE.
6.3 SII shall offer its customers under the maintenance agreement set
forth in Article 13.3 the following technical support in relation
to the use of Products.
(a) Telephone support, through which the customers are
provided with necessary advice and information during
SII's business hours;
(b) On-site support, through which SII personnel are
dispatched to address customers' problems;
(c) Product training, through which the customers are given
necessary instruction on the proper usage of Products;
6.4 SII shall provide to VIRAGE, on a quarterly basis, forecasts for
Products for the three (3) month period following the date of the
forecast.
6.5 SII shall quote to its customers and potential customers' prices
for VIRAGE's products based on direct solicitation from the
VIRAGE's main office.
7. Purchase Order. SII shall issue purchase orders to VIRAGE at least seven
(7) days prior to the date of delivery required by such purchase orders.
VIRAGE shall issue a notice of acceptance or non-acceptance to each
purchase order
-2-
<PAGE> 3
in writing within three (3) business days from the receipt of such
order. Any and all purchase orders shall be deemed accepted by VIRAGE
unless a notice of non-acceptance is issued during such period. Accepted
orders shall not be allocated, changed or canceled without mutual
agreement of both parties hereto.
8. Price and Payment
8.1 VIRAGE transfer prices from VIRAGE to SII for Products shall be
in accordance with Appendix B attached hereto.
8.2 The delivery of Products hereunder shall be made on the condition
of CIF, Kameido, Tokyo.
8.3 VIRAGE shall give SII written notice at least ninety (90) days
prior to any and all price changes in the U.S. Price List. VIRAGE
shall provide SII with the latest U.S. Price List as it becomes
available.
8.4 Terms of payment by 311 shall be sixty (60) days after SII's
receiving invoice from VIRAGE. Amounts payable to VIRAGE will be
paid to VIRAGE in United States dollars by wire transfer in
immediately available funds to an account designated in writing
by VIRAGE from time to time. As of Effective Date,
VIRAGE's account is:
Bank name: Silicon Valley Bank
Bank Address: 3003 Tasman Drive Santa Clara, CA. 95054
Account Number: ***
ABA Number: ***
Contact Name: Gayle Nickel
Telephone Number; 1-408-654-7318
All bank charges and commissions associated with payment inside Japan
hereunder will be borne by SII
8.5 All trade terms provided in this Agreement shall be interpreted
in accordance with the latest Incoterms of the International
Chamber of Commerce.
8.6 SII shall pay withholding tax by deducting the same from amounts
of transfer price. SII shall send VIRAGE an official certificate
evidencing such payment.
8.7 The Yen-Dollar exchange rate used is T.T.S. rate of Fuji Bank on
the last day of the previous month of the payment.
9. Title and Risk of Loss. Title and risk of loss to any Products shall be
passed from VIRAGE to SII at the C.T.F point Kameido, Tokyo.
-3-
<PAGE> 4
10. Advertising and Promotion. VIRAGE may advertise products and lists SII's
name in its advertising from time to time.
SII may likewise advertise and hold itself our as an authorized
distributor of the VIRAGE and may promote the sale of the VIRAGE's
products through all appropriate media.
VIRAGE shall supply, free of charge, masters of advertising materials
for marketing of the products, such as catalogs, brochures, pamphlets,
and the like.
11. Proprietary Rights
11.1 VIRAGE retains all titles and reserves all rights of ownership to
the documentation, manuals, information, and promotional
materials furnished by VIRAGE to SII, and to all intellectual
property rights in or to Product.
11.2 VIRAGE hereby grants SII the right to translate documentation
attached to Products into Japanese and distribute such
translations to customers for the sale and support of Products.
SII and VIRAGE shall own an equal share of the copyright and
ownership of the translated documentation in Japan.
11.3 SII may during the term of this Agreement use any trade mark and
trade name registered by VIRAGE in connection with the sale of
Products in Japan. VIRAGE shall possess the sole ownership of the
trade marks and trade name in Japan. Other than SII's right to
promote, distribute and sell the products covered by this
Agreement within the territory granted to SII, no rights or
licenses with respect to VIRAGE's trademarks, service marks,
trade names copyrights, parents and other intellectual property
rights are granted or deemed granted hereunder or in connection
herewith, other than those rights or licenses expressly granted
in this Agreement.
11.4 SII shall not reverse-engineer, copy, disassemble or decompile
any Product and shall make its best efforts to ensure that its
employees arid affiliated companies do not do so.
12. Confidentiality. Both SII and VIRAGE shall keep in the strictest
confidence any and all trade secrets, information and know-how disclosed
by the other party (hereinafter referred to as the "Confidential
Information") and shall not disclose to any third party nor use any
Confidential Information for any other purpose than those provided
herein for a period of seven (7) years from the date of receipt of such
Confidential Information.
This obligation of confidence shall not apply to the following
information;
(1) at the time of such disclosure is in the public domain, or
(2) after such disclosure becomes part of the public domain through
no fault of the receiving party, or
(3) was known to the receiving party without breach of any duty to or
violation of any right of the disclosing
-4-
<PAGE> 5
party before it was obtained from the disclosing party, or
(4) is acquired by the receiving party on a non-confidential basis
from a third party who is not under a secrecy obligation to and
did not violate any obligation of non-disclosure of the
disclosing party, or
(5) is developed by or for the receiving party independently of the
disclosing party's Confidential Information received hereunder,
or
(6) is disclosed by the receiving party under the obligation created
by any country or government action.
This Agreement extends to and covers only Confidential Information which
(1) is marked by the Disclosing Party as confidential or proprietary
nature (e.g., "Confidential"), if the Confidential Information is
disclosed in an tangible form; or (2) is treated, and is notified the
Receiving Party by the Disclosing Party as confidential at the rune of
oral or other intangible disclosure and confirmed in writing provided by
the Disclosing Party within thirty, (30) days after the date of such
disclosure, which writing shall be marked by the Disclosing Party as
confidential or proprietary nature, if the Confidential Information is
disclosed orally or in other intangible form.
13. Warranty and Maintenance
13.1 VIRAGE declares that it owns the copyrights to Products sold
hereunder, and has legal right to sell such product. VIRAGE shall
warrant that Products do not infringe any third party's patents,
copyrights, trade secret or other proprietary right.
13.2 VIRAGE shall warrant that Products distributed by VIRAGE is free
from defects in workmanship as well as materials and conforms to
the technical standards as set forth in the product
specifications defined as Appendix C for a period of one (1) year
from the date of shipment to the customer by SI. For CTMC and
Custom Compilers, the customer may purchase an additional Foundry
Maintenance Agreement which provides updates to the libraries and
compilers as a result of design rule changes, changes in the
spice models or process and updates to EDA tools. Foundry
Maintenance will appear on the price list separately as an
option. The price to SII is in Appendix B.
13.3 After this one (1) year warranty period, customers may enter into
Maintenance Agreement covering any Product with SII. SII will
promote the Maintenance Agreement with customers. SII shall pay
the software maintenance fee stated in Appendix B on a quarterly
basis to VIRAGE for the tern-i of each Maintenance Agreement
only.
13.4 VIRAGE recognizes, as authorized, the standard Maintenance
Agreement prepared by SII which is written in Japanese and shall
be governed by and interpreted in accordance with the laws of
Japan. SII shall use no other form of Maintenance Agreement
without VIRAGE prior written consent, which shall not be
unreasonably withheld.
-5-
<PAGE> 6
13.5 In case SII or the customers finds a defect in Products, VIRAGE
shall according to the SII's or customers' demands repair,
correct or replace for such Products without charge and/or
compensate for losses incurred thereby during warranty and the
software maintenance period, VIRAGE's and SII's total liability
to any particular SII customer shall be limited to fees received
by SII from such customer.
VIRAGE's non-exclusive warranty shall be:
(i) to repair, correct or replace the Product; or
(ii) to compensate for losses incurred thereby during warranty
and the software maintenance period, provided that
VIRAGE's and SII's total liability to any particular SII
customer shall be limited to fees received by SII from
such customer.
This express warranty granted is in lieu of all other warranties,
express or implied, including the implied warranties of merchantability
and fitness for particular purpose. VIRAGE shall not be liable to any
other party for special, incidental, or consequential damages (including
any claims for lost profits or disruption of business or loss of use).
VIRAGE's total liability to SII shall be limited to all fees received by
VIRAGE from SII.
13.6 During warranty and the software maintenance period which means
an effective period specified on Maintenance Agreement entered in
customers and 511, VIRAGE shall provide the following maintenance
and support services:
(a) SII may report to VIRAGE any error that may be found in
Products and VIRAGE shall rectify such error or to provide
a work-around solution.
(b) VIRAGE will provide to SII any new versions of Products,
the documentation and manuals that are released and SII
will be granted to use such new Versions in accordance
with this Agreement.
13.7 VIRAGE shall provide any new versions of Products free of charge
for all Products which include the Products of SII's inventory,
the demonstration Products referred in the Article 5.3 hereof and
the Products lent to the customers from SII.
13.8 In the event of a resumption of any Maintenance Agreement under
Section 13.9, SII shall pay VIRAGE a maintenance fee under the
same conditions as 13.9. The payment shall be made within sixty
(60) days of the last day of each quarter.
When a Maintenance Agreement is entered into in the middle of a
quarter, the maintenance fee for the quarter shall be prorated
according to the exact number of days between the effective date
of the Maintenance Agreement and the last day of the quarter.
13.9 With regard to the resumption of any Maintenance Agreement,
VIRAGE shall agree to the following conditions:
After the termination of the Maintenance Agreement, the customer
may resume the Maintenance Agreement within three (3) years from
the date of termination of the Maintenance Agreement on the
condition that the
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<PAGE> 7
customer pays an amount 1.3 times the maintenance fee
retroactive to the date of termination. This resumption policy
is not applicable, if longer than three (3) years has passed
since the date of termination of the Maintenance Agreement.
After the three year period, the customer will have to buy
Products for upgrade.
13.10 VIRAGE shall not charge SII a maintenance fee for any Products as
in Article 5.3.
14. Products Liability. Should any claim, demand or suit be made or filed
against SII as a result of any defect, whether patent or latent, in
products, under the theory of breach warranty, express or implied, or
under the theory of products liability, Company shall indemnity and hold
SII harmless for any claims suit, demands, proceeding or expenses
including attorney's fees.
15. Notices. All necessary notices or requests to each party in performing
this Agreement shall be sent to the following addresses:
VIRAGE:46824 Lakeview Blvd. Fremont CA. 94538 USA
SII: SII Kameido Bldg.-West 4F, 41-6 Kameido 6-chome, Koto-ku Tokyo 136,
Japan
Such notices or requests shall be deemed to take effect upon receipt by
the addressee. Each party shall notify the other in writing about an;
changes in address to which all notices or requests shall be sent.
16. Patent and Copyright Indemnity
16.1 VIRAGE shall defend or settle at its expense any action brought
against SII alleging that Products Furnished under this Agreement
infringe on American or Japanese patents, copyrights, and
intellectual proprietary rights such as trade secrets, except
when SII is deemed primarily responsible, and VIRAGE shall pay
all costs, damages and reasonable attorney's fees finally awarded
against SII that are attributed to such claims, provided that
SII:
(a) notifies VIRAGE promptly in writing of the action,
(b) provides VIRAGE all reasonable information and assistance
to settle or defend the action,
(c) grants VIRAGE sole authority and control of the defense or
settlement of the action.
If an injunction is issued as the result of any such alleged
infringement, SII shall permit VIRAGE, at VIRAGE option and
expense, either to (a) replace or modify Products to avert any
infringement or (b) procure for SII or customers the right to
continue distributing or using Products.
VIRAGE shall nor be responsible for any infringement claim due to
any Product change or modification done by SII or a SII customer.
16.2 In the event that VIRAGE provides SII with Products with embedded
products developed and manufactured
-7-
<PAGE> 8
by such third by the third parties, VIRAGE shall warrant that
VIP-AGE is authorized parties to modify such products and
distributed SII for the use of such modified Products.
17. Termination
17.1 This Agreement may be terminated;
(a) by an agreement duly signed by the parties hereto; or
(b) by either party with at least ninety (90) days prior
written notice to the other, with a material breach of
this Agreement in the payment of money that remains
uncured for 15 days after receipt of written notice or a
material breach of any other material term of the
Agreement that remains uncured for 30 days after receipt
of written notice.
Upon any allegation that a breach of this Agreement has occurred
or is likely to occur, both parties agree to cooperate in using
their best efforts to address and attempt to cure or prevent the
alleged breach.
As soon as possible after receiving notice of the alleged breach,
the parties will investigate the circumstances surrounding the
alleged breach and agree upon the steps necessary to remedy the
breach. Throughout the process the parties will share any
relevant information and materials that would be relevant to
determining whether a breach has occurred or the steps necessary
to remedy the breach.
17.2 In the event either party voluntarily files a petition for
bankruptcy or has such a petition involuntarily filed against IT,
or is placed in receivership or recognition proceeding or is
placed in trusteeship involving insolvency, or has ceased regular
business operations, the other party may terminate this Agreement
by giving a termination notice, upon which termination shall
become effective thirty' (30) days after the issuance of such a
notice, if the petition has not been dismissed, withdrawn or
otherwise invalidated during said thirty (30) day period.
Termination of this Agreement by either party shall not be deemed
an ejection of remedies or waivers of any claim relating to the
other party.
17.3 After termination or expiration of this Agreement, VIRAGE shall
take responsibility for distribution, maintenance and support of
Products which SII was distributed from VIRAGE. and sold to
customers.
17.4 If VIRAGE should be acquired by any other company, then SII may,
within thirty (30) days of written notice by VIRAGE to SII of the
acquiSIion, request in writing that VIRAGE shall purchase SII's
inventory at the price paid to VIRAGE upon placement of the
purchase orders for such unsold Products.
17.5 After termination or expiration of this Agreement, SII shall
receive full sales commission as stated in Appendix B for orders
received on quotations issued in the 3 months prior to
termination or expiration of the agreement.
18. Severability. Except as provided herein, the provisions of this
Agreement can be severed and, if, by stature, regulation, court order or
other action taken by any government or governmental subdivision having
jurisdiction over this
-8-
<PAGE> 9
Agreement, any provision of this Agreement is voided or declared
unlawful, then, within the jurisdiction of the said government or
governmental subdivision, the said provision shall be of no effect and
it shall be as if said provision had never been included in this
Agreement, provided that in the event such statute, regulation, court
order or other action frustrates the economic assumptions of this
Agreement or renders performance impossible, the party affected thereby
shall have the right to terminate this Agreement.
19. Force Majeure. In the event of an occurrence of an emergency or
contingency of a natural disaster constituting a cause of force majeure
to either or both of the parties hereto, with the result that the
performance of any of its or their obligations under this Agreement is
rendered impossible; thereby, neither party shall be liable in any way
for any delay in its performance due to such a cause. Under this
Agreement, a force majeure refers to any cause beyond the parties'
control, including, but not limited to, strikes, lockouts, riots, war,
accidents, failures or breakdowns of components necessary to completing
orders, delays caused by subcontractors, suppliers or customers,
inability to obtain or substantial increases in the cost of labor and/or
manufacturing facilities, fire, Acts of God, curtailment of or failure
to obtain sufficient electrical or other energy, whether valid or
invalid, of any cognizant governmental body or any other instrumentality
thereof, whether presently existing or hereafter created.
20. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all provisions, negotiations,
agreements and commitments in respect thereto, and shall not be
released, discharged, changed or modified in any manner except by
instruments signed by duly authorized officers or representatives of
each of the parties hereto.
21. Waiver. No delay or failure of each party in exercising any right, power
or remedy hereunder shall operate as a waiver thereof nor shall any
single or partial exercise of any such right, power or remedy preclude
other or Further exercise thereof or the exercise of any other right,
power or remedy.
22. Arbitration. All disputes, controversies or differences which may arise
between the parties, out of or in relation to or in connection with this
Agreement or for the breach thereof, shall be referred to arbitration.
If the arbitration is initiated by SI, the arbitration shall take place
in Milpitas, California, before three arbitrators selected in accordance
with the Commercial Rules of the American Arbitration Association. If
the arbitration is initiated by VIRAGE, the arbitration shall take place
at the Japan Commercial Arbitration Association in Tokyo in accordance
with the Commercial Arbitration Rules of said Association. The award of
arbitration rendered shall be final and binding upon both parties.
-9-
<PAGE> 10
23. Assignment. This Agreement is not assignable or transferable by either
party in whole or in part without the express written consent of the
other party, which shall not be unreasonably withheld.
24. Governing Law. The validity, construction and performance of this
Agreement and/or each individual contract shall be governed by and
interpreted in accordance with the laws of Japan.
25. Survival. The following provisions shall survive the expiration or
termination of this Agreement, Article 11 (Proprietary Rights), Article
12 (Confidentiality), Article 13 (Warranty and Maintenance), Article 16
(Patent and Copyright Indemnity), Article 17.6 (Termination), Article 18
(Severability), Article 22 (Arbitration), Article 24 (Governing Law) and
Article 24 (Survival) shall survive such expiration or termination.
-10-
<PAGE> 11
Seiko Instruments, Inc. Virage Logic Corporation
By: /s/ Ishibashi Shinichi By: /s/ Adam Kablanian
-------------------------- ---------------------------
Title: General Manager Title: President & CEO
----------------------- -------------------------
Date: Oct. 1, 1998 Date: 10/7/98
----------------------- -------------------------
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<PAGE> 12
October 1, 1998
Appendix A
Products
(1) MD-PRO
(2) Custom RAM
(3) Fixed Libraries (STMC,CTMC,MBA)
(4) MD - Pro Maintenance
(5) Foundry Maintenance for Fixed Libraries or Custom RAM
-12-
<PAGE> 13
Appendix B
Prices to SII
The prices to be paid by SII shall be equal to the actual customer purchase
price minus the discount as specified in the following table.
<TABLE>
<CAPTION>
Product discount rate
<S> <C>
MD-PRO **%
Custom RAM **%
Fixed Libraries (STMC, CTMC, MBA) **%
MD-PRO Maintenance **%
Foundry Maintenance **%
</TABLE>
(1) SII shall place orders to VIRAGE based on Japan list price. The Cap in
Japan mark-up should be decided by SII based on the market and/or competitive
price. This pricing is good for a year. After once year, the parties agree to
revisit the discount rate to make necessary adjustments if necessary.
(2) The quotation that VIRAGE has made to Hitachi (back in August 1997)
regarding Ultra Low Power memory compilers on 0.2um process is excluded from
this Agreement.
-13-
<PAGE> 14
Appendix C
VIRAGE shall meet the functions specified on each Product's User's Manual.
-14-
<PAGE> 1
EXHIBIT 10.13
*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
DEVELOPMENT AND LICENSING AGREEMENT
This agreement ("Agreement") is entered into and effective as of March 3, 1999
("Effective Date") by and between Taiwan Semiconductor Manufacturing Co., Ltd.,
a company duly incorporated under the laws of the Republic of China ("ROC"),
having its principal place of business at No. 121, Park Avenue 3, Science Based
Industrial Park, Hsin-Chu, Taiwan, ROC ("TSMC"), and VIRAGE LOGIC, Corp.,
("VIRAGE"), a company duly incorporated under the laws of Delaware, USA, having
its principal place of business at 46824 Lakeview Blvd., Fremont, California
94538 USA.
WHEREAS, VIRAGE has the expertise in developing capability in designing
sub-micron memory bit cells, memory compilers, and other silicon intellectual
property; and
WHEREAS, TSMC desires to have VIRAGE license to TSMC and TSMC's customers an
existing and/or future development of sub-micron memory bit cells and memory
compilers, including, but not limited to, based on TSMC 0.25um and 0.18um
technologies (the "Library") for TSMC's manufacturing services, and to have
VIRAGE extend the Library to its customers;
WHEREAS, Parties desire to jointly determine the manufacturability of
TSMC's Bit Cells ("TBC");
This Agreement shall serve to:
(i) confirm certain agreements that TSMC and VIRAGE have reached
over the past several months regarding certain elements of the
TSMC library Program. The TSMC Library Program shall mean the
design, maintenance, sales, distribution and support by VIRAGE
of certain library cells (the "Licensed Product"). TSMC Cells
are defined as certain library cells contained in the Licensed
Product, including but not limited to Exhibits A & B, which are
solely owned by TSMC as listed in Exhibit D. The Licensed
Library contains the Licensed Products and TSMC Cells ("Licensed
Library").
(ii) identify a) the legally binding terms which are as provided
below in this Agreement; and b) certain non-binding and open
issues relating to the TSMC Library Program (as listed in the
Exhibit F), and the parties agree to work together in good faith
to find mutually satisfactory resolutions to open issues
identified herein.
NOW, THEREFORE, the parties hereto agree as follows:
I. DEVELOPMENT AND DELIVERY OF THE LIBRARY EXTENSIONS
1.1 VIRAGE agrees to use good faith and reasonable efforts to develop for
TSMC the Library according to specifications as provided in Exhibit B
("Specifications") of this document. VIRAGE agrees to use good faith and
reasonable efforts to provide to TSMC the set of deliverables outlined
in Exhibit A and Exhibit B Specifications ("Deliverables"). The scope of
this Agreement shall include 0.25um and 0.18um
<PAGE> 2
technologies, which may be extended to future technologies by mutual
agreement in writing.
1.2 VIRAGE agrees to use good faith and reasonable efforts to provide the
set of Deliverables according to the schedule and milestones as provided
in the Exhibit C ("Schedule"). Both TSMC and VIRAGE shall conduct
engineering reviews to track the progress on a weekly basis. For every
milestone set forth in Exhibit C, VIRAGE commits to allocate resources
to meet the Schedule.
1.3 TSMC agrees to use good faith and reasonable efforts to provide early
access to the technical information, including Design Rules and SPICE
Models to VIRAGE for the purpose of developing the Library. TSMC will
also provide when available, the DRC command file for the given process,
if appropriate, to VIRAGE for verification of design rule
interpretations. VIRAGE understands that there may be potential changes
to information provided, and TSMC agrees to use good faith and
reasonable efforts to keep VIRAGE continuously updated on the most
current version of information. Provided, however, that both parties
understand that the scope of such changes may result in VIRAGE being
unable to meet the Schedule.
1.4 Library Deliverables will be an integration of (but not limited to)
TSMC-specific memory compilers using the single-port TSMC-supplied bit
cells (only after VIRAGE has reviewed the TSMC bit cell and finds it
technically superior to VIRAGE's bit cells from an electrical and layout
standpoint), and TSMC-specific memory compilers for dual-port, two-port
and ROM compilers which contain bit cells developed by VIRAGE. Library
Deliverables shall also pass TSMC's design rule check (DRC) procedure.
TSMC will consider VIRAGE's suggestions with respect to design rule
modifications and interpretations.
1.5 VIRAGE and TSMC shall hold joint periodic technical discussions in order
to improve the probability that TSMC-specific library versions are
industry-competitive. The objectives and schedules of such technical
discussions are set forth in Exhibit G.
1.6 Parties shall mutually agree on an auditable quality assurance ("QA")
procedure to ascertain that VIRAGE's deliverables meet the Specification
prior to the delivery of the Library Products. VIRAGE agrees to perform
the QA Procedure on the Library Deliverables and promptly provide the
results to TSMC for its review. TSMC will review the Library
Deliverables, then provide authorization for customer release. Both
Parties agree to make the QA Procedure and results thereof available to
either party's potential customers promptly upon request.
1.7 The Schedule shall be appropriately and equitably extended to account
for any delays resulting from changes due to either party, and the
non-changing party shall have no liability as a result of Schedule
change.
II. MODIFICATION AND REVISION
2.1 VIRAGE shall revise the Library at its own expense and at no charge to
TSMC in the event that TSMC makes changes (not limited to) to design
rules and process parameters
-2-
<PAGE> 3
which TSMC at its discretion deems significant. The adjusted VIRAGE
Deliverables shall be shipped to TSMC after QA verification, upon a
mutually agreed-upon schedule as set forth in Exhibit G.
2.2 VIRAGE shall revise the design kits in the Library at its own expense in
the event of design tool revisions and changes which are deemed
significant but customer demand and/or after technical review as set
forth in Exhibit G and agreed to by VIRAGE and TSMC. The adjusted VIRAGE
Deliverables shall be shipped to TSMC after VIRAGE's QA verification,
upon a mutually agreed Schedule.
2.3 VIRAGE shall have no right to modify, alter or improve any cell in TSMC
Cells and TSMC shall remain the sole owner to all rights to such TSMC
Cells. TSMC grants VIRAGE the non-exclusive, non-transferable,
worldwide, royalty-free right and license to reproduce, and distribute
TSMC Cells, under the terms set forth in Section 5.1, for the term of
this Agreement, solely for the purpose of evaluation and for the design,
place-and-route and tape-out of integrated circuits to be manufactured
at TSMC owned or controlled manufacturing facilities. Such distribution
of TSMC Cells by VIRAGE shall be consistent with the manner in which
VIRAGE distributes the Licensed Products under TSMC Library Program
(e.g., provided under the same License Agreements, etc.). TSMC will use
good faith and reasonable efforts and reasonable efforts to correct any
bugs as necessary to have VIRAGE meet its Support Agreement(s).
III. OWNERSHIP AND LICENSE
3.1 As between the parties, VIRAGE exclusively shall have all right, title
and interest [including all patent rights, copyrights, trade secret
rights, mask work rights and other rights throughout the world
(collectively "Intellectual Property Rights")] in any inventions,
intellectual property, trademarks, works-of-authorship, mask works,
ideas or information made or conceived or reduced to practice by VIRAGE
or by VIRAGE jointly with TSMC and/or other third parties in the course
of development of memory bit cells, memory compilers, excepting only
those TSMC Cells listed in Exhibit D, or others as listed in Exhibit B
under this Agreement.
3.2 As between the parties, TSMC exclusively shall have all right, title and
interest [including all patent rights, copyrights, trade secret rights,
mask work rights and other rights throughout the world (collectively
"Intellectual Property Rights")] in any inventions, works-of-authorship,
processes, mask works, ideas or information made or conceived or reduced
to practice by TSMC or by TSMC jointly with third parties in the course
of development of those specifically identified library cells as listed
in Exhibit D, including but not limited to the TSMC single port memory
bit cells under this Agreement. Exhibit D shall be modified from time to
time upon mutual agreement between parties.
IV. CONSIDERATION
4.1 In consideration of the 0.18um Licensed Products developed herein, TSMC
shall pay to VIRAGE ****
which shall be net of
-3-
<PAGE> 4
any taxes and withholdings, excepting only any taxes due on VIRAGE's
income, and where the payment terms are as follows:
****
4.2 TSMC shall also pay to VIRAGE a Pay-for-Performance compensation rate as
specified herein. Pay-for-Performance compensation payments will be
strictly limited based on the wafers shipped and accepted through TSMC
that contain third party libraries from vendors participating in the
TSMC Library Program where these libraries conform to the specifications
identified by TSMC as part of this Agreement. TSMC shall not pay any
Pay-for-Performance compensation for either engineering lots or any test
chip wafers.
4.3 Parties understand and agree that TSMC is in the process of evaluating
Pay-for-Performance compensation methods such as area-based
partitioning. This evaluation may alter the
Pay-for-Performance/compensation methods stated herein. Notwithstanding
the above, both Parties agree that the method of Pay-for-Performance
compensation payments will be as determined below:
A) 1/N x applicable percentage, where N = number of third party
library supplies identified on one tape-out.
B) Area-based partitioning model where the percentage of the
Pay-for-Performance compensation is based directly upon the
percent of the core die are occupied by the Library.
4.4 Pay-for-Performance Table. Parties agree that the total TSMC
Pay-for-Performance percentage compensation is based upon accounts
receivables of wafers ordered through TSMC that contains third party
libraries from vendors participating in the TSMC Library Program where
these libraries conform to the specifications identified by TSMC as part
of this Agreement. VIRAGE shall receive compensation for TSMC for TSMC
cells that contain the Library Program. Pay-for-Performance compensation
percentage rates are applicable to Licensed Library products which are
TSMC-specific libraries for both 0.25um and 0.18um technologies.
Pay-for-Performance TABLE for 0.25um technology:
<TABLE>
<CAPTION>
Year 1998 1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Compensation ** ** ** ** ** ** ** **
</TABLE>
-4-
<PAGE> 5
Pay-for-Performance TABLE for 0.18um technology:
<TABLE>
<CAPTION>
Year 1998 1999 2000 2001 2002 2003 2004 2005
---- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Compensation ** ** ** ** ** ** ** **
</TABLE>
4.5 TSMC shall be obligated to pay royalties as stated herein to VIRAGE for
any TSMC customer design that is: (a) designated at time of production
release to TSMC to TSMC's customer as containing VIRAGE's Library
Products that have been so licensed under TSMC's Library Program, and
(b) where such designs are manufactured by TSMC. In the event that a
customer designates to TSMC that multiple Licensed Products vendors
contributed to the design, the royalties shall be distributed among
these multiple Licensed Products vendors as stated in Section 4.3
4.6 TSMC agrees to use good faith and reasonable efforts to require that
customers declare all designs as either "containing such Licensed
Products" or "NOT contained such Licensed Products." TSMC's sole
liability shall be limited to recording its customers' assertions
regarding such Licensed Products. Notwithstanding the above, if any of
TSMC's customers notifies TSMC of errors or omissions discovered, TSMC
shall pay VIRAGE the owed applicable royalties as stated under the terms
of this Agreement.
4.7 TSMC and VIRAGE shall work together to develop an auditing system to
verify the Pay-for-Performance compensation structure without violating
the confidentiality of TSMC's and VIRAGE's customers.
V. DISTRIBUTION OF THE LIBRARY
5.1 During the terms of this Agreement, VIRAGE shall have non-exclusive and
non-transferable rights to reproduce and distribute the Licensed Library
to third party entities ("Licensed Library Recipients") without any
payment of royalties or other fees to TSMC. VIRAGE agrees that Tm bit
cells may only be shipped with memory compilers developed specifically
for the TSMC bit cell and shall not be distributed by themselves.
5.2 VIRAGE agrees to sign "License Agreements" with the Licensed Library
Recipients' use of the Licensed Library. VIRAGE understands and agrees
to inform Licensed Library Recipients in the License Agreements that the
relationship between TSMC and the Licensed Library Recipients will be
purely for foundry services provided by TSMC, and the Licensed Library
Recipients must enter into a separate agreement with TSMC to obtain
foundry services from TSMC.
5.3 TSMC and VIRAGE shall use their best efforts to reach a mutual agreement
on the forms of the License Agreements immediately upon signing of this
Agreement. VIRAGE shall have the right to make changes from time to time
to the License Agreements so long as any such changes do not materially
alter (1) the terms and conditions provided in the mutually agreed
version of the License Agreements approved by TSMC, and (2) the basic
license restriction that the Licensed Library Recipients may use the
Licensed Library
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<PAGE> 6
only for evaluation and for the design, place-and-route and tape-out of
integrated circuits to be manufactured solely at TSMC or its designated
manufacturing facilities.
5.4 Parties agree that VIRAGE may make changes to the License Agreements on
a case-by-case basis for particular Licensed Library Recipients that do
materially alter the terms and conditions set forth; provided that
TSMC's consent has been obtained in writing (Email with appropriate
acknowledgment and facsimile will be acceptable forms of writing for
such consents).
5.5 VIRAGE shall be responsible for providing Licensed Library Recipients
the support for the Licensed Library distributed by VIRAGE. VIRAGE shall
be free to set all terms and conditions for support, maintenance,
engineering and customization services provided by VIRAGE to any
Licensed Library Recipients with no accounting to TSMC of any such fees.
5.6 TSMC shall have the right to distribute the Licensed Library for TSMC or
its designated subcontractors' internal designs, including ASIC's;
provided that TSMC shall execute a standard VIRAGE License Agreement as
described in this Agreement. If required, support for TSMC's internal
ASIC use of the Licensed Library can be purchased at VIRAGE's standard
fees.
5.7 Upon written request by TSMC, VIRAGE will license and distribute the
Licensed Library to (a) other third party design service providers
creating designs that will be manufactured solely at TSMC or TSMC
designated facilities; (b) distribute as necessary to Licensed Products
developers; or (c) distribute to fulfill TSMC's current contractual
obligations and to facilitate future contractual obligations. The terms
of these aforementioned licenses will be mutually agreeable to TSMC,
VIRAGE and the third party on a case-by-case basis.
5.8 Both VIRAGE and TSMC shall actively promote the Library to customers of
both parties ("Customers") using VIRAGE as the distributor. All Library
licensees will be granted a license for unlimited and/or limited use of
the Licensed Library and Deliverables solely for tape-out to TSMC.
5.9 VIRAGE shall provide TSMC a monthly update of all Licensed Library
Recipients who receive Front-End Views and/or Back-End Views. VIRAGE
shall not directly or knowingly indirectly make available the Licensed
Library to any company on the list provided in Exhibit E without first
obtaining TSMC's consent in writing (Email and facsimile will be
acceptable forms of writing for such consents).
5.10 Both parties will jointly hold quarterly meetings to review performance
as a participant in the TSMC Library Program beginning from the
Effective Date. The Parties will assign liaison representatives at both
corporate and regional levels.
5.11 TSMC, as the sponsor of the TSMC Library Program, agrees to use good
faith and reasonable efforts to manage the program for the useful life
of the 0l25 and 0.18 processes in the Licensed Libraries. VIRAGE will
incur large, uncompensated, up-front costs, and possible loss of
short-term business that can only be recovered through the
-6-
<PAGE> 7
aforementioned long-term Pay-for-Performance payments. If, due to
changes in the business environment or other reasons, TSMC chooses to
alter the terms of this Agreement, then TSMC agrees to use good faith
and reasonable efforts to give VIRAGE at least one year's notice before
any of the terms in Section IV of this Agreement can be altered so that
VIRAGE can renegotiate its agreements with Customers. Notwithstanding
the above, the one-year notice period will be waived due to any
unforeseen circumstances to TSMC.
VI. TERMS AND TERMINATION
6.1 This Agreement shall have an initial term of five (5) years from the
Effective Date, and shall automatically be renewed for successive one
(1) year terms, unless either Party gives sixty (60) days' written
notice of cancellation to the other Party prior to the expiration of the
term (including the initial term) then in effect.
6.2 This Agreement may be terminated early by either Party if the other
Party (1) breaches any material provision of this Agreement and does not
cure or remedy such breach within thirty (30) days after receipt of the
written notice of the breach from the other Party; (2) becomes the
subject of a voluntary or involuntary petition in bankruptcy or any
proceeding relating to insolvency, receivership, liquidation, or
composition for the benefits of creditors if such petition or proceeding
is not dismissed with prejudice within sixty (60) days after filing.
Termination of this Agreement shall be effective thirty (30) days after
issuance of a written notice of termination to the other Party by the
non-defaulting party.
6.3 Either Party without any cause may also terminate this Agreement early
by giving a ninety (90) day written notice to the other Party prior to
the desired termination date.
6.4 Termination of this Agreement for any reason shall not affect (1) the
obligations accruing prior to the effective date of termination; and (2)
any obligations under Sections 3, 4, 7, 8, 9, 10 and current customer
engagements hereof, all of which shall survive termination or expiration
of this Agreement.
6.5 Upon the effective date of termination, VIRAGE shall cease to use and
shall either destroy or return to TSMC all of the TBC documentation and
data in VIRAGE's possession or under VIRAGE's control. Any related
documentation and copies thereof, in whole or in part, in all forms of
media, together with VIRAGE's written certification by a duly authorized
officer, that the TBC documentation and data stored in any kind of forms
in VIRAGE's possession or under VIRAGE's control, and all related
documentation and all copies thereof in whole or in part are no longer
in use and have been returned to TSMC or destroyed.
-7-
<PAGE> 8
6.6 Termination of this Agreement under this Section shall be in addition
to, and not a waiver of, any remedy at law or in equity available to
either Party arising from the other Party's breach of this Agreement.
VII. DISCLAIMER OF WARRANTEE
7.1 Limited Warranty. VIRAGE warrants for a period of twelve (12) months
from delivery of the Licensed Library to TSMC that such Licensed
Library, as delivered, will be free from defects in the media and will
substantially conform to the Specifications. In the event of
nonconformance of the Licensed Library, TSMC shall promptly notify
VIRAGE and provide VIRAGE with all available information in written or
electronic form so that VIRAGE can reproduce the Error. VIRAGE's sole
obligation is to undertake reasonable commercial efforts to correct the
Errors reported to VIRAGE in writing, or in electronic form during the
warranty period. VIRAGE'S SOLE LIABILITY AND LICENSEE'S EXCLUSIVE REMEDY
WITH RESPECT TO BREACH OF THE FOREGOING LIMITED WARRANTY WILL BE LIMITED
TO ERROR CORRECTION AND PRODUCT REPLACEMENT, OR IF NEITHER IS IN
VIRAGE'S OPINION COMMERCIAL FEASIBLE, REFUND OF THE NRE DEVELOPMENT FEE
AND PAY-FOR-PERFORMANCE COMPENSATION PAYMENTS RECEIVED BY VIRAGE BY
TSMC.
7.2 DISCLAIMER. EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTY, THE LICENSED
LIBRARY, KNOW-HOW, AND DOCUMENTATION ARE LICENSED "AS IS," AND VIRAGE
MAKES NO OTHER WARRANTIES EXPRESS, IMPLIED, OR STATUTORY OR OTHERWISE
REGARDING THE LICENSED PRODUCT, DESIGN TECHNIQUES OR DOCUMENTATION.
VIRAGE SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE, OR ARISING FROM A COURSE OF
DEALING OR USAGE OF TRADE.
VIII. LIMITATIONS OF LIABILITY
8.1 Direct Damages. VIRAGE'S TOTAL LIABILITY FOR DIRECT DAMAGES UNDER THIS
AGREEMENT SHALL NOT EXCEED THE NRE DEVELOPMENT FEE AND
PAY-FOR-PERFORMANCE COMPENSATION PAYMENTS RECEIVED BY VIRAGE FROM TSMC.
TSMC'S TOTAL LIABILITY FOR DIRECT DAMAGES UNDER THIS AGREEMENT SHALL NOT
EXCEED $50,000 AS STATED IN THIS AGREEMENT.
8.2 Consequential Damages. EXCEPT AS PROVIDED IN SECTION 7 ABOVE, UNDER NO
CIRCUMSTANCES, SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL, INCIDENTAL
OR CONSEQUENTIAL DAMAGES ARISING IN ANY WAY OUT OF THIS AGREEMENT OR IN
THE USE OF THE LICENSED PRODUCT, DESIGN TECHNIQUES AND DOCUMENTATION,
HOWEVER CAUSES (WHETHER ARISING UNDER A THEORY OF CONTRACT, TORT
(INCLUDING NEGLIGENCE); OR OTHERWISE); INCLUDING, WITHOUT LIMITATION,
DAMAGES FOR LOST PROFITS, LOSS OF DATA, OR COSTS OF
-8-
<PAGE> 9
PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS ON EITHER
PARTY'S LIABILITY SET FORTH IN THIS SECTION VIII SHALL APPLY,
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY OF THE LIMITED
REMEDIES SET FORTH IN SECTION 8.1 ABOVE.
IX. PROPRIETARY INFORMATION
9.1 Both Parties agree to maintain Property Information in confidence, not
to make use thereof other than for the performance of this Agreement, to
release it only to employees who have a reasonable need to know the
same, and to release or disclose it to any third parties, without prior
written consent of the disclosing Party. Each Party hereto shall provide
proper and secured storage for papers, return the original and all
copies of tangible Proprietary Information.
9.2 All Proprietary Information and any copies thereof remain the property
of the disclosing Party, and no license or other rights is granted or
implied hereby. The receiving Party shall, upon the disclosing Party's
request, return the original and all copies of tangible Proprietary
information.
9.3 This Section shall survive the termination or expiration of this
Agreement for a period of three (3) years.
X. PATENT AND COPYRIGHT INFRINGEMENT
10.1 TSMC represents that TSMC Cells are and will be developed by TSMC or its
subcontractors and such TSMC Cells shall not infringe upon or
misappropriate the patents, mask work rights, copyrights, trade secrets
or other proprietary rights of other intellectual property of third
parties and that it has the right and authority to convey the TSMC Cells
as set forth herein.
10.2 TSMC shall, at its own expense, indemnify, hold harmless, and defend or
at its option, settle any claim, suit or proceeding brought by a third
party against VIRAGE for infringement of any third party's proprietary
rights or other intellectual property right issued in the United States,
Taiwan, Japan or the European Union, by virtue of VIRAGE's authorized
use, reproduction, distribution and sublicensing of any of the TSMC
Cells pursuant to the terms of this Agreement and shall pay any
settlement amounts or damages finally awarded in such claim, suit or
proceeding; provided that VIRAGE: (a) promptly notifies TSMC in writing
of such claim, suit or proceeding; (b) gives TSMC sole control over the
defense and/or settlement of such claim, suit or proceeding; and (c)
fully cooperates and provides all available information, assistance and
authority to defend or settle the claim, suit or proceeding. TSMC shall
not be liable for any costs, expenses, damages or fees incurred by
VIRAGE in defending such action or claim unless authorized in advance in
writing by TSMC.
10.3 Any action to be brought to prevent or enjoin any third party from
infringement of any patent, copyright or other proprietary rights of
TSMC with respect to TSMC Cells shall be brought exclusively by TSMC or
TSMC's designee, in TSMC's sole discretion and as between TSMC and
VIRAGE, at TSMC's sole cost and expense.
-9-
<PAGE> 10
10.4 If the TSMC Cells are, or in TSMC's opinion are likely to become the
subject of a claim, suit or proceeding alleging infringement, TSMC will
use good faith and reasonable efforts: (a) to procure at not cost to
VIRAGE, the right to continue using, reproducing, distributing and
sublicensing the TSMC Cells; (b) to replace or modify the TSMC Cells, at
not cost to VIRAGE, to make them non-infringing, provided that
substantially the same function is performed by the replacement of
modified TSMC Cells; or (c) if the right to continue using, reproducing,
distributing and sublicensing the TSMC Cells cannot be reasonably
procured for VIRAGE or the TSMC Cells cannot be replaced or modified to
make them non-infringing, terminate the license of such TSMC Cells
hereunder; provided that TSMC's indemnity obligations shall continue
indefinitely as to all use, reproduction, distribution and sublicensing
of the TSMC Cells prior to such termination.
10.5 The foregoing states TSMC's sole obligations and entire liability with
respect to any claim infringement of the TSMC Cells of any intellectual
property or other rights of any third party.
10.6 VIRAGE warrants and represents that the Library will be developed by
VIRAGE or appropriate subcontractors and that as such the Library shall
not infringe upon or misappropriate the patents, mask work rights,
copyrights, trade secrets, or other proprietary rights of other
intellectual property of third parties and that it has the right and
authority to convey the Library as set forth herein.
10.7 VIRAGE shall, at its own expense, indemnify, hold harmless, and defend
at its option, settle any claim, suit or proceeding brought by a third
party against TSMC for infringement of any third party's proprietary
rights or other intellectual property including but not limited to any
claim based upon a patent, copyright or other intellectual property
right issued in the United States, Taiwan, Japan or the European Union,
by virtue of TSMC's authorized use, reproduction, distribution and
sublicensing of any of the Library pursuant to the terms of this
Agreement and shall pay any settlement amounts or damages finally
awarded in such claim, suit or proceeding; provided that TSMC: (a)
promptly notifies VIRAGE in writing of such claim, suit or proceeding;
(b) gives VIRAGE sole control over the defense and/or settlement of such
claim, suit or proceeding; and ( ) reasonably cooperates and provides
all available information, assistance and authority to defend or settle
the claim, suit or proceeding. VIRAGE shall not be liable for any costs,
expenses, damages or fees incurred by TSMC in defending such action or
claim unless authorized in advance in writing by VIRAGE.
10.8 Any action to be brought to prevent or enjoin any third party from
infringement of any patent, copyright or other proprietary rights of
VIRAGE with respect to the Library shall be brought exclusively by
VIRAGE or VIRAGE's designee, in VIRAGE's sole discretion and as between
VIRAGE and TSMC, at VIRAGE's sole cost and expense.
10.9 If the Library, or in VIRAGE's opinion is likely to become the subject
of a claim, suit or proceeding alleging infringement, VIRAGE will use
good faith and reasonable efforts: (a) to procure at not cost to TSMC,
the right to continue using, reproducing, distributing and sublicensing
the Library; (b) to replace or modify the Library, at no cost to TSMC,
to
-10-
<PAGE> 11
make them non-infringing, provided that substantially the same function
is performed by the replacement of modified the Library, or (c) if the
right to continue using, reproducing, distributing and sublicensing the
VIRAGE Cells cannot be reasonably procured for TSMC or the Library
cannot be replaced or modified to make them non-infringing, terminate
the license of such VIRAGE products hereunder; provided that VIRAGE's
indemnity obligations shall continue indefinitely as to all use,
reproduction, distribution and sublicensing of the Library prior to such
termination.
10.10 The foregoing states VIRAGE's sole obligations and entire liability with
respect to any claim infringement of the Library of any intellectual
property or other rights of any third party.
XI. GENERAL TERMS
11.1 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California. In the event of any
dispute arising out of or in connection with this Agreement which cannot
be amicably settled by the Parties hereto, the Parties agree to submit
any such dispute to binding arbitration in accordance with the Rules of
American Arbitration Association. All information relating to or
disclosed by either Party in connection with the arbitration shall be
treated by the Parties as confidential information and no disclosure of
such information shall be made by either Party without prior written
consent of the other party.
11.2 Export Controls. Both Parties agree and certify that neither the
Licensed Library, not any other technical data received from VIRAGE, nor
the direct product thereof, will be exported or reexported outside the
United States except as authorized and as permitted by the laws and
regulations of the United States.
11.3 Assignment. This Agreement may not be assigned by either Party without
the prior written consent from the other party.
11.4 Audit. TSMC shall keep full and accurate books and records pertaining to
TSMC's performance under this Agreement for a period of at least one (1)
year after the date a given quarterly payment is made by TSMC to VIRAGE.
TSMC shall permit a mutually appointed third party, on behalf of VIRAGE,
to examine such books and records, at VIRAGE's sole cost and expense,
upon reasonable prior written notice during normal working hours, but
not later than one (1) year following the payment in question, for the
sole purpose of verifying the compensation payments and reports and
accountings related thereto. Prompt adjustments shall be made to
compensate for any errors or omissions disclosed by such examination. In
the event such examination shows underreporting and underpayments in
excess of five percent (5%) for any twelve (12) month period ending
three (3) months prior to the date of such examination, then TSMC shall
pay VIRAGE the reasonable costs of any such examination as well as the
unpaid compensation payments.
11.5 Notices. Any notice, report, approval or consent required or permitted
hereunder shall be in writing (allowing 5 days for mailing) and will be
deemed to have been duly given if
-11-
<PAGE> 12
delivered personally, by facsimile, or mailed by first-class, registered
or certified mail, postage prepaid to the respective addresses of the
Parties as set forth in this Agreement. If to VIRAGE, Attention:
Corporate Controller. If to TSMC: Attention: Corporate Counsel.
George Rassam: CFO
Telephone: 510-360-8020
[email protected]
11.6 No Waiver. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future endorsement of that or
any other provision.
11.7 Independent Contractors. The relationship of VIRAGE and Licensee
established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed (i) to give
either party the power to direct or control the day-to-day activities of
the other or (ii) to constitute the Parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking.
11.8 Severability. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the Parties,
and the remainder of this Agreement will continue in full force and
effect.
11.9 Attorneys' Fees. The prevailing party in any action to enforce this
Agreement shall be entitled to recover the costs and expenses including,
without limitation, reasonable attorneys' fees.
11.10 Injunctive Relief. The parties agree that a material breach of this
Agreement adversely affecting both Parties' Intellectual Property Rights
which would cause irreparable injury to the non-breaching Party for
which monetary damages would not be an adequate remedy. Therefore, the
Parties agree that the non-breaching Party shall be entitled to
equitable relief in addition to any remedies it may have hereunder or at
law.
11.11 Force Majeure. Except for the obligation to make payments hereunder,
nonperformance of either Party shall be excused to the extent that
performance is rendered impossible by strike, fire, flood, governmental
action, failure of suppliers, earthquake, or any other reason where
failure to perform is beyond the reasonable control of the nonperforming
Party.
11.12 Entire Agreement. This Agreement, including all Supplements, constitutes
the entire agreement between the Parties with respect to the subject
matter hereof, and supersedes all prior agreements or representations,
oral or written, regarding such subject matter. This Agreement may not
be modified or amended except in writing, signed by a duly authorized
representative of both parties.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly
executed in duplicate on their behalf by their duly authorized officers and
representatives on the date given above.
TAIWAN SEMICONDUCTOR MANUFACTURING VIRAGE LOGIC CORPORATION
CO., LTD.
By: /s/ MAGNUS RYDE /s/ ADAM KABLANIAN
------------------------------ -------------------------------------
Magnus Ryde for Ron Norris Adam Kablanian
- --------------------------------- -------------------------------------
(Print Name) (Print Name)
Sr. VP TSMC Ltd. President & CEO
- --------------------------------- -------------------------------------
(Title) (Title)
-13-
<PAGE> 14
EXHIBIT A VIRAGE 0.18um DELIVERABLES TO TSMC
The contents of this Exhibit shall be modified from time to time as mutually
agreed to by both parties:
DEFINITION OF TSMC 0.18um DELIVERABLES:
Models and User Documentation ("Front-End Views"):
1. Verilog Models with SDF Support
2. VCS Models with SDF Support (in Stamp format)
3. -VHDL (VITAL) Models with SDF Support
4. Symbols for compose (RAM support not required)
5. Symbols for Synopsys (RAM support not required)
6. Symbols for EDIF 200 (RAM support not required)
7. Schematic for special cell design (TSMC internal use only)
**Schematics in composer format for TSMC core cell
**Hard copy for memory compilers (models include core cell & memory
compiler models)
8. Motive Models with SDF Support
9. Primetime Models with SDF Support
10. IKOS models with SDF Support
11. Ambit models
12. Fastscan models
13. Sunrise models
14. Quickturn models
15. Synopsys Synthesis Models (.lib file) - including power information for
power design, wire-load model (options for customer to choose)
constructed by place & route results.
16. Cadence TLF 3.0 Models
17. Star-RC timing models
18. Star-DC timing models
19. LEF/Abstracts for Silicon Ensemble/Cell3/Aquarius/Apollo
20. Memory compiler abstract for Aquarius & Apollo: manual and
automated approach
21. CLF models for Avanti
22. Derating factors (including pin-to-pin delay time. Timing constraints:
setup time, hold time, recovery time, min. pulse width).
**Process derating factor when typical is set to 1
**Temp. derating factor when 25 degrees V is set to 1
**Voltage derating factor when VDD = 1.8V is set to 1
23. Automatic Data Sheet Generator
24. Customer Documentation*
* Note that item 1, 3, 9, 15, 16, 19, 22, 23 are the standard
deliverables, other items are delivered upon customer request
<PAGE> 15
Physical Views ("Back-End" Views):
1. -GDSII
2. Place & Route technology file for Silicon
Ensemble/Cell3/Aquarius/Apollo
**Provide sample solution in deliverable (TSMC needs to review and run
test case).
3. -SPICE netlist for LVS
Note that Item 2 will be shipped as per customer request.
<PAGE> 16
EXHIBIT A: TSMC 0.18UM DELIVERABLES (cont'd)
CUSTOMER DOCUMENTATION
- - Documentation Describing Characterization and Verification Methodology
*Note: Customer Documentation includes:
1) Standard Cell Databook (if provided by Virage) (including power route
guide)
2) Users Manual for Custom-Touch Memory Compilers which may include
1. Installation and usage instructions
2. Process Optimization for TSMC 0.18 process
3. Memory architecture
Optimizing clock-to-wordline driver performance Optimizing
wordline driver-to-sensing performance Optimizing
sensing-to-output drive performance Optimizing sense
amplifier recovery time Self-timing and duty-cycle
independence
4. Memory Compiler
USER OPTIONS - .glb PARAMETERS
Performance metrics
Design specifications
Run-time configuration
Model views
Functional description
Timing diagrams
Characterization conditions
5. Test Interface
BIST
Parallel test
Scan test
Serial test
<PAGE> 17
EXHIBIT B: VIRAGE LOGIC BIT CELLS
The contents of this Exhibit shall be modified from time to time as mutually
agreed to by both Parties:
Please see 0.18um TSMC memory Compiler Data Sheet
1) Dual Port Bit Cell
2) ROM Bit Cell
3) Register File Bit Cell one and two ports
4) Virage Logic Bit Cell for Single port High Density
<PAGE> 18
EXHIBIT C: 0.25uM DELIVERABLE SCHEDULE
Exhibit C1
0.25um TSMC-Specific Library - PHASE I
<TABLE>
<CAPTION>
TSMC SPECIFICATIONS VERSION DATE DELIVERY TSMC CONTROL #
- ------------------------------------- ------- -------- -------- ---------------
<S> <C> <C> <C> <C>
Spice Models - TSMC 0.25uM LOGIC 1.7 8/7/98 8/24/98 TA-1099-6001
SALICIDE (1P5M, 2.5V, 2.5V/3.3V)
Design Rules - 0.25uM LOGIC SALICIDE 1.3 9/25/98 11/21/98 TA-1099-4003
2.5V/3.3V PROCESS DESIGN RULE
DRC runset - 0.25uM LOGIC SALICIDE 3 8/04/98 11/21/98 TA-1099-4003-D2
2.5V/3.3V DESIGN RULE COMMAND FILE
TSMC Single-Port Memory Bit Cell 1.0 11/04/98 12/17/98 TA-10A0-4101
Sizing Equation
Layer Mapping
</TABLE>
KEY MILESTONES (D1 + RELATIVE TIMES)
<TABLE>
<CAPTION>
DELIVERY TIME
REQ. ACTIVITY WHO (RELATIVE TO D1)
- ------------------------------- ----------------------------- -------------------------------
<S> <C> <C>
Tech file 0.25um data including TSMC Done
Dracula runset
Tech file calibration & sample VIRAGE D1 + 2 weeks
set
Tech file review & sign-off TSMC D1 + 4 weeks
Create synchronous single-port VIRAGE Bitcell delivery + 16 weeks
memory compiler using TSMC
bit cell for large memories
</TABLE>
<PAGE> 19
EXHIBIT C: 0.18um DELIVERABLE SCHEDULE
Exhibit C2
0.18um TSMC Specific Library --- PHASE I
<TABLE>
<CAPTION>
TSMC SPECIFICATIONS VERSION DATE DELIVERY TSMC CONTROL #
- ------------------- ------- -------- -------- --------------
<S> <C> <C> <C> <C>
Spice Models - TSMC 0.18uM LOGIC 1.1 11/06/98 11/16/98 TA-10A5-6001
SALICIDE (1.8V/3.3V)
Design Rules - 0.18uM LOGIC SALICIDE 1.1 11/05/98 11/16/98 TA-10A5-4001
1.8V/3.3V PROCESS DESIGN RULE
DRC runset - 0.18uM LOGIC SALICIDE 2 10/21/98 11/24/98 TA-10A5-4001-D1
1.8V/3.3V PROCESS DESIGN RULE COMMAND
FILE
TSMC Single-Port RAM Bit Cell 0.1 10/09/98 12/17/98 TA-10A5-4101
Sizing Equation
Layer Mapping
</TABLE>
KEY MILESTONES (D2 + RELATIVE TIMES)
<TABLE>
<CAPTION>
DELIVERY TIME
REQ. ACTIVITY WHO (RELATIVE TO D1)
- ------------------------------- ----------------------------- -------------------------------
<S> <C> <C>
Tech file 0.18um data including TSMC Done
Dracula runset
Tech file calibration & sample VIRAGE D2 + 2 weeks
set
Tech file review & sign-off TSMC D2 + 4 weeks
Create synchronous single-port VIRAGE Bitcell delivery + 18 weeks
memory compiler using TSMC or
Virage Logic bit cell for large
memories
</TABLE>
-16-
<PAGE> 20
EXHIBIT D: TSMC CELLS
The contents of this Exhibit shall be modified from time to time as mutually
agreed to by both Parties:
<TABLE>
<CAPTION>
PART NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
0.18um 4.6552um2 Single-Port SRAM bit cell
(Borderless)
0.25um 7.5 um2 Single-Port SRAM bit cell
(Borderless)
10.95 um2 Single-Port SRAM bit cell
(Borderless)
</TABLE>
<PAGE> 21
EXHIBIT E
List to be updated as appropriate. Companies on this list shall not receive
Licensed Library from VIRAGE unless first approved by TSMC:
****
<PAGE> 22
EXHIBIT F: OPEN ISSUES
1. Review End-User License Agreement from VIRAGE, to review for TSMC
related Terms and Conditions.
2. 1/N based Pay-for-Performance/compensation calculation model versus
Area-based royalty/compensation calculation model decision.
<PAGE> 23
EXHIBIT G: TECHNICAL REVIEWS OR DISCUSSIONS
<PAGE> 24
EXHIBIT H
CUSTOM TOUCH STAR MEMORY COMPILER
This Exhibit H to the Development and Licensing Agreement between TSMC and
VIRAGE, dated March 3, 1999 ("DLA") constitutes the agreement between TSMC and
VIRAGE for the development, distribution and sale of the Custom Touch STAR
Memory Compiler developed by VIRAGE. Except as modified herein, the DLA is
hereby ratified and confirmed and remains in full force and effect. In the event
of a conflict between the terms of this Exhibit H and the DLA, the terms of this
Exhibit shall govern.
I. DEVELOPMENT DELIVERY OF THE CUSTOM TOUCH STAR COMPILER
1.1 VIRAGE agrees to develop for TSMC the Custom Touch STAR memory compiler
as specified in Attachment Number One ("Specifications") to this
Exhibit. VIRAGE agrees to provide to TSMC the set of deliverable
("Deliverables") outlined in the Attachment Number One to this Exhibit,
and to provide these Deliverables according to the Schedule and
milestones as provided in Attachment Number Two to this Exhibit
("Schedule"). The scope of this Agreement shall only include 0.18um
technologies and may be extended to future technologies by mutual
agreement in writing.
1.2 All terms of Section I of the DLA apply to the Deliverables of this
Exhibit.
II. MODIFICATION AND REVISION
All terms of Section II of the DLA apply to the Deliverables of this
Exhibit with the exception that the Schedule for the Custom Touch STAR
Deliverables is provided in Attachment Number Two to this Exhibit.
III. OWNERSHIP AND LICENSE
All terms of Section III of the DLA apply to the Deliverables of this
Exhibit.
IV. CONSIDERATION
4.1 In consideration for the development of the 0.18um Custom Touch STAR
memory compiler and Deliverables developed herein, TSMC shall pay to
VIRAGE US$**** as a non-refundable, Non-Recurring Engineering (NRE)
development fee, which shall include any taxes and withholdings,
excepting only any taxes due on VIRAGE's income. If upon receipt of the
final deliverable, the Custom Touch STAR Compiler is non-functional
(meaning the inability to generate any memory instances)k, and the
problems are unrecoverable, VIRAGE will credit Tm for the NRE paid. The
credit will be applied to any new project development between VIRAGE and
TSMC. If TSMC does not identify a project in which to apply the credit
within one (1) year, the credit will be rolled over to VIRAGE as
pre-paid royalty income. The payment terms are net 30 days upon receipt
of invoice from VIRAGE, which will be generated upon notification of
receipt from TSMC. TSMC shall be invoiced as follows:
<PAGE> 25
****
TSMC shall pay to VIRAGE Pay-for-Performance compensation as specified
in Sections 4.2 through 4l7 in the DLA. For those wafers that include a
Custom Touch STARinstance, **% of the Pay-for-Performance royalty amount
paid by TSMC to VIRAGE, to a maximum of $****, shall be kept in
reserve, to be utilized in funding VIRAGE to perform subsequent
technology developments for joint TSMC/VIRAGE memory products.
Developments funded with these funds must be mutually agreed to between
VIRAGE and TSMC, and must be in accordance with VIRAGE's published
product/technology roadmap. TSMC shall not unreasonably withhold
agreement to fund future developments in accordance with this section.
If TSMC does not utilize the royalty pool to fund future developments
within one (1) year of accumulating up to $**** in accordance with
the terms of this section, then VIRAGE will rollover the accumulated
funds and accept the $**** as royalty revenue. The one (1) year
period may be extended in twelve (12) month increments if mutually
agreed upon by both Parties.
4.2 VIRAGE will insert a paragraph in their Licensing Agreement, which when
signed by VIRAGE's and TSMC's customer, will provide authorization for
TSMC to release information that will assist VIRAGE in the collection of
royalties from the Custom Touch STAR memory compiler customers. The
authorization will allow TSMC to collect information on the usage of the
resulting Custom Touch STAR memory compiler instances and provide that
information to VIRAGE in order to assist in the collection of the
royalties. The information that VIRAGE will obtain permission from
Custom Touch STARcustomers for TSMC to collect and provide to VIRAGE
shall include but not be limited to: (i) specific data on wafers where
Custom Touch STAR instances are utilized, including customer name and
tape-out information, number of wafers manufactured and price per wafer
for that customer, and (ii) any other information deemed necessary to
ensure VIRAGE can charge and collect royalties for the Custom Touch STAR
instances.
For any actual customers of the Custom Touch STAR memory compiler,
VIRAGE shall mandate that these customers enter into appropriate
Licensing Agreements with VIRAGE directly, whereby the customers shall
pay to VIRAGE Licensing fees and/or Royalty fees. All distribution and
licensing will occur between the Custom Touch STAR customer and VIRAGE
unless authorized by VIRAGE to TSMC on a case-by-case basis. TSMC shall
clearly communicate to their customers the proper engagement method with
VIRAGE for obtaining said technology.
V. SILICON VERIFICATION AND CUSTOM TOUCH STAR CUSTOMER DELIVERABLES
5.1 All deliverables listed in Attachment Number Two must be
compliant with TSMC9000 specification.
-2-
<PAGE> 26
5.2 VIRAGE and TSMC will work together to define and develop a manufacturing
and yield analysis plan for redundancy & repair.
5.3 VIRAGE shall make available to their Custom Touch STAR
customers the following deliverables:
Front-end models
GDSII files
Custom Touch STAR specifications
Custom Touch STAR application notes
Test flow and test methodology
Built-in self test (BIST) or diagnostic circuitry description
BIST interface
BIST Option for testability
5.4 After receiving VIRAGE's deliverables (Attachment number Two), TSMC
will, free of any charges to VIRAGE, start the fabrication procedure by
running test instances developed by VIRAGE, and produce the Prototype
for VIRAGE. The number of lots and units supplied to VIRAGE by TSMC will
be determined mutually with Deliverables and Schedule. VIRAGE agrees to
start its own verification and qualification procedure on the Prototype
produced by TSMC, and within 45 calendar days after receiving Prototype,
VIRAGE shall provide a silicon verification report which shall include
information as outlined in the TSMC9000 specification.
VI. OTHER TERMS
6.1 All other terms in the DLA, including Sections 5, 6, 7, 8, 9, 10 and 11
in their entirety, shall apply to the Custom Touch STAR memory compiler
and Deliverables developed under this Exhibit unless specifically
modified by this Exhibit.
6.2 The rights and obligations of the parties contained in section 9 of the
DLA shall survive the termination or expiration of this Exhibit for a
period of five (5) years.
6.3 All rights and obligations of the parties under this Exhibit shall not
survive the expiration or termination of the DLA.
TAIWAN SEMICONDUCTOR MANUFACTURING VIRAGE LOGIC CORPORATION
COMPANY, LTD.
/s/ MICHAEL M. PAWLIK /s/ ADAM KABLANIAN
- ------------------------------------------ -----------------------------------
NAME: Michael M. Pawlik NAME: Adam Kablanian
TITLE: Vice President, Corporate Marketing TITLE: President & CEO
DATE: DATE:
-3-
<PAGE> 1
EXHIBIT 10.14
*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
JOINT MARKETING AND TECHNICAL SUPPORT AGREEMENT
This agreement is entered into and effective November 14, 1997, (the "Effective
Date") by and between VIRAGE LOGIC, with a place of business at 1641A South Main
Street Milpitas CA, 95025, USA ("VIRAGE LOGIC"), and Chartered Semiconductor
Manufacturing Ltd., with a place of business at 60 Woodlands Industrial Park D,
Street 2, Singapore 738406 ("CHARTERED").
Whereas, the parties hereto desire to work together to develop and promote
customer benefits of the joint use of CHARTERED foundry and VIRAGE LOGIC
products and services.
Whereas, the parties hereto desire to enter into a worldwide non-exclusive
agreement that defines the technical and marketing support that each party will
provide to the other in support of mutual customers and prospects.
BACKGROUND
VIRAGE LOGIC is a full service VLSI design and ASIC Company and a leader in
ultra low power and high performance integrated circuit design. VIRAGE LOGIC
provides design and test solution to ASIC and COT customers.
CHARTERED is a dedicated foundry providing quality manufacturing service for
semiconductor companies worldwide. CHARTERED business focus is in wafer
fabrication for implementing the customer designs in silicon.
This agreement serves to clarify the strong cooperative relationship between
VIRAGE LOGIC and CHARTERED to coordinate areas of mutual interest in the future
offering and promotion of libraries and foundry service for the benefit of
mutual customers.
1. JOINT MARKETING
It is the intention of both parties to provide the greatest value to mutual
customers through the delivery of compatible and complementary products and
services. Both parties agree to start cooperation in the area of compiler, BIST,
and SRAM, potentially EEPROM and Flash in the future. In order to achieve these
ends, both parties agree to work together in the following area:
1.1 Provide the other party and mutual customers with technical, marketing,
and sales support.
1.2 Introduce its customers to the products of the other party, when
appropriate.
1.3 Use each other's logos in marketing literature described in this
Agreement and upon the prior written approval of the other party.
<PAGE> 2
1.4 Issue press releases on significant achievements of this relationship.
All formal press releases must be approved by both VIRAGE LOGIC and
CHARTERED before they are issued. Both parties may comment on this
relationship to customers, third party and the press without prior
approval by the other party.
1.5 Promote each other's services in the COT market place. CHARTERED would
promote VIRAGE LOGIC libraries as having been manufactured at CHARTERED
and VIRAGE LOGIC would promote CHARTERED as foundry manufacturer meeting
VIRAGE LOGIC standard.
2. JOINT TEST CHIP AND SILICON VERIFICATION PROGRAM
CHARTERED and VIRAGE LOGIC will share the costs of model extraction and spice to
silicon correlation using the CHARTERED test chip or the VIRAGE LOGIC test chip.
The CHARTERED test chip would include a BSIM extract module for DC analysis, and
a performance module for AC characterization.
2.1 CHARTERED will be responsible for providing CHARTERED's test chip layout
and test plans to VIRAGE LOGIC. VIRAGE LOGIC is free to adapt CHARTERED
test chip, or design a new test chip at VIRAGE LOGIC's expense that best
meet VIRAGE LOGIC's needs in silicon verifications.
2.2 For each new process technology, VIRAGE LOGIC can take advantage of
riding on CHARTERED's test chip for such technology provided that VIRAGE
LOGIC is able to tape-out before CHARTERED's pre-determined cut-off
date. In the event VIRAGE LOGIC is unable to tape out by such date,
VIRAGE LOGIC shall be responsible for the costs of mask and CHARTERED
shall provide the silicon. If VIRAGE LOGIC is able to tape out before
such date, CHARTERED shall include VIRAGE LOGIC's test chip of a
reasonable size on CHARTERED's test chip without incurring masks or
silicon costs to VIRAGE LOGIC. VIRAGE LOGIC hereby acknowledges that
CHARTERED may make available such test chip to CHARTERED's customers and
technology partners upon their request.
2.3 VIRAGE LOGIC will be responsible for the engineering and test costs for
model extraction, performance characterization, and Spice to silicon
correlation. All resulting records, reports and data are shared between
VIRAGE LOGIC and CHARTERED.
2.4 CHARTERED will be responsible for running internal CHARTERED process
monitoring modules on as needed basis to assure that the CHARTERED
process is meeting CHARTERED specifications. If there are material
changes to the process that warrant new model extraction and/or silicon
verification, then the above model extraction and correlation sequence
will, if agreed by both parties, be repeated as described above.
2
<PAGE> 3
3. CHARTERED RESPONSIBILITIES
To ensure the highest probability of success for our mutual customers, CHARTERED
hereby accepts the following responsibilities:
3.1 CHARTERED will provide VIRAGE LOGIC with the most updated CHARTERED
Design Rules, Spice Models, Parasitic Extraction tables, and Biasing
tables for production processes on the same schedule that it provides
for its best customers based on CHARTERED test chip. CHARTERED reserves
the right to make changes as needed but will consider the ramifications
to VIRAGE LOGIC of such a change. It will be VIRAGE LOGIC discretion to
decide if a re-generation of model and/or silicon verification at VIRAGE
LOGIC's expense, is needed.
3.2 CHARTERED will support VIRAGE LOGIC through designated technical
contacts, usually CHARTERED account managers, to facilitate the orderly
flow of customer design data for mask making and wafer manufacturing.
3.3 CHARTERED will equip its sales channel with standard approved VIRAGE
LOGIC sales and marketing collateral for promoting VIRAGE LOGIC offers
to mutual customers and prospects.
3.4 CHARTERED will develop a press release which outlines the basic terms of
this agreement. Final approval of this press release will be with VIRAGE
LOGIC.
3.5 CHARTERED will support VIRAGE LOGIC's customers in the same manner as
CHARTERED supports its customers in similar locations.
4. VIRAGE LOGIC RESPONSIBILITIES
To ensure the highest probability of success for our mutual customers, VIRAGE
LOGIC hereby accepts the following responsibilities:
4.1 VIRAGE LOGIC will develop physical and logical design libraries based on
CHARTERED rules. Based on market demand, CHARTERED will advise and
VIRAGE LOGIC will choose which libraries to build using these rules.
VIRAGE LOGIC will make all reasonable efforts to keep these libraries
current with the CHARTERED Design Rules, and support mutual customers
with such libraries.
4.2 VIRAGE LOGIC will equip its sales channel with approved CHARTERED sales
and marketing collateral for promoting CHARTERED offers to mutual
customers and prospects.
3
<PAGE> 4
5. CONTACTS AND REVIEWS
5.1 Quarterly review meeting will be held at a mutually agreed time and
venue between CHARTERED and VIRAGE LOGIC to address any concerns or
issues affecting mutual customers, and to assess the effectiveness of
the sales effort and co-operative relationship.
5.2 VIRAGE LOGIC and CHARTERED Contacts
VIRAGE LOGIC CHARTERED
Engineering Alex Shubat Dong Khong / Bob Kwong
Sales Adam Kablanian
Marketing Adam Kablanian S.Y. Tan - Stahel
6. TERMS OF AGREEMENT AND CONFIDENTIALITY
6.1 This agreement shall remain in force for a period of three years from
the Effective Date.
6.2 Either party hereto may terminate this Agreement without cause or reason
by 90 days prior written notice to the other party during the term of
this Agreement provided that the terminating party will fully cooperate
with the other party to enable the customers to complete the tasks that
were started prior to termination.
6.3 Both parties hereto agree to treat all information, materials, and
documents, except for characterization data, provided by the other party
in accordance with Non-Disclosure Agreement executed separately by both
parties.
7. TRADEMARKS AND USE OF NAMES
7.1 The use of the name or products of the other party or indication of this
Agreement in the marketing and/or publicity materials of either party
shall be subject to written approval of the other party, and such
approval should not be unreasonably withheld or delayed. The requirement
of written approval shall not apply to accurate factual listings of
products publicly offered or supported by either party.
8. GENERAL PROVISIONS
8.1 Neither party may assign its rights or obligations, or assign or
sublicense any licenses granted under this Agreement without the prior
written consent of the other party.
4
<PAGE> 5
8.2 Neither party is authorized to act for or on behalf of the other party
under this Agreement. Each party is an independent contractor. No
commitments to customers on VIRAGE LOGIC library pricing, availability,
routed density, quality, or reliability may be made by CHARTERED. No
commitments to customers on CHARTERED wafer pricing wafer capacity,
delivery dates, quality, or yield may be made by VIRAGE LOGIC.
8.3 The validity, performance and construction of this Agreement shall be
governed by the Laws of the State of California.
8.4 If either party is challenged by a third party to be infringing the
intellectual property rights of such third party with respect to the
material or documents jointly developed or consented to by both parties,
then the other party shall provide all reasonable assistance to the
challenged party in defending against those claims. Such reasonable
assistance shall include providing relevant documents, materials, and
consulting.
8.5 No failure or delay by either party to enforce or take advantage of any
provision or right under this Agreement shall constitute a subsequent
waiver of that provision or right, nor shall it be deemed to be a waiver
of any of the other terms and conditions of this Agreement.
8.6 In the event that any provision of this Agreement is prohibited by any
law governing its construction, performance and enforcement, such
provision shall be ineffective to the extent of such prohibition without
invalidating thereby any of the remaining provisions of the Agreement.
The captions of sections herein are intended for convenience only, and
the same shall not be interpretive of the content of such section.
8.7 All notices and communications to be given under this Agreement shall be
in writing and shall be deemed delivered upon hand delivery, upon
acknowledged facsimile communication, or seven (7) days after deposit in
the mail of the home country of the party, postage prepaid, by
certified, registered or first class mail, addressed to the parties at
the addresses set forth above.
9. COPYRIGHT, PATENT, AND INDEMNITY
9.1 Indemnification by VIRAGE LOGIC
VIRAGE LOGIC shall indemnify and defend (including attorney fees)
CHARTERED and hold it harmless against any and all damages awarded by a
court or payable in settlement (whether or not a legal proceeding is
commenced) resulting from a claim against CHARTERED based upon an actual
or alleged infringement of a third party's patent, mask work right,
copyright trade secrets or other intellectual property right arising
from CHARTERED's use of design
5
<PAGE> 6
modules, spice models, or testchips provided by VIRAGE LOGIC under this
Agreement.
9.2 Indemnification by CHARTERED
CHARTERED shall indemnify and defend (including attorney fees) VIRAGE
LOGIC and hold it harmless against any and all damages awarded by a
court or payable in settlement (whether or not a legal proceeding is
commenced) resulting from a claim against VIRAGE LOGIC based upon an
actual or alleged infringement of a third party's patent, mask work
right, copyright, trade secrets or other intellectual property right
arising from VIRAGE LOGIC's use of CHARTERED's design rules, Spice
models, testchips, material, techniques, or process provided by
CHARTERED under this Agreement.
9.3 Procedure
Neither party shall have any liability under this section 9 unless:
(a) the indemnifying party is promptly notified in writing of each
notice and communication regarding such claim and given (at the
indemnifying party's expense) the authority, information, and
assistance necessary to present a defense; and
(b) The indemnifying party is offered sole control of the defense of
such claim and of all negotiations for its settlement or
compromise. The indemnified party may, at its expense,
participate in the defense of such claim and in all negotiations
for its settlement or compromise. If the indemnifying party does
not assume control of the defense promptly after notice of the
claim it shall be bound by the results obtained by the
indemnified party with respect to such claim.
9.4 In no event shall either party's liability to each other arising out of
sections 9.1 and 9.2, or out of any other provision in this Agreement
exceed an aggregate of United States Dollars One Hundred Thousand
(US$100,000).
9.5 Disclaimer
THE FOREGOING STATES EACH PARTY'S ENTIRE LIABILITY AND OBLIGATION
(EXPRESS, IMPLIED, STATUTORY OR OTHERWISE) WITH RESPECT TO INTELLECTUAL
PROPERTY INFRINGEMENT OR CLAIMS THEREFOR REGARDING ANY OF THE
INFORMATION EXCHANGED PURSUANT TO THIS AGREEMENT.
Acknowledged and agreed:
For VIRAGE LOGIC /s/ For CHARTERED /s/
----------- --------------
6
<PAGE> 7
Title President Title SVP
--------------------- ---
Date 10/27/97 Date 11/4/97
--------------------- -------
7
<PAGE> 8
ADDENDUM NO. 1 TO JOINT MARKETING AND TECHNICAL SUPPORT AGREEMENT
THIS ADDENDUM NO. 1, TOGETHER WITH EXHIBIT A is entered into and effective on
___________ 1999 (the "Effective Date") by and between Virage Logic Corporation
("Virage Logic"), a California corporation having its principal place of
business 46824 Lakeview Blvd., Fremont, CA 94538, USA and Chartered
Semiconductor Manufacturing Ltd. ("Chartered"), a Singapore company having, its
principal place of business at 60 Woodlands Industrial Park D, Street 2,
Singapore 738406, and is supplemental to a Joint Marketing and Technical Support
Agreement dated 4 November 1997 (the "Agreement").
WHEREAS:
In response to the market demand, the Parties have discussed and agreed to
revise the business model on which the Joint Marketing and Technical Support
Agreement was based. In accordance with those discussions, the Parties now
desire to incorporate the additional provisions to the Agreement.
IT IS AGREED AS FOLLOWS:
1. LIBRARIES
The terms of this Addendum No. 1 are only applicable to the following Virage
Logic Memory Compilers libraries that Virage Logic has developed for Chartered's
0.35um and 0.25um processes (the "Chartered/Virage Logic 0.35um/0.25um memory
compilers") pursuant to the Agreement:
- - 0.35um PROCESS:
(i) 1 port High density compiler
- - 0.25um PROCESS:
(i) 1 port High Density compiler (HD-Family)
(ii) 2 port High density compiler (HD-Family)
(iii) 1 port Register file
(iv) 2 port Register file
2. PRICING OPTION AND PAYMENTS
(a) Virage Logic agrees to grant twenty (20) compiler tokens to Chartered. The
compiler tokens may be exercised by Chartered to require Virage Logic to license
to Chartered customers any Chartered/Virage Logic 0.35um/0.25um memory compilers
on the payment by Chartered or customer of **% of Virage Logic's COT list prices
set out in Exhibit A together with Virage Logic's end-user maintenance fees
which shall not
<PAGE> 9
exceed 12% of the relevant list price per annum per site (all references to "$"
in this Addendum No. 1 shall mean United States dollars).
(b) In consideration of the receipt of the twenty (20) compiler tokens referred
to in Clause 2(a), Chartered agrees to pay the following royalties to Virage
Logic:
(i) Subject to Clause 2(b)(vii) below, for each revenue bearing wafer
manufactured at Chartered that incorporates any Chartered/Virage Logic
0.35um/0.25um memory compilers ("Wafer"), Chartered shall pay to Virage
Logic the following royalties, up to a maximum of **** per process ****
Technology:
(aa) **% of the Net Selling Price of each Wafer up to ****; and
thereafter,
(bb) **% of the Net Selling Price of each Wafer up to ****.
In this Agreement, "Net Selling Price" shall mean the gross
consideration (whether in cash or kind) received by Chartered
from sales of Wafers less (i) normal and customary rebates, and
cash and trade discounts actually taken, (ii) sales, use and/or
other excise taxes or duties actually paid, (iii) the cost of any
packages and packaging, (iv) insurance costs and outbound
transportation charges prepaid or allowed, (v) import and/or
export duties actually paid, and (vi) amounts allowed or credited
due to returns. In addition, when a Wafer is sold in a packaged
or tested form, the gross consideration (whether in cash or kind)
received by Chartered for the purposes of calculating the Net
Selling Price shall be less the costs of packaging and testing.
(ii) The total amount of royalties that Chartered shall pay to Virage Logic
pursuant to Clause 2(b)(i) above, over the life of the design using any
Chartered/Virage Logic 0.35um/0.25um memory compiler shall be limited to
**** per process technology and Chartered shall not be required to pay
Virage Logic any royalties in excess of **** per process technology.
(iii) Notwithstanding Clause 2(b)(i) above, in the event that a Wafer
incorporates any libraries or other foundation IPs (i.e. Standard cells,
I/0 and memories), of other vendors in addition to any Chartered/Virage
Logic 0.35um/0.25um memory compilers. Virage Logic agrees that the
percentages in Clause 2(b)(i)(aa) and 2(b)(i)(bb) above shall be reduced
proportionately in accordance with the total number of vendors whose
libraries and/or foundation IPs (i.e. standard cells, I/O and memories)
are incorporated into the same wafer.
2
<PAGE> 10
By way of an example, if a Wafer incorporates any Chartered/Virage Logic
0.35um/0.25um memory compiler and libraries or other foundation IPs
(i.e. standard cells, I/O and memories), of two (2) other vendors, the
percentages set out in Clauses 2(b)(i)(aa) and 2(b)(i)(bb) above shall
each be reduced by two thirds.
(iv) All royalty payments to be made by Chartered pursuant to Clause 2(b)(i)
above shall be computed according to the actual amounts received by
Chartered from customers as payment for the purchase of Wafers, and
shall be paid by Chartered on a quarterly basis.
(v) Payments to Virage Logic hereunder shall be made without deduction or
withholding except that Chartered shall have the right to withhold from
payments to Virage Logic any taxes that Chartered is required to
withhold under any applicable law. Chartered shall provide Virage Logic
with a certificate from the applicable tax authorities or other evidence
reasonably required by Virage Logic to evidence such tax payment.
(vi) Chartered shall keep for a period of two (2) years after each royalty
payment hereunder records as may be necessary to determine and verify
the royalty payments hereunder. Virage Logic is entitled at Virago
Logic's cost to have such records of Chartered inspected by independent
public accountant firms acceptable to Chartered, upon reasonable notice
and not more than once a year.
(vii) The foregoing provisions in Clauses 2(b)(i) to (vii) shall only apply to
mutual customers' designs that incorporate the Chartered/Virage Logic
0.35um/0.25um memory compilers that are taped-out to Chartered on or
after the Effective Date.
(viii) Virage Logic will make available the Chartered/Virage Logic
0.35um/0.25um memory compilers and Chartered/Virage Logic 0.35um/0.25um
Instances (and all Virage Logic's standard EDA views) by licensing the
same directly to customers.
(ix) Thc merging of physical libraries for customers using the libraries will
be done by customers. Chartered, or Chartered appointed design houses
(Rights to access subject to business terms agreed herein, but without
rights to sub-license).
3. TERM AND TERMINATION
(a) This Addendum No. 1 shall remain in force for a period of three (3)
years from the Effective Date.
(b) Notwithstanding the foregoing, this Addendum No. 1 shall terminate if
the Agreement is terminated, or either party terminates this Addendum
No. 1, without cause or reason, by 90 days' written notice of
termination to the other party. However, notwithstanding the termination
of this Addendum, Chartered shall
3
<PAGE> 11
continue to pay royalties under the terms of this Addendum in respect of
Wafers manufactured and sold to customers that have licensed the
Chartered/Virage Logic 0.35um/0.25um memory compilers during the term of
this Addendum No. 1.
(c) The termination of this Addendum however caused shall be without
prejudice to any obligations or rights of either party which have
accrued prior to such termination and shall not affect any provision of
this Addendum which is expressly or by implication provided to come into
effect on or to continue in affect after such termination.
4. SAVING AND INCORPORATION
(a) Clause 6.1 of the Agreement is hereby deleted and substituted with the
following provision:
"6.1 This Agreement shall remain in force for a period of three (3)
years from the Effective Date of this Addendum No. 1".
(b) Save as expressly varied by the terms of this Addendum No. 1, the terms
and conditions of the Agreement shall remain with full force and effect
in all other respects.
(c) The Agreement and this Addendum No. 1 shall be construed as one document
and this Addendum No. 1 shall be deemed to be part of the Agreement.
5. GOVERNING LAW
The validity, enforceability and construction of this Addendum No. 1 shall be
governed by the Laws of the State of California.
IN WITNESS WHEREOF the parties have entered into this Addendum No. 1 as of the
date first above written:
VIRAGE LOGIC CHARTERED SEMICONDUCTOR
MANUFACTURING LTD.
/s/ ALEX SHUBAT /s/ ROB BAXTER
---------------------------------- ----------------------------------
Name: Alex Shubat for Adam Kablanian Name: Rob Baxter
Title: President & CEO Title: Senior Vice President,
Business Operations
4
<PAGE> 12
EXHIBIT A
LIST PRICES FOR CHARTERED/VIRAGE 0.35um/0.25um MEMORY COMPILERS AS OF 31 MARCH
1999 (REF. CLOSE 2)
(All references to $ shall mean United States Dollars)
- - 0.35um PROCESS:
(i) 1 port High density compiler: ****
- - 0.25um PROCESS:
(i) 1 port High Density compiler: ****
(ii) 2 port High density compiler: ****
(iii) 1 port Register file: ****
(iv) 2 port Register file: ****
For the purpose of this Addendum No. 1. compilers will be offered regardless of
whether the customer needs one instance or the complete compiler.
Acknowledged and agreed by:
VIRAGE LOGIC: CHARTERED:
/s/ ALEX SHUBAT /s/ ROB BAXTER
------------------------- --------------------------------
<PAGE> 13
ADDENDUM NO. 2 TO JOINT MARKETING AND TECHNICAL SUPPORT
AGREEMENT
THIS ADDENDUM NO. 2 is entered into and effective on ___________ 1999 (the
"Effective Date") by and between Virage Logic Corporation ("Virage Logic"), a
California corporation having its principal place of business at 46824 Lakeview
Blvd. Fremont, CA 94538, USA and Chartered Semiconductor Manufacturing Ltd
("Chartered"), a Singapore company having its principal place of business at 60
Woodlands Industrial Park D, Street 2, Singapore 738406, and is supplemental to
a Joint Marketing and Technical Support Agreement dated 4 November 1997 (the
"Agreement").
WHEREAS:-
In response to the market demand, Virage Logic and Chartered have entered into
Addendum No. 1 to the Agreement dated [ ] and have further agreed to extend
their cooperation as set out in the Agreement to the development of 0.18um
memory compliers, including but not limited to SRAMs. In connection with this
further agreement, the Parties have agreed to modify and supplement the
provisions of the Agreement.
IT IS AGREED AS FOLLOWS:-
1. CHARTERED RESPONSIBILITIES
To ensure that highest probability of success for mutual customers of Chartered
and Virage Logic, Chartered hereby accepts the following responsibilities:
1.1 In connection with the marketing of Virage Logic's products and services
to mutual and prospective customers, Chartered will promote Virage Logic as a
premier SRAM provider.
1.2 To support the development of the 0.18um memory compliers by Virage Logic,
Chartered agrees to pay a development fee of United States Dollars One Hundred
Thousand (US$100,000/-). The fee shall be paid as follows:
(a) ****-to be paid within 30 days from the Effective Date
(b) ****-to be paid within 30 days of first test chip tape out.
1.3 In addition to the development fee referred to in Section 1.2 of this
Addendum No. 2, Chartered agrees to pay Virage Logic royalties for the use of
any Chartered/Virage Logic 0.18um memory complier by mutual customers, on the
following terms and conditions:
(a) Royalties will be based on **% of the Net Selling Price of each
revenue-bearing Wafer manufactured by Chartered that incorporates a
Chartered/Virage Logic memory complier.
1
<PAGE> 14
In this Addendum, "Net Selling Price" shall mean the gross consideration
(whether in cash or kind) received by Chartered from sales of Wafers less (i)
normal and customary rebates, and cash and trade discounts actually taken, (ii)
sales, use and/or other excise taxes or duties actually paid, (iii) the cost of
any packages and packaging, (iv) insurance costs and outbound transportation
charges prepaid or allowed, (v) import and/or export duties actually paid, and
(vi) amounts allowed or credited due to returns. In addition, when a Wafer is
sold in a packaged or tested form, the gross consideration (whether in cash or
kind) received by Chartered for the purposes of calculating the Net Selling
Price shall be less the costs of packaging and testing.
(b) Notwithstanding 1.3(a) above, in the event that a Wafer incorporates any
libraries or other foundation IP's; i.e., standard cells, I/O's and memories of
other vendors, in addition to any Chartered/Virage Logic 0.18um memory
compilers, Virage Logic agrees that the percentages in Section 1.3(a) above
shall be reduced proportionately in accordance with the total number of vendors
whose libraries and/or IPs are incorporated into the same wafer.
By way of an example, if a Wafer incorporates any Chartered/Virage Logic 0.18um
memory compiler and libraries or other foundation IPs of two (2) other vendors,
the percentages set out in Section 1.3(a) above shall each be reduced by two
thirds.
(c) All royalties to be paid by Chartered pursuant to Section 1.3(a) above
shall be computed according to the actual amounts received by Chartered from
mutual customers as payment for the purchase of Wafers, and shall be paid by
Chartered on a quarterly basis.
(d) Payments to Virage Logic hereunder shall be made without deduction or
withholding, except that Chartered shall have the right to withhold from
payments to Virage Logic any taxes that Chartered is required to withhold under
any applicable law. Chartered shall provide Virage Logic with a certificate
from the applicable tax authorities or other evidence reasonably required by
Virage Logic to evidence such tax payment.
2. VIRAGE LOGIC RESPONSIBILITIES
To ensure that highest probability of success for mutual customers of Chartered
and Virage Logic, Virage Logic hereby accepts the following responsibilities:
2.1 Virage Logic will develop and deliver all 0.18um memory compilers to
Chartered. In order to facilitate the tapeout of the test chip, Virage will
deliver a test chip with the memory compilers below to Chartered for silicon
validation by 30 September 1999.
(a) Single Port Synchronous memory compiler
(b) Dual Port Synchronous memory compiler
2
<PAGE> 15
3. Term and Termination
(a) This Addendum No. 2 shall remain in force for a period of three (3) years
from the Effective Date.
(b) Notwithstanding the foregoing, this Addendum No. 2 shall terminate if the
Agreement is terminated or expired and not renewed, or either party terminates
this Addendum No. 2, without cause or reason, by 90 days' notice of termination
to the other party.
4. Saving and Incorporation
(a) Section 6.1 of the Agreement is hereby deleted and substituted with the
following provision:
"6.1 This Agreement shall remain in force for a period of three (3) years
from the Effective Date of Addendum No. 2 to this Agreement."
(b) Save as expressly varied by the terms of this Addendum No. 2, the terms and
conditions of the Agreement shall remain with full force and effect in all
other respects.
(c) The Agreement, Addendum No. 1 to the Agreement and this Addendum No. 2
shall be construed as one document and this Addendum No. 2 shall be deemed to
be part of the Agreement.
5. Governing Law
The validity, enforceability and construction of this Addendum No. 2 shall be
governed by the Laws of the State of California.
IN WITNESS WHEREOF the parties have entered into this Addendum No. 2 as of the
date first above written:
VIRAGE LOGIC CHARTERED SEMICONDUCTOR
MANUFACTURING LTD.
/s/ ADAM KABLANIAN /s/ ROB BAXTER
- ----------------------------------- -------------------------------------
NAME: Adam Kablanian NAME: Rob Baxter
TITLE: President & CEO TITLE: Senior Vice President,Business
Operations
DATE: DATE:
3
<PAGE> 16
ADDENDUM NO. 3 TO JOINT MARKETING AND TECHNICAL SUPPORT AGREEMENT
THIS ADDENDUM NO. 3 is entered into and effective on June 7 1999 by and between
Virage Logic Corporation ("Virage Logic"), a California corporation having its
principal place of business at 46824 Lakeview Blvd. Fremont, CA 94538, USA and
Chartered Semiconductor Manufacturing Ltd ("Chartered"), a Singapore company
having its principal place of business at 60 Woodlands Industrial Park D, Street
2, Singapore 738406, and is supplemental to a Joint Marketing and Technical
Support Agreement dated 4 November 1997 (the "Agreement") and an Addendum No. 2
to the Agreement dated 12 April 1999 (the "Addendum No. 2").
WHEREAS:-
In response to the market demand, Virage Logic and Chartered had entered into
Addendum No. 2 to modify and supplement the provisions of the Agreement. The
parties now desire to amend the term and termination provisions of Addendum No.
2 on the following terms and conditions.
IT IS AGREED AS FOLLOWS:-
1. Clause 3 of Addendum No. 2 is deleted in its entirety and replaced with the
following provision:
"3. Term and Termination
3.1 Unless otherwise terminated by the parties in accordance with Clause 3.2
hereof, this Addendum No. 2 shall remain in force for a period of three (3)
years from the Effective Date. However, notwithstanding the termination of this
Addendum No. 2, Chartered shall continue to pay royalties under the terms of
this Addendum in respect of wafers manufactured and sold to customers that have
licensed the Chartered/Virage Logic 0.18um memory compilers during the term of
this Addendum No. 2.
3.2 Notwithstanding the foregoing, this Addendum No. 2 shall terminate
(a) by the agreement of the Parties in writing;
(b) forthwith by either Party if the other commits any material
breach of any term of this Addendum No. 2 or the Agreement and
which in the case of a breach capable of being remedied shall not
have been remedied within thirty (30) days of a written request
to remedy the same.
(c) at the option of either Party, in any of the following events:
<PAGE> 17
(i) the inability of the other Party to pay its debts in the
normal course of business; or
(ii) the other Party ceasing or threatening to cease wholly or
substantially to carry on its business, otherwise than for
the purpose of a reconstruction or amalgamation without
insolvency; or
(iii) any encumbrancer taking possession of or a receiver,
trustee or judicial manager being appointed over the whole
or any substantial part of the undertaking, property or
assets of the other Party; or
(iv) the making of an order by a court of competent
jurisdiction or the passing of a resolution for the
winding-up of the other Party or any company controlling
the other Party, otherwise than for the purpose of a
reconstruction or amalgamation without insolvency.
3.3 The termination of this Addendum No. 2 pursuant to this Clause 3.2 shall
take effect immediately upon the issue of a written notice to that effect by the
Party terminating the Addendum to the other. The termination of this Addendum
No. 2 however caused shall be without prejudice to any obligations or rights of
either Party which have accrued prior to such termination and shall not affect
any provision of this Addendum No. 2 and/or any provision of the Agreement which
is expressly or by implication provided to come into effect on or to continue in
effect after such termination."
2. Term and Termination
This Addendum No. 3 shall terminate at the same time that Addendum No. 2 is
terminated or has expired and is not renewed.
3. Saving and Incorporation
(a) Save as expressly varied by the terms of this Addendum No. 3, the
provisions of Addendum No. 2 shall remain with full force and effect in
all other respects.
(b) The Agreement, Addendum No. 1 to the Agreement, Addendum No. 2 to the
Agreement and this Addendum No. 3 shall be construed as one document and
this Addendum No. 3 shall be deemed to be a part of the Agreement.
4. Governing Law
The validity, enforceability and construction of this Addendum No. 3 shall be
governed by the Laws of the State of California.
2
<PAGE> 18
IN WITNESS WHEREOF the parties have entered into this Addendum No. 3 as of the
date first above written:
VIRAGE LOGIC CHARTERED SEMICONDUCTOR
MANUFACTURING LTD.
/s/ ALEX SHUBAT /s/ ROB BAXTER
------------------------------ ---------------------------------
Name: Alex Shubat Name: Rob Baxter
Title: VP Engineering, CTO Title: Senior Vice President,
Business Operations
<PAGE> 1
Exhibit 10.15
*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT
HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
MEMORY COMPILER LICENSING AGREEMENT
This agreement ("Agreement") is entered into and effective as of
______________ ("Effective Date") by and between Virage Logic Corporation
("Virage Logic"), a company duly incorporated under the laws of California, USA,
having its principal place of business at 46501 Landing Parkway, Fremont, CA
94538 USA, and United Microelectronics Corporation, an ROC corporation having
its principal place of business at 13 Innovation Road I, Science Based
Industrial Park, Hsin-Chu City, Taiwan, on behalf of and for the benefit of
itself, UMC Group (USA), UMC Group (Europe) BV and the UMC Group Fabs
(collectively "UMC"). For purposes of this Agreement, the UMC Group fabs are (i)
Nippon Foundry Inc., and (ii) any integrated circuit fabrication facilities
("Fabs") as to which United Microelectronics Corporation owns or controls,
directly or indirectly, in excess of 30% of the voting shares, but only during
such times as such ownership or control exists.
BACKGROUND
Virage Logic has the expertise in developing capability in designing
sub-micron memory bit cells, memory compilers, and other silicon intellectual
property; and
UMC desires to have Virage Logic license to mutual customers an existing
and/or future development of sub-micron memory bit cells and memory compilers
based on UMC's 0.18um and 0.15um technologies;
Now, therefore, the parties hereto agree as follows:
I. DEFINITIONS
1.1 "Net Sales Revenue" shall mean net sales revenues on sales of
Royalty-Bearing Products by UMC as determined in accordance with UMC
Group normal and customary business records under Taiwan Generally
Accepted Accounting Practices.
1.2 "Royalty-Bearing Products" shall mean production wafers manufactured by
UMC and sold to UMC Customers that contain die that include Licensed
Libraries. Royalty-Bearing Products shall not include test chips,
samples and other similar products.
1.3 "Licensed Products" shall mean the Memory Compiler which consists of:
(i) object code versions of a set of executable software programs, (ii)
libraries containing design elements of memory cell arrays and control
logic, and (iii) all related documentation, used for generating memory
configurations as supplied to UMC by Virage Logic.
1.4 "Licensed Libraries" shall mean the libraries set forth in Exhibit A
which contain the Licensed Products and UMC Cells and shall be licensed
by Virage Logic to UMC's customers only.
1.5 "The UMC/Virage Logic Library Program" shall mean the design,
maintenance, sales, distribution and support by Virage Logic of certain
Memory Compilers.
1.6 "UMC Cells" shall mean certain library cells that are provided by UMC as
listed in Exhibit D.
II. DEVELOPMENT AND DELIVERY OF THE LIBRARY
2.1 Development. Virage Logic agrees to use good faith and reasonable
efforts to develop for UMC the Licensed Libraries according to
specifications as provided in Exhibit B ("Specifications") of this
document. Virage Logic agrees to use good faith and reasonable efforts
to provide to UMC the set of deliverables outlined in Exhibit A and
Exhibit B Specifications ("Deliverables"). The
1
<PAGE> 2
scope of this Agreement shall include 0.18um and 0.15um technologies,
which may be extended to other technologies, by mutual agreement in
writing.
2.2 Schedule. Virage Logic agrees to use good faith and reasonable efforts
to provide the set of Deliverables according to the schedule and
milestones as provided in the Exhibit C ("Schedule"). For every
milestone set forth Exhibit C, Virage Logic commits to allocate
resources to meet the Schedule.
2.3 UMC Deliverables. UMC agrees to use good faith and reasonable efforts to
provide early access to the technical information, including Design
Rules and SPICE models to Virage Logic for the purpose of developing the
Licensed Libraries. UMC will also provide when available, the DRC
command file for the given process, if appropriate, to Virage Logic for
verification of the design rule interpretation. Virage Logic understands
that there may be potential changes to the information provided, and UMC
agrees to use good faith and reasonable efforts to keep Virage Logic
continuously updated on the most current version of information. Any
changes to the information provided to Virage Logic by UMC may result in
changes to the Schedule set forth in Exhibit C. Exhibit C shall be
updated as necessary to reflect these changes to the schedule with no
penalty imposed upon Virage Logic.
2.4 Licensed Libraries. The Licensed Libraries will be an integration of
(but not limited to) UMC specific memory compilers using the single-port
UMC-supplied bit cells (only after Virage Logic has reviewed the UMC bit
cell and finds it technically superior to the Virage Logic bit cells
from an electrical, layout and manufacturability standpoint), and UMC
specific memory compilers for dual-port and ROM compilers, which contain
bit cells developed by Virage Logic. Licensed Libraries shall also pass
UMC's design rule check (DRC) procedure. UMC shall consider Virage
Logic's suggestions with respect to design rule modifications and
interpretations.
2.5 Quality Assurance. Virage Logic shall use the quality assurance ("QA")
procedure set forth in Exhibit I to instantiate compiled memory on test
wafers produced by UMC, to ascertain that Virage Logic's deliverables
meet the Specification prior to the availability of the Licensed
Libraries. Virage Logic shall provide a tapeout of the test chip to UMC
and will verify the test chip. Virage Logic agrees to perform the QA
procedure on the library deliverables and promptly provide the results
to UMC for its review. UMC will review the library deliverables, then
provide authorization for customer release. In the event the
deliverables provided by Virage Logic are not acceptable, the parties
will use the process set forth in Exhibit I to resolve any issues. After
customer release by UMC, both parties agree to make the QA procedure and
results thereof available to either party's potential customers promptly
upon request.
2.6 Silicon Characterization. Parties shall mutually agree on a Silicon
Characterization program for the memory instances and compilers
generated by Virage Logic for UMC's customers. The intent of such a
program is to prove the viability of Virage Logic's products on the
0.18um and 0.15um UMC processes and provide a vehicle to supply such
Silicon information to UMC's and Virage Logic's joint customers for the
purpose of ensuring Virage Logic's product functionality and for
required data to assist in the chip design.
2.7 Schedule Changes. The Schedule set forth in Exhibit C shall be revised
to reflect any delays resulting from changes to the specification
implemented by either party and agreed to by both parties.
2.8 Test Chips. UMC agrees to allow Virage Logic to use UMC's silicon
shuttle program for the manufacture of 50 test chips per run, up to two
such shuttle runs at no charge to Virage Logic. Any additional test
chips or additional runs required shall be at an additional charge.
Virage Logic agrees to promptly provide UMC with a test characterization
report based on such test chips.
2
<PAGE> 3
III. MODIFICATION AND REVISION
3.1 UMC Changes. In the event that UMC makes changes, including but not
limited to design rules and/or process parameters which UMC at its
discretion deem significant, Virage Logic shall, at its sole discretion,
revise the Library at its own expense and at no charge to UMC. The
adjusted Virage Logic deliverables will be provided to UMC's customers
after QA verification, upon a mutually agreed upon schedule.
3.2 Customer Driven Changes. In the event of design tool revisions and
changes which are deemed significant by customer demand and/or technical
review, Virage Logic shall use reasonable efforts to revise the design
kits in the library at its own expense. The adjusted Virage Logic
deliverables will be provided to UMC's customers after QA verification,
upon a schedule mutually agreed upon by UMC and Virage Logic.
3.3 UMC Cells. Virage Logic shall have no right to modify, alter or improve
any cell in UMC Cells and UMC shall remain the sole owner to all rights
to such UMC Cells. UMC grants Virage Logic the non-exclusive,
non-transferable, worldwide, royalty-free right and license to
reproduce, and distribute UMC Cells, under the terms set form in Section
5.1, for the arm of this agreement, solely for the purpose of evaluation
and for the design, place-and-route and tape-out of integrated circuits
to be manufactured at UMC owned or controlled manufacturing facilities.
Such distribution of UMC Cells by Virage Logic shall be consistent with
the manner in which Virage Logic distributes the Licensed Libraries
under UMC/Virage Logic Library Program. UMC will use good faith and
reasonable efforts to correct any bug as necessary to have Virage Logic
meet its Support Agreement(s). If such any bug cannot be corrected using
such efforts, UMC may terminate this Agreement.
IV. OWNERSHIP AND LICENSE
4.1 Virage. As between the parties, Virage Logic exclusively shall have all
property rights, including but not limited to, patent rights,
copyrights, trade secret rights, mask work rights and other rights,
throughout the world in any inventions, intellectual property,
trademarks, works-of-authorship, mask works, ideas or information made
or conceived or reduced to practice by Virage Logic or by Virage Logic
jointly with mid parties in the course of development of memory bit
cells, memory compilers, or other Deliverables under this Agreement.
4.2 UMC. As between the parties, UMC exclusively shall have all right, title
and interest including all patent rights, copyrights, trade secret
rights, mask work rights and other rights throughout the world
(collectively "Intellectual Property Rights") in any inventions,
works-of-authorship, processes, mask works, ideas or information made or
conceived or reduced to practice by UMC or by UMC jointly with third
parties in the course of development of those specifically identified
library cells as listed in Exhibit D, including but not limited to the
UMC single port memory bit cells under this Agreement. Exhibit D shall
be modified from time to time upon mutual agreement between the Parties.
4.3 Joint Development. The parties shall jointly own any inventions,
intellectual property, trademarks, works-of-authorship, mask works,
ideas or information made or conceived or reduced to practice by Virage
Logic jointly with UMC during the course of this Agreement. Each party
shall have the right to use, exploit, and license such joint inventions
for any purpose without a duty to account to, or obtain the consent of,
the other party, and the parties shall cooperate with respect to the
prosecution, protection, and enforcement of the joint inventions.
V. CONSIDERATION
5.1 Royalties.
3
<PAGE> 4
5.1.1 UMC shall pay to Virage Logic a royalty on Net Sales Revenue
of Royalty Bearing Products as follows (as reduced by
Section 5.1.2 below) :
<TABLE>
<CAPTION>
--------------------- ----------------------
Total Cumulative Maximum Royalty Rate
Royalty Paid to
Virage Logic
--------------------- ----------------------
<S> <C>
*** **%
--------------------- ----------------------
*** **%
--------------------- ----------------------
*** **%
--------------------- ----------------------
</TABLE>
5.1.2 Allocation.
5.1.2.1 By Library Class. Except as set forth herein, **** of
the above Maximum Royalty Rate shall be due for each
library class integrated into Royalty-Bearing Products
that utilize a Licensed Library. The library classes
are standard cells (SCL), input/output cells (I/O) and
memory.(1)
5.1.2.2 Within a Library Class. In the event a Royalty-Bearing
Product contains both a Licensed Library and library
components licensed from a third party for which MAC is
contractually obligated to pay royalties in the same
library class, the royalty due for Licensed Libraries
under the affected library class(es) shall be reduced
to **** the applicable Maximum Royalty Rate.(2)
5.2 Royalty Obligation. UMC shall be obligated to pay royalties as stated
herein to Virage Logic for any UMC customer design that is: (a) properly
designated at time of production release to UMC by UMC's customer as
containing Licensed Libraries that have been so licensed under UMC's
Library Program, and (b) where such designs are manufactured by UMC. In
the event that a customer designates to UMC that multiple library
vendors contributed to the design, the royalties payable under this
Agreement shall be in accordance with Section 5.1.2.
5.3 Identification of Licensed Libraries. UMC agrees to use its standard
procedures for identifying designs that contain Licensed Libraries,
including without limitation, requiring customers to identify all third
party IP included in customer designs manufactured at UMC fabs. In order
to facilitate this effort, Virage Logic agrees to participate in UMC's
IP watermarking program. Under this program UMC will read tapeouts to
identify watermarked IP contained on such tapeout and provide Virage
Logic with a report of all customer designs that include Virage Logic
IP. Notwithstanding the above, if any of UMC's customers notifies UMC of
errors or omissions discovered, UMC shall pay Virage Logic the owed
applicable royalties as stated under the terms of this Agreement or
Virage Logic shall refund any overpayment of royalties, as applicable.
5.4 Royalty Reports. In order to facilitate payment of royalties pursuant to
this Agreement, UMC will report to Virage Logic in writing the total Net
Sales Revenues on Royalty-Bearing Products within thirty days of the end
of each quarter in which royalties have accrued, and, for those quarters
in which royalties have accrued, will pay the applicable royalties to
Virage Logic within forty-five (45) days of receipt of an applicable
invoice from Virage Logic.
- --------
(1) By way of example, if Licensed Libraries are integrated into a
Royalty-Bearing Product while the total applicable Royalty Rate is **%, only
** percent royalty shall be due on such products (**% for memory libraries).
(2) By way of example, if memory libraries are integrated into a Royalty-Bearing
Product while the total applicable Royalty Rate is **%, but a third party
memory library is also integrated into such Royalty-Bearing Product, only
**% royalty shall be due to Virage on such products.
4
<PAGE> 5
5.5 Taxes. The royalties set forth in this Article 5 include all applicable
taxes, if any. If any taxes (including without limitation, sales taxes,
value added taxes or withholding taxes) are imposed on the payment of
NREs, royalties or other fees by UMC to Virage Logic hereunder, UMC may
either deduct such taxes from payments made to Virage Logic, have Virage
Logic directly pay such taxes, or have Virage Logic reimburse UMC for
taxes paid by UMC The parties agree to commercially reasonable efforts
to cooperate to reduce the tax burden on each party.
5.6 Third Party Licenses. The royalties set forth in this Article 5 include
all third party licenses necessary for UMC and UMC customers to enjoy
the rights granted hereunder. Virage Logic win be solely responsible for
any third party fees and royalties due.
VI. DISTRIBUTION OF THE LIBRARY
6.1 Distribution of Licensed Libraries. During the terms of this Agreement,
upon acceptance of the Licensed Libraries by UMC pursuant to Section 2.5
above, Virage Logic shall have non-exclusive and non-transferable rights
to reproduce and distribute, free of charge, the Licensed Libraries to
third party entities ("Licensed Library Recipients") without any payment
of royalties or other fees to UMC. Virage Logic agrees that UMC bit
cells may only be shipped with memory compilers developed specifically
for the UMC bit cell and shall not be distributed by themselves.
6.2 End-User Agreements. Virage Logic agrees to sign "License Agreements"
with the Licensed Library Recipients for their use of the Licensed
Libraries. Virage Logic understands and agrees to inform Licensed
Library Recipients that the relationship between UMC and the Licensed
Library Recipients will be purely for foundry services provided by UMC
and the Licensed Library Recipients must enter into a separate agreement
with UMC to obtain foundry services from UMC.
6.3 Restrictions. Virage Logic shall have no right to use, and hereby agrees
that it will not use, any information provided by UMC hereunder to
assist third parties in migrating from UMC processes to non-UMC
processes. Virage Logic further agrees that it will not provide any UMC
information to third parties unless such party has entered into a
non-disclosure agreement with UMC specifically authorizing such
disclosure.
6.4 Master License Agreement. Virage Logic's standard Master License
Agreement is attached as Exhibit H for information only and shall serve
as a basis for the License Agreements Virage Logic will enter into with
customers under the UMC/Virage Logic Library Program. Virage Logic shall
have the right to make changes from time to time to the License
Agreements so long as any such changes do not: (1) violate the terms of
this Agreement, (2) materially alter the basic license restriction that
the Licensed Library Recipients may use the Licensed Libraries only for
evaluation and for the design, place-and-route and tape-out of
integrated circuits to be manufactured solely at UMC or its designated
manufacturing facilities, or (3) alter the terms set forth in delete
Virage Logic's indemnification and limitation of liability sections of
the Master License Agreement. Virage Logic agrees that it will offer its
standard Master License Agreement with its standard pricing (or more
favorable pricing) to all UMC Customers.
6.5 Changes to MLA. The parties agree that Virage Logic may make changes to
the Master License Agreement on a case-by-case basis for particular
Licensed Library Recipients that are not permitted under Section 6.4;
provided that, UMC's consent has been obtained in writing (email with
appropriate acknowledgment and facsimile will be acceptable forms of
writing for such consents). Provided that Virage Logic may change those
sections described in Section 6.4(3) as negotiated with a customer as
long as the sections described in Section 6.4(3) are initially offered
to such customer as set forth in the attached Master License Agreement.
6.6 Customer Support. Virage Logic shall be responsible for providing
Licensed Library Recipients support for the Licensed Libraries
distributed by Virage Logic. Virage Logic shall be free to set all terms
and conditions for support, maintenance, engineering and customization
services
5
<PAGE> 6
provided by Virage Logic to any Licensed Library Recipients; provided
that UMC customers in the aggregate will be provided the same level of
support at the same percentage of list price for support as customers of
other foundries unless UMC customers require abnormal amounts of
support.
6.7 Distribution by UMC. UMC shall have the right to use and distribute the
Licensed Libraries for UMC or its designated subcontractors' internal
designs, including ASICs; provided that, UMC shall execute a Virage
Logic License Agreement as described in Exhibit H of this Agreement. If
required, support for UMC's internal ASIC use of the Licensed Libraries
can be purchased at Virage Logic's standard fees.
6.8 Licenses Requested by UMC. Upon written request by UMC, Virage Logic
will, on reasonable terms and conditions, license and distribute the
Licensed Libraries to (a) other third party design service providers
creating designs that will be manufactured solely at UMC or UMC
designated facilities; (b) distribute as necessary to library
developers; or (c), distribute to fulfill UMC's current contractual
obligations and to facilitate future contractual obligations. The terms
of these aforementioned licenses will be mutually agreeable to UMC.
Virage Logic, and the third party on a case by case basis. Virage Logic
may decline to license the following competitors of Virage Logic:
Avant!, Dolphin, Virtual Silicon Technology, Duet, Silicon Access, and
Leda. Virage Logic may unilaterally modify the above list of competitors
at any time (upon written notice to UMC to include any additional
competitors that sell, transfer, and/or license compilers and instances
(designs of discrete integrated circuit memory cell arrays and
corresponding control logic) that compete with Virage Logic products and
Virage Logic shall, if requested by UMC, remove from the list any
entities that no longer compete with Virage Logic.
6.9 Promotion of Licensed Libraries. Both Virage Logic and UMC shall promote
the Licensed Libraries to customers of both parties ("Customers") using
Virage Logic as the distributor. All licensees of Licensed Libraries
will be granted a license for unlimited and/or limited use of the
Licensed Libraries and Deliverables solely for tapeout to UMC.
6.10 Reports. Virage Logic shall provide UMC a monthly update of all Licensed
Library Recipients who receive front-end Views and/or Back-End Views.
Virage Logic shall not directly or knowingly indirectly make available
the Licensed Libraries to any company on the list provided in Exhibit E
without first obtaining UMC's consent in writing (email and facsimile
will be acceptable forms of writing for such consents).
6.11 Quarterly Meetings. Both parties will jointly hold quarterly meetings to
review performance as a participant in the UMC/Virage Logic Library
Program beginning from the Effective Date. The parties will assign
liaison representatives at both corporate and regional levels. The
liaison representatives are as follows:
<TABLE>
<CAPTION>
<S> <C>
UMC VIRAGE LOGIC
Name: Name: Rusty Ingram or designee
Title: Title: Director, Business Development
Phone #: Phone #: (510) 360-8035
E-mail address: E-mail address: [email protected]
</TABLE>
VII. TERM AND TERMINATION
7.1 Term. This agreement shall have an initial term of five (5) years from
the Effective Date, and shall automatically be renewed for successive
one (1) year terms, unless either party give the other party notice of
its intent to terminate the Agreement at least ninety (90) days prior to
the end of the then current term.
6
<PAGE> 7
7.2 Termination. This Agreement may be terminated early by either party if
the other party (1) breaches any material provision of this Agreement
and does not cure or remedy such breach within thirty (30) days after
receipt of the written notice of breach from the other party; or (2)
becomes the subject of a voluntary or involuntary petition in bankruptcy
or any proceeding relating to insolvency, receivership, liquidation, or
composition for the benefit of creditors if such petition or proceeding
is not dismissed with prejudice within sixty (60) days after filing.
Termination of this Agreement shall be effective thirty (30) days after
issuance of a written notice of termination to the other party by the
non-defaulting party.
7.3 Effect of Termination. Termination of this Agreement for any reason
shall not affect the obligations accruing prior to the effective date of
termination, including but not limited to payment of all royalties due
Virage Logic based on sales of the Compiler prior to termination. The
rights and obligations under Sections 4, 5, 7.6 (if a Release Condition
has occurred), 8, 9, 10, 11, and 12, shall survive the termination or
expiration of this Agreement.
7.4 Return of Confidential Information. Upon the effective date of
termination, each receiving party shall cease to use and shall either
destroy or return to the disclosing party all of the disclosing party's
Confidential Information in possession or under the receiving party's
control during the term of this Agreement. Any related documentation and
copies thereof, in whole or in part, in all forms of media, together
with the receiving party's written certification by a duly authorized
officer that the receiving party's Confidential Information, and all
related documentation and all copies thereof, in whole or in part, are
no longer in use and have been returned to the disclosing party or
destroyed; provided that UMC may retain Virage Logic Confidential
Information in the event it receives source code under Section 7.6, and
such Confidential Information is necessary or useful for exercising
UMC's rights grants under Section 7.6 below.
7.5 No Waiver. Termination of this Agreement under this Section shall be in
addition to, and not a waiver of, any remedy at law or in equity
available to either party arising from the other party's breach of this
Agreement.
7.6 Source Code Escrow. Virage Logic agrees to put into escrow a copy of the
Licensed Libraries, excluding the GUI software, in human readable format
("Source Code"), in detail that is in accordance with the industry
standard for such Source Code. Prior to Virage Logic putting the Source
Code into escrow, the parties shall execute a source code escrow
agreement that contains the provisions below:
7.6.1 Escrow Account. Within sixty (60) days of the signing of a
source code escrow agreement between UMC Virage Logic and
Data Securities International ("Escrow Agent"), Virage Logic
agrees to place in an escrow account in California, a copy
of the Source Code. The escrow agreement shall contain, at a
minimum, the terms and conditions Set forth in this Section
7.6.1 and Section 7.6.2 below. UMC shall bear all fees,
expenses and other charges incurred to open and maintain
such escrow account. Virage Logic shall update the escrow
account as necessary to maintain the most recent copy of
Licensed Libraries in the escrow account.
7.6.2 Release. UMC shall notify Virage Logic and Escrow Agent by
certified mail in the event: (i) Virage Logic or its
successors is unable or unwilling to provide support, and
(ii) UMC reasonably anticipates that the release of the
Source Code will be required for UMC to properly support a
current existing customer of both UMC and Virage Logic
because of a change in Spice Models, Design Rules, UMC
Single-Port Memory Bit Cell, Sizing Equation, and/or Layer
Mapping for a specific process identified in Exhibit C to
this Agreement (the "Release Conditions"). Unless within
fifteen (15) days thereafter Virage Logic files with the
Escrow Agent its affidavit executed by a responsible
executive officer clearly refuting the occurrence of Release
Conditions, the Escrow Agent shall upon the sixteenth (16th)
day release the Source Code to UMC. In the event Virage
Logic files such an affidavit, the parties agree to enter
into binding mediation to resolve
7
<PAGE> 8
the dispute. The mediation shall be completed within thirty
(30) days of either party's notification requesting a
mediation. The mediator shall require pre-hearing exchange
of documentary evidence to be relied upon by each of the
respective parties in their respective cases in chief and
pre-hearing exchange of briefs. The mediator will make her
decision in writing; and her decision will be binding upon
the Parties. In the event the mediator decides in favor of
UMC, the parties shall send a joint notification to the
Escrow Agent to immediately release the Source Code to UMC.
7.6.3 License. Upon the release of the Source Code hereunder, UMC
shall have a license to modify, have modified and use the
Source Code only in the event that the need for such use
and/or modification is necessary to support current existing
customer(s) of both Virage and UMC for the processes
identified in Exhibit C. UMC's license to use and/or modify
Source Code released hereunder is strictly limited to only
the Source Code associated with the process(es) for which
support is required or anticipated to be required. UMC shall
own all right title and interest in any modifications to the
Source Code created by or for UMC; subject to Virage Logic's
rights in the underlying Source Code. UMC agrees to grant
Virage Logic a perpetual, royalty-free, worldwide,
non-exclusive, fully-paid license to use such UMC
modifications to create modified versions of the Source Code
and to reproduce and distribute such modified versions of
the Source Code in object code form.
VIII. WARRANTY
8.1 Limited Warranty. Virage Logic warrants for a period of twelve (12)
months from delivery of the Licensed Libraries to UMC that such Licensed
Libraries, as delivered, will be free from defects in the media and will
substantially conform to the Specifications. In the event of
nonconformance of the Licensed Libraries, UMC shall promptly notify
Virage Logic and provide Virage Logic with all available information in
written or electronic form so that Virage Logic can reproduce the Error.
Virage Logic's sole obligation is to undertake good faith and reasonable
efforts to correct the Errors reported to Virage Logic in writing or in
electronic form during the warranty period. VIRAGE LOGIC'S SOLE
LIABILITY AND UMC's EXCLUSIVE REMEDY WITH RESPECT TO BREACH OF THE
FOREGOING LIMITED WARRANTY WILL BE LIMITED TO, AT VIRAGE LOGIC'S OPTION,
ERROR CORRECTION OR PRODUCT REPLACEMENT, OR IF NEITHER IS IN VIRAGE
LOGIC'S OPINION REASONABLY FEASIBLE, TERMINATION OF THE AGREEMENT'S
COVERAGE OF THE PRODUCT THAT BREACHES THE FOREGOING LIMITED WARRANTY.
8.2 Disclaimer of Warranty. EXCEPT FOR THE ABOVE EXPRESS LIMITED WARRANTY
AND THE WARRANTIES SET FORTH IN ARTICLE X BELOW, THE LICENSED LIBRARIES,
KNOW-HOW, AND DOCUMENTATION ARE LICENSED "AS IS," AND VIRAGE LOGIC MAKES
NO OTHER WARRANTIES EXPRESS, IMPLIED, STATUTORY OR OTHERWISE REGARDING
THE LICENSED PRODUCT, DESIGN TECHNIQUES OR DOCUMENTATION. VIRAGE LOGIC
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, OR RISING FROM A COURSE OF DEALING OR
USAGE OF TRADE.
IX. LIMITATION OF LIABILITY
9.1 Direct Damages. VIRAGE LOGIC'S TOTAL LIABILITY FOR DIRECT DAMAGES UNDER
THIS AGREEMENT SHALL NOT EXCEED $100,000. UMC's TOTAL LIABILITY FOR
DIRECT DAMAGES UNDER THIS AGREEMENT SHALL NOT EXCEED $100,000; PROVIDED
THAT EACH PARTY'S LIABILITY FOR CLAIMS ARISING OUT OF ARTICLE XI BELOW
SHALL BE AS FOLLOWS: (I) FOR CLAIMS COVERED BY SECTIONS 11.2(i),
11.2(ii), 11.7(i) or 11.7(ii) EACH PARTY'S TOTAL LIABILITY SHALL NOT BE
LIMITED; and (II) FOR CLAIMS COVERED BY SECTIONS 11.2(iii) or 11.7(iii),
EACH PARTY'S LIABILITY SHALL BE LIMITED TO THE AMOUNTS PAID BY UMC TO
VIRAGE
8
<PAGE> 9
PURSUANT TO THIS AGREEMENT AT THE TIME THE CLAIM IS SETTLED OR DAMAGES
ARE AWARDED.
9.2 Consequential Damages. EXCEPT FOR DAMAGES ARISING OUT OF A BREACH OF
ARTICLE X BELOW OR FOR DAMAGES CLAIMED BY A THIRD PARTY THAT ARE COVERED
BY ARTICLE XI BELOW, UNDER NO CIRCUMSTANCES, SHALL EITHER PARTY BE
LIABLE FOR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING IN
ANY WAY OUT OF THIS AGREEMENT OR THE USE OF THE LICENSED PRODUCT, DESIGN
TECHNIQUES AND DOCUMENTATION, HOWEVER CAUSED, (WHETHER ARISING UNDER A
THEORY OF CONTRACT, TORT (INCLUDING NEGLIGENCE); OR OTHERWISE),
INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOST PROFITS, LOSS OF DATA,
OR COSTS OF PROCUREMENT OF SUBSTITUTE GOODS OR SERVICES. THE LIMITATIONS
ON EITHER PARTY'S LIABILITY SET FORTH IN THIS SECTION IX SHALL APPLY
NOTWITHSTANDING THE FAILURE OF ESSENTIAL PURPOSE OF ANY OF THE LIMITED
REMEDIES SET FORTH IN SECTIONS 8.1 AND 9.1 ABOVE.
X. PROPRIETARY INFORMATION
10.1 NDA. The parties have entered into a Non-disclosure agreement (NDA)
attached hereto as Exhibit G and the terms of such NDA shall be
incorporated into this Agreement by reference.
10.2 Proprietary Information. All Proprietary Information and any copies
thereof remain the property of the disclosing party and no license or
other rights is granted or implied hereby. The receiving party shall,
upon the disclosing party's request, return the original and all copies
of tangible Proprietary Information.
10.3 Survival. This Section shall survive the termination or expiration of
this Agreement for a period of five (5) years.
XI. PATENT AND COPYRIGHT INFRINGEMENT
11.1 UMC Warranties. UMC represents, warrants and covenants that: (a) the UMC
Cells will not infringe or misappropriate any patent, copyright, tirade
secret, trademark, mask work right, or any proprietary right of any
third party; (b) entering into and performance of this Agreement does
not contravene the terms, provisions or conditions of any instrument or
contract by and between UMC and any third party; (c) the UMC Cells shall
be original works of UMC or its subcontractors who have granted
ownership to UMC, (d) UMC has not previously granted, and neither will
grant in the future, any rights in the UMC Cells that are inconsistent
with the ownership rights and licenses granted to Virage Logic herein;
(e) UMC has the rights and abilities to perform its obligations
hereunder; (f) all hardware, software and/or firmware delivered by UMC
individually or in combination as an integrated system, as the case may
be, shall accurately and automatically process any and all date and
date-related data including, but not limited to calculating, comparing,
and sequencing and that such date-related processing will take into
consideration leap year calculations; and (a) the UMC Cells will contain
no computer viruses or other contaminants, including but not limited to
any code or instructions that may enable unauthorized access to, or
damage, modify or disable, programs or data stored on or transmitted by
a computer system in a manner not intended by the owner and/or user of
such computer system.
11.2 UMC Indemnity. UMC shall, at its own expense, subject to the limitations
set forth in Sections 9.1 and 9.2 above, indemnify, hold harmless, and
defend or at its option, settle any claim, suit, or proceeding brought
by a third party against Virage Logic for infringement of (i) any third
party's copyright or misappropriation of any third party trade secret,
(ii) any patent knowingly infringed by UMC that is issued in the United
States, Taiwan, Japan or the European Union, or (iii) any patent issued
in the United States, Taiwan, Japan or the European Union that is
unknowingly infringed by UMC, by virtue of Virage Logic's authorized
use, reproduction, distribution and
9
<PAGE> 10
sublicensing of any of the UMC Cells as provided by UMC pursuant to the
terms of this Agreement and shall pay any settlement amounts or damages
finally awarded in such claim, suit or proceeding; provided that Virage
Logic: (a) promptly notifies UMC in writing of such claim, suit or
proceeding, (b) gives UMC sole control over the defense and/or
settlement of such claim, suit or proceeding; and (c) fully cooperates
and provides all available information, assistance and authority to
defend or settle the claim, suit or proceeding. UMC shall not be liable
for any costs, expenses, damages or fees incurred by Virage Logic in
defending such action or claim unless authorized in advance in writing
by UMC or UMC has failed to fulfill its obligations under the terms of
this clause in a timely manner. This Section 11.2 shall not apply to
claims arising out of modifications to the UMC Cells as provided by UMC
or arising out of combination of the UMC Cells with other technology.
11.3 UMC Control. Any action to be brought to prevent or enjoin any third
party from infringement of any patent, copyright or other proprietary
rights of UMC with respect to UMC Cells shall be brought exclusively by
MAC or UMC's designee, in UMC's sole discretion and as between UMC and
Virage Logic, at UMC's sole cost and expense.
11.4 Potential Infringement. If the UMC cells are, or in UMC's opinion are
likely to become, the subject of a claim, suit, or proceeding alleging
infringement, UMC will use good faith and reasonable efforts: (a) to
procure at no cost to Virage Logic, the right to continue using,
reproducing, distributing and sublicensing the UMC cells; (b) to replace
or modify the UMC cells, at no cost to Virage Logic, to make them
non-infringing, provided that substantially the same function is
performed by the replacement of modified UMC cells, or (c) if the right
to continue using, reproducing, distributing and sublicensing the UMC
cells cannot be reasonably procured for Virage Logic or the UMC Cells
cannot be replaced or modified to make them non-infringing, terminate
the license of such UMC cells hereunder; provided, that UMC's indemnity
obligations shall continue indefinitely as to all use, reproduction,
distribution and sublicensing of the UMC cells prior to such
termination.
11.5 Sole Obligation. The foregoing states UMC's sole obligations and entire
liability with respect to any claim of infringement of the UMC cells of
any intellectual property or other rights of any third party.
11.6 Virage Warranties. Virage Logic represents, warrants and covenants that:
(a) the Licensed Libraries will not infringe or misappropriate any
patent, copyright, trade secret, trademark, mask work right, or any
proprietary right of any third party; (b) entering into and performance
of this Agreement does not contravene the terms, provisions or
conditions of any instrument or contact by and between Virage Logic and
any third party; (c) the Deliverables shall be an original work of
Virage Logic or its subcontractors who have granted ownership to Virage
Logic, (d) Virage Logic has not previously granted, and neither will
grant in the future, any rights in the Deliverables that are
inconsistent with the ownership rights and licenses granted to UMC
herein; (e) Virage Logic has the rights and abilities to perform its
obligations hereunder; (f) all hardware, software and/or firmware
delivered individually or delivered in combination as an integrated
system, as the case may be, shall accurately and automatically process
any and all date and date-related data including, but not limited to
calculating, comparing, and sequencing and that such date-related
processing will take into consideration leap year calculations; and (a)
the Deliverables will contain no computer viruses or other contaminants,
including but not limited to any code or instructions that may enable
unauthorized access to, or damage, modify or disable, programs or data
stored on or transmitted by a computer system in a manner not intended
by the owner and/or user of such computer system.
11.7 Virage Indemnity. Virage Logic shall, at its own expense, , subject to
the limitations set forth in Sections 9.1 and 9.2 above, indemnify, hold
harmless, and defend or at its option, settle any claim, damages, suits,
or proceeding brought by a third party against UMC: (i) for infringement
of any third party's copyright or misappropriation of a third party
trade secret, (ii) for infringement of a
10
<PAGE> 11
third party patent issued in the United States, Taiwan, Japan or the
European Union where such patent was knowingly infringed by Virage
Logic; and (iii) for infringement of a third party patent issued in the
United States, Taiwan, Japan or the European Union where such patent was
unknowingly infringed by Virage Logic, by virtue of UMC's authorized
use, reproduction, distribution and sublicensing of any of the Licensed
Libraries pursuant to the terms of this Agreement, and shall pay any
settlement amounts or damages finally awarded in such claim, suit or
proceeding; provided that UMC: (a) promptly notifies Virage Logic in
writing of such claim, suit or proceeding, (b) gives Virage Logic sole
control over the defense and/or settlement of such claim, suit or
proceeding; and (c) reasonably cooperates and provides all available
information, assistance and authority to defend or settle the claim,
suit or proceeding. Virage Logic shall not be liable for any costs,
expenses, damages or fees incurred by UMC in defending such action or
claim unless authorized in advance in writing by Virage Logic or Virage
Logic has failed to fulfill its obligations under the terms and
conditions of this clause in a timely manner. This Section 11.7 shall
not apply to claims arising out of modifications to the Licensed
Libraries as provided by Virage Logic or arising out of combination of
the Licensed Libraries with other technology.
11.8 Virage Control. Any action to be brought to prevent or enjoin any third
party from infringement of any patent, copyright or other proprietary
right of Virage Logic with respect to the licensed Libraries shall be
brought exclusively by Virage Logic or Virage Logic's designee, in
Virage Logic's sole discretion and as between Virage Logic and UMC, at
Virage Logic's sole cost and expense.
11.9 Potential Infringement. If the Licensed Libraries are, or in Virage
Logic's opinion are likely to become, the subject of a claim, suit, or
proceeding alleging infringement, Virage Logic will use good faith and
reasonable efforts: (a) to procure at no cost to UMC the right to
continue using, reproducing, distributing and sublicensing the Licensed
Libraries; (b) to replace or modify the Licensed Libraries, at no cost
to UMC, to make them non-infringing, provided that substantially the
same function is performed by the replacement of modified the Licensed
Libraries, or (c) if the right to continue using, reproducing,
distributing and sublicensing the Virage Logic Cells cannot be
reasonably procured for UMC, or the licensed Libraries cannot be
replaced or modified to make them non-infringing, terminate the license
of such Virage Logic products hereunder; provided, that Virage Logic's
indemnity obligations shall continue indefinitely as to all use,
reproduction, distribution and sublicensing of the Licensed Libraries
prior to such termination.
11.10 Sole Obligation. The foregoing states Virage Logic's sole obligations
and entire liability with respect to any claim of infringement of the
Licensed Libraries of any intellectual property or other rights of any
third party.
XII. GENERAL TERMS
12.1 Choice of Law. This Agreement shall be governed by and construed in
accordance with the laws of State of California. In the event of any
dispute arising out of or in connection with this Agreement which cannot
be amicably settled by the parties hereto, the parties agree to submit
any such dispute to binding arbitration in accordance with the Rules of
American Arbitration Association. All information relating to or
disclosed by either party in connection with the arbitration shall be
treated by the parties as confidential information and no disclosure of
such information shall be made by either party without the prior written
consent of the other party.
12.2 Export Controls. Both parties agree and certify that neither party will
export the materials nor the direct product thereof outside the United
States except as authorized and as permitted by the laws and regulations
of the United States; provided that the party providing such information
or other items subject to export control restrictions identify such
restrictions to the receiving party.
12.3 Assignment. This Agreement may not be assigned by either party without
the prior written consent from the other party, including pursuant to a
merger or acquisition or operation of law.
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<PAGE> 12
12.4 Audit. UMC shall keep full and accurate books and records pertaining to
UMC's performance under this Agreement for a period of at least two (2)
years after the date a given quarterly payment is made by UMC to Virage
Logic. UMC shall permit a mutually appointed 3rd party who has signed a
UMC NDA, on behalf of Virage Logic, to examine such books and records,
at Virage Logic's sole cost and expense, upon reasonable prior written
notice during normal working hours, but not later than two (2) years
following the payment in question nor more frequently than once each
year, for the sole purpose of verifying the compensation payments and
reports and accountings related thereto. Prompt adjustment shall be made
to compensate for any errors or omissions disclosed by such examination.
In the event such examination shows underreporting and underpayment in
excess of seven and one half percent (7.5%) in any twelve (12) month
period ending 3 months prior to the date of such examination, then UMC
shall pay Virage Logic the reasonable cost of any such examination as
well as the unpaid compensation payments.
12.5 Notices. Any notice, report, approval or consent required or permitted
hereunder shall be in writing and will be deemed to have been duly given
if delivered personally, by facsimile, or mailed by first-class,
registered or certified mail, postage prepaid to the respective
addresses of the parties as set forth in this Agreement. If to Virage
Logic, Attention: VP, Finance.
If to UMC:
Attn:
Copy to:
Law+
993 Highlands Circle
Los Altos, CA 94024
Attn: Peter Courture, Esq.
Fax: (650) 968-8885
12.6 No Waiver. Failure by either party to enforce any provision of this
Agreement will not be deemed a waiver of future enforcement of that or
any other provision.
12.7 Independent Contractors. The relationship of Virage Logic and UMC
established by this Agreement is that of independent contractors, and
nothing contained in this Agreement shall be construed (i) to give
either party the power to direct or control the day-to-day activities of
the other or (ii) to constitute the parties as partners, joint ventures,
co-owners or otherwise as participants in a joint or common undertaking.
Neither party will have the power to bind the other or incur obligations
on the other's behalf without the other's prior written consent
12.8 Severability. If for any reason a court of competent jurisdiction finds
any provision of this Agreement, or portion thereof, to be
unenforceable, that provision of the Agreement will be enforced to the
maximum extent permissible so as to effect the intent of the parties,
and the remainder of this Agreement will continue in full force and
effect.
12.9 Attorneys' Fees. The prevailing party in any action to enforce the
Agreement shall be entitled to recover the costs and expenses including,
without limitation, reasonable attorneys' fees.
12.10 Injunctive Relief. The parties agree that a material breach of this
Agreement adversely affecting both parties' Intellectual Property Rights
which would cause irreparable injury to the nonbreaching party for which
monetary damages would not be an adequate remedy. Therefore, the parties
agree that the non-breaching party shall be entitled to equitable relief
in addition to any remedies it may have hereunder or at law.
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<PAGE> 13
12.11 Force Majeure. Except for the obligation to make payments hereunder,
nonperformance of either party shall to be excused to the extent that
performance is rendered impossible by strike, fire, flood, governmental
action, failure of suppliers, earthquake, or any other reason where
failure to perform is beyond the reasonable control of the
non-performing party.
12.12 Entire Agreement. This Agreement, including all Supplements, constitutes
the entire agreement between the parties with respect to the subject
matter hereof, and supersedes all prior agreements or representations,
oral or written, regarding such subject matter. This Agreement may not
be modified or amended except in writing, signed by a duly authorized
representative of both parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in duplicate on their behalf by their duly authorized officers and
representatives on the date given above.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
------------------------------- ---------------------------------
- ---------------------------------- ------------------------------------
(Print Name) (Print Name)
- ---------------------------------- ------------------------------------
(Title) (Title)
- ---------------------------------- ------------------------------------
(Date) (Date)
13
<PAGE> 14
EXHIBIT A: VIRAGE LOGIC 0.18UM & 0.15UM DELIVERABLES
REVISION 0, DATED 3/15/00
The content of this Exhibit shall be modified from time to time as mutually
agreed to by both parties:
DEFINITION OF UMC 0.18UM AND 0.15UM DELIVERABLES:
Models and User Documentation ("Front-end Views"):
1. Verilog Models with SDF Support
2. VHDL (VITAL) Models with SDF Support
3. Symbols for composer (RAM support not required)
4. Symbols for Synopsys (RAM support not required)
5. Symbols for EDIF 200 (RAM support not required)
6. PrimeTime Models with SDF Support
7. Synopsys Synthesis Models (.lib file) - including power information for
power design, wire-load model (options for customer to choose)
constructed by place & route results.
8. Cadence TLF 3.0 Models
9. Star-DC timing models
10. LEF/Abstracts for Silicon Ensemble/Cell3/Aquarius/Apollo
11. Memory compiler abstract for Aquarius & Apollo: manual and automated
approach
12. CLF models for Avant!
13. Derating factors (including pin-to-pin delay time. Timing constraints :
setup time, hold time, recovery time, min. pulse width).
** Process-derating factor when typical is set to 1
** Temp. derating factor when ____ degrees C is set to 1
** Voltage derating factor when VDD = ______ V is set to 1
14. Automatic Data Sheet Generator
15. Customer Documentation*
- - Note that item 1, 2, 7, 8, 10, 11, 14, 15 are the standard deliverables,
other items are delivered upon customer request.
Physical Views ("Back-End" Views):
1. GDSII
2. Place & Route technology file for Silicon Ensemble/Cell3/Aquarius/Apollo
** Provide sample solution in deliverable UMC needs to review and run
test case).
3. SPICE netlist for LVS
- - Note that item 2 will be shipped as per customer request
14
<PAGE> 15
EXHIBIT A: VIRAGE LOGIC 0.18UM & 0.15UM DELIVERABLES (con't.)
REVISION 0, DATED 3/15/00
CUSTOMER DOCUMENTATION
Documentation Describing Characterization and Verification Methodology
*Note: Customer Documentation includes:
1) Standard Cell Databook (if provided by Virage Logic) (including power
route guide)
2) Users Manual for Custom-Touch Memory Compilers which may include:
1. Installation and usage instructions
2. Process Optimization for UMC 0.18 process
3. Memory architecture
Optimizing clock-to-wordline driver performance
Optimizing wordline driver-to-sensing performance
Optimizing sensing-to-output drive performance
Optimizing sense amplifier recovery time
Self-timing and duty-cycle independence
4. Memory Compiler
User options - Global file parameters
Performance metrics
Design specifications
Run-time configuration
Model views
Functional description
Timing diagrams
Characterization conditions
5. Test Interface
BIST
Parallel test
Scan test
Serial test
LICENSED LIBRARIES (AS DEFINED IN THE DATA SHEETS ATTACHED HERETO AS EXHIBIT F)
2 port (1R, 1W) Register File compiler
1 port high density SRAM compiler
Dual port (2RW) high density SRAM compiler
IN WITNESS WHEREOF, the parties have caused this Exhibit revision to be executed
on their behalf by their duly authorized officers and representatives on the
date given below. This revision hereby supersedes all previous versions of this
Exhibit.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
---------------------------- ---------------------------------
- -------------------------------- ------------------------------------
(Print Name) (Print Name)
- -------------------------------- ------------------------------------
(Date) (Date)
15
<PAGE> 16
EXHIBIT B: SPECIFICATIONS
REVISION 0, DATED 3/15/00
The contents of this Exhibit shall be modified from time to time as mutually
agreed to by both parties:
Please see 0.18(mu)m & 0.15(mu)m UMC Memory Compiler Data Sheets
1) Dual Port Bit cell
2) ROM Bit cell
3) Register File single port bit cell
4) Virage Logic Bit cell for Single port High Density
IN WITNESS WHEREOF, the parties have caused this Exhibit revision to be
executed on their behalf by their duly authorized officers and representatives
on the date given below. This revision hereby supersedes all previous versions
of this Exhibit.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
---------------------------- ---------------------------------
- -------------------------------- ------------------------------------
(Print Name) (Print Name)
- -------------------------------- ------------------------------------
(Date) (Date)
16
<PAGE> 17
EXHIBIT C: DELIVERABLE SCHEDULE
REVISION 0, 3/15/00
EXHIBIT C1: 0.18UM UMC SPECIFIC MEMORY COMPILERS
<TABLE>
<CAPTION>
UMC SPECIFICATIONS VERSION DATE DELIVERY UMC CONTROL #
- ----------------------------------------- ----------- --------- ------------ --------------------
<S> <C> <C> <C> <C>
Spice Models TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
Design Rules TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
DRC runset TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
UMC Single-Port Memory Bit Cell TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
Sizing Equation TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
Layer Mapping TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
</TABLE>
KEY MILESTONES (EFFECTIVE DATE + RELATIVE TIMES)
<TABLE>
<CAPTION>
- --------------------------------------- ------------------------- -------------------------------
REQ. ACTIVITY WHO DELIVERY TIME
(RELATIVE TO EFFECTIVE DATE)
- --------------------------------------- ------------------------- -------------------------------
<S> <C> <C>
Tech file 0.18um data including UMC Complete
Dracula or Calibre runset
- --------------------------------------- ------------------------- -------------------------------
Tech file calibration & sample set VIRAGE LOGIC TBD
- --------------------------------------- ------------------------- -------------------------------
Tech file review & sign-off UMC TBD
- --------------------------------------- ------------------------- -------------------------------
Create memory compilers: VIRAGE LOGIC
2 port register file Effective Date of this
agreement +4 wks
1 port high density Effective Date of this
agreement +12 wks
2 port high density Effective Date of this
agreement +18 wks
- --------------------------------------- ------------------------- -------------------------------
</TABLE>
EXHIBIT C2: 0.15UM UMC SPECIFIC MEMORY COMPILERS
<TABLE>
<CAPTION>
UMC SPECIFICATIONS VERSION DATE DELIVERY UMC CONTROL #
- ----------------------------------------- ----------- --------- ------------ --------------------
<S> <C> <C> <C> <C>
Spice Models TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
Design Rules TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
DRC runset TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
UMC Single-Port Memory Bit Cell TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
Sizing Equation TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
Layer Mapping TBD
- ----------------------------------------- ----------- --------- ------------ --------------------
</TABLE>
KEY MILESTONES (EFFECTIVE DATE + RELATIVE TIMES)
<TABLE>
<CAPTION>
- -------------------------------------- -------------------------- -------------------------------
REQ. ACTIVITY WHO DELIVERY TIME
(RELATIVE TO EFFECTIVE DATE)
- -------------------------------------- -------------------------- -------------------------------
<S> <C> <C>
Tech file 0.15um data including UMC TBD
Dracula or Calibre runset
- -------------------------------------- -------------------------- -------------------------------
Tech file calibration & sample set VIRAGE LOGIC TBD
- -------------------------------------- -------------------------- -------------------------------
Tech file review & sign-off UMC TBD
- -------------------------------------- -------------------------- -------------------------------
Create synchronous single-port VIRAGE LOGIC TBD
memory compiler using UMC bit cell
for larger memories
- -------------------------------------- -------------------------- -------------------------------
</TABLE>
17
<PAGE> 18
EXHIBIT C: DELIVERABLE SCHEDULE (con't)
REVISION 0, 3/15/00
IN WITNESS WHEREOF, the parties have caused this Exhibit revision to be executed
on their behalf by their duly authorized officers and representatives on the
date given below. This revision hereby supersedes all previous versions of this
Exhibit.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
---------------------------- ---------------------------------
- -------------------------------- ------------------------------------
(Print Name) (Print Name)
- -------------------------------- ------------------------------------
(Date) (Date)
18
<PAGE> 19
EXHIBIT D: UMC CELLS
REVISION 0, 3/15/00
The contents of this Exhibit shall be modified from time to time as mutually
agreed to by both parties:
<TABLE>
<CAPTION>
PART NUMBER DESCRIPTION
- ----------- -----------
<S> <C>
0.18um 4.0 um2 Single-Port SRAM bit cell (Borderless)
5.5 um2 Single-Port SRAM bit cell (Bordered)
0.15um ___um2 Single-Port SRAM bit cell (Borderless)
___um2 Single-Port SRAM bit cell (Bordered)
</TABLE>
IN WITNESS WHEREOF, the parties have caused this Exhibit revision to be executed
on their behalf by their duly authorized officers and representatives on the
date given below. This revision hereby supersedes all previous versions of this
Exhibit.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
---------------------------- ---------------------------------
- -------------------------------- ------------------------------------
(Print Name) (Print Name)
- -------------------------------- ------------------------------------
(Date) (Date)
19
<PAGE> 20
EXHIBIT E: LIST OF EXCLUDED CUSTOMERS
REVISION N/C, DATED
List to be updated as appropriate. Companies on this list shall not receive
Licensed Libraries from Virage Logic unless first approved by UMC:
IN WITNESS WHEREOF, the parties have caused this Exhibit revision to be executed
on their behalf by their duly authorized officers and representatives on the
date given below. This revision hereby supersedes all previous versions of this
Exhibit.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
---------------------------- ---------------------------------
- -------------------------------- ------------------------------------
(Print Name) (Print Name)
- -------------------------------- ------------------------------------
(Date) (Date)
20
<PAGE> 21
EXHIBIT F: DATA SHEETS
REVISION 0, DATED 3/15/00
The data sheets provided herein are preliminary and may change during the design
of the compilers due to any number of issues. Any change to the datasheet due to
the design of the compilers will be brought to the attention of UMC before being
released.
IN WITNESS WHEREOF, the parties have caused this Exhibit revision to be executed
on their behalf by their duly authorized officers and representatives on the
date given below. This revision hereby supersedes all previous versions of this
Exhibit.
UMC GROUP VIRAGE LOGIC CORPORATION
By: By:
---------------------------- ---------------------------------
- -------------------------------- ------------------------------------
(Print Name) (Print Name)
- -------------------------------- ------------------------------------
(Date) (Date)
21
<PAGE> 22
EXHIBIT G: UMC/VIRAGE LOGIC RECIPROCAL NON-DISCLOSURE AGREEMENT,
DATED 4/23/98
22
<PAGE> 23
EXHIBIT H: VIRAGE LOGIC'S MASTER LICENSE AGREEMENT
MASTER LICENSE AGREEMENT
This Master License Agreement ("Agreement") is made and entered into
_____________ ("Effective Date") by and between Virage Logic ("Virage Logic"), a
California corporation, with offices at 46501 Landing Parkway, Fremont,
California 94538, and ______________ ("Licensee"), a ___________ corporation,
with offices at __________.
This Agreement is a master license agreement that will govern the license of
certain Virage Logic software products and other technology. Licensed Materials
will be listed in schedule(s) ("Program Schedule(s)"), that may be added hereto
from time to time upon mutual execution of such Program Schedule(s).
1. DEFINITIONS.
1.1 "Compiler" means each Virage Logic development tool listed in a Program
Schedule, which tool consists of: (i) object code versions of a set of
executable software program(s), (ii) libraries containing design elements of
memory cell arrays and control logic, and (iii) all related documentation. Each
Compiler includes any and all updates, replacements and enhancements thereto
that Virage Logic delivers to the Licensee.
1.2 "Instances" means designs of discrete integrated circuit memory cell
arrays and corresponding control logic, which me either generated for Licensee
by Virage Logic and described in a Program Schedule, or are generated by
Licensee through the use of a Compiler. Instances may be expressed in GDSII,
hardware definition languages, or other formats. Each Instance includes all
documentation related to the design and any and all updates, replacements and
enhancements thereto that Virage Logic delivers to the Licensee.
1.3 "Licensed Material(s)" means, collectively, the Compiler(s) and any
Instance(s) generated for Licensee by Virage Logic.
1.4 "Intellectual Property Rights" means patent rights (including patent
applications and disclosures), rights of priority, mask work rights, copyrights,
moral rights, trade secrets, know-how and any other intellectual property rights
recognized in any country or jurisdiction of the world; exclusive of trademarks,
trade names, logos, service marks, and other designations of source.
2. LICENSE GRANTS.
2.1 License Grants. Virage Logic grants to Licensee, subject to the terms
and conditions of this Agreement, including but not limited to the
conditions of pertinent Program Schedules, a non-exclusive,
non-transferable, fee-bearing license to:
(a) use each Compiler to create Instances;
(b) use and reproduce Instances (whether created by Licensee or
by Virage Logic on Licensee's behalf) solely to design and develop
Licensee's integrated circuits; and
(c) distribute such Instances solely: (i) in GDSII data format
to the semiconductor manufacturer set forth for the relevant Compiler or
Instance it the pertinent Program Schedule and solely for the purpose of
enabling such manufacturer to manufacture integrated circuits for
Licensee, and (ii) as incorporated into physical implementations of
Licensee's integrated circuits as reduced to silicon.
2.2 Limitations on Licenses.
(a) Licensee may use Compilers and Instances only for the
applications and processes set farm Or those Compilers and Instances it
me pertinent Program Schedule.
(b) Licensee has no right to transfer, sublicense, or otherwise
distribute Licensed Materials except as expressly set forth in this
Agreement, and without limiting the generality of the foregoing,
information (including, but not limited to GDSII data) that reflects any
element of Compilers or Instances may be provided only to the
semiconductor manufacturer set forth for the relevant Compilers or
Instances in the pertinent Program Schedule and solely for the purpose
of enabling such manufacturer to manufacture integrated circuits for
Licensee.
(c) Licensee will not: (i) copy or otherwise reproduce any
Licensed Materials, in whole or in part, except as expressly authorized
by this Agreement or to make reasonable numbers of back-up
23
<PAGE> 24
copies; or (ii) use the Licensed Materials in any manner to provide
services to third parties, including, but not limited to, integrated
circuit design services.
(d) Licensee's rights in the Licensed Materials will be limited
to those expressly granted in this Agreement, and Virage Logic reserves
all moan and licenses not expressly granted to Licensee in this
Agreement.
3. PROPRIETARY RIGHTS.
3.1 Virage Logic's Ownership.
(a) The Licensed Materials are and will remain the sole and
exclusive property of Virage Logic and its suppliers, if any, whether
the Licensed Materials are separate or combined with any other products.
Virage Logic's rights under this subsection (a) will include, but not be
limited to, all copies of the Licensed Materials, in whole and in part;
and all Intellectual Property Rights in the Licensed Materials.
(b) Licensee will not delete or in any manner alter the
Intellectual Property Rights notices of Virage Logic and its suppliers,
if any, appearing on the Licensed Materials as delivered to Licensee. As
a condition of the license rights granted to Licensee in this Agreement,
Licensee will reproduce and display such notices on each copy it makes
of any Licensed Material.
(c) Nothing in this Agreement grants Licensee any rights in or
to use any of the Virage Logic's trademarks, tradenames, service marks,
and/or service names.
4. PAYMENT; TAXES.
Licensee will pay Virage Logic the license fee(s) set forth Attachment.
Payments made under this Agreement after their due date will incur interest at a
rate equal to 1.5% per month or the highest rate permitted by applicable law,
whichever is lower. All license fees and other charges stated herein are
exclusive of any sales, use, value-added, or other federal, state or local taxes
(excluding taxes based on Virage Logic's net income) and Licensee agrees to pay
such taxes.
5. CONFIDENTIALITY.
5.1 Confidential Information. "Confidential Information" means: (i) the
Licensed Materials; and (ii) any business or technical information of Virage
Logic or Licensee, that is designated by the discloser as "confidential" or
"proprietary" and, if orally disclosed, summarized in writing by the discloser
and transmitted to the recipient within thirty (30) days of such disclosure.
5.2 Exclusions. Confidential Information shall not include information that
the recipient can document: (i) is or becomes generally known or available by
publication, commercial use or otherwise through no fault of the recipient; (ii)
is known to the recipient at the time of disclosure without violation of any
confidentiality restriction and without any restriction on the receiving party's
further use or disclosure; (iii) is independently developed by the recipient;
(iv) was received from a third party rightfully in possession of such
information without an obligation of confidentiality; (v) is permitted for
release or disclosure to any third party by me written prior consent of the
discloser; or (vi) is intentionally furnished to a third party by the discloser
without imposing confidentiality restrictions on such third party.
5.3 Use and Disclosure Restrictions. For a term of three (3) years from me
last disclosure of Confidential Information, each party will refrain from using
the other party's Confidential Information except as permitted herein, and will
use the same level of care, but in any event will not use less than reasonable
care, to prevent disclosure of the other party's Confidential Information that
it uses with its own information of similar sensitivity and importance. However,
each party may disclose Confidential Information of me other party: (i) pursuant
to the order or requirement of a court, administrative agency, or other
governmental body, provided that the disclosing party gives reasonable notice to
the other party to contest such order or requirement; and (ii) on a confidential
basis to legal or financial advisors. Notwithstanding anything herein, Licensee
will not allow any individual who is an employee or agent of a direct competitor
of Virage Logic to have access to the Licensed Materials.
5.4 No Reverse Engineering. Licensee acknowledges and agrees that the
Licensed Materials contain trade secrets and other proprietary information of
Virage Logic. In order to protect those trade secrets and other proprietary
information, Licensee agrees that, except as expressly permitted under
applicable law, it will not reverse engineer, disassemble, or otherwise attempt
to derive the source code form of the Licensed Materials.
24
<PAGE> 25
6. WARRANTY.
6.1 Power and Authority. Each party wan-ants to the other that it has
sufficient corporate power and authority to enter into this Agreement and to
grant to the other all licenses and rights that it grants under this Agreement.
6.2 Performance Warranty. Virage Logic warrants, for a period of ninety (90)
days from the date Virage Logic delivers the Licensed Materials to Licensee,
that the Licensed Materials will substantially conform to the functional
specifications of the Licensed Materials provided to Licensee by Virage Logic.
The foregoing warranty does not apply to any element of the Licensed Materials
that has been modified, combined with other products or used improperly.
6.3 Sole and Exclusive Remedy. FOR ANY BREACH OF THE WARRANTY CONTAINED IN
SECTION 6.2, LICENSEE'S SOLE AND EXCLUSIVE REMEDY WILL BE THAT VIRAGE LOGIC
WILL, AT ITS OPTION, EITHER REPLACE OR CORRECT THE DEFECTIVE PORT-ION OF THE
LICENSED MATERIALS WITHIN 30 DAYS OF BEING INFORMED OF THE BREACH OF WARRANTY.
6.4 Disclaimer of Other Warranties. THE WARRANTIES IN THIS SECTION ARE IN
LIEU OF ALL OTHER WARRANTIES, EXPRESS AND IMPLIED, INCLUDING BUT NOT LIMITED TO
ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
NONINFRINGEMENT. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, VIRAGE LOGIC
DOES NOT WARRANT THAT THE LICENSED MATERIALS WILL MEET LICENSEE'S REQUIREMENTS,
THAT THE LICENSED MATERIALS WILL OPERATE IN THE COMBINATIONS THAT LICENSEE MAY
SELECT OR USE, THAT THE OPERATION OF THE LICENSED MATERIALS WILL BE
UNINTERRUPTED OR ERROR FREE, OR THAT ALL ERRORS IN THE LICENSED MATERIALS WILL
BE CORRECTED.
7. INDEMNITIES.
7.1 Licensee. Subject to the terms of Section 7.2, Licensee agrees to
indemnify Virage Logic against any third party claims against Virage Logic for
loss, damage, liability, or expense (including but not limited to attorneys'
fees) arising out of any acts or omissions of Licensee in connection with
Licensee's activities under this Agreement.
7.2 Infringement Indemnity.
(a) Duty to Indemnify and Defend. Virage Logic will indemnify
Licensee against, and will defend or settle at Virage Logic's own
expense, subject to the limitations set forth in Section 9 of this
Agreement, any action or other proceeding brought against Licensee to
the extent that it is based on a claim that the use of the Licensed
Materials as licensed in this Agreement infringes any copyright or any
U.S., Taiwan, European or Japanese patent issued as of the Effective
Date, or that the Licensed Materials incorporate any misappropriated
trade secrets. Virage Logic will pay costs, damages, and expenses
(including reasonable attorneys' fees) finally awarded against Licensee,
subject to the limitations set forth in Section 9 of this Agreement, in
any such action or proceeding attributable to any such claim. Virage
Logic will have no obligation under this Section as to any action,
proceeding, or claim unless: (i) Virage Logic is notified of it
promptly; (ii) Virage Logic has sole control of its defense and
settlement; and (iii) Licensee provides Virage Logic with reasonable
assistance in its defense and settlement.
(b) Injunctions. If Licensee's use of any Licensed Materials
under the terms of this Agreement is, or in Virage Logic's opinion is
likely to be, enjoined due to the type of infringement or
misappropriation specified in subsection (a) above, then Virage Logic
may, at its sole option and expense, either: (i) procure for Licensee
the right to continue using such Licensed Materials under the terms of
this Agreement; (ii) replace or modify such Licensed Materials so that
they are noninfringing and substantially equivalent in function to the
enjoined Licensed Materials; or (iii) if options (i) and (ii) cannot be
accomplished despite the reasonable efforts of Virage Logic, terminate
Licensee's rights and Virage Logic's obligations under this Agreement
with respect to such Licensed Materials.
(c) Sole Remedy. THE FOREGOING ARE VIRAGE LOGIC'S SOLE AND
EXCLUSIVE OBLIGATIONS, AND LICENSEE'S SOLE AND EXCLUSIVE REMEDIES, WITH
RESPECT TO INFRINGEMENT OR MISAPPROPRIATION OF INTELLECTUAL PROPERTY
RIGHTS.
25
<PAGE> 26
(d) Exclusions. Virage Logic will have no obligations under this
Section 7.2 with respect to infringement or misappropriation arising
from: (i) modifications to the Licensed Materials by any party other
than Virage Logic, (ii) Licensed Material specifications requested by
Licensee, (iii) any Instances generated by Licensee except to the extent
such infringement or misappropriation existed in the Licensed Materials
as provided to Licensee, or (iv) the use of the Licensed Materials in
combination with products or technology not provided by Virage Logic.
8. TERM AND TERMINATION.
8.1 Term. The term, of this Agreement will begin on me Effective Date and
will continue, unless terminated earlier in accordance with the provisions of
8.2 below, for the period specified in the Program Schedule(s) solely for the
applications and processes for the Licensed materials set forth therein.
8.2 Events of Termination.
(a) Either party will have the right to terminate this Agreement
if: (i) the other party breaches any material term or condition of this
Agreement and fails to cure such breach within thirty (30) days after
written notice; (ii) the other party becomes the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to
insolvency, receivership, liquidation, or composition for the benefit of
creditors; or (iii) the other party becomes the subject of an
involuntary petition in bankruptcy or any involuntary proceeding
relating to insolvency, receivership, liquidation, or composition for
the benefit of creditors, if such petition or proceeding is not
dismissed within sixty (60) days of filing.
(b) Virage Logic will have the right to terminate this Agreement
if Licensee acquires, consolidates or merges with a direct competitor of
Virage Logic. For the purposes of this Agreement, a direct competitor of
Virage Logic is any entity engaged in the commercial sale of Compilers
and/or Instances as defined in Sections 1.1 and 1.2 of this Agreement
respectively.
8.3 Effect of Termination. Upon termination or expiration of this Agreement,
Licensee will immediately return to Virage Logic or (at Virage Logic's request)
destroy all copies of the Licensed Materials and other Confidential Information
in its possession or control, and an officer of Licensee will certify to Virage
Logic in writing that Licensee has done so. Provided that Virage Logic did not
terminate the Agreement for Licensee's breach or for the event specified in
section 8.2(b) above, Licensee will have the right to continue to use Licensed
Materials for which Licensee has paid the license fees as of the effective date
of the termination, subject to the terms of Section 2.1.
8.4 No Damages for Termination. Neither party mill be liable to the other on
account of termination or expiration of this Agreement for reimbursement or
damages for the loss of goodwill, prospective profits or anticipated income, or
on account of any expenditures, investments, leases or commitments made by
either party or for any other reason whatsoever based upon or growing out of
such termination or expiration.
8.5 Nonexclusive Remedy. The exercise by either party of any remedy under
this Agreement will be without prejudice to its other remedies under this
Agreement or otherwise.
8.6 Survival. The rights and obligations of the parties contained in
Sections 2.2, 3, 4, 5, 7, 8.3, 8.4, 8.5, 9, and 10 will survive the termination
or expiration of this Agreement.
9. LIMITATIONS OF LIABILITY.
9.1 Limitations.
(a) IN NO EVENT WILL VIRAGE LOGIC BE LIABLE TO LICENSEE FOR ANY
SPECIAL, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, WHETHER BASED ON BREACH
OF CONTRACT, TORT (INCLUDING NEGLIGENCE), PRODUCT LIABILITY, OR
OTHERWISE, AND WHETHER OR NOT VIRAGE LOGIC HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGE.
(b) VIRAGE LOGIC'S TOTAL LIABILITY TO LICENSEE UNDER THIS
AGREEMENT WILL BE LIMITED TO THE PAYMENTS RECEIVED BY VIRAGE LOGIC FROM
LICENSEE UNDER THIS AGREEMENT.
9.2 Failure of Essential Purpose. The parties have agreed that the
limitations specified in this Section 9 will survive and apply even if any
limited remedy specified in this Agreement is found to have failed of its
essential purpose.
10. GENERAL.
26
<PAGE> 27
10.1 Compliance with Law. Each party agrees to comply with all applicable
laws, rules, and regulations in connection with its activities under this
Agreement. Each party shall comply with all applicable international, national,
state, regional and local laws and regulations in connection with its activities
under this Agreement. Without limiting the foregoing, Licensee acknowledges that
all Licensed Materials, including documentation and other Virage Logic technical
data, are subject to export controls imposed by the U.S. Export Administration
Act of 1979, as amended (the "Act"), and the regulations promulgated thereunder.
Licensee shall not export or re-export (directly or indirectly) any Licensed
Materials or other Virage Logic technical data therefor without complying with
the Act and the regulations thereunder.
10.2 Publicity. Virage Logic may include Licensee's name in Virage Logic's
customer list. Virage Logic may also use Licensee's name in Virage Logic
promotional literature and marketing materials, provided that Virage Logic will
obtain Licensee's prior approval, such approval not to be unreasonably withheld
or delayed.
10.3 Assignment. This Agreement will bind and inure to the benefit of each
party's permitted successors and assigns. Licensee may not assign this
Agreement, by operation of law or otherwise, in whole or in part, without Virage
Logic's written consent, which consent will not be unreasonably withheld. Any
attempt to assign this Agreement without such consent will be null and void.
10.4 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of California applicable to agreements
entered into, and to be performed entirely, within California between California
residents. Any suit hereunder will be brought solely in the federal or state
courts in the Northern District of California and Licensee hereby submits to the
personal jurisdiction thereof.
10.5 Injunctive Relief. Licensee acknowledges that the Licensed Materials
contain and embody trade secrets and other intellectual property of Virage
Logic, the disclosure or unauthorized use of which would cause substantial harm
to Virage Logic that could not be remedied by the payment of damages alone.
Accordingly, Virage Logic will be entitled to preliminary and permanent
injunctive relief and other equitable relief for any breach of Licensee's
obligations of confidentiality or use of Licensed Materials not in accordance
with this Agreement.
10.6 Severability. If any provision of this Agreement is found invalid or
unenforceable, that provision will be enforced to the maximum extent
permissible, and the other provisions of this Agreement will remain in force.
10.7 Force Majeure. Except for payments due under this Agreement, neither
party will be responsible for any failure to perform due to causes beyond its
reasonable control (each a "Force Majeure"), including, but not limited to, acts
of God, war, riot, embargoes, acts of civil or military authorities, denial of
or delays in processing of export license applications, fire, floods,
earthquakes, accidents, strikes, or fuel crises, provided that such party gives
prompt written notice thereof to the other party. The dine for performance will
be extended for a period equal to the duration of the Force Majeure, but in no
event longer than sixty (60) days.
10.8 Notices. All notices under this Agreement will be deemed given when
delivered personally, sent by confirmed facsimile transmission, or sent by
certified or registered U.S. mail or nationally-recognized express courier,
return receipt requested, to the address shown below or as may otherwise be
specified by either party to the other in accordance with this Section.
10.9 Independent Contractors. The parties to this Agreement are independent
contractors. There is no relationship of partnership, joint venture, employment,
franchise, or agency between the parties. Neither party will have the power to
bind the other or incur obligations on the other's behalf without the other's
prior written consent.
10.10 Waiver. No failure of either party to exercise or enforce any of its
rights under this Agreement will act as a waiver of such rights.
10.11 Entire Agreement. This Agreement and its exhibits are the complete and
exclusive agreement between the parties with respect to the subject matter
hereof, superseding and replacing any and all prior agreements, communications,
and understandings (both written and oral) regarding such subject matter. This
Agreement may only be modified, or any rights under it waived, by a written
document executed by both parties.
27
<PAGE> 28
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized representatives as of the Effective Date.
Licensee: VIRAGE LOGIC CORPORATION
-------------------------
By: By:
------------------------------- --------------------------------------
Name: Name:
----------------------------- ------------------------------------
Title: Title:
---------------------------- -----------------------------------
Address: Address: 46501 Landing Parkway
-------------------------- ------------------------------
Fremont, California 94538
------------------------------
Facsimile: Facsimile: 510-360-8099
------------------------ ------------------------------
28
<PAGE> 29
PROGRAM SCHEDULE NO.
I. Licensed Materials:
[ ] Compiler(s)
[ ] Instance(s)
II. Permitted Use of Licensed Materials"
(A) Permitted Processes
(B) Permitted Applications
(C) Other Restrictions
Licensee: VIRAGE LOGIC CORPORATION
-------------------------
By: By:
------------------------------- --------------------------------------
Name: Name:
----------------------------- ------------------------------------
Title: Title:
---------------------------- -----------------------------------
Address: Address: 46501 Landing Parkway
-------------------------- ------------------------------
Fremont, California 94538
------------------------------
Facsimile: Facsimile: 510-360-8099
------------------------ ------------------------------
29
<PAGE> 30
Attachment A to Program Schedule No.
------
LICENSE FEES
30
<PAGE> 31
EXHIBIT I: UMC'S QUALITY ASSURANCE PROCEDURE
------.
REVISION N/C, DATED
31
<PAGE> 1
EXHIBIT 10.16
*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
CONFIDENTIAL
MOSYS-VIRAGE LOGIC
MEMORANDUM OF UNDERSTANDING
FOR JOINTLY DEVELOPED
1T-SRAM(TM) TECHNOLOGY MEMORY COMPILERS
PURPOSE
To establish a relationship between MoSys Incorporated (MoSys) and
Virage Logic Corporation (Virage) to jointly develop and market 1T-SRAM
technology memory compilers in order to speed proliferation of the MoSys 1T-SRAM
technology and Virage memory compiler technology.
Following the signature of this MOU both MoSys and Virage will use best
efforts to conclude a definitive agreement within 60 days of the signature of
this MOU.
TERM
Agreement to have a 3 year duration unless terminated by either party
giving the other 90 days written notice.
PRODUCT
MoSys and Virage shall jointly develop a multi-megabit 1T-SRAM compiler
for an initial foundry and process. The specification of the compiler shall be
as per the attached specification to be updated by mutual agreement.
MoSys and Virage shall engineer the 1T-SRAM compiler such that instances
generated include BIST, redundancy and fuse programming to ensure high yield and
density. MoSys and Virage shall provide the plans for all DFT planned; including
but not limited to, BIST, diagnostics, etc. MoSys and Virage to determine before
project start on which parameter to optimize the compilers: low power, speed,
area or any combination of the above factors into one or more compilers.
The schedule for the joint compiler development project shall be
developed jointly by MoSys and Virage. The current date for the start of the
development is slated to be July 1, 1999. Front-end views would then be
available 6 weeks after project start. The GDS availability date is to be
determined during the schedule development.
Following this initial joint compiler development MoSys and Virage may
agree to develop additional compilers for further foundries and/or processes.
<PAGE> 2
BUSINESS
Potential compiler customers of MoSys and Virage can be characterized in
one of three ways: Foundry Users, ASIC Vendors, or semiconductor Integrated
Device Manufacturers (IDMs). The Foundry User is the fabless IC or Systems
Company that goes direct to a licensed Foundry with GDS2 to have the silicon
fabricated. Although a relationship with Foundries will be important in order to
initially develop compilers for their processes and market the results to their
customers, the compilers would not normally be sold to the Foundries themselves.
The business models, and therefore pricing, for each of these customers
is potentially different. However it is expected to set the same pricing for
ASIC vendors and IDMs, resulting in a simpler compiler pricing structure. All
Foundries, ASIC vendors and IDMs must have a valid 1T-SRAM base technology
license direct from MoSys, who will retain all royalties from that license.
Any potential 1T-SRAM compiler customer shall be engaged by either
company to determine the need of the customer and determine what course of
action is to be taken to meet and exceed the customers' needs. To that end,
there are four potential engagement scenarios with customers:
1) Licensing of the 1T-SRAM base technology,
2) Custom instance development or stand alone chip development,
3) Instance production using the jointly developed compilers,
4) Licensing of the Jointly developed compilers themselves.
In the case of scenarios 1 &2, MoSys shall determine the customers needs
and execute the business with that customer and retain all revenues derived from
such business. MoSys has the sole discretion of directly licensing its 1T-SRAM
technology to its direct customers (Scenarios #1&2).
In the case of scenarios 3&4, either MoSys or Virage will take the lead
position in determining the customers needs and driving the business with that
customer. In these cases the revenue derived from this business with the
customer will be split between MoSys and Virage as specified in the pricing
section of this agreement. This agreement shall establish the licensing of the
jointly developed compilers incorporating Virage's Compiler Technology and MoSys
1T-SRAM Technology to both companies solely for the purposes of selling the
jointly developed compilers and instances generated from the jointly developed
compilers to customers. Neither MoSys nor Virage may use each other's technology
for any other purpose. The Partner Company takes a secondary role in providing
the product and/or service to the customer in both of the aforementioned
-2-
<PAGE> 3
scenarios 3&4. The ability for the Partner Company to move from a secondary to
primary role in any scenario is only allowed by joint agreement.
MoSys and Virage will cooperate in Joint selling activities in order to
locate an initial source of NRE fees to help fund development of the compiler
through direct funding of the compiler development or the purchase of a number
of instances. If possible, the first compiler will be developed with common
design rules to allow foundry reuse. MoSys and Virage shall also cooperate on
development of the test chip and silicon validation report with the first
customer. MoSys and Virage shall migrate the developed compiler to additional
foundries based on customer demand.
PRICING
Although initial pricing is given below, it is expected that pricing
will have to be updated regularly based on the response from the market. MoSys
and Virage will jointly review and, if necessary, amend this pricing by mutual
agreement on a quarterly basis.
All compiler or compiled instance revenues gained from the jointly
developed compiler products covered by this agreement will be split 50% to MoSys
and 50% to Virage. The pricing below is for the compiler only and does not
include the 1T-SRAM technology license from MoSys, which will require an
additional royalty, together with a license fee from the foundry.
ASIC VENDORS AND IDMS
Unlimited Compiler License Fee ***.
Can be converted at customer request to an initial license fee plus
non-capped royalty to at least reach the *** mark. However, both MoSys and
Virage to agree all ASIC Vendor and IDM business proposals prior to customer
commitment.
COMPILERS FOR FOUNDRY USERS
Unlimited Compiler Site License Fee ***.
Additional Compiler BIST option Fee ***.
Compiler royalty (additional to MoSys technology license royalty): MoSys
will assist Virage's negotiations with the foundry to participate in the normal
library EP pool business model royalty. The discount schedule presented in Table
I shall be used in setting discounted pricing for MoSys/Virage products to
prospective customers and applies to MoSys/Virage products only.
-3-
<PAGE> 4
Any MoSys or Virage specific products included in a deal with a customer
shall not be included in the volume calculation for the purposes of utilizing
Table 1. Any discount in excess of the published discount schedule in Table I to
be extended to any prospective customer is to be agreed by both MoSys and Virage
before being offered.
COMPILED INSTANCES FOR FOUNDRY USERS
Unlimited worldwide Instance License Fee ***.
Compiler royalty (additional to MoSys technology license royalty): MoSys
will assist Virage's negotiations with the foundry to participate in the normal
library IP pool business model royalty. The discount schedule presented in Table
I shall be used in setting discounted pricing for MoSys/Virage products to
prospective customers and applies to MoSys/Virage products only.
Any MoSys or Virage specific products included in a deal with a customer
shall not be included in the volume calculation for the purposes of utilizing
Table 1. Any discount in excess of the published discount schedule in Table I to
be extended to any prospective customer is to be agreed by both MoSys and Virage
before being offered.
TABLE I - VOLUME DISCOUNT TABLE (APPLIES TO COT PRODUCT ONLY)
<TABLE>
<CAPTION>
VOLUME (LIST PRICE) DISCOUNT
------------------- --------
<S> <C>
*** ***
*** ***
*** ***
*** ***
*** ***
*** ***
</TABLE>
MAINTENANCE AND SUPPORT
The customer maintenance revenues shall be split 50% MoSys - 50% Virage
as per the agreement that MoSys will answer the physical layout issues resulting
from design rule changes and Virage will answer recharacterization issues,
specific compiler technology issues, EDA models and updates, and will act as the
first line of support to all customers of products borne from this agreement. If
either party finds that this split is not equitable and does not at least cover
the cost of the support provided, the split shall be renegotiated.
-4-
<PAGE> 5
The maintenance to be charged to the customers shall be 20% of the
compiler list price per year for ASIC and IDM customers and 15% of the list
price per year for Foundry User customers.
MARKETING
MoSys and Virage agree to perform joint marketing activities to promote
the relationship established by this agreement. The activities shall include,
but not be limited to, the following;
a) A Joint press release that announces the established partnership,
published after signature of this MOU by both parties,
b) Joint sales activities to establish the first customer, that will
find the NRE of the first compiler, and also subsequent customers to proliferate
the 1T-SRAM compiler products,
c) A jointly authored white paper discussing the 1T-SRAM compiler
technology and the Virage compiler technology, and the advantages of both in one
product,
d) Quarterly technology reviews to inform each party of subsequent
technology developments that could lead to the modification of the product
established under this agreement, or to additional products jointly developed by
the parties,
e) Advertisement of the compiler in the list of off-the-shelf components
by both MoSys and Virage, including published datasheets to be used by both
companies in the selling of the compiler
<TABLE>
<S> <C>
MOSYS INCORPORATED /s/ FU-CHIEH HSU VIRAGE LOGIC CORPORATION /s/ ADAM KABLANIAN
----------------- -------------------
Date: 7/1/99 Date: 6/29/99
--------------------------- ---------------------------
Fu-Chieh Hsu Adam Kablanian
Chairman, President & CEO President & CEO
</TABLE>
-5-
<PAGE> 6
1T-SRAM COMPILER OUTLINE SPECIFICATION
DELIVERABLES
- Data sheet
- Verilog model (back-annotatable o/p delays)
- VHDL (VITAL95) model (back-annotatable o/p delays)
- Synopsys synthesis model
- Synopsys static timing (Motive) model
- Synopsys timing model
- Synopsys power model
- Cadence place-and-route abstract (LEF)
- Avant! place-and-route Frame view abstract
- GDSII
- Spice netlist for LVS
PARAMETERS & LIMITS
- Word widths: 16, 32, 64 or 128 bits with 8-bit byte enables
- Size: 4K, 8K, 16K, 32K, 64K, 128K, 256K, 512K, IM or 2M words
provided total memory size is between 512K and 32M bits
- Pipeline or Flow-Through
- Late-write options (To be defined)
- Some aspect-ratio control (To be defined)
- BIST option (To be defined)
OTHER ITEMS
- Include Redundancy
- Include Scan support
-6-
<PAGE> 7
- Define timing characterization process
- Define test silicon process
-7-
<PAGE> 1
EXHIBIT 10.17
*CERTAIN INFORMATION WITHIN THIS EXHIBIT HAS BEEN OMITTED AND THE NON-PUBLIC
INFORMATION HAS BEEN FILED SEPARATELY WITH THE SEC. CONFIDENTIAL TREATMENT HAS
BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.
MEMORANDUM OF UNDERSTANDING
FOR
CUSTOM TOUCH(TM) 1T-SRAM(TM) MEMORY COMPILER
FOR TSMC 0.18um & 0.15um LOGIC PROCESSES
This Memorandum of Understanding (the "MOU") is entered into and effective as of
the date of the last signature below ("Effective Date") by and between Taiwan
Semiconductor Manufacturing Co., Ltd., a company duly incorporated under the
laws of the Republic of China ("ROC"), having its principal place of business at
No. 121, Park Avenue 3, Science Based Industrial Park, Hsin-Chu, Taiwan, ROC
("TSMC"), Monolithic System Technology Incorporated, a company duly incorporated
under the laws of the State of California, USA, having its principal place of
business at 1020 Stewart Drive, Sunnyvale, CA 94086 USA ("MoSys"), and Virage
Logic Corporation, a company duly incorporated under the laws of the State of
California, USA, having its principal place of business at 46501 Landing
Parkway, Fremont, CA 94538 USA ("Virage").
PURPOSE
This MOU is to set forth parameters for an agreement for MoSys and Virage to
develop a Custom Touch(TM) 1T-SRAM(TM) memory compiler (the "Compiler") for
TSMC's 0.18um and 0.15um standard logic semiconductor processes to be jointly
marketed by all parties and sold to TSMC customers by MoSys and Virage.
TERM
This MOU is in place only as long as it takes the three parties to establish a
definitive agreement ("Definitive Agreement") covering the terms and conditions
of establishing and licensing the Compiler, but in no event longer that one (1)
year. TSMC may and licensing the Compiler, but in no event longer than one (1)
year. TSMC may terminate this MOU at any time in the event there is a
technological reason why the Compiler does not provide the functionality agree
to in the Compiler Statement of Work ("SOW") as defined herein.
Following the signature of this MOU, all parties shall use good faith and
reasonable efforts to conclude a definitive agreement within sixty (60) days of
the signature of this MOU.
CONSIDERATION
TSMC shall share the cost of the development of the Compiler with MoSys and
Virage in consideration for developing the Compiler for TSMC's 0.18um process
prior to any one else which would provide an advantage to TSMC and its customers
in the access to the
<PAGE> 2
Compiler. TSMC agree to pay ***, excluding any taxes and withholdings, for the
Development and the Compiler to MoSys and Virage jointly.
TSMC and MoSys shall amend the agreement executed between them dated March 31,
1999 to incorporate wafer-based running royalties for the compiled instances. It
is the intent of TSMC and MoSys to amend their agreement prior to the execution
of the Definitive Agreement.
TSMC and Virage agree that the Compiler and the resulting instances shall be
considered as "0.18um Licensed Products" and thus covered under TSMC's
Pay-for-Performance program as detailed in the Development and Licensing
Agreement executed between them on March 3, 1999.
In consideration for the cost sharing amount paid by TSMC, MoSys and Virage
agree to provide the Compiler for the 0.15um process to TSMC before any other
foundry customer so long as TSMC has provided the said process in a timely
manner. Such development shall be free of charge to TSMC from either MoSys or
Virage provided that at least five (5). TSMC 0.18um customers purchase the
Compiler from either MoSys and/or Virage for use in their chip development. TSMC
understands that the free of charge development of the Compiler for the 0.15 um
process does not necessarily mean no charge for future cost sharing of future
process generations.
PRODUCT
MoSys and Virage shall jointly develop the Compiler initially for TSMC's 0.18um
standard process that is not low voltage. The Compiler shall be developed in
accordance with the SOW which shall be agreed to by all parties, and shall be
updated from time to time by mutual agreement of all parties.
MoSys and Virage shall engineer the Compiler such that instances generated
include BIST, redundancy and fuse programming to ensure high yield and density.
MoSys and Virage shall provide the plans for all DFT planned such as BIST and
diagnostics.
The schedule for the Compiler development project shall be in accordance with
the SOW. The current date for the start of the development is intended to be two
weeks after receipt of cost sharing purchase order from TSMC. TSMC shall issue
the cost sharing purchase order to Virage in a timely manner from the date of
full execution of this MOU. The front-end view and GDS availability dates are to
be determined during the schedule development.
JOINT MARKET ACTIVITIES
TSMC, MoSys and Virage agree to perform joint marketing activities to promote
the relationship and the Compiler established by this MOU. Each entity shall be
financially responsible for its own marketing activities and such activities
must be pre-approved by
-2-
<PAGE> 3
the other two entities prior to launching such activities. The activities shall
include, but not be limited to, the following:
a) A joint press release that announces the established partnership and
planned Compiler, published after signature of this MOU by all
parties and the issuance of a purchase order for the cost sharing
amount by TSMC to MoSys and/or Virage;
b) Joint sales activities with TSMC by MoSys and Virage, to determine
customers for the Compiler;
c) Quarterly technology reviews to inform all parties of subsequent
technology developments that could lead to the modification of the
product established under this agreement, or to additional products
developed by and/or for the parties; and
d) Advertisement of the Compiler in the list of off-the-shelf
components by both MoSys and Virage, including published datasheets
to be used by both companies in the selling of the Compiler.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed in triplicate on their behalf by their duly authorized offers and
representatives on the date first given above.
TAIWAN SEMICONDUCTOR MANUFACTURING
CO., LTD.
/s/ MIKE PAWLIK
- -----------------------------------
Mike Pawlik
Vice President, Corporate Marketing
MOSYS INCORPORATED VIRAGE LOGIC
CORPORATION
/s/ FU-CHIEH HSU /s/ ADAM KABLANIAN
- ----------------------------------- ---------------------------------------
Fu-Chieh Hsu Adam Kablanian
Chairman, President & CEO President & CEO
-3-
<PAGE> 4
SOW#101999DSI_1
REVISION 1.0
OCTOBER 19, 1999
INTRODUCTION
Taiwan Semiconductor Manufacturing Company, Ltd. (TSMC) is contracting with
Virage Logic Corporation (Virage) and MoSys, Inc. (MoSys) to construct a Custom
Touch(TM) 1T-SRAM(TM) Memory Compiler (1T Compiler) based on MoSys' 1T-SRAM(TM)
technology for TSMC's 0.18um standard process, under the business terms
delineated in the document, "Memorandum of Understanding For Custom Touch(TM)
1T-SRAM(TM) Memory Compiler for TSMC 0.18u and 0.15um Logic Processes." The
compilers to be constructed under this program are described in the Virage/MoSys
deliverables section, and are specified in the specification to be determined
and agreed upon by all parties. The work to be accomplished and schedule for
that work is delineated in the Microsoft Project document that shall be
submitted to TSMC by Virage and MoSys in a timely manner but no later than
thirty (30) days from the date of payment made by TSMC to Virage.
TSMC Deliverables
1. Approval of the Virage Logic/MoSys Custom Touch(TM) 1T-SRAM(TM) Memory
Compiler Specification, #MCPR-119, dated 9/28/99.
2. TSMC 0.18um process information to enable circuit simulation and GDS
layout.
3. TSMC personnel shall be available to answer technical questions pertaining
to the process technology by phone, fax, Email or in person.
Customer EDA Tool Flow
The following table describes TSMC's customer tool flow and EDA support
requirements for the purposes of deliverables under this SOW.
<TABLE>
<CAPTION>
TOOL TYPE TOOL NAME TOOL VENDOR
- ------------- ---------------- ---------------
<S> <C> <C>
Simulation ModelSim Mentor Graphics
Simulation Verilog-XL Cadence
Synthesis Design Compiler Synopsys
Place & Route Apollo Avant!
Place & Route Silicon Ensemble Cadence
</TABLE>
<PAGE> 5
Additional EDA views that are needed are to be developed in accordance with the
definitive contract signed between TSMC, MoSys and Virage for the 1T-SRAM
Program.
Virage/MoSys Deliverables
1. Project Schedule and design reviews as required
2. EDA Views to support the tool flow to include:
a) Verilog with SDF support
b) VHDL (VITAL) with SDF support
c) Test benches in Verilog and/or VHDL
d) Timing models in Synopsys .lib format
e) Structural netlists in Verilog and Spice
3. Physical and logical LEF
4. GDSII
5. Custom Touch(TM) 1T-SRAM(TM) Memory Compiler as described in the
specification #MCPR-119 attached in Appendix B.
REFERENCE DOCUMENTS
The following documents or the relevant information contained therein are the
entire reference basis for construction of the 1T compiler.
1. TSMC 0.18um Process Design Rules, Version TBD, Document #TBD, TSMC, Ltd.
2. Virage Logic/MoSys Custom Touch(TM) 1T-SRAM(TM) Memory Specification,
Spec #MCPR-119, Virage Logic/MoSys, November 1, 1999.
3. Memorandum of Understanding For Custom Touch(TM) 1T SRAM(TM) Memory
Compiler for TSMC 0.18u & 0.15um Logic Processes, Version TBD, Document
TBD, TSMC, Ltd.
4. Spice Model Version: Type: TBD, version TBD, 0.18um process.
WARRANTY
All Virage instances and compilers come with a 90-day warranty against defects.
To support changes in the process, we offer a foundry Maintenance option,
available for 20% of the list price of the compilers for 1 year of Maintenance.
Included is:
1. Extended warranty (1 year) for the Maintenance period.
2. 1 change in the design due to design rule changes.
3. Up to 3 recharacterizations due to changes in spice models or process
data.
4. Updated or new EDA models/views, as available.
-2-
<PAGE> 6
Pricing
Attachment A describes the pricing and payment schedule.
Delivery Schedule
The following memory compiler schedule is subject to a start date of 15 calendar
days after receipt of order.
ITEM #1 - Custom Touch(TM) 1T-SRAM(TM) Memory Compiler based on MoSys'
1T-SRAM(TM) technology for TSMC's 0.18um standard process as specified in Spec
#MCPR-119.
<TABLE>
<CAPTION>
Milestone Date Deliverable
- -------------- -----------
<S> <C>
Milestone #0 - Project Start Final SOW
Milestone #1 - Start + 10 weeks Delivery of front end models
Milestone #2 - Start + 20 weeks Delivery of abstracts
Milestone #3 - Start + 24 weeks Delivery of final compiler with GDS
</TABLE>
Virage Logic will conduct its customary quality assurance (QA) simulation and
testing.
Change Orders to SOW
Any party may request changes to any part of a previously agreed upon design
effort during the course of this SOW. Upon receipt of written request, the
receiving party shall promptly inform the other parties the acceptability,
effect and impact, if any, of the requested changes which shall include but is
not limited to, any change in price or scheduled completion dates. It is
understood that all work will continue as previously agreed and without regard
to the requested change until all parties have agreed in writing and have
amended the terms of this SOW accordingly.
-3-
<PAGE> 7
1. In the event that TSMC needs to update the specification of this
SOW, TSMC, MoSys and Virage Logic shall work together to plan
for the change in specification. TSMC shall have the option to
approve any increase in cost beforehand.
2. Addition/deletion to the SOW requires formal notification of all
parties with costs and schedule impact documented if possible.
3. Any changes to the original SOW requires a minimum of 2 weeks'
notice before the change can be initiated.
4. Any changes to the SOW will require re-confirmation of the
MoSys/Virage Logic deliverables schedule as well as the contents
of the deliverables.
5. Charge Order - Change orders are modifications required by TSMC
as a result of modifications to the original specification.
Written change orders will be acknowledged within one working
day upon receipt in writing or by email. MoSys/Virage Logic will
submit an initial estimate for the cost to complete the change
and any Schedule changes within 5 working days. MoSys/Virage
will also have the option to update the estimate within 15
working days of receipt of change order if any additional
discoveries are made that materially impact cost or schedule.
Please refer to the SOW number in all communications and purchase orders, as
applicable.
APPROVALS
The above statement of work and its attachments are understood and approved.
/s/ MIKE PAWLIK /s/ ADAM KABLANIAN /s/ FU-CHIEN HSU
- --------------------------- -------------------------- -----------------
TSMC, Ltd. Virage Logic Corporation MoSys, Inc.
Mike Pawlik Adam Kablanian Fu-Chien Hsu
- --------------------------- -------------------------- -----------------
Name Name Name
VP, Corp. Marketing President & CEO President
- --------------------------- -------------------------- -----------------
Title Title Title
-4-
<PAGE> 8
Attachment A - Pricing
PRICE
TSMC shall pay *** to Virage Logic for the work specific in the MOU and
the SOW. Virage and MoSys agrees that such amount shall be shared equally
between Virage and MoSys.
Please refer to Quote dated October 19, 1999 previously submitted for accurate
pricing and terms information. The final quote will be attached to this section
for completeness, once an order for the subject compilers is received by Virage
Logic.
PAYMENT SCHEDULE
The payment schedule is milestone based, with percentages due based on the work
completed for that milestone. The milestone numbering is consistent with the
product deliveries.
Milestone #0 - Project Start, Delivery of Final SOW - 30% of total order amount
Milestone #1 - Delivery of front end models - 25% of total order amount
Milestone #2 - Delivery of abstracts - 20% of total order amount
Milestone #3 - Final compiler version delivery - 25% of total order amount
PAYMENT TERMS
Payment terms are net 30.
<PAGE> 1
EXHIBIT 10.18
NETLOGIC/VIRAGE LOGIC MEMORANDUM OF
UNDERSTANDING FOR CAM COMPILERS
PURPOSE
To establish a proposed relationship between NetLogic Microsystems, Inc.
(NetLogic) and Virage Logic Corporation (Virage) to develop and market memory
Compilers that utilize NetLogic CAM technology in order to speed proliferation
of the NetLogic CAM technology and Virage memory compiler technology. It is the
intent of the parties to use this Memorandum of Understanding (MOU) to agree on
a basic framework for the proposed relationship.
It is further the intent of the parties that revenue generated based on
the Compilers will come from customers of Virage or NetLogic. The parties do not
intend to receive revenue from each other except for specific circumstances
indicated below.
Following the signature of this MOU, both NetLogic and Virage agree to
use their best efforts to conclude a Formal Contract within 60 days of the
signature of this MOU. Until such time as the Formal Contract is signed, none of
the terms of this MOU are binding on either party.
TERM
This MOU is effective when signed by both parties (Effective Date) and
expires when the parties enter into the Formal Contract or one year after the
Effective Date.
DEFINITIONS
A. "Embedded CAM Technology" shall mean (i) all NetLogic architecture,
circuitry, design, database information, and layout information including
documents, data, inventions (whether patentable or patented), and other
intellectual property rights related to CAMs in existence prior to, or developed
by NetLogic during, the term of this Agreement, and incorporated into the
Embedded Product, and (ii) corresponding Embedded Product-related technical
information, documents, data, inventions (whether patentable or patented), and
other intellectual property rights in existence as of the Effective Date or
developed by NetLogic during the term of this Agreement, which are necessary for
the utilization in integrated circuits of the technology described in (i).
B. "Subsidiary(ies)" of a party shall mean a corporation or other entity
of which such party directly or indirectly owns or controls more than fifty
percent (50%) of the voting stock. Corporations or other entities shall be
considered Subsidiaries only as long as such ownership or control exists. For
the purposes of this MOU, subsidiaries shall always exclude any of the
competitors of either party identified in Attachment A.
<PAGE> 2
C. "Third Party" shall mean any party other than NetLogic, Virage,
NetLogic Subsidiaries, and Virage Subsidiaries.
D. "Compiler" shall mean a software tool used by Virage, NetLogic or
customers to develop a Virtual Component or an Embedded Product for the customer
and consists of: (i) object code versions of a set of executable software
program(s), (ii) libraries containing design elements of memory cell arrays and
control logic, and (iii) all related documentation.
E. "Virtual Component" shall mean a component based on or incorporating
NetLogic's Embedded CAM Technology and generated for a customer using the
jointly developed Compiler, and for use by NetLogic's and/or Virage's customers
who have established a license agreement with NetLogic to use NetLogic's
Embedded CAM Technology.
F. "Instance" shall mean an output file of a specific "Virtual
Component" generated from the CAM Compiler and provided by Virage to a Third
Party Licensee according to the Third Party Licensee's specific requirement on a
per-design basis.
G. "Embedded Product" shall mean the semiconductor product that
incorporates the Virtual Component, and modifications thereof as agreed to by
NetLogic and a Third Party Licensee. The Embedded Product shall include the end
product of a Third Party Licensee including System Integrated Circuits (ICs),
including but not limited to a microprocessor, microcontroller, DSP product, or
system-on-a-chip (SOC) products, and Application Specific Integrated Circuits
(ASICs). The Embedded Product shall exclude all products designed as stand-alone
CAM products, including those designed to JEDEC-standard pin-out for stand-alone
CAM products. The Embedded Product shall also exclude all products that compete
with NetLogic products and Virage products existing or under development during
the term of this MOU and the Formal Contract.
H. "Third Party Licensee" shall mean a Third Party that has a written
license agreement with NetLogic to use the Virtual Component in an Embedded
Product provided by the Third Party.
I. "Licensed Foundry" shall mean a foundry that has established a
license with NetLogic to manufacture the Virtual Component in a particular
process for an Embedded Product provided by a Third Party.
J. "CAM Compiler" shall mean a Compiler as defined in D. above that
incorporates the NetLogic Embedded CAM Technology as defined in A. above as the
base memory technology to generate Instances for use in Embedded Products.
PRODUCT
NetLogic and Virage shall develop a binary and/or ternary CAM Compiler
based on NetLogic's CAM technology for a Licensed Foundry and process.
If a customer for the CAM Compiler has already been identified, the
high-level functional
NetLogic/Virage Logic Memorandum of Understanding Page 2
<PAGE> 3
description of the CAM Compiler (the "Specification') shall be mutually
developed by NetLogic, Virage and the customer. If a customer for the CAM
Compiler has not already been identified, then the Specification of the CAM
Compiler shall be mutually developed and mutually agreed to by NetLogic and
Virage before the start of the project. The schedule for the CAM Compiler
Specification shall be developed jointly by NetLogic and Virage.
NetLogic and Virage agree to use their best efforts to engineer the CAM
Compiler such that Virtual Components generated therefrom include BIST,
redundancy and/or fuse programming to increase yield and density. Virage shall
provide the plans for all DFT planned including but not limited to BIST and
diagnostics. Virage and NetLogic agree to work together to determine the amount
and type of DFT to be included in the CAM Compiler. NetLogic and Virage agree to
determine, before start of the project, whether to optimize the CAM Compiler to
one or mom of the following particular parameters: low power, speed, area or
density.
The date for the start of development of the first CAM Compiler is to be
determined and shall be after the parties obtain a first customer for the first
CAM Compiler. Additional CAM Compilers for additional foundries and/or processes
may be developed under the terms of the Formal Contract as required to meet
customer demand.
CUSTOMERS
Potential customers of NetLogic and Virage can be characterized as (1)
Customer Owned Tooling (COT) customers, and (2) semiconductor Integrated Device
Manufacturers (IDMs). A customer requires a CAM Instance for a specific Embedded
Product or a CAM Compiler for generating multiple Instances for corresponding
Embedded Products.
COT CUSTOMERS
The COT customer is the fabless IC or Systems Company that directly
contracts with a Licensed Foundry to have the Embedded Product fabricated. It is
anticipated that the COT customer will purchase the Instance for a specific
Virtual Component, or the CAM Compiler to generate Virtual Components, for its
Embedded Products that will be manufactured at a specific Licensed Foundry.
Although a relationship with Licensed Foundries will be important in order to
initially develop CAM Compilers for their processes and to market the results to
their customers, the parties shall not sell the CAM Compilers to the Licensed
foundries themselves.
IDM CUSTOMERS
The IDM customer is a vertically integrated semiconductor or systems
company that owns or operates their own wafer fabrication facility. It is
anticipated that the IDM customer will purchase the CAM Compiler to generate
Virtual Components for its Embedded Products that will be manufactured at its
own facility.
BUSINESS
NetLogic/Virage Logic Memorandum of Understanding Page 3
<PAGE> 4
NetLogic shall grant Virage a royalty-free, non-transferable,
non-exclusive license, for the duration of the MOU and Formal Contract, to use
NetLogic's Embedded CAM Technology only in connection with development and sale
of the CAM Compilers or Instances generated pursuant to the Formal Contract.
If any customer wishes to add their own proprietary technology to
NetLogic's Embedded CAM Technology, Virage may build products subject to
approval from NetLogic and agreement on suitable licensing fees to NetLogic from
the customer or Virage. Ownership of the resultant product shall be determined
on a case-by-case basis between NetLogic, Virage and the customer.
If any customer decides not to use NetLogic's Embedded CAM Technology,
Virage is free to build custom CAM components and compilers utilizing other CAM
technologies for the customer's internal and other use provided that the custom
CAM components and compilers are not offered for general commercial sale by
Virage, and do not use, and are not based on, any proprietary or confidential
NetLogic information (including know-how) disclosed to, or learned by, Virage
prior to, during, or subsequent to this agreement. Virage agrees to notify
NetLogic of their intent to enter into such an agreement. Virage also agrees to
provide NetLogic with a high level product description of the custom CAM
component. Under these circumstances, Virage and NetLogic agree to discuss the
product description and compiler to determine the best means for protecting each
parity's intellectual property and business interests.
Similarly, if a customer decides that they would like to use NetLogic's
Embedded CAM Technology, but would like to use its own or other compiler
technology to develop a Compiler or Instance, then NetLogic is free to provide
NetLogic's Embedded CAM Technology to the customer for the development of the
compiler for the customer's internal and other use provided that the resultant
compiler is not offered for general commercial sale by NetLogic, and does not
use, and is not based on, any proprietary or confidential Virage information
(including know-how) disclosed to, or learned by, NetLogic prior to, during, or
subsequent to this agreement. NetLogic agrees to notify Virage of their intent
to enter into such an agreement. NetLogic also agrees to provide Virage with a
high level product description of the custom Compiler or Instance. Under these
circumstances, Virage and NetLogic agree to discuss the product description and
compiler to determine the best means for protecting each party's intellectual
property and business interests.
The parties agree to determine, on a case-by-case basis, the
compensation and payment terms of such compensation to be provided to Virage by
NetLogic for NetLogic's own use of the developed CAM Compiler incorporating
Virage's Compiler Technology and NetLogic Embedded CAM Technology to develop a
NetLogic's stand-alone integrated circuit device.
NetLogic agrees to use its best efforts to license the use of its
Virtual Component to Third Parties, including those referred to NetLogic by
Virage, under reasonable terms and conditions that are demonstrably free of any
unfair discrimination. NetLogic reserves the right, however, to determine, in
its sole discretion whether to license the use of NetLogic's
NetLogic/Virage Logic Memorandum of Understanding Page 4
<PAGE> 5
Embedded CAM Technology to any IDM customer. NetLogic also reserves the right to
not license the use of NetLogic's Embedded CAM Technology to IDM customers if
the IDM customers do not agree to include a grant back clause to NetLogic in the
license agreement for rights to future inventions developed by the IDM customer.
For COT customers, Virage and NetLogic agree to continue discussions
during the next sixty (60) days, and to formalize in the Formal Contract, a
framework in which COT customers obtain rights to make, use, sell, or offer to
sell NetLogic's Embedded CAM Technology as part of the CAM compiler.
PRICING AND ALLOCATION OF SALES REVENUE
The parties agree that the overall pricing to the customer shall be
determined by a fair market value and shall be based on value to the customer. A
Pricing Model shall be established in the Formal Contract and shall be based on
the following five components:
(1) a Non-Recurring Engineering (NRE) fee based on the amount of
time and/or resources expended by the respective parties to
develop a subject compiler for the respective foundry and/or
process;
(2) a compiler or instance license fee based on the core values of
the respective intellectual properties, that can be in the form,
for example, of an initial license fee, royalties based on the
selling price of the wafers or Embedded Product, or both;
(3) a technology license fee paid by the CAM technology licensee
based on the core value of NetLogic's CAM intellectual property,
that can either be in the form, for example, of an initial
license fee, royalties based on the selling price of the wafer
or Embedded Product, or both;
(4) royalties based on a percentage of the Average Selling Price
(ASP) of the Embedded Product paid by COT foundry as part of a
library royalty program; and
(5) a maintenance fee for the Instance or the Compiler.
The overall sales revenue collected by the parties shall be allocated
between the parties based on the amount of contributions from each party, fair
sharing and compatibility with each party's license business model. Allocation
of sales revenue between the parties shall reflect the five components discussed
above and shall be further defined in the Formal Contract. The Formal Contract
shall also address the method for collecting sales tax and allocating tax
liability between the parties.
INSTANCES
For any potential CAM Instance customer (whether COT or IDM), the
parties anticipate that Virage will take the lead position in determining the
customer's needs and obtaining the order from the customer. In some situations,
however, NetLogic may make the initial customer contact, determine the
customer's needs and obtain the order from the customer.
The CAM Instance generated for the customer is to be targeted for a
specific process of a Licensed Foundry for a COT customer or a specific process
for an IDM customer. For the
NetLogic/Virage Logic Memorandum of Understanding Page 5
<PAGE> 6
sale of a CAM Instance, Virage will generate the Instance and provide necessary
customer support to incorporate the Instance (as a Virtual Component) into the
customer's Embedded Product, with the assistance from NetLogic if needed. Under
this assumption, Virage shall receive and retain substantially the entire NRE
fee and/or the instance license from its sale or licensing agreement with the
customer.
If NetLogic provides support for generation of an Instance, then
NetLogic and Virage agree to split the NRE fee and/or the instance license based
on the amount of time and/or resources expended by the respective parties in
accordance with the method established in the Formal Contract. Before the
parties begin any CAM Compiler development where Net Logic provides support for
the generation of Instances, the parties shall agree upon the resources to be
expended by each.
Virage shall provide the customer maintenance services if needed and
retain the entire maintenance fee. NetLogic shall independently establish a
technology license relationship with the customer for use of NetLogic's Embedded
CAM Technology in each Instance. NetLogic shall receive and retain all
compensation, including a license fee and a royalty, from its separate licensing
arrangement with the Customer consistent with its established license business
model.
COMPILERS
Any potential CAM Compiler customer may be approached by either company
to determine the need of the customer and determine what course of action is to
be taken to meet or exceed the customer's needs. The CAM Compiler can be
developed and characterized for the customer's specific process or a Licensed
Foundry's process specified by the customer.
NetLogic and Virage agree that Virage will assume the leadership role
and provide substantially all of the support to the customer to develop the CAM
Compiler. Under this assumption, Virage shall receive and retain substantially
the entire NRE fee and/or the compiler license for development of the CAM
Compiler. If NetLogic provides support to develop the CAM Compiler, then
NetLogic and Virage agree to split the NRE fee and/or the compiler license fee
based on the amount of time and/or resources expended by the respective parties
in accordance with the method established in the Formal Contract. Before the
parties begin any CAM Compiler development where Net Logic provides support for
the development of the CAM Compiler, the parties shall agree upon the resources
to be expended by each.
Virage may also charge the customer a maintenance fee. The parties
anticipate that Virage will provide most of the maintenance services for the
Compiler and shall retain the entire maintenance fee. If, however, NetLogic
provides maintenance services for the Compiler, then Virage and NetLogic shall
split the maintenance fee based on the amount of time and/or resources expended
by the respective parties in accordance with the method established in the
Formal Contact. NetLogic shall independently establish a technology license
relationship with the customer for use of NetLogic's Embedded CAM Technology in
each Compiler. NetLogic shall receive and retain all compensation, including a
license fee.
NetLogic/Virage Logic Memorandum of Understanding Page 6
<PAGE> 7
and a royalty, from its separate licensing arrangement with the Customer
consistent with its established license business model.
INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION
Neither NetLogic nor Virage may use each other's technology for any
purpose other than that identified in this agreement. In all cases, the
confidentiality of NetLogic and Virage technology must be protected. Both
parties agree to execute a mutual non-disclosure agreement, which shall become
a part of this agreement and the Formal Contract.
Additionally, Virage and NetLogic agree to cross-license each other's
relevant technology and patents required for the development, sale, and use of
the developed CAM Compiler. Also, NetLogic and Virage agree not to develop
other compilers that compete against the CAM Compiler developed under this
agreement. NetLogic and Virage also agree not to engage or sell products to the
other companies' competitors. Each company is to provide a list of competitors,
and that list is to be attached to this document as Attachment A. Attachment A
may be updated from time-to-time by either party and shall be incorporated into
the Formal Contract.
NetLogic and Virage anticipate that there will be intellectual property
developed by the parties during the course of development of the CAM Compiler
under this agreement and the subsequent Formal Contract. The parties agree that
the ownership of any intellectual property developed during the course of the
development of the CAM Compiler shall be as follows:
a) Any intellectual property developed independently by either party
which is not based on the other party's intellectual property shall
be the sole and exclusive property of the developing party and the
non-developing party shall not acquire any ownership interest in it.
However, the developing party shall grant the non-developing party a
non-transferable, non-exclusive, royalty-free license to use the
intellectual property only in connection with the products developed
pursuant to this agreement or the subsequent Formal Contract. All
other license grants shall be at the sole discretion of the
developing party.
b) Any intellectual property developed independently by either party
which is based on the other party's intellectual property shall be
the sole and exclusive property of the developing party and the
non-developing party shall not acquire any ownership interest in
it. However, the developing party shall grant the non-developing
party a perpetual non-transferable, non-exclusive, royalty-free
license to use the intellectual property to develop products or
services provided by the non-developing party, and to make or sell
products that incorporate the intellectual property.
c) Any intellectual property jointly developed by both parties shall
be jointly owned by both parties. Neither party shall license,
assign, or transfer or grant any rights in or to the jointly
developed intellectual property to any Third Party without the
prior written consent of the other party. Each party agrees that it
will not unreasonably withhold such consent. The parties shall
define in the Formal Contract the method of allocation between the
parties of any revenue derived from the jointly developed
intellectual property.
NETLOGIC/VIRAGE MEMORANDUM OF UNDERSTANDING PAGE 7
<PAGE> 8
NetLogic and Virage agree to cooperate in joint selling activities to
locate an initial source of NRE fees to help fund development of the CAM
Compiler. NetLogic and Virage agree to cooperate on development of a
verification vehicle for the Virtual Component, and a silicon validation report
with the first customer and Licensed Foundry. NetLogic and Virage agree that
Virage shall assume the leadership role in developing the CAM Compiler with the
Licensed Foundry, and that NetLogic shall provide specific product support for
the Virtual Component on an as needed basis. If possible, the first CAM Compiler
will be developed with common design rules to allow foundry reuse. NetLogic and
Virage shall migrate the developed CAM Compiler to additional foundries based on
customer demand.
MARKETING
NetLogic and Virage agree to perform joint marketing activities to
promote the relationship established by this Agreement. The activities shall
include, but not be limited to, the following:
a) A joint press release that the parties are working together to
develop a CAM Compiler the includes NetLogic's Embedded CAM
Technology, the joint press release to be published after
signature of this MOU and approval of the joint press release by
both parties,
b) Joint sales activities to establish the first customer, that
will fund the NRE of the first Compiler, and also subsequent
customers to proliferate the CAM Compiler products,
c) A jointly authored white paper discussing the NetLogic's CAM
technology and the Virage Compiler technology, and the
advantages of both in one product,
d) Quarterly technology reviews to inform each party of subsequent
technology developments that could lead to the modification of
the product established under this agreement, or to additional
products jointly developed by the parties,
e) Advertisement of the Compiler in the list of off-the-shelf
components by both NetLogic and Virage, including published
datasheets to be used by both companies in the selling of the
Compiler.
NETLOGIC MICROSYSTEMS, INC. VIRAGE LOGIC CORPORATION
/s/ AL KWOK /s/ ADAM KABLANIAN
- ------------------------------------ ----------------------------------
NAME: Al Kwok NAME: Adam Kablanian
TITLE: VP of Operations and Business TITLE: President & CEO
Development
DATE: DATE:
NetLogic/Virage Logic Memorandum of Understanding Page 7
<PAGE> 1
EXHIBIT 10.19
File No _____________________
INDUSTRIAL SPACE LEASE
(MULTI-TENANT NET)
THIS LEASE, dated March 17, 1999 for reference purposes only, is
made by and between RENCO BAYSIDE INVESTORS, a California Limited Partnership
("Landlord"), and Virage Logic Corp., a California Corporation ("Tenant"), to be
effective and binding upon the parties as of the date the last of the designated
signatories to this Lease shall have executed this Lease (the "Effective Date of
this Lease").
ARTICLE 1
REFERENCES
1.1 REFERENCES: All references in this Lease (subject to any further
clarifications contained in this Lease) to the following terms shall have the
following meaning or refer to the respective address, person, date, time period,
amount, percentage, calendar year or fiscal year as below set forth:
A. Tenant's Address for Notices: 46501 Landina Parkway
Fremont, California 94538
B. Tenant's Representative: Mr. Adam Kablanian
Phone Number: 510.360.8000
C. Landlord's Address for Notices: 285 Oakmead Parkway
Sunnyvale, California
94086
D. Landlord's Representative: William Neidie
Phone Number: 408-730-5500
E. Intended Commencement Date: July 1, 1999
F. Intended Term: Three Years and three
months
G. Lease Expiration Date: September 30, 2002
H. Tenant's Punchlist Period: One business day from
delivery of Premises to
Tenant
I. First Month's Prepaid Rent: $26,219.70
<PAGE> 2
J. Last Month's Prepaid Reni: None
K. Tenant's Security Deposit: $58,490.10
L. Late Charge Amount: 10% of the late amount(s)
M. Tenant's Required Liability
Coverage: $3,000,000.00 single limit
N. Tenant's Number of Parking Spaces: Sixty Seven (67)
O. Brokers: Willis & Company
P. Project or Property: That certain real property situated in
the City of Fremont, County of Alameda State of California, as presently
improved with one (1) building, which real property is shown on the Site Plan
attached hereto as Exhibit "A" and is commonly known as or otherwise described
as follows:
Renco 4 I
4650146515 Landing Parkway
Fremont, CA 94538-6421
Q. Building: That certain Building within the Project in which
the Leased Premises are located, which Building is shown outlined in red on
Exhibit "A" hereto.
R. Common Areas: The "Common Areas" shall mean those areas
within the Project which are located outside the buildings and which are
provided and designated by Landlord from time to time for general use by tenants
of the Project including driveways, pedestrian walkways, parking spaces,
landscaped areas and enclosed trash disposal areas.
S. Leased Premises: That certain space which is a portion of the
Building, which space is shown outlined in red on the Floor Plan attached hereto
as Exhibit "B" consisting of approximately 20,169 square feet of gross leasable
area and, for purposes of this Lease, agreed to contain said number of square
feet. The Leased Premises are commonly known as or otherwise described as
follows:
46501 Landing Parkway
Fremont, CA
T. Base Monthly Rent: The term "Base Monthly Rent" shall mean
the following:
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<PAGE> 3
$26,219.70 shall be due and payable on or before the first day of the 1st month
of the lease term, with a like sum to be due and payable on or before the first
day of each month thereafter, through and including the 12th month of the lease
term.
$27,228.15 shall be due and payable on or before the first day of the 13th month
of the lease term, with a like sum to be due and payable on or before the first
day of each month thereafter, through and including the 24th month of the lease
term.
$28,236.60 shall be due and payable on or before the first day of the 25th month
of the lease term, with a like sum to be due and payable on or before the first
day of each month thereafter, through and including the 36th month of the lease
term.
$29,245.05 shall be due and payable on or before the first day of the 37th month
of the lease term, with a like sum to be due and payable on or before the first
day of each month thereafter, through and including the 39th month of the lease
term.
U. Permitted Use: The term "Permitted Use" shall mean the
following:
Office, research and development, assembly, storage and sale of Tenant's
products.
V. Exhibits: The term "Exhibits" shall mean the Exhibits to this
Lease which are described as follows:
Exhibit "A" - Site Plan showing the Project and delineating the
Building in which the Leased Premises are located.
Exhibit "B" - Floor Plan outlining the Leased Premises.
Exhibit "C" - Acceptance Agreement
Exhibit "D" - Tenant Improvements
W. Addenda: The term "Addenda" shall mean the Addendum (or
Addenda) to this Lease which is (or are) described as follows: none.
ARTICLE 2
LEASED PREMISES, TERM AND POSSESSION
2.1 DEMISE OF LEASED PREMISES: Landlord hereby leases to Tenant and
Tenant hereby leases from Landlord for Tenant's own use in the conduct of
Tenant's business and not for purposes of speculating in real estate, for the
Lease Term and upon the terms and subject to the conditions of this Lease, that
certain interior space described in Article 1(s) as the Leased Premises,
reserving and excepting to Landlord the exclusive right to all profits to be
derived from any assignments or sublettings by Tenant during the Lease Term by
reason of the appreciation in the fair market rental value of the Leased
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<PAGE> 4
Premises. Landlord further reserves the right to install, maintain, use and
replace ducts, wires, conduits and pipes leading through the Leased Premises in
locations which will not materially interfere with Tenant's use of the Leased
Premises. Tenant's lease of the Leased Premises, together with the appurtenant
right to use the Common Areas as described in Article 2.2 below, shall be
conditioned upon and be subject to the continuing compliance by Tenant with (i)
all the terms and conditions of the Lease, (ii) all Laws governing the use of
the Leased Premises and the Project, (iii) all Private Restrictions, easements
and other matters now of public record respecting the use of the Leased Premises
and the Project, and (iv) all reasonable rules and regulations from time to time
established by Landlord.
2.2 RIGHT TO USE COMMON AREAS: As an appurtenant right to Tenant's right
to the use of the Leased Premises, Tenant shall have the non-exclusive right to
use the Common Areas in conjunction with other tenants of the Project and their
invitees, subject to the limitations on such use as set forth in Article 4, and
solely for the purposes for which they were designed and intended. Tenant's
right to use the Common Areas shall terminate concurrently with any termination
of this Lease.
2.3 LEASE COMMENCEMENT DATE AND LEASE TERM: The term of this Lease shall
begin, and the Lease Commencement Date shall be deemed to have occurred, on the
Intended Commencement Date (as set forth in Article 1) unless either (i)
Landlord is unable to deliver possession of the Leased Premises to Tenant on the
Intended Commencement Date, in which case the Lease Commencement Date shall be
as determined pursuant to Article 2.4 below or (ii) Tenant enters into
possession of the Leased Premises prior to the Intended Commencement Date, in
which case the Lease Commencement Date shall be as determined pursuant to
Article 2.7 below (the "Lease Commencement Date") . The term of this Lease shall
end on the Lease Expiration Date (as set forth in Article 1), irrespective of
whatever date the Lease Commencement Date is determined to be pursuant to the
foregoing sentence. The Lease Term shall be that period of time commencing on
the Lease Commencement Date and ending on the Lease Expiration Date (the "Lease
Term").
2.4 DELIVERY OF POSSESSION: Landlord shall deliver to Tenant possession
of the Leased Premises on or before the Intended Commencement Date (as set forth
in Article 1) in their presently existing condition, broom clean, unless
Landlord shall have agreed, as a condition to Tenant's obligation to accept
possession of the Leased Premises, pursuant to an Exhibit or Addenda attached to
and made a part of this Lease to modify existing interior improvements or to
make, construct and/or install additional specified improvements within the
Leased Premises, in which case Landlord shall deliver to Tenant possession of
the Leased Premises on or before the Intended Commencement Date as so modified
and/or improved. If Landlord is unable to so deliver possession of the Leased
Premises to Tenant on or before the Intended Commencement Date, for whatever
reason, Landlord shall not be in default under this Lease, nor shall this
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<PAGE> 5
Lease be void, voidable or cancelable by Tenant until the lapse of one hundred
twenty days after the Intended Commencement Date (the "delivery grace period");
however, the Lease Commencement Date shall not be deemed to have occurred until
such date as Landlord notifies Tenant that the Leased Premises are Ready for
Occupancy. Additionally, the delivery grace period above set forth shall be
extended for such number of days as Landlord may be delayed in delivering
possession of the Leased Premises to Tenant by reason of Force Majeure or the
actions of Tenant. If Landlord is unable to deliver possession of the Leased
Premises to Tenant within the described delivery grace period (including any
extensions thereof by reason of Force Majeure or the actions of Tenant), then
Tenant's sole remedy shall be to cancel and terminate this Lease, and in no
event shall Landlord be liable to Tenant for such delay. Tenant may not cancel
this Lease at any time after the date Landlord notifies Tenant the Leased
Premises are Ready for Occupancy.
2.5 ACCEPTANCE OF POSSESSION: Tenant acknowledges that it has inspected
the Leased Premises and is willing to accept them in their existing condition,
broom clean, unless Landlord shall have agreed, as a condition to Tenant's
obligation to accept possession of the Leased Premises, pursuant to an Exhibit
or Addenda attached to and made a part of this Lease to modify existing interior
improvements or to make, construct and/or install additional specified
improvements within the Leased Premises, in which case Tenant agrees to accept
possession of the Leased Premises when Landlord has substantially completed such
modifications or improvements and the Leased Premises are Ready for Occupancy.
If Landlord shall have so modified existing improvements or constructed
additional improvements within the Leased Premises for Tenant, Tenant shall,
within Tenant's Punchlist Period (as set forth in Article 1) which shall
commence on the date that Landlord notifies Tenant that the Leased Premises are
Ready for Occupancy, submit to Landlord a signed copy of the Acceptance
Agreement attached hereto as Exhibit "D" together with a punchlist of all
incomplete and/or improper work performed by Landlord. Upon the expiration of
Tenant's Punchlist Period, Tenant shall be conclusively deemed to have accepted
the Leased Premises in their then-existing condition as so delivered by Landlord
to Tenant, except as to those items reasonably set forth in the punchlist
submitted to Landlord prior to the expiration of said period. Landlord agrees to
correct all items reasonably set forth in Tenant's punchlist, provided that such
punchlist was submitted to Landlord within Tenant's Punchlist Period.
Additionally, Landlord agrees to place in good working order all existing
plumbing, lighting, heating, ventilating and air conditioning systems within the
Leased Premises and all man doors and roll-up truck doors serving the Leased
Premises to the extent that such systems and/or items are not in good operating
condition as of the date Tenant accepts possession of the Leased Premises;
provided that, and only if, Tenant notifies Landlord in writing of such failures
or deficiencies within five business days from the date Tenant so accepts
possession of the Leased Premises.
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<PAGE> 6
2.6 SURRENDER OF POSSESSION: Immediately prior to the expiration or upon
the sooner termination of this Lease, Tenant shall remove all of Tenant's signs
from the exterior of the Building and shall remove all of Tenant's equipment,
trade fixtures, furniture, supplies, wall decorations and other personal
property from the Leased Premises, and shall vacate and surrender the Leased
Premises to Landlord in the same condition, broom clean, as existed at the Lease
Commencement Date. Landlord, at Tenant's expense, shall retain a mechanical
contractor to service all heating, ventilation and air conditioning equipment,
and Tenant shall pay the cost to restore (or replace as required), said
equipment to good working order. Tenant shall pay the cost of restoring or
replacing all trees, shrubs, plants, lawn and ground cover, and repair (or
replace as required) all paved surfaces of the Property, and otherwise satisfy
all requirements to repair any damage or wear to the Leased Premises, Building,
Common Areas, Outside Areas, and/or Property. Tenant shall repair all damage to
the Leased Premises caused by Tenant or by Tenant's removal of Tenant's property
and all damage to the exterior of the Building caused by Tenant's removal of
Tenant's signs. Tenant shall patch and refinish, to Landlord's reasonable
satisfaction, all penetrations made by Tenant or its employees to the floor,
walls or ceiling of the Leased Premises, whether such penetrations were made
with Landlord's approval or not. Tenant shall clean, repair or replace all
stained or damaged ceiling tiles, wall coverings and clean or replace as may be
required floor coverings to the reasonable satisfaction of Landlord. Tenant
shall replace all burned out light bulbs and damaged light lenses, and clean and
repaint all painted walls. Tenant shall repair all damage caused by Tenant to
the exterior surface of the Building and the paved surfaces of the outside areas
adjoining the Leased Premises and, where necessary, replace or resurface same.
Additionally, Tenant shall, prior to the expiration or sooner termination of
this Lease, remove any improvements constructed or installed by Tenant which
Landlord requests be so removed by Tenant and repair all damage caused by such
removal. If the Leased Premises are not, surrendered to Landlord in the
condition required by this Article at the expiration or sooner termination of
this Lease. Landlord may, at Tenant's expense, so remove Tenant's signs,
property and/or improvements not so removed and make such repairs and
replacements not so made or hire, at Tenant's expense, independent contractors
to perform such work. Tenant shall be liable to Landlord for all coats incurred
by Landlord in returning the Leased Premises to the required condition, plus
interest on all costs incurred from the date paid by Landlord at the then
maximum rate of interest not prohibited by Law until paid, payable by Tenant to
Landlord within ten days after receipt of a statement therefore from Landlord,
and Tenant shall be deemed to have impermissibly held over until such time as
such required work is completed, and Tenant shall pay Base Monthly Rent and
Additional Rent in accordance with the terms of Section 13.2 (Holding Over)
until such work is completed. Tenant shall indemnify Landlord against loss or
liability resulting from delay by Tenant in so surrendering the Leased Premises,
including, without limitation, any claims made by any succeeding tenant or any
losses to Landlord due to lost opportunities to lease to succeeding tenants.
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<PAGE> 7
2.7 PRIOR OCCUPANCY: Landlord and Tenant acknowledge that Tenant will be
in possession of the Premises, prior to the Lease Commencement Date, under the
terms of a sublease with a prior tenant of Landlord. As such, Landlord and
Tenant agree that the Lease Commencement Date shall be the Intended Commencement
Date.
ARTICLE 3
RENT, LATE CHARGES AND SECURITY DEPOSITS
3.1 BASE MONTHLY RENT: Commencing on the Lease Commencement Dated (as
determined pursuant Article 2.3 above) and continuing throughout the Lease Term,
Tenant shall pay to Landlord, without prior demand therefore, in advance on the
first day of each calendar month, as base monthly rent, the amount set forth as
"Base Monthly Rent" in Article 1 (the Base Monthly Rent").
3.2 ADDITIONAL RENT: Commencing on the Lease Commencement Date (as
determined pursuant to Article 2.3 above) and continuing throughout the Lease
Term, in addition to the Base Monthly Rent, Tenant shall pay to Landlord as
additional rent (the "Additional Rent") the following amounts:
A. Tenant's Proportionate Share of all Building Operating
Expenses (as defined in Article 13). Payment shall be made by whichever of the
following methods (or combination of methods) is (are) from time to time
designated by Landlord:
(1) Landlord may bill to Tenant, on a periodic basis not
more frequently than monthly, Tenant's Proportionate Share of such expenses (or
group of expenses) as paid or incurred by Landlord, and Tenant shall pay such
share of such expenses within ten days after receipt of a written bill therefore
from Landlord; and/or
(2) Landlord may deliver to Tenant Landlord's reasonable
estimate of any given expense (or group of expenses, such as Landlord's
Insurance Costs or Real Property Taxes) which it anticipates will be paid or
incurred for the ensuing calendar or fiscal year, as Landlord may determine, and
Tenant shall pay its Proportionate Share of such expenses for such year in equal
monthly installments during such year with the installments of Base Monthly
Rent. Landlord reserves the right to change from time to time the method of
billing Tenant its Proportionate Share of such expenses or the periodic basis on
which such expenses are billed.
B. Landlord's share of the consideration received by Tenant upon
certain assignments and sublettings as required by Article 7;
C. Any legal fees and coats that Tenant is obligated to pay or
reimburse to Landlord pursuant to Article 13; and
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<PAGE> 8
D. Any other charges or reimbursements due Landlord from Tenant
pursuant to the terms of this Lease.
3.3 YEAR-END ADJUSTMENTS: If Landlord shall have elected to charge
Tenant its Proportionate Share of the Building Operating Expenses (or any group
of such expenses) on an estimated basis in accordance with the provisions of
Article 3.2A(2) above, Landlord shall furnish to Tenant within three months
following the end of the applicable calendar or fiscal year, as the case may be,
a statement setting forth (i) the amount of such expenses paid or incurred
during the just ended calendar or fiscal year, as appropriate, and (ii) Tenant's
Proportionate Share of such expenses for such period. If Tenant shall have paid
more than its Proportionate Share of such expenses for the stated period,
Landlord shall, at its election, either (i) credit the amount of such
overpayment toward the next ensuing payment or payments of Additional Rent that
would otherwise be due or (ii) refund in cash to Tenant the amount of such
overpayment. If such year-end statement shall show that Tenant did not pay its
Proportionate Share of any such expenses in full, then Tenant shall pay to
Landlord the amount of such underpayment within ten days from Landlord's billing
of same to Tenant. The provisions of this Article shall survive the expiration
or sooner termination of this Lease.
3.4 LATE CHARGE AND INTEREST ON RENT IN DEFAULT: Tenant acknowledges
that the late payment by Tenant of any monthly installment of Base Monthly Rent
or any Additional Rent will cause Landlord to incur certain coats and expenses
not contemplated under this Lease, the exact amounts of which are extremely
difficult or impractical to fix. Such costs and expenses will include, without
limitation, administration and collection costs and processing and accounting
expenses. Therefore, if any installment of Base Monthly Rent is not received by
Landlord from Tenant within six calendar days after the same becomes due, Tenant
shall immediately pay to Landlord a late charge in an amount equal to the amount
set forth in Article 1 as the "Late Charge Amount," and if any Additional Rent
is not received by Landlord within six calendar days after same becomes due,
Tenant shall immediately pay to Landlord a late charge in an amount equal to ten
percent of the Additional Rent not so paid. Landlord and Tenant agree that this
late charge represents a reasonable estimate of such costs and expenses and is
fair compensation to Landlord for its loss suffered by reason of Tenant's
failure to make timely payment. In no event shall this provision for a late
charge be deemed to grant to Tenant a grace period or extension of time within
which to pay any rental installment or prevent Landlord from exercising any
right or remedy available to Landlord upon Tenant's failure to pay each rental
installment due under this Lease when due, including the right to terminate this
Lease. If any rent remains delinquent for a period in excess of six calendar
days, then, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not so paid from said sixth day at the then maximum
rate of interest not prohibited by Law until paid.
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3.5 PAYMENT OF RENT: All rent shall be paid in lawful money of the
United States, without any abatement, deduction or offset for any reason
whatsoever, to Landlord at such address as Landlord may designate from time to
time. Tenant's obligation to pay Base Monthly Rent and all Additional Rent shall
be prorated at the commencement and expiration of the Lease Term. The failure by
Tenant to pay any Additional Rent as required pursuant to this Lease when due
shall be treated the same as a failure by Tenant to pay Base Monthly Rent when
due, and Landlord shall have the same rights and remedies against Tenant as
Landlord would have if Tenant failed to pay the Base Monthly Rent when due.
3.6 PREPAID RENT: Upon signing this Lease, Tenant shall immediately pay
to Landlord the amount set forth in Article 1 as "First Month's Prepaid Rent" as
prepayment of rent for credit against the first installment(s) of Base Monthly
Rent due hereunder. Additionally, Tenant has paid to Landlord the amount set
forth in Article 1 as "Last Month's Prepaid Rent" as prepayment of rent for
credit against the last installment(s) of Base Monthly Rent due hereunder,
subject, however, to the provisions of Article 3.7 below.
3.7 SECURITY DEPOSIT: Upon signing this Lease, Tenant shall immediately
deposit with Landlord the amount set forth in Article 1 as the "Security
Deposit" as security for the performance by Tenant of the terms of this Lease to
be performed by Tenant, and not as prepayment of rent. Landlord may apply such
portion or portions of the Security Deposit as are reasonably necessary for the
following purposes: (i) to remedy any default by Tenant in the payment of Base
Monthly Rent or Additional Rest or a late charge or interest on defaulted rent;
(ii) to repair damage to the Leased Premises caused by Tenant; (iii) to clean
and repair the Leased Premises following their surrender to Landlord if not
surrendered in the condition required pursuant to the provisions of Article 2;
and (iv) to remedy any other default of Tenant to the extent permitted by Law
including, without limitation, paying in full on Tenant's behalf any sums
claimed by materialmen or contractors of Tenant to be owing to them by Tenant
for work done or improvements made at Tenant's request to the Leased Premises.
In this regard, Tenant hereby waives any restriction on the uses to which the
Security Deposit may be applied as contained in Section 1950.7(c) of the
California Civil Code and/or any successor statute. In the event the Security
Deposit or any portion thereof is so used, Tenant shall pay to Landlord,
promptly upon demand, an amount in cash sufficient to restore the Security
Deposit to the full original sum. If Tenant fails to promptly restore the
Security Deposit and if Tenant shall have paid to Landlord any sums as "Last
Month's Prepaid Rent," Landlord may, in addition to any other remedy Landlord
may have under this Lease, reduce the amount of Tenant's Last Month's Prepaid
Rent by transferring all or portions of such Last Month's Prepaid Rent to
Tenant's Security Deposit until such Security Deposit is restored to the amount
set forth in Article 1. Landlord shall not be deemed a trustee of the Security
Deposit. Landlord may use the Security Deposit in Landlord's ordinary business
and shall not be required to segregate it
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from its general accounts. Tenant shall not be entitled to any interest on the
Security Deposit. If Landlord transfers the Building during the Lease Term,
Landlord may pay the Security Deposit to any subsequent owner in conformity with
the provisions of Section 1950.7 of the California Civil Code and/or any
successor statute, in which event the transferring landlord shall be released
from all liability for the return of the Security Deposit. Tenant specifically
grants to Landlord (and hereby waives the provisions of California Civil Code
Section 1950.7 to the contrary) a period of sixty days following a surrender of
the Leased Premises by Tenant to Landlord within which to return the Security
Deposit (less permitted deductions) to Tenant, it being agreed between Landlord
and Tenant that sixty days is a reasonable period of time within which to
inspect the Leased Premises, make required repairs, receive and verify workmen's
billings therefore, and prepare a final accounting with respect to such deposit.
In no event shall the Security Deposit, or any portion thereof, be considered
prepaid rent.
In the event that Tenant shall not have been in default of any of the terms and
conditions of this Lease during the first twelve (12) months of the Lease Term,
Landlord shall return the sum of $29,245.05 of Tenant's Security Deposit such
that commencing upon the second year of the Lease Term, Tenant's Security
Deposit shall be the sum of $29,245.05.
ARTICLE 4
USE OF LEASED PREMISES AND COMMON AREAS
4.1 PERMITTED USE: Tenant shall be entitled to use the Leased Premises
solely for the "Permitted Use" as set forth in Article 1 and for no other
purpose whatsoever. Tenant shall continuously and without interruption use the
Leased Premises for such purpose for the entire Lease Term. Any discontinuance
of such use for a period of thirty consecutive calendar days shall be, at
Landlord's election, a default by Tenant under the terms of this Lease. Subject
to the limitations contained in this Article 4, Tenant shall have the right to
use the Common Areas, in conjunction with other tenants and during normal
business hours, solely for the purposes for which they were intended and for no
other purposes whatsoever. Tenant shall not have the right to use the exterior
surfaces of exterior walls, the area beneath the floor or the area above the
ceiling of the Leased Premises.
4.2 GENERAL LIMITATIONS ON USE: Tenant shall not do or permit anything
to be done in or about the Leased Premises, the Building, the Common Areas or
the Project which does or could (i) interfere with the rights of other tenants
or occupants of the Building or the Project, (ii) jeopardize the structural
integrity of the Building or (iii) cause damage to any part of the Building or
the Project. Tenant shall not operate any equipment within the Leased Premises
which does or could (i) injure, vibrate or shake the Leased Premises or the
Building, (ii) damage, overload, corrode, or impair the efficient operation of
any electrical, plumbing, sewer, heating, ventilating or air conditioning
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systems within or servicing the Leased Premises or the Building or (iii) damage
or impair the efficient operation of the sprinkler system (if any) within or
servicing the Leased Premises or the Building. Tenant shall not install any
equipment or antennas on or make any penetrations of the exterior walls or roof
of the Building. Tenant shall not affix any equipment to or make any
penetrations or cuts in the floor, ceiling or walls of the Leased Premises.
Tenant shall not place any loads upon the floors, walls, ceiling or roof systems
which could endanger the structural integrity of the Building or damage its
floors, foundations or supporting structural components. Tenant shall not place
any explosive, flammable or harmful fluids, including Hazardous Materials, or
other waste materials in the drainage systems of the Building or the Project.
Tenant shall not drain or discharge any fluids in the landscaped areas or across
the paved areas of the Project. Tenant shall not use any areas located outside
the Leased Premises for the storage of its materials, supplies, inventory or
equipment, and all such materials, supplies, inventory and equipment shall at
all times be stored within the Leased Premises. Tenant shall not commit nor
permit to be committed any waste in or about the Leased Premises, the Common
Areas or the Project.
4.3 NOISE AND EMISSIONS: All noise generated by Tenant in its use of the
Leased Premises shall be confined or muffled so that it does not interfere with
the businesses of or annoy other tenants of the Building or the Project. All
dust, fumes, odors and other emissions generated by Tenant's use of the Leased
Premises shall be sufficiently dissipated in accordance with sound environmental
practices and exhausted from the Leased Premises in such a manner so as not to
interfere with the businesses of or annoy other tenants of the Building or the
Project, or cause any damage to the Leased Premises or the Building or any
component part thereof or the property of other tenants of the Building or the
Project.
4.4 TRASH DISPOSAL: Tenant shall provide trash and garbage disposal
facilities inside the Leased Premises for all of its trash, garbage and waste
requirements and shall cause such trash, garbage and waste to be regularly
removed from the Leased Premises at Tenant's sole cost. Tenant shall keep all
areas outside the Leased Premises and all fire corridors and mechanical
equipment rooms in or about the Leased Premises free and clear of all trash,
garbage, waste and boxes containing same at all times.
4.5 PARKING: Tenant is allocated, and Tenant and its employees and
invitees shall have the non-exclusive right to use, not more than the number of
parking spaces set forth in Article 1 as "Tenant's Number of Parking Spaces."
Tenant shall not, at any time, use or permit its employees or invitees to use
more parking spaces than the number so allocated to Tenant. Tenant shall not
have the exclusive right to use any specific parking space, and Landlord
reserves the right to designate from time to time the location of the parking
spaces allocated for Tenant's use. In the event Landlord elects or is required
by any Law to limit or control parking within the Project, whether by validation
of parking tickets or any other method, Tenant agrees to participate in such
validation or other
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program as reasonably established by Landlord. Tenant shall not, at any time,
park or permit to be parked any trucks or vehicles adjacent to entryways or
loading areas within the Project so as to interfere in any way with the use of
such areas, nor shall Tenant, at any time, park or permit the parking of
Tenant's trucks or other vehicles, or the trucks and vehicles of Tenant's
suppliers or others, in any portion of the Common Areas not designated by
Landlord for such use by Tenant. Tenant shall not, at any time, park or permit
to be parked any recreational vehicles, inoperative vehicles or equipment on any
portion of the common parking area or other Common Areas of the Project. Tenant
agrees to assume responsibility for compliance by its employees and invitees
with the parking provisions contained herein. If Tenant or its employees park
any vehicle within the Project in violation of these provisions, then Landlord
may charge Tenant, as Additional Rent, and Tenant agrees to pay, as Additional
Rent, Fifty Dollars per day for each day or partial day that each such vehicle
is illegally parked, or parked in any area other than that designated. Tenant
hereby authorizes Landlord, at Tenant's sole expense, to tow away from the
Project and store until redeemed by its owner any vehicle belonging to Tenant or
Tenant's employees parked in violation of these provisions.
4.6 SIGNS: Tenant shall not place or install on or within any portion of
the Leased Premises, the Building, the Common Areas or the Project any sign
(other than a business identification sign first approved by Landlord in
accordance with this Article), advertisements, banners, placards or pictures
which are visible from the exterior of the Leased Premises. Tenant shall not
place or install on or within any portion of the Leased Premises, the Building,
the Common Areas or the Project any business identification sign which is
visible from the exterior of the Leased Premises until Landlord shall have first
approved in writing the location, size, content, design, method of attachment
and material to be used in the making of such sign. Any signs, once approved by
Landlord, shall be installed only in strict compliance with Landlord's approval,
at Tenant's expense, using a person first approved by Landlord to install same.
Landlord may remove any signs (not first approved in writing by Landlord),
advertisements, banners, placards or pictures so placed by Tenant on or within
the Leased Premises, the Building, the Common Areas or the Project and charge to
Tenant the cost of such removal, together with any costs incurred by Landlord to
repair any damage caused thereby, including any cost incurred to restore the
surface upon which such sign was so affixed to its original condition. Tenant
shall remove any such signs, repair any damage caused thereby, and restore the
surface upon which the sign was affixed to its original condition, all to
Landlord's reasonable satisfaction, upon the termination of this Lease.
4.7 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS: Tenant shall not use
or permit any person to use the Leased Premises in any manner which violates any
Laws or Private Restrictions. Tenant shall abide by and shall promptly observe
and comply with, at its sole cost and expense, all Laws and Private Restrictions
respecting the use and occupancy of the Leased Premises, the Building, the
Common Areas or the Project and shall defend with competent counsel, indemnify
and hold
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Landlord harmless from arty claims, damages or liability resulting from Tenant's
failure to do so.
4.8 COMPLIANCE WITH INSURANCE REQUIREMENTS: With respect to any
insurance policies carried by Landlord in accordance with the provisions of this
Lease, Tenant shall not conduct (nor permit any other person to conduct) any
activities within the Leased Premises, or store, keep or use anything within the
Leased Premises which (i) is prohibited under the terms of any of such policies,
(ii) could result in the termination of the coverage afforded under any of such
policies, (iii) could give to the insurance carrier the right to cancel any of
such policies, or (iv) could cause an increase in the rates (over standard
rates) charged for the coverage afforded under any of such policies. Tenant
shall comply with all requirements of any insurance company, insurance
underwriter, or Board of Fire Underwriters which are necessary to maintain, at
standard rates, the insurance coverages carried by either Landlord or Tenant
pursuant to this Lease.
4.9 LANDLORD'S RIGHT TO ENTER: Landlord and its agents shall have the
right to enter the Leased Premises during normal business hours and subject to
Tenant's reasonable security measures for the purpose of (i) inspecting the
same; (ii) supplying any services to be provided by Landlord to Tenant; (iii)
showing the Leased Premises to prospective purchasers, mortgagees or tenants:
(iv) making necessary alterations, additions or repairs; (v) performing any of
Tenant's obligations when Tenant has failed to do so after giving Tenant
reasonable written notice of its intent to do so; and (vi) posting notices of
non-responsibility or "For Lease" or "For Sale" signs. Additionally, Landlord
shall have the right to enter the Leased Premises at times of emergency. Any
entry into the Leased Premises or portions thereof obtained by Landlord in
accordance with this Article shall not under any circumstances be construed or
deemed to be a forcible or unlawful entry into, or a detainer of, the Leased
Premises, or an eviction, actual or constructive, of Tenant from the Leased
Premises or any portion thereof.
4.10 CONTROL OF COMMON AREAS: Landlord shall at all times have exclusive
control of the Common Areas. Landlord shall have the right, without the same
constituting an actual or constructive eviction and without entitling Tenant to
any reduction in or abatement of rent, to: (i) temporarily close any part of the
Common Areas to whatever extent required in the opinion of Landlord's counsel to
prevent a dedication thereof or the accrual of any prescriptive rights therein;
(ii) temporarily close all or any part of the Common Areas to perform
maintenance or for any other reason deemed sufficient by Landlord; (iii) change
the shape, size, location, number and extent of improvements within the Common
Areas including, without limitation, changing the location of driveways,
entrances, exits, parking spaces, parking areas, sidewalks, directional or
locator signs, or the direction of the flow of traffic; and (iv) to make
additions to the Common Areas including, without limitation, the construction of
parking
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structures. Landlord shall have the right to change the name or address of the
Building. Tenant, in its use of the Common Areas, shall keep the Common Areas
free and clear of all obstructions created or permitted by Tenant. If, in the
opinion of Landlord, unauthorized persons are using any of the Common Areas by
reason of, or under claim of, the express or implied authority or consent of
Tenant, then Tenant, upon demand of Landlord, shall restrain, to the fullest
extent then allowed by Law, such unauthorized use, and shall initiate such
appropriate proceedings as may be required to so restrain such use. Nothing
contained herein shall affect the right of Landlord at any time to remove any
unauthorized person from the Common Areas or to prohibit the use of the Common
Areas by unauthorized persons, including, without limitation, the right to
prohibit mobile food and beverage vendors. In exercising any such right
regarding the Common Areas, Landlord shall make a reasonable effort to minimize
any disruption to Tenant's business.
4.11 RULES AND REGULATIONS: Landlord shall have the right from time to
time to establish reasonable rules and regulations and/or amendments or
additions thereto respecting the use of space within the Project and the use of
the Common Areas for the care and orderly management of the Project and the
safety of its tenants, occupants and invitees. Upon delivery to Tenant of a copy
of such rules and regulations or any amendments or additions thereto, Tenant
shall comply with such rules and regulations. A violation by Tenant of any of
such rules and regulations shall constitute a default by Tenant under this
Lease. If there is a conflict between the rules and regulations and any of the
provisions of this Lease, the provisions of this Lease shall prevail. Landlord
shall not be responsible or liable to Tenant for the violation of such rules and
regulations by any other tenant of the Project.
4.12 ENVIRONMENTAL PROTECTION: Landlord may voluntarily cooperate in a
reasonable manner with the efforts of all governmental agencies in reducing
actual or potential environmental damage. Tenant shall not be entitled to
terminate this Lease or to any reduction in or abatement of rent by reason of
such compliance or cooperation. Tenant agrees at all times to cooperate fully
with Landlord and to abide by all rules and regulations and requirements which
Landlord may reasonably prescribe in order to comply with the requirements and
recommendations of governmental agencies regulating, or otherwise involved in,
the protection of the environment.
4.13 OUTSIDE AREAS: No materials, pallets, supplies, tanks or containers
whether above or below ground level, equipment, finished products or
semi-finished products, raw materials, inoperable vehicles or articles of any
nature shall be stored upon or permitted to remain outside of the Leased
Premises except in fully fenced and screened areas outside the Building which
have been designed for such purpose and have been approved in writing by
Landlord for such use by Tenant.
4.14 HAZARDOUS MATERIALS: Landlord and Tenant agree as follows with
respect to the existence or use of Hazardous Materials on the Property:
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A. Any handling, transportation, storage, treatment, disposal or
use of Hazardous Materials by Tenant, Tenant's Agents, or any other party after
the Effective Date of this Lease in or about the Property shall strictly comply
with all applicable Hazardous Materials Laws. Tenant shall indemnify, defend
upon demand with counsel reasonably acceptable to Landlord, and hold harmless
Landlord from and against any and all liabilities, losses, claims, damages, lost
profits, consequential damages, interest, penalties, fines, court costs,
remediation costs, investigation costs and other expenses which result from or
arise in any manner whatsoever out of the use, storage, treatment,
transportation, release, or disposal of Hazardous Materials on or about the
Property by Tenant , Tenant's Agents, Permitees, or Invitees after the Effective
Date.
B. If the presence of Hazardous Materials on the Property caused
or permitted by Tenant, Tenant's Agents, Permitees, or Invitees after the
Effective Date of this Lease results in contamination or deterioration of water
or soil or any other part of the Property, then Tenant shall promptly take any
and all action necessary to investigate and remediate such contamination. Tenant
shall further be solely responsible for, and shall defend, indemnify and hold
Landlord and its agents harmless from and against all claims, costs and
liabilities, including attorneys' fees and costs, arising out of or in
connection with any investigation and remediation (including investigative
analysis, removal, cleanup, and/or restoration work) required hereunder to
return the Leased Premises, Building, Common Areas, Outside Areas, and/or
Property and any other property of whatever nature to their condition existing
prior to the appearance of such Hazardous Materials.
C. Landlord and Tenant shall each give written notice to the
other as soon as reasonably practicable of (i) any communication received from
any governmental authority concerning Hazardous Materials which relates to the
Property, and (ii) any contamination of the Property by Hazardous Materials
which constitutes a violation of any Hazardous Materials Law. Tenant
acknowledges that Landlord, as the owner of the Property, at Landlord's
election, shall have the sole right at Tenants expense to negotiate, defend,
approve, and/or appeal any action taken or order issued with regard to Hazardous
Materials by any applicable governmental authority. Tenant may use small
quantities of household chemicals such as adhesive, lubricants, and cleaning
fluids in order to conduct its business at the Premises and such other Hazardous
Materials as are necessary to the operation of Tenant's business of which
Landlord receives notice prior to such Hazardous Materials being brought onto
the Property (or any portion thereof) and which Landlord consents in writing may
be brought onto the Property. In granting Landlord's consent, Landlord may
specify the location and manner or use, storage, or handling of any Hazardous
Material, Landlord's consent shall in no way relieve Tenant from any of its
obligations as contained herein. Tenant shall notify Landlord in writing at
least ten (10) days prior to the first appearance of any Hazardous Material on
the Leased Premises, Building, Common Areas, Outside Areas, and/or Property.
Tenant shall provide Landlord with a list of all Hazardous Materials and the
quantities of each Hazardous Material to be
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stored, or used, on any portion of the Property, and upon Landlord's request
Tenant shall provide Landlord with copies of any and all Hazardous Materials
Management Plans, Material Safety Data Sheets, Hazardous Waste Manifests, and
other documentation maintained or received by Tenant pertaining to the Hazardous
Materials used, stored, or transported or to be used, stored, or transported on
any portion of the Property. At any time during the Lease Term, Tenant shall,
within five days after written request therefor received from Landlord, disclose
in writing all Hazardous Materials that are being used by Tenant on the Property
(or have been used on the Property), the nature of such use, and the manner of
storage and disposal.
D. Landlord may cause testing wells to be installed on the
Property and may cause the ground water to be tested to detect the presence of
Hazardous Material by the use of such tests as are then customarily used for
such purposes. If Tenant so requests, Landlord shall supply Tenant with copies
of such test results, the cost of such tests and of the installation,
maintenance, repair and replacement of such wells shall be paid by Tenant if
such tests disclose the existence of facts which give rise to liability of
Tenant pursuant to its indemnity given in A and/or B above. Landlord may retain
consultants to inspect the Property, conduct periodic environmental audits, and
review any information provided by Tenant. Tenant shall pay the reasonable cost
of fees charged by Landlord and/or Landlord's consultants as a Project
Maintenance Cost.
E. Upon the expiration or earlier termination of the Lease,
Tenant, at its sole cost, shall remove all Hazardous Materials from the Property
and shall provide a certificate to Landlord from a registered consultant
satisfactory to Landlord, certifying that Tenant has caused no contamination of
building(s), soil or groundwater in or about the Leased Premises, Building,
Common Areas, Outside Areas, or Property. If Tenant fails to so surrender the
Property, Tenant shall indemnify and hold Landlord harmless from all damages
resulting from Tenant's failure to surrender the Property as required by this
Subsection, including, without limitation, any claims or damages in connection
with the condition of the Property including, without limitation, damages
occasioned by the inability to Lease the Property (or any portion thereof) or a
reduction in the fair market and/or rental value of the Property, Building,
Common Areas, Outside Areas, and/or Property by reason of the existence of any
Hazardous Materials in or around the Leased Premises, Building, Common Areas,
Outside Areas, and/or Property. If any action is required to be taken by a
governmental authority to test, monitor, and/or clean up Hazardous Materials
from the Leased Premises, Building, Common Areas, Outside Areas, and/or Property
and such action is not completed prior to the expiration or earlier termination
of the Lease, Tenant shall be deemed to have impermissibly held over until such
time as such required action is completed, and Tenant shall pay Base Monthly
Rent and Additional Rent in accordance with the terms of Section 13.2 (Holding
Over). In addition, Landlord shall be entitled to all damages directly or
indirectly incurred in connection with such holding over, including without
limitation, damages occasioned by
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the inability to Lease the Property or a reduction of the fair market and/or
rental value of the Leased Premises, Building, Common Areas, Outside Areas,
and/or Property.
F. As used herein, the term "Hazardous Materials(s)" means any
hazardous or toxic substance, material or waste, which is or becomes regulated
by any federal, state, regional or local governmental authority because it is in
any way hazardous, toxic, carcinogenic, mutagenic or otherwise adversely affects
any part of the environment or creates risks of any such hazards or effects,
including, but not limited to, petroleum; asbestos, and polychlorinated bipheyls
and any material, substance, or waste (a) defined as a "hazardous waste,"
"extremely hazardous waste" or "restricted hazardous waste" under Sections
25115, 25117 or 25122,7, or listed pursuant to Section 25140 of the California
Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control Law);
(b) defined as a "hazardous substance" under Section 25316 of the California
Health and Safety Code, Division 20, Chapter 6.8 (Carpenter-Presley Tanner
Hazardous Substance Account Act); (c) defined as a "hazardous material,"
"hazardous substance" or "hazardous waste" under Section 25501 of the California
Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release
Response Plans and Inventory); (d) defined as a "hazardous substance" under
Section 25281 of the California Health and Safety Code, Division 20, Chapter 6.7
(Underground Storage of Hazardous Substances); (e) defined as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 United States Code
Sections 1251 et seq. (33 U.S.C. 1321) or listed pursuant to Section 307 of the
Clean Water Act (33 U.S.C. 1317); (f) defined as a "hazardous waste" pursuant to
Section 1004 of the Resource Conservation and Recovery Act, 42 United States
Code Sections 6901 et seq. (42 U.S.C. 6903); or (g) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation, and Liability Act, 42 United States Code Section 9601 et seq. (42
U.S.C. 9601) or (h) defined as a "hazardous substance" pursuant to Section 311
of the Federal Water Pollution Control Act, 33 U.S.C. 1251 et seq. or (i) listed
pursuant to Section 307 of the Federal Water Pollution Control Act (33 U.S.C.
1317 ) or (j ) regulated under the Toxic Substances Control Act (15 U.S.C. 2601
et seq.) or (k) defined ass "hazardous material "under Section 66680 or 66084 of
Title 22 of the California Code of Regulations (Administrative Code) (l) listed
in the United States Department of Transportation Hazardous Materials Table (49
C. F.R. 172.101) or (m) listed by the Environmental Protection Agency as
"hazardous substances" (4 0 C.F.R. Part 302 ) and amendments thereto . The term
"Hazardous Material Laws" shall mean (i) all of the foregoing laws as amended
from time to time and (ii) any other federal, state, or local law, ordinance,
regulation, or order regulating Hazardous Materials,
G. Tenant's failure to comply with any of the requirements of
this Section regarding the storage, use, disposal, or transportation of
Hazardous Materials, or the appearance of any Hazardous Materials on the Leased
Premises, Building, Common Area, Outside Area, and/or the Property without
Landlord's consent shall be an Event of Default as defined in this Lease. The
obligations of Landlord and Tenant under this
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Section shall survive the expiration or earlier termination of the Lease Term.
The rights and obligations of Landlord and Tenant within respect to issues
relating to Hazardous Materials are exclusively established by this section. In
the event of any inconsistency between any other part of this Lease and this
Section, the terms of this Section shall control.
ARTICLE 5
REPAIRS, MAINTENANCE, SERVICES AND UTILITIES
5.1 REPAIR AND MAINTENANCE: Except in the case of damage to or
destruction of the Leased Premises, the Building or the Project caused by an Act
of God or other peril, in which case the provisions of Article 10 shall control,
the parties shall have the following obligations and responsibilities with
respect to the repair and maintenance of the Leased Premises, the Building and
the Common Areas.
A. Tenants Obligation: Tenant shall, at all times during the
Lease Term and at its sole cost and expense, regularly clean and continuously
keep and maintain in good order, condition and repair the Leased Premises and
every part thereof and all appurtenances thereto, including, without limiting
the generality of the foregoing, (i) all interior walls, floors and ceilings,
(ii) all windows, doors and skylights, (iii) all electrical wiring, conduits,
connectors and fixtures, (iv) all plumbing, pipes, sinks, toilets, faucets and
drains, (v) all lighting fixtures, bulbs and lamps, (vi) all heating,
ventilating and air conditioning equipment located within the Leased Premises or
located outside the Leased Premises (e.g. rooftop compressors) and serving the
Leased Premises (other than Common HVAC as defined in Subarticle B below), and
(vii) all entranceways to the Leased Premises. Tenant, if requested to do so by
Landlord, shall hire, at Tenant's sole cost and expense, a licensed heating,
ventilating and air conditioning contractor to regularly, and periodically
inspect (not less frequently than every three months) and perform required
maintenance on the heating, ventilating and air conditioning equipment and
systems serving the Leased Premises, or alternatively, Landlord may, at its
election, contract in its own name for such regular and periodic inspections of
and maintenance on such heating, ventilating and air conditioning equipment and
systems and charge to Tenant, as Additional Rent, the cost thereof. Tenant
shall, at its sole cost and expense, repair all damage to the Building, the
Common Areas or the Project caused by the activities of Tenant, its employees,
invitees or contractors promptly following written notice from Landlord to so
repair such damage. If Tenant shall fail to perform the required maintenance or
fail to make repairs required of it pursuant to this Article within a reasonable
period of time following notice from Landlord to do so, then Landlord may, at
its election and without waiving any other remedy it may otherwise have under
this Lease or as Law, perform such maintenance or make such repairs and charge
to Tenant, as Additional Rent, the costs so incurred by Landlord for same. All
glass within or a part of the Leased Premises, both interior and exterior, is at
the sole risk of Tenant and any
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broken glass shall promptly be replaced by Tenant at Tenant's expense with glass
of the same kind, size and quality.
B. Landlord's Obligation: Landlord shall, at all times during
the Lease Term, maintain in good condition and repair: (i) the exterior and
structural parts of the Building (including the foundation, subflooring,
load-bearing and exterior walls, and roof); (ii) the Common Areas; and (iii) the
electrical and plumbing systems located outside the Leased Premises which
service the Building. Additionally, to the extent that the Building contains
central heating, ventilating and/or air conditioning systems located outside the
Leased Premises which are designed to service, and are then servicing, more than
a single tenant within the Building ("Common HVAC"), Landlord shall maintain in
good operating condition and repair such Common HVAC equipment and systems. The
provisions of this Subarticle B shall in no way limit the right of Landlord to
charge to tenants of the Project, as Additional Rent pursuant to Article 3, the
costs incurred by Landlord in making such repairs and/or performing such
maintenance.
5.2 SERVICES AND UTILITIES: The parties shall have the following
responsibilities and obligations with respect to obtaining and paying the cost
of providing the following utilities and other services to the Leased Premises.
A. Gas and Electricity: Tenant shall arrange, at its sole cost
and expense and in its own name, for the supply of gas and electricity to the
Leased Premises. In the event that such services are not separately metered,
Tenant shall, at its sole expense, cause such meters to be installed. Tenant
shall be responsible for determining if the local supplier of gas and/or
electricity can supply the needs of Tenant and whether or not the existing gas
and/or electrical distribution systems within the Building and the Leased
Premises are adequate for Tenant's needs. Tenant shall pay all charges for gas
and electricity as so supplied to the Leased Premises.
B. Water: Landlord shall provide the Leased Premises with water
for lavatory and drinking purposes only. Tenant shall pay, as Additional Rent,
the cost to Landlord of providing water to the Leased Premises. In the event
Landlord believes that Tenant is using more water than what normally would be
required for lavatory and drinking purposes, Landlord at its election may (i)
periodically charge Tenant, as Additional Rent, a sum equal to Landlord's
estimate of the cost of Tenant's excess water usage or (ii) install (or require
Tenant to install at Tenant's sole cost) a separate meter for purposes of
measuring Tenant's water usage and, based upon such meter readings, periodically
charge Tenant, as Additional Rent, a sum equal to Landlord's estimate of the
cost of Tenant's excess water usage. In the event that Landlord shall so install
such a separate meter, Tenant shall pay to Landlord, upon demand, the costs
incurred by Landlord in purchasing and installing such meter and thereafter all
costs incurred by Landlord in maintaining said meter. The cost of Tenant's water
usage shall include any costs to Landlord in keeping account of such usage and
all governmental fees, public
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charges or the like attributable to or based upon (such as sewer usage fees) the
use of water to the extent of such usage.
C. Security Service: Tenant acknowledges that Landlord is not
responsible for the security of the Leased Premises or the protection of
Tenant's property or Tenant's employees, invitees or contractors, and that to
the extent Tenant determines that such security or protection services are
advisable or necessary, Tenant shall arrange for and pay the costs of providing
same.
D. Trash Disposal: Tenant acknowledges that Landlord is not
responsible for the disposal of Tenant's waste, garbage or trash and that Tenant
shall arrange, in its own name and at its sole cost, for the regular and
periodic removal of such waste, garbage or trash from the Leased Premises. In no
event shall Landlord be required to provide trash bins for the disposal of
Tenant's waste, garbage or trash.
5.3 ENERGY AND RESOURCE CONSUMPTION: Landlord may voluntarily cooperate
in a reasonable manner with the efforts of governmental agencies and/or utility
suppliers in reducing energy or other resource consumption within the Project.
Tenant shall not be entitled to terminate this Lease or to any reduction in or
abatement of rent by reason of such compliance or cooperation. Tenant agrees at
all times to cooperate fully with Landlord and to abide by all reasonable rules
established by Landlord (i) in order to maximize the efficient operation of the
electrical, heating, ventilating and air conditioning systems and all other
energy or other resource consumption systems within the Project and/or (ii) in
order to comply with the requirements and recommendations of utility suppliers
and governmental agencies regulating the consumption of energy and/or other
resources.
5.4 LIMITATION OF LANDLORD'S LIABILITY: Landlord shall not be liable to
Tenant for injury to Tenant, its employees, agents, invitees or contractors,
damage to Tenant's property or loss of Tenant's business or profits, nor shall
Tenant be entitled to terminate this Lease or to any reduction in or abatement
of rent by reason of (i) Landlord's failure to perform any maintenance or
repairs to the Project until Tenant shall have first notified Landlord, in
writing, of the need for such maintenance or repairs, and then only after
Landlord shall have had a reasonable period of time following its receipt of
such notice within which to perform such maintenance or repairs, or (ii) any
failure, interruption, rationing or other curtailment in the supply of water,
electric current, gas or other utility service to the Leased Premises, the
Building or the Project from whatever cause (other than Landlord's active
negligence or willful misconduct), or (iii) the unauthorized intrusion or entry
into the Leased Premises by third parties (other than Landlord).
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ARTICLE 6
ALTERATIONS AND IMPROVEMENTS
6.1 BY TENANT: Tenant shall not make any alterations to or modifications
of the Leased Premises or construct any improvements to or within the Leased
Premises without Landlord's prior written approval, and then not until Landlord
shall have first approved, in writing, the plans and specifications therefore,
which approval shall not be unreasonably withheld. All such modifications,
alterations or improvements, once so approved, shall be made, constructed or
installed by Tenant at Tenant's expense, using a licensed contractor first
approved by Landlord, in substantial compliance with the Landlord-approved plans
and specifications therefore. All work undertaken by Tenant shall be done in
accordance with all Laws and in a good and workmanlike manner using new
materials of good quality that match or complement the original improvements
existing as of the Lease Commencement Date. Tenant shall not commence the making
of any such modifications or alterations or the construction of any such
improvements until (i) all required governmental approvals and permits shall
have been obtained, (ii) all requirements regarding insurance imposed by this
Lease have been satisfied, (iii) Tenant shall have given Landlord at least five
business days prior written notice of its intention to commence such work so
that Landlord may post and file notices of non-responsibility, and (iv) if
requested by Landlord, Tenant shall have obtained contingent liability and broad
form builder's risk insurance in an amount satisfactory to Landlord to cover any
perils relating to the proposed work not covered by insurance carried by Tenant
pursuant to Article 9. In no event shall Tenant make any modifications,
alterations or improvements to the Common Areas or any areas outside of the
Leased Premises. As used in this Article, the term "modifications, alterations
and/or improvements" shall include, without limitation, the installation of
additional electrical outlets, overhead lighting fixtures, drains, sinks,
partitions, doorways, or the like. As a part of granting Landlord's approval for
Tenant to make alterations or modifications Landlord may require Tenant to
increase the amount of it's Security Deposit to cover the cost of removing
Tenant's alterations or modifications and to restore the condition of the
Premises to it's prior condition. Tenant shall pay Landlord's reasonable costs
to inspect the construction of Tenant's alterations or modifications and to have
Landlord's architect revise Landlord's drawings to show the work performed by
Tenant.
6.2 OWNERSHIP OF IMPROVEMENTS: All modifications, alterations or
improvements made or added to the Leased Premises by Tenant (other than Tenant's
inventory, equipment, movable furniture, wall decorations and trade fixtures)
shall be deemed real property and a part of the Leased Premises, but shall
remain the property of Tenant during the Lease Term. Any such modifications,
alterations or improvements, once completed, shall not be altered or removed
from the Leased Premises during the Lease Term without Landlord's written
approval first obtained in accordance with the provisions of Article 6.1 above.
At the expiration or sooner termination of the Lease, all such modifications,
alterations and improvements (other than Tenant's inventory,
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equipment, movable furniture, wall decorations and trade fixtures) shall
automatically become the property of Landlord and shall be surrendered to
Landlord as a part of the Leased Premise as required pursuant to Article 2,
unless Landlord shall require Tenant to remove any of such modifications,
alterations or improvements in accordance with the provisions of Article 2, in
which case Tenant shall so remove same. Landlord shall have no obligation to
reimburse to Tenant all or any portion of the cost or value of any such
modifications, alterations or improvements so surrendered to Landlord. All
modifications, alterations or improvements which are installed or constructed on
or attached to the Leased Premises by Landlord at Landlord's expense shall be
deemed real property, and a part of the Leased Premises and shall be the
property of Landlord. All lighting, plumbing, electrical, heating, ventilating
and air conditioning fixtures, partitioning, window coverings, wall coverings
and floor coverings installed by Tenant shall be deemed improvements to the
Leased Premises and not trade fixtures of Tenant.
6.3 ALTERATIONS: At its sole cost, Tenant shall make all modifications,
alterations and improvements to the Leased Premises that are required by any Law
because of (i) Tenant's use or occupancy of the Leased Premises, the Building,
the Outside Areas, or the Property, (ii) Tenant's application for any permit or
governmental approval, or (iii) Tenant's making of any modifications,
alterations or improvements to or within the Leased Premises. If Landlord shall,
as any time during the Lease Term, (i) be required by any governmental authority
to make any modifications, alterations or improvements to the Building or the
Project, (ii) modify the existing (or construct additional) capital improvements
or provide building service equipment for the purpose of reducing the
consumption of utility services or project maintenance costs for the property,
the cost incurred by Landlord in making such modifications, alterations or
improvements, including an eighteen percent per annum cost of money factor,
shall be amortized by Landlord over the useful life of such modifications,
alterations or improvements, as determined in accordance with generally accepted
accounting standards, and the monthly amortized cost of such modifications,
alterations and improvements as so amortized shall be considered a Project
Maintenance Cost.
6.4 LIENS: Tenant shall keep the Leased Premises, the Building and the
Property free from any liens and shall pay when due all bills arising out of any
work performed, materials furnished, or obligations incurred by Tenant, its
agents, employees or contractors relating to the Leased Premises. If any such
claim of lien is recorded against Tenant's interest in this Lease, the Leased
Premises, the Building or the Project, Tenant shall bond against, discharge or
otherwise cause such lien to be entirely released within ten days after the same
has been so recorded.
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ARTICLE 7
ASSIGNMENT AND SUBLETTING BY TENANT
7.1 BY TENANT: Tenant shall not sublet the Leased Premises (or any
portion thereof) or assign or encumber its interest in this Lease, whether
voluntarily or by operation of Law, without Landlord's prior written consent
first obtained in accordance with the provisions of this Article 7. Any
attempted subletting, assignment or encumbrance without Landlord's prior written
consent, at Landlord's election, shall constitute a default by Tenant under the
terms of this Lease. The acceptance of rent by Landlord from any person or
entity other than Tenant, or the acceptance of rent by Landlord from Tenant with
knowledge of a violation of the provisions of this Article, shall not be deemed
to be a waiver by Landlord of any provision of this Article or this Lease or to
be a consent to any subletting by Tenant or any assignment or encumbrance of
Tenant's interest in this Lease.
7.2 MERGER OR REORGANIZATION: If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, or the
sale or other transfer in the aggregate over the Lease Term of a controlling
percentage of the capital stock of Tenant, shall be deemed a voluntary
assignment of Tenant's interest in this Lease. The phrase "controlling
percentage" means the ownership of and the right to vote stock possessing more
than fifty percent of the total combined voting power of all classes of Tenant's
capital stock issued, outstanding and entitled to vote for the election of
directors. If Tenant is a partnership, a withdrawal or change, whether
voluntary, involuntary or by operation of Law, of any general partner, or the
dissolution of the partnership, shall be deemed a voluntary assignment of
Tenant's interest in this Lease.
7.3 LANDLORD'S ELECTION: If Tenant or Tenant's successors shall desire
to assign its interest under this Lease or to sublet the Leased Premises, Tenant
and Tenant's successors must first notify Landlord, in writing, of its intent to
so assign or sublet, as least thirty days in advance of the date it intends to
so assign its interest in this Lease or sublet the Leased Premises but not
sooner than sixty days in advance of such date, specifying in detail the terms
of such proposed assignment or subletting, including the name of the proposed
assignee or sublessee, the proposed assignee's or Sublessee's intended use of
the Leased Premises, a current financial statement of such proposed assignee or
sublessee and the form of documents to be used in effectuating such assignment
or subletting. Landlord shall have a period of fifteen days following receipt of
such notice and receipt of all information requested by Landlord regarding the
proposed assignee or sublessee within which to do one of the following: (a)
terminate this Lease or, in the case of a sublease of less than all of the
Leased Premises, terminate this Lease as to that part of the Leased Premises
proposed to be so sublet, either (i) on the condition that the proposed
Transferee immediately enter into a direct lease of the Leased Premises with
Landlord (or, in the case of a partial sublease, a lease for the portion
proposed to be so sublet) on the same terms and conditions contained in Tenant's
(or Tenant's successors')
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notice, or (ii) so that Landlord is thereafter free to lease the Leased Premises
(or, in the case of a partial sublease, the portion proposed to be so sublet) to
whomever it pleases on whatever terms are acceptable to Landlord. In the event
Landlord elects to so terminate this Lease, then (i) if such termination is
conditioned upon the execution of a lease between Landlord and the proposed
Transferee, Tenant's and Tenant's successors' obligations under this Lease shall
not be terminated until such Transferee executes a new lease with Landlord,
enters into possession, and commences the payment of rent, and (ii) if Landlord
elects simply to terminate this Lease (or, in the case of a partial sublease
terminate this Lease as to the portion to be so sublet), the Lease shall so
terminate in its entirety (or as to the space to be so sublet) fifteen (15) days
after Landlord has notified Tenant and Tenant's successors in writing of such
election. In the case of a partial termination of the Lease, the Base Monthly
Rent and Tenant's or Tenant's successors' proportionate share shall be reduced
to an amount which bears the same relationship to the original amount thereof as
the area of that part of the Leased Premises which remains subject to the Lease
bears to the original area of the Leased Premises. Landlord and Tenant or
Tenant's successors shall execute a cancellation agreement with respect to the
Lease to effect such termination or partial termination, or (b) if Landlord
shall not have elected to cancel and terminate this Lease, to either (i) consent
to such requested assignment or subletting subject to Tenant's and Tenant's
successors' compliance with the conditions set forth in Article 7.4 below or
(ii) refuse to so consent to such requested assignment or subletting, provided
that such consent shall not be unreasonably refused. It shall not be
unreasonable for Landlord to withhold its consent to any proposed assignment or
subletting if (i) the proposed assignee's or subtenant's anticipated use of the
Premises involves the storage, use or disposal of a Hazardous Material; (ii) if
the proposed assignee or subtenant has been required by any prior landlord,
lender or governmental authority to clean up Hazardous Materials unlawfully
discharged by the proposed assignee or subtenant; or (iii) if the proposed
assignee or subtenant is subject to investigation or enforcement order or
proceeding by any governmental authority in connection with the use, disposal or
storage of a Hazardous Material. Tenant and Tenant's successors covenant and
agree to supply to Landlord, upon request, with all necessary or relevant
information which Landlord may reasonably request respecting such proposed
assignment or subletting and/or the proposed assignee or sublessee. Landlord's
review period shall not commence until Landlord has received all information
requested by Landlord.
7.4 CONDITIONS TO LANDLORD'S CONSENT: If Landlord elects to consent, or
shall have been ordered to so consent by a court of competent jurisdiction, to
such requested assignment, subletting or encumbrance, such consent shall be
expressly conditioned upon the occurrence of each of the conditions below set
forth, and any purported assignment, subletting or encumbrance made or ordered
prior to the full and complete satisfaction of each of the following conditions
shall be void and, at the election of Landlord, which election may be exercised
at any time following such a purported assignment, subletting or encumbrance
shall constitute a material default by Tenant under
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this Lease giving Landlord the absolute right to terminate this Lease. The
conditions are as follows:
A. Landlord having approved in form and substance the assignment
of sublease agreement (or the encumbrance agreement), which approval shall not
be unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.
B. Each such sublessee or assignee having agreed, in writing
satisfactory to Landlord and its counsel and for the benefit of Landlord, to
assume, to be bound by, and to perform the obligations of this Lease to be
performed by Tenant (or, in the case of an encumbrance, each such encumbrancer
having similarly agreed to assume, be bound by and perform Tenant's obligations
upon a foreclosure or transfer in lieu thereof).
C. Tenant having fully and completely performed all of its
obligations under the terms of this Lease through and including the date of the
requested consent, as well as through and including the date such assignment or
subletting is to become effective.
D. Tenant having reimbursed to Landlord all reasonable costs and
attorneys' fees incurred by Landlord in conjunction with the processing and
documentation of any such requested subletting, assignment or encumbrance.
E. Tenant having delivered to Landlord a complete and fully
executed duplicate original of such sublease agreement, assignment agreement or
encumbrance (as applicable) and all related agreements.
F. Tenant having paid, or having agreed in writing to pay as to
future payments, to Landlord one hundred percent of all assignment consideration
or excess rentals to be paid to Tenant or to any other on Tenant's behalf or for
Tenant's benefit for such assignment or subletting as follows:
(1) If Tenant assigns its interest under the Lease and
if all or a portion of the consideration for such assignment is to be paid by
the assignee at the time of the assignment, that Tenant shall have paid to
Landlord and Landlord shall have received an amount equal to one hundred percent
of the assignment consideration so paid or to be paid whichever is the greater)
at the time of the assignment by the assignee; or
(2) If Tenant assigns its interest under this Lease and
if Tenant is to receive all or a portion of the consideration for such
assignment in future installments, that Tenant and Tenant's assignee shall have
entered into a written agreement with and for the benefit of Landlord
satisfactory to Landlord and its counsel whereby Tenant and Tenant's assignee
jointly agree to pay to Landlord an amount equal to one hundred
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percent of all such future assignment consideration installments to be paid by
such assignee as and when such assignment consideration is so paid.
(3) If Tenant subleases the Leased Premises, that Tenant
and Tenant's sublessee shall have entered into a written agreement with and for
the benefit of Landlord satisfactory to Landlord and its counsel whereby Tenant
and Tenant's sublessee jointly agree to pay to Landlord one hundred percent of
all excess rentals to be paid by such sublessee as and when such excess rentals
are so paid.
7.5 ASSIGNMENT CONSIDERATION AND EXCESS RENTALS DEFINED: For purposes of
this article, the term "Assignment Consideration" shall mean all consideration
to be paid by the Assignee as consideration for such assignment, and the term
"Excess Rentals" shall mean all consideration to be paid by the Sublessee in
excess of the rent to be paid by said Sublessee/Sublessor for the premises
subleased for the same period. It is specifically intended and agreed that this
provision is intended to be a one hundred percent profit sharing clause, such
that neither Tenant nor any successor to Tenant shall make any profit whatsoever
as a result of any transfer of an interest in the Lease or the Leased Premises
or any other property, as more particularly described herein. Assignment
Considerations and/or "Excess Rentals" shall include all payments made or to be
made by any Assignee or Sublessee relating in any way to any transfer of an
interest in the Lease or the Leased Premises including, but not limited to, any
payment made with respect to property which would or shall become Landlord's
property upon the expiration or earlier termination of the lease, whether such
property was installed or paid for by Landlord or by Tenant or Tenant's
successors. In the event Tenant or Tenant's successors sublease a portion of the
Leased Premises, "Excess Rentals" shall be calculated by subtracting the rent
payable by the Subleasor for the portion of the Leased Premises so sublet from
all consideration to be paid by such Sublessee. Rent payable by the Sublessor
for the portion of the Leased Premises so sublet shall be calculated by
multiplying the Base Monthly Rent payable by the Sublessor for the Leased
Premises leased by such Sublessor by a fraction, the numerator of which is the
area in square feet subleased and the denominator of which is the total floor
area of the Leased Premises leased by such Sublessor also in square feet. Tenant
and Tenant's Successors agree that any Assignment Consideration and/or Excess
Rentals hereunder shall be the property of Landlord and not the property of
Tenant.
7.6 PAYMENTS: All payments required by this Article to be made to
Landlord shall be made in cash in full as and when they become due. As the time
Tenant, Tenant's assignee or sublessee makes each such payment to Landlord,
Tenant or Tenant's assignee or sublessee, as the case may be, shall deliver to
Landlord an itemized statement in reasonable detail showing the method by which
the amount due Landlord was calculated and certified by the party making such
payment as true and correct. Landlord may require that all payments of Excess
Rentals and/or Assignment Consideration to be made hereunder be made directly to
Landlord by such Transferee.
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7.7 GOOD FAITH: The rights granted to Tenant by this Article are granted
in consideration of Tenant's express covenant that all pertinent allocations
which are made by Tenant between the rental value of the Leased Premises and the
value of any of Tenant's personal property which may be conveyed or leased
concurrently with and which may reasonably be considered a part of the same
transaction as the permitted assignment or subletting shall be made fairly,
honestly and in good faith. If Tenant shall breach this Covenant of Good Faith,
Landlord may immediately declare Tenant to be in default under the terms of this
Lease and terminate this Lease and/or exercise any other rights and remedies
Landlord would have under the terms of this Lease in the case of a material
default by Tenant under this Lease.
7.8 EFFECT OF LANDLORD'S CONSENT: No subletting, assignment or
encumbrance, even with the consent of Landlord, shall relieve Tenant of its
personal and primary obligation to pay rent and to perform all of the
obligations to be performed by Tenant hereunder. Consent by Landlord to one or
more assignments or encumbrances of Tenant's interest in this Lease or to one or
more sublettings of the Leased Premises shall not be deemed to be a consent to
any subsequent assignment, encumbrance or subletting. If Landlord shall have
been ordered by a court of competent jurisdiction to consent to a requested
assignment or subletting, or such an assignment or subletting shall have been
ordered over the objection of Landlord, such assignment or subletting shall not
be binding between the assignee (or sublessee) and Landlord until such time as
all conditions set forth in Article 7.4 above have been fully satisfied (to the
extent not then satisfied) by the assignee or sublessee, including, without
limitation, the payment to Landlord of all agreed assignment considerations
and/or excess rentals then due Landlord.
7.9 PROHIBITED FINANCIAL TRANSACTIONS: Tenant shall not, without
Landlord's consent, enter into or do any of the following acts if to do so would
result in Tenant having a net worth or net income after such action or evens
that is less than Tenant's net worth and/or net income as of the date of this
Lease: (i) make any distribution or declare or pay any cash dividends on, or
purchase, acquire, redeem or retire any of its capital stock, of any class,
whether now or hereafter outstanding, (ii) acquire, merge, or consolidate with
or into any other business organization, (iii) make any changes in Tenant's
financial structure or (iv) borrow funds, pledge assets, or lease or sell
equipment or other property. Landlord and Tenant understand and agree that the
value of the Leased Premises is influenced by Tenant's financial standing, and
the provisions of this section are intended to prohibit those voluntary actions
of Tenant that are not conducted in the normal course of its business which
would reduce Tenant's net worth and/or net income and thereby would adversely
effect the value of the Leased Premises.
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ARTICLE 8
LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE: Landlord shall not
be liable to Tenant for, and Tenant hereby releases Landlord and its partners
and officers from, any and all liability, whether in contract, tort or on any
other basis, for any injury to or any damage sustained by Tenant, its agents,
employees, contractors or invitees; any damage to Tenant's property; or any loss
to Tenant's business, loss of Tenant's profits or other financial loss of Tenant
resulting from or attributable to the condition of, the management of, the
maintenance of, or the protection of the Leased Premises, the Building, the
Project or the Common Areas, including, without limitation, any such injury,
damage or loss resulting from (i) the failure, interruption, rationing or other
curtailment or cessation in the supply of electricity, water, gas or other
utility service to the Project, the Building or the Leased Premises; (ii) the
vandalism or forcible entry into the Building or the Leased Premises; (iii) the
penetration of water into or onto any portion of the Leased Premises through
roof leaks or otherwise; (iv) the failure to provide security and/or adequate
lighting in or about the Project, the Building or the Leased Premises; (v) the
existence of any design or construction defects within the Project, the Building
or the Leased Premises; (vi) the failure of any mechanical systems to function
properly (such as the HVAC systems); or (vii) the blockage of access to any
portion of the Project, the Building or the Leased Premises, except to the
extent such damage was proximately caused by Landlord's active negligence or
willful misconduct, or Landlord's failure to perform an obligation expressly
undertaken pursuant to this Lease but only if Tenant shall have given Landlord
prior written notice to perform such obligation and Landlord shall have failed
to perform such obligation within a reasonable period of time following receipt
of written notice from Tenant to so perform such obligation. In this regard,
Tenant acknowledges that it is fully apprised of the provisions of Law relating
to releases, and particularly to those provisions contained in Section 1542 of
the California Civil Code which read as follows: A general release does not
extend to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which if known by him must have
materially affected his settlement with the debtor. Notwithstanding such
statutory provision, and for the purpose of implementing a full and complete
release and discharge, Tenant hereby (i) waives the benefit of such statutory
provision and (ii) acknowledges that, subject to the exceptions specifically set
forth herein, the release and discharge set forth in this Article is a full and
complete settlement and release and discharge of all claims and is intended to
include in its effect, without limitation, all claims which Tenant, as of the
date hereof, does not know of or suspect to exist in its favor.
8.2 TENANT'S INDEMNIFICATION OF LANDLORD: Tenant shall defend, with
competent counsel satisfactory to Landlord, any claims made or legal actions
filed or threatened by third parties against landlord which result in the death,
bodily injury, personal injury, damage to property or interference with
contractual or
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other rights suffered by any third party, (including other Tenants within the
Project) which (i) occurred within the Leased Premises or (ii) resulted from
Tenant's use or occupancy of the Leased Premises or the Common Areas or (iii)
resulted from Tenant's activities in or about the Leased Premises, the Building
or the Project, and Tenant shall indemnify and hold Landlord, Landlord's
principals, employees and agents harmless from any loss (including loss of rents
by reason of vacant space which otherwise would have been leased but for such
activities), liabilities , penalties, or expense whatsoever (including all legal
fees incurred by Landlord with respect to defending such claims) resulting
therefrom, except to the extent proximately caused by the active negligence or
willful misconduct of Landlord. This indemnity agreement shall survive the
expiration or sooner termination of this Lease, provided that Tenant shall not
be required to indemnify Landlord under this section 8.2 with respect to events
that first occur after the later of (a) the date of the expiration, or sooner
termination, of this Lease, or (b) the date Tenant actually vacates the
Premises, provided that Landlord has actual notice of such vacation.
ARTICLE 9
INSURANCE
9.1 TENANT'S INSURANCE: Tenant shall maintain insurance complying with
all of the following:
A. Tenant shall procure, pay for and keep in full force and
effect, at all times during the Lease Term, the following:
(1) Commercial General Liability insurance insuring
Tenant against liability for bodily injury, death, property damage and personal
injury occurring at the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises or the Building, Outside Areas, Property, or
Common Areas or resulting from Tenant's activities in or about the Leased
Premises. Such insurance shall be on an occurrence basis with a combined single
limit of liability of not less than the amount of Tenant's Required Liability
Coverage (as set forth in Article 1). The policy or policies shall be endorsed
to name Landlord and such others as are designated by Landlord as additional
insureds in the form equivalent to CG20111185 or successor and shall contain the
following additional endorsement: "The insurance afforded to the additional
insureds is primary insurance. If the additional insureds have other insurance
which is applicable to the loss on a contributing, excess or contingent basis,
the amount of this insurance company's liability under this policy shall not be
reduced by the existence of such other insurance. Any insurance carried by the
additional insureds shall be excess and non-contributing with the insurance
provided by the Tenant." The policy shall not be canceled or reduced without at
least 30 days' written notice to additional insureds. If the policy insures more
than one location, it shall be endorsed to show that the limits and aggregate
apply per location using endorsement CG25041185 or successor. Tenant's policy
shall also contain the severability of interest and cross-liability endorsement
or clauses.
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(2) Fire and property damage insurance in so-called
Special Form plus earthquake and flood insuring Tenant against loss from
physical damage to Tenant's personal property, inventory, stock, trade fixtures
and improvements within the Leased Premises with coverage for the full actual
replacement cost thereof;
(3) Plate-glass insurance, at actual replacement cost;
(4) Boiler and Machinery insurance, if applicable;
(5) Product Liability insurance (including without
limitation Liquor Liability insurance for liability arising out of the
distribution, sale, or consumption of food and/or beverages including alcoholic
beverages at the Leased Premises for not less than the Tenant's Required
Liability Coverage as set forth in Article I;
(6) Workers' compensation insurance and any other
employee benefit insurance sufficient to comply with all Laws which policy shall
be endorsed to provide thirty (30) days written notice of cancellation to
Landlord;
(7) With respect to making of alterations or the
construction of improvements or the like undertaken by Tenant, contingent
liability and builder's risk insurance, in an amount and with coverage
satisfactory to Landlord;
(8) Business Income Insurance at a minimum of 50%
co-insurance including coverage for loss of business income due to damage to
equipment from perils covered under the so-called Special Form plus perils of
earthquake and flood; and
(9) Comprehensive Auto Liability insurance with a
combined single limit coverage of not less than the amount of Tenant's Required
Liability Coverage (as set forth in Article I) for bodily injury and/or property
damage liability for: a) Owned autos b) Hired or borrowed autos c) Non-owned
autos d) Auto blanket contractual form CA0029. The policy shall be endorsed to
provide 30 days written notice of cancellation to Landlord.
B. Each policy of liability insurance required to be carried by
Tenant pursuant to this Article or actually carried by Tenant with respect to
the Leased Premises or the Property (i) shall be in a form satisfactory to
Landlord, (ii) Shall be provided by carriers admitted to do business in the
state of California, with a Best rating of "A/VI" or better and/or acceptable to
Landlord. Property insurance shall contain a waiver and/or a permission to waive
by the insurer any right of subrogation against Landlord, its principals,
employees, agents and contractors which might arise by reason of any payment
under such policy or by reason of any act or omission of Landlord, its
principals, employees, agents or contractors.
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C. Prior to the time Tenant or any of its contractors enters the
Leased Premises, Tenant shall deliver to the Landlord with respect to each
policy of insurance required to be carried by Tenant pursuant to this Article, a
certificate of the insurer certifying, in a form satisfactory to the Landlord,
that the policy has been issued and premium paid providing the coverage required
by this Article and containing the provisions herein. Attached to such a
certificate shall be endorsements naming Landlord as additional insured, and
including the wording under primary insurance above. With respect to each
renewal or replacement of any such insurance, the requirements of this Article
must be complied with not less than 30 days prior to the expiration or
cancellation of the policy being renewed or replaced. Landlord may as any time
and from time-to-time inspect and/or copy any and all insurance policies
required to be carried by Tenant pursuant to this article. If Landlord's lender,
insurance broker or advisor or counsel reasonably determines as any time that
the form or amount of coverage set forth in Article 9.1 (A) for any policy of
insurance Tenant is required to carry pursuant to this Article is not adequate,
then Tenant shall increase the amount of coverage for such insurance to such
greater amount or change the form as Landlord's lender, insurance broker or
advisor or counsel reasonably deems adequate (provided however such increase
level of coverage may not exceed the level of coverage for such insurance
commonly carried by comparable businesses similarly situated and operating under
similar circumstances).
D. The Commercial General Liability insurance carried by Tenant
shall specifically insure the performance b Tenant of the Indemnification
provisions set forth in Article 8.2 of this lease provided, however, nothing
contained in this Article 9 shall be construed to limit the liability of Tenant
under site Indemnification provisions set forth in said Article 8.2.
9.2 LANDLORD'S INSURANCE: With respect to insurance maintained by
Landlord:
A. Landlord shall maintain, as the minimum coverage required of
is by this Lease, property insurance in so-called "Special" form insuring
Landlord (and such others as Landlord may designate) against loss from physical
damage to the Building with coverage of not less than one hundred percent of the
full actual replacement cost thereof and against loss of rents for a period of
not less than twelve months. Such property damage insurance, at Landlord's
election but without any requirement on Landlord's behalf to do so, (i) may be
written in so-called Special Form, excluding only those perils commonly excluded
from such coverage by Landlord's then property damage insurer; (ii) may provide
coverage for physical damage to the improvements so insured for up to the entire
full actual replacement cost thereof; (iii) may be endorsed to include (or
separate policies which may be carried to cover) loss or damage caused by any
additional perils against which Landlord may elect to insure, including
earthquake and/or flood; (iv) may provide coverage for loss of rents for a
period of up to twelve months;
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and/or (v) may contain "deductibles" per occurrence in an amount reasonably
acceptable to Landlord. Landlord shall not be required to cause such insurance
to cover any of Tenant's personal property, inventory and trade fixtures, or any
modifications, alterations or improvements made or constructed by Tenant to or
within the Leased Premises.
B. Landlord shall maintain Commercial General Liability
insurance insuring Landlord (and such others as are designated by Landlord)
against liability for personal injury, bodily injury, death, and damage to
property occurring in, on or about, or resulting from the use or occupancy of
the Project, or any portion thereof, with combined single limit coverage of as
least Two Million Dollars. Landlord may carry such greater coverage as Landlord
or Landlord's Lender, insurance broker or advisor or counsel may from time to
time determine is reasonably necessary for the adequate protection of Landlord
and the Project.
C. Landlord may maintain any other insurance which in the
opinion of its lender, insurance broker or advisor, or legal counsel is prudent
to carry under the given circumstances.
9.3 MUTUAL WAIVER OF SUBROGATION: Landlord hereby releases Tenant, and
Tenant hereby releases Landlord and its respective partners and officers,
agents, employees and servants, from any and all liability for loss, damage or
injury to the property of the other in or about the Leased Premises which is
caused by or results from a peril or event or happening which would be covered
by insurance required to be carried under the terms of this Lease, or is covered
by insurance actually carried and in force as the time of the loss, by the party
sustaining such loss; provided, however, that such waiver shall be effective
only to the extent permitted by the insurance covering such loss and to the
extent such insurance is not prejudiced thereby.
ARTICLE 10
DAMAGE TO LEASED PREMISES
10.1 LANDLORD'S DUTY TO RESTORE: If the Leased Premises are damaged by
any peril after the Effective Date of this Lease, Landlord shall restore the
Leased Premises, as and when required by this Article, unless this Lease is
terminated by Landlord pursuant to Article 10.2 or by Tenant pursuant to Article
10.3. All insurance proceeds available from the fire and property damage
insurance carried by Landlord shall be paid to and become the property of
Landlord. If this Lease is terminated pursuant to either Article 10.2 or 10.3,
all insurance proceeds available from insurance carried by Tenant which cover
loss to property that is Landlord's property or would become Landlord's property
on termination of this Lease shall be paid to and become the property of
Landlord, and the remainder of such proceeds shall be paid to and become the
property of Tenant. If this Lease is not terminated pursuant to either Article
10.2 or 10.3, all insurance proceeds available from insurance carried by Tenant
which cover loss to
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property that is Landlord's property shall be paid to and become the property of
Landlord, and all proceeds available which cover loss to property which would
become the property of Landlord upon the termination of this Lease shall be paid
to and remain the property of Tenant. If this Lease is not so terminated, then
upon receipt of the insurance proceeds (if the loss is covered by insurance) and
the issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, to
the extent then allowed by Law, to substantially the same condition in which the
Leased Premises existed as of the Lease Commencement Date. Landlord's obligation
to restore shall be limited to the Leased Premises and interior improvements
constructed by Landlord. Landlord shall have no obligation to restore any other
improvements to the Leased Premises or any of Tenant's personal property,
inventory or trade fixtures. Upon completion of the restoration by Landlord,
Tenant shall forthwith replace or fully repair all of Tenant's personal
property, inventory, trade fixtures and other improvements constructed by Tenant
to like or similar condition as existed as the time of such damage or
destruction.
10.2 LANDLORD'S RIGHT TO TERMINATE: Landlord shall have the option to
terminate this Lease in the event any of the following occurs, which option may
be exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:
A. The Building is damaged by any peril covered by valid and
collectible insurance actually carried by Landlord and in force at the time of
such damage or destruction (an "insured peril") to such an extent that the
estimated cost to restore the Building exceeds the lesser of (i) the insurance
proceeds available from insurance actually carried by Landlord, or (ii)
seventy-five percent of the then actual replacement cost thereof;
B. The Building is damaged by an uninsured peril, which peril
Landlord was required to insure against pursuant to the provisions of Article 9
of this Lease, to such an extent that the estimated cost to restore the Building
exceeds the lesser of (i) the insurance proceeds which would have been available
had Landlord carried such required insurance, or (ii) seventy-five percent of
the then actual replacement cost thereof;
C. The Building is damaged by an uninsured peril, which peril
Landlord was not required to insure against pursuant to the provisions of
Article 9 of this Lease, to any extent.
D. The Building is damaged by any peril and, because of the Laws
then in force, the Building (i) can not be restored as reasonable cost or (ii)
if restored, can not be used for the same use being made thereof before such
damage.
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10.3 TENANT'S RIGHT TO TERMINATE: If the Leased Premises are damaged by
any peril and Landlord does not elect to terminate this Lease or is not entitled
to terminate this Lease pursuant to this Article, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be complete. Tenant shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised in the case of A or B below only by delivery to Landlord of a written
notice of election to terminate within seven days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:
A. The Leased Premises are damaged by any peril and, in the
reasonable opinion of Landlord's architect or construction consultant, the
restoration of the Leased Premises cannot be substantially completed within
twelve months after the date of such notice from Landlord; or
B. The Leased Premises are damaged by any peril within nine
months of the last day of the Lease Term and, in the reasonable opinion of
Landlord's architect or construction consultant, the restoration of the Leased
Premises cannot be substantially completed within ninety days after the date
such restoration is commenced.
10.4 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of
Article 10.3 above, captioned "Tenant's Right to Terminate," are intended to
supersede and replace the provisions contained in California Civil Code, Section
1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly,
Tenant hereby waives the provisions of said Civil Code Sections and the
provisions of any successor Code Sections or similar Laws hereinafter enacted.
10.5 ABATEMENT OF RENT: In the evens of damage to the Leased Premises
which does not result in the termination of this Lease, the Base Monthly Rent
(and any Additional Rent) shall be temporarily abated during the period of
restoration in proportion to the degree to which Tenant's use of the Leased
Premises is impaired by such damage.
ARTICLE 11
CONDEMNATION
11.1 LANDLORDS RIGHT TO TERMINATE: Subject to Article 11.3, Landlord
shall have the option to terminate this Lease if, as a result of a taking by
means of the exercise of the power of eminent domain (including inverse
condemnation and/or a voluntary sale or transfer by Landlord under threat of
condemnation to an entity having the power of eminent domain), (i) all or any
part of the Leased Premises is so taken, (ii) more than thirty-three and
one-third percent of the Buildings leasable area is so taken,
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(iii) more than thirty-three and one-third percent of the Common Area is so
taken, or (iv) because of the Laws then in force, the Leased Premises may not be
used for the same use being made thereof before such taking, whether or not
restored as required by Article 11..4 below. Any such option to terminate by
Landlord muss be exercisable within a reasonable period of time, to be effective
as of the date possession is taken by the condemnor.
11.2 TENANT'S RIGHT TO TERMINATE: Subject to Article 11.3, Tenant shall
have the option to terminate this Lease if, as a result of any taking by means
of the exercise of the power of eminent domain (including inverse condemnation
and/or a voluntary sale or transfer by Landlord to an entity having the power of
eminent domain under threat of condemnation), (i) all of the Leased Premises is
so taken, (ii) thirty-three and one-third percent or more of the Leased Premises
is so taken and the part of the Leased Premises that remains cannot, within a
reasonable period of time, be made reasonably suitable for the continued
operation of the Tenant's business, or (iii) there is a taking of a portion of
the Common Area and, as a result of such taking, Landlord cannot provide parking
spaces within the Project (or within a reasonable distance therefrom) equal in
number to at least sixty-six and two-thirds percent of Tenant's Number of
Parking Spaces (as set forth in Article 1), whether by rearrangement of the
remaining parking areas in the Common Area (including, if Landlord elects,
construction of multi-dock parking structures or restriping for compact cars
where permitted by Law), or by providing alternative parking facilities on other
land within reasonable walking distance of the Leased Premises. Tenant must
exercise such option within a reasonable period of time, to be effective on the
later to occur of (i) the date that possession of that portion of the Common
Area or the Leased Premises that is condemned is taken by the condemnor or (ii)
the date Tenant vacates the Leased Premises.
11.3 TEMPORARY TAKING: If any portion of the Leased Premises is
temporarily taken for one year or less, this Lease shall remain in effect. If
any portion of the Leased Premises is temporarily taken for a period which
either exceeds one year or which extends beyond the natural expiration of the
Lease Term, then Landlord and Tenant shall each independently have the option to
terminate this Lease, effective on the date possession is taken by the condemnor
11.4 RESTORATION AND ABATEMENT OF RENT: If any part of the Leased
Premises is taken by condemnation and this Lease is not terminated, then
Landlord shall repair any damage occasioned thereby to the remainder of the
Leased Premises to a condition reasonably suitable for Tenant's continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Article 10. I. As of the date possession is taken by the
condemning authority, (i) the Base Monthly Rent shall be reduced in the same
proportion that the area of that part of the Leased Premises so taken (less any
addition to the area of the Leased Premises by reason
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of any reconstruction) bears to the area of the Leased Premises immediately
prior to such taking, and (ii) Tenant's Proportionate Share shall be
appropriately adjusted.
11.5 DIVISION OF CONDEMNATION AWARD: Any award made for any condemnation
of the Project, the Building, the Common Areas or the Leased Premises, or any
portion thereof, shall belong to and be paid to Landlord, and Tenant hereby
assigns to Landlord all of its right, title and interest in any such award;
provided, however, that Tenant shall be entitled to receive any condemnation
award that is made directly to Tenant (i) for the taking of personal property,
inventory or trade fixtures belonging to Tenant, (ii) for the interruption of
Tenant's business or its moving costs, (iii) for loss of Tenant's goodwill, or
(iv) for any temporary taking where this Lease is not terminated as a result of
such taking. The rights of Landlord and Tenant regarding any condemnation shall
be determined as provided in this Article, and each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure, and
the provisions of any similar law hereinafter enacted, allowing either party to
petition the Superior Court to terminate this Lease and/or allocating
condemnation awards between Landlord and Tenant in the evens of a taking of the
Leased Premises,
ARTICLE 12
DEFAULT AND REMEDIES
12.1 EVENTS OF TENANT'S DEFAULT: Tenant shall be in default of its
obligations under this Lease if any of the following events occur:
A. Tenant shall have failed to pay Base Monthly Rent or any
Additional Rent when due; or
B. Tenant shall have done or permitted to have been done any
act, use or thing in its use, occupancy or possession of the Leased Premises or
in its use of the Common Areas which is prohibited by the terms of this Lease;
or
C. Tenant shall have failed to perform any term, covenant or
condition of this Lease, except those requiring the payment of Base Monthly Rent
or Additional Rent, within ten days after written notice from Landlord to Tenant
specifying the nature of such failure and requesting Tenant to perform same.
D. Tenant shall have sublet the Leased Premises or assigned or
encumbered its interest in this Lease in violation of the provisions contained
in Article 7, whether voluntarily or by operation of Law; or
E. Tenant shall have failed too continuously occupy the Leased
Premises for a period of 10 consecutive days; or
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F. Tenant or any Guarantor of this Lease shall have permitted or
suffered the sequestration or attachment of, or execution on, or the appointment
of a custodian or receiver with respect to, all or any substantial part of the
property or assets of Tenant (or such Guarantor) or any property or asset
essential to the conduct of Tenant's (or such Guarantor's) business, and Tenant
(or such Guarantor) shall have failed to obtain a return or release of the same
within thirty days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier; or
G. Tenant or any Guarantor of this Lease shall have made a
general assignment of all or a substantial part of its assets for the benefit of
its creditors; or
H. Tenant or any Guarantor of this Lease shall have allowed (or
sought) to have entered against it a decree or order which: (i) grants or
constitutes an order for relief, appointment of a trustee, or confirmation of a
reorganization plan under the bankruptcy laws of the United States; (ii)
approves as properly filed a petition seeking liquidation or reorganization
under said bankruptcy laws or any other debtor's relief law or similar statute
of the United States or any state thereof; or (iii) otherwise directs the
winding up or liquidation of Tenant; provided, however, if any decree or order
was entered without Tenant's consent or over Tenant's objection, Landlord may
not terminate this Lease pursuant to this Subarticle if such decree or order is
rescinded or reversed within thirty days after its original entry.
I. Tenant or any Guarantor of this Lease shall have availed
itself of the protection of any debtor's relief law, moratorium law or other
similar Law which does not require the prior entry of a decree of order.
12.2 LANDLORD'S REMEDIES: In the event of any default by Tenant, and
without limiting Landlord's right to indemnification as provided in Article 8.2,
Landlord shall have the following remedies, in addition to all other rights and
remedies provided by Law or otherwise provided in this Lease, to which Landlord
may resort cumulatively, or in the alternative:
A. Landlord may, as Landlord's election, keep this Lease in
effect and enforce, by an action at law or in equity all of its rights and
remedies under this Lease including, without limitation, (i) the right to
recover the rent and other sums as they become due by appropriate legal action,
(ii) the right to make payments required of Tenant, or perform Tenant's
obligations and be reimbursed by Tenant for the cost thereof with interest as
the then maximum rate of interest not prohibited by Law from the date the sum is
paid by Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies
of injunctive relief and specific performance to prevent Tenant from violating
the terms of this Lease and/or to compel Tenant to perform its obligations under
this Lease, as the case may be,
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B. Landlord may, as Landlord's election, terminate this Lease by
giving Tenant written notice of termination, in which event this Lease shall
terminate on the date set forth for termination in such notice. Any termination
under this Subarticle shall not relieve Tenant from its obligation to pay to
Landlord all Base Monthly Rent and Additional Rent then or thereafter due, or
any other sums due or thereafter accruing to Landlord, or from any claim against
Tenant for damages previously accrued or then or thereafter accruing. In no
event shall any one or more of the following actions by Landlord, in the absence
of a written election by Landlord to terminate this Lease, constitute a
termination of this Lease:
(1) Appointment of a receiver or keeper in order to
protect Landlord's interest hereunder;
(2) Consent to any subletting of the Leased Premises or
assignment of this Lease by Tenant, whether pursuant to the provisions hereof or
otherwise; or
(3) Any other action by Landlord or Landlord's agents
intended to mitigate the adverse effects of any breach of this Lease by Tenant,
including, without limitation, any action taken to maintain and preserve the
Leased Premises or any action taken to relet the Leased Premises, or any portion
thereof, for the account of Tenant and in the name of Tenant.
C. In the event Tenant breaches this Lease and abandons the
Leased Premises, Landlord may terminate this Lease, but this Lease shall not
terminate unless Landlord gives Tenant written notice of termination. No act by
or on behalf of Landlord intended to mitigate the adverse effect of such breach,
including those described by Subarticles B(l), (2) and (3) immediately
preceding, shall constitute a termination of Tenant's right to possession unless
Landlord gives Tenant written notice of termination. If Landlord does not
terminate this Lease by giving written notice of termination, Landlord may
enforce all its rights and remedies under this Lease, including the right to
recover rent as is becomes due under this Lease as provided in California Civil
Code Section 1951.4, as in effect on the Effective Date of this Lease.
D. In the event Landlord terminates this Lease, Landlord shall
be entitled, as Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to said Section 1951.2, an
interest rate equal to the maximum rate of interest then not prohibited by Law
shall be used where permitted. Such damages shall include, without limitation:
(1) The worth as the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided, computed by
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discounting suds amount as the discount rate of the Federal Reserve Bank of San
Francisco as the time of award plus one percent; and
(2) Any other amount necessary to compensate Landlord
for all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would be
likely to result therefrom, including, without limitation, the following: (i)
expenses for cleaning, repairing or restoring the Leased Premises; (ii) expenses
for altering, remodeling or otherwise improving the Leased Premises for the
purpose of reletting, including removal of existing leasehold improvements
and/or installation of additional leasehold improvements (regardless of how the
same is funded, including reduction of rent, a direct payment or allowance to a
new tenant, or otherwise); (iii) broker's fees, advertising costs and other
expenses of reletting the Leased Premises; (iv) costs of carrying the Leased
Premises, which costs would have been billed to Tenant as Additional Rent had
Tenant not defaulted and which include, but are not limited to; taxes, insurance
premiums, landscape maintenance, HVAC maintenance, utility charges and security
precautions; (v) expenses incurred in removing, disposing of and/or storing any
of Tenant's personal property, inventory or trade fixtures remaining therein;
(vi) attorneys' fees, expert witness fees, court costs and other reasonable
expenses incurred by Landlord (bus not limited to taxable costs) in retaking
possession of the Leased Premises, establishing damages hereunder, and releasing
the Leased Premises; and (vii) any other expenses, costs or damages otherwise
incurred or suffered ass result of Tenant's default.
12.3 LANDLORD'S DEFAULT AND TENANT'S REMEDIES: In the event Landlord
fails to perform any of its obligations under this Lease, Landlord shall
nevertheless not be in default under the terms of this Lease until such time as
Tenant shall have first given Landlord written notice specifying the nature of
such failure to perform its obligations, and then only after Landlord shall have
had a reasonable period of time following its receipt of such notice within
which to perform such obligations. In the event of Landlord's default as above
set forth, then, and only then, Tenant shall have the following remedies only:
A. Tenant may then proceed in equity or at law to compel
Landlord to perform its obligations and/or to recover damages proximately caused
by such failure to perform (except as and to the extent Tenant has waived its
right to damages as provided in this Lease).
B. Tenant, as its option, may then cure any default of Landlord
at Landlord's cost. If, pursuant to this Subarticle, Tenant reasonably pays any
sum to any third party or does any act that requires the payment of any sum to
any third party at any time by reason of Landlord's default, the sum paid by
Tenant shall be immediately due from Landlord to Tenant as the time Tenant
supplies Landlord with an invoice therefore (provided such invoice sets forth
and is accompanied by a written statement of Tenant setting forth in reasonable
detail the amount paid, the party to whom it was paid, the date
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is was paid, and the reasons giving rise to such payment), together with
interest at twelve percent per annum from the date of such invoice until Tenant
is reimbursed by Landlord. Tenant may not offset such sums against any
installment of rent due Landlord under the terms of this Lease.
12.4 LIMITATION ON TENANT'S RECOURSE: If Landlord is a corporation,
trust, partnership, joint venture, unincorporated association, or other form of
business entity, Tenant agrees that (i) the obligations of Landlord under this
Lease shall not constitute personal obligations of the officers, directors,
trustees, partners, joint venturers, members, owners, stockholders, or other
principals of such business entity and (ii) Tenant shall have recourse only to
Landlord's then equity interest, if any, in the Property for the satisfaction of
such obligations and not against the assets of such officers, directors,
trustees, partners, joint venturers, members, owners, stockholders or principals
(other than to the extent of their interest in the Property). Tenant shall look
exclusively to such equity interest of Landlord, if any, in the Property for
payment and discharge of any obligations imposed upon Landlord hereunder, and
Landlord is hereby released and relieved of any other obligations hereunder.
Additionally, if Landlord is a partnership, then Tenant covenants and agrees:
A. No partner of Landlord shall be sued or named as a party in
any suit or action brought by Tenant with respect to any alleged breach of this
Lease (except to the extent necessary to secure jurisdiction over the
partnership and then only for that sole purpose);
B. No service of process shall be made against any partner of
Landlord except for the sole purpose of securing jurisdiction over the
partnership; and
C. No writ of execution shall be levied against the assess of
any partner of Landlord other than to the extent of his interest in Property.
Tenant further agrees that each of the foregoing covenants and agreements shall
be enforceable by Landlord and by any partner of Landlord and shall be
applicable to any actual or alleged misrepresentation or non-disclosure made
respecting this Lease or the Leased Premises or any actual or alleged failure,
default or breach of any covenant or agreement either expressly or implicitly
contained in this Lease or imposed by statute or as common law.
12.5 TENANT'S WAIVER: Landlord and Tenant agree that the provisions of
Article 12.3 above are intended to supersede and replace the provisions of
California Civil Code 1932(l), 1941 and 1942, and accordingly, Tenant hereby
waives the provisions of Section 1932(1), 1941 and 1942 of the California Civil
Code and/or any similar or successor Law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the
rent due under this Lease. Tenant hereby waives any right of redemption or
relief from forfeiture under the Laws of
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the State of California, or under any other present or future Law, in the event
Tenant is evicted or Landlord takes possession of the Leased Premises by reason
of any default by Tenant.
ARTICLE 13
GENERAL PROVISIONS
13.1 TAXES ON TENANT'S PROPERTY: Tenant shall pay before delinquency any
and all taxes, assessments, license fees, use fees, permit fees and public
charges of whatever nature or description levied, assessed or imposed against
Tenant or Landlord by a governmental agency arising out of, caused by reason of
or based upon Tenant's estate in this Lease, Tenant's ownership of property,
improvements made by Tenant to the Leased Premises, improvements made by
Landlord for Tenant's use within the Leased Premises, Tenant's use (or estimated
use) of public facilities or services or Tenant's consumption (or estimated
consumption) of public utilities, energy, water or other resources. On demand by
Landlord, Tenant shall furnish Landlord with satisfactory evidence of these
payments. If any such taxes, assessments, fees or public charges are levied
against Landlord, Landlord's property, the Building or the Project, or if the
assessed value of the Building or the Project is increased by the inclusion
therein of a value placed upon same, then Landlord, after giving written notice
to Tenant, shall have the right, regardless of the validity thereof, to pay such
taxes, assessment, fee or public charge and bill Tenant, as Additional Rent, the
amount of such taxes, assessment, fee or public charge so paid on Tenant's
behalf. Tenant shall, within ten days from the date is receives an invoice from
Landlord setting forth the amount of such taxes, assessment, fee or public
charge so levied, pay to Landlord, as Additional Rent, the amount set forth in
said invoice. Failure by Tenant to pay the amount so invoiced within said ten
day period shall be conclusively deemed a default by Tenant under this Lease.
Tenant shall have the right, and with Landlord's full cooperation if Tenant is
not then in default under the terms of this Lease, to bring suit in any court of
competent jurisdiction to recover from the taxing authority the amount of any
such taxes, assessment, fee or public charge so paid.
13.2 HOLDING OVER: This Lease shall terminate without further notice on
the Lease Expiration Date (as set forth in Article I). Any holding over by
Tenant after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Article. Any such holding over shall be
deemed an unlawful detainer of the Leased Premises unless Landlord has consented
to same. Any such holding over to which Landlord has consented shall be
construed to be a tenancy from month to month, on the same terms and conditions
herein specified insofar as applicable, except that the Base Monthly Rent shall
be increased to an amount equal to one hundred fifty percent of the Base Monthly
Rent payable during the last full month immediately preceding such holding over.
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13.3 SUBORDINATION TO MORTGAGES: This Lease is subject and subordinate
to all underlying ground leases and to all mortgages and deeds of truss which
affect the Building and are of public record as of the Effective Date of this
Lease, and to all renewals, modifications, consolidations, replacements and
extensions thereof. However, if the lessor under any such ground lease or any
Lender holding any such mortgage or deed of truss shall advise Landlord that is
desires or requires this Lease to be made prior and superior thereto, then, upon
written request of Landlord to Tenant, Tenant shall promptly execute,
acknowledge and deliver any and all documents or instruments which Landlord and
such lessor or Lender deem necessary or desirable to make this Lease prior
thereto. Tenant hereby consents to Landlord's ground leasing the land underlying
the Building and/or encumbering the Building as security for future loans on
such terms as Landlord shall desire, all of which future ground leases,
mortgages or deeds of truss shall be subject and subordinate to this Lease.
However, if any lessor under any such future ground lease or any Lender holding
such future mortgage or deed of truss shall desire or require that this Lease be
made subject and subordinate to such future ground lease, mortgage or deed of
trust, then Tenant agrees, within ten days after Landlord's written request
therefore, to execute, acknowledge and deliver to Landlord any and all documents
or instruments requested by Landlord or such lessor or Lender as may be
necessary or proper to assure the subordination of this Lease to such future
ground lease, mortgage or deed of trust; bus only if such lessor or Lender
agrees to recognize Tenant's rights under this Lease and not to disturb Tenant's
quiet possession of the Leased Premises so long as Tenant is not in default
under this Lease.
13.4 TENANT'S ATTORNMENT UPON FORECLOSURE: Tenant shall, upon request,
attorn (i) to any purchaser of the Building as any foreclosure sale or private
sale conducted pursuant to any security instrument encumbering the Building,
(ii) to any grantee or transferee designated in any deed given in lieu of
foreclosure of any security interest encumbering the Building, or (iii) to the
lessor under any underlying ground lease of the land underlying the Building,
should such ground lease be terminated; provided that such purchaser, grantee or
lessor recognizes Tenant's rights under this Lease.
13.5 MORTGAGEE PROTECTION: In the event of any default on the part of
Landlord, Tenant will give notice by registered mail to any Lender or lessor
under any underlying ground lease who shall have requested, in writing, to
Tenant that it be provided with such notice, and Tenant shall offer such Lender
or lessors reasonable opportunity to cure the default, including time to obtain
possession of the Leased Premises by power of sale or judicial foreclosure or
other appropriate legal proceedings if reasonably necessary to effects cure.
13.6 ESTOPPEL CERTIFICATES: Tenant will, following any request by
Landlord, promptly execute and deliver to Landlord an estoppel certificate (i)
certifying that this Lease is unmodified and in full force and effect, or, if
modified, stating the nature of such modification and certifying that this
Lease, as so modified, is in full force
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and effect, (ii) stating the date to which the rent and other charges are paid
in advance, if any, (iii) acknowledging that there are not, to Tenant's
knowledge, any uncured defaults on the part of Landlord hereunder, or specifying
such defaults if any are claimed, and (iv) certifying such other information
about this Lease as may be reasonably requested by Landlord. Tenant's failure to
execute and deliver such estoppel certificate within ten days after Landlord's
request therefore shall be a material default by Tenant under this Lease, and
Landlord shall have all of the rights and remedies available to Landlord as
Landlord would otherwise have in the case of any other material default by
Tenant, including the right to terminate this Lease and sue for damages
proximately caused thereby : being agreed and understood by Tenant that Tenant's
failure to so deliver such estoppel certificate in a timely manner could result
in Landlord being unable to perform committed obligations to other third parties
which were made by Landlord in reliance upon this covenant of Tenant. Landlord
and Tenant intend that any statement delivered pursuant to this Article may be
relied upon by any Lender or purchaser or prospective Lender or purchaser of the
Building, the Project, or party interest therein.
13.7 TENANT'S FINANCIAL INFORMATION: Tenant shall, within ten business
days after Landlord's request therefore, deliver to Landlord a copy of a current
financial statement, including an income statement and balance sheet, and any
such other information reasonably requested by Landlord regarding Tenant's
financial condition. Tenant acknowledges that Landlord has and will rely on the
truth and accuracy of the information provided by Tenant to Landlord both prior
to and during the term of the Lease. Landlord shall be entitled to disclose such
financial statements or other information to its Lender, to any present or
prospective principal of or investor in Landlord, or to any prospective Lender
or purchaser of the Building, the Project or any portion thereof or interest
therein. Any such financial statement or other information which is marked
"confidential" or "company secrets" (or is otherwise similarly marked by Tenant)
shall be confidential and shall not be disclosed by Landlord to any third party
except as specifically provided in this Article, unless the same becomes a part
of the public domain without the fault of Landlord.
13.8 TRANSFER BY LANDLORD: Landlord and its successors in interest shall
have the right to transfer their interest in the Building, the Project, or any
portion thereof as any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Project.
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13.9 FORCE MAJEURE: The obligations of each of the parties under this
Lease (other than the obligation to pay money) shall be temporarily excused if
such party is prevented or delayed in performing such obligation by reason of
any strikes, lockouts or labor disputes; inability to obtain labor, materials,
fuels or reasonable substitutes therefore' governmental restrictions,
regulations, controls, action or inaction; civil commotion; inclement weather,
fire or other acts of God; or other causes (except financial inability) beyond
the reasonable control of the party obligated to perform (including acts or
omissions of the other party for a period equal to the period of any such
prevention, delay or stoppage.
13.10 NOTICES: Any notice required or desired to be given by a party
regarding this Lease shall be in writing and shall be personally served, or in
lieu of personal service may be given by: (i) delivery by Federal Express,
United Parcel Service or similar commercial service, (ii) electronic facsimile
transmission, or (iii) by depositing such notice in the United States mail,
postage prepaid, addressed to the other party as follows:
A. If addressed to Landlord, to Landlord as its Address for
Notices (as set forth in Article I).
B. If addressed to Tenant, to Tenant at its Address for Notices
(as set forth in Article I).
Any notice given by registered mail shall be deemed to have been given on the
third business day after its deposit in the United States mail. Any notice given
by certified mail shall be deemed given on the date receipt was acknowledged to
the postal authorities. Any notice given by mail other than registered or
certified mail shall be deemed given only if received by the other party, and
then on the date of receipt. In the event of notice by electronic facsimile
transmission or commercial carrier, notice shall be deemed received on the date
of confirmation documented by the transmission or carrier. Each party may, by
written notice to the other in the manner aforesaid, change the address to which
notices addressed to is shall thereafter be mailed.
13.11 ATTORNEYS' FEES: In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party. In the event
that Landlord shall be required to retain counsel to enforce any provision of
this Lease, and if Tenant shall thereafter cure (or desire to cure) such
default, Landlord shall be conclusively deemed the prevailing party, and Tenant
shall pay to Landlord all attorneys' fees, expert witness fees, court costs and
other reasonable expenses so incurred
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by Landlord promptly upon demand. Landlord may enforce this provision by either
(i) requiring Tenant to pay such fees and costs as a condition to curing its
default or (ii) bringing a separate action to enforce such payment, is being
agreed by and between Landlord and Tenant that Tenant's failure to pay such fees
and costs upon demand shall constitute a breach of this Lease in the same manner
as a failure by Tenant to pay the Base Monthly Rent, giving Landlord the same
rights and remedies as if Tenant failed to pay the Base Monthly Rent.
13.12 DEFINITIONS: Any term that is given a special meaning by any
provision in this Lease shall, unless otherwise specifically stated, have such
meaning whenever used in this Lease or in any Addenda or amendment hereto. In
addition to the terms defined in Article I, the following terms shall have the
following meanings:
A. REAL PROPERTY TAXES: The term "Real Property Tax" or "Real
Property Taxes" shall each mean (i) all taxes, assessments, levies and other
charges of any kind or nature whatsoever, general and special, foreseen and
unforeseen (including all installments of principal and interest required to pay
any general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership or new
construction), now or hereafter imposed by any governmental or
quasi-governmental authority or special district having the direct or indirect
power to tax or levy assessments, which are levied or assessed for whatever
reason against the Project or any portion thereof, or Landlord's interest
therein, or the fixtures, equipment and other property of Landlord that is an
integral part of the Project and located thereon, or Landlord's business of
owning, leasing or managing the Project or the gross receipts, income or rentals
from the Project; (ii) all charges, levies or fees imposed by any governmental
authority against Landlord by reason of or based upon the use of or number of
parking spaces within the Project, the amount of public services or public
utilities used or consumed (e.g. water, gas, electricity, sewage or surface
water disposal) at the Project, the number of persons employed by tenants of the
Project, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Project, or the type of use or uses conducted
within the Project; and (iii) all costs and fees (including attorneys' fees)
incurred by Landlord in contesting any Real Property Tax and in negotiating with
public authorities as to any Real Property Tax. If, as any time during the Lease
Term, the taxation or assessment of the Project prevailing as of the Effective
Date of this Lease shall be altered so that in lieu of or in addition to any
Real Property Tax described above there shall be levied, assessed or imposed
(whether by reason of a change in the method of taxation or assessment, creation
of a new sax or charge, or any other cause) an alternate, substitute, or
additional sax or charge (i) on the value, size, use or occupancy of the Project
or Landlord's interest therein or (ii) on or measured by the gross receipts,
income or rentals from the Project, or on Landlord's business of owning, leasing
or managing the Project or (iii) computed in any manner with respect to the
operation of the Project, then any such sax or charge, however designated, shall
be included within the meaning of the terms "Real Property Tax" or "Real
Property
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Taxes" for purposes of this Lease. If any Real Property Tax is partly based upon
property or rents unrelated to the Project, then only that part of such Real
Property Tax that is fairly allocable to the Project shall be included within
the meaning of the terms "Real Property Tax" or "Real Property Taxes".
Notwithstanding the foregoing, the terms "Real Property Tax" or "Real Property
Taxes" shall not include estate, inheritance, transfer, gift or franchise taxes
of Landlord or the federal or state income sax imposed on Landlord's income from
all sources.
B. LANDLORD'S INSURANCE COSTS: The term "Landlord's Insurance
Costs" shall mean the costs to Landlord to carry and maintain the policies of
fire and property damage insurance, including quake and flood, for the Project
and general liability insurance required, or permitted, to be carried by
Landlord pursuant to Article 9, together with any deductible amounts paid by
Landlord upon the occurrence of any insured casualty or loss.
C. PROJECT MAINTENANCE COSTS: The term "Project Maintenance
Costs" shall mean all costs and expenses (except Landlord's Insurance Costs and
Real Property Taxes) paid or incurred by Landlord in protecting, operating,
maintaining, repairing and preserving the Project and all parts thereof,
including without limitation, (i) professional management fees (equal to five
percent of the annualized Base Monthly Rent), (ii) the amortizing portion of any
costs incurred by Landlord in the making of any modifications, alterations or
improvements as set forth in Article 6, which are so amortized during the Lease
Term, (iii) costs of complying with governmental regulations governing Tenant's
use of Hazardous Materials, and Landlord's costs of monitoring Tenant's use of
Hazardous Materials including fees charged by Landlord's consultants to
periodically inspect the Premises and the Property, and (iv) such other costs as
may be paid or incurred with respect to operating, maintaining and preserving
the Project, such as repairing replacing and resurfacing the exterior surfaces
of the buildings (including roofs), repairing, replacing, and resurfacing paved
areas, repairing structural parts of the buildings, cleaning, maintaining,
repairing, or replacing the interior of the Leased Premises both during the
Lease Term and upon the termination of the Lease, and maintaining, repairing or
replacing, when necessary electrical, plumbing, sewer, drainage, heating,
ventilating and air conditioning systems serving the buildings, providing
utilities to the common areas, maintenance, repair, replacement or installation
of lighting fixtures, directional or other signs and signals, irrigation or
drainage systems, trees, shrubs, materials, maintenance of all landscaped areas,
and depreciation and financing costs on maintenance and operating machinery and
equipment (if owned) and rental paid for such machinery and equipment (if
leased).
D. READY FOR OCCUPANCY: The term "Ready for Occupancy" shall
mean the date upon which (i) the Leased Premises are available for Tenant's
occupancy in a broom clean condition and (ii) the improvements, if any, to be
made to the Leased Premises by Landlord as a condition to Tenant's obligation to
accept
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possession of the Leased Premises have been substantially completed and the
appropriate governmental building department (i.e. the City building department,
if the Project is located within a City, or otherwise the County building
department) shall have approved the construction of the improvements as
substantially complete or is willing to so approve the construction of such
improvements as substantially complete subject only to compliance with specified
conditions which are the responsibility of Tenant to satisfy or is willing to
allow Tenant to occupy subject to its receiving assurances that specified work
will be completed.
E. TENANT'S PROPORTIONATE SHARE: The term "Tenant's
Proportionate Share" or "Tenant's Share," as used with respect to an item
pertaining to the Building, shall each mean that percentage obtained by dividing
the leasable square footage contained within the Leased Premises (as set forth
in Article I) by the total leasable square footage contained within the Building
as the same from time to time exists or, as used with respect to an item
pertaining to the Project, shall each mean that percentage obtained by dividing
the leasable square footage contained within the Leased Premises (as set forth
in Article I) by the total leasable square footage contained within the Project
as the same from time to time exists, unless, as to any given item, such a
percentage allocation unfairly burdens or benefits a given tenant(s), in which
case Landlord shall have the exclusive right to equitably allocate such item so
as to not unfairly burden or benefit any given tenant(s). Landlord's
determination of any such special allocation shall be final and binding upon
Tenant unless made in bad faith.
F. BUILDING'S PROPORTIONATE SHARE: The term "Building's
Proportionate Share" or "Building's Share" shall each mean that percentage which
is obtained by dividing the leasable square footage contained within the
Building by the leasable square footage contained within all buildings located
within the Project, unless, as to any given item, such a percentage allocation
unfairly burdens or benefits a given building(s), in which case Landlord shall
have the exclusive right to equitably allocate such item so as to not unfairly
burden or benefit any given building(s). Landlord's determination of any such
special allocation shall be final and binding upon Tenant unless made in bad
faith.
G. BUILDING OPERATING EXPENSES: The term "Building Operating
Expenses" shall mean and include the Building's Share of all Real Property
Taxes, plus the Building's Share of all Landlord's Insurance Costs, plus the
Building's Share of all Project Maintenance Costs, plus an accounting fee equal
to five percent of all such costs.
H. LAW: The term "Law" shall mean any judicial decision and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or usher requirement of any municipal, county , state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Project, or any of them in
effect either at the Effective Date of this Lease
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or as any time during the Lease Term, including, without limitation, any
regulation, order, or policy of any quasi-official entity or body (e.g. a board
of fire examiners or a public utility or special district).
I. LENDER: The term "Lender" shall mean the holder of any Note
or other evidence of indebtedness secured by the Project or any portion thereof
J. PRIVATE RESTRICTIONS: The term "Private Restrictions" shall
mean all recorded covenants, conditions and restrictions, private agreements,
easements, and any other recorded instruments affecting the use of the Project,
as they may exist from time to time.
K. RENT: The term "rent" shall mean collectively Base Monthly
Rent and all Additional Rent.
13.13 GENERAL WAIVERS: One party's consent to or approval of any act by
the other party, requiring the first party's consent or approval shall not be
deemed to waive or render unnecessary the first party's consent to or approval
of any subsequent similar act by the other party. No waiver of any provision
hereof or any breach of any provision hereof shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No waiver of any provision of
this Lease shall be deemed a continuing waiver unless such waiver specifically
states so in writing and is signed by both Landlord and Tenant. No delay or
omission in the exercise of any right or remedy accruing to either party upon
any breach by the other party under this Lease shall impair such right or remedy
or be construed as a waiver of any such breach theretofore or thereafter
occurring. The waiver by either party of any breach of any provision of this
Lease shall not be deemed to be a waiver of any subsequent breach of the same or
any other provisions herein contained.
13.14 MISCELLANEOUS: Should any provision of this Lease prove to be
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for or against either
Landlord or Tenant. The captions used in this Lease are for convenience
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only and shall not be considered in the construction or interpretation of any
provision hereof. When the context of this Lease requires, the neuter gender
includes the masculine, the feminine, a partnership or corporation or joint
venture, and the singular includes the plural. The terms "must," "shall," "will"
and "agree" are mandatory. The term "may" is permissive. When a party is
required to do something by this Lease, it shall do so at its sole cost and
expense without right of reimbursement from the other party unless specific
provision is made therefore. Where Tenant is obligated not to perform any act or
is not permitted to perform any act, Tenant is also obligated to restrain any
others reasonably within its control, including agents, invitees, contractors,
subcontractors and employees, from performing said act. Landlord shall not
become orbs deemed a partner or a joins venturer with Tenant by reason of any of
the provisions of this Lease.
ARTICLE 14
CORPORATE AUTHORITY
BROKERS AND ENTIRE AGREEMENT
14.1 CORPORATE AUTHORITY: If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
Tenant is validly formed and duly authorized and existing, that Tenant is
qualified to do business in the State in which the Leased Premises are located,
that Tenant has the full right and legal authority to enter into this Lease,
that he or the is duly authorized to execute and deliver this Lease on behalf of
Tenant in accordance with the bylaws and/or a board of directors' resolution of
Tenant, and that this Lease is binding upon Tenant in accordance with its terms.
Tenant shall, within thirty days after execution of this Lease, deliver to
Landlord a certified copy of the resolution of its board of directors
authorizing or ratifying the execution of this Lease, and if Tenant fails to do
so, Landlord as its sole election may elect to (i) extend the Intended
Commencement Date by such number of days that Tenant shall have delayed in so
delivering such corporate resolution to Landlord or (ii) terminate this Lease.
14.2 BROKERAGE COMMISSIONS: Tenant warrants that is has not had any
dealings with any real estate broker(s), leasing agent(s), finder(s) or
salesmen, other than those persons or entities named in Article I as the
"Brokers" with respect to the lease by it of the Leased Premises pursuant to
this Lease, and that it will indemnify, defend with competent counsel, and hold
Landlord harmless from any liabilities for the payment of any real estate
brokerage commissions, leasing commissions or finder's fees claimed by any other
real estate broker(s), leasing agent(s), finder(s) or salesmen to be earned or
due and payable by reason of Tenant's agreement or promise (implied or
otherwise) to pay (or have Landlord pay) such a commission or finder's fee by
reason of its leasing the Leased Premises pursuant to this Lease.
14.3 ENTIRE AGREEMENT: This Lease, the Exhibits (as described in Article
I) and the Addenda (as described in Article I), which Exhibits and Addenda are
by this
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reference incorporated herein, constitute the entire agreement between the
parties, and there are no other agreements, understandings or representations
between the parties relating to the lease by Landlord of the Leased Premises to
Tenant, except as expressed herein, No subsequent changes, modifications or
additions to this Lease shall be binding upon the parties unless in writing and
signed by both Landlord and Tenant.
14.4 LANDLORD'S REPRESENTATIONS: Tenant acknowledges that neither
Landlord nor any of its agents made any representations or warranties respecting
the Project, the Building or the Leased Premises, upon which Tenant relied in
entering into this Lease, which are not expressly set forth in this Lease.
Tenant further acknowledges that neither Landlord nor any of its agents made any
representations as to (i) whether the Leased Premises may be used for Tenant's
intended use under existing Law or (ii) the suitability of the Leased Premises
for the conduct of Tenant's business or (iii) the exact square footage of the
Leased Premises, and that Tenant relied solely upon its own investigations
respecting said matters. Tenant expressly waives any and all claims for damage
by reason of any statement, representation, warranty, promise or other agreement
of Landlord or Landlord's agent(s), if any, not contained in this Lease or in
any Addenda hereto.
ARTICLE 15
TENANT IMPROVEMENTS
Landlord shall pay for and construct the improvements depicted
on Exhibit "D," attached hereto, new building standard carpet, base and painting
of the walls of the Premises ("Tenant Improvements"). Except for the Tenant
Improvements, Tenant agrees to lease the Premises in their "as-is" condition,
and any alteration or modification to the Premises shall be made as Tenant's
sole cost and expense and shall not delay the Lease Commencement Date nor the
payment of Rent.
ARTICLE 16
EARLY OCCUPANCY
At such time as Landlord has completed construction of' the
Tenant Improvements, Tenant shall have the right to take occupancy of the
Premises and to use the Premises as set forth under the terms of the Lease.
Notwithstanding Tenant's early occupancy of the Premises, Tenant shall not be
required to pay Base Monthly Rent, nor Additional Rent for the use of the
Premises for any period of time prior to July 1, 1999. From and after July I,
999, Tenant shall pay Rent for the Premises as set forth in this Lease.
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IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease
as of the date set forth above, wish the intent to be legally bound thereby as
of the Effective Date of this Lease.
AS LANDLORD: AS TENANT:
RENCO BAYSIDE INVESTORS VIRAGE LOGIC, CORP.
A California Limited Partnership A California Corporation
By: Renco Properties IX By: /s/ Adam Kablanian
A California Limited Partnership ---------------------------------
General Partner Title: President & CEO
------------------------------
By: Renco Properties, Inc.
General Partner
By: /s/ Donald Vermeil
---------------------------------
Title: Secretary/Treasurer Renco Properties, Inc.
-------------------------------------------
By: /s/
---------------------------------
Title: Exec. VP & Asst. Secy. Renco Properties, Inc.
----------------------------------------------
By: /s/
---------------------------------
Title: Richard T. Peery Trustee, UTA Dated 7/20/77
----------------------------------------------
(Richard T. Peery Separate Property Trust)
----------------------------------------------
If Tenant is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. This Lease must
be executed by the chairman of the board, president or vice president, and the
secretary, assistant secretary, the chief financial officer or assistant
treasurer, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event a certified copy of the bylaws or a certified
copy of the resolution, as the case may be, muss be attached to this Lease.
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EXHIBIT "C"
ACCEPTANCE AGREEMENT
This Acceptance Agreement is made as of ___________________, by and
between the parties hereto with regard to the Lease dated ___________________,
by and between ______________________________, a California general partnership,
as Landlord ("Landlord"), and _________________________________, a California
Corporation, as Tenant ("Tenant"), affecting those premises commonly known as
________________ located at __________________________________ in the City of
____________, State of California (the "Premises"). The parties agree as
follows:
1. All improvements required to be constructed by Landlord by the Lease
have been completed in accordance with the terms of the Lease and are hereby
accepted by Tenant, subject to the completion of punchlist items identified on
Exhibit "A" attached hereto.
2. Possession of the Premises has been delivered to Tenant and Tenant
has accepted and taken possession of the Premises.
3. The Lease Commencement Date is _____________________.
4. The Lease Term shall expire on _________________ unless sooner
terminated according to the terms of the Lease or by mutual agreement.
5. The Base Monthly Rent due pursuant to the Lease is as follows:
_____________ through _____________ $______________________
_____________ through _____________ $______________________
_____________ through _____________ $______________________
6. Landlord has received a Security Deposit in the amount of ___________
($__________).
7. Landlord has received Prepaid Rent in the amount of _________________
($__________), which shall be applied to the first installment of Base Monthly
Rent.
8. The Lease is in full force and effect, neither party is in default of
its obligations under the Lease, and Tenant has no setoffs, claims, or defenses
to the enforcement of the Lease.
<PAGE> 53
AS LANDLORD: AS TENANT:
VIRAGE LOGIC, CORP.
- -------------------------------- A California Corporation
A California Limited Partnership
By: By:
--------------------------------- ---------------------------------
Title: General Partner Title:
------------------------------ ------------------------------
By:
---------------------------------
Title: General Partner
<PAGE> 54
EXHIBIT "A"
None
<PAGE> 1
EXHIBIT 10.20
HQ
OFFICE SERVICE AGREEMENT
This Agreement is dated August 3, 1999 entered into in Lebanon, NJ (City & State
of Center) for the HQ Clinton (Center) located at 3 Werner Way, Lebanon, NJ
08833 (Center Address) by and between HQ Global Workplaces, Inc. (hereinafter
"HQ") and Virage Logic (hereinafter "Client).
HQ and Client agree that HQ shall grant to Client for an in consideration of the
agreements and fee(s) set forth herein and in the Master Office Service
Agreement dated August 3, 1999, a license to use the Office(s) as from time to
time designated by HQ and, in common with HQ's other clients. Client's license
to use HQ's Business Center facilities and services shall be in accordance with
the terms hereof and the Master Office Service Agreement. All of the terms and
conditions of the Master Office Service Agreement shall be included in and shall
control this Agreement. This Agreement shall be attached to and become part of
the Master Office Service Agreement.
1. BASIC TERMS. Stated below are the basic terms of this Agreement and all
provisions of the Master Office Service Agreement are to be read in accord
therewith.
A. Base Services. HQ's Complete Executive Office Program, including the
use of executive offices complete with professional administrative staff and
such other inclusive services are as defined in Schedule "A" (attached to the
Master Office Service Agreement.)
B. Additional Services. Access to additional business services for
purchase as needed by Client, including secretarial, administrative,
telecommunications support and such other services are as defined in Schedule
"B" (attached to the Master Office Service Agreement.)
C. HQ Business Center Name: HQ Clinton.
D. Business Center Address: 3 Warner Way.
E. Office number(s): #331($865.00), #332 ($860.00), #333 ($1,046.00)
having a maximum occupancy capacity of 6 person(s).
<TABLE>
<CAPTION>
- ------------------------- --------------------- --------------------
# OF PERSONS MONTHLY BASE
OFFICE #(S) PER OFFICE OFFICE FEE
- ------------------------- --------------------- --------------------
<S> <C> <C>
334 2 $ 890.50
- ------------------------- --------------------- --------------------
335 2 $1,176.00
- ------------------------- --------------------- --------------------
336 2 $ 890.50
- ------------------------- --------------------- --------------------
TOTAL: 3 OFFICES 6 PEOPLE $2,967.00
- ------------------------- --------------------- --------------------
</TABLE>
1 of 1
<PAGE> 2
F. Commencement Date: August 9, 1999
G. Initial Term: Six (6) months
H. End of Initial Term: January 31, 2000
I. Total Fixed Monthly Charges: $4,007.00
J. Refundable Services Retainer: $6,010.50
K. Client represents and warrants to HQ that there are no agents,
brokers, finders or other parties except Kurt Burdock - CO, Richard Ellis with
whom Client has dealt who are or may be entitled to any commission or fee with
respect to this Agreement unless noted in this section.
L. Based upon a twelve, six or three month term, and upon the Ending of
the Initial Term (as noted above), or any extension thereof, the term of this
Agreement and the license herein granted shall be automatically extended for the
same period of time as the Initial Term, upon the same terms and conditions as
contained herein, unless either party give notice to the other in writing to the
contrary at least sixty (60) days prior to the End of Initial Term if Client has
licensed the use of two (2) or less offices or(90) days if Client has licensed
the use of three (3) or more offices.
All notices hereunder shall be in writing. Notices to Client shall be deemed to
be duly given if mailed by registered or certified mail, postage prepaid,
overnight mail service or hand delivered with proof of delivery addressed to
Client at:
Contact: James Pekarsky, Chief Financial Officer
Client/Company Name: Virage Logic
Client Address: 9 Trade Winds Dr.
Client City, State, Zip: Randolph, NJ 07849
Phone:
Notice to HQ shall be deemed to be duly given if mailed by registered or
certified mail, postage prepaid, overnight mail service or hand delivered with
proof of delivery addressed to HQ at the Building and as follows:
Center Name: HQ Clinton
Address: 3 Warner Way
Client City, State, Zip: Lebanon NJ 08833
Attn: Center Manager
Center Phone: 908-236-3800
2 of 2
<PAGE> 3
This Agreement may be executed in two or more counterparts, each of which shall
be deemed to be an original but all of which together shall constitute one and
the same instrument.
HQ GLOBAL WORKPLACES, INC. CLIENT: VIRAGE LOGIC
By: /s/ By: /s/
-------------------------- ----------------------------
Authorized Signature Authorized Signature
James Pekarsky
-------------------------- ----------------------------
Print Name Print Name
Its: Its: 8/5/99
-------------------------- ----------------------------
IF A PARTNERSHIP:
By:
----------------------------
Authorized Signature
----------------------------
Print Name
Its:
----------------------------
3 of 3
<PAGE> 4
ADDENDUM 1
TO
OFFICE SERVICE AGREEMENT
The following modifications are hereby made to the Office Service Agreement
dated August 3, 1999 by and between HQ Global Workplaces, Inc. d/b/a HQ Clinton
and Virage Logic.
Section 1.E. Add the following:
<TABLE>
<CAPTION>
------------------- ---------------- ------------------
OFFICE #(S) # OF PERSONS MONTHLY BASE
PER OFFICE OFFICE FEE
------------------- ---------------- ------------------
<S> <C> <C>
331 2 $ 865.00
------------------- ---------------- ------------------
332 2 $ 860.00
------------------- ---------------- ------------------
333 2 $1,046.00
------------------- ---------------- ------------------
</TABLE>
Change Monthly Base Office Fee to $5,728.00 and Total
number of people to twelve (12)
Section 1.F. Commencement Date: August 23, 1999
Section 1.I. Change Total Fixed Monthly Charges to $8,038.00
Section 1.J. Change Total Refundable Service Retainer: $12,092.00
Additional Service Retainer will be required
in the amount of $6,046.50.
All other terms and conditions will remain in full force and effect.
HQ GLOBAL WORKPLACES, INC. D/B/A HQ CLINTON
/s/
- ---------------------------- ---------------
Barbara Cafferty Date
Center Manager
VIRAGE LOGIC
/s/ VP Finance, CFO 8/5/99
- ---------------------------- ----------------
Signature/Title Date
<PAGE> 5
ADDENDUM 2
TO
OFFICE SERVICE AGREEMENT
The following modifications are hereby made to the Office Service Agreement
dated August 3, 1999 by and between HQ Global Workplaces, Inc. d/b/a HQ Clinton
and Virage Logic.
Section 1.E. Add the following:
<TABLE>
<CAPTION>
------------------- ---------------- ------------------
OFFICE #(S) # OF PERSONS MONTHLY BASE
PER OFFICE OFFICE FEE
------------------- ---------------- ------------------
<S> <C> <C>
345 2 $ 570.00
------------------- ---------------- ------------------
346 2 $ 640.00
------------------- ---------------- ------------------
</TABLE>
Change Monthly Base Office Fee to $6,938.00 and Total
number of people to sixteen (16)
Section 1.F. Commencement Date: September 6, 1999
Section 1.I. Change Total Fixed Monthly Charges to $9,873.00
Section 1.J. Change Total Refundable Service Retainer: $14,809.50
Additional Service Retainer will be required
in the amount of $2,752.50.
All other terms and conditions will remain in full force and effect.
HQ GLOBAL WORKPLACES, INC. D/B/A HQ CLINTON
/s/
- ---------------------------- ---------------
Barbara Cafferty Date
Center Manager
VIRAGE LOGIC
/s/ VP Finance, CFO 8/5/99
- ---------------------------- ----------------
Signature/Title Date
<PAGE> 6
ADDENDUM
TO
MASTER OFFICE SERVICE AGREEMENT
The following modifications are hereby made to the Master Office Service
Agreement dated August 3, 1999 by and between HQ Global Workplaces, Inc. d/b/a
HQ Clinton and Virage Logic.
Section 5 DAMAGES AND INSURANCE
...Client agrees to pay for repainting and cleaning
fees for each office occupied less than twelve (12)
months by Client at a cost not to exceed one
hundred dollars ($100.00) per Office.
...HQ shall have the right to show the Office to
prospective Clients after written notification,
provided HQ will use reasonable efforts not to
disrupt Client's business.
...effective upon such casualty, or may elect to
repair, restore, or rehabilitate, or cause to be
repaired, restored or rehabilitated, the HQ
Business Center, without expense to the client,
within thirty (30) days or within such longer
period of time as may be required because of events
beyond HQ's control.
Section 7 RESTRICTION ON HIRING
Both parties agree that during the term of this
Master Agreement...
The hiring party shall be liable to the other party
for and shall pay to such other party, on demand,
liquidated damages in the sum of $25,000...
Section 8B MISCELLANEOUS
Either Party's failure to enforce any provision of
this Agreement or its acceptance of fees shall not
be a waiver and shall not prevent such party from
enforcing...
All other terms and conditions will remain in full force and effect.
1 of 1
<PAGE> 7
HQ GLOBAL WORKPLACES, INC. D/B/A HQ CLINTON
/s/
- ---------------------------- ---------------
Barbara Cafferty Date
Center Manager
VIRAGE LOGIC
/s/ VP Finance, CFO 8/5/99
- ---------------------------- ---------------
Signature/Title Date
2 of 2
<PAGE> 8
HQ
MASTER OFFICE SERVICE AGREEMENT
This Master Office Service Agreement ("Master Agreement") is dated August 3,1999
and is entered into in Lebanon, NJ by and between HQ GLOBAL WORKPLACES, INC.
(hereinafter "HQ") and VIRAGE LOGIC (hereinafter "Client).
1. OFFICE. Client shall execute an Office Service Agreement ("Office
Agreement") for each HQ Business Center location where Client licenses an Office
and is provided services by HQ. Furthermore, each Office Agreement shall be
attached as a schedule to this Master Agreement. Furthermore, all of the terms
and conditions of each Office Agreement shall be incorporated into and become
part of this Master Agreement.
Client shall, as part of the Base Services, be granted a license to use
the Office and shall have access to the Office twenty-four (24) hours a day,
seven (7) days a week. HQ agrees to provide office cleaning, maintenance
services, heating and air conditioning to the Office for normal office use in
such reasonable quantities and during such reasonable hours as shall be
determined by HQ or the Building. In addition, Client will have reasonable use
of HQ common area facilities during normal business hours. Client shall use the
Office and common areas of the HQ Business Center solely for general office use
in the conduct of the Client's business. HQ agrees, at its own cost and expense,
to furnish and to install furniture, fixtures and equipment that are in HQ's
sole opinion necessary to provide suitable office facilities for the Client upon
such terms and conditions routinely applicable to the facility; provided that
such furniture, fixtures and equipment shall remain HQ's property.
If, for any reason whatsoever, HQ is unable to provide use of the Office
or a mutually agreed upon alternative Office at the time herein agreed, Client
may either extend the Commencement Date until the Office becomes available or,
as its sole remedy for such failure, cancel and terminate this Agreement if the
use of the Office is not available to Client within five (5) business days after
written notice to HQ by Client, in which case any prior payments shall be fully
refunded. No such failure to provide use of the Office shall subject HQ to any
liability for loss or damage, nor affect the validity of this Agreement or the
obligations of the Client hereunder.
HQ will have the right to relocate Client to another office in the HQ
Business Center, and to substitute such other office for the Office licensed
hereby, provided such other office is substantially similar in area and
configuration to Client's contracted office and provided Client shall incur no
increase in the Monthly Base Office Fee or any relocation cost or expense.
2. SERVICES. HQ agrees, in consideration of the Monthly Base Office Fee,
to provide Base Services to Client as described in Schedule "A." From time to
time during the Term, HQ may, at its option,
1 of 11
<PAGE> 9
make other services available to Client of the nature described in Schedule "B"
at fees that are from time to time established by HQ. Fees are subject to change
at HQ's discretion, with thirty (30) days written notice to the Client from the
HQ Business Center. HQ shall be under no obligation to provide Schedule "B"
services if the monthly cost thereof exceeds the Refundable Services Retainer.
In the event Client is in default of this Agreement, HQ may, at its option,
cease furnishing any and all services including telephone services.
Client will not offer to any party in the HQ Business Center or the
Building, any of the services that HQ provides to its clients including, but not
limited to, the services described in Schedule "A" or "B."
Client acknowledges that due to the imperfect nature of verbal, written
and electronic communications, neither HQ nor HQ's Landlord or any of its
officers, directions, employees, shareholders, partners, agents or
representatives shall be responsible for damages, direct or consequential, that
may result from the failure of HQ to furnish any service, including but not
limited to the service of conveying messages, communications and other utility
or services required under this Master Agreement, Office Service Agreement or
agreed to by HQ. Client's sole remedy and HQ's sole obligation for any failure
to render any service, any error or omission, or any delay or interruption with
respect thereto, is limited to an adjustment to Client's billing in an amount
equal to the charge for such service for the period during which the failure,
delay or interruption continues.
WITH THE SOLE EXCEPTION OF THE REMEDY SET FORTH IN THIS PARAGRAPH,
CLIENT EXPRESSLY AND SPECIFICALLY AGREES TO WAIVE, AND AGREES NOT TO MAKE ANY
CLAIM FOR DAMAGES, DIRECT OR CONSEQUENTIAL, INCLUDING WITH RESPECT TO LOST
BUSINESS OR PROFITS, ARISING OUT OF ANY FAILURE TO FURNISH ANY SERVICE, ANY
ERROR OR OMISSION WITH RESPECT THERETO OR ANY DELAY OR INTERRUPTION OF THE SAME.
3. DURATION OF AGREEMENT. This Master Agreement can be terminated by
either party upon thirty (30) days written notice provided such notice is in
accordance with section 8(G), if and only if all of the licenses for office
space granted in accordance with the attached schedules have expired or been
terminated.
Upon any termination of this Master Agreement or any Office Agreement,
whether by lapse of time or otherwise, or upon any revocation of Client's
license herein granted, the Client shall cease all use of the Office, the HQ
Business Center and all services immediately. For each and every month or
portion thereof that Client continues use of the Office after the termination
time or otherwise, without the express written consent of HQ, Client shall pay
HQ an amount equal to two (2) times the Monthly Base Office Fee computed on a
per-month basis for each month or portion thereof that Client continues the use
of the Office.
4. PAYMENTS AND ESCALATIONS. Client agrees to pay to HQ the Monthly
Base Office Fee plus applicable
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<PAGE> 10
sales or use taxes, in advance, on the first day of each calendar month during
the Initial Term and all extensions thereof, without any deduction, offset,
notice or demand. If the Commencement Date shall be other than the first day of
a month, fees for any such month shall be prorated. Charges for any Schedule "B"
service purchased by Client from HQ shall be due and payable on the 10th of the
month following the order for any such service.
All Monthly Base Office Fees and other sums payable hereunder shall be
payable at the office of HQ or at such other location or to any agent designated
in writing by HQ. In addition to any other sums due, Client shall pay monthly
late charges equal to five percent (5%) of all amounts that have not been paid
to HQ within five (5) days of their respective due dates. The parties agree that
such late charges are fair and reasonable compensation for costs incurred by HQ
where there is default in any payment due under this Master Agreement or an
Office Agreement.
Upon the execution of an Office Agreement, Client shall pay HQ or its
agent the Refundable Services Retainer. The Refundable Services Retainer need
not be kept separate and apart from other funds of HQ, no interest shall be paid
thereon, and may be used by HQ to provide "Schedule "A" and "B" services under
this Master Agreement, pay to HQ the Total Fixed Monthly Charges for the first
full month of the Initial Term.
Client agrees that the Refundable Services Retainer shall not be used by
Client as payment for the Monthly Base Office Fee for the last month of the
Initial Term, or any extension thereof. In the event Client defaults in the
performance of any of the terms hereof, HQ may terminate this Master Agreement
and the license herein granted and may also use, apply or retain the whole, or
any part, of the Refundable Services Retainer for the payment of any service fee
or any other payment due hereunder, or for payment of any other sum that HQ may
spend by reason of Client's default. If Client shall, at the end of the term of
this Master Agreement, have fully and faithfully complied with all of the terms
and provisions of this Master Agreement, and surrendered all keys, access cards
and building passes, the Refundable Services Retainer, or any balance thereof,
shall be returned to Client within forty-five (45) days thereafter.
5. DAMAGES AND INSURANCE. Client will not damage or deface the
furnishings, walls, floors or ceilings, nor make holes for the hanging of
pictures or make or suffer to be made any waste, obstruction or unlawful,
improper or offensive use of the Office or the common area facilities. Client
will not cause damage to any part of the Building or the property of HQ or
disturb the quiet enjoyment of any other licensee or occupant of the Building.
At the termination of this Master Agreement, the Office shall be in as good
condition as when Client commenced the use thereof, normal wear and tear
excepted. Client agrees to pay for repainting and cleaning fees for each Office
occupied less than twelve (12) months by Client, at a cost not to exceed Two
Hundred Fifty Dollars ($250.00) per Office. Client is responsible for costs of
repairing any damage to office or furniture and to return each office to HQ
3 of 11
<PAGE> 11
in good condition. HQ will have the right, at any time and from time to time, to
enter the Office to inspect the same, to make such repairs and alterations as HQ
reasonably deems necessary, and the cost of any such repair resulting from the
act or omission of Client shall be reimbursed to HQ by Client upon demand. HQ
shall have the right to show the Office to prospective Clients, provided HQ will
use reasonable efforts not to disrupt Client's business.
HQ or Client and its respective directors, licensors, officers, agents,
servants and employees shall not, to the extent permitted by law, except upon
the affirmative showing of HQ's or Client's gross negligence or willful
misconduct, be liable for, and Client or HQ waives all right of recovery against
such entities and individuals for any damage or claim with respect to any injury
to person or damage to, or loss or destruction of any property of Client or HQ,
its employees, authorized persons and invitees due to any act, omission or
occurrence in or about the HQ Business Center or the Building. Without
limitation of any other provision hereof, each party hereto hereby agrees to
indemnify, defend and hold harmless the other party hereto, and such other
party's officers, directors, employees, shareholders, partners, agents and
representatives from and against any liability to third parties arising out of,
in the case of Client as an indemnifying party. Client's use and occupancy of
the Office or any act or omission constituting gross negligence or willful
misconduct of Client or Client's officers, directors, employees, shareholders,
partners, agents, representatives, contractors, customers or invitees and, in
the case of HQ as an indemnifying party, any act or omission constituting gross
negligence or willful misconduct of HQ or HQ's officers, directors, employees,
shareholders, partners, agents or representatives. Subject to the foregoing,
Client assumes all risk of loss with respect to all personal property of Client,
its agents, employees, contractors, and invitees, within or about the HQ
Business Center or the Building. Client acknowledges that it is the Client's
responsibility to maintain insurance to cover the risks set forth in this
paragraph.
HQ and Client each hereby waive any and all rights of recovery against
the other, or against the directors, licensors, officers, agents, servants and
employees of the other, for loss of or damage to the property or the property of
others under its control, to the extent such loss or damage is covered by any
insurance policy.
If the HQ Business Center is made unusable, in whole or in part, by fire
or other casualty not due to negligence of Client, HQ may, at its option,
terminate the Master Agreement upon notice to Client, effective upon such
casualty, or may elect to repair, restore or rehabilitate, or cause to be
repaired, restored or rehabilitated, the HQ Business Center, without expense to
Client, within ninety (90) days or within such longer period of time as may be
required because of events beyond HQ's control. The Monthly Base Office Fee
shall be abated on a per diem basis for the portions of the Office that are
unusable.
6. DEFAULT. Client shall be deemed to be in default under this Master
Agreement, and all executed Office Agreements: (a) if Client defaults in the
payment of the Monthly Base Office Fee or
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<PAGE> 12
other sums due or (b) if Client defaults in the prompt and full performance of
any other provision of this Master Agreement or any executed Office Agreements
and any such default continues in excess of ten (10) business days after written
notice by HQ.
Should Client be in default hereunder, HQ shall have the option to
pursue any one or more of the following remedies without any additional notice
or demand whatsoever and without limitation to HQ in the exercise of any remedy:
(1) HQ may, if HQ so elects, without any additional notice of such
election or demand to Client, either forthwith terminate this Agreement and the
license to use any portion of the HQ Business Center, in whole or in part, from
the Client's obligations hereunder. In the event of such termination, HQ may, at
its option, declare the entire amount of the Monthly Base Office Fee which would
become due and payable during the remainder of the term, to be due and payable
immediately, in which event, Client agrees to pay the same at once.
(2) Pursue any other remedy now or hereafter available to HQ. HQ's
exercise of any right or remedy shall not prevent it from exercising any other
right or remedy.
7. RESTRICTION ON HIRING. Client agrees that during the term of this
Master Agreement and within one (1) year of the termination of this Master
Agreement, neither Client nor any of its principals, employees or affiliates
will hire directly or as an independent contractor, any person who is at that
time, or was during the term of this Agreement, an employee of HQ. In the vent
of a breach of any obligation of Client contained in this paragraph, Client
shall be liable to HQ for, and shall pay to HQ, on demand, liquidated damages in
the sum of $25,000.00 for each employee with respect to whom such breach shall
occur, it being mutually agreed that the actual damage that would be sustained
by HQ as the result of any such breach would be, from the nature of the case,
extremely difficult to fix and that the aforesaid liquidated damage amount is
fair and reasonable.
8. MISCELLANEOUS.
A. All Amendments to this Agreement shall be in writing and signed by
all parties. Any other attempted amendment shall be void. The invalidity or
unenforceability of any provision hereof shall not affect the remainder hereof.
B. All waivers must be in writing and signed by the waiving party. HQ's
failure to enforce any provision of this Agreement or its acceptance of fees
shall not be a waiver and shall not prevent HQ from enforcing any provision of
this Agreement in the future. No receipt of money by HQ shall be deemed to waive
any default of Client or to extend, reinstate or continue the term hereof.
C. All Schedules and Addenda attached hereto are hereby incorporated by
this reference. The laws of the State in which the HQ Business Center is located
shall govern this Agreement.
D. All parties signing this Agreement as a partnership or co-signing
individuals shall be jointly and severally liable for all obligations of Client.
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<PAGE> 13
E. Neither Client nor anyone claiming by, through or under Client shall
assign this Master Agreement and Office Agreements or permit the use of any
portion of the HQ Business Center by any person other than Client; provided,
however, Client may assign this Master Agreement and Office Agreements to an
affiliated corporation of Client. In the event of any such permitted assignment,
Client shall not thereby be relieved of any of its obligations under this Master
Agreement or any Office Agreement.
F. The Rules and Regulations of the Building and of HQ as defined on
Schedule "C" hereto and any additional schedules that may be attached hereto are
expressly made a part of this Agreement and Client expressly covenants and
agrees to abide by all of such Rules and Regulations and such additional terms,
as well as such reasonable modifications to such Rules and Regulations as may be
hereafter adopted by HQ.
G. All notices hereunder shall be in writing. Notices to Client shall be
deemed to be duly given if mailed by registered or certified mail, postage
prepaid, overnight mail service or hand delivered with proof of delivery
addressed to client at:
Contact: Mr. James Pekarsky, CFO
Client Name: Virage Logic
Client Address: 9 Trade Winds Dr.
City, State, Zip: Randolph, NJ 07849
Phone:
Notice to HQ shall be deemed to be duly given if mailed by registered or
certified mail, postage prepaid, overnight mail service or hand delivered with
proof of delivery addressed to HQ at the Building and as follows:
Center Name: HQ Clinton
Address: 3 Warner Way
City, State, Zip: Lebanon NJ 08833
Attn: Center Manager
Center Phone: 908-236-3800
H. THIS MASTER AGREEMENT AND THE OFFICE AGREEMENTS ARE NOT INTENDED TO
CREATE A LEASE OR ANY OTHER INTEREST IN REAL PROPERTY IN FAVOR OF THE CLIENT,
BUT MERELY CREATES A REVOCABLE LICENSE IN ACCORDANCE WITH THE TERMS HEREOF. This
Master Agreement and an Office Agreement grant Client the license to use the HQ
Business Center and the Office for the license to use the HQ Business Center and
the Office for the specific purposes herein set forth without diminution of the
legal possession or control thereof by HQ and shall be revocable at the option
of HQ upon the destruction of the HQ Business Center or the breach by Client of
any term or condition herein set forth. This Master Agreement and Office
Agreement are subject and subordinate to any underlying lease or contract of the
Building or of the premises comprising the Office or the HQ Business Center as
such lease or contract may be amended from time to time (such underlying lease
or contract together with any amendments, is hereinafter referred to
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<PAGE> 14
as the "Master Lease"). An Office Agreement shall terminate simultaneously with
the termination of the corresponding HQ Business Center operation for any
reason. Client is not a party to nor shall Client have any rights under the
Master Lease.
I. Client acknowledges that each HQ Business Center will comply with
U.S. Postal Service regulations regarding Client mail and, upon termination of
this Agreement, it will be Client's responsibility to notify all parties of
termination of the use of the above described address, assigned telephone number
and facsimile numbers. For a period of thirty (30) days after the termination of
this Agreement, HQ will, at Client's written request and cost, provide Client's
new telephone number and address to all incoming callers and will hold or
forward to Client once a week all mail, packages, and facsimiles.
J. HQ may assign this Agreement and/or any fees hereunder and Client
agrees to attorn to any such assignee.
K. This Agreement may be executed in two or more counterparts, each of
which shall be deemed to be an original but all of which together shall
constitute one and the same instrument.
HQ GLOBAL WORKPLACES, INC.
By: /s/
--------------------------
Authorized Signature
--------------------------
Print Name
Its:
--------------------------
CLIENT: VIRAGE LOGIC
By: /s/
--------------------------
Authorized Signature
James Pekarsky
--------------------------
Print Name
Its: 8/5/99
--------------------------
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<PAGE> 15
SCHEDULE "A"
BASE SERVICES
- - Furnished Executive Office
- - Furnished and Decorated Reception Area
- - Professional Receptionist, Message Center, and Office Manager
- - Use of Furnished and Audio-Visual Equipped Conference Rooms, 8 hours per
month at no charge
- - Prestigious Business Address
- - Building Lobby Directory Listing*
- - Facsimile Number for Client's Use
- - Mail and Package Receipt
- - Utilities and Janitorial Service
- - Building Operating Expenses
*Where available
SCHEDULE "B"
ADDITIONAL SERVICES
- - Word Processing Services
- - Secretarial Services
- - Facsimile Services
- - Copy and Binding Services
- - Outgoing Mail & Express Delivery Services
- - Additional Office Furniture
- - Specialized Equipment
- - Printing & Office Supplies
- - Miscellaneous Purchasing Services
- - Catering & Beverage Services
- - Paging Services
- - Telephone Equipment
- - Specialized Telephone Services
- - Local & Long Distance Telephone Service
- - Excess Conference Room Usage
- - Other Client Requested Services*
*Where available
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<PAGE> 16
SCHEDULE "C"
RULES AND REGULATIONS
1. Client's employees and guests shall conduct themselves in a
businesslike manner; proper business attire shall be worn at all times; the
noise level will be kept to a level so as not to interfere with or annoy other
clients and Client will abide by HQ's directives regarding security, keys,
parking and other such matters common to all occupants.
2. Client agrees to use chair mats and desk pads in the Office(s) and
any damage from failure to use the same shall be the responsibility of Client.
Client shall not affix anything to the windows, walls or any other part of the
Office(s) or the HQ Business Center or make alterations or additions to the
Office(s) or the HQ Business Center without the prior written consent of HQ.
3. Client shall not prop open any corridor doors, exit doors or door
connecting corridors during or after business hours.
4. Client can only use public areas with the consent of HQ and those
areas must be kept neat and attractive at all times.
5. All corridors, halls, elevators and stairways shall not be obstructed
by Client or used for any purpose other than egress and ingress.
6. No advertisement or identifying signs, other than provided by HQ, or
other notices shall be inscribed, painted, or affixed on any part of the
corridors, doors or public areas.
7. Client shall not, without HQ's prior written consent, store or
operate in the Office(s) or the HQ Business Center any computer (excepting a
personal computer) or any other large business machine, reproduction equipment,
heating equipment, stove, radio, stereo equipment or other mechanical
amplification equipment, vending or coin operated machine, refrigerator or
coffee equipment, or conduct a mechanical business therein, do any cooking
therein, or use or allow to be used in the Building, oil burning fluids,
gasoline, kerosene for heating, warming or lighting. No article deemed hazardous
on account of fire or any explosives shall be brought into the HQ Business
Center. No offensive gases, odors or liquids shall be permitted. No fire arms
shall be permitted.
8. The electrical current shall be used for ordinary lighting purposes
only unless written permission to do otherwise shall first have been obtained
from HQ at an agreed cost to Client.
9. If Client requires any special installation or wiring for electrical
use, telephone equipment or otherwise, such wiring shall be done at Client's
expense by the personnel designated by HQ.
10. Client may not conduct business in the hallways, reception areas or
any other area except in its designated Office(s) without the prior written
consent of HQ.
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11. Client shall bring no animals other than seeing-eye dogs in the
company of blind persons into the building.
12. Client shall not remove furniture, fixtures or decorative material
from the Office(s) without the written consent of HQ and such removal shall be
under the supervision and regulations of the HQ Business Center.
13. Client shall not use the HQ Business Center for manufacturing or
storage of merchandise except as such storage may be incidental to general
office purposes.
14. Client shall not occupy or permit any portion of the HQ Business
Center to be occupied or used for the manufacture, sale, gift or use of liquor,
narcotics or tobacco in any form.
15. Client shall not use the Office(s) for lodging or sleeping or for
any immoral or illegal purposes.
16. No additional locks or bolts of any kind shall be placed upon any of
the doors or windows of the HQ Business Center by Client nor shall any changes
be made on existing locks or the mechanisms thereof.
17. Client shall, before leaving the Office(s) unattended for an
extended period of time, close and securely lock all doors and shut off all
lights and other electrical apparatus. Any damage resulting from failure to do
so shall be paid by Client.
18. Canvassing, soliciting and peddling in the Building are prohibited
and Client shall not solicit other clients for any business or other purpose
without the prior written approval of HQ.
19. All property belonging to Client or any employee, agent or invitee
of Client shall be at the risk of such person only and HQ shall not be liable
for damages thereto or for theft or misappropriation thereof.
20. If Client does not remove any property belonging to Client from the
HQ Business Center by the end of the term, at the option of HQ, Client shall be
conclusively presumed to have conveyed such property to HQ under this Agreement
as a bill of sale without further payment or credit by HQ to Client and HQ may
remove the same and Client shall pay HQ all costs of such removal upon demand.
21. Smoking shall be prohibited in all public areas, including
conference and training rooms. No smoking shall be permitted at any time in any
area of the HQ Business Center (including open offices and workstations),
provided, however, with the prior written consent of HQ, smoking shall be
permitted in Client's Office(s), but only with the door closed, and then only
cigarette smoking will be permitted so long as client provides an air filter
device acceptable to HQ, unless the entire Building has been designated
non-smoking, in which case smoking is not permitted in the Office(s). Cigar and
pipe smoking are prohibited in all areas of the HQ Business Center.
22. Client shall use only telecommunications systems and services as
provided by HQ. Client shall pay HQ a monthly equipment rental fee for the use
of each telephone instrument and voice lines.
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In the event HQ discontinues the offering of long distance service, Client shall
provide its own long distance service through a locally accessed long distance
carrier.
23. Client or Client's officers, directors, employees, shareholders,
partners, agents, representatives, contractors, customers, or invitees shall be
prohibited from participating in any type of harassment, verbal or physical, in
the HQ Business Center for any reason.
HQ reserves the right to make such other rules and regulations as in its
judgment may from time to time be needed for the safety, care and cleanliness of
the offices. HQ shall have no responsibility to Client for the violation or
non-performance by any other HQ clients of any of the Rules and Regulations but
shall use reasonable efforts to uniformly enforce all Rules and Regulations.
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<PAGE> 1
EXHIBIT 10.21
OFFICE LEASE
THIS OFFICE LEASE ("Lease"), dated March 25, 1999, is made between
Morris Piha Real Estate Services, Inc. "Landlord"), Virage Logic Corporation
("Tenant") and N/A ("Guarantor").
In consideration of the mutual covenants in this Lease, Landlord and
Tenant agree as follows:
1. BASIC LEASE INFORMATION
1.1 Basic Lease Information. In addition to the terms that are
defined elsewhere in this Lease, these terms are used in this
Lease:
(a) LANDLORD'S ADDRESS: Morris Piha Real Estate
Services, Inc.
14100 SE 36TH Street, Suite 200
Bellevue WA 98006
(425) 643-8400
Fax (425) 643-9139
(b) TENANTS ADDRESS: Virage Logic Corporation
46824 Lakeview Blvd.
Fremont CA 94538
(510) 360-8000
Fax (510) 360-8099
(c) GUARANTOR'S ADDRESS: N/A
(d) BUILDING ADDRESS: 14100 SE 36th Street. Suite 210
Bellevue WA 98006
(e) PREMISES: The Premises shown on Exhibit A to this Lease.
(f) RENTABLE AREA OF THE PREMISES: square feet (2.318 sq. ft. +
371 sq. ft. (load factor))
(g) USEABLE AREA OF THE BUILDING: N/A
(h) LOAD FACTOR: 16%
(i) RENTABLE AREA OF THE BUILDING: N/A square feet.
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(j) TERM: The period beginning on the Commencement Date and
expiring on the Expiration Date.
(k) COMMENCEMENT DATE: Date to be mutually agreed upon. or as
extended pursuant to the work letter.
(l) EXPIRATION DATE: 60 months after commencement. The
Expiration Date shall be the last day of a month.
(m) SECURITY DEPOSIT: $ 6.275.00
(n) MONTHLY RENT: Months 1-36 - $5.602. months 37-60 - $6.275.
(o) BASE YEAR: The calendar year 1999
(p) BASE OPERATING EXPENSES: The operating expenses paid or
incurred by Landlord in the base year.
(q) BASE PROPERTY TAXES: The amount of property taxes for the
tax year ending December 31 of the Base Year.
(r) TENANTS PERCENTAGE SHARE: 12.75 (determined by dividing the
rentable area of the Premises by the rentable area of the
Building, multiplying the resulting quotient by 100, and
rounding to the 3rd decimal place).
(s) PARKING SPACES: 9 spaces according to Article 26.
(t) PARKING CHARGE: $ 0 per parking space per month, subject to
adjustments specified in Article 26.
(u) PERMITTED USE: General office
(v) BROKER: Colliers International
(w) BUSINESS HOURS: The term "business hours" means 7:00
a.m. to 6:00 p.m. on Monday through Friday, except holiday
(as that term is defined below), and 8 a.m. to 1 p.m. on
Saturdays, except holidays. The term "holidays" means New
Year Day, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
1.2 Definitions
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<PAGE> 3
(a) ADDITIONAL RENT: Any amounts that this Lease requires
Tenant to pay in addition to monthly rent.
(b) BUILDING: The building located on the land and of which
the Premises are a part, including, without limitation,
the parking lot, walkways, driveways, fences and
landscaping.
(c) LAND: The land on which the Building is located and
which is described on Exhibit B.
(d) RENT: The Monthly Rent and Additional Rent.
(e) WORKLETTER: The workletter attached to this Lease as
Exhibit C (if any).
If any other provision of this Lease contradicts any definition
of this Article, the other provision will prevail.
1.3 Exhibits. The following addenda and exhibits are attached to
this Lease and are made part of this Lease:
ADDENDA: Riders #28 & #29
EXHIBIT A--Drawing of the Premises
EXHIBIT B--Legal Description of the Land
EXHIBIT C--Workletter
EXHIBIT D--Rules and Regulations
EXHIBIT E--Commencement Date Certificate
2. AGREEMENT TO LEASE. Landlord leases the Premises to Tenant, and Tenant
leases the Premises from Landlord, in accordance to the and conditions
of this Lease. The duration of this Lease will be the Term. The Term
will commence on the Commencement Date and will expire on the Expiration
Date.
3. DELIVERY OF PREMISES
3.1 Delivery of Possession. Landlord will be deemed to have
delivered possession of the Premises to Tenant on the
Commencement as it may be adjusted pursuant to the workletter.
Landlord will construct or install in the Premises the
improvements to be construct or installed by Landlord according
to the workletter. If no workletter is attached to this Lease,
it will be deemed that
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<PAGE> 4
Landlord delivered to Tenant possession of the Premises "as is"
in its present condition on the Commencement Date. Tenant
acknowledges neither Landlord nor its agents or employees have
made any representations or warranties as to the suitability or
fitness of the Prer for the conduct of Tenant's business or for
any other purpose, nor has Landlord or its agents or employees
agreed to undertake any alterations or construct any Tenant
improvements to the Premises except as expressly provided in
this Lease and the workletter. If any reason Landlord cannot
deliver possession of the Premises to Tenant on the Commencement
Date, this Lease will not be void voidable, and Landlord will
not be liable to Tenant for any resultant loss or damage. Tenant
will execute the Commencement Date Certificate attached to this
Lease as Exhibit E within 15 days of Landlord's request.
3.2 Early Entry. If Tenant is permitted entry to the Premises prior
to the Commencement Date for the purpose of installing fixtures
any other purpose permitted by Landlord, the early entry will be
at Tenant's sole risk and subject to all the terms and
provisions of Lease as though the Commencement Date had
occurred, except for the payment of rent, which will commence on
the Commencement Date. Tenant, its agents, or employees will not
interfere with or delay Landlord's completion of construction of
the improvements rights of Tenant under this Section 3.2 will be
subject to the requirements of all applicable building codes,
zoning requirements, a federal. state, and local laws, rules,
and regulations, so as riot :o interfere with Landlord's
compliance with all laws, including the obtaining of a
certificate of occupancy for the Premises. Landlord has the
right to impose additional conditions on Tenant's early en that
Landlord, in its reasonable discretion, deems appropriate,
including without limitation, proof of insurance.
4. MONTHLY RENT. Throughout the term of this Lease, Tenant will pay monthly
rent to Landlord as rent for the Premises. Monthly rent will be paid in
advance on or before the first day of each calendar month of the Term.
If the Term commences on a day other than the first day of calendar
month or ends on a day other than the last day of a calendar month, then
monthly rent will be appropriately prorated by Landlord based on the
actual number of calendar days in such month. If the Term commences on a
day other than the first day of a calendar month, then the prorated
monthly rent for such month will be paid on or before the first day of
the Term. Monthly rent will be paid to Landlord, without writ notice or
demand, and without deduction or offset, in lawful money of the United
States of America at Landlord's address, or to such other address as
Landlord may from time to time designate in writing.
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<PAGE> 5
5. OPERATING EXPENSES
5.1 General
(a) Tenant will pay to Landlord throughout the Term of this
Lease as rent for the Premises the sums specified in the
basic lease information as the base rent, provided that
the rent payable during each calendar year subsequent to
the base year will be base rent, increased by Tenant's
percentage share of the total dollar increase, if any,
in operating expenses paid or incurred by Landlord in
that year over the base operating expenses, and also
increased by Tenant's percentage share of the total d(
increase, if any, in property taxes paid by Landlord in
that year over the base property taxes. The increased
rent due pursuant to this Section 5 is referred to as
"escalation rent."
(b) Escalation rent will be paid monthly on an estimated
basis, with subsequent annual reconciliation, in
accordance with the following procedures:
(1) As soon after December of each calendar year as
practicable, Landlord will give Tenant notice of
its estimate any escalation rent due for the
ensuing calendar year. On or before the first
day of each month during the end calendar year,
Tenant will pay Landlord 1/12th of the estimated
escalation rent: however, if the notice is not g
in December, Tenant will continue to pay on the
basis of the prior year's estimate until the
month after the not given. If at any time or
times it appears to Landlord that the escalation
rent for the current calendar year will' from
its estimate by more than 5%, Landlord will, by
notice to Tenant, revise its estimate for the
year, and subsequent payments by Tenant for such
year will be based upon the revised estimate.
(2) As soon as practicable after the end of each
calendar year, Landlord will deliver to Tenant a
statement of the escalation rent for the
calendar year, accompanied by a statement
showing the operating expenses and property
taxes. The statement will be final and binding
upon Landlord and Tenant as the amount of the
operating expense and property taxes unless
objected to in writing within 30 days after it
is delivered to Tenant. If Landlord's statement
discloses that Tenant owes an amount that is
less than the estimated payments for such
calendar year previously made by Tenant,
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Landlord will credit such excess first against
any sums then owed by Tenant to Landlord and
then against the next payments of rent. If
Landlord's statement discloses that Tenant owes
the estimated payments for such calendar year
previously made by Tenant, Tenant will pay the
deficiency to Landlord within 30 days after
delivery of the statement.
(3) The amount of escalation rent for any fractional
year in the Term will be appropriately prorated.
The termini of this Lease will not affect the
obligations of Landlord and Tenant pursuant to
paragraph (b) to be performed such termination.
(c) As used in this Lease, the term "operating expenses
means:
(1) All reasonable costs of management, operation,
and maintenance of the Building, including
without limitation and personal property taxes
and assessments (and any tax levied in whole or
in part in lieu of or in addition t property
taxes); wages, salaries, and compensation of
employees; consulting, accounting, legal,
janitorial, maintenance, guard, and other
services; management fees and costs (charged by
Landlord, any affiliate of Landlord, or any
other entity managing the Building and
determined at a rate consistent with prevailing
marl rates for comparable services and
buildings); reasonable reserves for operating
expenses; that part of office r rental value of
space in the Building used or furnished by
Landlord to enhance, manage, operate, and
maintain Building; power, water, waste disposal,
sprinkler, fire, and life safety systems,
heating, ventilating, air conditioning, and
other utilities; materials and supplies;
maintenance and repairs: insurance obtained by
Land common area signage, and any other costs,
charges and expenses that under generally
accepted accounting principles would be regarded
as management, maintenance, and operating
expenses; and
(d) The operating expenses will not include:
(1) depreciation on the Building (other than
depreciation on personal property, equipment,
window coverings on exterior windows provided by
Landlord and carpeting in public corridors and
common areas);
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<PAGE> 7
(2) costs of alterations of space or other
improvements made for Tenants of the Building;
(3) finders' fees and real estate brokers'
commissions;
(4) ground lease payments, mortgage principal, or
interest;
(5) capital items other than those referred to in
clause (b)(2) above;
(6) costs of replacements to personal property and
equipment for which depreciation costs are
included as an opera expense;
(7) costs of excess or additional services provided
to any Tenant in the Building that are directly
billed to such Tenants;
(8) the cost of repairs due to casualty or
condemnation that are reimbursed by third
parties;
(9) any cost due to Landlord's breach of this Lease;
(10) any income, estate, inheritance, or other
transfer tax and any excess profit, franchise,
or similar taxes on Landlord's business;
(11) all costs, including legal fees, relating to
activities for the solicitation and execution of
leases of space in the Building; and
(12) any legal fees incurred by Landlord in enforcing
its rights under other leases for premises in
the Building.
(e) Tenant acknowledges that Landlord has not made any
representation or given Tenant any assurances that the
operating expenses base will equal or approximate the
actual operating expenses per square foot of rentable
area of the Premises f. any calendar year during the
Term.
5.2 Estimated Payments. During each calendar year or partial
calendar year in the Term, in addition to monthly rent, Tenant
will pa: Landlord on the first day of each month an amount equal
to 1/12 of the product of Tenant's share multiplied by the
"estimated operating expenses" (defined below) for such calendar
year. "Estimated operating expenses" for any calendar year means
Landlor reasonable estimate of operating expenses for such
calendar year, less the product of the operating expenses base,
multiplied by the rentable
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<PAGE> 8
area of the Building and will be subject to revision according
to the further provisions of this Section 5.2 and Section 53.
During any partial calendar year during the Term, estimated
operating expenses will be estimated on a full year basis.
During each December during the Term, or as soon after each
December as practicable, Landlord will give Tenant written
notice of estimated operating expenses for the ensuing calendar
year. On or before the first day of each month during the
ensuing calendar year (or e~ month of the term, if a partial
calendar year), Tenant will pay to Landlord 1/12 of the product
of Tenant's share multiplied by the estimated operating expenses
for such calendar year', however, if such written notice is not
given in December, Tenant will continue make monthly payments on
the basis of the prior year's estimated operating expenses until
the month after such written notice is g at which time Tenant
will commence making monthly payments based upon the revised
estimated operating expenses. In the more Tenant first makes a
payment based upon the revised estimated operating expenses,
Tenant will pay to Landlord for each month `~ has elapsed since
December the difference between the amount payable based upon
the revised estimated operating expenses and amount payable
based upon the prior year's estimated operating expenses. If at
any time or times it reasonably appears to Landlord: that the
actual operating expenses for any calendar year will vary from
the estimated operating expenses for such calendar year,
Landlord may. by written notice to Tenant, revise the estimated
operating expenses for such calendar year, and subsequent
payment by Tenant in such calendar year will be based upon such
revised estimated operating expenses.
5.3 Annual Settlement. As soon as practicable after the end of each
calendar year, Landlord will deliver to Tenant a statement of
amounts payable under Section 5.1 for such calendar year
prepared and certified by Landlord. Such certified statement
will be final and binding upon Landlord and Tenant unless Tenant
objects to it in writing to Landlord within 30 days after it is
given to Tenant. such statement shows an amount owing by Tenant
that is less than the estimated payments previously made by
Tenant for such calendar year, the excess will be held by
Landlord and credited against the next payment of rent; however,
if the Term has ended a Tenant was not in default at its end,
Landlord will refund the excess to Tenant. If such statement
shows an amount owing by Tenant that is more than the estimated
payments previously made by Tenant for such calendar year,
Tenant will pay the deficiency to Landlord within 30 days after
the delivery of such statement. Tenant may review Landlord's
records of the operating expenses, at Tenant's sole cost and
expense, at the place Landlord normally
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maintains such records during Landlord's normal business hours
up reasonable advance written notice.
5.4 Final Proration. If this Lease ends on a day other than the last
day of a calendar year, the amount of increase (if any) in the
opera expenses payable by Tenant applicable to the calendar year
in which this Lease ends will be calculated on the basis of the
number days of the term falling within such calendar year, and
Tenant's obligation to pay any increase or Landlord's obligation
to refund a overage will survive the expiration or other
termination of this Lease.
5.5 Additional Rent. Amounts payable by Tenant according to this
Article 5 will be payable as rent, without deduction or offset.
If Tenant fails to pay any amounts due according to this Article
5, Landlord will have all the rights and remedies available to
it on account of Tenant's failure to pay rent.
5.6 Tenant Audit. Tenant may have performed an audit of the amount
or the calculation of the escalation rent, provided that (a) Ten
shall have no right to have such an audit performed for any
Additional Rent unless Tenant provides notice of Tenant's
intention t so within 30 days of the date that Tenant receives
the Adjustments Statement related to such Additional Rent, (b)
any such audit 5 be at Tenant's sole cost and expense, (c) the
audit shall be performed by a recognized independent accounting
firm that is not been compensated on a contingency fee basis,
and (d) the audit shall not unreasonably interfere with the
business of Landlord or its agent.
6. INSURANCE
6.1 Landlord's Insurance. At all times during the Term, Landlord
will carry and maintain:
(a) Fire and extended coverage insurance covering the
Building. its equipment, common area furnishings, and
leasehold improvements in the Premises to the extent of
the Tenant finish allowance (as that term is defined in
the Workletter);
(b) Bodily injury and property damage insurance;
(c) A commercial general liability insurance policy
providing coverage for bodily injury liability, property
damage liability personal injury liability with in such
amounts and with such endorsements as Landlord may
reasonably determine from to time; and
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(d) Suchother insurance as Landlord reasonably determines
from time to time, which may include, without
limitation, earthquake, flood and plate glass insurance.
The insurance coverages and amounts will be reasonably
determined by Landlord, based on coverages carried by prudent
owner comparable buildings in the vicinity of the Building.
6.2 Tenant's Insurance. At all times during the Term, Tenant will
carry and maintain, at Tenant's expense, the following insurance
the amounts specified below or such other amounts as Landlord
may from time to time reasonably request, with insurance comp
and on forms satisfactory to Landlord, and naming as additional
insureds, Landlord, Morris Piha Management Group, Inc. And
Landlord's lender:
(a) A commercial general liability insurance policy
providing coverage for bodily injury liability, property
damage liability personal injury liability with minimum
limits of not less than $1,000,000 Combined Single Limit
per accident and $2,000,000 General Aggregate. Such
insurance policies shall include Blanket Contractual
Liability and Owners and Contractors Protective
endorsements. Landlord may increase or decrease the
required limit as it deems necessary base periodic
insurance reviews. The insurance required by this
Section shall be on an occurrence basis, and
underwritten acceptable insurer licensed to do business
in the State of Washington. If Tenant is unable to
obtain this insurance on an occurrence basis, it may be
on a claims-made basis provided that, in addition,
Tenant, at Tenant's expense, obtains an owner's
protective policy, issued in the name of Landlord only,
which is on an occurrence basis for the limits required
by this Section 9.2.2(a). This insurance shall be
written as a primary policy not contributing with and
not in excess of coverage which Landlord may carry;
(b) A special form policy of property insurance (or the
equivalent) covering all Tenant's personal property,
including but not limited to Tenants furniture,
fixtures, leasehold improvements, equipment and
inventory, in the amount of its full replacement costs.
Such property insurance coverage shall be a minimum
insure against loss resulting from fire, lightning and
extended or broad form perils. Landlord shall be named
as Loss Payee as its interest may appear in tenant
improvement and betterments; and
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<PAGE> 11
(c) Business interruption insurance in an amount sufficient
to protect Tenant against any additional costs and lost
income associated with a move to temporary space due to
a business interruption.
6.3 Forms of Policies. Certificates of insurance, together with
copies of the endorsements, when applicable, naming Landlord and
others specified by Landlord as additional insureds, will be
delivered to Landlord prior to Tenant's occupancy of the
Premises and from time to time at least ten days prior to the
expiration of the term of each such policy. All commercial
general liability or comparable policies maintained by Tenant
will name Landlord and such other persons or firms as Landlord
specifies from time to 1 as additional insureds, entitling them
to recover under such policies for any loss sustained by them,
their agents, and employees as result of the negligent acts or
omissions of Tenant. All such policies maintained by Tenant will
provide that they may not be terminated nor may coverage be
reduced except after 30 days' prior written notice to Landlord.
All commercial general liability as property policies maintained
by Tenant will be written as primary policies, not contributing
with and not supplemental to the covenant that Landlord may
carry.
6.4 Waiver of Subrogation. Landlord and Tenant each waive any and
all rights to recover against the other or against any other
tenant occupant of the Building, or against the officers,
directors, shareholders, partners, joint venturers, employees,
agents, customers, invitees, or business visitors of such other
party or of such other tenant or occupant of the Building, for
any loss or damage to such waiving party arising from any cause
covered by any property insurance required to be carried by such
party pursuant to this Article or any other property insurance
actually carried by such party to the extent of the limits of
such policy. Landlord and Tenant from time to time will cause
their respective insurers to issue appropriate waiver of
subrogation rights endorsements to all property insurance
policies carried in connection with the Building or the Premises
or the contents of the Building or the Premises. Tenant agrees
to cause all other occupants of the Premises claiming by, under,
or through Tenant to execute and deliver to Landlord such waiver
of claims and to obtain such waiver of subrogation rights
endorsements.
6.5 Adequacy of Coverage. Landlord, its agents, and employees make
no representation that the limits of liability specified to be
ca] by Tenant pursuant to this Article 6 are adequate to protect
Tenant. If Tenant believes that any of such insurance coverage
is inadequate, Tenant will obtain such additional insurance
coverage as Tenant deems adequate, at Tenant's sole expense.
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7. USE. The Premises will be used only for the purposes set forth in
Article 1.1 and purposes incidental to that use, and for no other
purpose. Tenant will use the Premises in a careful, safe, and proper
manner. Tenant will not use or permit the Premises to be used or
occupied for as purpose or in any manner prohibited by any applicable
laws, and shall refrain from using or permitting the use of the Premises
or any portion thereof as living quarters, sleeping quarters or for
lodging purposes. Tenant will not commit waste or suffer or permit waste
to be committed on, or about the Premises. Tenant will conduct its
business and control its employees, agents, and invitees in such a
manner as not to create nuisance or interfere with, annoy, or disturb
any other Tenant or occupant of the Building or Landlord in its
operation of the Building.
8. REQUIREMENTS OF LAW
8.1 General. At its sole cost and expense, Tenant will promptly
comply with all laws, statutes, ordinances, and governmental
rules, regulations, or requirements now in force or in force
after the date of the Lease, with the requirements of any board
of fire under or other similar body constituted now or after the
date, with any direction or occupancy certificate issued
pursuant to any law by public officer or officers, as well as
with the provisions of all recorded documents affecting the
Premises, insofar as they relate to condition, use, or occupancy
of the Premises, excluding requirements of structural changes to
the Premises or the Building, unless required by the unique
nature of Tenant's use or occupancy of the Premises.
8.2 Hazardous Materials
(a) For purposes of this Lease, "hazardous materials" means
any explosives, radioactive materials, hazardous wastes,
or hazardous substances, including without limitation
substances defined as "hazardous substances" in the
Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, 42 U.S.C. #~
96019657; the Hazardous Materials Transportation Act of
1975, 49 U.S.C. ## 18011812; the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. ## 69016987; or any
other federal, state, or local statute, law, ordinance,
code, rule, regulation, order, or decree regulating,
relating to, or imposing liability or standards of
conduct concerning hazardous materials, waste, or
substances now or at any time hereafter in effect
(collectively, "hazardous materials laws").
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<PAGE> 13
(b) Tenant will not cause or permit the storage, use,
generation, or disposition of any hazardous materials
in, on, or about the Premises or the Building by Tenant,
its agents, employees, or contractors. Tenant will not
permit the Premises to be used operated in a manner that
may cause the Premises or the Building to be
contaminated by any hazardous materials in violation of
any hazardous materials laws. Tenant will immediately
advise Landlord in writing of(l) any and all
enforcement, cleanup, remedial, removal, or other
governmental or regulatory actions instituted,
completed, or threatened pursuant to a hazardous
materials laws relating to any hazardous materials
affecting the Premises; and (2) all claims made or
threatened any third party against Tenant, Landlord, or
the Premises relating to damage, contribution, cost
recovery, compensation, 1 or injury resulting from any
hazardous materials on or about the Premises. Without
Landlord's prior written consent, Ten will not take any
remedial action or enter into any agreements or
settlements in response to the presence of any hazardous
materials in, on, or about the Premises.
(c) Tenant will be solely responsible for and will defend,
indemnify and hold Landlord, its agents, and employees
harmless f and against all claims, costs, and
liabilities, including attorneys' fees and costs,
arising out of or in connection with Tenant breach of
its obligations in this Article 8. Tenant will be solely
responsible for and will defend, indemnify, and hold
Landlord, its agents, and employees harmless from and
against any and all claims, costs, and liabilities,
including attorney's fees and costs, arising out of or
in connection with the removal, cleanup, and restoration
work and materials necessary to return the Premises and
any other property of whatever nature located in or
around the Building to their condition existing prior to
the appearance of Tenant's hazardous materials on the
Premises. Tenant's obligations under this Article 8 will
survive the expiration or other termination of this
Lease.
8.3 Certain Insurance Risks. Tenant will not do or permit to be done
any act or thing upon the Premises or the Building which would
(a) jeopardize or be in conflict with fire insurance policies
covering the Building and fixtures and property in the Building;
(b) mean the rate of fire insurance applicable to the Building
to an amount higher than it otherwise would be for Tenant's
authorized use of 1 Building; or (c) subject Landlord to any
liability or responsibility for injury to any person or persons
or to property by reason of a business or operation being
carried on upon the Premises.
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<PAGE> 14
9. ASSIGNMENT AND SUBLETTING
9.1 General. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors, and assigns,
covenant that it will not assign, mortgage, or encumber this
Lease, nor sublease, nor permit the Premises or any part of the
Premises to be u or occupied by others, without the prior
written consent of Landlord in each instance, which consent
shall not be unreasonably withheld. Any assignment or sublease
in violation of this Article 9 will be void. If this Lease is
assigned, or if the Premises or any part of the Premises are
subleased or occupied by anyone other than Tenant, Landlord
after default by Tenant, collect rent from the assignee,
subtenant, or occupant, and apply the net amount collected to
rent. No assignment, sublease, occupancy, or collection will be
deemed (a) a waiver of the provisions of this Section 9.1; (b)
the acceptance the assignee, subtenant, or occupant as Tenant;
or (c) a release of Tenant from the further performance by
Tenant of covenants on part of Tenant contained in this Lease.
The consent by Landlord to an assignment or sublease will not be
construed to relieve Tenant from obtaining Landlord's prior
written consent in writing to any further assignment or
sublease. No permitted subtenant may as: or encumber its
sublease or further sublease all or any portion of its subleased
space, or otherwise permit the subleased space or a part of its
subleased space to be used or occupied by others, without
Landlord's prior written consent in each instance, which con
shall not be unreasonably withheld.
9.2 Submission of Information. If Tenant requests Landlord's consent
to a specific assignment or subletting, Tenant will submit in
writing to Landlord (a) the name and address of the proposed
assignee or subtenant; (b) the business terms of the proposed
assignment or sublease; (c) reasonably satisfactory information
as to the nature and character of the business of the proposed
assignee or sub and as to the nature of its proposed use of the
space; (d) banking, financial, or other credit information
reasonably sufficient to ex Landlord to determine the financial
responsibility and character of the proposed assignee or
subtenant; and (e) the proposed form assignment or sublease for
Landlord's approval.
9.3 Payments to Landlord. If Landlord consents to a proposed
assignment or sublease, then Landlord will have the right to
require Tenant to pay to Landlord a sum equal to (a) any rent
or. other consideration paid to Tenant by any proposed
transferee that (after deducting the costs of Tenant, if any, in
effecting the assignment or sublease, including reasonable
alteration costs, commissions legal fees) is in excess of the
rent allocable to the transferred space then being paid by
Tenant to Landlord pursuant to this
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<PAGE> 15
Lease (b) any other profit or gain (after deducting any
necessary expenses incurred) realized by Tenant from any such
sublease or assignment; (c) Landlord's reasonable attorneys'
fees and costs incurred in connection with negotiation, review,
and processing of the transfer. All such sums payable will be
payable to Landlord at the time the next payment of monthly rent
is due.
9.4 Prohibited Transfers. The transfer of a majority of the issued
and outstanding capital stock of any corporate Tenant or
subtenant this Lease, or a majority of the total interest in any
partnership, limited liability company or other form of entity
that is a Tenant or subtenant, however accomplished, and whether
in a single transaction or in a series of related or unrelated
transactions, will be deer an assignment of this Lease or of
such sublease requiring Landlord's consent in each instance. For
purposes of this Article 9, the transfer of outstanding capital
stock of any corporate Tenant will not include any sale of such
stock by persons other than those deemed "insiders" within the
meaning of the Securities Exchange Act of 1934, as amended,
effected through the "over-the-counter market" or through any
recognized stock exchange.
9.5 Permitted Transfer. Landlord consents to an assignment of this
Lease or sublease of all or part of the Premises to a
wholly-owned subsidiary of Tenant or the parent of Tenant or to
any corporation into or with which Tenant may be merged or
consolidated; provided that Tenant promptly provides Landlord
with a fully executed copy of such assignment or sublease and
that Tenant is not released from liability under the lease.
10. RULES AND REGULATIONS. Tenant and its employees, agents, licensees, and
invitees will at all times observe faithfully, and comply strictly with,
the rules and regulations set forth in Exhibit D. Landlord may from time
to time reasonably amend, delete, or modify existing and regulations, or
adopt reasonable new rules and regulations for the use, safety,
cleanliness, and care of the Premises and the Building, and comfort,
quiet, and convenience of occupants of the Building. Modifications or
additions to the rules and regulations will be effective upon days'
prior written notice to Tenant from Landlord. In the event of any breach
of any rules or regulations or any amendments or additions to such rules
and regulations, Landlord will have all remedies that this Lease
provides for default by Tenant, and will in addition have any remedies
available at law or in equity, including the right to enjoin any breach
of such rules and regulations. Landlord will not be liable to Tenant for
violation of such rules and regulations by any other Tenant, its
employees, agents, visitors, or licensees or any other person. In the
event of. conflict between the provisions of this Lease and the rules
and regulations, the provisions of this Lease will govern.
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<PAGE> 16
11. COMMON AREAS. As used in this Lease, the term "common areas" means,
without limitation, the hallways, entryways, stairs, elevators,
driveways, walkways, terraces, docks, loading areas, restrooms, trash
facilities, and all other areas and facilities in the Building that are
provided and designated from time to time by Landlord for the general
nonexclusive use and convenience of Tenant with Landlord and other
Tenants the Building and their respective employees, invitees,
licensees, or other visitors. Landlord grants Tenant, its employees,
invitees, licensees. other visitors a nonexclusive license for the term
to use the common areas in common with others entitled to use the common
areas, subject the terms and conditions of this Lease. Without advance
written notice to Tenant, except with respect to matters covered by
subsection (a) below, and without any liability to Tenant in any
respect, provided Landlord will take no action permitted under this
Article 11 in such a m~ as to materially impair or adversely affect
Tenant's substantial benefit and enjoyment of the Premises, Landlord
will have the right to:
(a) Close off any of the common areas to whatever extent required in
the opinion of Landlord and its counsel to prevent a dedication
of any of the common areas or the accrual of any rights by any
person or the public to the common areas;
(b) Temporarily close any of the common areas for maintenance,
alteration, or improvement purposes; and
(c) Change the size, use, shape, or nature of any such common areas,
including erecting additional buildings on the common areas,
expanding the existing Building or other buildings to cover a
portion of the common areas, converting common a to a portion of
the Building or other buildings, or converting any portion of
the Building (excluding the Premises) or other buildings to
common areas. Upon erection of any additional buildings or
change in common areas, the portion of the land upon which
buildings or structures have been erected will no longer be
deemed to be a part of the common areas. In the event of any
such changes in the size or use of the Building or common areas
of the Building, Landlord will make an appropriate adjustment in
the rentable area of the Building or the Building's pro rata
share of exterior common areas of Building, as appropriate, and
a corresponding adjustment to Tenant's share of the operating
expenses payable pursuant 1 Article 5 of this Lease.
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<PAGE> 17
12. LANDLORD'S SERVICES
12.1 Landlord's Repair and Maintenance. Landlord will maintain,
repair and restore the common areas of the Building, including
lobbies, stairs, elevators, corridors, and restrooms, the
windows in the Building, the mechanical, plumbing and electrical
equipment serving the Building, and the structure of the
Building in reasonably good order and condition.
12.2 Landlord's Other Services
(a) Landlord will furnish the Premises with those services
customarily provided in comparable office buildings in
the vicinity the Building, including without limitation
(1) electricity for lighting and the operation of low
wattage office machines (such as desktop microcomputers,
desktop calculators, and typewriters) during business
hours (as that term is defined below), although Landlord
will not be obligated to furnish more power to the
Premises than is proportionally allocated to the
Premises under the Building design; (2) heat/air
conditioning reasonably required for the comfortable
occupation of the Premises during business hours; (3)
access and elevator service; (4) lighting replacement
during business hours (for building standard lights, but
not for any special Tenant lights, which will be
replaced at Tenants sole cost and expense); (5) restroom
supplies; (6) window washing with reasonable frequency,
as determined by Landlord; and (7) daily cleaning
service on weekdays. Landlord may provide, but will not
be obligated to provide, any such services (except
access and elevator service) on holidays or weekends.
(b) Tenant will have the right to purchase for use during
business hours and nonbusiness hours the services
described in clauses (a)(l) and (2) in excess of the
amounts Landlord has agreed to furnish so long as (1)
Tenant gives Landlord reasonable ~ written notice of its
desire to do so; (2) the excess services are reasonably
available to Landlord and to the Premises; and (3)
Tenant pays as additional rent (at the time the next
payment of monthly rent is due) the cost of such excess
service ft time to time charged by Landlord; subject to
the procedures established by Landlord from time to time
for providing such additional or excess services.
12.3 Tenant's Costs. If Landlord reasonably believes that Tenant is
using more power than Landlord furnishes pursuant to Section 12
Landlord may install separate meters of Tenant's power usage,
and Tenant will pay for the cost
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<PAGE> 18
of such excess power as additional together with the cost of
installing any risers, meters, or other facilities that may be
necessary to furnish or measure such excess p to the Premises.
12.4 Limitation on Liability. Landlord will not be in default under
this Lease or be liable to Tenant or any other person for direct
or consequential damage, or otherwise, for any failure to supply
any heat, air conditioning, elevator, cleaning, lighting,
security; for surges or interruptions of electricity; or for
other services Landlord has agreed to supply during any period
when Landlord uses reasonable diligence to supply such services.
Landlord will use reasonable efforts to diligently remedy any
interruption in the furnishing of such services. Landlord
reserves the right temporarily to discontinue such services at
such times as may be necessary reason of accident; repairs,
alterations OR improvements; strikes; lockouts; riots; acts of
God; governmental preemption in connection with a national or
local emergency; any rule, order, or regulation of any
governmental agency; conditions of supply and demand make any
product unavailable; Landlord's compliance with any mandatory
governmental energy conservation or environmental protection
program, or any voluntary governmental energy conservation
program at the request of or with consent or acquiescent Tenant;
or any other happening beyond the control of Landlord. Landlord
will not be liable to Tenant or any other person or tenant
direct or consequential damages resulting from the admission to
or exclusion from the Building of any person. In the event of
invasion, mob, riot, public excitement, strikes, lockouts, or
other circumstances rendering such action advisable in
Landlord's so] opinion, Landlord will have the right to prevent
access to the Building during the continuance of the same by
such means as Landlor in its sole discretion, may deem
appropriate, including without limitation locking doors and
closing parking areas and other com areas. Landlord will not be
liable for damages to person or property or for injury to, or
interruption of, business for any discontinuance permitted under
this Article 12, nor will such discontinuance in any way be
construed as an eviction of Tenant to an abatement of rent or
operate to release Tenant from any of Tenant's obligations under
this Lease.
13. TENANT'S CARE OF THE PREMISES. Tenant will maintain the Premises
(including, without limitation, Tenant's equipment, person property, and
trade fixtures located in the Premises, as well as all interior doors
and walls, plumbing and plumbing fixtures located in the Premises or for
a specific benefit of the Premises, as opposed to the Building as a
whole) in their condition at the time they delivered to Tenant,
reasonable wear and tear excluded. Tenant will immediately advise
Landlord of any damage to the Premises or the Building. All damage or
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<PAGE> 19
injury to the Premises, the Building, or the fixtures, appurtenances,
and equipment in the Premises or the Building is caused by Tenant, its
agents, employees, or invitees may be repaired, restored, or replaced by
Landlord, at the expense of Tenant. Such expense (plus 15 percent of
such expense for Landlord's overhead) will be collectible as additional
rent and will be paid by Tenant within days after delivery of a
statement for such expense.
14. ALTERATIONS
14.1 General
(a) During the Term, Tenant will not make or allow to be
made any alterations, additions, or improvements to or
of the P or any part of the Premises, or attach any
fixtures or equipment to the Premises, without first
obtaining Landlord's written consent. All such
alterations, additions, and improvements consented to by
Landlord, and capital improvements that are required to
be made to the Building as a result of the nature of
Tenant's use of the Premises:
(1) Will be performed by contractors approved by
Landlord and subject to conditions specified by
Landlord (which may including requiring the
posting of a mechanic's or materialmen's lien
bond);
(2) At Landlord's option, will be made by Landlord
for Tenant's account, and Tenant will reimburse
Landlord for their cost (including 15 percent
for Landlord's overhead) within ten days after
receipt of a statement of such cost; and
(3) All such alterations, additions or improvements
shall be made in a good and workmanlike manner
and shall comply with a applicable laws, codes,
ordinances, rules and regulations.
(b) Subject to Tenant's rights in Article 16, all
alterations, additions, fixtures, and improvements,
whether temporary or permanent in character, made in or
upon the Premises either by Tenant or Landlord, will
immediately become Landlord's property and at the end of
the term will remain on the Premises without
compensation to Tenant. unless Landlord demand their
removal. Upon expiration or sooner termination of the
lease term, Tenant shall, at Tenant's cost and expense,
with al due diligence, remove any alterations, additions
or improvements made by Tenant and designated by
Landlord to be
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<PAGE> 20
removed; provided, however, that Landlord gives Tenant
not less than 15 days advance written notice.
14.2 Freestanding Partitions. Tenant will have the right to install
freestanding work station partitions, without Landlord's prior
written consent, so long as no building or other governmental
permit is required for their installation or relocation;
however, if a permit is required, Landlord will not unreasonably
withhold its consent to such relocation or installation. The
freestanding work station partitions for which Tenant pays will
be part of Tenant's trade fixtures for all purposes under this
Lease. All other partitions installing in the Premises are and
will be Landlord's property for all purposes under this Lease.
14.3 Removal. If Landlord has required Tenant to remove any or all
alterations, additions, fixtures, and improvements that are made
in upon the Premises pursuant to this Article 14 prior to the
Expiration Date, Tenant will remove such alterations, additions,
fixtures, improvements at Tenant's sole cost and will restore
the Premises to the condition in which they were before such
alterations, additional fixtures, improvements, and additions
were made, reasonable wear and tear excepted.
15. MECHANICS' LIENS. Tenant will pay or cause to be paid all costs and
charges for work (a) done by Tenant or caused to be done by Tenant, in
or to the Premises, and (b) for all materials furnished for or in
connection with such work. Tenant will indemnify Landlord against and h
Landlord, the Premises, and the Building free, clear, and harmless of
and from all mechanics' liens and claims of liens, and all other
liabilities liens, claims, and demands on account of such work by or on
behalf of Tenant, other than work performed by Landlord pursuant to the
Workletter. If any such lien, at any time, is filed against the Premises
or any part of the Building or land, Tenant will cause such lien to be
discharged of record within ten days after the filing of such lien,
except that if Tenant desires to contest such lien, it will furnish
Landlord, within such ten day period, security reasonably satisfactory
to Landlord of at least 150% of the amount of the claim, plus estimated
costs an interest, or comply with such statutory procedures as may be
available to release the lien. If a final judgment establishing the
validity or existence of a lien for any amount is entered, Tenant will
pay and satisfy the same at once, If Tenant fails to pay any charge for
which a mechanics' lien has been filed, and has not given Landlord
security as described above, or has not complied with such statutory
procedures may be available to release the lien, Landlord may, at its
option, pay such charge and related costs and interest, and the amount
so paid, together with reasonable attorneys' fees incurred in connection
with such lien, will be immediately due from Tenant to Landlord as
additional rent. Nothing contained in this Lease will be deemed the
consent or agreement of Landlord to
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<PAGE> 21
subject Landlord's interest in the Building or land I liability under
any mechanics' or other lien law. If Tenant receives written notice that
a lien has been or is about to be filed against the Premises, Building
or land, or that any action affecting title to the Building or land has
been commenced on account of work done by or for or material furnished
to or for Tenant, it will immediately give Landlord written notice of
such notice. At least I S days prior to the commencement of work
(including but not limited to any maintenance, repairs, alterations,
additions, improvements, or installations) in or to the Premises, by
Tenant, Tenant will give Landlord written notice of the proposed work
and the names and addresses of the persons supplying labor and mat for
the proposed work. Landlord will have the right to post notices of
nonresponsibility or similar written notices on the Premises in order
protect the Premises against any such liens.
16. END OF TERM. At the end of this Lease, Tenant will promptly quit and
surrender the Premises broom clean, in good order and repair, ordinary
wear and tear excepted. If Tenant is not then in default, Tenant may
remove from the Premises any trade fixtures. equipment, and movable
furniture placed in the Premises by Tenant, whether or not such trade
fixtures or equipment are fastened to the Building; Tenant not remove
any trade fixtures or equipment without Landlord's prior written consent
if such fixtures or equipment are used in the operation the Building, or
if the removal of such fixtures or equipment will result in impairing
the structural strength of the Building. Whether or not Tenant is in
default, Tenant will remove such alterations, additions, improvements,
trade fixtures, equipment, and furniture as Landlord have requested in
accordance with Article 14. Tenant will fully repair any damage
occasioned by the removal of any trade fixtures, equipment, furniture.
alterations, additions, and improvements. All trade fixtures, equipment,
furniture, inventory, effects, alterations, additions, and improvements
on the Premises after the end of the term will be deemed conclusively to
have been abandoned and may be appropriated, sold, stored, destroyed, or
otherwise disposed of by Landlord without written notice to Tenant or
any other person and without obligation to account for them. Tenant will
pay Landlord for all expenses incurred in connection with the removal of
such property, including but not limited to the cost of repairing any
damage to the Building or premises caused by the removal of such
property. Tenant's obligation to observe and perform this covenant will
survive the expiration or other termination of this Lease,
17. EMINENT DOMAIN. If all of the Premises are taken by exercise of the
power of eminent domain (or conveyed by Landlord in lieu of such
exercise) this Lease will terminate on a date (the "termination date")
which is the earlier of the date upon which the condemning authority
takes possession of the Premises or the date on which title to the
Premises is vested in the condemning authority. If more than 25 percent
of the rentable area of the Premises is so taken, Tenant will have the
right
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<PAGE> 22
to cancel this Lease by written notice to Landlord given within 20 days
after the termination date. If less than 25 percent of the rentable area
of the Premises is so taken, or if the Tenant does not cancel this Lease
according to the preceding sentence, the monthly rent will be abated in
the proportion of the rentable area of the Premises so taken to the
rentable area of the Premises immediately before such taking, and
Tenant's share will be appropriately recalculated. If 25 percent or more
of the Building or to land is so taken, Landlord may cancel this Lease
by written notice to Tenant given within 30 days after the termination
date. In the event of ax such taking, the entire award will be paid to
Landlord and Tenant will have no right or claim to any part of such
award; however, Tenant will have the right to assert a claim against the
condemning authority in a separate action, so long as Landlord's award
is not otherwise reduced, for Tenant's moving expenses and leasehold
improvements owned by Tenant.
18. DAMAGE AND DESTRUCTION
(a) If the Premises or the Building are damaged by fire or other
insured casualty, Landlord will give Tenant written notice of
time which will be needed to repair such damage, as determined
by Landlord in its reasonable discretion, and the election any)
which Landlord has made according to this Article 18. Such
notice will be given before the 30th day (the "notice cia after
the fire or other insured casualty.
(b) If the Premises or the Building are damaged by fire or other
insured casualty to an extent which may be repaired within 1
days after the notice date, as reasonably determined by
Landlord, Landlord will promptly begin to repair the damage
after the notice date and will diligently pursue the completion
of such repair. In that event this Lease will continue in full
force and effect except that monthly rent will be abated on a
pro rata basis from the date of the damage until the date of the
completion of such repairs (the "repair period") based on the
proportion of the rentable area of the Premises Tenant is urn to
use during the repair period.
(c) If the Premises or the Building are damaged by fire or other
insured casualty to an extent that may not be repaired within
days after the notice date, as reasonably determined by
Landlord, then (1) Landlord may cancel this Lease as of the date
such damage by written notice given to Tenant on or before the
notice date or (2) Tenant may cancel this Lease as of the of
such damage by written notice given to Landlord within ten days
after Landlord's delivery of a written notice that the repairs
cannot be made within such 120 day period. If neither Landlord
nor Tenant so elects to cancel this Lease,
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<PAGE> 23
Landlord will diligently proceed to repair the Building and
Premises and monthly rent will be abated on a pro rata basis
during the repair period based on the proportion of the rentable
area of the Premises Tenant is unable to use during the repair
period
(d) Notwithstanding the provisions of subparagraphs (a), (b), and
(c) above, if the Premises or the Building are damaged by
uninsured casualty, or if the proceeds of insurance are
insufficient to pay for the repair of any damage to the Premises
or Building, Landlord will have the option to repair such damage
or cancel this Lease as of the date of such casualty by written
notice to Tenant on or before the notice date.
(e) If any such damage by fire or other casualty is the result of
the willful conduct or negligence or failure to act of Tenant,
agents, contractors, employees, or invitees, there will be no
abatement of monthly rent as otherwise provided for in this
Article 18. Tenant will have no rights to terminate this Lease
on account of any damage to the Premises, the Building, land,
except as set forth in this Lease.
19. SUBORDINATION
19.1 General. This Lease and Tenant's rights under this Lease are
subject and subordinate to any ground or underlying lease,
mortgage indenture, deed of trust, or other lien encumbrance
(each a "superior lien"), together with any renewals,
extensions, modifications consolidations, and replacements of
such superior lien, now or after the date affecting or placed,
charged. or enforced against the or all or any portion of the
Building or any interest of Landlord in them or Landlord's
interest in this Lease and the leasehold estate created by this
Lease (except to the extent any such instrument expressly
provides that this Lease is superior to such instrument).
provision will be self-operative and no further instrument of
subordination will be required in order to effect it.
notwithstanding foregoing, Tenant will execute, acknowledge, and
deliver to Landlord, within five days after written demand by
Landlord, such documents as may be reasonably requested by
Landlord or the holder of any superior lien to confirm or effect
any such subordination.
19.2 Attornment and Nondisturbance. Tenant agrees that in the event
that any holder of a superior lien succeeds to Landlord's
interest the Premises, Tenant will pay to such holder all rents
subsequently payable under this Lease. Further, Tenant agrees
that in the eve of the enforcement by the holder of a superior
lien of the remedies provided for by law or by such
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<PAGE> 24
superior lien, Tenant will, upon request of any person or party
succeeding to the interest of Landlord as a result of such
enforcement, automatically become the Tenant of and attorney to
such successor in interest without change in the terms or
provisions of this Lease. Such successor in interest will n be
bound by:
(a) Any payment of rent for more than one month in advance,
except prepayments in the nature of security for the
performance by Tenant of its obligations under this
Lease;
(b) Any amendment or modification of this Lease made without
the written consent of such successor in interest (if
such consent was required under the terms of such
superior lien);
(c) Any claim against Landlord arising prior to the date on
which such successor in interest succeeded to Landlord's
interest
(d) Any claim or offset of rent against the Landlord.
Upon request by such successor in interest and without cost to Landlord
or such successor in interest, Tenant will, within 20 days after written
demand, execute, acknowledge, and deliver an instrument or instruments
confirming the attornment, so long as such instrument provides the such
successor in interest will not disturb Tenant in its use of the Premises
in accordance with this Lease.
20. ENTRY BY LANDLORD. Landlord, its agents, employees, and contractors may
enter the Premises at any time in response to an emergency and at
reasonable hours to:
(a) Inspect the Premises;
(b) Show the Premises to prospective purchasers, lenders, or
Tenants;
(c) Determine whether Tenant is complying with all its
obligations in this Lease;
(d) Supply cleaning service and any other service to be
provided by Landlord to Tenant according to this Lease;
(e) Post written notices of nonresponsibility or similar
notices; or
(f) Make repairs required of Landlord under the terms of
this Lease or make repairs to any adjoining space or
utility service make repairs, alterations, or
improvements to any other portion of the Building;
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<PAGE> 25
however, all such work will be done as promptly as
reasonably possible and so as to cause as little
interference to Tenant as reasonably possible.
Tenant, by this Article 20. waives any claim against Landlord, its
agents, employees, or contractors for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of
occupancy or quiet enjoyment of the Premises, or any other loss
occasioned by any en accordance with this Article 20. Landlord will ax
all times have and retain a key with which to unlock all of the doors
in, on, or about the Premises (excluding Tenant's vaults, safes, and
similar areas designated in writing by Tenant in advance). Landlord will
have the right to u any and all means Landlord may deem proper to open
doors in and to the Premises in an emergency in order to obtain entry to
the Premises provided that Landlord will promptly repair any damages
caused by any forced entry. Any entry to the Premises by Landlord in
accordance this Article 20 will not be construed or deemed to be a
forcible or unlawful entry into or a detainer of the Premises or an
eviction, actual or constructive, of Tenant from the Premises or any
portion of the Premises, nor will any such entry entitle Tenant to
damages or an abatement monthly rent, additional rent, or other charges
that this Lease requires Tenant to pay.
21. INDEMNIFICATION, WAIVER, AND RELEASE
21.1 Indemnification. Except for any injury or damage to persons or
property on the Premises that is proximately caused by or result
proximately from the negligence or deliberate act of Landlord,
its employees, or agents, and subject to the provisions of
Section ~ Tenant will neither hold nor attempt to hold Landlord,
its employees, or agents liable for, and Tenant will indemnify
and hold hax Landlord, its employees, and agents from and
against, any and all demands, claims, causes of action, fines,
penalties, damages (including consequential damages),
liabilities, judgments, and expenses (including without
limitation reasonable attorneys' fees) incurred in connection
with or arising from:
(a) The use or occupancy or manner of use or occupancy of
the Premises by Tenant or any person claiming under
Tenant:
(b) Any activity, work, or thing done or permitted by Tenant
in or about the Premises, the Building, or the land;
(c) Any breach by Tenant or its employees, agents,
contractors, or invitees of this Lease; and
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(d) Any injury or damage to the person, property, or
business of Tenant, its employees, agents, contractors,
or invitees entering upon the Premises under the express
o~ implied invitation of Tenant.
If any action or proceeding is brought against Landlord, its
employees, or agents by reason of any such claim for which
Tenant has indemnified Landlord, Tenant, upon written notice
from Landlord, will defend the same at Tenant's expense, with
counsel reasonably satisfactory to Landlord.
21.2 Waiver and Release. Tenant, as a material part of the
consideration to Landlord for this Lease, by this Section 21.2
waives and releases all claims against Landlord, its employees,
and agents with respect to all matters for which Landlord has
disclaimed liability pursuant to the provisions of this Lease.
22. SECURITY DEPOSIT. Tenant has deposited the security deposit with
Landlord as security for the full, faithful, and timely performance of
every provision of this Lease to be performed by Tenant. If Tenant
defaults with respect to any provision of this Lease, including but not
limit to the provisions relating to the payment of rent, Landlord may
use, apply, or retain all or any part of the security deposit for the
payment of a rent, or any other sum in default, or for the payment of
any other amount Landlord may spend or become obligated to spend by
reason of Tenant's default, or to compensate Landlord for any other loss
or damage Landlord may suffer by reason of Tenant's default. If any
portion of the security deposit is so used, applied, or retained, Tenant
will within five days after written demand deposit cash with Landlord in
an amount sufficient to restore the security deposit to its original
amount. Landlord will not be required to keep the security deposit
separate from its general funds, and Tenant will not be entitled to
interest on the security deposit. The security deposit will not be
deemed a limitation on Landlord's damages or a payment of liquidated
damages or a payment of the monthly rent due for the last month of the
term. If Tenant fully, faithfully, and timely performs every provision
of this Lease to be performed by it, the security deposit or any balance
of the security deposit will be returned to Tenant within 60 days after
the expiration of the Term. Landlord may deliver the funds deposited
under this Lease by Ten to the purchaser of the Building in the event
the Building is sold, and after such time Landlord will have no further
liability to Tenant with respect to the security deposit.
23. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that so long
as Tenant pays the rent and observes and performs all the terms,
covenants, and conditions of this Lease on Tenant's part to be observed
and performed, Tenant may peaceably and quietly enjoy the Premises
subject, nevertheless, to the terms
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and conditions of this Lease, and Tenant's possession will not be
disturbed by anyone claiming by, through, or under Landlord.
24. EFFECT OF SALE. A sale, conveyance, or assignment of the Building will
operate to release Landlord from liability from and after the effective
date of such sale, conveyance, or assignment upon all of the covenants,
terms, and conditions of this Lease, express or implied, excise those
liabilities that arose prior to such effective date, and, after the
effective date of such sale, conveyance, or assignment, Tenant will look
solely to Landlord's successor in interest in and to this Lease. This
Lease will not be affected by any such sale, conveyance, or assignment,
Tenant will attorn to Landlord's successor in interest to this Lease, so
long as such successor in interest assumes Landlord's obligations under
this Lease from and after such effective date.
25. DEFAULT
25.1 Events of Default. The following events are referred to,
collectively, as "events of default" or, individually, as an
"event of default":
(a) Tenant defaults in the due and punctual payment of rent,
and such default continues for three days after written
notice from Landlord; however, Tenant will not be
entitled to more than one written notice for monetary
defaults during any 12-mot period, and if after such
written notice any rent is not paid when due, an event
of default will be considered to have occupy without
further notice;
(b) Tenant vacates or abandons the Premises or fails to
operate its business on the Premises:
(c) ThisLease or the Premises or any part of the Premises
are taken upon execution or by other process of law
directed against Tenant, or are taken upon or subject to
any attachment by any creditor of Tenant or claimant
against Tenant, and said attachment is not discharged or
disposed of within 15 days after its levy;
(d) Tenant files a petition in bankruptcy or insolvency or
for reorganization or arrangement under the bankruptcy
laws of the United States or under any insolvency act of
any state, or admits the material allegations of any
such petition by answer or otherwise, or is dissolved or
makes an assignment for the benefit of creditors;
(e) Involuntary proceedings under any such bankruptcy law or
insolvency act or for the dissolution of Tenant are
instituted against Tenant, or a receiver or trustee is
appointed for all or substantially all of the
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property of Tenant, and such proceeding is not dismissed
or such receivership or trusteeship vacated within 60
days after such institution or appointment;
(f) Tenant makes, causes to be made or suffers to exist on
the Premises noise of any type (including music) that,
in the opinion of Landlord, could reasonably be expected
to interfere with the rights of quiet enjoyment of other
tenants in the Building, and such default continues or
occurs for ten days after written notice from Landlord;
however, Tenant will not be entitled more than one
written notice of such defaults during any 12 month
period, and if after such written notice a default under
this provision exists or occurs, an Event of Default
will be considered to have occurred without further
notice;
(g) Tenant breaches any of the other agreements, terms,
covenants, or conditions that this Lease requires Tenant
to perform, on such breach continues for a period of 30
days after written notice from Landlord to Tenant or, if
such breach cannot be cut reasonably within such 30 day
period, if Tenant fails to diligently commence to cure
such breach within 30 days after writ notice from
Landlord and to complete such cure within a reasonable
time thereafter (not to exceed 90 days).
25.2 Landlord's Remedies. If any one or more events of default set
forth in Section 25.1 occurs then Landlord has the right, at its
elect.
(a) To give Tenant written notice of Landlord's intention to
terminate this Lease on the earliest date permitted by
law or on at later date specified in such notice, in
which case Tenants right to possession of the Premises
will cease and this Lease will terminated, except as to
Tenant's liability, as if the expiration of the term
fixed in such notice were the end of the term;
(b) Without further demand or notice, to reenter and take
possession of the Premises or any part of the Premises,
repossess the same, expel Tenant and those claiming
through or under Tenant, and remove the effects of both
or either, using such force for such purposes as may be
necessary. without being liable for prosecution, without
being deemed guilty of any manner trespass. and without
prejudice to any remedies for arrears of monthly rent or
other amounts payable under this Lease or result of any
preceding breach of covenants or conditions; or
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(c) Without further demand or notice to cure any event of
default and to charge Tenant for the cost of effecting
such cure, including without limitation reasonable
attorneys' fees and interest on the amount so advanced
at the rate of 15 percent p annum, provided that
Landlord will have no obligation to cure any such event
of default of Tenant.
Should Landlord elect to reenter as provided in subsection (b),
or should Landlord take possession pursuant to legal proceedings
c pursuant to any notice provided by law, Landlord may, from
time to time, without terminating this Lease, relet the Premises
or and part of the Premises in Landlord's or Tenant's name, but
for the account of Tenant, for such term or terms (which may be
greater o than the period which would otherwise have constituted
the balance of the term) and on such conditions and upon such
other term (which may include concessions of free rent and
alteration and repair of the Premises) as Landlord, in its
reasonable discretion, may determine, and Landlord may collect
and receive the rent. Landlord will in no way be responsible or
liable for any failure to relet Premises, or any part of the
Premises, or for any failure to collect any rent due upon such
reletting. No such reentry or taking possession of the Premises
by Landlord will be construed as an election on Landlord's part
to terminate this Lease unless a written notice of such
intention is given to Tenant. No written notice from Landlord
under this Section or under a forcible or unlawful or and
detainer statute or similar law will constitute an election by
Landlord to terminate this Lease unless such notice specifically
54 states. Landlord reserves the right following any such
reentry or reletting to exercise its right to terminate this
Lease by giving Tenant such written notice, in which event this
Lease will terminate as specified in such notice.
25.3 Certain Damages. In the event that Landlord does not elect to
terminate this Lease as permitted in Section 25.2(a), but on the
contrary elects to take possession as provided in Section
25.2(b), Tenant will pay to Landlord monthly rent and other sums
as promise in this Lease that would be payable under this Lease
if such repossession had not occurred, less the net proceeds, if
any, of any reletting of the Premises after deducting all of
Landlord's reasonable expenses in connection with such
reletting, including without limitation all repossession costs,
brokerage commissions, attorneys' fees, expenses of employees,
alteration and repair costs, and expenses of preparation for
such reletting. If, in connection with any reletting, the new
lease term extends beyond the existing to the Premises covered
by such new lease include other premises not part of the
Premises, a fair apportionment of the rent received such
reletting and the expenses incurred in connection with such
reletting as provided in this Section will
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be made in determining net proceeds from such reletting, and any
rent concessions will be equally apportioned over the term of
the new lease. Tenant w such rent and other sums to Landlord
monthly on the day on which the monthly rent would have been
payable under this Lease possession had not been retaken, and
Landlord will be entitled to receive such rent and other sums
from Tenant on each such day.
25.4 Continuing Liability After Termination. If this Lease is
terminated on account of the occurrence of an event of default.
Tenant will remain liable to Landlord for damages in an amount
equal to monthly rent and other amounts that would have been
owing by Tenant for the balance of the term, had this Lease not
been terminated, less the net proceeds, if any, of any reletting
of the Premises by Landlord subsequent to such termination,
after deducting all of Landlord's expenses in connection with
such reletting, including without limitation the expenses
enumerated in Section 25.3. Landlord will be entitled to collect
such damages from Tenant monthly on the day on which monthly
rent and other amounts would have been payable under this Lease
if this Lease had not been terminated and Landlord will be
entitled to receive such monthly rent and other amounts from
Tenant on each such day. Alternatively, at the option of
Landlord, in the event this Lease is so terminated, Landlord
will be entitled to recover against Tenant as damages for loss
01 the bargain and not as a penalty:
(a) The worth at the time of award of the unpaid rent that
had been earned at the time of termination;
(b) The worth at the time of award of the amount by which
the unpaid rent that would have been earned after
termination until the time of award exceeds the amount
of such rental loss that Tenant proves could have been
reasonably avoided;
(c) The worth at the time of award of the amount by which
the unpaid rent for the balance of the term of this
Lease (had the same not been so terminated by Landlord)
after the time of award exceeds the amount of such
rental loss that Tenant prove could be reasonably
avoided;
(d) Any other amount necessary to compensate Landlord for
all the detriment proximately caused by Tenant's failure
to perform its obligations under this Lease or which
would be likely to result therefrom.
The "worth at the time of award" of the amounts referred to in
clauses (a) and (b) above is computed by adding interest at the
rate of 15 percent per
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annum on the date on which this Lease is terminated from the
date of termination until the time of the award. The "worth at
the time of award" of the amount referred to in clause (c) above
is computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco, at the time of award
plus 1 percent.
25.5 Cumulative Remedies. Any suit or suits for the recovery of the
amounts and damages set forth in Sections 25.3 and 25.4 may be
brought by Landlord, from time to time, at Landlord's election,
and nothing in this Lease will be deemed to require Landlord to
aware the date upon which this Lease or the term would have
expired had there occurred no event of default. Each right and
remedy provided for in this Lease is cumulative and is in
addition to every other right or remedy provided for in this
Lease or now or after lease date existing at law or in equity or
by statute or otherwise, and the exercise or beginning of the
exercise by Landlord of any or more of the rights or remedies
provided for in this Lease or at law, in equity or by statute or
otherwise will not preclude the simultaneous or later exercise
by Landlord of any or all other rights or remedies provided for
in this Lease, at law or in equity or by statute or otherwise.
All costs incurred by Landlord in collecting any amounts and
damages owing by Tenant pursuant to the provisions of this Lease
or to enforce any provision of this Lease, including reasonable
attorneys' fees from the date any such matte turned over to an
attorney, whether or not one or more actions are commenced by
Landlord, will also be recoverable by Landlord from Tenant.
25.6 Waiver of Redemption. Tenant waives any right of redemption
arising as a result of Landlord's exercise of its remedies under
this Article 25.
25.7 Late Charges. Tenant acknowledges that late payment by Tenant to
Landlord of rent and other sums due under this Lease will cat
Landlord to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain.
These c include, but are not limited to, processing and
accounting charges, and late charges which may be imposed on
Landlord by the tern any mortgage or deed of trust covering the
Premises. Accordingly, if any installment of rent or other sums
due from Tenant shall n be received by Landlord or Landlord's
agent within five days after the amount shall be due or if
payment is made with a check that returned for lack of
sufficient funds, then without any requirement of notice to
Tenant, Tenant shall pay to Landlord a late charge equal to the
greater of 10 percent of the delinquent amount or $75, plus 1
percent per month interest on the delinquencies from the due
until payment. The parties agree that this late charge plus
interest represents fair and reasonable estimate of
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the cost Landlord incur by reason of late payment by Tenant.
Acceptance of the late charge by Landlord shall in no event
constitute a waiver of Tens default with respect to the overdue
amount, nor prevent Landlord from exercising any of the other
rights or remedies granted to Landlord under this Lease, or at
law or equity.
25.8 Default by Landlord. Landlord shall not be in default unless
Landlord fails to perform obligations required of Landlord
within a reasonable time, but in any event 30 days after written
notice by certified mail by Tenant to Landlord and to the holder
of any first mortgage or deed of trust covering the Premises
whose name and address shall have theretofore been furnished to
Tenant in writing Said notice shall specify wherein Landlord has
failed to perform such obligation; provided, however, that if
the nature of Landlord obligation is such that more than 30 days
are required for performance, then Landlord shall not be in
default if Landlord commence performance within such 30-day
period and thereafter diligently prosecutes the same to
completion. Tenant further agrees not to invoke any of its
remedies under this Lease until said 30 days have elapsed. In no
event shall Tenant have the right to terminate this Lease as a
result of Landlord's default and Tenant's remedies shall be
limited to damages and/or an injunction; and in no case may the
Tenant withhold rent or claim a set-off or deduction from rent.
26. PARKING. Tenant will be entitled to use the parking spaces during the
Term subject to the rules and regulations set forth in Exhibit D. and
amendments or additions to them. The parking charges set forth in
Section 1.1, if any, will be due and payable in advance at the same time
and place as monthly rent. The parking spaces will be unassigned,
nonreserved, and nondesignated. Landlord reserves the right to adjust
the parking charges in Landlord's sole discretion at any time after 30
days' prior written notice. Twenty-four hour parking on the real
property up which the Premises are located shall not be permitted by
Tenant, its employees, agents or invitees.
27. MISCELLANEOUS
27.1 No Offer. This Lease is submitted to Tenant on the understanding
that it will not be considered an offer and will not bind
Landlor any way until Tenant has duly executed and delivered
duplicate originals to Landlord and Landlord has executed and
delivered onto such originals to Tenant.
27.2 Joint and Several Liability. If Tenant is composed of more than
one signatory to this Lease, each signatory will be jointly and
severally liable with each other signatory for payment and
performance according to this
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Lease. The act of, written notice to, written notice from,
refund to. or signature of any signatory to this Lease
(including without limitation modifications of this Lease made b
fewer than all such signatories) will bind every other signatory
as though every other signatory had so acted, or received or
given written notice or refund, or signed.
27.3 No Construction Against Drafting Party. Landlord and Tenant
acknowledge that each of them and their counsel have had an
opportunity to review this Lease and that this Lease will not be
construed against Landlord merely because Landlord has prepared
27.4 Time of the Essence. Time is of the essence of each and every
provision of this Lease.
27.5 No Recordation. A short form memorandum of this Lease may be
recorded at the request of either party, and at the requesting p
expense.
27.6 No Waiver. The waiver by Landlord of any agreement, condition,
or provision contained in this Lease will not be deemed to be
waiver of any subsequent breach of the same or any other
agreement, condition, or provision contained in this Lease, nor
will and custom or practice that may grow up between the parties
in the administration of the terms of this Lease be construed to
waive or lessen the right of Landlord to insist upon the
performance by Tenant in strict accordance with the terms of
this Lease. The subs acceptance of rent by Landlord will not be
deemed to be a waiver of any preceding breach by Tenant of any
agreement, condition provision of this Lease, other than the
failure of Tenant to pay the particular rent so accepted,
regardless of Landlord's knowledge such preceding breach at the
time of acceptance of such rent.
27.7 Limitation on Recourse. Tenant specifically agrees to look
solely to Landlord's interest in the Building and land for the
recover any judgments from Landlord. It is agreed that Landlord
(and its shareholders, venturers, members and partners, and
their shareholders, venturers, members and partners and all of
their officers, directors, and employees) will not be personally
liable for such judgments. The provisions contained in the
preceding sentences are not intended to and will not limit any
right that Tenant otherwise have to obtain injunctive relief
against Landlord or relief in any suit or action in connection
with enforcement or collect of amounts that may become owing or
payable under or on account of insurance maintained by Landlord.
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27.8 Estoppel Certificates. At any time and from time to time but
within five days after prior written request by Landlord, Tenant
V execute, acknowledge, and deliver to Landlord, promptly upon
request. a certificate certifying (a) that this Lease is
unmodified full force and effect or, if there have been
modifications, that this Lease is in full force and effect, as
modified, and stating the d~ nature of each modification; (b)
the date, if any, to which rent and other sums payable under
this Lease have been paid; (c) that written notice of any
default has been delivered to Landlord which default has not
been cured, except as to defaults specified in certificate; (d)
that there is no event of default under this Lease or an event
which, with notice or the passage of time, or both, w result in
an event of default under this Lease, except for defaults
specified in said certificate; and (e) such other matters as may
1 reasonably requested by Landlord. Any such certificate may be
relied upon by any prospective purchaser or existing or prospect
mortgagee or beneficiary under any deed of trust of the Building
or any part of the Building. Tenant's failure to deliver such a
certificate within such time will be conclusive evidence of the
matters set forth in it.
27.9 Waiver of Jury Trial. LANDLORD, TENANT AND GUARANTOR BY THIS
SECTION 27.9 WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING. OR
COUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES TO THE LEASE
AGAINST OTHER ON ANY Mailers WHATSOEVER ARlSING OUT OF OR IN ANY
WAY CONNECTED WITH THIS LEASE. THIS RELATIONSHIP OF LANDLORD AND
TENANT, TENANTS USE OR OCCUPANCY OF THE PREMISES, OR ANY OTHER
CLAIMS (EXCEPT CLAIMS FOR PERSONAL INJURY OR PROPERTY DAMAGE),
AND ANY EMERGENCY STATUTORY' OR ANY OTHER STATUTORY REMEDY.
27.10 No Merger. The voluntary or other surrender of this Lease by
Tenant or the cancellation of this Lease by mutual agreement of
Tenant and Landlord or the termination of this Lease on account
of Tenant's default will not work a merger, and will, at
Landlord's option, (a) terminate all or any subleases and
subtenancies or (b) operate as an assignment to Landlord of all
or any subleases or subtenancies Landlord's option under this
Section 27.10 will be exercised by written notice to Tenant and
all known sublessees or subtenants in Premises or any part of
the Premises.
27.11 Holding Over. Tenant will have no right to remain in possession
of all or any part of the Premises after the expiration of the
term. Tenant remains in possession of all or any part of the
Premises after the expiration of the term, with the express or
implied consent Landlord: (a) such tenancy will be deemed to be
a periodic tenancy from month-to-month only; (b) such
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<PAGE> 35
tenancy will not constitute renewal or extension of this Lease
for any further term; and (c) such tenancy may be terminated by
Landlord upon the earlier of 30 days' prior written notice or
the earliest date permitted by law. In such event, monthly rent
will be increased to an amount equal to 150% of the monthly rent
payable during the last month of the term, and any other sums
due under this Lease will be payable in the amount and at the
times specified in this Lease. Such month-to-month tenancy will
be subject to every other term, condition, and covenant
contained in this Lease.
27.12 Notices. Any notice, request, demand, consent, approval, or
other communication required or permitted under this Lease must
be writing and will be deemed to have been given when personally
delivered, sent by facsimile with receipt acknowledged,
deposited with any nationally recognized overnight carrier that
routinely issues receipts, or deposited in any depository
regularly maintained the United States Postal Service, postage
prepaid, certified mail, return receipt requested, addressed to
the party for whom it is intended at its address set forth in
Section 1. 1. Either Landlord or Tenant may add additional
addresses or change its address for purposes of receipt of any
such communication by giving ten days' prior written notice of
such change to the other party in the ma prescribed in this
Section 27. 12.
27.13 Severability. If any provision of this Lease proves to be
illegal, invalid, or unenforceable, the remainder of this Lease
will not be affected by such finding, and in lieu of each
provision of this Lease that is illegal, invalid, or
unenforceable a provision will be ad as a part of this Lease as
similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid enforceable.
27.14 Written Amendment Required. No amendment, alteration,
modification of, or addition to this Lease will be valid or
binding and expressed in writing and signed by Landlord and
Tenant. Tenant agrees to make any modifications of the terms and
provisions of Lease required or requested by any lending
institution providing financing for the Building, or project, as
the case may be, provide that no such modifications will
materially adversely affect Tenant's rights and obligations
under this Lease.
27.15 Entire Agreement. This Lease, the exhibits and addenda, if any,
contain the entire agreement between Landlord and Tenant. No
promises or representations, except as contained in this Lease,
have been made to Tenant respecting the condition or the manner
of operating the Premises, the Building, or the project.
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27.16 Captions. The captions of the various articles and sections of
this Lease are for convenience only and do not necessarily
define, 1 describe, or construe the contents of such articles or
sections.
27.17 Authority. Tenant and the party executing this Lease on behalf
of Tenant represent to Landlord that such party is authorized to
d by requisite action of the board of directors, partners or
members, as the case may be, and agree upon request to deliver
to Landlord resolution or similar document to that effect.
27.18 Brokers. Landlord and Tenant respectively represent and warrant
to each other that neither of them has consulted or negotiated v
any broker or finder with regard to the Premises except the
broker named in Section 1.1, if any. Each of them will indemnify
the against and hold the other harmless from any claims for fees
or commissions from anyone with whom either of them has
consulted negotiated with regard to the Premises except the
broker. Landlord will pay any fees or commissions due the
broker.
27.19 Governing Law. This Lease will be governed by and construed
pursuant to the laws of the State of Washington.
27.20 No Easements for Air or Light. Any diminution or shutting off of
light, air, or view by any structure that may be erected on Ian
adjacent to the building will in no way affect this Lease or
impose any liability on Landlord.
27.21 Tax Credits. Landlord is entitled to claim all tax credits and
depreciation attributable to leasehold improvements in the
Premises. Promptly after Landlord's demand, Landlord and Tenant
will prepare a detailed list of the leasehold improvements and
fixtures and their respective costs for which Landlord or Tenant
has paid. Landlord will be entitled to all credits and
depreciation for those items for which Landlord has paid by
means of any Tenant finish allowance or otherwise. Tenant will
be entitled to any tax credits and depreciation for all items
for which Tenant has paid with funds not provided by Landlord.
27.22 Relocation of the Premises. Landlord reserves the right to
relocate the Premises to substantially comparable space within
the Building, pursuant to this Section 27.22. Landlord will give
Tenant a written notice of its intention to relocate the
Premises, and Tenant will complete such relocation within 60
days after receipt of such written notice. If the space to which
Landlord proposes to relocate Tenant is not substantially
comparable to the Premises, Tenant may so notify Landlord, and
if Landlord fails to offer space satisfactory to Tenant, Tenant
may terminate this Lease effective as
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of the 30th day after the date of Landlord's initial written
notice. Tenant does relocate within the Building, then effective
on the date of such relocation this Lease will be amended by
deleting the description of the original Premises and
substituting for it a description of such comparable space.
Landlord agrees to reimburse Tenant for its actual reasonable
moving costs to such other space within the Building, the
reasonable costs of reprinting stationery, 2 the costs of
rewiring the new premises for telephone and computers comparably
to the original Premises.
27.23 Landlord's Fees. Whenever Tenant requests Landlord to take any
action or give any consent required or permitted under this Less
Tenant will reimburse Landlord for all of Landlord's reasonable
costs incurred in reviewing the proposed action or consent,
including without limitation reasonable attorneys', engineers'
or architects' fees, within ten days after Landlord's delivery
to Tenant of a statement of such costs. Tenant will be obligated
to make such reimbursement without regard to whether Landlord
consents to any such proposed action.
27.24 Binding Effect. The covenants, conditions, and agreements
contained in this Lease will bind and inure to the benefit of
Landlord Tenant and their respective heirs, distributees,
executors, administrators, successors, and, except as otherwise
provided in this Leas their assigns.
27.25 Guarantor. In the event that there is a Guarantor of this Lease,
Guarantor hereby agrees to jointly and severally perform all
payment and other obligations of Tenant under this Lease.
Guarantor waives all suretyship defenses that would otherwise be
available to Guarantor.
27.26 Disclosure of Agency Representation. At the signing of this
Lease Agreement, Morris Piha Management Group, Inc. represented
Landlord. Each party signing this document confirms that prior
oral and/or written disclosure of agency was provided to them in
transaction.
27.27 Confidentiality. Tenant agrees not to disclose the terms and
conditions of this Lease to a third party without the written
consent Landlord.
27.28 Rules of Construction. The parties agree that (a) in the event
of any inconsistency between the provisions of Section 1 and the
o provisions of this Lease, the other provisions of this Lease
shall govern; (b) in the event of any inconsistency between the
provisit of the body of this Lease and the Riders and
workletters attached hereto, the provisions set forth in the
Riders and workletters shall govern; (c) in the event of any
ambiguity regarding which party is responsible for costs or
expenses, Tenant shall be
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responsible; (d) ambiguities shall not be construed against the
party that drafted this Lease.
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<PAGE> 39
IN WITNESS WHEREOF, the parties have executed this instrument as of the
day and year first above written.
LANDLORD: MORRIS PIHA REAL ESTATE
SERVICES, INC.
By: /s/
---------------------------------
Title: President
------------------------------
TENANT: VIRAGE LOGIC CORPORATION
By: /s/
---------------------------------
Title: President & CEO
------------------------------
THE OBLIGATIONS OF TENANT ARE
GUARANTEED BY:
By:
---------------------------------
Title:
------------------------------
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<PAGE> 40
EXHIBIT B
LEGAL DESCRIPTION
DESCRIPTION:
THAT PORTION OF THE NORTHWEST QUARTER OF THE SOUTHEAST QUARTER OF
SECTION 10, TOWNSHIP 24 NORTH, RANGE 5 EAST WM., IN KING COUNTY, WASHINGTON,
LYING SOUTHERLY OF SR-90, WESTERLY OF THE 136TH UNDERCROSSING AND NORTHERLY OF A
LINE 30 FEET NORTHERLY OF AND PARALLEL TO THE FR-6 LINE.
ALL AS SHOWN SHEETS 4, 5, AND 6 OF 25 SHEETS, SR-90 M.P. 7.71 TO M.P.
11.73 (RICHARDS ROAD TO LAKE SAMMAMISH).
SITUATE IN THE COUNTY OF KING, STATE OF WASHINGTON.
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<PAGE> 41
EXHIBIT C
WORKLETTER
This workletter is attached to and forms a part of that certain office lease
dated ___________________ ("Lease"), pursuant to which Landlord has lease to
Tenant office space in the Building to be known as:
<TABLE>
<S> <C>
PROJECT: Virage Logic Corporation ADDRESS: 14100 SE 36th Street. Suite 205
------------------------ -------------------------------
</TABLE>
The Landlord agrees to provide the Leased premises in the following condition:
____ STANDARD IMPROVEMENTS (As Is)
X STANDARD IMPROVEMENTS (As Is) PLUS THOSE SHOWN BELOW
LANDLORD AT LANDLORD'S sole cost and expense shall:
1) Install new carpet throughout the space according to building standards.
2) Remove walls indicated on attached floor plan.
3) Build an 8 x 12 room with a sink and lower cabinets. The exact location
is further described on the attached floor plan on Exhibit A.
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<PAGE> 42
EXHIBIT D
RULES AND REGULATIONS
1. No sign, placard, picture, advertisement, name or notice shall be
inscribed, displayed or printed or affixed on or to any part of the
outside or inside the Building without the written consent of Landlord
first had and obtained and Landlord shall have the right to remove any
such sign, placard, picture advertisement, name or notice without notice
to and at the expense of Tenant.
All approved signs or lettering on doors shall be printed, painted,
affixed or inscribed at the expense of Tenant by a person approved of by
Landlord.
Tenant shall not place anything or allow anything to be placed near the
glass of any window, door, partition or wall which may appear unsightly
from outside the Premises; provided, however, that Landlord may furnish
and install a Building standard window covering at all exterior windows.
Tenant shall not without prior written consent of Landlord cause or
otherwise sunscreen any window.
2. The sidewalks, halls, passages, exits, entrances, elevators and
stairways shall not be obstructed by any of the tenants or used by them
for any purposes other than for ingress and egress from their respective
Premises.
3. Tenant shall not alter any lock or install any new or additional locks
or any bolts on any doors or windows of the Premises.
4. The toilet rooms, urinals, wash bowls and other apparatus shall not be
used for any purpose other than that for which they were constructed ant
foreign substance of any kind whatsoever shall be thrown therein and the
expense of any breakage, stoppage or damage resulting from the violation
of rule shall be borne by the Tenant who, or whose employees or invitees
shall have caused it.
5. Tenant shall not overload the floor of the Premises or in any way deface
the Premises or any part thereof.
6. No furniture, freight or equipment of any kind shall be brought into the
Building without the prior notice to Landlord and all moving of the same
or out of the Building shall be done at such time and in such manner as
Landlord shall designate. Landlord shall have the right to prescribe the
we size and position of all safes and other heavy equipment brought into
the Building and also the times and manner of moving the same in and out
o Building. Safes or other heavy objects shall, if considered necessary
by Landlord, stand on supports of such thickness as is necessary to pro
distribute the weight. Landlord will not be responsible for loss
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<PAGE> 43
of or damage to any such safe or property from any cause and all damage
done building by moving or maintaining any such safe or other property
shall be repaired at the expense of Tenant.
7. Tenant shall not use, keep or permit to be used or kept any foul or
noxious gas or substance in the Premises, or permit or suffer the
Premises occupied or used in a manner offensive to objectionable to the
Landlord or other occupants of the Building by reason of noise, odors
and/or vibration interfere in any way with other tenants or those having
business therein, nor shall any animals or birds he brought in or kept
in or about the Premises Building.
8. No cooking shall be done or permitted on the Premises, nor shall the
Premises be used for the storage of merchandise, for washing clothes,
for lodging or for any improper, objectionable or immoral purposes.
9. Tenant shall not use or keep in the Premises or the Building any
kerosene, gasoline or inflammable or combustible fluid or material, or
use any method of heating or air conditioning other than that supplied
by Landlord.
10. Landlord will direct electricians as to where and how telephone and
telegraph wires are to be introduced. No boring or cutting for wires
allowed without the consent of the Landlord. The location of telephones,
call boxes and other office equipment affixed to the Premises shall be
subject to the approval of Landlord.
11. On Saturdays, Sundays and legal holidays, and on other days between the
hours of 6:00 P.M. and 8:00 A.M. the following day, access to the
Building or to the halls, corridors, elevators or stairways in the
Building, or to the Premises may be refused unless the person seeking
access is known to the or employee of the Building in charge and has a
pass or is properly identified. The Landlord shall in no case be liable
for damages for any error regard to the admission to or exclusion from
the Building of any person. In case of invasion, mob, riot, public
excitement, or other commotion Landlord reserves the right to prevent
access to the Building during the continuance of the same by closing of
the doors or otherwise, for the safety tenants and protection of
property in the Building and the Building.
12. Landlord reserves the right to exclude or expel from the Building any
person who, in the judgment of Landlord, is intoxicated or under the
influence of liquor or drugs, or who shall in any manner do any act in
violation of any of the rules and regulations of the Building.
13. No vending machine or machines of any description shall be installed,
maintained or operated upon the Premises without the written consent
Landlord.
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<PAGE> 44
14. Landlord shall have the right, exercisable without notice and without
liability to Tenant, to change the name and street address of the
Building of which the Premises are a part.
15. Tenant shall not disturb, solicit, or canvass any occupant of the
Building and shall cooperate to prevent same.
Without the written consent of Landlord, Tenant shall not use the name
of the Building in connection with or in promoting or advertising the
business of Tenant except as Tenant's address.
17. Landlord shall have the right to control and operate the public portions
of the Building, and the public facilities, and hearing and air
conditioning, well as facilities furnished for the common use of the
tenants, in such manner as it deems best for the benefit of the tenants
generally.
18. All entrance doors in the Premises shall be left locked when the
Premises are not in use, and all doors opening to public corridors shall
be kept do except for normal ingress and egress from the Premises.
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<PAGE> 45
EXHIBIT E
COMMENCEMENT DATE CERTIFICATE
This Commencement Date certificate is entered into by Landlord and Tenant
pursuant to Section 3.1 of the Lease.
1. DEFINITIONS. In this certificate the following terms have the meanings
given to them:
(a) Landlord:
(b) Tenant:
(c) Lease: Office Lease dated ___________________ between Landlord
and Tenant.
(d) Premises: Suite __________
(e) Building Address:
2. CONFIRMATION OF LEASE COMMENCEMENT: Landlord and Tenant confirm that the
commencement date of the lease is _____________________________ and the
Expiration Date is ___________________________________ and that Sections
1.1(k) and (1) are accordingly amended.
Landlord and Tenant have executed this Commencement Date certificate as of the
dates set forth below.
TENANT:
By:_________________________________
Title:______________________________
LANDLORD:
By:_________________________________
Title:______________________________
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<PAGE> 46
To be made a part of the Office Lease document under date of ______________
between _______________________, as Landlord, and _________________, as Tenant.
Initials _________
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<PAGE> 47
RIDER #28 PARKING:
Pursuant to Article 26 of the Lease, Tenant shall be entitled to the exclusive,
reserved (AND marked with the Tenant name) use of I covered parking stall.
Landlord shall provide a total of eight (8) uncovered parking stalls which shall
be unreserved and first come, first served. Landlord reserves the right to
assign the unreserved parking stalls a will strictly enforce the Tenant's limit
to 8 uncovered parking stalls. Landlord has approved the floor plan showing 17
work stations but does not in any way alter, approve or effect the total number
of parking stalls allowed Tenant's use. Landlord reserves the right to remove
any of Tenant's cars that are parked in other Tenant's parking spaces and if
after the 3rd notice by Landlord to Tenant of improper parking, Landlord may at
Landlord's s discretion cancel Tenant's lease by providing a minimum of 90 days
written notice and all the un-amontized Ten. improvement dollars and lease
commissions shall be due and payable upon notice.
RIDER #29 TENANT'S RIGHT OF EARLY TERMINATION:
Nowithstanding anything contained herein to the contrary, Tenant in its sole
discretion, shall have the right terminate the Lease on the last day of the
thirty-sixth (36) month after the commencement date. In order to exen this early
termination right, Tenant must give Landlord written notice at least one hundred
eighty (180) days before the early Termination Date. Upon the date notice is
provided, Tenant shall pay Landlord seventeen thousand se hundred thirty dollars
($17,730) and Tenant shall be fully released and discharged from any and all
obligation except any obligation accrued before the Early Termination Date.
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<PAGE> 1
EXHIBIT 10.22
MASTER LEASE AGREEMENT
This Master Lease Agreement (the "Lease") is made the 12th day of
February, 1999 between Leasing Technologies International, Inc., with its
principal office at 221 Danbury Road, Wilton, CT 06897 (the "Lessor"), and
Virage Logic Corporation and Virage Logic International, each with its principal
office at 46824 Lakeview Boulevard, Fremont, CA 94538 (hereinafter sometimes
collectively referred to as the "Lessee" and individually, as an "Individual
Lessee"). The parties hereto agree as follows:
1. LEASE:
This Lease establishes the general terms and conditions by which
Lessor may lease to any individual Lessee the Equipment (the "Equipment") listed
on each Equipment Schedule executed periodically pursuant to this Lease. Each
such Equipment Schedule shall incorporate by reference the terms of this Lease,
and shall be a separate lease agreement as to the Equipment listed thereon for
all purposes, including default. If the provisions of an Equipment Schedule
conflict with the provisions of this Lease, the provisions of such Equipment
Schedule shall prevail. Although each Equipment Schedule may be executed only by
an Individual Lessee, each individual Lessee and its respective successors and
assigns shall be absolutely and unconditionally jointly and severally liable for
each and every obligation arising under this Lease and any Equipment Schedule
thereto. Each Individual Lessee agrees that Lessor may proceed directly against
any Individual Lessee for the payment, performance or observance of each and
every obligation of any Individual Lessee under this Lease or any Equipment
Schedule thereto. The obligations of any Individual Lessee shall not be subject
to any counterclaim, setoff, recoupment or defense based upon any claim any
Individual Lessee may have against any other Individual Lessee or the Lessor,
and shall remain in full force and effect without regard to, and shall not be
released, discharged or in any way affected by, any circumstance or condition
affecting any Individual Lessee, including without limitation (a) any waiver,
consent, extension, renewal, indulgence or other action or inaction under or in
respect of this Lease or any Equipment Schedule; (b) any invalidity or
unenforceability, in whole or in part, of any such agreement or instrument with
respect to any Individual Lessee; (c) any failure on the part of any Individual
Lessee for any reason to perform or comply with any term of any Equipment
Schedule; (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or similar proceeding with respect to any
other Individual Lessee its properties or creditors; or (e) any other occurrence
whatsoever, whether similar or dissimilar to the foregoing, with respect to any
other Individual Lessee. Each Individual Lessee hereby waives any requirement of
diligence or promptness on the part of the Lessor in the enforcement of the
Lessor's rights hereunder or under any other Loan Document with respect to the
obligations of itself or of any other Individual Lessee. Without limiting the
foregoing any failure to make any demand upon, to pursue or exhaust any rights
or remedies against
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<PAGE> 2
Individual Lessee, or any delay with respect thereto, shall not affect the
obligations of any Individual Lessee hereunder.
2. DEFINITIONS:
(a) The "Installation Date" means the date determined in accordance with
the applicable Equipment Schedule.
(b) The "Commencement Date" means, as to any item of the Equipment
designated on any Equipment Schedule where the Installation Date for such item
of Equipment falls on the first day of the month, that date, or, in any other
case, the first day of the month following the month in which such Installation
Date falls.
(c) The "Daily Rental" means 1/30th of the amount set forth as the
monthly rental in the applicable Equipment Schedule.
3. TERM OF LEASE:
The term of this Lease, as to all Equipment designated on any Equipment
Schedule, shall commence on the Installation Date for such Equipment, and shall
continue for an initial period ending that number of months as is specified on
the applicable Equipment Schedule from the Commencement Date for the last item
of Equipment to be installed (the "Initial Term"). The term of this Lease for
all such Equipment shall be automatically extended for successive monthly
periods until terminated in accordance with this Lease. Any termination shall be
effective only on the last day of the Initial Term or the last day of any such
successive period.
4. RENTAL:
The monthly rental payable hereunder is as set forth in the Equipment
Schedule(s). Rental shall begin to accrue on the Installation Date for each item
of Equipment and shall be due and payable by Lessee in advance on the first day
of each month. If the Installation Date does not fall on the first day of a
month, the rental for that period of time from the Installation Date until the
Commencement Date shall be an amount equal to the Daily Rental multiplied by the
number of days from (and including) the Installation Date to (but not including)
the Commencement Date and shall be due and payable on the Installation Date. In
addition to the monthly rental set forth in the Equipment Schedule(s), Lessee
shall pay to Lessor an amount equal to all taxes paid, payable or required to be
collected by Lessor, however designated, which are levied or based on the
rental, on the Lease or on the Equipment or on its purchase for lease hereunder,
or on its use, lease, operation, control or value (including, without
limitation, state and local privilege or excise taxes based on gross revenue),
any penalties or interest in connection therewith which are attributable to
Lessee's negligence or taxes or amounts in lieu thereof paid or payable by
Lessor in respect of the foregoing, but excluding taxes based
2
<PAGE> 3
on Lessor's net income. Personal property taxes assessed on the Equipment during
the term hereof shall be paid by Lessee. Lessee agrees to file, on behalf of
Lessor, all required property tax returns and reports concerning the Equipment
with all appropriate governmental agencies, and, within not more than thirty
(30) days after the due date of such filing to send Lessor confirmation of such
filing. Lessee agrees that Lessor, or Lessor's agent may file all required
property tax returns and reports and pay all taxes thereon pertaining to the
Equipment. In such event, Lessee shall reimburse Lessor for all costs and
expenses incurred in connection therewith, provided that such costs and expenses
(including property taxes) shall not exceed the property taxes pursuant to
statutory tax rates and regulations.
Interest on any past due payments, including but not limited to
administrative charges and any other charges or fees arising out of or related
to this Lease, shall accrue at the rate of 1 1/2% per month, or if such rate
shall exceed the maximum rate allowed by law, then at such maximum rate, and
shall be payable on demand. Charges for taxes, penalties and interest shall be
promptly paid by Lessee when invoiced by Lessor.
As security for the full performance of all of the Lessee's obligations
under each Equipment Schedule, Lessee shall, simultaneously with the execution
and delivery of each Equipment Schedule, deposit with Lessor the amount set
forth on such Equipment Schedule. The security deposit shall be promptly
returned to the Lessee by the Lessor upon the expiration of such Equipment
Schedule and return of all Equipment, provided that all Lessee obligations under
such Equipment Schedule have been fulfilled.
5. INSTALLATION, USE AND QUIET POSSESSION OF EQUIPMENT:
(a) Lessee, at its own expense, will provide the required suitable
electric current to operate the Equipment and appropriate installation
facilities as specified by the manufacturer.
(b) Any equipment, cards, disks, tapes or other items not specified in
the Equipment Schedule(s) which are used on or in connection with the Equipment
must meet the specifications of the manufacturer and shall be acquired by Lessee
at its own expense.
(c) Lessee shall use the Equipment solely in connection with Lessee's
business and for no other purpose. Subject to the preceding sentence, Lessee
shall be entitled to unlimited usage of the Equipment without extra charge by
Lessor.
(d) Unless otherwise set forth in the applicable Equipment Schedule,
Lessee will at all times keep the Equipment in its sole possession and control.
The Equipment shall not be moved from the location stated in the applicable
Equipment Schedule without the prior written consent of Lessor.
3
<PAGE> 4
(e) After prior notice to Lessor, Lessee may, at its own expense, make
alterations in or add attachments to the Equipment, provided such alterations or
attachments do not interfere with the normal and satisfactory operation or
maintenance of the Equipment or with Lessee's ability to obtain and maintain the
maintenance contract required by Section 5(h) hereof. The manufacturer or other
organization selected by Lessee and approved in writing by Lessor to maintain
the Equipment ("Maintenance Organization") may incorporate engineering changes
or make temporary alterations to the Equipment upon request of Lessee. All such
alterations and attachments shall be and become the property of Lessor or, at
the option of Lessee, shall be removed by Lessee and the Equipment restored, at
Lessee's expense, to its original condition as of the Installation Date thereof,
reasonable wear and tear only excepted. and upon the removal and restoration,
the alteration and/or attachment which was made by Lessee shall become the
property of Lessee.
(f) So long as Lessee is not in default hereunder, neither Lessor nor
any party claiming through or under Lessor shall interfere with Lessee's use or
possession of any Equipment during the term of this Lease.
(g) Lessee shall, during the term of this Lease, at its expense, keep
the Equipment in good working order and condition and make all necessary
adjustments, repairs and replacements and shall not use or permit the Equipment
to be used in any manner or for any purpose for which, in the opinion of the
manufacturer, the Equipment is not designed or reasonably suitable.
(h) Unless otherwise set forth in the applicable Equipment Schedule,
Lessee shall, during the term of this Lease, at its own expense, enter into and
maintain in force a contract with the manufacturer or the Maintenance
Organization covering at least prime shift maintenance of each item of
Equipment. Such contract shall commence upon expiration of the manufacturer's
warranty period, if any, relating to such item. Lessee shall furnish Lessor with
a copy of such contracts).
(i) At the termination of the applicable Equipment Schedule, Lessee
shall, at its expense, return not less than all the Equipment subject thereto to
Lessor (at the location designated by Lessor within the Continental United
States) in the same operating order, repair, condition and appearance as on the
Installation Date, reasonable wear and tear only excepted, with all engineering
and safety changes prescribed by the manufacturer or Maintenance Organization
incorporated therein. Lessee shall, prior to such termination, arrange and pay
for any repairs, changes and manufacturer's certifications as are necessary for
the manufacturer or Maintenance Organization to accept the Equipment under
contract maintenance at its then standard rates. Lessee shall return all
accessories supplied with the Equipment, including but not limited to all
manuals, cables and software diskettes. Lessee shall promptly pay, after receipt
of an invoice therefore, all costs and expenses pertaining to the replacement of
any missing
4
<PAGE> 5
items and for the repair of any Equipment, together with any audit, inspection
or certification charges reasonably incurred by Lessor.
6. LEASEHOLD RIGHTS AND INSPECTION:
(a) Lessee shall have no interest in the Equipment other than the rights
acquired as a lessee hereunder and the Equipment shall remain personalty
regardless of the manner in which it may be installed or attached. Lessee shall,
at Lessor's request, affix to the Equipment, tags, decals or plates furnished by
Lessor, indicating Lessor's ownership and Lessee shall not permit their removal
or concealment. Lessee shall replace any such tag, decal or plate which may be
removed or destroyed or become illegible. Lessee shall keep all Equipment free
from any marking or labeling which might be interpreted as a claim of ownership
thereof by Lessee or any party other than Lessor or anyone claiming through
Lessor.
(b) Lessee shall keep the Equipment free and clear of all liens and
encumbrances except liens or encumbrances arising through the actions or
omissions of Lessor. Lessee shall not assign or otherwise encumber this Lease or
any of its rights hereunder or sublease the Equipment without the prior written
consent of Lessor except that Lessee may assign this Lease or sublease the
Equipment to its parent or any subsidiary corporation, or to a corporation which
shall have acquired all or substantially all of the property of Lessee by
merger, consolidation or purchase. No permitted assignment or sublease shall
relieve Lessee of any of its obligations hereunder.
(c) Lessor or its agents shall have free access to the Equipment at all
reasonable times for the purpose of inspection and for any other purpose
contemplated by this Lease.
(d) Lessee shall immediately notify Lessor of all details concerning any
damage to, or loss of, the Equipment arising out of any event or occurrence
whatsoever, including but not limited to, the alleged or apparent improper
manufacture, functioning or operation of the Equipment.
7. NO WARRANTIES BY LESSOR:
Lessee represents that, at the Installation Date thereof, it shall have
(a) thoroughly inspected the Equipment; (b) determined for itself that all items
of Equipment are of a size, design, capacity and manufacture selected by it; and
(c) satisfied itself that the Equipment is suitable for Lessee's purposes.
LESSOR SUPPLIES THE EQUIPMENT AS IS AND NOT BEING THE MANUFACTURER OF THE
EQUIPMENT, THE MANUFACTURER'S AGENT OR THE SELLER'S AGENT, MAKES NO WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED AS TO THE EQUIPMENT'S MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, DESIGN, CONDITION, QUALITY, CAPACITY, MATERIAL
OR
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<PAGE> 6
WORKMANSHIP OR AS TO PATENT INFRINGEMENT OR THE LIKE, it being agreed that all
such risks, as between Lessor and Lessee, are to be borne by Lessee. Lessee
agrees to look solely to the manufacturer or to suppliers of the Equipment for
any and all warranty claims and any and all warranties made by the manufacturer
or the supplier of Lessor are, to the extent to which the same may be
assignable, hereby assigned to Lessee for the term of the applicable Equipment
Schedule. Lessee agrees that Lessor shall not be responsible for the delivery,
installation, maintenance, operation or service of the Equipment or for delay or
inadequacy of any or all of the foregoing. Lessor shall not be responsible for
any direct or consequential loss or damage resulting from the installation,
operation or use of the Equipment or otherwise. Lessee will defend, indemnify
and hold Lessor harmless against any and all claims, demands and liabilities
arising Out of or in connection with the design, manufacture. possession or
operation of the Equipment.
8. RISK OF LOSS ON LESSEE:
(a) Beginning on the Installation Date thereof and continuing until the
Equipment is returned to Lessor as provided in this Lease, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment, howsoever caused. During the term of this Lease as
to any Equipment Schedule, Lessee shall, at its own expense, keep in effect "all
risk" property insurance and public liability insurance policies covering the
Equipment designated in each Equipment Schedule. The public liability insurance
policy shall be in such amount as is reasonably acceptable to Lessor. The "all
risk" property insurance policy shall be for an amount not less than the
replacement cost of the Equipment Lessor, its successors and assigns and/or such
other party as may be designated by any thereof to Lessee, in writing, shall be
named as additional insureds and loss payees on such policies, which shall be
written by an insurance company of recognized responsibility which is reasonably
acceptable to Lessor. Evidence of such insurance coverage shall be furnished to
Lessor no later than the Installation Date set forth in the Equipment
Schedule(s) and, from time to time, thereafter as Lessor may request. Such
policies shall provide that no less than ten days written notice shall be given
Lessor and any other party named as loss payee prior to cancellation of such
policies for any reason. To the extent of Lessor's interest therein, Lessee
hereby irrevocably appoints Lessor or any other party named as loss payee as
Lessees attorney-in-fact coupled with an interest to make claim for, receive
payment of, and execute any and all documents that may be required to be
provided to the insurance carrier in substantiation of any such claim for loss
or damage under said insurance policies, and to endorse Lessee's name to any and
all drafts or checks in payment of the loss proceeds.
(b) If any item of Equipment is rendered unusable as a result of any
physical damage to, or destruction of, the Equipment, Lessee shall give to
Lessor immediate notice thereof and this Lease shall continue in full force and
effect without any abatement
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<PAGE> 7
of rental. Lessee shall determine, within fifteen (15) days after the date of
occurrence of such damage or destruction, whether such item of Equipment can be
repaired. In the event Lessee determines that the item of Equipment cannot be
repaired, Lessee shall either, at its expense, promptly replace such item of
Equipment and convey title to such replacement to Lessor free and clear of all
liens and encumbrances, and this Lease shall continue in full force and effect
as though such damage or destruction had not occurred, or pay Lessor therefor in
cash the Stipulated Loss Value (defined below) within thirty (30) days of such
loss or damage. "Stipulated Loss Value," as used herein, shall be an amount as
shown on Exhibit A to the applicable Equipment Schedule. In the event Lessee
determines that such item of Equipment can be repaired, Lessee shall cause such
item of Equipment to be promptly repaired. All proceeds of insurance received by
Lessor, the designated loss payee, or Lessee under the policy referred to in the
preceding paragraph of this Section shall be applied toward the cost of any such
repair or replacement so long as Lessee shall not be in default of its
obligations hereunder.
9. EVENTS OF DEFAULT AND REMEDIES:
The occurrence of any one of the following shall constitute an Event of
Default hereunder:
(a) Lessee fails to pay an installment of rent on or before the date
when the same becomes due and payable and such failure continues for a period of
five days;
(b) Lessee attempts to remove, sell, transfer, encumber, sublet or part
with possession of the Equipment or any items thereof, except as expressly
permitted herein.
(c) Lessee shall fail to observe or perform any of the other obligations
required to be observed or performed by Lessee hereunder and such failure shall
continue uncured for ten (10) days after written notice thereof to Lessee by
Lessor or the then assignee hereof.
(d) Lessee ceases doing business as a going concern, makes an assignment
for the benefit of creditors, admits in writing its inability to pay its debts
as they become due, files a voluntary petition of bankruptcy, is adjudicated a
bankrupt or an insolvent, files a petition seeking for itself any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar arrangement under any present or future statute, law or regulation or
files an answer admitting the material allegations of the petition filed against
it in any such proceeding, consents to or acquiesces in the appointment of a
trustee, receiver, or liquidator of it or of all or any substantial part of its
assets or properties, or if it or its shareholders shall take any action looking
to its dissolution or liquidation.
(e) Within thirty (30) days after the commencement of any proceedings
against Lessee seeking reorganization, arrangement, readjustment, liquidation,
dissolution or
7
<PAGE> 8
similar relief under any present or future statute, law or regulation, such
proceedings shall not have been dismissed, or if within thirty (30) days after
the appointment without Lessee's consent or acquiescence of any trustee,
receiver or liquidator of it or of all or any substantial part of its assets and
properties, such appointment shall not be vacated.
(f) Lessee defaults in the performance or observation of any term,
condition or covenant of any loan agreement, indenture, trust agreement, lease
or similar agreement to which Lessee is a party or by which Lessee is bound and
such default continues beyond any applicable cure period;
(g) Lessee enters into any transaction which adversely affects a
significant portion of the business value of Lessee and which affects the
ability of the Lessee to repay the Lessee's obligations under the Lease.
Upon the occurrence of an Event of Default, Lessor may at its option do
any one or more of the following: (i) by notice to Lessee terminate this Lease
as to any or all Equipment Schedules; (ii) whether or not this Lease is
terminated as to any or all Equipment Schedules, take possession on not less
than three (3) days' notice of any or all of the Equipment listed on any or all
Equipment Schedules, wherever situated, and for such purpose, enter upon any
premises without liability for so doing or Lessor may cause Lessee and Lessee
hereby agrees, to return said Equipment to Lessor as provided in this Lease;
(iii) recover from Lessee, as liquidated damages for loss of a bargain and not
as a penalty, all past due amounts as well as an amount equal to the present
value of all monies to be paid by Lessee during the remaining Initial Term or
any successive period then in effect, calculated by discounting at the rate of
six percent (6%) per annum compounded monthly, which payment shall become
immediately due and payable; and (iv) sell, dispose of, hold, use or lease any
Equipment as Lessor in its sole discretion may determine (and Lessor shall not
be obligated to give preference to the sale, lease or other disposition of the
Equipment over the sale, lease or other disposition of similar equipment owned
or leased by Lessor).
In the event that Lessee shall have first paid to Lessor or its assigns
the liquidated damages referred to in (iii) above Lessee shall thereafter be
entitled to receive all rentals or proceeds received from any reletting of the
Equipment during the balance of the Initial Term (after deduction of Lessors
expected residual value of the Equipment at the expiration of the Initial Term
or any extension thereof and of all expenses incurred in connection therewith)
said amount never to exceed the amount of the liquidated damages paid by Lessee.
Lessee agrees that Lessor shall have no obligation to sell the Equipment. Lessee
shall in any event remain fully liable for reasonable damages as provided by law
and for all costs and expenses incurred by Lessor or its assigns on account of
such default including but not limited to all court costs and reasonable
attorney's fees. Lessee hereby agrees that, in any event, it will be liable for
any deficiency after any lease or other
8
<PAGE> 9
disposition of the Equipment. The rights afforded Lessor hereunder shall not be
deemed to be exclusive, but shall be in addition to any rights or remedies
provided by law.
10. NET LEASE:
Except as otherwise specifically provided in this Lease, it is
understood and agreed that this is a net lease, and that, as between Lessor and
Lessee, Lessee shall be responsible for all costs and expenses of every nature
whatsoever arising out of or in connection with or related to this Lease or the
Equipment (including, but not limited to, transportation in and out, rigging,
manufacturer's approved packing, installation, certification costs and
disconnect charges). Lessee hereby agrees that in the event that Lessee fails to
pay or perform any obligation under this Lease, Lessor may, at its option, pay
or perform said obligation and any payment made or expense incurred by Lessor in
connection therewith shall become additional rent which shall be due and payable
by Lessee upon demand. Lessee acknowledges that Lessor may, from time to time,
and at Lessee's request, execute and deliver purchase orders pertaining to the
purchase of equipment to be leased pursuant to this Lease. Lessee agrees that it
will indemnify and hold Lessor harmless from and against any and all loss, cost,
liability and expense that Lessor may incur as a result of the execution and
delivery of such purchase orders.
11. ASSIGNMENT:
Lessee agrees that Lessor may transfer or assign all or any part of
Lessor's right, title, and interest in, under or to the Equipment and this Lease
and any or all sums due or to become due pursuant to any of the above, to any
third party (the "Assignee") for any reason and that the Assignee may so
re-assign and transfer. Lessee agrees that upon receipt of written notice from
Lessor or Assignee of such assignment, Lessee shall perform all of its
obligations hereunder for the benefit of Assignee and any successor assignee
and, if so directed, shall pay all sums due or to become due thereunder directly
to the Assignee or to any other party designated by the Assignee. Lessee hereby
covenants, represents and warrants as follows and agrees that the Assignee and
any successor assignee shall be entitled to rely on and shall be considered a
third party beneficiary of the following covenants, representations and
warranties: (i) Lessee's obligations hereunder are absolute and unconditional
and are not subject to any abatement, reduction, recoupment, defense, offset or
counterclaim available to Lessee for any reason whatsoever including operation
of law, defect in the Equipment, failure of Lessor or Assignee to perform any of
its obligations hereunder or for any other cause or reason whatsoever, whether
similar or dissimilar to the foregoing; (ii) Lessee shall not look to Assignee
or any successor assignee to perform any of Lessor's obligations hereunder;
(iii) Lessee will not amend or modify this Agreement without the prior written
consent of the Assignee and any successor assignee; and (iv) Lessee will send a
copy to Assignee and any successor assignee of each notice which Lessee sends to
Lessor.
9
<PAGE> 10
12. REPRESENTATIONS AND WARRANTIES OF LESSEE:
Lessee represents and warrants to Lessor and its assigns, as follows:
1. The execution, delivery and performance of this Lease has been duly
authorized and, upon execution by Lessor and Lessee, will constitute a valid
obligation bin ding upon and enforceable against Lessee in accordance with its
terms, subject to laws governing creditors' rights;
2. The performance by Lessee will not result in any breach, default or
violation of, Lessee's certificate of incorporation or by-laws or any agreement
to which Lessee is a party;
3. Lessee is in good standing in its jurisdiction of incorporation and
in any jurisdiction in which any of the Equipment is to be located; and
4. Any and all financial statements or other information with respect to
Lessee heretofore furnished by Lessee to Lessor was, when furnished, and remains
at the time of execution of this Lease, true and complete.
Lessor represents and warrants to Lessee as follows:
1. The execution, delivery and performance of this Lease has been duly
authorized and, upon execution by Lessor and Lessee, will constitute a valid
obligation bin ding upon and enforceable against Lessor in accordance with its
terms, subject to laws governing creditors' rights ;and
2. The performance by Lessor will not result in any breach, default or
violation of, Lessor's certificate of incorporation or by-laws or any agreement
to which Lessor is a party:
The foregoing representations and warranties shall survive the
expiration or termination of this Lease.
13. END OF LEASE:
Provided (i) no Event of Default has occurred and is continuing and (ii)
Lessee has made all payments in accordance with the Lease, upon written notice
furnished by Lessee no later than four (4) months prior to the expiration of the
Initial Term, Lessee shall, with respect to each Equipment Schedule elect only
such alternatives as may be set forth on the Equipment Schedule.
To the extent that any of such alternatives involves a determination of
Fair Market Value, the Fair Market Value shall be defined and determined by the
provisions of this Section. For purposes hereof, Fair Market Value shall mean
the amount that would obtain
10
<PAGE> 11
in a retail arm's length transaction between an informed and willing
lessee-buyer in possession and an informed and willing lessor-seller. Rental
charges previously paid pursuant to the applicable Equipment Schedule shall have
no effect on the determination of Fair Market Value. Unless otherwise stated in
the Equipment Schedule, the Fair Market Value for items set forth on the
Equipment Schedule which do not have a readily ascertainable market value,
(including but not limited to software, cabling and certain equipment) shall be
determined by multiplying the Lessor's acquisition cost of such items by a
fraction, the numerator of which shall be the Fair Market Value of the other
items and the denominator of which shall be the Lessor's acquisition cost of
such other items; and the determination of Fair Market Value shall be based upon
the assumption that all items set forth on the Equipment Schedule or included
with the Equipment may be transferred to, and used by, a third party user. In
such determination, all alternative uses in the hands of each buyer or lessee,
including, without limitation, the further leasing of the Equipment shall be
taken into account in making such determination.
If on or before a date which is sixty (60) days prior to the expiration
of the Initial Term, Lessor and Lessee are unable to agree upon a determination
of the Fair Market Value of the Equipment, the Fair Market Value (to be
determined in accordance with the definition set forth in this Section) shall,
upon written request by Lessee therefor, be conclusively established not less
than thirty (30) days prior to the expiration of the Initial Term by an
independent appraiser selected by Lessor. Lessor shall notify Lessee of the name
and address of said appraiser. The costs of such appraiser shall be paid by
Lessee within ten (10) days after receipt of an invoice therefor. The Lease,
including the obligation to pay monthly rentals, shall remain in effect pending
the determination of Fair Market Value.
14. MISCELLANEOUS:
(a) During the term of this Lease, Lessee hereby agrees to deliver to
Lessor or Assignee and any successor assignee a copy of Lessee's monthly
unaudited financial statements, and the annual financial budget for the upcoming
year as soon as available and as it may be adjusted during the year. Lessee
shall also furnish, as soon as available and in any event within ninety (90)
days after the last day of Lessee's fiscal year, a copy of Lessee's annual
audited statements and consolidating and consolidated balance sheet, if any, as
of the end of such fiscal year, accompanied by the opinion of an independent
certified public accounting firm of recognized standing. The Lessee shall
furnish such other financial information as may be reasonably requested by
Lessor, including but not limited to any material changes in budgets or
financial reports furnished to the Lessee's Board of Directors or Shareholders.
(b) This Lease constitutes the entire agreement between Lessee and
Lessor with respect to the Equipment, and except as agreed upon in writing no
covenant, condition or other term or provision hereof may be waived or modified
orally.
11
<PAGE> 12
(c) All notices hereunder shall be in writing and shall be delivered in
person or sent by registered or certified mail, postage prepaid, or by facsimile
transmission (confirmed by registered mail as set forth in this section) to the
address of the other party as set forth herein or to such other address as such
party shall have designated by proper notice.
(d) This Lease shall be binding upon and inure to the benefit of Lessor
and Lessee and their respective successors and assigns (including any subsequent
assignee of Assignee).
(e) If any term or provision of this Lease or the application thereof to
any person is, to any extent, invalid or unenforceable, the remainder of this
Lease, or the application of such provision to the person other than those to
which it is invalid or unenforceable, shall not be affected thereby, and each
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law.
(f) No waiver of any of the terms and conditions hereof shall be
effective unless in writing and signed by the party against whom such waiver is
sought to be enforced. Any waiver of the terms hereof shall be effective only in
the specific instance and for the specific purpose given. The subsequent
acceptance of rental payments hereunder by Lessor shall not be deemed a waiver
of any prior existing breach by Lessee regardless of Lessor's knowledge of such
prior existing breach at the time of acceptance of such rental payments. Where
permitted by law, Lessee authorizes any attorney of record, Clerk of Court or
Prothonotary of any state to appear for and confess judgment (a) against Lessee
for all amounts as to which Lessee is in default under this Agreement and (b)
against Lessee in any action for writ of replevin or possession of the
Equipment. No bond shall be required.
(g) Lessor is hereby authorized by Lessee to cause this Lease or other
instruments, including Uniform Commercial Code Financing Statements to be filed
or recorded for the purpose of showing Lessor's interest in the Equipment and
Lessee agrees that Lessor may execute such instruments for and on behalf of
Lessee. All filing fees reasonably incurred by Lessor in connection therewith
and filing fees incurred by Lessor's assignees in perfecting security interests
shall be paid by Lessee or reimbursed to Lessor by Lessee.
(h) In the event of any conflict between the terms and conditions of
this Lease and the terms and conditions of any Equipment Schedule(s) or Rider(s)
thereto, the terms and conditions of such Equipment Schedule(s) or Rider(s)
shall prevail.
(i) No consent or approval provided for herein shall be binding upon
Lessor unless signed on its behalf by an officer of Lessor. THIS LEASE SHALL BE
DEEMED TO HAVE BEEN MADE IN THE STATE OF CONNECTICUT AND SHALL BE GOVERNED IN
ALL RESPECTS BY THE LAWS OF SUCH STATE. The Lessee
12
<PAGE> 13
accepts for itself the non-exclusive jurisdiction of any Federal or State court
of competent jurisdiction in the State of Connecticut in any action, suit or
proceeding of any kind against it which arises out of or by reason of this Lease
or any Equipment Schedule.
(j) Lessee acknowledges that the late payment by Lessee to Lessor of
monthly rental and other sums due hereunder will cause Lessor harm and to incur
costs not contemplated by this Lease, the precise amount and severity of which
will be difficult to ascertain. Such costs include, but are not limited to,
administrative, accounting and legal charges which Lessor may incur due to such
late payment. Accordingly, if any monthly rent or any other sum due from Lessee
shall not be received by Lessor or Lessor's assignee within twenty (20) days
after the same is due, Lessee shall pay to Lessor or Lessor's assignee a late
charge equal to five per cent (5%) of such overdue amount monthly until such
overdue amount is paid. Lessee acknowledges that such late charge represents a
fair and reasonable estimate of the cost Lessor will incur by reason of a late
payment by Lessee. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's default, if any, with respect to such overdue
amounts, nor prevent Lessor from exercising any of the other rights and remedies
which Lessor may have pursuant to this Lease.
(k) The obligations which Lessee is required to perform during the term
of this Lease shall survive the expiration or other termination of this Lease.
(l) Lessee will promptly execute and deliver to Lessor such further
documents and assurances and take such further action as Lessor may reasonably
request in order to effectuate the intent and purpose of this Lease and to
establish and protect the tights, interests and remedies intended to be created
in favor of Lessor hereunder, including without limitation, the execution and
filing of financing statements and continuation statements with respect to this
Lease, the Equipment and any Equipment Schedule. Lessee authorizes Lessor to
effect any such Filing and Lessor's reasonable expenses (together with the
reasonable expenses of Lessor's assignees in this regard) shall be payable by
Lessee on demand.
13
<PAGE> 14
LESSOR: LESSEE:
Leasing Technologies International, Inc. Virage Logic Corporation
BY: /s/ BY: /s/
------------------------------- ---------------------------------
NAME: NAME: George Rassam
----------------------------- -------------------------------
TITLE: TITLE: CFO (VP Finance)
---------------------------- ------------------------------
DATE: DATE: Feb 19, 1999
----------------------------- -------------------------------
Virage Logic International
BY: /s/
---------------------------------
TITLE: CFO (VP Finance)
------------------------------
TITLE: CFO (VP Finance)
------------------------------
DATE: Feb 19, 1999
-------------------------------
14
<PAGE> 15
CERTIFICATE OF INCUMBENCY
Re: Master Lease Agreement dated February 12, 1999
Between Leasing Technologies International, Inc.
and Virage Logic Corporation
I, * Alex Shubat , hereby certify that I am the duly
--------------------------
[print name of certifying officer, other than signatory]
elected, qualified, and presently serving CTO & Secretary of Virage Logic
----------------
[office of certifying officer]
Corporation, (the "Company").
I further certify that each of the persons listed below was duly elected
to and on the date hereof holds the office set forth opposite his name and that
the signature appearing opposite the name of such officer is the genuine
signature of such officer. Such person has the power and authority to execute
any and all documents on behalf of the Company relating to the above referenced
transaction and to bind the Company to perform in accordance with the terms
thereof,
<TABLE>
<CAPTION>
NAME OF SIGNATORY OFFICE SIGNATURE
- ----------------- ------ ---------
<S> <C> <C>
George Rassam VP Finance, CFO /s/ GEORGE RASSAM
</TABLE>
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of
the Company this 19 day of Feb 1999.
---------- ------------
*BY: /s/ ALEX SHUBAT
----------------------------------
[signature of certifying officer]
NAME: Alex Shubat
---------------------------------
TITLE: VP Engineering, CTO, Secretary
--------------------------------
* certifying officer must be other than signatory.
<PAGE> 16
REQUEST FOR INSURANCE
LESSOR: LEASING TECHNOLOGIES INTERNATIONAL, INC.
221 DANBURY ROAD
WILTON, CT 06897
LESSEE: VIRAGE LOGIC CORPORATION AND
VIRAGE LOGIC INTERNATIONAL
46824 LAKEVIEW BOULEVARD
FREMONT, CA 94538
Pursuant to Section 8(a) of the Master Lease Agreement dated February 12, 1999
("Lease"), Lessor hereby requests that Lessee provide a Certificate(s) of
Insurance as evidence of both casualty and liability insurance coverage on the
equipment leased to Lessee under the Lease. Such Certificate(s) should name
Leasing Technologies International, Inc., 221 Danbury Road, Wilton, CT 06897 and
its assigns as loss payees and additional insureds as their interests may
appear. Please refer to Section 8(a) of the Lease and the attached Leasing
Insurance Requirements for additional instructions.
Lessee, by authorized signature below, acknowledges the obligations under the
Lease to protect the equipment identified therein against all risks of loss, and
hereby confirms that applicable Certificate(s) of Insurance have been requested
from __________ (Fill in name of Insurance Agent/Broker).
LESSEE: VIRAGE LOGIC CORPORATION LESSEE: VIRAGE LOGIC INTERNATIONAL
BY: /s/ GEORGE RASSAM BY: /s/ GEORGE RASSAM
----------------------------- ---------------------------------
NAME: George Rassam NAME: George Rassam
--------------------------- -------------------------------
TITLE: VP Finance, CFO TITLE: VP Finance, CFO
-------------------------- ------------------------------
DATE: Feb 19, 1999 DATE: Feb 19, 1999
--------------------------- -------------------------------
<PAGE> 17
LEASING INSURANCE REQUIREMENTS
LIABILITY INSURANCE:
All liability policies are to meet, at the minimum, the following requirements:
(a) Minimum limits of liability are:
Bodily Injury: $1,000,000 per occurrence
Property Damage: $50,000 per occurrence
(b) All liability insurance policies are to specify Lessor, its assigns,
and/or such other party designated by Lessor as additional insureds, and
must be effective at the time of shipment of the Equipment from the
seller.
PROPERTY INSURANCE:
All property insurance policies are to meet, at the minimum, the following
requirements:
(a) All-risk Property insurance coverage in an amount equal to the
replacement cost of the Equipment.
(b) All property insurance policies are to specify Lessor, its assigns,
and/or such other party designated by Lessor as loss payees and must be
effective at the time of shipment of the Equipment from the seller.
GENERAL:
(1) All insurance policies are to provide that in the event of material
change to the policy (i.e., terms, conditions, limits, broker or insurer, or
cancellation of the policy or any part) either by the insured or the insurance
company, the insurer will provide 10 days' prior written notice of such material
change or cancellation to Lessor and its specified assigns.
(2) All insurance policies are to provide that violation of terms,
conditions, or warranties of the policy by the insured or others will not
invalidate the insurance insofar as the interest of Lessor and its specified
assigns is concerned.
(3) In order to eliminate multiple certifications, we encourage blanket
liability and All-Risk coverage warranted to remain in force until at lease 10
days' prior written notice is provided as aforesaid.
<PAGE> 18
LTI
LEASING TECHNOLOGIES INTERNATIONAL, INC.
<TABLE>
<S> <C>
Date:________ Return by mail or fax to: Leasing Technologies International, Inc.,
221 Danbury Road, CT 06897
Phone: (203) 563-1100 Fax: (203) 563-1112
</TABLE>
LEASE APPLICATION
LESSEE
Legal Name_________________________ Trade Name__________________________________
Address_____________________ City_________________ State________ Zip____________
Phone_________________ Fax_______________ Years in Business_____________________
Description of Business_________________________________________________________
Business Type: Corporation___ Proprietorship ___ Partnership ___ Fed I.D. #_____
CEO's Name______________________ Title__________________ Phone _________________
Address_________________________________________________________________________
Contact Officer's Name_______________________ Title_____________________________
Address_________________________________________________________________________
Auditor & Partner________________________ Phone #_______________________________
Law Firm & Partner_________________________ Phone #_____________________________
Duns #_____________________________________
BANK AND CREDIT REFERENCES
Bank Name_________________________ Address______________________________________
Contact_________________ Phone #______________ Checking Acct #__________________
Date Opened________________ Loan Acct #______________ Date______________________
Lessor Name______________________________ Address_______________________________
Contact________________ Phone #____________________ Acct #______________________
Other Creditor________________________ Address__________________________________
Contact__________________ Phone #____________________ Acct #____________________
TRADE SUPPLIER REFERENCES
Trade Name__________________ Phone #______________ Contact_____________________
Trade Name__________________ Phone #______________ Contact_____________________
Trade Name__________________ Phone #______________ Contact_____________________
OTHER INFORMATION TO BE SUPPLIED
1) Financials: Last two fiscal audits & year-to-date interim financials
2) Most recent business plan and/or offering memorandum
3) List of all company Officers & Directors
4) List of major shareholders with percentage ownership
5) List of equipment to be leased. Include qty, descriptions, brands,
models, cost
I hereby authorize the investigation and review of all the above credit
information.
BY:_______________________________ Title________________________________________
<PAGE> 19
EQUIPMENT SCHEDULE NO. _____ ("EQUIPMENT SCHEDULE")
TO
MASTER LEASE AGREEMENT DATED __________, 199__ ("LEASE")
BETWEEN LEASING TECHNOLOGIES INTERNATIONAL, INC. ("LESSOR")
AND __________("LESSEE")
1. EQUIPMENT:
<TABLE>
<CAPTION>
MODEL/ PURCHASE SERIAL
QTY FEATURE DESCRIPTION MFR PRICE NUMBER
--- ------- ----------- --- ----- ------
<S> <C> <C> <C> <C> <C>
</TABLE>
2. EQUIPMENT LOCATION:
3. INSTALLATION DATE:__________. If this space is not completed, the
Installation Date shall be: the date which the Vendor(s) determines to
be the date of installation, which, Lessee agrees, will not occur
without Lessor's prior written consent or the fifth day following
delivery of the Equipment to the location set forth in Section 2,
whichever is earlier; or in the case of Equipment which is the subject
of a sale and leaseback between Lessor and Lessee, the date upon which
Lessor obtains title to the Equipment from Lessee (but not later than
the date Lessor pays for the Equipment).
4. COMMENCEMENT DATE:__________. (Subject to the terms and conditions of
Section , of the Lease, if all of the Equipment is not installed on the
same date).
5. INITIAL TERM:__________ months.
6. MONTHLY RENTAL: $__________. The Monthly Rental set forth in this
section is conditional upon Lessor acquiring the Equipment at a purchase
price of $__________ and Lessor obtaining financing for such purchase at
a 8.25% Prime Interest Rate. Lessor and Lessee agree that the Monthly
Rental shall be increased by $__________ for each one-quarter of one
percent (1/4 of 1%) by which the Prime Interest Rate (as stated by
Citibank N.A.) increases prior to the Commencement Date, or the date
Lessor has received sufficient documentation so as to finance the Lease,
whichever is later. Lessee agrees that it shall confirm the amount of
the rental payable hereunder after adjustment, if any, in such form as
Lessor may request.
Page 1 of 3
<PAGE> 20
EQUIPMENT SCHEDULE NO. _____ ("EQUIPMENT SCHEDULE")
TO
MASTER LEASE AGREEMENT DATED __________, 199__ ("LEASE")
BETWEEN LEASING TECHNOLOGIES INTERNATIONAL, INC. ("LESSOR")
AND __________("LESSEE")
7. LESSOR'S OBLIGATIONS: Lessor's obligations under this Equipment Schedule
are subject to there being no tax legislation enacted prior to the
Installation Date which would have an adverse effect on the rights or
anticipated benefits to Lessor or any Assignee.
8. SECURITY DEPOSIT: $__________.
9. END OF LEASE: Provided (i) no Event of Default has occurred and is
continuing and (ii) Lessee has made all payments in accordance with the
Lease, upon written notice furnished by Lessee to Lessor no earlier than
one hundred eighty (180) days and no later than ninety (90) days prior
to the expiration of the Initial Term, Lessee may either:
(a) Extend the Initial Term for not less than all the Equipment for
an additional 12 months at Fair Market Value rental;
(b) Purchase not less than all the Equipment at Fair Market Value
for a purchase price equal to the Fair Market Value thereof as
of the end of the Initial Term, plus any taxes applicable at the
time of purchase. The purchase price shall be paid by Lessee to
Lessor at least thirty (30) days before the expiration of the
Initial Term; or
(c) Extend the Initial Term for not less than all the Equipment for
an additional 12 months at a Monthly Rental equal to _____% of
the Monthly Rental paid by Lessee during the Initial Term,
provided all payments have been made in accordance with the
Lease and there shall be no default under the Lease by Lessee,
title to the Equipment shall pass to Lessee at the expiration of
the 12 month extension and upon payment of $1.00;
(d) Return not less than all the Equipment, subject to a remarketing
charge equal to ____% of the Purchase Price.
10. LEASE AGREEMENT: All of the terms, covenants and conditions set forth in
the Lease are incorporated herein by reference as if the same had been
set forth herein in full.
<PAGE> 21
EQUIPMENT SCHEDULE NO. _____ ("EQUIPMENT SCHEDULE")
TO
MASTER LEASE AGREEMENT DATED __________, 199__ ("LEASE")
BETWEEN LEASING TECHNOLOGIES INTERNATIONAL, INC. ("LESSOR")
AND __________("LESSEE")
LESSOR: LESSEE:
LEASING TECHNOLOGIES INTERNATIONAL, INC.
BY:______________________________ BY:_________________________________
NAME:____________________________ NAME:_______________________________
TITLE:___________________________ TITLE:______________________________
DATE:____________________________ DATE:_______________________________
LESSEE:
BY:_________________________________
NAME:_______________________________
TITLE:______________________________
DATE:_______________________________
<PAGE> 22
CERTIFICATE OF ACCEPTANCE
To: Leasing Technologies International, Inc.
221 Danbury Road
Wilton, CT 06897
From: ________________ Lessee under that certain Master Lease Agreement
("Lease") dated _____________ hereby certifies to Leasing Technologies
International, Inc., Lessor under the said Lease, that, to wit:
1. The Lessee is a corporation in good standing in ______, the state of
its incorporation.
2. The signatures which appear in said Lease have been duly authorized
by the Lessee and the Lease constitutes a valid and binding obligation
of, and is enforceable by its terms against Lessee.
3. All items of computer equipment ("Equipment") described in Equipment
Schedule No. __ to the said Lease, have been delivered to Lessee.
4. The equipment has been received and inspected, and is approved and
accepted by Lessee, effective __________, 1999.
5. As of the date hereof, the Lessee's interest in the Equipment is free
and clear of any liens and encumbrances other than those created by and
in favor of the Lessor.
6. The Lessee hereby represents and warrants that no event of Default or
event which, with the giving of notice or the lapse of time, or both,
would become such an Event of Default has occurred and is continuing
under the Lease.
7. The Lessee hereby represents and warrants that the Lessee has
obtained all insurance policies, with respect to the Equipment, that may
be required under the terms of the Lease and such policies are in full
force and effect.
Lessee is delivering this Certificate to Lessor pursuant to and in connection
with the said Lease.
LESSEE: LESSEE:
BY:______________________________ BY:_________________________________
NAME:____________________________ NAME:_______________________________
TITLE:___________________________ TITLE:______________________________
DATE:____________________________ DATE:_______________________________
<PAGE> 23
EQUIPMENT SCHEDULE NO. _____
TO
MASTER LEASE AGREEMENT DATED_______
EXHIBIT A
STATEMENT OF CASUALTY VALUES
<TABLE>
<CAPTION>
MONTHLY STIPULATED MONTHLY STIPULATED LOSS
PMT. MADE VALUE* PMTS. MADE VALUE
--------- ----- ---------- -----
<S> <C> <C> <C>
1 125.00 19 94.22
2 123.29 20 92.51
3 121.58 21 90.80
4 119.87 22 89.09
5 118.16 23 87.38
6 116.45 24 85.67
7 114.74 25 83.96
8 113.03 26 82.25
9 111.32 27 80.54
10 109.61 28 78.83
11 107.90 29 77.12
12 106.19 30 75.41
13 104.48 31 73.70
14 102.77 32 71.99
15 101.66 33 70.28
16 99.35 34 68.57
17 97.64 35 66.86
18 95.93 36 65.15
</TABLE>
* Expressed as a percentage of Lessor's original purchase price for the
equipment.
LESSOR: LESSEE:
LEASING TECHNOLOGIES INTERNATIONAL, INC.
BY:______________________________ BY:_________________________________
NAME:____________________________ NAME:_______________________________
TITLE:___________________________ TITLE:______________________________
DATE:____________________________ DATE:_______________________________
LESSEE:
BY:_________________________________
NAME:_______________________________
TITLE:______________________________
DATE:_______________________________
<PAGE> 24
EQUIPMENT SCHEDULE NO. _____
TO
MASTER LEASE AGREEMENT DATED_______
EXHIBIT A
STATEMENT OF CASUALTY VALUES
<TABLE>
<CAPTION>
MONTHLY STIPULATED LOSS
PMT. MADE VALUE*
--------- -----
<S> <C>
1 125.00
2 123.29
4 119.87
5 118.16
8 113.03
9 111.32
11 107.90
12 106.19
13 104.48
14 102.77
15 101.66
16 99.35
17 97.64
18 95.93
19 94.22
20 92.51
21 90.80
22 89.09
23 87.38
24 85.67
</TABLE>
* Expressed as a percentage of Lessor's original purchase price for the
equipment.
LESSOR: LESSEE:
LEASING TECHNOLOGIES INTERNATIONAL, INC.
BY:______________________________ BY:_________________________________
NAME:____________________________ NAME:_______________________________
TITLE:___________________________ TITLE:______________________________
DATE:____________________________ DATE:_______________________________
LESSEE:
BY:_________________________________
NAME:_______________________________
TITLE:______________________________
DATE:_______________________________
<PAGE> 25
EQUIPMENT SCHEDULE NO. _____
TO
MASTER LEASE AGREEMENT DATED_______
EXHIBIT A
STATEMENT OF CASUALTY VALUES
<TABLE>
<CAPTION>
MONTHLY STIPULATED LOSS
PMT. MADE VALUE*
--------- -----
<S> <C>
1 125.00
2 123.29
4 119.87
5 118.16
8 113.03
9 111.32
11 107.90
12 106.19
13 104.48
14 102.77
15 101.66
16 99.35
17 97.64
18 95.93
19 94.22
20 92.51
21 90.80
22 89.09
23 87.38
24 85.67
25 83.96
26 82.25
27 80.54
28 78.83
29 77.12
30 75.41
</TABLE>
* Expressed as a percentage of Lessor's original purchase price for the
equipment.
LESSOR: LESSEE:
LEASING TECHNOLOGIES INTERNATIONAL, INC.
BY:______________________________ BY:_________________________________
NAME:____________________________ NAME:_______________________________
TITLE:___________________________ TITLE:______________________________
DATE:____________________________ DATE:_______________________________
LESSEE:
BY:_________________________________
NAME:_______________________________
TITLE:______________________________
DATE:_______________________________
<PAGE> 1
EXHIBIT 10.23
February 1, 1998
Vincent F. Ratford
5689 Snowdon Place
San Jose, California 95138
Dear Vincent:
It give us a great pleasure to extend this offer of employment to you
with Virage Logic Corporation. Virage Logic is an emerging semiconductor startup
and will greatly benefit from your contributions. To be sure that you understand
the terms and conditions of this offer of employment, I would like to detail
them below:
This offer is conditioned on Virage Logic getting a commitment from
investors to close financing in the next 2-4 weeks or get a very firm commitment
to secure such financing.
Your position will be Vice President of worldwide marketing and sales
reporting to me. In this position you will receive a base salary of $140,000 per
year plus the following compensation package:
1. $10,000 bonus if Virage Logic realizes $2.5 Million in sales in
total (including the pre booked sales) for the fiscal year 1998
ending September 30, 1998.
2. Additional $30,000 bonus (prorated from $2.5M) if Virage Logic
realizes $5.0 Million (including the pre booked sales) in sales
for the fiscal year 1998 ending September 30, 1998.
3. Additional $20,000 bonus (prorated from $5.0M) if Virage Logic
realizes $6.0M.
The bonus will be paid every quarter as Virage Logic hits the target
millstones.
In addition to this, we would like to offer you 200,000 (Two Hundred
Thousand) Founders shares of Virage Logic Corporation to be vested over four
years and subject to the board of directors approval.
In the event that your employment is terminated for reason other than
for cause following a change of control of the company, 25% of the remaining
unvested stock will vest and become immediately exercisable. In addition, you
will receive 3 months of base salary as severance pay.
<PAGE> 2
Vincent F. Ratford
February 1, 1998
Page 2
If the company is acquired after you have been with Virage Logic more
than one year, all unvested shares become immediately fully vested and subject
to the same constrained put forth on the shares of the key personal of the
company.
You will be eligible for all the standard company benefits, including a
full medical and dental coverage as of the date of hire. Two weeks of vacation
and 10 paid holidays.
As is normal practice, this offer is contingent upon verification of
work authorization as required by the Immigration Reform and Control Act of
1986, as well as your signing the "Employment Invention and Confidential
Information Agreement." I have enclosed a copy of the Employment Invention and
Confidential Information Agreement for your review.
If you find the terms of this offer acceptable, please sign below
conveying your acceptance and indicate a start date prior to returning this
letter. Retain the enclosed copy of this letter for your records. Vin, we are
excited about the opportunity to have you join our Company and personally I am
very excited to work with you. We are confident you will make a significant
contribution to the success and future of Virage Logic Corporation. We certainly
look forward to an affirmation reply to his offer by February 4, 1998.
Very truly yours,
Adam Kablanian
President and CEO
/s/ Vincent Ratford 2/5/98
- ----------------------------------- -----------------------------------
Signature of Applicant Start Date
<PAGE> 1
EXHIBIT 10.24
August 6, 1998
Raymond Leung
4018 Ben Lomond Drive
Palo Alto, California 94306
Dear Raymond:
It gives us a great pleasure to extend this offer of employment to you
with Virage Logic Corporation. Virage Logic is an emerging semiconductor startup
and will greatly benefit from your contributions. To be sure that you understand
the terms and conditions of this offer of employment, I would like to detail
them below:
Your position will be Vice President of Engineering operations and
reporting to Adam Kablanian. In this position you will receive a base salary of
$4,807.70 bi-weekly ($125,000 annualized), plus the following compensation
package:
In addition to this, we would like to offer you 100,000 (One Hundred
Thousand) Founders shares of Virage Logic Corporation to be vested over four
years and subject to the board of directors approval and any legal requirements
of the Virage Logic Corporation Stock Option Plan.
The vesting schedule will be as follows:
- Quarterly vesting for the first year of employment unless you
voluntarily terminate you employment prior to completion of one
year. Should you voluntarily terminate prior to one year of
service you will forfeit all vested options.
- Quarterly thereafter for the remaining 75%.
If the company is acquired and your position is eliminated, all unvested
shares become immediately fully vested and subject to the same constraints put
forth on the shares of the key personnel of the company.
You will be eligible for all the standard company benefits, including a
full medical and dental coverage as of the date of hire. Two weeks of vacation,
five days sick leave and 10 paid holidays.
<PAGE> 2
Raymond Leung
August 6, 1998
Page 2
As is normal practice, this offer is contingent upon verification of
work authorization as required by the Immigration Reform and Control Act of
1986, as well as your signing the "Employment Invention and Confidential
Information Agreement." I have enclosed a copy of the Employment Invention and
Confidential Information Agreement for your review.
If you find the terms of this offer acceptable, please sign below
conveying your acceptance and indicate a start date prior to returning this
letter. Retain the enclosed copy of this letter for your records. Raymond, we
are excited about the opportunity to have you join our Company. We are confident
you will make a significant contribution to the success and future of Virage
Logic Corporation. We certainly look forward to an affirmation reply to his
offer by August 12, 1998.
Very truly yours,
Renac Hogan
Human Resources Manager
/s/ Raymond Leung 8/26/98
- --------------------------------- -----------------------------------
Signature of Applicant Start Date
<PAGE> 1
EXHIBIT 10.25
April 5, 1999
James Pekarsky
3173 Monterey Blvd.
Oakland, California 94602
Dear James:
It give us a great pleasure to extend this offer of employment to you
with Virage Logic Corporation. Virage Logic is an emerging semiconductor startup
and will greatly benefit from your contributions. To be sure that you understand
the terms and conditions of this offer of employment, I would like to detail
them below:
Your position will be Vice President of Finance, CEO reporting to Adam
Kablanian. In this position you will receive a salary of $5,769.24 bi-weekly
($150,000 annualized).
In addition to this, we would like to offer you 100,000 (One Hundred
Thousand) shares of Virage Logic Corporation to be vested over four years and
subject to the board of directors approval.
In the event that your employment is terminated for reason other than
for cause, following a change of control during your first 12 months of
employment you will immediately vest 25% and if after 12 months, all remaining
unvested shares become immediately fully vested.
You will be eligible for all the standard company benefits, including
401K, medical, dental and vision coverage as of your date of hire. Three weeks
of Paid Time Off and 10 paid holidays per year.
As is normal practice, this offer is contingent upon verification of
work authorization as required by the Immigration Reform and Control Act of
1986, as well as your signing the "Employment Invention and Confidential
Information Agreement." I have enclosed a copy of the Employment Invention and
Confidential Information Agreement for your review.
<PAGE> 2
James Pekarsky
April 5, 1999
Page 2
If you find the terms of this offer acceptable, please sign below
conveying your acceptance. Retain the enclosed copy of this letter for your
records. James, we are excited about the opportunity to have you join our
Company. We are confident you will make a significant contribution to the
success and future of Virage Logic Corporation. We certainly look forward to an
affirmation reply to his offer by April 12, 1999.
Very truly yours,
Remae Hogan
Human Resources Manager
/s/ James Pekarsky 5/10/99
- ------------------------------------ ------------------------------------
Signature of Applicant Start Date
<PAGE> 1
EXHIBIT 10.26
January 18, 2000
Kenneth V. Rousseau
1341 Cerro Verde
San Jose, California 95120
Dear Ken,
It gives us a great pleasure to extend this offer to employment to join Virage
Logic Corporation. Virage Logic is an emerging semiconductor startup and we
believe that you can make a significant contribution to our company.
Your position will be Vice President, Software Development, reporting to Adam
Kablanian. In this position you will receive a salary of $5,769.23 bi-weekly
($150,000 annualized). You will also be eligible to participate in the VIP
Program. Your target bonus is 25% of your base salary. Virage Logic will
reimburse you relocation costs to move personal belongings and provide
transportation for you and your family to Seattle after one year of employment.
In addition to this, we would like to offer you 200,000 (Two Hundred Thousand)
shares of Virage Logic Corporation to be vested over four years and subject to
the board of directors approval. In the event that your employment is terminated
for reason other than for cause, following a change of control during your first
12 months of employment you will immediately vest 25% of your shares.
You will have the opportunity to participate according to the terms of the
respective plans, in a comprehensive package of benefits, including 401K,
medical, dental and vision coverage. In addition, you will be eligible for 3
weeks Paid Time Off and 10 paid holidays per year.
This offer is contingent upon your ability to present documentation evidencing
your compliance with terms of the Immigration Reform and Control Act of 1986, as
well as your signing the "Employment Invention and Confidential Information
Agreement." I have enclosed a copy of the Employment Invention and Confidential
Information Agreement for your review.
Further, this offer does not constitute, and may not be construed as, a
commitment to employment for any specific duration. Your employment with the
company will be at-will, which means that you may leave the Company or the
Company may require you to leave its employ, at any time, and for any reason.
<PAGE> 2
Kenneth V. Rousseau
January 18, 2000
Page 2
This letter sets forth the exclusive terms of your offer of employment, and you
acknowledge that you have not relied on any representations or statements,
whether oral or written, regarding your employment with Virage Logic.
Your signature below will signify your acceptance of our employment offer.
Retain the enclosed copy of this letter for your records. Ken, we are excited
about the opportunity to have you join our Company. We certainly look forward to
a prompt and positive reply to this offer by January 21, 2000.
Very truly yours,
Remae Hogan
Human Resources Manager
/s/ Kenneth V. Rousseau 31 January 2000
- ------------------------------------ ------------------------------------
Signature of Applicant Start Date
<PAGE> 1
EXHIBIT 16.1
May 2, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Gentlemen:
We have read the Changes in Accountants section of Form S-1 of Virage Logic
Corporation and are in agreement with the statements contained in that section.
We have no basis to agree or disagree with other statements of the registrant
contained in the document.
/s/ Mohler, Nixon & Williams
Accountancy Corporation
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
November 1, 1999 in the Registration Statement (Form S-1) and related Prospectus
of Virage Logic Corporation.
Our audit also included the financial statement schedule listed in Item
16(b) of the Registration Statement. This schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion based on our
audits. In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
Ernst & Young LLP
San Jose, California
, 2000
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the
completion of the reincorporation of Virage Logic Corporation in Delaware as
described in Note 9 of the Notes to the Consolidated Financial Statements.
/s/ Ernst & Young LLP
San Jose, California
May 1, 2000
<PAGE> 1
EXHIBIT 23.3
CONSENT OF MOHLER, NIXON & WILLIAMS ACCOUNTANCY CORPORATION,
INDEPENDENT AUDITORS
We consent to the references to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" and to the use of our report dated
February 18, 2000, in the Registration Statement (Form S-1) and related
prospectus of Virage Logic Corporation.
Our audits are also included in the consolidated financial statements schedule
listed in Item 16(b) to the Registration Statement. This schedule is the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits. In our opinion, the consolidated financial
statement schedule referred to above, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
Mohler, Nixon & Williams
Accountancy Corporation
Campbell, California
, 2000
- --------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon the completion of
the reincorporation of Virage Logic Corporation in Delaware as described in
Note 9 of the Notes to the consolidated financial statements.
/s/ Mohler, Nixon & Williams
Accountancy Corporation
Campbell, California
May 2, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<CASH> 1,512,757
<SECURITIES> 0
<RECEIVABLES> 4,305,705
<ALLOWANCES> 43,000
<INVENTORY> 0
<CURRENT-ASSETS> 6,826,621
<PP&E> 2,527,160
<DEPRECIATION> (563,624)
<TOTAL-ASSETS> 9,050,157
<CURRENT-LIABILITIES> 5,272,701
<BONDS> 0
0
2,979
<COMMON> 5,214,952
<OTHER-SE> (1,891,623)
<TOTAL-LIABILITY-AND-EQUITY> 9,050,157
<SALES> 9,588,946
<TOTAL-REVENUES> 0
<CGS> 2,562,357
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,557,970
<LOSS-PROVISION> 19,506
<INTEREST-EXPENSE> 90,807
<INCOME-PRETAX> 400,234
<INCOME-TAX> 154,300
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 245,934
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.02
</TABLE>
