<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 14, 2000
REGISTRATION NO. 333-94573
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1 TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
INSILICON CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3674 77-0526155
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
411 EAST PLUMERIA DRIVE
SAN JOSE, CA 95134
(408) 894-1900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------------------
WAYNE C. CANTWELL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
411 EAST PLUMERIA DRIVE
SAN JOSE, CA 95134
(408) 894-1900
(NAME, ADDRESS INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
--------------------------
COPIES TO:
<TABLE>
<S> <C>
ALAN TALKINGTON, ESQ. PETER T. HEALY, ESQ.
BARBARA M. LANGE, ESQ. C. BROPHY CHRISTENSEN, JR., ESQ.
PAUL L. RUBIN, ESQ. O'MELVENY & MYERS LLP
ORRICK, HERRINGTON & SUTCLIFFE LLP 275 BATTERY STREET
400 SANSOME STREET SAN FRANCISCO, CA 94111
SAN FRANCISCO, CA 94111
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date 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, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ____________
If this form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / / ____________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / / ____________
--------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED SHARE(1) PRICE(1) REGISTRATION FEE(2)
<S> <C> <C> <C> <C>
COMMON STOCK, PAR VALUE $.001...... 4,025,000 SHARES $11.00 $44,275,000 $11,688
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(a) under the Securities Act.
(2) Paid at initial filing.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 DECLARED EFFECTIVE. THIS
PRELIMINARY PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND WE ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 14, 2000
[LOGO]
3,500,000 SHARES
COMMON STOCK
inSilicon is offering 3,500,000 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 "INSN." We anticipate that the initial public offering
price will be between $9.00 and $11.00 per share.
Phoenix Technologies Ltd. currently owns all of inSilicon's common stock.
After this offering, Phoenix will own approximately 74.8% of inSilicon's common
stock (approximately 72.1% if the underwriters exercise their overallotment
option in full). Phoenix is not selling any of its inSilicon common stock in
this offering.
------------------------
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 inSilicon....................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
inSilicon has granted the underwriters a 30-day option to purchase up to an
additional 525,000 shares of its common stock to cover over-allotments.
FleetBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 2000.
------------------------
ROBERTSON STEPHENS
PRUDENTIAL VOLPE TECHNOLOGY
A UNIT OF PRUDENTIAL SECURITIES
NEEDHAM & COMPANY, INC.
THE DATE OF THIS PROSPECTUS IS , 2000
<PAGE>
[INSIDE FRONT COVER]
Title: "DESIGN TESTED AND PROVEN TECHNOLOGY FOR TOMORROW'S PRODUCTS"
Four separate blocks of text underneath title:
"CONNECTING THE WORLD. The internet is creating the demand for all digital
devices to be connected--inSilicon is providing solutions."
"WIDE ARRAY OF CHOICES. inSilicon brings semiconductor and systems companies a
broad selection of highly flexible and efficient communications and connectivity
technology."
"PROVEN SOLUTIONS. More than 400 companies have implemented inSilicon technology
in millions of systems from network routers to digital cameras."
"IMPROVING TIME-TO-MARKET. inSilicon's customer-proven technology speeds
system-on-a-chip development and reduces engineering risks and costs."
Color Artwork: Representation of the evolution of advanced system-on-a-chip
semiconductor devices. Images of inSilicon intellectual property "virtual
components" labeled "Ethernet," "USB," "1394," "PCI" and "IrDA" sweeping left to
right to a semiconductor device in a package that sweeps into a semiconductor
wafer. inSilicon logo.
[INSIDE GATEFOLD]
Right column: Title: "CONNECTING THE FUTURE -- INSILICON"
Text underneath title: "The internet is creating the demand for all digital
devices to be connected. The resulting proliferation of communications standards
and connectivity requirements are creating a high demand for complex
semiconductors. inSilicon is a leading provider of communications technology
used by semiconductor and systems companies to design complex
"systems-on-a-chip" that are critical technologies for digital devices. By
integrating inSilicon's technology into their designs, semiconductor designers
can create highly differentiated products, reduce risk and development costs,
increase system functionality and improve time to market." inSilicon logo.
Just left of the right column, vertically, from top to bottom, in separate
colored boxes, the words: "Our Markets," "Communications," "Consumer,"
"Computers" and "Office Automation."
Color Artwork: Picture of a system board sweeping left to right via a
directional arrow to a semiconductor package sweeping to a semiconductor
system-on-chip die with a graphic labeled "System-On-Chip" and a two-by-four
grid underneath with the following labels: CPU, USB, Control, IEEE 1394, Custom,
PCI, Memory and Ethernet. The arrow then continues to sweep right to the
inSilicon logo. Graphic continues to sweep right to left via a directional arrow
from the inSilicon logo to a "cloud-like" representation of the internet labeled
"INTERNET." Surrounding the cloud are 10 representative photographs of
end-markets, accompanied by the following titles (counter-clockwise) "Digital
Cameras," "Set-Top Boxes," "Smart Phones," "Peripherals," "Internet Appliances,"
"Laptop Computers," "Central Office Switching," "Routers," "DSL Modems" and
"Satellite Receivers."
2
<PAGE>
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
"INSILICON," "WE," "OUR" AND "US" REFER TO THE HISTORICAL OPERATING RESULTS AND
ACTIVITIES OF AND THE ASSETS AND LIABILITIES ASSIGNED TO THE BUSINESS AND
OPERATIONS OF INSILICON BY PHOENIX, AND NOT THE UNDERWRITERS OR PHOENIX.
UNTIL , 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 OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary.......................................... 4
Risk Factors................................................ 7
Forward-Looking Statements.................................. 16
Use of Proceeds............................................. 16
Dividend Policy............................................. 16
Capitalization.............................................. 17
Dilution.................................................... 18
Selected Consolidated Financial Data........................ 20
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 22
Business.................................................... 33
Management.................................................. 42
Arrangements Between inSilicon Corporation and Phoenix
Technologies Ltd.......................................... 52
Related Party Transactions.................................. 59
Principal Stockholder....................................... 60
Description of Capital Stock................................ 60
Shares Eligible for Future Sale............................. 64
Underwriting................................................ 65
Legal Matters............................................... 68
Experts..................................................... 68
Where You Can Find Additional Information................... 68
Index to Financial Statements............................... F-1
</TABLE>
------------------------
USBAccess-Registered Trademark- is a registered trademark of inSilicon.
TymeWare-TM-, SmartBridge-TM- and Rapidscript-TM- are trademarks of inSilicon.
We have filed for registration in the U.S. Patent and Trademark Office for
inSilicon-TM-, TymeWare-TM- and SmartBridge-TM-. All other brand names or
trademarks appearing in this prospectus are the property of their respective
holders.
3
<PAGE>
PROSPECTUS 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 CONSOLIDATED FINANCIAL STATEMENTS, AND THE NOTES TO
THOSE CONSOLIDATED 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 THOSE FORWARD-LOOKING STATEMENTS AS A RESULT OF THE FACTORS
DESCRIBED UNDER THE HEADING "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OUR BUSINESS
inSilicon is a leading provider of communications technology that is used by
semiconductor and systems companies to design complex semiconductors called
systems-on-a-chip that are critical components of digital devices. Over 400
customers use our communications technology in hundreds of different digital
devices ranging from network routers to cellular phones. Our modular approach
emphasizes customer-proven reusable semiconductor intellectual property that
focuses on communications and connectivity, and are compatible with a wide range
of microprocessor designs. Semiconductor and systems companies integrate our
communications technology into their overall semiconductor designs, saving time
and money and allowing them to focus on their core competencies that
differentiate their products. By integrating our communications technology into
their complex designs, our customers are better able to solve the widening
"design gap" caused by the difficulty of designing complex systems-on-a-chip in
the time necessary to get to market with their products.
The internet is creating the demand for all digital devices to be connected.
This demand is generating a proliferation of communications standards. These
standards include Ethernet, which is a widely used local area networking
standard; USB, which is a standard designed to simplify personal computer
connections to peripheral devices; and IrDA, which is a standard that allows a
wireless signal to be sent between appliances across short distances. The
proliferation of these standards and products based on them is driving the
demand for complex semiconductors. Improvements in semiconductor design and
manufacturing processes have enabled the integration of entire systems on a
single chip, thus creating a system-on-a-chip solution. Due to the complexity of
designing systems-on-a-chip, the multiplicity of communications standards and
time-to-market requirements, the design capabilities of semiconductor and
systems companies have not kept pace with the increase in the number of
transistors that can be placed on single chip. Consequently, a significant
"design gap" has developed. To address this gap, semiconductor and systems
companies are increasingly licensing proven and reusable intellectual property
from merchant semiconductor intellectual property suppliers, such as inSilicon.
Integrated Circuit Engineering, an independent research firm, estimates that the
merchant semiconductor intellectual property market will grow from approximately
$732 million in 2000 to approximately $1.9 billion in 2003, which represents a
compounded annual growth rate of approximately 37%.
We provide communications and connectivity solutions that allow
semiconductor and systems companies to focus their development resources on
their core competencies that differentiate their products. This reduces
development costs and improves time to market in the design of complex
systems-on-a-chip, thus narrowing the design gap with reusable technology. We
offer:
- proven solutions;
- a broad portfolio of communications technology for a wide range of
standards;
- integrated systems that combine our communications technology and related
software;
- extensive test and verification tools;
- portability and flexibility; and
- standards leadership.
4
<PAGE>
Our goal is to be a leading provider of semiconductor intellectual property
for communications and connectivity. Key elements of our strategy include:
- targeting high growth communications applications;
- expanding our portfolio of communications technology and related software;
- expanding distribution channels and brand awareness; and
- developing e-commerce channels.
CORPORATE INFORMATION
inSilicon was incorporated in Delaware on November 1, 1999 as a wholly owned
subsidiary of Phoenix. Before November 1999, we were operated as a division of
Phoenix. Our principal executive offices are located at 411 East Plumeria Drive,
San Jose, CA 95134 and our telephone number is (408) 894-1900. We expect to move
to new executive offices in the Silicon Valley area. Our web site address is
http://www.insilicon.com. Information on our web site and on web sites linked to
it is not part of this prospectus.
OUR RELATIONSHIP WITH PHOENIX
So long as Phoenix owns a substantial amount of our common stock, Phoenix
can exercise a controlling influence over our business. Phoenix has advised us
that it intends to hold its inSilicon's shares after this offering. However,
Phoenix has no contractual or other obligation to hold any or all of our shares
of common stock, except that it has agreed that it will not dispose of any
inSilicon shares for 365 days after the date of this prospectus without the
prior written consent of FleetBoston Robertson Stephens Inc. See
"Underwriting--Future Sales." Therefore, you cannot be sure how long Phoenix
will continue to own our common stock after this offering. Phoenix may dispose
of our common stock in one or more transactions, in one or more ways, including
a public offering, a distribution to Phoenix stockholders, an exchange offer
involving Phoenix common stock or other transactions. We granted Phoenix
registration rights for our common stock that it will own after this offering,
which will make it easier for Phoenix to dispose of its inSilicon common stock.
inSilicon and Phoenix have executed agreements addressing interim and
ongoing relationships between them. See "Arrangements between inSilicon
Corporation and Phoenix Technologies Ltd."
THE OFFERING
<TABLE>
<S> <C>
Common stock offered......................... 3,500,000 shares
Common stock to be outstanding after the
offering................................... 13,900,010 shares
Use of proceeds.............................. General corporate purposes, including working
capital, sales and marketing, and research
and development.
Proposed Nasdaq National Market symbol....... INSN
</TABLE>
The above information assumes the automatic conversion of our Series A
Preferred Stock into common stock and that the underwriters do not exercise
their option to purchase additional shares in the offering. The information
excludes the following:
- 2,348,844 shares of common stock issuable as of December 31, 1999, upon
exercise of options under our 1999 stock option plan;
- 50,000 shares of common stock issuable upon exercise of a warrant held by
Phoenix;
- 1,651,156 shares of common stock available for future issuance as of
December 31, 1999, upon exercise of options not yet granted or for future
issuance under our 1999 stock option plan and 2000 stock plan; and
- 250,000 shares of common stock available for future issuance under our
2000 employee stock purchase plan.
5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The historical financial information may not be indicative of our future
performance and does not reflect what our financial position and results of
operations would have been had we operated as a separate, stand-alone entity
during the periods presented.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Total revenue........................... $ 2,106 $ 3,330 $ 5,111 $ 8,792 $18,955 $ 4,866 $ 5,257
Gross margin............................ 1,702 2,666 3,501 6,835 14,994 4,148 4,182
Merger and restructuring charges........ -- 318 -- 5,778 6,050 86 --
Net income (loss)....................... 48 (1,232) (1,986) (7,101) (12,082) (1,315) (991)
Pro forma net loss...................... (8,566) (817)
Pro forma net loss per share............ $ (0.82) $ (0.08)
Shares used in computing pro forma net
loss per share........................ 10,400 10,400
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-----------------------
ACTUAL AS ADJUSTED
-------- ------------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ -- $31,150
Working capital (deficit)................................... (1,995) 29,155
Total assets................................................ 22,023 53,173
Long-term obligations, less current portion................. -- --
Total stockholder's equity.................................. 13,784 44,934
</TABLE>
See Note 2 of Notes to Consolidated Financial Statements of inSilicon for an
explanation of the determination of the number of shares used in computing per
share data.
"As adjusted" amounts reflect the application of the net proceeds from the
sale of 3,500,000 shares of common stock by inSilicon at an assumed initial
public offering price of $10.00 per share, after deducting the underwriting
discounts, commissions and the estimated offering expenses. See "Use of
Proceeds" and "Capitalization."
6
<PAGE>
RISK FACTORS
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO
THE OTHER INFORMATION IN THIS PROSPECTUS, YOU SHOULD CAREFULLY CONSIDER THE
RISKS DESCRIBED BELOW BEFORE PURCHASING OUR COMMON STOCK. IF ANY OF THE
FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS COULD BE MATERIALLY HARMED, AND OUR
FINANCIAL CONDITION AND RESULTS OF OPERATIONS COULD BE MATERIALLY AND ADVERSELY
AFFECTED. AS A RESULT, THE TRADING PRICE OF OUR COMMON STOCK COULD DECLINE, AND
YOU MIGHT LOSE ALL OR PART OF YOUR INVESTMENT.
RISKS RELATED TO OUR BUSINESS
OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY AND OUR STOCK PRICE
MAY DECLINE IF WE DO NOT MEET EXPECTATIONS OF INVESTORS AND ANALYSTS.
We expect our quarterly operating results to fluctuate significantly due to
a variety of factors, many of which are outside of our control. Our revenue is
difficult to predict and may fluctuate significantly from period to period.
Because our expenses are largely independent of our revenue in any particular
period, it is difficult to accurately forecast our operating results. Our
operating expenses are based, in part, on anticipated future revenue and a high
percentage of our expenses are fixed in the short term. As a result, if our
revenue is 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.
Factors that could cause our revenue and operating results to vary from
quarter to quarter include:
- the demand for and average selling prices of semiconductors that
incorporate our technology;
- dependence on large orders or regional spending patterns unevenly spaced
over time;
- our ability to develop, introduce and market new communications
technology;
- the financial terms of our contractual arrangements with our licensees and
partners that may provide for significant up-front payments or payments
based on the achievement of certain milestones;
- the relative mix of license revenues, royalties and services;
- competitive pressures resulting in lower license revenue or royalty rates;
- establishment or loss of strategic relationships with semiconductor or
systems companies;
- timing of new technologies and technology enhancements by us and our
competitors;
- seasonality of demand; and
- changes in development schedules, research and development expenditure
levels and product support by us and semiconductor and systems companies.
As a result, we believe that period-to-period comparisons of our results of
operations are not necessarily meaningful and, accordingly, that these
comparisons should not be relied upon as indications of future performance. Due
to these and other factors, it is likely that our operating results will be
below market analysts' expectations in some future quarters, which would cause
the market price of our stock to decline.
WE HAVE INCURRED NET LOSSES SINCE OUR INCEPTION, AND WE MAY NOT ACHIEVE OR
SUSTAIN ANNUAL PROFITABILITY.
We incurred net losses of $2.0 million for fiscal year 1997, $7.1 million
for fiscal year 1998, $12.1 million for fiscal year 1999 and $1.0 million for
the three months ended December 31, 1999, and had an accumulated deficit of
$23.8 million as of December 31, 1999. We expect to continue to incur additional
operating losses for at least the next 12 months. Although we have experienced
revenue
7
<PAGE>
growth in recent periods, our net losses have also increased. In addition, we
cannot assure you that we will be able to sustain the growth in our revenue. If
we do achieve profitability, we cannot be certain that we can sustain or
increase profitability on a quarterly or annual basis in the future or at all.
This may in turn cause our stock price to decline. In addition, if we do not
achieve or sustain profitability in the future, we may be unable to continue our
operations.
IF SEMICONDUCTOR AND SYSTEMS COMPANIES DO NOT ADOPT OUR SEMICONDUCTOR
INTELLECTUAL PROPERTY AND USE IT IN THE PRODUCTS THEY SELL, WE WILL NOT BE
SUCCESSFUL.
The adoption and continued use of our semiconductor intellectual property by
semiconductor and systems companies and an increasing demand for products
requiring complex semiconductors, such as portable computing devices and
cellular phones, is important to our continued success. The market for merchant
semiconductor intellectual property has only recently begun to emerge. Our
ability to achieve sustained revenue growth and profitability in the future will
depend on the continued development of this market and, to a large extent, on
the demand for complex semiconductors. There can be no assurance that the
merchant semiconductor intellectual property and complex semiconductor markets
will continue to develop or grow at a rate sufficient to support our business.
If either of these markets fails to grow or develops slower than expected, our
business, operating results and financial condition would be seriously harmed.
We face numerous risks in obtaining agreements with semiconductor and
systems companies on terms beneficial to our business, including:
- the lengthy and expensive process of building a relationship with a
potential licensee or prospective partner;
- the fact that we may compete with the internal development groups of
semiconductor and systems companies;
- the fact that we may be unable to persuade semiconductor and systems
companies to rely on us for critical technology;
- the fact that we may be unable to persuade potential licensees and
partners to bear development costs associated with our communications
technology;
- the risk that even after our customers select our communications
technology, they may not produce semiconductors using our communications
technology; and
- the risk that even if a particular semiconductor or systems company adopts
our communications technology, that the customer may fail due to
competition or lack of market acceptance of its products that use our
communications technology.
We cannot assure you that we will be able to maintain our current
relationships or establish new relationships with additional licensees or
partners, and any failure by us to do so could seriously harm our business. None
of our current licensees or partners is obligated to license new or future
generations of our communications technology.
IF WE ARE NOT ABLE TO PROTECT OUR INTELLECTUAL PROPERTY ADEQUATELY, OUR BUSINESS
WILL SUFFER BECAUSE WE WILL HAVE LESS PROPRIETARY TECHNOLOGY TO LICENSE.
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. After this offering, inSilicon will own three U.S. patents on various
aspects of its technology and have six 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
8
<PAGE>
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. We also cannot be sure that the steps we may take to obtain ownership of
any contributed intellectual property will be sufficient to assure our ownership
of all proprietary rights. We also rely on unpatented trade secrets to protect
our proprietary technology, however, 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 THEIR INTELLECTUAL PROPERTY RIGHTS,
AND WE COULD SUFFER SIGNIFICANT LITIGATION OR LICENSING EXPENSES OR BE PREVENTED
FROM LICENSING OUR TECHNOLOGY.
Third parties may claim that we are infringing their intellectual property
rights, and we may be found to infringe those intellectual property rights.
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 and services.
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 and the
uncertainty of the outcome of intellectual property litigation increase these
risks. Claims of intellectual property infringement also might require us to
enter into costly royalty or license agreements. However, we may not be able to
obtain royalty or license agreements on terms acceptable to us, or at all. We
also may be subject to significant damages or injunctions against development
and licensing of certain of our technologies.
BECAUSE OUR INDUSTRY IS SO COMPETITIVE, WE WILL NOT SUCCEED UNLESS WE CAN
CONTINUOUSLY DISTINGUISH OURSELVES FROM OUR MANY COMPETITORS, MANY OF WHICH ARE
PART OF LARGER ORGANIZATIONS WITH SUBSTANTIAL FINANCIAL AND MARKETING RESOURCES.
We will face competition from both existing and new suppliers of
semiconductor intellectual property that we anticipate will enter the market. We
also compete with the internal development groups of large, vertically
integrated semiconductor and systems companies. We also may face competition
from suppliers of technologies based on new or emerging technology standards.
We must also differentiate our communications technology from those
available or under development by other suppliers or the internal development
groups of semiconductor and systems companies, including some of our current and
prospective licensees. Many of these internal development groups have
substantial programming and design resources and are part of larger
organizations with substantial financial and marketing resources. These internal
development groups may develop technologies that compete directly with ours or
may actively seek to license their own technologies to third parties.
Many of our existing competitors, as well as a number of potential new
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
9
<PAGE>
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.
IF WE ARE UNABLE TO DEVELOP ENHANCEMENTS AND NEW GENERATIONS OF OUR INTELLECTUAL
PROPERTY, WE MAY BE UNABLE TO ATTRACT OR RETAIN CUSTOMERS.
Our future success will depend on our ability to develop enhancements and
new generations of our communications technology that satisfy the requirements
of new and evolving standards and introduce these new technologies to the
marketplace in a timely manner. If our development efforts are not successful or
are significantly delayed, or if the characteristics of our communications
technology are not compatible with the requirements of specific product
applications, we may be unable to attract or retain customers.
Technical innovations of the type critical to our success are inherently
complex and involve several risks, including:
- our ability to anticipate and respond in a timely manner to changes in the
requirements of semiconductor and systems companies;
- the emergence of new standards by semiconductor and systems companies;
- the significant research and development investment that is often required
before market acceptance, if any, of a particular standard;
- the possibility that even after a significant investment of our resources,
the standard will not become accepted by the industry; and
- the introduction of products by our competitors embodying new technologies
or features.
Our failure to adequately address these risks could render our existing or
future communications technology obsolete and could seriously harm our business.
In addition, we cannot assure you that we will have the financial and other
resources necessary to develop communications technology in the future, or that
any enhancements or new generations of the technology that we develop or procure
will generate revenue in excess of the costs of development or procurement.
RAPID PRODUCT TRANSITIONS OR INTRODUCTIONS OF NEW STANDARDS MAY CAUSE CUSTOMERS
TO DEFER OR STOP LICENSING OUR TECHNOLOGIES, WHICH WOULD REDUCE OUR REVENUES.
From time to time, we or our competitors may announce new technologies or
capabilities that may replace or shorten the life cycles of our existing
technologies. Announcements of currently planned or other new technologies may
cause customers to defer or stop licensing our technologies until those new
technologies become available. In addition, announcements of a new standard may
cause customers to defer or stop licensing our technologies until that standard
becomes available or accepted.
IF WE DO NOT COMPETE EFFECTIVELY WITH OTHERS TO ATTRACT AND RETAIN KEY
PERSONNEL, WE MAY BE UNABLE TO DEVELOP THE NEW COMMUNICATIONS TECHNOLOGY
NECESSARY TO EXPAND OUR BUSINESS.
Our ability to continue to grow successfully requires an effective planning
and management process. Since October 31, 1998, we have increased our headcount
substantially, from 51 employees at that date to 78 employees at December 31,
1999.
Our growth has placed, and the recruitment and integration of additional
employees will continue to place, a strain on our resources. Semiconductor and
systems company licensees typically require significant engineering support in
the design, testing and manufacture of products incorporating our technology.
Accordingly, increases in the adoption of our technology can be expected to
increase the strain on our personnel, particularly our engineers.
10
<PAGE>
We believe our future success will depend upon our ability to successfully
manage our growth, including attracting and retaining engineers, other highly
skilled personnel and senior managers. Our employees are "at will" and are not
hired for a specified term. Hiring qualified sales and technical personnel will
be difficult due to the limited number of qualified professionals. Competition
for these types of employees is intense. We have in the past experienced
difficulty in recruiting and retaining qualified sales and technical personnel.
Our employees are recruited aggressively by our competitors and by start-up
companies. We believe our salaries are competitive, but under certain
circumstances, start-up companies can offer more attractive stock option
packages. As a result, we have experienced, and may continue to experience,
significant employee turnover. Failure to attract and retain personnel,
particularly sales and technical personnel, would materially harm our business.
As we seek to expand our operations, we may also significantly strain our
financial and management systems and other resources. We cannot be certain that
our systems, procedures, controls and facilities will be adequate to support our
operations.
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.
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. 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. Once these guidelines are issued, our current revenue
recognition accounting practices may need to change and such changes could
affect the timing of our future revenue recognition.
RISKS RELATED TO THE SEMICONDUCTOR INDUSTRY
A DOWNTURN IN THE SEMICONDUCTOR OR ELECTRONICS BUSINESSES WOULD REDUCE OUR
SALES.
Our business has benefited from the rapid worldwide growth of the
semiconductor industry, which in turn has been fueled by growth in
telecommunications, computers and consumer electronics. Continued licenses of
our technologies are largely dependent upon the commencement of new design
projects by semiconductor and systems companies. However, the semiconductor
industry is highly cyclical and subject to rapid technological change. It also
has been subject to significant economic downturns at various times,
characterized by diminished demand, accelerated erosion of average selling
prices and production overcapacity. In addition, the semiconductor industry also
periodically experiences increased demand and production capacity constraints.
As a result, we may experience substantial period-to-period fluctuations in
future operating results due to general semiconductor industry conditions,
overall economic conditions or other factors. A number of semiconductor and
systems companies have announced layoffs of their employees or the suspension of
investment plans, and although we have not seen a significant drop-off in demand
from these customers, their budgets could be reduced, alone or as part of
overall expense control efforts. In addition, there have been a number of
mergers in the electronics industry, which may reduce the aggregate level of
licenses of our technologies and purchases of our services by the merged
companies. Potential slower growth in the electronics industry, a reduced number
of design starts, tightening of customers' operating budgets or continued
consolidation among our customers may seriously harm our business.
11
<PAGE>
RISKS RELATED TO OUR RECENT SEPARATION FROM PHOENIX TECHNOLOGIES LTD.
OUR EXPENSES MAY BE HIGHER AS A SEPARATE STAND-ALONE ENTITY THAN THEY WERE WHEN
WE WERE PART OF PHOENIX.
The historical financial information included in this prospectus does not
reflect the many significant changes in our cost structure that will occur as a
result of our separation from Phoenix or changes in our funding and operations
that will result from our transition to a separate, stand-alone entity. Although
we will continue to be a majority-owned subsidiary of Phoenix immediately after
this offering, Phoenix will have no obligation to assist us except as described
below and in the Services and Cost-Sharing Agreement. Before the Services and
Cost-Sharing Agreement expires, we will need to develop and implement
operational, administrative and other systems and infrastructure, such as the
new networks, accounting systems and facilities necessary to support our current
and future business. Our general and administrative expenses and a portion of
our research and development and sales and marketing expenses represent
allocations of Phoenix's total expenses. Once Phoenix no longer provides these
services for us, our expenses may be greater than these allocations.
WE WILL DEPEND ON AGREEMENTS WITH PHOENIX FOR MANY IMPORTANT SERVICES THAT MAY
BE HARD TO REPLACE IF PHOENIX TERMINATES THE AGREEMENTS.
We have entered into agreements with Phoenix that will define our
relationship after this offering. These agreements include a Services and
Cost-Sharing Agreement, under which Phoenix will provide various, primarily
administrative, services to us, including accounting, treasury, tax and
information services, and we will share with Phoenix certain costs, including
facilities and insurance. The Services and Cost-Sharing Agreement has an initial
term that extends to June 30, 2000 for all services other than accounting and an
initial term that extends to September 30, 2000 with respect to accounting
services, although we can terminate any one or more of the services at any time
on 30 days' written notice. The Services and Cost-Sharing Agreement will be
renewed on a month-to-month basis. Phoenix can terminate after those dates on 30
days' written notice. Consequently, we cannot be sure how long Phoenix will
continue to provide us services under the Services and Cost-Sharing Agreement
and, if it does not, whether, or on what terms we could obtain these services.
If we cannot perform these services ourselves or obtain them on acceptable
terms, this could materially harm our business. In addition, we have entered
into a distribution agreement under which Phoenix will act as a sales
representative for inSilicon in certain Asian countries and this service will be
difficult to replace if Phoenix terminates this agreement.
SINCE PHOENIX CAN ELECT ALL OUR DIRECTORS AND INFLUENCE OUR BUSINESS FOR ITS
BENEFIT FOR AT LEAST AS LONG AS IT OWNS 50% OR MORE OF OUR SHARES, PHOENIX CAN
TAKE ACTIONS BENEFICIAL TO IT AT OUR EXPENSE.
For at least as long as Phoenix continues to own more than 50% of our common
stock, Phoenix can direct the election of all our directors and exercise a
controlling influence over our business, including any mergers or other business
combinations, acquisitions or dispositions of assets, future issuances of our
common stock or other equity securities, the incurrence of debt and the payment
of dividends. Phoenix also can determine matters submitted to a vote of our
stockholders without the consent of our other stockholders, prevent or cause a
change in who controls us and take other actions that might be favorable to
Phoenix.
WE MAY HAVE CONFLICTS OF INTEREST WITH PHOENIX THAT ARE NOT RESOLVED IN OUR
FAVOR.
We may have conflicts of interest with Phoenix in areas relating to our past
and ongoing relationships, including potential competitive business activities,
indemnity arrangements, tax and intellectual property matters, registration
rights, potential acquisitions or financing transactions, sales or other
dispositions by Phoenix of the shares of inSilicon common stock it will hold
after this offering
12
<PAGE>
and the exercise by Phoenix of its ability to control our management and
affairs. We also cannot be sure that any conflicts that may arise between us and
Phoenix will be resolved in a manner that does not seriously harm us, even if
Phoenix does not intend that result.
In addition, the ownership interests of our directors or officers in Phoenix
common stock or service as both a director of inSilicon and an officer or
director of Phoenix could create or appear to create potential conflicts of
interest when directors and officers are faced with decisions that could have
different implications for us and Phoenix. One of our current directors is a
director and officer of Phoenix.
AS A SEPARATE, STAND-ALONE COMPANY FROM PHOENIX, WE MAY EXPERIENCE INCREASED
COSTS RESULTING FROM DECREASED PURCHASING OR NEGOTIATING POWER WHICH COULD
DECREASE OUR PROFITABILITY.
Before our separation from Phoenix, we were able to take advantage of
Phoenix's size and purchasing power in procuring goods, services and technology,
such as computer software licenses and employee benefits, and in negotiating
relatively favorable leases for facilities and other agreements. As a separate,
stand-alone entity, we may be unable to obtain goods, services, technology,
facilities and other items at prices and on terms as favorable as those we
obtained before the separation.
LOSS OF THE PHOENIX AFFILIATION AS A RESULT OF OUR SEPARATION FROM PHOENIX MAY
DAMAGE OUR RELATIONSHIPS WITH EXISTING LICENSEES OR PARTNERS OR THEIR
PERCEPTIONS OF US.
Licensees of our communications technology or our strategic partners may
have chosen our technologies because of the positive reputation of Phoenix or
their economic ties to Phoenix. For example, Phoenix may also be a customer for
their products. As a separate, stand-alone entity, we may not enjoy these
advantages with those customers and partners and it may be harder for us to
compete for their continued business. For example, our new name is not yet
recognized as a brand in the marketplace, and as a result our technology
licensing could suffer. The loss of the "Phoenix" brand name may hinder our
ability to establish new relationships with potential customers and partners,
particularly in Asia. In addition, our current customers, suppliers and partners
may react negatively to the separation. Although we believe we have all
necessary rights to use the brand name "inSilicon," our rights to use it may be
challenged by others.
WITHOUT FINANCIAL BACKING FROM PHOENIX, WE MAY HAVE INSUFFICIENT FUNDS TO EXPAND
OUR BUSINESS.
Phoenix has satisfied our capital requirements in the past, but it will not
be obligated to do so, nor do we expect it to do so, after this offering. As a
result, we must depend on the proceeds of this offering, cash flows from
operations and future financings, if any, to expand our business.
RISKS RELATED TO THE OFFERING
THE MARKET PRICE OF OUR COMMON STOCK MAY DROP IF PHOENIX SELLS ITS SHARES.
Phoenix, our only stockholder before this offering, will derive certain
benefits as a result of this offering, including the creation of a public market
for our common stock. After this offering, Phoenix may sell any and all of its
inSilicon common stock or distribute any or all of our common stock to its
stockholders. Phoenix has advised us that it intends to continue to hold our
common stock after this offering, but it is not obligated to do so (although it
cannot sell or otherwise dispose of any shares for 365 days after the date of
this prospectus without the prior written consent of FleetBoston Robertson
Stephens Inc.). The market price of our common stock may decline if Phoenix
sells or distributes large amounts of our common stock in the public market or
to its stockholders, or if investors think that Phoenix might do so. If Phoenix
transfers controlling interest in inSilicon, the other holders of our common
stock may not participate in the transaction or realize any premium on their
common stock.
13
<PAGE>
Phoenix has registration rights for its inSilicon common stock that will make
future dispositions easier for it.
OUR RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS WILL CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER AND THEREFORE LIMIT THE MARKET PRICE OF OUR
COMMON STOCK.
Our Restated Certificate of Incorporation and by-laws will contain
provisions that could delay or prevent a change of control. These provisions
could limit the price that investors might be willing to pay in the future for
shares of our common stock. Some of these provisions:
- divide our board of directors into three classes;
- authorize the issuance of preferred stock which can be created and issued
by the 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.
However, for at least as long as Phoenix continues to own more than 50% of our
common stock, these provisions should not have any practical significance to
investors.
YOU WILL EXPERIENCE IMMEDIATE DILUTION WITH RESPECT TO YOUR SHARES.
You will incur immediate and substantial dilution of $7.96 per share in the
net tangible book value of your shares as a result of this offering.
OUR ABILITY TO RAISE CAPITAL IN THE FUTURE MAY BE LIMITED AND OUR FAILURE TO
RAISE CAPITAL WHEN NEEDED COULD SERIOUSLY HARM OUR BUSINESS.
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 twelve months. However, we may in the
future be required to raise additional funds through public or private
financing, strategic relationships 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.
Additional equity financing may be dilutive to the holders of our common stock,
and debt financing, if available, may involve restrictive covenants. In
addition, pursuant to the Registration Rights Agreement, a substantial portion
of the proceeds raised in any subsequent offerings of our common stock may be
payable to Phoenix for the sale of any of its shares of inSilicon common stock.
Moreover, strategic relationships, if necessary to raise additional funds, may
require us to relinquish some technology rights or modify our allocation of
resources.
OUR COMMON STOCK HAS NOT BEEN PUBLICLY TRADED BEFORE THIS OFFERING AND ITS PRICE
MAY BE VOLATILE.
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:
- actual or anticipated fluctuations in our results of operations;
- 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;
14
<PAGE>
- introduction of new services 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.
OUR MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY FAIL TO USE SUCH FUNDS EFFECTIVELY TO ACHIEVE OUR OTHER
BUSINESS GOALS.
We currently have no specific plans for using the net proceeds of this
offering. As a consequence, our management will have broad discretion to
allocate a large percentage of the net proceeds to uses which the stockholders
may not deem desirable or to uses that fail to achieve our business goals
effectively.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements based largely on our
current expectations and projections about future events and financial trends
affecting the financial condition or financial results of our business. The
words "believe," "may," "will," "estimate," "continue," "anticipate," "intend,"
"expect" and similar expressions identify these forward-looking statements.
These forward-looking statements are subject to a number of risks, uncertainties
and assumptions, including those described above under the caption "Risk
Factors" that may cause our or our industry's actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements expressed or implied by
these forward-looking statements. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
USE OF PROCEEDS
We expect that the net proceeds from this offering will be approximately
$31.1 million, based on an assumed initial public offering price of $10.00 per
share, after paying underwriting discounts, commissions and offering expenses.
Except to the extent that any portion of the net proceeds is used to repay a
working capital bridge loan from Phoenix under the Contribution Agreement (which
amount is not expected to exceed $1 million), we expect to use the net proceeds
for general corporate purposes, including working capital, sales and marketing,
and research and development. In addition, we may use a portion of the net
proceeds to acquire complementary products, technologies or companies. From time
to time, we may acquire complementary products, technologies or companies. We
currently have no commitments or agreements and are not involved in any
negotiations for the acquisition of companies. Our management will have broad
discretion in the allocation of net proceeds. Pending use, the net proceeds will
be invested in short-term securities. We are not under any contractual or other
obligation, nor do we expect, to pay any dividends or distribute any of the net
proceeds from this offering to Phoenix other than for the provision of
administrative services included in the Services and Cost-Sharing Agreement.
DIVIDEND POLICY
We have never paid any dividends. We currently intend to retain any earnings
to fund the development and growth of our business and do not anticipate
declaring or paying any cash dividends. We executed a commitment letter for a
revolving credit facility, which we expect will include limitations and
restrictions on our ability to pay dividends.
16
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1999:
- on an actual basis; and
- on a pro forma basis to give effect to the conversion of all shares of
Series A Preferred Stock into shares of common stock and our sale of
3,500,000 shares of common stock at an assumed initial public offering
price of $10.00 per share, less underwriting discounts, commissions and
estimated offering expenses payable by us.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
-------------------------
ACTUAL PRO FORMA
----------- -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE DATA)
<S> <C> <C>
Long-term obligations, less current portion................. $ -- $ --
Stockholder's equity........................................
Preferred stock, par value $0.001; 15,000,000 shares
authorized; 10,400,000 Series A shares issued and
outstanding actual; no shares issued and outstanding pro
forma................................................... 10 --
Common stock, par value $0.001; 100,000,000 shares
authorized; 10 shares issued and outstanding actual;
13,900,010 shares issued and outstanding
pro forma............................................... -- 14
Additional paid-in capital................................ 38,953 70,099
Deferred stock-based compensation......................... (1,360) (1,360)
Accumulated deficit....................................... (23,819) (23,819)
-------- --------
Total stockholder's equity................................ 13,784 44,934
-------- --------
Total capitalization.................................... $ 13,784 $ 44,934
======== ========
</TABLE>
You should read this capitalization table together with the sections of this
prospectus entitled "Selected Consolidated Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the consolidated financial statements and related notes included in this
prospectus.
This table excludes the following shares:
- 2,348,844 shares of common stock issuable as of December 31, 1999, upon
exercise of options under our 1999 employee stock option plan;
- 50,000 shares of common stock issuable upon exercise of a warrant held by
Phoenix;
- 1,651,156 shares of common stock available for future issuance as of
December 31, 1999, upon exercise of options not yet granted or for future
issuance under our 1999 stock option plan and 2000 stock plan; and
- 250,000 shares of common stock available for future issuance under our
2000 employee stock purchase plan.
17
<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma net tangible book value per share of our common
stock after this offering. The net tangible book value of our common stock as of
December 31, 1999 was a deficit of $2,853,000, or $0.27 per share. Pro forma net
tangible book value per share represents the amount of our total tangible assets
reduced by the amount of our total liabilities and divided by the total pro
forma number of shares of common stock outstanding assuming the automatic
conversion of our Series A Preferred Stock into common stock. Dilution in 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
pro forma net tangible book value per share of our common stock immediately
afterwards. After giving effect to our sale of 3,500,000 shares of common stock
offered by this prospectus at an assumed public offering price of $10.00 per
share and after deducting the underwriting discounts, commissions and estimated
offering expenses payable by us, our pro forma net tangible book value as of
December 31, 1999 would have been $28,297,000, or approximately $2.04 per share.
This represents an immediate increase in net tangible book value of $2.31 per
share to Phoenix, our sole current stockholder, and an immediate and substantial
dilution in net tangible book value of $7.96 per share to new investors.
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $10.00
Net tangible book value deficit per share as of
December 31, 1999......................................... $(0.27)
Increase in net tangible book value per share attributable
to new investors.......................................... 2.31
------
Pro forma net tangible book value per share after the
offering.................................................. 2.04
------
Dilution per share to new investors......................... $ 7.96
======
</TABLE>
The table below sets forth, as of December 31, 1999, the following
information about our existing stockholder and the new investors:
- the total number of shares of common stock purchased from us;
- the total price paid; and
- the average price paid per share.
The dollar amounts in the table were calculated before deducting the
estimated underwriting discounts, commissions and estimated offering expenses
payable, assuming an initial public offering price of $10.00 per share.
<TABLE>
<CAPTION>
SHARES PURCHASED
ASSUMING NO
EXERCISE OF
UNDERWRITERS' TOTAL
OVERALLOTMENT OPTION CONSIDERATION
--------------------- ---------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
---------- -------- ----------- -------- -----------------------
<S> <C> <C> <C> <C> <C>
Phoenix.................................. 10,400,010 74.8% $38,963,000 52.7% $ 3.75
New investors............................ 3,500,000 25.2 35,000,000 47.3 10.00
---------- ----- ----------- -----
Total.................................... 13,900,010 100.0% $73,963,000 100.0%
========== ===== =========== =====
</TABLE>
18
<PAGE>
If the underwriters' over-allotment option is exercised in full, the
following will occur:
- the percentage of the total number of shares of common stock held by
Phoenix will decrease to 72.1% immediately after the offering; and
- the number of shares held by new public investors will increase to
4,025,000, or approximately 27.9% of the total number of shares of our
common stock outstanding immediately after the offering.
As of December 31, 1999, there were options outstanding to purchase a total
of 2,348,844 shares of our common stock at a weighted average exercise price of
$6.14 per share, of which 364,360 shares were exercisable as of that date. In
addition, Phoenix holds a warrant to purchase 50,000 shares of common stock at
$0.01 per share.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with the consolidated financial statements, the notes thereto and
the other information contained in this prospectus. The selected consolidated
balance sheet data as of September 30, 1998 and 1999 and the selected
consolidated statement of operations data for the years ended September 30,
1997, 1998 and 1999 have been derived from the audited consolidated financial
statements of inSilicon appearing elsewhere in this prospectus. The selected
consolidated balance sheet data as of September 30, 1995, 1996 and 1997, the
selected consolidated statement of operations data for the years ended
September 30, 1995 and 1996, and the pro forma net loss and pro forma net loss
per share data for the year ended September 30, 1999, have been derived from
unaudited consolidated financial statements of inSilicon not included in this
prospectus. The statement of operations data for the three months ended
December 31, 1998 and 1999, the balance sheet data as of December 31, 1999 and
the pro forma net loss and pro forma net loss per share data for the three
months ended December 31, 1999 have been derived from our unaudited financial
statements included elsewhere in this prospectus. In the opinion of management,
these unaudited statements have been prepared on the same basis as the audited
financial statements and include all adjustments, consisting only of normal
recurring accruals, that we consider necessary for a fair presentation of our
financial position and results of operations for these periods.
The historical financial information includes the operations of Sand
Microelectronics from September 1998, the date of acquisition. For further
discussion on the comparability of the financial information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
Furthermore, the historical financial information may not be indicative of our
future performance and does not necessarily reflect what our financial position
and results of operations would have been had we been a separate, stand-alone
entity during the periods covered. The historical financial information does not
reflect many significant changes that will occur in our operations and capital
structure as a result of our separation from Phoenix.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED SEPTEMBER 30, DECEMBER 31,
---------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
-------- -------- -------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENTS OF OPERATIONS DATA:
Revenue:
License fees....................................... $ 2,106 $ 2,832 $ 4,272 $ 7,304 $ 14,973 $ 3,677 $ 3,857
Services........................................... -- 498 839 1,488 3,982 1,189 1,400
------- ------- ------- ------- -------- ------- -------
Total revenue.................................... 2,106 3,330 5,111 8,792 18,955 4,866 5,257
Cost of revenue:
License fees....................................... 404 567 972 1,223 1,003 158 553
Services........................................... -- 97 638 734 826 27 208
Amortization of purchased technology............... -- -- -- -- 2,132 533 314
------- ------- ------- ------- -------- ------- -------
Total cost of revenue............................ 404 664 1,610 1,957 3,961 718 1,075
------- ------- ------- ------- -------- ------- -------
Gross margin......................................... 1,702 2,666 3,501 6,835 14,994 4,148 4,182
Operating expenses:
Research and development........................... 798 1,808 2,310 2,947 9,092 2,348 2,007
Sales and marketing................................ 575 1,223 2,128 3,843 6,350 1,622 1,712
General and administrative......................... 281 549 1,049 1,368 3,364 852 731
Amortization of intangible assets.................. -- -- -- -- 2,220 555 555
Stock-based compensation........................... -- -- -- -- -- -- 236
Merger and restructuring charges................... -- 318 -- 5,778 6,050 86 --
------- ------- ------- ------- -------- ------- -------
Total operating expenses......................... 1,654 3,898 5,487 13,936 27,076 5,463 5,241
------- ------- ------- ------- -------- ------- -------
Income (loss) from operations........................ 48 (1,232) (1,986) (7,101) (12,082) (1,315) (1,059)
Income tax benefit................................... -- -- -- -- -- -- (68)
------- ------- ------- ------- -------- ------- -------
Net income (loss).................................... $ 48 $(1,232) $(1,986) $(7,101) $(12,082) $(1,315) $ (991)
======= ======= ======= ======= ======== ======= =======
Pro forma net loss (1)............................... $ (8,566) $ (817)
======== =======
Pro forma net loss per share (2)(3).................. $ (0.82) $ (0.08)
======== =======
Shares used in computing pro forma net loss per share
(2)(3)............................................. 10,400 10,400
======== =======
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
---------------------------------------------------- DECEMBER 31,
1995 1996 1997 1998 1999 1999
-------- -------- -------- -------- -------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents........................ $ -- $ -- $ -- $ -- $ -- $ --
Working capital (deficit)........................ (103) (405) 974 (3,340) (393) (1,995)
Total assets..................................... 1,767 1,807 4,505 31,331 24,481 22,023
Long-term obligations, less current portion...... 610 35 15 16 45 --
Total stockholder's net investment/stockholder's
equity......................................... 13 491 3,554 25,412 18,804 13,784
</TABLE>
- ------------
(1) Pro forma net loss gives effect to pro forma income tax credits related to
the reversal of deferred income tax liabilities in connection with the
acquisition of Sand. See Note 8 of Notes to Consolidated Financial
Statements of inSilicon.
(2) See Note 2 of Notes to Consolidated Financial Statements of inSilicon for an
explanation of the method used to determine the number of shares used to
compute pro forma net loss per share.
(3) Assumes the conversion of all shares of Series A Preferred Stock and
excludes a warrant to purchase 50,000 shares of common stock and all
outstanding stock options.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
YOU SHOULD READ THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND
RESULTS OF OPERATIONS TOGETHER WITH THE CONSOLIDATED FINANCIAL STATEMENTS AND
THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS DISCUSSION
CONTAINS FORWARD-LOOKING STATEMENTS WHICH 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
THE "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS. SEE "FORWARD-LOOKING
STATEMENTS."
OVERVIEW
We provide communications and connectivity solutions that allow
semiconductor and systems companies to focus their development resources on
their core competencies that differentiate their products. This reduces
development costs and improves time to market in complex system-on-a-chip
designs. By integrating our communications technology into their complex
designs, our customers are better able to narrow the design gap caused by the
difficulty of designing complex semiconductors in the time necessary to get to
market with their products.
We are currently a wholly owned subsidiary of Phoenix and were incorporated
in November 1999. Before November 1999, we were operated as a division of
Phoenix. We have incurred operating and net losses for nearly all historical
periods. These losses have primarily resulted from two factors: research and
development and marketing costs incurred in order to generate market share and
revenue growth; and charges for restructurings, merger costs, and amortization
of acquired intangible assets. See further discussion included in "Risk
Factors." The discussion below refers to the historical operating results and
activities and the assets and liabilities assigned to inSilicon by Phoenix
included in our consolidated financial statements.
Phoenix has provided a number of administrative services to us on which we
continue to rely. Our consolidated financial statements were derived from the
historical books and records of Phoenix. The consolidated balance sheets include
all assets and liabilities directly attributable to us. The consolidated
statements of operations include all revenues and expenses attributable to us,
including direct charges and allocated costs for shared facilities, functions
and services used by us and provided by Phoenix. A significant amount of
expenses have been allocated to us based on Phoenix management's estimate of the
proportional benefit of services provided by it. These allocations were
generally based on pro rata personnel, revenue generated or costs incurred. See
Note 5 of Notes to Consolidated Financial Statements of inSilicon. You should
not consider our historical financial statements to be representative of our
operating results, financial position or cash flows to be expected in future
periods or what our results of operations, financial position or cash flows
would have been had inSilicon been a separate, stand-alone entity during the
periods presented.
We have entered into a Services and Cost-Sharing Agreement with Phoenix
effective as of November 30, 1999. This agreement covers various services that
Phoenix provides us and the method by which we and Phoenix share certain costs.
The services include data processing, telecommunications, information technology
support, accounting, financial management, tax preparation, payroll, stockholder
and public relations, legal, human resources administration, procurement, real
estate management and other administrative functions. The shared costs include
the costs of the office space we occupy at Phoenix's headquarters and insurance
premiums. The amount we will pay will be equal to the aggregate cost to Phoenix
and inSilicon of the services and costs multiplied by a percentage representing
the number of our employees to the total number of Phoenix and inSilicon
employees. The Services and Cost-Sharing Agreement has an initial term that
extends to June 30, 2000 for all services other than accounting and an initial
term that extends to September 30, 2000 with respect to accounting services,
although we can terminate any one or more of the services at any time on 30
days' written notice. The
22
<PAGE>
Services and Cost-Sharing Agreement will be renewed on a month-to-month basis.
Phoenix can terminate after those dates on 30 days' written notice.
Many Phoenix employees who were seconded to inSilicon in December 1999
exchanged their options to purchase Phoenix common stock for new options to
acquire 1,358,779 shares of inSilicon common stock. On the date of the exchange,
the inSilicon options had the same intrinsic value and ratio of exercise price
to market value of the underlying shares as the Phoenix options exchanged. They
also have equivalent vesting schedules to the Phoenix options exchanged. Also in
December 1999, we granted options to purchase 990,065 additional shares of our
common stock at a weighted average exercise price of $7.33 per share. Because we
granted these options at an exercise price less than the fair market value of
our common stock on the grant date, we recorded deferred stock compensation of
approximately $1.6 million. This stock compensation will be amortized by charges
to operations over the vesting period of the options, generally four years.
In September 1998, Phoenix acquired Sand Microelectronics, Inc., a leading
supplier of standards-based semiconductor intellectual property. The purchase
price consisted of approximately $18.6 million in cash, 464,000 shares of
Phoenix common stock with a fair value of $2.7 million, approximately 264,000
stock options to purchase Phoenix common stock with a fair value of
$1.6 million issued in exchange for Sand stock options, and up to $3.7 million
in performance incentives through fiscal year 2001 that inSilicon may be
required to pay. This transaction was accounted for using the purchase method of
accounting and therefore Sand's results of operations are not included within
ours before the date of acquisition. Our consolidated balance sheets include the
financial position of Sand as of September 30, 1998, and our consolidated
operating results include the operating results of Sand after the date of
acquisition.
In connection with the acquisition of Sand, we recorded $12.8 million of
capitalized software development costs, $9.6 million of goodwill and $2.8
million of other intangible assets. Amortization of these assets is being
recognized on a straight-line basis over three- to six-year periods. See Note 6
of Notes to Consolidated Financial Statements of inSilicon.
Also in September 1998, Phoenix completed a merger with Award Software
International, Inc. In connection with the Award merger, we acquired the
operations of Award associated with the development and marketing of
standards-based firmware. The Award transaction was accounted for as a
pooling-of-interests, and the firmware operations of Award are therefore
included in our results of operations for all periods presented. These
operations accounted for less than 10% of our revenue and operating costs for
all periods prior to the merger.
23
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth operating data as a percentage of total
revenue:
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------------------ ----------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA:
Revenue:
License fees........................................ 83.6% 83.1% 79.0% 75.6% 73.4%
Services............................................ 16.4 16.9 21.0 24.4 26.6
----- ----- ----- ----- -----
Total revenue..................................... 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
License fees........................................ 19.0 13.9 5.3 3.2 10.5
Services............................................ 12.5 8.4 4.4 0.6 4.0
Amortization of purchased technology................ -- -- 11.2 11.0 6.0
----- ----- ----- ----- -----
Total cost of revenue............................. 31.5 22.3 20.9 14.8 20.5
----- ----- ----- ----- -----
Gross margin.......................................... 68.5 77.7 79.1 85.2 79.5
Operating expenses:
Research and development............................ 45.2 33.5 48.0 48.2 38.2
Sales and marketing................................. 41.7 43.7 33.5 33.3 32.6
General and administrative.......................... 20.5 15.6 17.7 17.5 13.8
Amortization of intangible assets................... -- -- 11.7 11.4 10.6
Stock-based compensation............................ -- -- -- -- 4.5
Merger and restructuring charges.................... -- 65.7 31.9 1.8 --
----- ----- ----- ----- -----
Total operating expenses.......................... 107.4 158.5 142.8 112.2 99.7
----- ----- ----- ----- -----
Loss from operations.................................. (38.9) (80.8) (63.7) (27.0) (20.2)
Income tax benefit.................................... -- -- -- -- (1.3)
----- ----- ----- ----- -----
Net loss.............................................. (38.9)% (80.8)% (63.7)% (27.0)% (18.9)%
===== ===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED DECEMBER 31, 1998 AND 1999
REVENUE. We license software under non-cancelable license agreements and
provide related services, including training, non-recurring engineering and
product maintenance. License fee revenues are generally recognized when a
non-cancelable license agreement has been signed, the software has been shipped,
there are no uncertainties surrounding acceptance, the fees are fixed and
determinable, and collection is considered probable. For customer license
agreements which meet these recognition criteria, the portion of the fees
related to software licenses are generally recognized in the current period,
while the portion of the fees related to services is recognized as the services
are performed. When we enter into a license agreement with a customer requiring
significant customization of the software, we recognize revenue related to the
license agreement using contract accounting. Revenue from engineering services
is generally recognized on a time-and-materials basis or when contractual
milestones are met. Maintenance consists of support services and periodic
updates. Revenue from maintenance agreements is recognized ratably over the
maintenance period, which is typically one year.
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. The adoption of SOP 97-2 and SOP 98-4 did
not have a material impact or our consolidated financial statements and results
of
24
<PAGE>
operations. 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. The
adoption of SOP 98-9 as of October 1, 1999, did not have a material impact on
our consolidated financial statements and results of operations for the three
months ended December 31, 1999, and such adoption is not expected to
significantly impact future periods. However, full implementation guidelines for
SOP 97-2, SOP 98-4 and SOP 98-9 have not been issued. Once available, the
current revenue recognition accounting practices may need to change and such
changes could affect the timing of our future revenue recognition.
Revenue for the three months ended December 31, 1999 was $5.3 million, an
increase of 8.0% from $4.9 million for the comparable period of the prior year.
This increase consists of increases in license fees revenue ($180,000) and
services revenue ($211,000) due to the growing market acceptance of
semiconductor intellectual property.
GROSS MARGIN. Gross margin is revenue less cost of revenue. License fee
cost of revenue consists primarily of amortization of capitalized software
development costs and costs of licensing certain technologies from third-party
developers and publishers. Services cost of revenue includes internal payroll
costs and third-party consulting costs associated with providing non-recurring
engineering services to customers.
Gross margin for the three months ended December 31, 1999 was $4.2 million,
an increase of 0.8% from $4.1 million for the comparable period of the prior
year. This increase was due to increased revenue ($391,000) and decreased
amortization of purchased technology ($219,000), partially offset by increased
license fees cost of revenue ($395,000). The increased license fees cost of
revenue was primarily due to a non-recurring license fee payment related to
third-party developed technology.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
consist principally of payroll and related costs associated with the development
of our semiconductor intellectual property and related software, net of amounts
capitalized.
Research and development expenses for the three months ended December 31,
1999 were $2.0 million, a decrease of 14.5% from $2.3 million for the comparable
period of the prior year. This decrease was due to the completion of a
significant outsourced design contract.
SALES AND MARKETING EXPENSES. Sales and marketing expenses consist of costs
related to advertising, public relations, and other marketing, selling and
distribution activities. These costs include direct out-of-pocket and payroll
expenses, and an allocation from Phoenix of costs associated with corporate
marketing programs and field selling activities.
Sales and marketing expenses for the three months ended December 31, 1999
were $1.7 million, an increase of 5.5% from $1.6 million for the comparable
period of the prior year. This increase was due to higher commissions and other
variable compensation costs from the increase in revenue.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
consist of expenditures for executive, accounting, legal, personnel, recruiting
and other administrative functions. These costs were incurred and allocated by
Phoenix for all historical periods.
General and administrative expenses for the three months ended December 31,
1999 were $731,000, a decrease of 14.2% from $852,000 for the comparable period
of the prior year. This decrease was due to lower allocations of administrative
costs from Phoenix as a result of reductions in bad debt expense and other
allocated costs. We anticipate that general and administrative expenses will
increase in future quarters as we begin to incur additional direct
administrative costs.
25
<PAGE>
STOCK-BASED COMPENSATION. Stock-based compensation charges of $236,000 were
recorded in the three months ended December 31, 1999. These charges were due to
stock options granted in December 1999 at an exercise price less than the fair
market value of our common stock on the grant date. The total deferred
stock-based compensation recorded was approximately $1.6 million, and the
remaining compensation will be amortized by charges to operations over the
vesting periods of the options, generally four years.
INCOME TAX BENEFIT. A benefit for income taxes of $68,000 was recorded in
the three months ended December 31, 1999. This amount represents the benefit to
be realized from Phoenix for the income tax effect of our losses from November
30, 1999, the date of our capitalization, through December 31, 1999. Prior to
capitalization, we operated as a division of Phoenix, and the net losses we
incurred were included in income tax returns filed or to be filed by Phoenix.
Therefore, no tax benefit prior to November 30, 1999, was recognized.
YEARS ENDED SEPTEMBER 30, 1997, 1998 AND 1999
REVENUE. Our revenue for fiscal years 1997, 1998 and 1999 was $5.1 million,
$8.8 million and $19.0 million, respectively, increases of 72.0% from fiscal
year 1997 to fiscal year 1998 and 115.6% from fiscal year 1998 to fiscal year
1999. On a pro forma basis including Sand in all periods, revenue was $10.1
million and $15.1 million in fiscal years 1997 and 1998, respectively, resulting
in pro forma increases of 49.3% from fiscal year 1997 to fiscal year 1998 and
25.3% from fiscal year 1998 to fiscal year 1999. These pro forma increases
consist of increases in license fees revenue ($4.1 million in fiscal year 1998
and $2.2 million in fiscal year 1999) and services revenue ($870,000 in fiscal
year 1998 and $1.6 million in fiscal year 1999). The license fees revenue
increases were primarily due to the growing market acceptance of semiconductor
intellectual property, and service revenue increases were primarily due to
higher maintenance fees generated from our growing installed base of customers.
GROSS MARGIN. Gross margin was $3.5 million, $6.8 million and $15.0 million
in fiscal years 1997, 1998 and 1999, respectively, increases of 95.2% from
fiscal year 1997 to fiscal year 1998 and 119.4% from fiscal year 1998 to fiscal
year 1999. On a pro forma basis including Sand in all periods, gross margin was
$8.4 million and $12.9 million in fiscal years 1997 and 1998, respectively,
resulting in pro forma increases of 53.5% from fiscal year 1997 to fiscal year
1998 and 16.0% from fiscal year 1998 to fiscal year 1999. These pro forma
increases in both years were primarily the result of higher revenue ($5.0
million in fiscal year 1998 and $3.8 million in fiscal year 1999). Partially
offsetting the increase in fiscal year 1999 was $2.1 million of amortization of
purchased technology from the acquisition of Sand.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$2.3 million, $2.9 million and $9.1 million in fiscal years 1997, 1998 and 1999,
respectively, increases of 27.6% from fiscal year 1997 to fiscal year 1998 and
208.5% from fiscal year 1998 to fiscal year 1999. On a pro forma basis including
Sand in all periods, research and development expenses were $3.9 million and
$5.2 million in fiscal years 1997 and 1998, respectively, resulting in pro forma
increases of 33.8% from fiscal year 1997 to fiscal year 1998 and 75.5% from
fiscal year 1998 to fiscal year 1999. The pro forma increase in fiscal year 1998
was primarily due to increases in compensation and related benefits ($873,000)
and third-party consulting ($454,000). These increases were due to increases in
semiconductor intellectual property development activities. The pro forma
increase in fiscal year 1999 was primarily due to increased compensation and
related benefits ($929,000), increased corporate allocations ($1.3 million) and
a reduction of cost capitalized under SFAS 86 ($1.6 million). The increased
corporate allocations were due to growth in headcount and spending which were
used as the basis for Phoenix allocations, and the reduction of costs
capitalized under SFAS 86 was due to a higher proportion of spending on
non-capitalizable projects.
As a percentage of revenue, research and development expenses were 45.2% in
fiscal year 1997, 33.5% in fiscal year 1998 and 48.0% in fiscal year 1999. The
reduced relative research and development
26
<PAGE>
expenses in fiscal year 1998 were due to higher revenues. Because we completed a
significant outsourced design contract and have also reduced the use of software
consultants, we expect that overall research and development expenditures will
decrease in fiscal year 2000. We believe that they will increase thereafter.
SALES AND MARKETING EXPENSES. Sales and marketing expenses were $2.1
million, $3.8 million and $6.4 million in fiscal years 1997, 1998 and 1999,
respectively, increases of 80.6% from fiscal year 1997 to fiscal year 1998 and
65.2% from fiscal year 1998 to fiscal year 1999. On a pro forma basis including
Sand in all periods, sales and marketing expenses were $2.8 million and $5.2
million in fiscal years 1997 and 1998, respectively, resulting in pro forma
increases of 87.7% from fiscal year 1997 to fiscal year 1998 and 21.7% from
fiscal year 1998 to fiscal year 1999. The fiscal year 1998 pro forma increase
primarily reflects increases in compensation and related benefits
($1.5 million), marketing costs ($282,000) and allocations from Phoenix
($484,000). The increase in compensation and related benefits was due to
headcount increases and higher commissions due to revenue growth. The fiscal
year 1999 pro forma increase was primarily due to increased allocations from
Phoenix for field operations costs.
As a percentage of revenue, sales and marketing expenses amounted to 41.6%
in fiscal year 1997, 43.7% in fiscal year 1998 and 33.5% in fiscal year 1999.
The decrease in sales and marketing expenses as a percentage of revenue in
fiscal year 1999 is attributable to revenue growth that exceeded spending
growth, as certain sales and marketing costs are fixed.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
were $1.0 million, $1.4 million and $3.4 million in fiscal years 1997, 1998 and
1999, respectively, increases of 30.5% from fiscal year 1997 to fiscal year 1998
and 145.9% from fiscal year 1998 to fiscal year 1999. On a pro forma basis
including Sand in all periods, general and administrative expenses were
$1.5 million and $2.2 million in fiscal years 1997 and 1998, resulting in pro
forma increases of 47.7% from fiscal year 1997 to fiscal year 1998 and 55.6%
from fiscal year 1998 to fiscal year 1999. These increases were primarily due to
increases in the headcount-based allocations from Phoenix, which in 1999 were
substantially impacted by the acquisition of Sand.
As a percentage of revenue, general and administrative expenses amounted to
20.5% in fiscal year 1997, 15.6% in fiscal year 1998 and 17.7% in fiscal year
1999.
AMORTIZATION OF INTANGIBLE ASSETS. Amortization of intangible assets
represents the straight-line amortization of goodwill and other intangible
assets associated with the purchase of Sand in September 1998. Goodwill is being
amortized over a six-year period, while other intangible assets are being
amortized over three- to six-year periods.
MERGER AND RESTRUCTURING CHARGES. Merger and restructuring charges
represent out-of-pocket costs and asset write-offs related to merger or
restructuring activities.
In fiscal year 1998, we recorded merger and restructuring charges of $5.8
million related to the acquisition of Sand and the associated integration and
restructuring. In fiscal year 1999, we recorded restructuring charges of
$6.1 million.
Included in these restructuring charges were $1.5 million in fiscal year
1998 and $4.9 million in fiscal year 1999 related to the write-off of
capitalized semiconductor intellectual property development costs that became
redundant as a result of merger or restructuring activities. These development
cost write-offs were calculated for each development project based upon the
excess of carrying value over the difference between the gross expected future
revenue to be generated and the projected future costs of such revenue. The
charges related primarily to projects that were redundant between inSilicon and
Sand, and to reduced revenue expectations due to changing market conditions.
In fiscal year 1998, we recorded an in-process research and development
charge based upon an allocation of a portion of the Sand purchase price to
development projects that were not yet
27
<PAGE>
capitalizable under the provisions of SFAS 86. The determination of the value of
the in-process charge associated with each project, which is the responsibility
of inSilicon management, was made by estimating the future net cash flows from
the project, and discounting the net cash flows to calculate the present value.
The Sand projects under development at the date of acquisition related to
semiconductor intellectual property designed for various communications
standards. The value associated with each project as of the date of acquisition
was almost entirely attributable to the project's discrete development efforts.
The projects are listed below, along with the fair value assigned, anticipated
costs to complete at acquisition and the risk-adjusted discount rate. Each of
the projects was scheduled for completion and release in late fiscal year 1999
or early fiscal year 2000.
<TABLE>
<CAPTION>
COMMUNICATIONS FAIR VALUE COSTS TO DISCOUNT
STANDARD ASSIGNED COMPLETE RATE
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
10/100 Ethernet(1)............................... $1,223 $ 230 25%
IEEE-1394(1)..................................... 437 1,400 45%
USB(1)........................................... 835 380 30%
VSI/SIP (TymeWare-TM-)(2)........................ 1,025 720 40%
Gigabit Ethernet(3).............................. 370 480 50%
Cable Modem(4)................................... 360 690 45%
---------------------
$4,250 $3,900
=====================
</TABLE>
- ------------------------
(1) These projects were completed in fiscal year 1999.
(2) This project was completed in the first quarter of fiscal year 2000.
(3) This project is under development and currently scheduled for release in
the three months ending June 30, 2000.
(4) This project was cancelled in fiscal year 1999.
If these projects are not successfully developed and/or marketed, future
revenue and profitability of inSilicon may be adversely affected. Additionally,
the value of other intangible assets acquired may become impaired.
Also included in fiscal year 1999 was $1.2 million of severance costs
allocated from Phoenix related to the elimination of nine Phoenix corporate
management positions ($1.1 million) and three inSilicon positions ($90,000). The
severance costs incurred for the Phoenix positions were allocated to inSilicon
based upon relative headcount, consistent with the allocation of other inSilicon
costs incurred by Phoenix.
INCOME TAXES. The net losses we incurred through November 30, 1999 are
attributable to our operations as a division of Phoenix and were or will be
included in income tax returns filed by Phoenix. Because we will not receive any
benefit for our historical operating losses incurred through November 30, 1999,
no income tax benefit has been reflected for the periods presented through
September 30, 1999, and because our operating losses for tax purposes have been
used by Phoenix, we have no net operating loss carryforwards as of November 30,
1999 to apply against future taxable income, if any. We do not believe that the
tax treatment of these historical losses will have a material adverse effect on
our future results of operations or financial condition.
In conjunction with our capitalization as of November 30, 1999, a net
deferred tax liability of $2.7 million was transferred by Phoenix to us,
representing the future tax effect of historical temporary book/tax differences.
Further, we have entered into a tax-sharing agreement with Phoenix under which
we are responsible for federal and state income taxes for the periods subsequent
to November 30, 1999.
28
<PAGE>
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth inSilicon's consolidated statement of
operations data for each of the quarters during the fiscal years ended
September 30, 1998 and 1999, and the three months ended December 31, 1999,
expressed in dollars and as a percentage of total revenue. This unaudited
quarterly information has been prepared on the same basis as inSilicon's audited
consolidated financial statements and, in the opinion of management, reflects
all adjustments (consisting only of normal recurring adjustments) necessary for
a fair presentation of the information for the periods presented. The operating
results for any quarter are not necessarily indicative of results to be
anticipated for any future period.
29
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- --------- -------- -------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Revenue:
License fees............. $1,544 $2,049 $1,511 $ 2,200 $ 3,677 $ 4,003 $ 3,270 $ 4,023 $ 3,857
Services................. 238 407 432 411 1,189 922 882 989 1,400
------ ------ ------ ------- ------- ------- ------- ------- -------
Total revenue.......... 1,782 2,456 1,943 2,611 4,866 4,925 4,152 5,012 5,257
Cost of revenue:
License fees............. 305 194 372 352 158 274 61 510 553
Services................. 125 252 162 195 27 311 267 221 208
Amortization of purchased
technology............. -- -- -- -- 533 533 533 533 314
------ ------ ------ ------- ------- ------- ------- ------- -------
Total cost of
revenue.............. 430 446 534 547 718 1,118 861 1,264 1,075
------ ------ ------ ------- ------- ------- ------- ------- -------
Gross margin............... 1,352 2,010 1,409 2,064 4,148 3,807 3,291 3,748 4,182
Operating expenses:........
Research and
development............ 545 771 750 881 2,348 2,191 2,335 2,218 2,007
Sales and marketing...... 835 1,027 1,040 942 1,622 1,710 1,475 1,543 1,712
General and
administrative......... 297 338 349 384 852 725 809 978 731
Amortization of
intangible assets...... -- -- -- -- 555 555 555 555 555
Stock-based
compensation........... -- -- -- -- -- -- -- -- 236
Merger and restructuring
charges................ -- -- 50 5,728 86 -- 188 5,776 --
------ ------ ------ ------- ------- ------- ------- ------- -------
Total operating
expenses............. 1,677 2,136 2,189 7,935 5,463 5,181 5,362 11,070 5,241
------ ------ ------ ------- ------- ------- ------- ------- -------
Loss from operations....... (325) (126) (780) (5,871) (1,315) (1,374) (2,071) (7,322) (1,059)
Income tax benefit......... -- -- -- -- -- -- -- -- (68)
------ ------ ------ ------- ------- ------- ------- ------- -------
Net loss................... $ (325) $ (126) $ (780) $(5,871) $(1,315) $(1,374) $(2,071) $(7,322) $ (991)
====== ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
--------------------------------------------------------------------------------------------------
DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31,
1997 1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- --------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
PERCENTAGE OF TOTAL REVENUE:
Revenue:
License fees............. 86.6% 83.4% 77.8% 84.3% 75.6% 81.3% 78.8% 80.3% 73.4%
Services................. 13.4 16.6 22.2 15.7 24.4 18.7 21.2 19.7 26.6
------ ------ ------ ------- ------- ------- ------- ------- -------
Total revenue.......... 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Cost of revenue:
License fees............. 17.1 7.9 19.1 13.5 3.2 5.6 1.5 10.2 10.5
Services................. 7.0 10.3 8.4 7.4 0.6 6.3 6.4 4.4 4.0
Amortization of purchased
technology............. -- -- -- -- 11.0 10.8 12.8 10.6 6.0
------ ------ ------ ------- ------- ------- ------- ------- -------
Total cost of
revenue.............. 24.1 18.2 27.5 20.9 14.8 22.7 20.7 25.2 20.5
------ ------ ------ ------- ------- ------- ------- ------- -------
Gross margin............... 75.9 81.8 72.5 79.1 85.2 77.3 79.3 74.8 79.5
Operating expenses:
Research and
development............ 30.6 31.3 38.5 33.7 48.2 44.5 56.3 44.3 38.2
Sales and marketing...... 46.9 41.8 53.5 36.1 33.3 34.7 35.5 30.8 32.6
General and
administrative......... 16.6 13.8 18.0 14.7 17.5 14.7 19.5 19.5 13.8
Amortization of
intangible assets...... -- -- -- -- 11.4 11.3 13.4 11.1 10.6
Stock-based
compensation........... -- -- -- -- -- -- -- -- 4.5
Merger and restructuring
charges................ -- -- 2.6 219.4 1.8 -- 4.5 115.2 --
------ ------ ------ ------- ------- ------- ------- ------- -------
Total operating
expenses............. 94.1 86.9 112.6 303.9 112.2 105.2 129.2 220.9 99.7
------ ------ ------ ------- ------- ------- ------- ------- -------
Loss from operations....... (18.2) (5.1) (40.1) (224.8) (27.0) (27.9) (49.9) (146.1) (20.2)
Income tax benefit......... -- -- -- -- -- -- -- -- (1.3)
------ ------ ------ ------- ------- ------- ------- ------- -------
Net loss................... (18.2)% (5.1)% (40.1)% (224.8)% (27.0)% (27.9)% (49.9)% (146.1)% (18.9)%
====== ====== ====== ======= ======= ======= ======= ======= =======
</TABLE>
30
<PAGE>
Our revenue in each of the quarters of fiscal years 1999 and the first
quarter of fiscal year 2000 has increased over the comparable quarter of the
prior year. Revenue substantially increased between the fourth quarter of fiscal
year 1998 and first quarter of fiscal year 1999, primarily due to the inclusion
of Sand's results of operations. Typically, in the second quarter of each fiscal
year, we experience higher than normal revenue due to a number of factors,
including seasonal buying patterns and an increase in the number of design
starts typically associated with the beginning of the year. Over the nine fiscal
quarters, gross margins have also fluctuated due to the timing of
customer-specific development projects and capitalized software development cost
amortization.
Research and development costs increased in the first quarter of fiscal
1999, reflecting the research and development personnel added through the
acquisition of Sand and the initial outsourcing of a significant design
contract. General and administrative expenses have generally shown quarterly
increases, due to increased headcount-based allocations by Phoenix.
Quarterly results in fiscal years 1999 and 2000 also have been affected by
the amortization of goodwill associated with the acquisition of Sand, which has
amounted to $555,000 on a quarterly basis. In addition, in the third and fourth
quarters of fiscal year 1998 and the first, third and fourth quarters in fiscal
year 1999, we have taken one-time charges for employee severance costs and asset
write-offs related to merger and restructuring activities. These charges
amounted to $5.8 million in fiscal year 1998 and $6.1 million in fiscal year
1999.
LIQUIDITY AND CAPITAL RESOURCES
Our principal capital requirements are to fund working capital needs and
capital expenditures to support our revenue growth. Since Phoenix acquired or
introduced the various aspects of our business, Phoenix has performed cash
management services for us and provided the funds necessary to satisfy our
capital requirements. After this offering, Phoenix will no longer be obligated,
and does not intend, to provide us additional funds to finance our operations.
Cash used in operating activities was $2.2 million, $4.3 million and
$2.7 million for fiscal years 1997 and 1999 and the three months ended
December 31, 1998, respectively. Cash provided by operating activities was $3.6
million for fiscal year 1998 and $1.6 million for the three months ended
December 31, 1999. Cash used in operating activities during fiscal year 1997 was
primarily attributable to a net loss and an increase in accounts receivable due
to increased revenue, offset in part by depreciation and amortization. Cash
provided by operating activities during fiscal year 1998 was due to a net loss
and an increase in liabilities due to merger and restructuring activities, net
of charges for in-process research and development, depreciation and
amortization, and write-offs of capitalized software. Cash used in operating
activities during fiscal year 1999 was primarily due to a net loss and an
increase in accounts receivable due to increased revenue, offset in part by
depreciation and amortization and a write-off of capitalized software costs.
Cash used in operating activities in the three months ended December 31, 1998,
was due to an increase in accounts receivable due to increased revenue and
decreases in accounts payable and other accrued liabilities due to a transition
of direct to allocated costs and a payment of restructuring costs. Cash provided
by operating activities in the three months ended December 31, 1999 was due to a
decrease in accounts receivable generated from increased collection efforts.
Cash used in investing activities was $2.8 million, $18.9 million,
$1.1 million, $325,000 and $64,000 for fiscal years 1997, 1998, 1999, and the
three months ended December 31, 1998 and 1999, respectively. Cash used in fiscal
year 1997 and 1999 was primarily attributable to additions to computer software
costs. Cash used in fiscal year 1998 was primarily attributable to additions to
computer software costs, purchases of property and equipment and a
$15.6 million investment in Sand.
Net cash provided by financing activities was $5.0 million for fiscal year
1997, $15.3 million for fiscal year 1998, $5.5 million for fiscal year 1999 and
$3.0 million for the three months ended
31
<PAGE>
December 31, 1998. Net cash used in investing activities was $1.5 million for
the three months ended December 31, 1999. Cash provided by financing activities
in all annual periods and the three months ended December 31, 1998 related
primarily to capital contributions from Phoenix. Net cash used in the three
months ended December 31, 1999 was due to a reduction in Phoenix's net
investment based upon net cash generated by inSilicon operations through
November 30, 1999 as a division of Phoenix.
As a portion of the consideration for the acquisition of Sand, we entered
into an earn-out agreement with the selling stockholders. Under the terms of the
agreement, the selling stockholders may earn additional purchase price
consideration for each of the three years ending September 30, 2002, contingent
upon the financial performance of inSilicon. The maximum contingent
consideration is $3.7 million, of which approximately $1.6 million represents
minimum anticipated payments that were recorded as accrued merger costs. Future
payments are due subsequent to the end of each of the three fiscal years ending
September 2001, and payments in excess of amounts accrued, if any, will be
recorded as additional goodwill and amortized over the remaining life of the
original goodwill recorded. Approximately $867,000 was earned in fiscal year
1999 and will be paid in the second quarter of fiscal year 2000.
We expect our future liquidity and capital requirements to vary greatly from
quarter to quarter, depending on numerous factors, including the cost, timing
and success of product development efforts, the cost and timing of sales and
marketing activities, the extent to which our existing and new technologies gain
market acceptance, the number and complexity of communications standards, the
level and timing of revenues, competing technological and market developments
and the costs of maintaining and enforcing patent claims and other intellectual
property rights. We believe that the net proceeds from this offering, together
with cash generated by our operations, if any, will be sufficient to meet our
operating and capital requirements for at least the next 12 months. Thereafter,
we believe we will be able to raise any additional funds required through public
or private financings, strategic relationships or other arrangements. However,
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. Additional equity financing may be dilutive to the holders of
our common stock, and debt financing, if available, may involve restrictive
covenants. Moreover, strategic relationships, if necessary to raise additional
funds, may require that we relinquish our rights to certain technology.
Effective upon the closing of this offering, we have a secured bank line of
credit with Silicon Valley Bank, which will provide up to $5.0 million in
working capital. Borrowings, if any, will bear interest at prime plus 0.25%.
This line of credit expires in January 2001 and requires us to comply with
various financial covenants, including a minimum quick ratio and a maximum on
aggregate annual losses.
QUANTITATIVE AND QUALITATIVE DISCUSSION OF MARKET INTEREST RATE RISK
INTEREST RATE RISK. As a division of Phoenix, we have not maintained our
own cash investments and have not been subject to significant interest rate
risk. In addition, we do not believe that we will be subject to significant
interest rate risk in future periods.
FOREIGN CURRENCY. Substantially all of our revenues are earned in U.S.
dollars. Operating expenses incurred by our foreign subsidiaries are denominated
in local currencies. Accordingly, we are subject to exposure from movements in
foreign currency exchange rates. To date, the effect of changes in foreign
currency exchange rates on our financial position and operating results have not
been material. We currently do not use financial instruments to hedge foreign
currency risks. We intend to assess the use of financial instruments to hedge
currency exposures on an ongoing basis.
32
<PAGE>
BUSINESS
OVERVIEW
inSilicon is a leading provider of communications technology that is used by
semiconductor and systems companies to design complex semiconductors called
systems-on-a-chip that are critical components of digital devices. Over 400
customers use our communications technology in hundreds of different digital
devices ranging from network routers to cellular phones. Our modular approach
emphasizes customer-proven reusable semiconductor intellectual property that
focuses on communications and connectivity, and are compatible with a wide range
of microprocessor designs. Semiconductor and systems companies integrate our
communications technology into their overall semiconductor designs, saving time
and money and allowing them to focus on their core competencies that
differentiate their products. By integrating our communications technology into
their complex designs, our customers are better able to solve the widening
"design gap" caused by the difficulty of designing complex systems-on-a-chip in
the time necessary to get to market with their products.
INDUSTRY BACKGROUND
The internet is creating the demand for all digital devices to be connected.
This demand is generating a proliferation of communications standards and
connectivity requirements. Examples of current and emerging standards include
Ethernet, USB, IEEE 1394, PCI, HPNA, DSL and Bluetooth. Products that use these
standards include corporate networks which use Ethernet; printers and scanners
which use USB; digital video cameras which use IEEE 1394; routers, personal
computers and notebooks which use PCI; home networks which use HPNA; high speed
internet modems which use DSL; and next-generation cellular phones which use
Bluetooth.
The proliferation of these products and their many communications standards
is driving the demand for complex semiconductors. Improvements in semiconductor
design and manufacturing processes have enabled the integration of entire
systems, including microprocessor, communications, logic and memory elements, on
a single chip, and creating a system-on-a-chip solution. The following diagram
illustrates a sample system-on-a chip and its major technologies. Each block in
the diagram is a necessary technology used to create the complex
system-on-a-chip. In the diagram below, the upper left block represents the
video processing technology that distinguishes this chip from others and makes
it a set-top box. The upper right block represent the microprocessor and memory
technologies needed for this chip. The four blocks at the bottom represent
communications standards that enable the chip to communicate within the set-top
box and externally with other devices such as a digital video camera or a remote
control.
[DIAGRAM]
33
<PAGE>
A designer of a complex system-on-a-chip, such as the one above, needs to
design each technology separately and then must ensure that each communicates
with each other as well as externally with other devices. Due to the complexity
of designing such systems-on-a-chip, the multiplicity of communications
standards and time-to-market requirements, the design capabilities of
semiconductor and systems companies have not kept pace with the increase in the
number of transistors that can be placed on a single chip. Consequently, a
significant "design gap" has developed.
To address the design gap, semiconductor and systems companies are
increasingly licensing proven and reusable intellectual property such as
microprocessor, communications, logic and memory blocks from merchant
semiconductor intellectual property, or SIP, suppliers. The emergence of a
merchant SIP market allows semiconductor and systems companies to create
differentiated products, reduce development costs, increase functionality and
improve time to market. For example, Integrated Circuit Engineering, an
independent research firm, estimates that the merchant SIP market as a whole
will grow from approximately $732 million in 2000 to approximately $1.9 billion
in 2003, which represents a compounded annual growth rate of approximately 37%.
This developing merchant SIP market has three primary segments, as follows:
[DIAGRAM]
Microprocessors act as the central processing unit for the system-on-a-chip.
Communications and connectivity technologies are the primary vehicles that
translate and transport external data streams to and from the microprocessor.
Foundation SIP consists of the underlying logic that is designed to operate in a
specific semiconductor supplier's manufacturing process.
Leaders have emerged in both the microprocessor and foundation market
segments. However, no clear leader has emerged in the communication and
connectivity market segment. Semiconductor and systems companies divert
significant time and resources from their core competencies to address these
needs. Moreover, the wide variety of communications standards that have emerged
due to the specific requirements of various devices makes it increasingly
difficult for these companies to successfully design these crucial
communications technologies for their systems-on-a-chip. Consequently, they are
unable to develop new products in a cost- and time-effective manner.
THE inSILICON SOLUTION
We provide communications and connectivity technologies that allow
semiconductor and systems companies to focus their development resources on
their core competencies that differentiate their
34
<PAGE>
products. This improves time to market and reduces risk and development costs in
the design of complex systems-on-a-chip, thus narrowing the design gap. We
offer:
- PROVEN SOLUTIONS. More than 400 companies have implemented our technology
in more than 500 integrated circuit designs. Millions of individual
products include inSilicon technology. Our technologies have been
implemented in over 25 semiconductor fabrication facilities using some of
the most advanced semiconductor processing technology, including 0.18
micron process technology. The customer- and systems-proven nature of our
technologies makes less likely the substantial interoperability issues and
costly development delays that our customers might experience from
in-house or other third-party designs, thereby reducing risk.
- A BROAD PORTFOLIO OF COMMUNICATIONS TECHNOLOGY FOR A WIDE RANGE OF
STANDARDS. We provide semiconductor and systems companies with a broad
portfolio of communications and connectivity technology. We believe our
semiconductor intellectual property fulfills many of the communications
technology needs of those companies.
- INTEGRATED SILICON SUBSYSTEMS. We recently introduced a modular Virtual
Component Interface, or VCI, architecture known as TymeWare-TM-. This
product integrates a number of our popular communications technologies
into a single communication subsystem. TymeWare can also integrate
customer and third-party VCI-compliant semiconductor intellectual
property. Additionally, we have designed TymeWare so that it interfaces
successfully with the most popular microprocessors using our proprietary
SmartBridge-TM- technology.
- INTEGRATED SOFTWARE SOLUTION. For the USB and IEEE 1394 communications
standards, we have the essential software that allow operating systems to
communicate with our USB and IEEE 1394 technology. By using our software,
semiconductor and systems companies may integrate our technology into
their designs in a cost-effective and timely manner.
- EXTENSIVE TEST AND VERIFICATION TOOLS. We provide our customers with
extensive verification and test modules to ensure the functionality of our
technology within their designs. This allows our customers to implement
our communications technology into their designs with a higher degree of
first time success.
- PORTABILITY AND FLEXIBILITY. We design our semiconductor intellectual
property to be foundry independent and easy to use. We use popular
hardware languages that fit readily into our customers' design flows,
which provides our customers significant manufacturing flexibility. Our
Rapidscript-TM- configuration tool and our adoption of VCI facilitate
customer integration of our semiconductor intellectual property into their
system-on-a-chip designs.
- STANDARDS LEADERSHIP. We were the first to market with merchant
semiconductor intellectual property solutions for many communications
standards including PCI, AGP, USB, IrDA, IEEE 1394 and VCI. We are members
of numerous industry standards bodies, including the IEEE 1394 trade
association, USB Implementator Forum, Infrared Data Association and PCI
SIG Steering Committee. Our involvement with these bodies helps us stay on
the leading edge of evolving standards.
THE INSILICON STRATEGY
Our objective is to be a leading provider of communications and connectivity
technologies that allow semiconductor and systems companies to create
differentiated products, reduce risk and development costs, increase
functionality and improve time to market. Key elements of our strategy include:
- TARGET HIGH GROWTH COMMUNICATIONS APPLICATIONS. We target selected high
growth communications and connectivity protocols. Building upon our
established portfolio of
35
<PAGE>
technology, we plan to develop semiconductor intellectual property for
evolving wireless and wireline communications standards.
- EXPAND OUR PORTFOLIO OF COMMUNICATIONS TECHNOLOGY AND RELATED SOFTWARE. We
intend to continue strengthening and broadening our semiconductor
intellectual property to provide a wide range of new communications
technology together with related analog technology. We expect to expand by
developing products ourselves, acquiring technologies, and partnering with
and licensing from third parties. We also plan to expand our firmware
offerings.
- EXPAND DISTRIBUTION CHANNELS AND BRAND AWARENESS. We intend to expand our
traditional channels of distribution by increasing our direct sales force.
We also intend to increase the number of third-party partner programs with
design houses, application specific integrated circuit, or ASIC,
manufacturers and semiconductor-related tool makers, among others. We
intend to advertise both in print and online to our target audiences
worldwide.
- DEVELOP E-COMMERCE CHANNELS. We allow semiconductor designers to download,
via the internet, encrypted versions of our technology before committing
to a commercial license. Using this method, semiconductor designers can
immediately begin developing their designs using our communications
technology.
MARKETS AND APPLICATIONS
We target high growth markets requiring high performance, quick time to
market, design flexibility and compliance with industry standards. Examples of
the markets and applications using our products include:
- TELECOMMUNICATIONS AND DATA COMMUNICATIONS. Telecommunications and data
communications equipment companies design and manufacture equipment that
must comply with many industry standards. For example, communications
technologies such as Ethernet, PCI and USB are used in network switches
and routers, network adapters, concentrators, public switched telephone
network central office equipment, cable set-top boxes and modems.
- CONSUMER ELECTRONICS. Consumer electronics devices are rapidly converting
to digital methods of signal transmission, processing and storage, and
they require standard connectivity interfaces such as IEEE 1394, IrDA,
USB, and PCI. For example, digital still cameras, digital video cameras,
video games, digital video cassette recorders and DVD players all use such
digital transmission technology. New application of this technology is
anticipated in digital audio equipment and emerging video devices such as
personal video recorders.
- COMPUTERS. Computation equipment such as personal computers, workstations
and servers require implementation of standard interfaces such as PCI,
USB, AGP, IrDA and Ethernet. Our communications technology can be found in
standard products and application specific implementations for these types
of platforms.
- OFFICE AUTOMATION. Computer peripherals require a means of connection to
both their host computer and to larger networks. These connections are
generally made with standard interfaces, including USB, IEEE 1394 and
IrDA. These interface technologies are used in such devices as printers,
scanners, keyboards, display terminals, pointing devices, and mass storage
devices such as hard, floppy and removable media disk drives; and tape and
optical drives.
PRODUCTS
Our communications technology includes semiconductor intellectual property
and related software. Our semiconductor intellectual property includes a wide
variety of standards-based communications technology. Our semiconductor
intellectual property subsystems vertically combine many of these
36
<PAGE>
technologies into functional blocks tailored for ease of use and faster
integration into the customer's complex designs. Our firmware and drivers
provide protocol translation technologies that allow the operating system to
communicate with the hardware. We provide simulation models, test environments,
documentation and training for many of these technologies.
We supply our technology as Verilog, VHDL or C source code, which are the
primary design languages in use today. Semiconductor and systems companies then
integrate our communications technology into their overall semiconductor designs
using electronic design automation tools, such as those provided by Synopsys and
Cadence. We use a modular approach that emphasizes silicon-proven reusable,
licensable technology and software that are compatible with a wide range of
processor designs.
inSilicon's technologies are outlined in the following chart. Each family
consists of our technologies that relate to a specific industry standard.
<TABLE>
<C> <S> <C>
COMMUNICATIONS
STANDARDS TECHNOLOGY FAMILIES TECHNOLOGY APPLICATION
AGP AGP Master, AGP Host and AGP Accelerated Graphics Port is an interconnect standard
Simulation Models used in high performance graphic cards for personal
computers.
Ethernet 10/100 Ethernet Media Access Ethernet is a widely used local area networking
Controller and Ethernet Simulation communications standard, used in such devices as modems,
Model cable modems, home networking, routers and switches.
IEEE 1394 1394 Device Controller Link, 1394 IEEE 1394 is a high-speed digital interface standard
Analog Phy, 1394 Cable Phy and used in digital cameras, audio-visual disk drives and
1394 Simulation Model. scanners.
IrDA IrDA and IrDA Simulation Model IrDA is a wireless standard that enables communication
between appliances across short distances. It is used in
mobile phones, handheld and laptop computers and
electronic games.
PCI PCI Suite and PCI Simulation Model Peripheral Component Interconnect is an internal
communications standard that connects various elements
of computer systems to each other. It is used in many
computers as well as in embedded systems.
PCI-X PCI-X and PCI-X Simulation Model PCI-X is the latest revision of the PCI standard. It is
used in many high performance computing applications,
including multiprocessor servers, communications
switches and routers and storage area networks.
USB USB OHCI Host Controller, USB Hub, Universal Serial Bus is a standard designed to simplify
USB Device Controller and connections between personal computers and peripheral
USBAccess-Registered Trademark- devices, such as printers, digital cameras and scanners.
System Software Our USBAccess-Registered Trademark- software adds USB
capability to computer operating systems, such as
Microsoft's NT.
VCI TymeWare-TM- VCI Virtual Component Interface is a standard interface that
simplifies the mix-and-match of semiconductor
intellectual property. Our TymeWare-TM- VCI enables
integration of multiple communications standards and
includes interfaces to popular microprocessors.
</TABLE>
37
<PAGE>
RESEARCH AND DEVELOPMENT
We believe that our future success will depend in large part on our ability
to continue developing and acquiring new and enhanced communications technology
and related software in a timely and cost-effective manner. To this end, we have
assembled a team of highly skilled engineers with significant experience in the
design and development of communications technology, simulation and verification
environments and firmware. We participate in the development of new and existing
industry standards.
Our research and development costs were $2.3 million in fiscal year 1997,
$2.9 million in fiscal year 1998, $9.1 million in fiscal year 1999 and
$2.0 million in the three months ended December 31, 1999. In order to maintain a
leading position as a merchant semiconductor intellectual property provider in
emerging communications and connectivity standards, we expect that these costs
will increase in the future. However, because of the conclusion of a significant
outsource design contract and the reduced use of software consultants, we expect
that overall research and development expenditures will decrease in fiscal year
2000. As of December 31, 1999, we had 45 employees engaged in research and
development. We expect to identify and hire additional highly-skilled technical
personnel in fiscal year 2000 to staff our anticipated research and development
activities.
SALES AND MARKETING
We focus our sales efforts in the following areas: direct sales; indirect
sales through application specific integrated circuit, or ASIC, manufacturers,
software resellers and design house programs; and internet distribution.
DIRECT SALES. We maintain a direct worldwide sales network consisting of
our own employees and a limited number of sales representatives and field
applications engineers. The sales force's primary responsibility is to secure
and maintain direct account relationships with the semiconductor and systems
companies of the world. We have over 400 customers for which the sales force
maintains the relationship. We document these relationships with a technology
license agreement for the first purchase. For subsequent purchases from existing
customers, we generally obtain a customer purchase order for the desired
technology under the terms of the license agreement or an amendment to the
license agreement. The sales force is distributed in key geographic areas around
the world with employees in the following locations: Austin; Boston; Irvine; San
Jose; Geneva, Switzerland; London, England; Munich, Germany; and Tokyo, Japan.
In addition, we have a distribution agreement with Phoenix Technologies Ltd.
covering Hong Kong, Japan, Korea, Singapore and Taiwan.
INDIRECT SALES. In addition to the direct sales force, we also use the
following indirect sales channels:
- ASIC MANUFACTURERS. Application specific integrated circuit, or ASIC,
manufacturers provide customized build-to-order chips to their customers.
Several ASIC manufacturers have access to our technology and are able to
license our products directly to their customers and include our
communications technology in their complex semiconductors. We receive
revenues from the ASIC vendors for each of our technologies that is used
in a customer chip.
- SOFTWARE RESELLERS. We also have a group of software resellers whose
primary function is the development and resale of firmware and drivers.
These companies perform both licensing and servicing of firmware customers
for us. We receive revenues from our software resellers for our
technologies that they provide to their customers.
- DESIGN HOUSE PARTNERS. Our design house program provides access to our
communications technologies to enable design houses to develop expertise
with our semiconductor intellectual property. This encourages design
houses to incorporate our semiconductor intellectual property when they
design custom semiconductors for their customers. We receive revenues from
customers who are referred to us by our design center partners.
INTERNET DISTRIBUTION. In addition, we allow semiconductor designers to
download and test, via the internet, encrypted versions of our technology before
committing to any economic arrangement.
38
<PAGE>
CUSTOMERS
We have developed a strong customer base among semiconductor and systems
companies that use our communications technology to design complex
semiconductors. The following chart provides a representative list of our major
customers and some of the applications in each industry in which customers use
our technology:
<TABLE>
INDUSTRY EXAMPLE APPLICATION SELECTED CUSTOMERS
<S> <C> <C>
Communications ATM Traffic Processor, Backbone Alcatel
Router, Cable Modem, DSL Modem, Avici Systems
Encryption Processor, Gigabit Broadcom
Servicer Adapter, Gigabit Cisco
Switch, Multilayer hi/fn
Communications Switch, Network Juniper Systems
Adapter, Satellite Receiver and Maker Communications
Terabit Router
Consumer AutoPC, Cell Phone, Digital Fujitsu
Still Camera, Digital Video Microsoft
Camera, Internet Audio, Personal Motorola
Digital Assistant, Set-top Box Qualcomm
and Smart Card Reader Sharp
Sony
ST Microelectronics
Computer Embedded Microprocessor, Laptop AMD
Computer, RISC Processor, Server Fujitsu
Processor Interconnect, Super SMSC
I/O Chip, Microprocessor and USB Intel
Controller Lucent
Office Automation 3-D Digital Audio, Floppy Disk Siemens AG
Drive, Inkjet Printer, Laser Creative Labs
Printer, Page Scanner, PC Audio Hewlett-Packard
Card, PC Video Camera and iomega
Removable Disk Drive Logitech
Yamaha
</TABLE>
PROPRIETARY TECHNOLOGY 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 products or otherwise expected to be of value. We have an
active program to protect our proprietary technology through the filing of
patents.
As of February 1, 2000, we had applications for six U.S. patents on file
with the United States Patent and Trademark Office, or USPTO, and five draft
applications in the various stages of review in preparation for filing with the
USPTO. To date, the USPTO has issued two patents related to our design
simulation techniques and one patent related to our proprietary asynchronous PCI
design. As of December 31, 1999, we had filed two foreign applications under the
Patent Cooperation Treaty and had national filings in place for those countries
which are not members. 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 approved, that any issued patents will protect our
intellectual property or will not
39
<PAGE>
be challenged by third parties, or that 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 source 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.
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. Although we believe that our technologies do not infringe
on any copyright or other proprietary rights of third parties, there are
currently significant legal uncertainties relating to the application of
copyright and patent law in the field of software.
COMPETITION
Our industry is very competitive and is characterized by constant
technological change, rapid rates of product obsolescence, and frequently
emerging new suppliers. Our existing competitors include other merchant
semiconductor intellectual property, or SIP, suppliers, such as the Mentor
Graphics' Inventra Division, Synopsys, Enthink and VAutomation; and suppliers of
application specific integrated circuits, or ASICs, such as LSI Logic, and the
ASIC divisions of IBM, Lucent, Toshiba and NEC. We also compete with the
internal development groups of large, vertically integrated semiconductor and
systems companies, such as Intel, Motorola, Cisco and Hewlett-Packard. In these
companies, SIP developed for an individual project sometimes is subject to
efforts by the company to re-use the SIP in multiple projects. Companies whose
principal business is providing design services as work-for-hire, such as
Intrinsix, Sican and the service division of Cadence, also provide competition.
These companies generally build a portfolio of internally developed SIP over
time and then re-use that SIP as applicable in new service projects in order to
gain productivity leverage. For firmware, our primary competitors are in-house
research and development departments of system companies and small
privately-held companies. As we introduce new SIP technologies, we will face
competition from both existing SIP suppliers and new SIP suppliers that we
anticipate will enter the market. We also may face competition from new
suppliers of technologies based on new or emerging standards.
We believe that important competitive factors in our market include:
performance; functionality; customizability; 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 December 31, 1999, we had 78 employees, including 19 in sales, eight
in marketing, 45 in research and development and six 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.
40
<PAGE>
LEGAL PROCEEDINGS
inSilicon is not a party to any pending litigation.
FACILITIES
Our executive, administrative and technical offices currently occupy
approximately 22,000 square feet in a building leased by Phoenix in San Jose,
California. We expect in the future to move to separate offices in the Silicon
Valley area. We believe that our current and planned facilities will be
adequate.
41
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The names and ages of our existing executive officers and directors as of
February 10, 2000 are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- -------- -----------
<S> <C> <C>
Wayne C. Cantwell.................. 35 President, Chief Executive Officer and Director
Barry A. Hoberman.................. 41 Executive Vice President and Chief Technical
Officer
William E. Meyer................... 37 Executive Vice President and Chief Financial
Officer
Anand C. Naidu..................... 46 Vice President of Internet Products
Robert G. Nalesnik................. 41 Vice President of Marketing
David J. Power..................... 42 Vice President and General Counsel
Linda V. Moore..................... 53 Secretary
Albert E. Sisto(1)................. 50 Chairman of the Board of Directors
Raymond J. Farnham(1)(2)........... 52 Director
John R. Harding(2)................. 45 Director
E. Thomas Hart(1)(2)............... 58 Director
</TABLE>
- ------------------------
(1) Expected member of compensation committee
(2) Expected member of audit committee
WAYNE C. CANTWELL has served as our President and Chief Executive Officer
since our incorporation in November 1999 and as a Director of inSilicon since
November 1999. Mr. Cantwell also has served as Senior Vice President and General
Manager of Phoenix's Semiconductor IP Division since July 1999, a position from
which he will resign before the closing of this offering. He was Vice President
and General Manager, Worldwide Field Operations, for Phoenix from November 1998
to July 1999; Vice President and General Manager, North American Operations,
from March 1998 to October 1998; Vice President, Asia/America Operations, from
September 1997 to March 1998; and General Manager, Asia Operations, from
January 1996 to August 1997. Prior to that, Mr. Cantwell held various sales,
sales management and general management roles with Phoenix since joining in
March 1991. Prior to that, Mr. Cantwell held various roles in sales and
engineering at Intel and NEC Technologies. He received a B.S. in Electrical
Engineering from DeVry Institute of Technology.
BARRY A. HOBERMAN has served as our Executive Vice President and Chief
Technical Officer since November 1999. Prior to November 1999, Mr. Hoberman was
Vice President of Phoenix's Semiconductor IP Division from April 1999 to
November 1999, and the Senior Director of the same division from May 1996 to
March 1999. Prior to that, he was Product Line Director at Advanced Micro
Devices, a semiconductor manufacturer, from October 1987 to May 1996. He held
various roles in product management and development at Advanced Micro Devices
and Monolithic Memories. Mr. Hoberman has been issued 13 U.S. patents. He
received a B.S. in Electrical Engineering and a B.S. in Biology from the
Massachusetts Institute of Technology, and has done graduate work in Electrical
Engineering at Stanford University.
WILLIAM E. MEYER has served as our Executive Vice President and Chief
Financial Officer since December 1999. He was also a Director of inSilicon from
our incorporation in November 1999 until February 2000. He was Phoenix's Chief
Financial Officer from June 1999 to December 1999. He served as Phoenix's Vice
President of Finance and Controller from February 1998 to June 1999. Mr. Meyer
was Vice President and Corporate Controller for Microprose, a developer of
entertainment software, from November 1995 to February 1998. He served as Vice
President of Finance and Chief Financial Officer for SBT Accounting Systems, a
developer of accounting software applications, from 1992 to
42
<PAGE>
1995. Mr. Meyer also held various positions with Arthur Andersen. He is a
Certified Public Accountant and received a B.S. in Accounting from California
State University at Sacramento.
ANAND C. NAIDU has served as our Vice President of Internet Products since
November 1999. He has been the Vice President of Internet Products of Phoenix's
Semiconductor IP Division since October 1999, was the Senior Director of
Worldwide Sales in Phoenix's Semiconductor IP Division from July 1999 to
October 1999; and Director of Business Development from September 1998 to
July 1999. Mr. Naidu was a co-founder of Sand in 1991 and served as Sand's
President and Chief Executive Officer until Phoenix acquired Sand in
September 1998. Prior to founding Sand, he was President of Silicon Platforms,
which was acquired by S3. Mr. Naidu also held key marketing and development
management positions at Western Digital, STC, Intersil, and Rolm. He holds a
B.S. and an M.S. in Electrical Engineering from the University of California at
Berkeley and an M.B.A from the University of Santa Clara.
ROBERT G. NALESNIK has served as our Vice President of Marketing since
November 1999 and had held the same position at Phoenix's Semiconductor IP
Division since October 1999. Prior to that, he was Director of Marketing of the
Semiconductor IP Division since joining Phoenix in September 1998. He was Vice
President of Marketing at Sand from March 1998 until Phoenix acquired it in
September 1998. Prior to joining Sand, he was Director of Product Marketing at
Actel, a semiconductor manufacturer, from October 1995 to March 1998. Prior to
that, he spent five years at VLSI Technology, a semiconductor manufacturer, in
various marketing and engineering management roles. He has also held management
positions at Compass Design Automation and Fairchild Semiconductor.
Mr. Nalesnik holds a B.S. in Electrical Engineering from the Georgia Institute
of Technology.
DAVID J. POWER has served as Vice President and General Counsel of inSilicon
since November 1999. He was previously the Associate General Counsel for
Phoenix, overseeing the legal functions of the Semiconductor IP Division since
October 1997. Prior to coming to Phoenix, Mr. Power held corporate counsel
positions with CIDCO from July 1996 to October 1997, with Cymer Laser
Technologies from August 1995 through July 1996 and with Varian Associates from
January 1994 through August 1995. Mr. Power specializes in intellectual property
and technology licensing law. He received a B.S. in Engineering from Arizona
State University and a J.D. from the John Marshall Law School.
LINDA V. MOORE has been Secretary of inSilicon since November 1999. She has
served as Phoenix's Secretary and General Counsel since November 1999. Prior to
joining us, she was Vice President and General Counsel of Nhancement
Technologies, a distributor of computer-telephony products, from September 1998
to August 1999. She served as General Counsel and Secretary of Jabil Circuit, an
electronics contract manufacturer, from 1989 to 1998. She has also served as a
consultant to internet start-ups and has six years experience in equipment
leasing. Ms. Moore received a B.A. from the University of Michigan, an M.A. from
Eastern Michigan University and a J.D. from the Detroit College of Law. We
expect that Ms. Moore will resign as our Secretary immediately before the
closing of this offering.
ALBERT E. SISTO has served as a Director of inSilicon since our
incorporation in November 1999 and as the Chairman of our Board of Directors
since December 1999. Since June 1999, he has served as Phoenix's Chief Executive
Officer. Mr. Sisto served as the Chief Operating Officer of RSA Data Security, a
subsidiary of Security Dynamics Technologies, providing encryption technology,
from October 1997 to February 1999. He was Chairman, President and Chief
Executive Officer of Documagix, a software developer of document imaging
software, from September 1994 through October 1997. Mr. Sisto is a Director of
hi/fn, efax.com, Insignia Solutions and Tekgraf, all publicly traded technology
companies, and nCipher and Trintech Group. Mr. Sisto holds a B.E. in Engineering
from the Stevens Institute of Technology.
43
<PAGE>
JOHN R. HARDING has served as a Director of inSilicon since February 2000.
Since January 2000, he has served as Chairman of the Board of Directors and
Chief Executive Officer of The Dorset Group, a venture management and investment
firm. Mr. Harding served as Chief Executive Officer and as a Director of Cadence
Design Systems, a provider of software and services for electronic design, from
October 1997 through May 1999. From May 1997 through October 1997, he served as
Cadence's Senior Vice President of the Strategic Business Group. Mr. Harding
served as President and Chief Executive Officer of Cooper & Chyan
Technology, Inc., an electronic design automation software tool company, from
December 1994 until its merger with Cadence in May 1997. Prior to that,
Mr. Harding served as Executive Vice President of Zycad Corporation, an
electronic design automation company, from January 1992 through October 1994.
Mr. Harding is Chairman of the Board of Directors of SafeCorp.com, an
information security consulting firm. He is a Director of Zland.com, a provider
of internet-based applications for businesses. Mr. Harding holds a B.A. in
Economics and Chemistry from Drew University, where he is a member of the Board
of Trustees.
RAYMOND J. FARNHAM has served as a Director of inSilicon since
February 2000. Since October 1998, he has served as Chairman of the Board of
Directors, President and Chief Executive Officer of hi/fn, a designer and
developer of semiconductor devices and software. He served as Executive Vice
President of Integrated Device Technology, a supplier of microprocessor, logic
and memory integrated circuits, from July 1996 through July 1998. He worked as
an independent consultant from February 1995 through August 1996. Mr. Farnham
was President and Chief Executive Officer of OPTi, a fabless semiconductor
company, from February 1994 through February 1995. From 1972 through 1993, he
had numerous management responsibilities at National Semiconductor Corp., with
his final position being President of the Communication and Computing Group from
1991 through 1993. He received a B.S. in Electrical Engineering from
Pennsylvania State University.
E. THOMAS HART has served as a Director of inSilicon since February 2000.
Since June 1994, Mr. Hart has served as QuickLogic's President and Chief
Executive Officer. Prior to joining QuickLogic, Mr. Hart was Vice President and
General Manager of the Advanced Networks Division at National Semiconductor, a
semiconductor manufacturing company, from September 1992 to June 1994. Prior to
joining National Semiconductor, he was a private consultant with Hart Weston
International, a technology-based management consulting firm, from
February 1986 to September 1992. Mr. Hart holds a B.S. in Electrical Engineering
from the University of Washington.
There are no family relationships among any of our directors or executive
officers.
BOARD COMPOSITION
We currently have five directors, one of whom is an officer of Phoenix, and
one of whom is an officer of inSilicon.
After this offering, our board of directors will be divided into three
classes of directors serving staggered three-year terms. As a result, we will
elect only one class of directors at each annual meeting of our stockholders. We
expect the terms of office of the directors will expire as follows: Mr. Hart at
the annual meeting of stockholders in 2001, Mr. Farnham and Mr. Cantwell at the
annual meeting of stockholders in 2002 and Mr. Sisto and Mr. Harding at the
annual meeting of stockholders in 2003. For at least as long as Phoenix
continues to own more than 50% of our common stock, Phoenix will have the
ability to change the size and composition of our board of directors.
BOARD COMMITTEES
Our board of directors expects to establish two committees: an audit
committee and a compensation committee. The responsibilities of the audit
committee are expected to include recommending to the board of directors the
independent public accountants to conduct the annual audit of our accounts;
reviewing the proposed scope of the audit and approving the audit fees to be
44
<PAGE>
paid; and reviewing the adequacy and effectiveness of our internal auditing,
accounting and financial controls with the independent public accountants and
our financial and accounting staff. The audit committee will be comprised of the
three independent directors. The responsibilities of the compensation committee
are expected to include determining the compensation and benefits of inSilicon
officers, establishing and reviewing general policies relating to the
compensation and benefits of inSilicon officers and employees and administering
the stock option plans. We expect that the compensation committee will be
comprised of Mr. Sisto, Mr. Hart and Mr. Farnham.
The Board may, from time to time, establish other committees.
DIRECTOR COMPENSATION
We will pay to directors who are not officers or employees of inSilicon or
any of its affiliates $1,000 per board meeting and $500 for committee meetings.
We have also granted to each non-employee director options to purchase 20,000
shares of our common stock. Each person who becomes a non-employee director
after the completion of this offering will receive an initial grant of options
to purchase 20,000 shares of our common stock upon appointment or election under
the 2000 stock plan. The 2000 stock plan also provides for annual grants of
7,500 shares of our common stock to each non-employee director. Members of the
audit and compensation committees will also receive an additional 5,000 shares
upon appointment to that committee. We will also reimburse our directors for
reasonable expenses incurred in attending board of directors or committee
meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the expected members of the compensation committee of our board of
directors is or was an officer or employee of inSilicon. None of our executive
officers serves as a member of the board of directors or compensation committee
of any other public company. See "Related Party Transactions" for a description
of transactions between us and entities affiliated with prospective members of
the compensation committee.
BENEFIT PLANS
1999 STOCK OPTION PLAN. Our 1999 stock option plan was adopted by our board
of directors and approved by our stockholder in December 1999. Our 1999 stock
option 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, directors and consultants of nonstatutory stock options.
A total of 2,700,000 shares has been reserved for issuance under the 1999 stock
option plan. As of December 31, 1999, options to purchase an aggregate of
2,348,844 shares of our common stock were outstanding under our 1999 stock
option plan. Our board of directors has determined that no further options will
be granted under the 1999 stock option plan after this offering. The 1999 stock
option plan provides that in the event of our acquisition by another
corporation, each outstanding option may be assumed or substituted for by the
successor corporation. If outstanding options are not assumed or substituted for
in certain acquisitions, they will vest prior to the consummation of the
transaction.
2000 STOCK PLAN. Our 2000 stock plan was adopted by our board of directors
and approved by our stockholder in January 2000. The 2000 stock plan will become
effective when the underwriting agreement for this offering is signed. At that
time, all outstanding options under our 1999 stock option plan will be
administered under the 2000 stock plan but will continue to be governed by their
existing terms.
The 2000 stock plan provides for the discretionary grant of incentive stock
options to employees, including officers and employee directors, and for the
discretionary grant of nonstatutory stock options and stock purchase rights to
employees, directors and consultants. The 2000 stock plan also provides for the
periodic automatic grant to non-employee directors of nonstatutory stock
options.
45
<PAGE>
The total shares of common stock currently reserved for issuance under the
2000 stock plan equals 1,300,000 shares of common stock plus the number of
shares that remain reserved for issuance under the 1999 stock option plan as of
the date the 2000 option plan became effective.
In addition, commencing on the first day of our next fiscal year, shares
will be added to the 2000 stock plan annually equal to the lesser of (a) 5% of
the outstanding shares on the last day of the prior fiscal year and
(b) 2,000,000 shares.
Unless terminated sooner, the 2000 stock plan will terminate automatically
10 years from its effective date.
The administrator of our 2000 stock plan generally has the power to
determine:
- the terms of the options or stock purchase rights granted, including the
exercise price of the option or restricted stock grant;
- the number of shares subject to each option or restricted stock grant;
- the exercisability of each option or stock purchase right; and
- the form of consideration payable upon the exercise of each option or
stock purchase right.
The board is the administrator of the 2000 stock plan's automatic
non-employee director grant program. Under that program, non-employee directors
who first join our board after the date of this prospectus will receive a grant
of an option to purchase 20,000 shares when they become non-employee directors.
In addition, all non-employee directors will receive a grant of an option to
purchase 7,500 shares at each subsequent annual meeting, provided they continue
to serve after such annual meeting. Directors also receive an additional
one-time, automatic grant of an option to purchase 5,000 shares upon appointment
to the audit and compensation committees. These options vest quarterly at a rate
of 6.25% per quarter from the date of grant, provided the director continues to
serve as a director on the vesting date. These options also provide for
accelerated vesting in the event of certain changes of control.
In addition, the board has the authority to amend, suspend or terminate the
2000 stock plan, so long as no such action affects any shares of common stock
previously issued and sold or any option previously granted under the plan. The
maximum number of option shares each optionee may be granted during a fiscal
year is 1,000,000 shares. However, in connection with an optionee's initial
service with us, such optionee may be granted up to a total of 2,000,000 shares
during the initial fiscal year of service. Restricted stock grants are limited
to 200,000 shares in any fiscal year.
Options and restricted stock granted under our 2000 stock 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 2000 stock plan must generally be exercised within
three months after the end of optionee's status as an employee, director or
consultant of inSilicon, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's term. However, the compensation committee will have the power under
the 2000 stock plan to vary these terms, except for grants under the
non-employee director grant program.
In the case of restricted stock, unless the administrator determines
otherwise, the restricted stock purchase agreement shall grant inSilicon a
repurchase option exercisable after the purchaser's employment or consulting
relationship with inSilicon has ended for any reason, including death or
disability. The purchase price for shares repurchased pursuant to the restricted
stock purchase agreement shall be the original price paid by the purchaser and
may be paid by cancellation of any indebtedness of the purchaser to inSilicon.
The repurchase option shall lapse at a rate determined by the administrator.
46
<PAGE>
The exercise price of all incentive stock options and nonstatutory stock
options granted automatically to non-employee directors must be at least equal
to the fair market value of the common stock on the date of grant. The exercise
price of other nonstatutory stock options and stock purchase rights granted
under the 2000 stock plan is determined by the administrator, but with respect
to nonstatutory stock options intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Internal Revenue Code,
the exercise price must be at least equal to the fair market value of our common
stock on the date of 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 2000 stock plan may not exceed ten years.
The 2000 stock plan provides that in the event that we are acquired by
another corporation, or sell substantially all of our assets, each option and
stock purchase right may be assumed or an equivalent option 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 option
holder will fully vest in and have the right to exercise the option or stock
purchase right as to all of the optioned stock, including shares as to which the
holder would not otherwise be entitled to exercise.
2000 EMPLOYEE STOCK PURCHASE PLAN. Our 2000 employee stock purchase plan
was adopted by our board of directors and approved by our stockholder in
January 2000. A total of 250,000 shares of our common stock has been reserved
for issuance under the 2000 purchase plan, plus annual increases equal to the
lesser of (a) 0.3125% of the outstanding shares on the last day of the prior
fiscal year and (b) 100,000 shares.
The 2000 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, contains consecutive, overlapping, twenty-four month
offering periods. Each offering period includes four six-month purchase periods.
The offering periods generally start on the first trading day on or after
June 1 and December 1 of each year, except for the first such offering period
which commences on the first trading day on or after the effective date of this
offering and ends on the last trading day on or before May 31, 2000. The board
has the power to change the duration of the offering periods.
Employees of inSilicon or of any participating subsidiaries are eligible to
participate. However, employees may not be granted an option to purchase stock
under the 2000 purchase plan if they either:
- immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or
- hold rights to purchase stock under our employee stock purchase plan which
accrue at a rate which exceeds $25,000 worth of stock for each calendar
year.
The 2000 purchase plan permits participants to purchase our common stock
through payroll deductions of up to 10% of their total compensation, including
bonuses and commissions. The maximum number of shares a participant may purchase
during a single purchase period is 10,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 2000 purchase plan is generally 85% of the lower of the fair
market value of the common stock either at the beginning of the offering period
or at the end of the purchase period.
In the event the fair market value at the end of a purchase period is less
than the fair market value at the beginning of the offering period, the
participants will be withdrawn from the current offering period following
exercise and automatically re-enrolled in a new offering period. Participants
47
<PAGE>
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 inSilicon.
Rights granted under the 2000 purchase plan are not transferable by a
participant other than upon death or by a special determination by the plan
administrator. Each outstanding option under the 2000 purchase plan will be
subject to the acquisition agreement in the event we merge with or into another
corporation or sell substantially all of our assets.
Our board of directors has the authority to amend or terminate the 2000
purchase plan, except that no such action may adversely affect any outstanding
rights to purchase stock under the 2000 purchase plan, provided that the board
of directors may terminate an offering period on any exercise date if the board
determines that the termination of the 2000 purchase plan is in the best
interests of inSilicon and its stockholders. Notwithstanding anything to the
contrary, the board of directors may in its sole discretion amend the 2000
purchase plan to the extent necessary and desirable to avoid unfavorable
financial accounting consequences by altering the purchase price for any
offering period, shortening any offering period or allocating remaining shares
among the participants. Unless earlier terminated by our board of directors, the
2000 purchase plan will terminate automatically ten years from its effective
date.
EXECUTIVE COMPENSATION
The following table summarizes the compensation of inSilicon's Chief
Executive Officer and the other four most highly compensated executive officers
based on employment with Phoenix whose aggregate compensation exceeded $100,000
during the year ended September 30, 1999. We refer to these individuals as the
"named executive officers" elsewhere in this prospectus.
48
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
-------------
ANNUAL COMPENSATION SECURITIES
----------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION(S) SALARY(1) BONUS(1) OPTIONS(2) COMPENSATION(3)
- ------------------------------ ------------- ------------- ------------- ----------------
<S> <C> <C> <C> <C>
Wayne C. Cantwell, President and
Chief Executive Officer......... $199,166 $94,262 66,000 $ 1,000
Barry A. Hoberman, Executive Vice
President and Chief Technical
Officer......................... 169,125 32,918 25,996 1,000
William E. Meyer, Executive Vice
President and Chief Financial
Officer......................... 141,667 34,859 75,000 1,000
Anand C. Naidu, Vice President.... 132,275 17,272 40,000 1,000
Robert G. Nalesnik, Vice
President....................... 140,400 19,658 40,000 59,000(4)
</TABLE>
- --------------
(1) Represents salary and bonus paid by Phoenix to the named executive officers
for their services to Phoenix while employed at Phoenix.
(2) Represents options to purchase Phoenix common stock granted by Phoenix. The
named executive officers have exchanged these Phoenix options for options to
purchase inSilicon common stock at a ratio of 1.862 shares of inSilicon
common stock for each share of Phoenix common stock, except for Mr. Naidu
and Mr. Nalesnik, each of whom did not exchange their options with respect
to 2,500 shares of Phoenix common stock.
(3) Consists of Phoenix's contribution to the individual's 401(k) savings
account while employed at Phoenix.
(4) Includes $58,000 paid in October 1999 that is the first of three annual
installments of a $174,000 retention bonus.
FUTURE COMPENSATION
Since January 1, 2000, our officers and other employees of inSilicon have
been compensated by inSilicon. However, through February 2000, they will
continue to participate in Phoenix's 401(k) savings plan, and at least until
January 1, 2002, they will continue to participate in Phoenix's welfare benefit
plans at inSilicon's expense. Phoenix employees who were seconded to inSilicon
in December 1999 had the opportunity to exchange their unexercised options to
purchase Phoenix common stock for new options to acquire inSilicon common stock.
On the date of the exchange, the inSilicon options had the same intrinsic value
and ratio of exercise price to market value of the underlying shares as the
Phoenix options exchanged. They also have equivalent vesting schedules to the
Phoenix options exchanged. For information with respect to the exchange of
options by the named executive officers, see "Related Party Transactions."
49
<PAGE>
OPTION GRANTS
The following table provides summary information regarding options to
purchase Phoenix common stock that were granted by Phoenix to the named
executive officers during the fiscal year ended September 30, 1999.
OPTION GRANTS IN FISCAL YEAR 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF MARKET STOCK PRICE
SECURITIES TOTAL OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR ON DATE OPTION TERM(2)
OPTIONS EMPLOYEES IN BASE PRICE OF GRANT EXPIRATION --------------------------------
NAME GRANTED(1) FISCAL YEAR ($/SHARE) ($/SHARE) DATE 0%($) 5%($) 10%($)
- ---- ----------- ------------- ------------ --------- ---------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wayne C. Cantwell...... 35,000(3) 1.1% $ 9.3000 $17.1880 07/01/09 $276,080 $654,410 $1,234,844
Wayne C. Cantwell...... 31,000 1.0 8.5000 8.5000 03/31/09 NA 165,714 419,951
Barry A. Hoberman...... 25,996 0.8 8.5000 8.5000 04/16/09 NA 138,964 352,163
William E. Meyer....... 45,000 1.4 11.1250 11.1250 06/17/09 NA 91,976 233,085
William E. Meyer....... 10,000 0.3 10.8130 10.8130 05/28/09 NA 68,002 172,331
William E. Meyer....... 20,000 0.6 7.3125 7.3125 02/26/09 NA 314,840 797,867
Anand C. Naidu......... 40,000 1.3 11.1875 11.1875 09/30/09 NA 281,430 713,200
Robert G. Nalesnik..... 40,000 1.3 11.1875 11.1875 09/30/09 NA 281,430 713,200
</TABLE>
- ------------------
(1) In the fiscal year 1999, Phoenix granted options to purchase an aggregate of
3,279,370 shares of Phoenix common stock. Unless otherwise stated, options
to purchase shares vest quarterly at the rate of 6.25% per quarter. Options
have a term of ten years but may terminate before their expiration dates if
the optionee's status as an employee is terminated or upon the optionee's
death or disability. Except as set forth in Note 2 to the Summary
Compensation Table, all of these options were exchanged for options to
purchase inSilicon common stock that have substantially the same terms and
conditions.
(2) 0%, 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission and do not
represent our estimate or projection of our or Phoenix's future common stock
prices. The potential realizable values are calculated by assuming the
Exercise or Base Price shown on the table, that the common stock appreciates
at the indicated rate for the entire term of the option and that the option
is exercised at the exercise price and sold on the last day of the option
term at the appreciated price.
(3) 22,500 of these shares were subject to an accelerated vesting schedule,
based upon Mr. Cantwell's achievement of certain quarterly
management-related goals, of which options to purchase 15,000 shares had
vested as of December 31, 1999.
OPTION EXERCISES AND HOLDINGS
The following table provides summary information regarding options to
purchase Phoenix common stock that were exercised by the named executive
officers during the fiscal year ended September 30, 1999 and the number and
value of unexercised in the money Phoenix options held by the named executive
officers at September 30, 1999.
50
<PAGE>
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR-END(1)(2) AT FISCAL YEAR-END(3)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Wayne C. Cantwell.................. -- -- 58,362 86,638 $141,857 $213,442
Barry A. Hoberman.................. -- -- 50,064 38,432 16,360 100,233
William E. Meyer................... -- -- 11,813 79,188 11,488 78,132
Anand C. Naidu..................... -- -- -- 40,000 -- --
Robert G. Nalesnik................. -- -- 20,926 60,924 212,347 212,326
</TABLE>
- --------------
(1) These options were granted on various dates during fiscal years 1991 through
1999 and generally vest quarterly at the rate of 6.25% per quarter. Except
for an option of Mr. Naidu to purchase 2,500 shares and options of
Mr. Nalesnik to purchase 23,426 shares, all of these options were exchanged
for options to purchase inSilicon common stock.
(2) Stock option exercise prices ranged from $1.0400 per share to $19.8750 per
share.
(3) The amounts in this column reflect the difference between the closing market
price of Phoenix's common stock on September 30, 1999, which was $11.1875,
and the option exercise price.
STOCK OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
For a table setting forth the number of shares of inSilicon common stock
owned by Phoenix and each of our directors and named executive officers, see
"Principal Stockholder" in this prosepctus.
RELATED TRANSACTIONS WITH PHOENIX
SAND ACQUISITION. On September 24, 1998, Phoenix acquired Sand for
approximately $18.5 million in cash and 464,000 shares of Phoenix common stock.
The Agreement and Plan of Reorganization which governed the acquisition also
provided for contingent payments of up to $3.7 million, based on a formula tied
to the actual net revenues and operating earnings of the Semiconductor IP
Division unit of which Sand became a part. Mr. Naidu was one of the three
majority stockholders of Sand, and as a result of the acquisition, he received
32.73% of the initial consideration. He will also receive the same percentage of
any future contingent payments. Through December 31, 1999, no contingent
payments have been made. Phoenix also assumed Sand's stock options, including
Mr. Nalesnik's Sand stock options which were converted to the right to purchase
38,960 shares of Phoenix common stock.
Also in connection with the acquisition, Sand assigned to Phoenix an
Independent Contractor Agreement, dated March 15, 1996, between Sand and Sand
Microelectronics Pvt. Ltd., India, or Sand India, which allows Phoenix to obtain
consulting services for hardware and software development and related fields of
technical computer expertise from Sand India from time to time. Mr. Naidu owns
approximately one-third of the shares of Sand India. During fiscal year 1999,
Phoenix paid or accrued payments to Sand India of $365,000 for services under
the Independent Contractor Agreement.
The Agreement and Plan of Reorganization also required Mr. Naidu and the
other majority stockholders of Sand to enter into worldwide non-compete
agreements which are effective for three years after the acquisition regardless
of the status of their employment with Phoenix. Each non-compete agreement
provides that these individuals will not compete with Phoenix in the business
area
51
<PAGE>
in which Sand was engaged, including semiconductor intellectual property and
models and test environments based on interconnect standards.
In addition, as an incentive to encourage long-term service from certain
Sand personnel who remained in Phoenix's employ after the acquisition, Phoenix
established a retention bonus program. Under this program, Mr. Nalesnik is
entitled to receive up to $174,000 in three equal annual installments commencing
in fiscal year 1999 if he remains an employee of Phoenix. Phoenix paid
Mr. Nalesnik $58,000 as a retention bonus under this program related to fiscal
year 1999.
Phoenix has assigned the Agreement and Plan of Reorganization, the
Independent Contractor Agreement with Sand India, the non-compete agreements and
the retention bonus program agreements to inSilicon.
TECHNOLOGY LICENSE AGREEMENTS WITH HI/FN. Mr. Farnham, who is a director of
inSilicon, is chairman of the board of directors, president and chief executive
officer of hi/fn. Mr. Sisto, president and the chairman of the board of
directors of Phoenix and a director of inSilicon, is a director of hi/fn. During
fiscal years 1998 and 1999, Phoenix licensed to hi/fn PCI cores for $59,250 and
$89,250, respectively. This license agreement has been assigned to inSilicon.
INCENTIVE AND SEVERANCE AGREEMENT WITH MR. CANTWELL. In July 1999, Phoenix
entered into an Incentive and Severance Agreement with Mr. Cantwell. This
agreement provided an initial base compensation of $200,000 plus bonus and
benefits. In addition, the agreement provided that as a retention and
performance incentive, Phoenix grant to Mr. Cantwell a non-qualified option to
purchase 22,500 shares of Phoenix common stock at an exercise price of $9.30 per
share, vesting in three quarterly installments upon the fulfillment of various
objectives of which options to purchase 15,000 shares of Phoenix common stock
have vested. It also granted him options to purchase 12,500 shares of Phoenix
common stock at $9.30 per share that will immediately vest if Phoenix's
Semiconductor IP Division is no longer majority owned by Phoenix. On the date of
these grants, the market price of Phoenix common stock was $17.1875 per share.
If Mr. Cantwell's employment is terminated other than for cause or in a
constructive termination, the agreement also provides severance payments,
including continued salary for 12 months with continued option vesting during
such period. Benefits include participation in executive compensation programs
and company paid post-termination health insurance. This agreement has been
replaced with an agreement between Mr. Cantwell and inSilicon. See "Related
Party Transactions--Severance Agreements with inSilicon Named Executive
Officers."
ARRANGEMENTS BETWEEN INSILICON CORPORATION AND PHOENIX TECHNOLOGIES LTD.
We also have entered into various agreements with Phoenix including:
- a Contribution Agreement;
- an Initial Public Offering Agreement;
- a Services and Cost-Sharing Agreement;
- an Employee Matters Agreement;
- a Tax-Sharing Agreement;
- a Registration Rights Agreement; and
- a Technology Distributor Agreement.
This description summarizes the material terms of these agreements. You
should read the full text of these agreements, which have been filed with the
Securities and Exchange Commission as exhibits to the registration statement of
which this prospectus is a part.
52
<PAGE>
After this offering, any amendments to these agreements must be approved by
a majority of our independent directors.
CONTRIBUTION AGREEMENT
The separation was completed effective as of November 30, 1999. The
Contribution Agreement governs the terms of the transfer to us of assets and
liabilities from Phoenix. Some aspects of the contribution are also clarified in
the other agreements mentioned above. To the extent that the terms of any other
agreements conflict with the Contribution Agreement, the terms of the other
agreements govern.
Pursuant to the Contribution Agreement, Phoenix transferred to us ownership
of specified intellectual property and technology related to and necessary for
inSilicon to conduct its business, as well as customer and supplier contracts
related primarily to the SIP business.
The Contribution Agreement generally identifies the assets Phoenix
transferred to us and the liabilities we assumed from Phoenix in the separation.
The agreement also describes when and how these transfers and assumptions
occurred. The net book value of the assets transferred and the liabilities
assumed under this agreement was approximately $14.5 million.
ASSET TRANSFER. Effective on the separation date, Phoenix transferred
ownership of the following assets to us, subject to any exceptions expressly set
forth in an ancillary agreement:
- all assets reflected on our balance sheet as of September 30, 1999;
- all written-off, expensed or fully depreciated assets that would have
appeared on our balance sheet as of September 30, 1999 if we had not
written-off, expensed or fully depreciated them;
- all assets that Phoenix acquired after September 30, 1999 that would have
appeared in our financial statements as of the separation date if we
prepared these financial statements using the same principles we used in
preparing our balance sheet dated September 30, 1999;
- all assets used primarily by our business as of the separation date, but
are not reflected in our balance sheet as of September 30, 1999 due to
mistake or omission;
- intangible assets, including but not limited to, the following: (i) all
intellectual property assets such as copyrights, patents, patent
applications pending and in draft, trademarks, domain names, invention
disclosures, developed and developing technology, including ideas,
inventions, concepts currently in progress related to the SIP business;
and (ii) technology, software and know-how related to the current SIP
business and business plans;
- all supply, vendor, capital, equipment lease, software or technology
licenses, memberships in industry associations, or other contracts that
relate primarily to our business, including contracts representing
obligations reflected on our balance sheet as of September 30, 1999, and
all similar contracts obtained by Phoenix after that date;
- all computer-related assets used primarily by employees of Phoenix who
will become our employees due to the separation;
- copies of, and the right to use, all corporate license agreement forms and
templates used in the in the licensing and evaluation of the SIP products;
and
- a credit for administrative services and allocated costs for the month of
December 1999 of $550,000.
ASSUMPTION OF LIABILITIES. Effective on the separation date, we assumed the
following liabilities from Phoenix, except as provided in an ancillary agreement
or other agreement:
53
<PAGE>
- all liabilities reflected as liabilities on our balance sheet as of
September 30, 1999, less any liabilities that were discharged after the
date of the balance sheet;
- all liabilities of Phoenix arising after September 30, 1999, that would
have appeared in our financial statements as of the separation date if we
prepared these financial statements using the same principles we used in
preparing our balance sheet as of September 30, 1999;
- all liabilities that are primarily related to or primarily arise out of
our business but are not reflected in our balance sheet as of
September 30, 1999 due to mistake or omission; and
- all liabilities, other than income taxes, primarily resulting from the
operation of our business or resulting from any asset that Phoenix
transferred to us, including the contingent payment and other obligations
of Phoenix related to the acquisition of Sand.
EQUITY TO PHOENIX. For its contribution, we issued to Phoenix 10,400,000
shares of our Series A Preferred Stock, which converts to an equal number of
shares of our common stock at the completion of this offering. We also issued to
Phoenix a warrant to purchase 50,000 shares of our common stock at $.01 per
share, exercisable at any time until May 31, 2002.
BRIDGE LOAN FACILITY. Upon our written request, Phoenix will loan us any
funds necessary to fund our operations until the completion of this offering.
Such loan shall bear interest at a rate of 8.0% per annum and shall be repaid
from the proceeds of this offering.
OBTAINING APPROVALS AND CONSENTS. The parties agree to use all reasonable
efforts domestically and their best efforts internationally to obtain any
required consents, substitutions or amendments required to novate or assign all
rights and obligations under any contracts transferred in the separation.
DELAYED TRANSFERS. If it is not practicable to transfer specified assets
and liabilities on the separation date, the agreement provides that these assets
and liabilities will be transferred as promptly as possible after the separation
date. Pending receipt of any required consent or other action necessary to make
a transfer, Phoenix will hold the asset for the use and benefit of inSilicon or
the liability for the account of inSilicon and take all commercially reasonable
actions that inSilicon requests to place inSilicon in the same position as if
the transfer had occurred.
NO REPRESENTATIONS AND WARRANTIES. In general, Phoenix has provided no
representations or warranties with respect to the assets transferred, except
with respect to certain intellectual property developed by Phoenix outside of
the SIP division.
EXPENSES. We will reimburse Phoenix for its reasonable and actual third
party expenses incurred in connection with the separation.
TERMS OF OTHER AGREEMENTS GOVERN. To the extent that another agreement
expressly provides for the transfer of an asset or an assumption of a liability,
the terms of that other agreement will determine the manner of the transfer and
assumption.
THE INITIAL PUBLIC OFFERING AGREEMENT
The Initial Public Offering Agreement governs the relationship between us
and Phoenix following this offering in a number of respects including without
limitation, the following:
INFORMATION EXCHANGE. Both Phoenix and we have agreed to share information
with each other, at no cost to the requesting party, unless the information is
confidential and the sharing would be commercially detrimental to us or contrary
to any contract term:
- Each party has agreed to maintain adequate internal accounting to allow
the other party to satisfy its own reporting obligations and prepare its
own financial statements.
54
<PAGE>
- Each party will retain records that may be beneficial to the other party
for a specified period of time. If the records are going to be destroyed,
the destroying party will give the other party an opportunity to retrieve
all relevant information from the records.
- Each party will do its best to provide the other party with personnel,
directors, officers or agents who may be used as witnesses in legal
proceedings.
AUDITING PRACTICES. So long as Phoenix is required to consolidate our
results of operations and financial position, we have agreed to:
- not change independent accounting firms without Phoenix's consent, which
shall not unreasonably be withheld;
- use reasonable commercial efforts to generate quarterly financial
statements that have been reviewed by our independent accountants on a
timely basis following such fiscal quarter-end;
- use reasonable commercial efforts to cause our independent accountants to
date their opinion on our audited annual financial statements on the same
date as Phoenix's auditors date their opinion on Phoenix's financial
statements;
- provide Phoenix all relevant information to enable Phoenix to prepare
their financial statements (and Phoenix has agreed to provide us all
relevant information to enable us to prepare our financial statements);
- grant each other's internal accountants access to our relevant records;
and
- notify each other of any change in accounting principles.
DISPUTE RESOLUTION. If problems arise between us and Phoenix, we have
agreed to the following procedures:
- The parties will make a good faith effort to first resolve the dispute
through negotiation.
- If negotiations fail, the parties agree to attempt to resolve the dispute
through non-binding mediation. The selection of the mediator shall be
mutually agreed upon.
- If mediation fails, the parties can resort to litigation. In addition,
nothing prevents either party acting in good faith from initiating
litigation at any time if failure to do so would substantially
disadvantage the party.
NO SOLICITATION. Both parties have agreed not to directly recruit employees
of the other party for a period of one year after the separation date if the
recruiting would be damaging to the other party. However, general advertising
and employee-initiated solicitations are permissible.
NONCOMPETITION. Each of Phoenix and inSilicon has agreed not to engage in
any business conducted by the other as of the separation date for a period
ending at the earliest of (a) five years from the separation date, (b) the date
Phoenix no longer owns at least 10% of our outstanding voting securities and
(c) the date the other ceases to engage in that business. Should either we or
Phoenix experience a change of control, the other agrees it will not
unreasonably withhold its waiver of this agreement not to compete upon the
request of the party undergoing the change of control. Refusal to waive the
agreement not to compete is deemed to be reasonable if the person acquiring
control competes with the party from which waiver is sought.
STANDSTILL. So long as it retains ownership of at least 50% of our
outstanding voting securities, Phoenix has agreed not to purchase more than 2%
of our then-outstanding shares of common stock on the open market during any
12-month period.
55
<PAGE>
COSTS AND EXPENSES. The Initial Public Offering Agreement provides that we
will pay all of the third-party expenses related to the offering of our common
stock other than as provided in the Services and Cost-Sharing Agreement. After
the completion of the offering, any costs and expenses that are not allocated in
the Services and Cost-Sharing Agreement or any other agreement between Phoenix
and us shall be the responsibility of the party that incurs the costs and
expenses.
CONFIDENTIALITY. Both parties agree not to disclose confidential
information of the other party except in specific circumstances.
GENERAL RELEASE OF PRE-SEPARATION CLAIMS. Effective as of the separation
date, we have released Phoenix and its affiliates, agents, successors and
assigns, and Phoenix has released us, and our affiliates, agents, successors and
assigns, from any liabilities arising from events occurring on or before the
separation date, including events occurring in connection with the activities to
implement the separation and the initial public offering. This provision will
not impair a party from enforcing the Contribution Agreement, any other
agreement between Phoenix and inSilicon, or any arrangement specified in any of
these other agreements.
INDEMNIFICATION. In general, we have agreed to indemnify Phoenix and its
affiliates, agents, successors and assigns from all liabilities arising from:
- our business, any of our liabilities or any of our contracts; and
- any breach by us of the Contribution Agreement or any other agreement
between the parties.
Phoenix has agreed to indemnify us and our affiliates, agents, successors
and assigns from all liabilities arising from:
- Phoenix's business other than the businesses transferred to us pursuant to
the separation; and
- any breach by Phoenix of the Contribution Agreement or any other agreement
between the parties.
The indemnifying party will make all indemnification payments net of
insurance proceeds that the indemnified party receives. The agreement also
contains provisions governing notice and indemnification procedures.
DISCLOSURE LIABILITIES. We have agreed to bear any liability arising from
any untrue statement of a material fact or any omission of a material fact in
this prospectus, other than matters pertaining solely to Phoenix, which shall be
borne solely by Phoenix.
INSURANCE MATTERS. The agreement also contains provisions governing our
insurance coverage from the separation date. Phoenix will generally act as
insurance administrator and claims administrator for Phoenix insurance policies
under which we are or have been insured; provided, however, no settlements
involving us shall be made without our consent and all awards regarding us shall
be promptly paid to us. We will fund a pro rata portion of the Phoenix insurance
costs under the Services and Cost-Sharing Agreement and will be entitled to
receive the proceeds, if any, from insured claims under these policies and
applicable prior policies, after the applicable deductible or retention.
ASSIGNMENT. The Initial Public Offering Agreement is not assignable by
either party without the prior written consent of the other, except in
connection with a merger or a sale of significant assets, in which event the
agreement must be assumed by the surviving party.
SERVICES AND COST-SHARING AGREEMENT
We have also entered into a Services and Cost-Sharing Agreement with
Phoenix. This agreement covers various services that Phoenix provides and the
method by which certain costs will be shared by
56
<PAGE>
the companies. The services include data processing, telecommunications and
information technology support services, accounting, financial management, tax
preparation, payroll, stockholder and public relations, legal, human resources
administration, procurement, real estate management and other administrative
functions. The shared costs include the costs of the office space we occupy at
Phoenix's headquarters and insurance premiums.
The amount we will pay for services and shared costs will generally be equal
to the aggregate cost to Phoenix and inSilicon of the services and costs
multiplied by a percentage representing the number of our employees to the total
number of Phoenix and inSilicon employees. The Services and Cost-Sharing
Agreement will have an initial term that extends to June 30, 2000 for all
services other than accounting and an initial term that extends to
September 30, 2000 with respect to accounting services. The Services and
Cost-Sharing Agreement will be renewed on a month-to-month basis. Phoenix can
terminate after those dates on 30 days' written notice. We can terminate any one
or more of the services at any time on 30 days' written notice.
EMPLOYEE MATTERS AGREEMENT
We have entered into an Employee Matters Agreement with Phoenix to allocate
assets, liabilities, and responsibilities relating to current and former United
States employees of inSilicon Corporation and their participation in the benefit
plans, including stock plans, that Phoenix currently sponsors and maintains.
In general, separate agreements will address similar issues relating to
foreign employment and benefit matters.
Until the separation date, United States employees provided services to
inSilicon as employees of Phoenix. After the separation date, such employees
remained on the Phoenix payroll and provided services to inSilicon on a seconded
basis through December 31, 1999. Certain employees with pending visa
applications are being seconded for a longer period.
All eligible United States inSilicon employees will continue to participate
in the Phoenix benefit plans on comparable terms and conditions to those for
Phoenix employees until we establish comparable benefit plans for our current
and former employees. Once we establish our own corresponding benefit plan, we
may modify or terminate that plan in accordance with the terms of that plan and
our policies. inSilicon benefit plans generally will not provide benefits that
overlap benefits under the corresponding Phoenix benefit plan at the time of the
offering. Each inSilicon benefit plan will provide that all service,
compensation and other benefit determinations that, as of the offering, were
recognized under the corresponding Phoenix benefit plan will be taken into
account under that inSilicon benefit plan.
Each inSilicon benefit plan will assume any liabilities under the
corresponding Phoenix benefit plan for inSilicon employees. Assets relating to
the employee liabilities will also be transferred to inSilicon or the related
inSilicon plans and trusts from trusts and other funding vehicles associated
with Phoenix's benefit plans. However, with respect to the 401(k) retirement
plans, the companies may agree that assets and liabilities will be transferred
by way of employer-mandated transfer, employee voluntary transfer, employee
elective rollover or a combination thereof.
OPTIONS. Persons providing us services on December 21, 1999 had the ability
to have their Phoenix options exchanged for inSilicon stock options with the
same intrinsic value. The number of shares and the exercise price of Phoenix
options that were exchanged for inSilicon options were adjusted using a formula
based upon the relative fair market values of the two companies' stock on the
date of exchange. Each of the resulting inSilicon options maintains the original
vesting provisions and option period.
57
<PAGE>
STOCK PURCHASE PLAN. We anticipate that inSilicon employees will continue
to participate in the Phoenix stock purchase plan through the end of May 2000.
Immediately following the completion of this offering, inSilicon employees may
begin participating in our 2000 stock purchase plan.
TAX-SHARING AGREEMENT
We have entered into a Tax-Sharing Agreement with Phoenix concerning each
party's obligations for various tax liabilities. The Tax-Sharing Agreement
provides that Phoenix generally will pay all federal, state, local and foreign
taxes relating to our business before November 30, 1999. For any taxable period
after that date in which we are included in a Phoenix consolidated or combined
tax return, the agreement provides that we will make payments to Phoenix based
upon the amount of U.S. federal and state income taxes that would have been paid
by us had we and each of our subsidiaries filed our own federal and state income
tax returns, subject to specific adjustments. Further, if we incur losses on
either a federal or state basis that reduce Phoenix's consolidated or combined
tax liability, Phoenix will pay us an amount equal to the tax savings generated
by our losses.
The net losses we incurred for all periods through November 30, 1999 are
attributable to our operations as a division of Phoenix and were included in
income tax returns filed by Phoenix. Because we will not receive any benefit for
our historical operating losses incurred through November 30, 1999, no income
tax benefit has been reflected for the periods presented.
Each member of a consolidated group for U.S. federal income tax purposes is
severally liable for the federal income tax liability of each other member of
the consolidated group. Accordingly, although the Tax-Sharing Agreement
allocates tax liabilities between Phoenix and us for any period in which we were
included in Phoenix's consolidated group, we could be liable in the event that
any federal tax liability was incurred, but not discharged, by any other member
of the group. Phoenix has agreed to indemnify us for any tax liability allocated
to Phoenix under the Tax-Sharing Agreement, and we have provided a similar
indemnity to Phoenix.
The Tax-Sharing Agreement further provides for cooperation with respect to
tax matters, the exchange of information and the retention of records which may
affect the income tax liability of either party.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement provides that, at Phoenix's request, we
will use our best efforts to register for sale under federal and state
securities laws any shares of inSilicon common stock (or any other securities
Phoenix receives in exchange for inSilicon common stock) that Phoenix owns,
subject to specified limitations. Phoenix also will have the right to include
its inSilicon shares in other registrations of our common stock initiated by us.
In the first registration in which Phoenix participates after this offering,
following waiver or expiration of the lockup, we will be entitled to sell at
least 40% of the shares of the total offering if we so desire, and in all
registrations thereafter, 50% of the shares; provided that if the first
following registration involves a total of $50 million or less, we shall be
entitled to sell at least 50% of the shares of the total offering.
So long as Phoenix owns 50% or more of our common stock, Phoenix may request
or participate in an unlimited number of registrations. Once it owns less than
50%, Phoenix will be limited to a total of four demand and an unlimited number
of "piggyback" registrations, provided that it is not entitled to more than two
demand registrations in any 12-month period. Phoenix must request registration
of a minimum of $25 million of shares in any demand registration. Subject to
specified limitations, Phoenix may assign these registration rights. The
Registration Rights Agreement also will require us to indemnify Phoenix, the
underwriters and others in connection with these registrations.
Phoenix will pay its pro rata share (according to the percentage of shares
sold for its account) of expenses relating to any registration in which it
participates, and Phoenix will pay all of the underwriting discounts and
commissions attributable to the shares Phoenix sells.
58
<PAGE>
TECHNOLOGY DISTRIBUTOR AGREEMENT
We have entered into arrangements with Phoenix to act as our sales
representative and distributor of our firmware products in Japan and our full
line of products in the rest of Asia. Phoenix will promote the licensing of
inSilicon's firmware or other products, as applicable, identify prospective
customers, and solicit orders from prospective, as well as current, customers on
behalf of inSilicon. The agreement also provides Phoenix a nonexclusive license
for our firmware products that will allow it to perform customization, or
non-recurring engineering work, to the firmware in accordance with customer
specified requirements. Phoenix will provide all the customer support
obligations in Japan for the firmware and the firmware customization it
develops. We will pay Phoenix a commission of 20% of the net licensing and/or
royalty revenue specified under each license; and 80% of the net revenues for
customization and non-recurring engineering work. We believe that the terms of
this agreement are no less favorable than we would have obtained from an
unaffiliated third party.
RELATED PARTY TRANSACTIONS
Other than the transactions described in "Arrangements Between inSilicon
Corporation and Phoenix Technologies Ltd.," there has not been any transaction
or series of similar transactions since our inception to which we were or are a
party in which the amount involved exceeded or exceeds $60,000 and in which any
director, executive officer, holder of more than 5% of any class of our voting
securities or any member of the immediate family of any of the foregoing persons
had or will have a direct or indirect material interest, other than the
transactions described below.
OPTIONS TO NAMED EXECUTIVE OFFICERS AND DIRECTORS OF INSILICON. On
December 21, 1999, the named executive officers exchanged all or a portion of
their Phoenix options for options to purchase the following amounts of inSilicon
common stock based upon the exchange ratio of 1.862 options to purchase
inSilicon shares for each option to purchase Phoenix shares: Mr. Cantwell,
269,991 shares; Mr. Hoberman, 164,780 shares; Mr. Meyer, 169,443 shares;
Mr. Naidu, 69,825 shares; and Mr. Nalesnik, 108,786 shares. The exchange ratio
was determined based upon the relative fair values of Phoenix and inSilicon
common stock on the date of exchange. Therefore, on the date of the exchange,
the inSilicon options had the same intrinsic value and ratio of exercise price
to market value of the underlying shares as the Phoenix options exchanged. They
also have equivalent vesting schedules to the Phoenix options exchanged. In
addition, we granted the following named executive officers and directors
options to purchase additional inSilicon shares at a purchase price of $7.36 per
share, in the following amounts: Mr. Cantwell, 205,009 shares; Mr. Hoberman,
30,220 shares; Mr. Meyer, 60,000 shares; Mr. Naidu, 50,520 shares;
Mr. Nalesnik, 10,000 shares; Mr. Sisto, 20,000 shares; Mr. Farnham, 20,000
shares; and Mr. Hart, 20,000 shares. We later granted Mr. Harding an option to
purchase 20,000 inSilicon shares at a purchase price of $7.75 per share.
OPTIONS TO CONSULTANTS WHO ARE EMPLOYEES OF PHOENIX. On December 21, 1999,
we also granted options to purchase 50,000 shares of inSilicon common stock at
an exercise price of $7.36 per share to certain consultants of inSilicon, some
of whom are also employees of Phoenix.
SEVERANCE AGREEMENTS WITH INSILICON NAMED EXECUTIVE OFFICERS. We have
entered into severance agreements with certain of our officers, including all of
our named executive officers other than Mr. Naidu. The severance agreements
provide for initial levels of base compensation, bonus, and benefits. The
initial base levels of compensation are as follows: Mr. Cantwell, $200,000;
Mr. Hoberman, $173,250; Mr. Meyer, $173,250; and Mr. Nalesnik, $160,000. The
agreements also provide for the continued payment of salary for 12 months (in
the case of Mr. Cantwell, Mr. Hoberman and Mr. Meyer) and six months (in the
case of the other officers) with continued option vesting during such period,
and a prorated portion of the executive's target bonus if the executive's
employment is terminated for reasons other than for cause or constructive
termination. Mr. Cantwell's and Mr. Meyer's agreements also provide for the full
vesting of all unvested options within 90 days of a change in control. Benefits
provided under the severance agreements include participation in an executive
bonus plan and company-paid post-termination health insurance.
59
<PAGE>
PRINCIPAL STOCKHOLDER
Until this offering, Phoenix will own all of our outstanding shares of
common stock. Phoenix has previously conducted inSilicon's business through
Phoenix. As a division of Phoenix, inSilicon has historically utilized Phoenix's
cash management and certain other services. See Note 2 of Notes to Consolidated
Financial Statements of inSilicon. For a description of certain agreements we
entered into with Phoenix in connection with our separation from Phoenix and
this offering, see "Arrangements Between inSilicon Corporation and Phoenix
Technologies Ltd."
Phoenix Technologies Ltd. is a global leader in system-enabling software
solutions for PCs and connected devices. In addition to inSilicon, Phoenix has
two other operating divisions. One division focuses on platform-enabling
software providing critical functionality that links the hardware and operating
systems of tens of millions of PCs, embedded systems and information appliances
sold annually. The other is a recently launched Internet business to deliver new
value propositions to original equipment manufacturers, channel partners and end
users of connected PCs and other devices. The principal executive offices of
Phoenix are located at 411 East Plumeria Drive, San Jose, California 95134.
The following table sets forth certain information with respect to the
beneficial holders of inSilicon's common stock as of February 1, 2000, and as
adjusted to reflect the sale of the common stock being offered by this
prospectus, for each of inSilicon's directors and named executive officers, for
each holder of 5% or more of inSilicon's common stock and for all of inSilicon's
officers and directors as a group. The beneficial owners named in the table have
sole voting and investing power with respect to all shares of common stock shown
as beneficially owned by them, subject to community property laws, where
applicable. All shares beneficially owned by our executive officers and
directors are shares issuable upon the exercise of stock options exercisable
within 60 days of February 1, 2000.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED SHARES BENEFICIALLY OWNED
BEFORE THE OFFERING AFTER THE OFFERING
---------------------------- ----------------------------
NAME OF BENEFICIAL OWNERS NUMBER PERCENT(1) NUMBER PERCENT(1)
- --------------------------------------- -------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Phoenix Technologies Ltd............... 10,400,010 100% 10,400,010 74.8%
Wayne C. Cantwell...................... 150,862 1.4% 150,862 1.1%
Barry O. Hoberman...................... 108,721 1.0% 108,721 *
William E. Meyer....................... 43,176 * 43,176 *
Anand C. Naidu......................... 7,813 * 7,813 *
Robert G. Nalesnik..................... 5,280 * 5,280 *
Albert E. Sisto........................ 1,250 * 1,250 *
Raymond J. Farnham..................... 1,250 * 1,250 *
John R. Harding........................ 0 * 0 *
E. Thomas Hart......................... 1,250 * 1,250 *
All executive officers and directors as
a group (10 persons)................. 333,244 3.1% 333,244 2.3%
</TABLE>
- ------------------------
* Less than 1%.
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue
100,000,000 shares of common stock, $.001 par value per share, and 15,000,000
shares of undesignated preferred stock, $.001 par value per share.
60
<PAGE>
COMMON STOCK
Assuming the conversion of our Series A Preferred Stock to common stock, as
of December 31, 1999, there were 10,400,010 shares of common stock outstanding.
Options to purchase 2,348,844 shares of common stock were also outstanding.
There will be 13,900,010 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.
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 15,000,000
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, 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 inSilicon
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.
COMMON STOCK WARRANT
We have issued to Phoenix a warrant to purchase 50,000 shares of our common
stock for $0.01 per share, immediately exercisable in whole or in part at any
time until May 31, 2002. The exercise price and number of shares of common stock
issuable upon the exercise of the warrant may be adjusted upon the occurrence of
certain events, including stock splits, stock dividends, reorganization,
recapitalization, merger, or sale of all or substantially all of our assets.
DELAWARE ANTI-TAKEOVER LAW AND CHARTER AND BYLAW PROVISIONS
Provisions of Delaware law and our charter documents could have an
anti-takeover effort 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. inSilicon is subject to the provisions of Section 203 of the
Delaware law. In general, the 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
61
<PAGE>
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
inSilicon without further action by the stockholders.
BOARD OF DIRECTORS. Our Restated Certificate of Incorporation 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 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. Until Phoenix and its affiliates no longer own at least a majority of our
outstanding common stock, however, the holders of at least a majority of our
common stock may remove any director, with or without cause.
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 inSilicon.
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS. Our Restated
Certificate of Incorporation will provide that once Phoenix and its affiliates
no longer own at least a majority of our outstanding common stock, stockholders
may only take action at a duly called annual or special meeting and not by
written consent. At the same time, stockholders will no longer be able to call
special meetings; special meetings of stockholders may be called only by certain
specified officers or by any officer at the request in writing of a majority of
the board of directors. These provisions may delay consideration of a
stockholder proposal until the next annual meeting unless a special meeting is
called by our board of directors or certain specified officers.
ADVANCE NOTICE PROCEDURES. Our By-laws 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. The
advance notice procedures will not apply to Phoenix and its affiliates so long
as they own at least a majority of our outstanding common stock.
CHARTER AMENDMENTS. Our Restated Certificate of Incorporation will provide
that the affirmative vote of 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. The
Restated Certificate of Incorporation will also provide that the By-laws may be
altered, amended or repealed 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
62
<PAGE>
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).
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
As permitted by the Delaware General Corporation Law, we have included a
provision in our Restated Certificate of Incorporation to eliminate the personal
liability of our officers and directors for monetary damages for breach or
alleged breach of their fiduciary duties as officers or directors, other than in
cases of fraud or other willful misconduct. In addition, our By-laws provide
that we are required to indemnify our officers and directors even when
indemnification would otherwise be discretionary, and we are required to advance
expenses to our officers and directors as incurred in connection with
proceedings against them for which they may be indemnified. We have entered into
indemnification agreements with our officers and directors containing provisions
that are in some respects broader than the specific indemnification provisions
contained in the Delaware General Corporation Law. The indemnification
agreements require us to indemnify our officers and directors against
liabilities that may arise by reason of their status or service as officers and
directors and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
At present, we are not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of inSilicon in
which indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. We believe that our charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the common stock is EquiServe Trust
Company. The Transfer Agent's address and telephone number is P.O. Box 2533,
Jersey City, N.J. 07303; (201) 222-5610.
63
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
After completion of this offering, inSilicon will have outstanding
13,900,010 shares of common stock. Of these shares, the 3,500,000 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 inSilicon.
All of the inSilicon shares owned by Phoenix after this offering will not
have been registered under the Securities Act of 1933 and 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. Phoenix
has certain rights to require inSilicon to register its inSilicon shares, which
rights may be assigned. See "Arrangements Between inSilicon Corporation and
Phoenix Technologies Ltd."
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% of
the number of shares of our common stock then outstanding (which will equal
approximately 139,000 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 inSilicon.
Before this offering, there has been no public market for our common stock,
and no prediction can be made as to the effect, if any, that market sales of
outstanding shares of inSilicon common stock owned by Phoenix, or the
availability of such shares for sale, will have on the market price of our
common stock prevailing from time to time. Nevertheless, sales of substantial
amounts of our common stock owned by Phoenix in the public market, or the
perception that such sales could occur, could reduce the prevailing market price
of our common stock. Although Phoenix may in the future effect or direct sales
or other dispositions of common stock that would reduce its ownership interest
in inSilicon, Phoenix has advised us that it currently intends to continue to
hold all of its inSilicon common stock following this offering. However, Phoenix
is not subject to any contractual obligation to retain its controlling interest,
except that it has agreed not to sell or otherwise dispose of any shares of
inSilicon common stock for a period of 365 days after the date of this
Prospectus without the prior written consent of FleetBoston Robertson Stephens
Inc. As a result, we cannot be sure how long Phoenix will maintain its ownership
of inSilicon common stock after this offering.
64
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Prudential Securities Incorporated 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
UNDERWRITER OF SHARES
- ----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Prudential Securities Incorporated..........................
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. The underwriters
do not intend to confirm sales to any accounts over which they exercise
discretionary authority.
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.
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>
PER WITHOUT WITH
SHARE OPTION OPTION
-------- -------- --------
<S> <C> <C> <C>
Public offering price............................ $ $ $
Underwriting discounts and commissions........... $ $ $
Expenses payable by us........................... $ $ $
Proceeds to us................................... $ $ $
</TABLE>
FleetBoston Robertson Stephens Inc. expects to deliver the shares of our
common stock to purchasers on .
65
<PAGE>
Prudential Securities Incorporated facilitates the marketing of new issues
online through its PrudentialSecurities.com division. Clients of Prudential
Advisor-SM-, a full service brokerage firm program, may view offering terms and
a prospectus online and place orders through their financial advisors.
INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters, Phoenix 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 AGREEMENT. Each of our executive officers and directors 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. Phoenix has agreed with
the representatives for a period of 365 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 inSilicon's stockholders
providing consent by the representatives to the sale of shares prior to the
expiration of the lock-up period.
FUTURE SALES. 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."
NO PRIOR PUBLIC MARKET. Before this offering, there has been no public
market for the common stock of inSilicon. 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.
LISTING. We have applied to have our shares approved for quotation on the
Nasdaq National Market under the symbol "INSN."
66
<PAGE>
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.
DIRECTED SHARE PROGRAM. At our request, the underwriters have reserved up
to 175,000 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 inSilicon. 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 which 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.
From time to time, the underwriters may perform investment banking or other
services for Phoenix and for inSilicon in the future.
67
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Orrick, Herrington & Sutcliffe LLP, San Francisco, 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, have audited our consolidated
financial statements and financial statement schedule at September 30, 1998 and
1999 and for each of the three years in the period ended September 30, 1999, as
set forth in their report. We have included our consolidated financial
statements in the 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.
The financial statements of Sand Microelectronics, Inc., as of December 31,
1996 and 1997 and for the years then ended included in this prospectus have been
so included in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
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 inSilicon 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 and with quarterly reports for the first three
quarters of each year containing unaudited interim consolidated financial
information.
68
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF INSILICON CORPORATION
Report of Ernst & Young LLP, Independent Auditors....... F-2
Consolidated Balance Sheets............................. F-3
Consolidated Statements of Operations................... F-4
Consolidated Statements of Changes in Stockholder's Net
Investment/Stockholder's Equity........................ F-5
Consolidated Statements of Cash Flows................... F-6
Notes to Consolidated Financial Statements.............. F-7
AUDITED FINANCIAL STATEMENTS OF SAND MICROELECTRONICS, INC.
Report of PricewaterhouseCoopers LLP, Independent
Accountants............................................ F-22
Balance Sheets.......................................... F-23
Statements of Operations................................ F-24
Statements of Shareholders' Equity...................... F-25
Statements of Cash Flows................................ F-26
Notes to Financial Statements........................... F-27
UNAUDITED INTERIM FINANCIAL STATEMENTS OF SAND
MICROELECTRONICS, INC.
AS OF JUNE 30, 1998..................................... F-35
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholder
inSilicon Corporation
We have audited the accompanying consolidated balance sheets of inSilicon
Corporation as of September 30, 1998 and 1999 and the related consolidated
statements of operations, stockholder's net investment/stockholder's equity, and
cash flows for each of the three years in the period ended September 30, 1999.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
inSilicon Corporation at September 30, 1998 and 1999, and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended September 30, 1999, in conformity with generally accepted
accounting principles.
/S/ ERNST & YOUNG LLP
San Jose, California
December 17, 1999,
except for Notes 5 and 10, as to which the date is
February 11, 2000
F-2
<PAGE>
INSILICON CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDER'S
SEPTEMBER 30, EQUITY AT
------------------- DECEMBER 31, DECEMBER 31,
1998 1999 1999 1999
-------- -------- ------------- -------------
(UNAUDITED) (UNAUDITED)
------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ -- $ -- $ --
Accounts receivable, net of allowances of $198, $364 and
$216 at September 30, 1998 and 1999, and December 31,
1999, respectively...................................... 2,416 5,104 3,415
Other current assets...................................... 147 135 93
-------- -------- --------
Total current assets.................................... 2,563 5,239 3,508
Investments................................................. 838 838 838
Property and equipment, net................................. 1,477 1,174 1,004
Computer software costs, net................................ 13,958 6,974 6,408
Goodwill and other intangible assets, net................... 12,439 10,220 9,665
Other assets................................................ 56 36 600
-------- -------- --------
Total assets.............................................. $ 31,331 $ 24,481 $ 22,023
======== ======== ========
LIABILITIES AND STOCKHOLDER'S NET INVESTMENT/STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable.......................................... $ 830 $ 205 $ 378
Payroll and related liabilities........................... 1,223 1,776 1,312
Deferred revenue.......................................... 1,211 1,589 1,196
Payable to Phoenix........................................ -- -- 748
Accrued merger costs...................................... 1,560 1,560 1,560
Accrued restructuring costs............................... 696 200 200
Other accrued liabilities................................. 383 302 109
-------- -------- --------
Total current liabilities............................... 5,903 5,632 5,503
Deferred tax liabilities.................................... -- -- 2,736
Other liabilities........................................... 16 45 --
Commitments
Stockholder's net investment/stockholder's equity:
Preferred stock, par value $0.001; 15,000,000 shares
authorized, 10,400,000 Series A shares issued and
outstanding at December 31, 1999 (none pro forma)....... -- -- 10 $ --
Common stock, par value $0.001; 100,000,000 shares
authorized, 10 shares issued and outstanding at
December 31, 1999 (10,400,010 shares pro forma)......... -- -- -- --
Additional paid-in capital................................ -- -- 38,953 38,963
Net contribution from stockholder......................... 36,158 41,632 -- --
Deferred stock-based compensation......................... -- -- (1,360) (1,360)
Accumulated deficit....................................... (10,746) (22,828) (23,819) (23,819)
-------- -------- -------- --------
Total stockholder's net investment/stockholder's
equity................................................ 25,412 18,804 13,784 $ 13,784
========
Total liabilities and stockholder's net
investment/stockholder's
equity.................................................... $ 31,331 $ 24,481 $ 22,023
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
<PAGE>
INSILICON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue:
License fees................................ $ 4,272 $ 7,304 $ 14,973 $ 3,677 $ 3,857
Services.................................... 839 1,488 3,982 1,189 1,400
------- ------- -------- ------- --------
Total revenue............................. 5,111 8,792 18,955 4,866 5,257
Cost of revenue:
License fees................................ 972 1,223 1,003 158 553
Services.................................... 638 734 826 27 208
Amortization of purchased technology........ -- -- 2,132 533 314
------- ------- -------- ------- --------
Total cost of revenue..................... 1,610 1,957 3,961 718 1,075
------- ------- -------- ------- --------
Gross margin.................................. 3,501 6,835 14,994 4,148 4,182
Operating expenses:
Research and development.................... 2,310 2,947 9,092 2,348 2,007
Sales and marketing......................... 2,128 3,843 6,350 1,622 1,712
General and administrative.................. 1,049 1,368 3,364 852 731
Amortization of intangible assets........... -- -- 2,220 555 555
Stock-based compensation.................... -- -- -- -- 236
Merger and restructuring charges............ -- 5,778 6,050 86 --
------- ------- -------- ------- --------
Total operating expenses.................. 5,487 13,936 27,076 5,463 5,241
------- ------- -------- ------- --------
Loss from operations.......................... (1,986) (7,101) (12,082) (1,315) (1,059)
Income tax benefit............................ -- -- -- -- (68)
------- ------- -------- ------- --------
Net loss...................................... $(1,986) $(7,101) $(12,082) $(1,315) $ (991)
======= ======= ======== ======= ========
Pro forma net loss (unaudited)................ $ (8,566) $ (817)
======== ========
Pro forma net loss per share (unaudited)...... $ (0.82) $ (0.08)
======== ========
Shares used in computing pro forma net loss
per share (unaudited)....................... 10,400 10,400
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
INSILICON CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER'S NET INVESTMENT/
STOCKHOLDER'S EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
NET
PREFERRED STOCK COMMON STOCK ADDITIONAL CONTRIBUTION DEFERRED
------------------- ---------------------- PAID-IN FROM STOCK-BASED ACCUMULATED
SHARES AMOUNT SHARES AMOUNT CAPITAL STOCKHOLDER COMPENSATION DEFICIT
-------- -------- --------- ---------- ---------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1996.................... -- $-- -- $ -- $ -- $ 2,150 $ -- $ (1,659)
Net increase in
contribution from
stockholder........... -- -- -- -- -- 5,049 -- --
Net loss and
comprehensive loss.... -- -- -- -- -- -- -- (1,986)
------ --- --------- ---------- ------- -------- -------- --------
Balance, September 30,
1997.................... -- -- -- -- -- 7,199 -- (3,645)
Net increase in
contribution from
stockholder........... -- -- -- -- -- 28,959 -- --
Net loss and
comprehensive loss.... -- -- -- -- -- -- -- (7,101)
------ --- --------- ---------- ------- -------- -------- --------
Balance, September 30,
1998.................... -- -- -- -- -- 36,158 -- (10,746)
Net increase in
contribution from
stockholder........... -- -- -- -- -- 5,474 -- --
Net loss and
comprehensive loss.... -- -- -- -- -- -- -- (12,082)
------ --- --------- ---------- ------- -------- -------- --------
Balance, September 30,
1999.................... -- -- -- -- -- 41,632 -- (22,828)
Net decrease in
contribution from
stockholder
(unaudited)........... -- -- -- -- -- (1,529) -- --
Issuance of common and
preferred stock upon
capitalization, net of
deferred taxes
(unaudited)........... 10,400 10 -- -- 37,357 (40,103) -- --
Deferred stock-based
compensation
(unaudited)........... -- -- -- -- 1,596 -- (1,596) --
Amortization of deferred
stock-based
compensation
(unaudited)........... -- -- -- -- -- -- 236 --
Net loss and
comprehensive loss
(unaudited)........... -- -- -- -- -- -- -- (991)
------ --- --------- ---------- ------- -------- -------- --------
Balance, December 31, 1999
(unaudited)............. 10,400 $10 -- $ -- $38,953 $ -- $ (1,360) $(23,819)
====== === ========= ========== ======= ======== ======== ========
<CAPTION>
TOTAL
STOCKHOLDER'S
NET
INVESTMENT/
STOCKHOLDER'S
EQUITY
-------------
<S> <C>
Balance, September 30,
1996.................... $ 491
Net increase in
contribution from
stockholder........... 5,049
Net loss and
comprehensive loss.... (1,986)
--------
Balance, September 30,
1997.................... 3,554
Net increase in
contribution from
stockholder........... 28,959
Net loss and
comprehensive loss.... (7,101)
--------
Balance, September 30,
1998.................... 25,412
Net increase in
contribution from
stockholder........... 5,474
Net loss and
comprehensive loss.... (12,082)
--------
Balance, September 30,
1999.................... 18,804
Net decrease in
contribution from
stockholder
(unaudited)........... (1,529)
Issuance of common and
preferred stock upon
capitalization, net of
deferred taxes
(unaudited)........... (2,736)
Deferred stock-based
compensation
(unaudited)........... --
Amortization of deferred
stock-based
compensation
(unaudited)........... 236
Net loss and
comprehensive loss
(unaudited)........... (991)
--------
Balance, December 31, 1999
(unaudited)............. $ 13,784
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
INSILICON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED SEPTEMBER 30, DECEMBER 31,
------------------------------ -------------------
1997 1998 1999 1998 1999
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss........................................... $(1,986) $ (7,101) $(12,082) $(1,315) $ (991)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization.................... 1,175 1,411 5,787 1,314 1,355
Write-off of in-process research and
development.................................... -- 4,250 -- -- --
Write-off of capitalized software................ -- 1,478 4,855 -- --
Stock-based compensation......................... -- -- -- -- 236
Changes in operating assets and liabilities:
Accounts receivable............................ (754) (402) (2,688) (1,518) 1,689
Other assets................................... (299) 546 33 108 (522)
Accounts payable............................... (421) 675 (625) (675) 173
Payroll and related liabilities................ 68 328 553 172 (464)
Other accrued liabilities...................... (11) 2,438 (171) (802) 117
------- -------- -------- ------- -------
Total adjustments............................ (242) 10,724 7,745 (1,401) 2,584
------- -------- -------- ------- -------
Net cash provided by (used in) operating
activities................................... (2,228) 3,623 (4,337) (2,716) 1,593
------- -------- -------- ------- -------
Cash flows from investing activities:
Purchases of short-term and long-term
investments.................................... (500) (338) -- -- --
Additions to computer software costs............. (1,774) (2,359) (712) (162) --
Purchases of property and equipment.............. (547) (625) (425) (163) (64)
Acquisition of Sand, net of cash acquired........ -- (15,573) -- -- --
------- -------- -------- ------- -------
Net cash used in investing activities.......... (2,821) (18,895) (1,137) (325) (64)
------- -------- -------- ------- -------
Cash flows from financing activities:
Increase (decrease) in net contribution from
stockholder.................................... 5,049 15,272 5,474 3,041 (1,529)
------- -------- -------- ------- -------
Net cash provided by (used in) financing
activities................................... 5,049 15,272 5,474 3,041 (1,529)
------- -------- -------- ------- -------
Change in cash and cash equivalents................ -- -- -- -- --
Cash and cash equivalents at beginning of period... -- -- -- -- --
------- -------- -------- ------- -------
Cash and cash equivalents at end of period......... $ -- $ -- $ -- -- --
======= ======== ======== ======= =======
Supplemental disclosure of cash flow information:
Non-cash portion of Sand acquisition contributed
by stockholder................................. $ -- $ 13,687 $ -- $ -- $ --
Issuance of common and preferred stock upon
capitalization, net of deferred taxes............ $ -- $ -- $ -- $ -- $ 2,736
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 1. DESCRIPTION OF OPERATIONS
inSilicon Corporation ("inSilicon" or the "Company") provides communications
semiconductor intellectual property, or SIP, that is used by semiconductor and
systems companies to design the complex semiconductors called systems-on-a-chip,
or SOCs, which are critical components of digital devices. The Company provides
SIP cores, related silicon subsystems and firmware to over 400 customers that
use its technologies in hundreds of different digital devices ranging from
network routers to cellular phones.
The Company was incorporated on November 1, 1999. Prior to that date, the
Company was operated as a division of Phoenix Technologies Ltd. ("Phoenix"). As
of November 30, 1999, the assets, liabilities and operations of the Company were
contributed by Phoenix to inSilicon in exchange for 10.4 million shares of
inSilicon's Series A preferred stock.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
FINANCIAL STATEMENT PRESENTATION. The consolidated financial statements
include the accounts of inSilicon and its wholly owned subsidiaries after the
elimination of all significant intercompany balances.
The consolidated balance sheets as of September 30, 1998 and 1999, and
December 31, 1999, have been prepared using the historical basis of accounting
and include all of the assets and liabilities specifically identifiable to the
Company and certain liabilities that are not specifically identifiable, for
which estimates have been used to allocate a portion of Phoenix's liabilities to
the Company. Until December 1999, cash management for the Company was performed
by Phoenix on a centralized basis and all cash provided by Phoenix was recorded
as equity contributions from Phoenix in these consolidated financial statements.
The consolidated statements of operations include all revenue and costs
attributable to the Company, including an allocation of the costs of facilities
and employee benefits. Additionally, corporate administration, finance and
management costs have been allocated by Phoenix to the Company based on certain
methodologies that management believes are reasonable under the circumstances
(see Note 5).
INTERIM FINANCIAL INFORMATION. The interim financial information as of
December 31, 1999 and for the three months ended December 31, 1998 and 1999 is
unaudited, but includes all adjustments, consisting only of normal recurring
adjustments, that the Company considers necessary for a fair presentation of its
consolidated financial position at that date and its consolidated results of
operations and cash flows for those periods. Operating results for the three
months ended December 31, 1999 are not necessarily indicative of results that
may be expected for any future periods.
FOREIGN CURRENCY TRANSLATION. The Company has determined that the
functional currency of its foreign operations is the local currency. Therefore,
assets and liabilities are translated at year-end exchange rates and
transactions are translated at average exchange rates prevailing during each
period. Translation gains and losses are recorded as a component of
stockholder's equity and transaction gains and losses are recorded in the
consolidated statement of operations in the period in which they occur.
F-7
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
To date, transaction and translation gains and losses related to foreign
currencies have not been significant.
USE OF ESTIMATES. The presentation of 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.
REVENUE RECOGNITION. The Company's revenue is derived from license fees,
engineering services and maintenance and support services sold primarily to
systems and semiconductor companies. Revenue from software license fees is
generally recognized when a non-cancelable license agreement has been signed,
the software product has been shipped, there are no uncertainties surrounding
product acceptance, the fees are fixed and determinable, and collection of the
receivable is considered probable. Engineering services revenue is generally
recognized on a time-and-materials basis or when contractual milestones are met.
Maintenance revenue, which relates principally to maintenance and support
contracts, is generally recognized ratably over the contract period, which is
typically one year. Deferred revenue consists mostly of billings under
maintenance contracts in advance of revenue recognition.
The Company adopted the American Institute of Certified Public Accountants'
("AICPA") 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. The adoption of SOP 97-2
and SOP 98-4 did not have a material impact on the Company's consolidated
financial statements or results of operations.
In December 1998, the AICPA 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 provisions
of SOP 97-2 with respect to the fair value of elements in multiple element
arrangements. The adoption of SOP 98-9 as of October 1, 1999 did not have a
material impact on the Company's consolidated financial statements for the three
months ended December 31, 1999 and such adoption is not expected to
significantly impact future periods. However, full implementation guidelines for
SOP 97-2, SOP 98-4 and SOP 98-9 have not been issued. Once available, the
current revenue recognition accounting practices may need to change and such
changes could effect the timing of the Company's future revenue recognition.
Allowances for estimated returns and customer credits are recorded in the
same period as the related revenue.
No customer accounted for more than 10% of revenue in fiscal years 1997,
1998 or 1999.
FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying values of the Company's
financial instruments, including accounts receivable, accounts payable and
accrued liabilities, approximate their fair values due to their short
maturities. The estimated fair values may not be representative of actual values
of the financial instruments that could be realized as of the period end or that
will be realized in the future.
BUSINESS AND CREDIT RISK. The Company's product revenues are concentrated
in the computer industry, which is highly competitive and rapidly changing.
Significant changes in the industry, customer
F-8
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
requirements, or customer buying behavior or the emergence of competitive
products with new capabilities or technologies could adversely affect operating
results.
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade receivables. The Company extends
credit on open accounts to its customers and generally does not require
collateral. It performs ongoing credit evaluations of all customers and
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
At September 30, 1998 and 1999, no customer accounted for 10% of accounts
receivable.
INVESTMENTS. Investments consist of non-controlling interests in private
company securities, which are recorded at cost. At September 30, 1998 and 1999,
and December 31, 1999, the fair value of such securities approximated cost and
unrealized holding gains were not material.
PROPERTY AND EQUIPMENT. Property and equipment are carried at cost and
depreciated using the straight-line method over the estimated useful life of the
assets, typically three to five years. Leasehold improvements are recorded at
cost and amortized over the lesser of the useful life of the assets or the
remaining term of the related lease.
COMPUTER SOFTWARE COSTS. Computer software costs consist of internally
developed and purchased software under the provisions of Statement of Financial
Accounting Standards No. 86, "COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE
MARKETED" ("SFAS 86"). Costs incurred in the research and development of new
software products and enhancements to existing products are expensed as incurred
until technological feasibility has been established, at which time such costs
are capitalized. Capitalized computer software costs are amortized over the
estimated economic life of the product, generally three to six years, using the
straight-line method or a ratio of current revenue to total anticipated revenue.
inSilicon evaluates the net realizable value of computer software costs on
an ongoing basis based upon gross expected future revenue to be generated from
each product less projected future costs of those sales, and records charges to
reduce carrying value to net realizable value, as necessary. In assessing
expected future revenue and costs, inSilicon relies on a number of factors,
including operating results, business plans, budgets and economic projections.
In addition, inSilicon's evaluation considers non-financial data such as market
trends and customer relationships, buying patterns and product development
cycles.
INCOME TAXES. Income taxes are accounted for in accordance with SFAS No.
109, "ACCOUNTING FOR INCOME TAXES" ("SFAS 109"). Under the asset and liability
method of SFAS 109, deferred tax assets and liabilities are recognized for
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred tax assets and liabilities are measured using
enacted tax rates which apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period of enactment.
F-9
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The net losses incurred for fiscal years 1997, 1998 and 1999 are
attributable to the operations of the Company as a division of Phoenix and were
included in the income tax returns filed or to be filed by Phoenix. See Note 8.
STOCK-BASED COMPENSATION. The Company accounts for its stock option plans
and employee stock purchase plan in accordance with the provisions of the
Accounting Principles Board's Opinion No. 25, "ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES" ("APB 25"). The Company has adopted disclosure only criteria
described in SFAS No. 123, "ACCOUNTING FOR STOCK-BASED COMPENSATION" ("SFAS
123"). See Note 10. As a result, no expense has been recognized related to
employee options to purchase common stock granted with an exercise price equal
to fair market value at the date of grant.
NET LOSS PER SHARE. Through November 30, 1999, the Company was not a
separate legal entity and, as a division of Phoenix, had no historical capital
structure. Therefore, historical net loss per share amounts have not been
presented in the consolidated financial statements.
Pro forma net loss per share amounts for fiscal 1999 and for the three
months ended December 31, 1999, have been computed in accordance with SFAS 128,
"EARNINGS PER SHARE" to reflect the pro forma effect of the Company's
capitalization. Pro forma net loss per share has been computed by dividing the
pro forma net loss by the pro forma number of common shares outstanding, giving
effect to the issuance of preferred shares upon the capitalization of the
Company and the conversion of those preferred shares to common shares upon
completion of the Company's initial public offering of common stock.
COMPREHENSIVE INCOME. The Company adopted SFAS No. 130, "Reporting
Comprehensive Income" ("SFAS 130") which requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income (revenues, expenses, gains and losses) be reported in the
consolidated financial statements. The Company adopted SFAS 130 effective
October 1, 1998. Comprehensive losses were not materially different from net
losses incurred for all periods presented.
SEGMENT INFORMATION. The Company has organized and managed its operations
in a single operating segment for all periods presented. Revenues from customers
outside of the United States were less than 10% of net revenues for all periods
presented in the accompanying consolidated statements of operations.
F-10
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Equipment................................................. $ 2,345 $ 2,799
Leasehold improvements.................................... 7 --
Furniture and fixtures.................................... 187 165
------- -------
2,539 2,964
Less accumulated depreciation and amortization............ (1,062) (1,790)
------- -------
$ 1,477 $ 1,174
======= =======
</TABLE>
Depreciation and amortization expense related to property and equipment
totaled $277,000, $406,000 and $728,000 for fiscal years 1997, 1998 and 1999,
respectively.
NOTE 4. COMPUTER SOFTWARE COSTS
Costs associated with purchased and internally developed computer software
of $2.4 million and $711,000, were capitalized during fiscal years 1998 and
1999, respectively. In addition, inSilicon capitalized approximately $12.8
million of software costs in conjunction with its September 1998 acquisition of
Sand Microelectronics, Inc. ("Sand"). Amortization of computer software costs
charged to cost of revenue was $898,000, $1.0 million, and $2.8 million in
fiscal years 1997, 1998 and 1999, respectively. Accumulated amortization of
capitalized computer software costs was $3.2 million and $5.0 million at
September 30, 1998 and 1999, respectively.
NOTE 5. RELATED PARTY TRANSACTIONS
The Company has entered into an Independent Contractor Agreement with a
company in India of which an officer of the Company is a significant stockholder
for the provision of hardware and software development consulting services.
During fiscal year 1999, the Company paid or accrued $365,000 for services to
that company.
Prior to December 1999, the Company was operated as a division of Phoenix
and the Company's operations were funded entirely by Phoenix. Net financing
provided to the Company by Phoenix in fiscal years 1997, 1998 and 1999 was
approximately $5.0 million, $29.0 million and $5.5 million, respectively. These
cumulative contributions decreased by approximately $1.5 million in the three
months ended December 31, 1999.
For all periods through December 31, 1999, Phoenix has allocated a portion
of its domestic corporate expenses to its divisions, including the Company, in
accordance with SEC Staff Accounting Bulletin No. 55, "Allocation of Expenses
and Related Disclosure in Financial Statements of Subsidiaries, Divisions or
Lesser Business Components of Another Entity." These expenses have included
corporate communications, management, compensation and benefits administration,
payroll, accounts payable, income tax compliance, treasury and other
administration and finance overhead. Allocations and charges were based on
either a direct cost pass-through or a percentage allocation for
F-11
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
such services provided based on factors such as net revenue, headcount and
relative expenditure levels. Such allocations and corporate charges totaled
$2.5 million, $3.3 million, $8.3 million and $1.3 million for fiscal years 1997,
1998 and 1999, and the three months ended December 31, 1999, respectively.
Management believes that the basis used for allocating corporate services is
reasonable. While the terms of these transactions may differ from those that
would result from transactions among unrelated parties, management does not
believe such differences would be material.
The Company has entered into certain agreements with Phoenix effective
November 30, 1999 for the purpose of defining their ongoing relationship.
CONTRIBUTION AGREEMENT
Pursuant to the Contribution Agreement, Phoenix transferred to the Company
ownership of all assets reflected on the Company's consolidated balance sheet,
specified intellectual property and technology related to and necessary for
inSilicon to conduct its business, as well as customer and supplier contracts
related primarily to the semiconductor intellectual property business. As of the
effective date, the Company also assumed all liabilities from Phoenix primarily
resulting from operations of the business or resulting from any asset that
Phoenix transferred to the Company. For its contribution, Phoenix received
10,400,000 shares of inSilicon Series A Preferred Stock that convert to an equal
number of shares of common stock at the completion of the initial public
offering of common stock. The Company also issued to Phoenix a warrant to
purchase 50,000 shares of inSilicon common stock at $.01 per share, exercisable
at any time until May 31, 2002.
SERVICES AND COST-SHARING AGREEMENT
The Services and Cost-Sharing Agreement covers various services that Phoenix
provides to the Company and the method by which certain costs will be shared by
the companies. The services include data processing, telecommunications and
information technology support services, accounting, financial management, tax
preparation, payroll, stockholder and public relations, legal, human resources
administration, procurement, real estate management and other administrative
functions. The shared costs include the costs of the office space the Company
occupies at Phoenix's headquarters and insurance premiums.
The amount the Company will pay for services and shared costs will generally
be equal to the aggregate cost to Phoenix and inSilicon of the services and
costs multiplied by a percentage representing the number of the Company's
employees to the total number of Phoenix and inSilicon employees. The Services
and Cost-Sharing Agreement has an initial term that extends to June 30, 2000 for
all services other than accounting and an initial term that extends to
September 30, 2000 with respect to accounting services. The Services and
Cost-Sharing Agreement will be renewed on a month-to-month basis. Phoenix can
terminate after those dates on 30 days' written notice. The Company can
terminate any one or more of the services at any time on 30 days' written
notice.
F-12
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 5. RELATED PARTY TRANSACTIONS (CONTINUED)
TAX-SHARING AGREEMENT
The Company entered into a Tax-Sharing Agreement with Phoenix concerning
each party's obligations for various tax liabilities. The Tax-Sharing Agreement
provides that Phoenix generally will pay all federal, state, local and foreign
taxes relating to the Company's business before November 30, 1999. For any
taxable period after that date in which the Company is included in a Phoenix
consolidated or combined tax return, the agreement provides that the Company
will make payments to Phoenix based upon the amount of U.S. federal and state
income taxes that would have been paid by the Company had it and each of its
subsidiaries filed separate federal and state income tax returns, subject to
specific adjustments. Further, if the Company incurs losses on either a federal
or state basis that reduce Phoenix's consolidated or combined tax liability,
Phoenix will pay the Company an amount equal to the tax savings generated by the
Company's losses.
INITIAL PUBLIC OFFERING AGREEMENT
The Initial Public Offering Agreement governs the relationship between the
Company and Phoenix following the initial public offering in a number of
respects.
EMPLOYEE MATTERS AGREEMENT
The Company entered into an Employee Matters Agreement with Phoenix to
allocate assets, liabilities, and responsibilities relating to current and
former United States employees of inSilicon Corporation and their participation
in the benefit plans, including stock plans, that Phoenix currently sponsors and
maintains.
REGISTRATION RIGHTS AGREEMENT
The Registration Rights Agreement provides that, at Phoenix's request, the
Company will use its best efforts to register for sale under federal and state
securities laws any shares of inSilicon common stock (or any other securities
Phoenix receives in exchange for inSilicon common stock) that Phoenix owns,
subject to specified limitations. Phoenix also will have the right to include
its inSilicon shares in other registrations of common stock initiated by the
Company.
TECHNOLOGY DISTRIBUTOR AGREEMENT
The Company entered into arrangements with Phoenix to act as its sales
representative and distributor of its firmware technology in Japan and our full
line of technology and related services in the rest of Asia.
NOTE 6. BUSINESS COMBINATIONS
SAND MICROELECTRONICS, INC. In September 1998, Phoenix acquired Sand, a
leading supplier of standards-based system software and semiconductor
intellectual property for PCs and information appliances. The purchase price
consisted of approximately $18.6 million in cash, 464,000 shares of Phoenix's
common stock with a fair value of $2.7 million, options to purchase
approximately 264,000 shares of Phoenix's common stock with a fair value of
$1.6 million in exchange for Sand stock options,
F-13
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 6. BUSINESS COMBINATIONS (CONTINUED)
and up to $3.7 million in performance incentives to be paid through fiscal 2001.
Of the total performance incentives, approximately $1.6 million of minimum
anticipated payments was recorded as accrued merger costs. None of these costs
had been paid as of December 31, 1999.
The acquisition was accounted for using the purchase method of accounting.
Accordingly, the assets and liabilities of the acquired business are included in
the consolidated balance sheet as of September 30, 1998. The results of
operations of Sand from the date of acquisition through September 30, 1998 were
included in the accompanying consolidated statement of operations for the year
ended September 30, 1998.
The total purchase cost of approximately $33.7 million exceeded the assets
acquired as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Total consideration......................................... $ 24,494
Liabilities assumed......................................... 7,749
Acquisition costs........................................... 1,465
--------
Total purchase cost......................................... 33,708
Less: Assets acquired....................................... (19,831)
Less: Acquired in-process research and development.......... (4,250)
--------
Excess of purchase cost over assets acquired................ $ 9,627
========
</TABLE>
The assets acquired include $12.8 million of software development costs
(that are being amortized on a straight-line basis over six years) and $2.8
million of other intangible assets (that are being amortized on a straight-line
basis over three to six years). The other intangible assets capitalized
represents the value of the distribution channel, assembled workforce and
related agreements acquired. The $9.6 million of excess of purchase cost over
assets acquired was recorded as goodwill and is being amortized on a
straight-line basis over six years. The Company regularly reviews the carrying
value of these intangible assets for impairment in accordance with SFAS
No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED
ASSETS TO BE DISPOSED OF." Any impairment to be recognized is measured by the
amount by which the carrying amount of the asset exceeds its fair market value.
The in-process research and development charge in fiscal year 1998 was an
allocation of a portion of the Sand purchase price for development projects that
were not yet capitalizable under the provisions of Statement of Financial
Accounting Standards No. 86, "Computer Software to be Sold, Leased or Otherwise
Marketed." The Sand projects under development upon acquisition related to the
development of semiconductor intellectual property technology designed for
various communications standards. The value of the in-process charge associated
with each project is the responsibility of Company management, and was
determined by estimating the future net cash flows from the project, and
discounting the net cash flows back to their present value. If these projects
are not successfully developed and/or marketed, future revenue and profitability
of the Company may be adversely affected. Additionally, the value of other
intangible assets acquired may become impaired.
F-14
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 6. BUSINESS COMBINATIONS (CONTINUED)
The following pro forma, unaudited information includes the consolidated
results of operations for the years ended September 30, 1997 and 1998, as if the
Sand acquisition had occurred at the beginning of each period presented at the
purchase price established in September 1998. The results of operations are not
necessarily indicative of those which would have occurred had the acquisition
actually been made at the beginning of each of the respective periods presented
or of future operations of the combined companies. The pro forma results for
1997 combine inSilicon's results for the year ended September 30, 1997 with the
results of Sand for the year ended December 31, 1997. The pro forma results for
fiscal year 1998 combine inSilicon's results for the year ended September 30,
1998, with the results of Sand for the same period. Accordingly, the fiscal 1997
operating results included a three-month period (ended December 31, 1997) that
is also included in the fiscal 1998 operating results. Revenue and an operating
loss of $443,000 and $470,000 were recorded in this three-month period,
respectively. The following pro forma results for the years ended September 30,
1997 and 1998, include the straight-line amortization of acquired intangibles,
primarily over a period of six years; and the pro forma fiscal 1998 results
include a $4.3 million write-off of acquired in-process research and development
discussed above (in thousands):
<TABLE>
<CAPTION>
PRO FORMA,
UNAUDITED
-------------------
1997 1998
-------- --------
<S> <C> <C>
Revenue................................................... $10,135 $15,128
Net loss.................................................. (3,978) (9,761)
</TABLE>
AWARD SOFTWARE INTERNATIONAL, INC. Also in September 1998, Phoenix
completed a merger with Award Software International, Inc. ("Award"), a leading
provider of system enabling and management software for personal computers.
Phoenix exchanged approximately 8.8 million shares of its common stock for all
of the common stock of Award. Each share of Award was exchanged for 1.225 shares
of Phoenix common stock. In addition, outstanding Award employee stock options
were converted at the same exchange ratio into options to purchase approximately
2.3 million shares of Phoenix common stock. The merger was accounted for as a
pooling of interests. Certain of Award's operations were merged with inSilicon's
operations, and accordingly, inSilicon's consolidated financial statements
include the combined results of operations and financial position for all
periods and dates presented. The Award operations accounted for less than 10% of
the Company's revenue and operating costs for all periods prior to the merger.
F-15
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 6. BUSINESS COMBINATIONS (CONTINUED)
The results of operations for the separate companies prior to the merger and
the combined amounts included in the consolidated financial statements were as
follows:
<TABLE>
<CAPTION>
NINE-MONTHS
YEAR ENDED ENDED
SEPTEMBER 30, 1997 JUNE 30, 1998
<S> <C> <C>
----------------------------------
<CAPTION>
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Revenue:
inSilicon..................................... $ 5,006 $ 6,001
Award......................................... 105 180
-------- --------
Combined...................................... $ 5,111 $ 6,181
======== ========
Net Loss:
inSilicon..................................... $ (1,868) $ (707)
Award......................................... (118) (523)
-------- --------
Combined...................................... $ (1,986) $ (1,230)
======== ========
</TABLE>
NOTE 7. MERGER AND RESTRUCTURING CHARGES
Merger and restructuring charges during the years ended September 30, 1998
and 1999, were as follows:
<TABLE>
<CAPTION>
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Restructuring............................................... $ 50 $1,195
Asset write-offs............................................ 1,478 4,855
In-process research and development......................... 4,250 --
------ ------
$5,778 $6,050
====== ======
</TABLE>
These charges were mostly related to the integration of Sand into inSilicon
and severance costs allocated to inSilicon from Phoenix related to the
elimination of certain corporate management positions.
1998 CHARGES
Included in the fourth quarter of fiscal 1998 was a charge of $5.8 million
related to the acquisition of Sand. Included in this charge was a $1.5 million
write-off of software development costs associated with semiconductor
intellectual property that were capitalized on the historical balance sheet of
inSilicon under SFAS 86. The write-off was calculated based upon the excess of
carrying value over the difference between the gross expected future revenue to
be generated and the projected future costs of such revenue, and related
primarily to projects that were redundant between inSilicon and Sand.
F-16
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 7. MERGER AND RESTRUCTURING CHARGES (CONTINUED)
The in-process research and development charge in fiscal 1998 was an
allocation of a portion of the purchase price for Sand for projects that were
not yet capitalizable under the provisions of SFAS 86.
1999 CHARGES
Included in fiscal 1999 was a restructuring charge of $6.1 million due to
the write-off of $4.9 million of capitalized software development costs and
approximately $1.2 million of severance and other costs allocated from Phoenix.
The capitalized software development cost write-off was calculated based upon
the excess of carrying value over the difference between the gross expected
future revenue to be generated and the projected future costs of such revenue,
and was related primarily to reduced revenue expectations due to changing market
conditions. The severance and other costs allocated from Phoenix related to the
elimination of nine Phoenix corporate management positions ($1.1 million) and
three inSilicon positions ($90,000). The severance costs incurred for the
Phoenix positions were allocated to the Company based upon relative headcount,
consistent with the allocation of other Company costs incurred by Phoenix.
None of the fiscal 1998 merger and restructuring charges and approximately
$200,000 of the fiscal 1999 restructuring charges were unpaid as of
December 31, 1999. The remaining unpaid charges will mostly be paid in fiscal
year 2000.
NOTE 8. INCOME TAXES
The net losses incurred through November 30, 1999, are attributable to the
operations of the Company as a division of Phoenix and were included in the
income tax returns filed or to be filed by Phoenix. Because the Company will not
receive any benefit for its historical operating losses incurred through
November 30, 1999, no income tax benefit has been reflected for the periods
presented.
The unaudited pro forma net losses for fiscal 1999 and for the three months
ended December 31, 1999, give effect to income tax credits related to the
reversal of deferred income tax liabilities in connection with the Company's
acquisition of Sand. These credits would have been recorded had the Company
operated as a separate, stand-alone entity.
In conjunction with the capitalization of the Company as of November 30,
1999, a net deferred tax liability of $2.7 million was transferred by Phoenix to
the Company, representing the future tax effects of historical temporary
book/tax differences applicable to the Company.
The Company and Phoenix have entered into a tax-sharing agreement. See
Note 5. In general, the Company will be included in Phoenix's consolidated group
for federal income tax purposes for so long as Phoenix beneficially owns at
least 80% of the total voting power and value of the Company's outstanding
stock.
F-17
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 9. STOCKHOLDER'S EQUITY
In November 1999, the Company issued 10,400,000 shares of Series A
convertible preferred stock and a warrant to purchase 50,000 shares of common
stock to Phoenix in exchange for its accumulated net investment. The rights and
preferences of each Series A preferred share are as follows:
- liquidation preference of $8.66;
- voting rights equal to one vote for each share of common stock into which
such convertible preferred stock could be converted;
- convertible into one share of common stock at the option of the holder;
and
- automatically converted into one share of common stock upon the sale of
common stock in a public offering pursuant to a registration statement
under the Securities Act of 1933, as amended, with proceeds of greater
than $10 million and a price to the public of at least $7.50 per share.
The warrant has an exercise price of $0.01 per share, is immediately
exercisable and expires May 31, 2002.
NOTE 10. EMPLOYEE BENEFIT PLANS
Employees of the Company have historically participated in stock-based
compensation and savings plans that are administered through Phoenix and involve
options to acquire Phoenix's common stock.
EMPLOYEE STOCK PURCHASE PLAN. Phoenix has an employee stock purchase plan
for all eligible employees. Under the terms of the plan, shares of Phoenix's
common stock may be purchased at six-month intervals at 85% of the lower of the
fair market value on the first or the last day of each six-month period.
Employees may purchase shares having a value not exceeding 10% of their gross
compensation during an offering period. During fiscal 1997, 1998 and 1999,
employees of the Company purchased approximately 7,000, 20,000 and 61,000 shares
under the Phoenix plan at average prices of $12.37, $9.96 and $5.92 per share,
respectively.
401(K) SAVINGS PLAN. Phoenix has a retirement plan ("401(k) Plan") that is
intended to qualify under Section 401(k) of the Internal Revenue Code. This plan
covers U.S. employees who meet minimum age and service requirements and allows
participants to defer a portion of their annual compensation on a pre-tax basis.
In addition, Company contributions to the 401(k) Plan may be made at the
discretion of the board of directors. Phoenix has historically made matching
contributions of 25% of each participant's contribution, up to a match of $1,000
per year per participant. Matching contributions vest over a four-year period
which starts with the participant's employment start date with Phoenix.
Phoenix's matching contributions for employees of the Company were approximately
$17,000, $29,000 and $30,000 in fiscal 1997, 1998 and 1999, respectively.
STOCK OPTION PLANS. Phoenix has various stock option plans for employees,
officers, consultants and independent contractors. Incentive stock options under
these Phoenix plans may not be granted at a price less than 100% (110% in
certain cases) of the fair market value of the shares on the date of grant.
Nonqualified options may not be granted at a price less than 85% of the fair
value of the shares
F-18
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
on the date of grant. Options vest over a period determined by the board of
directors, generally four years, and have a term not exceeding ten years.
The following table sets forth the option activity under Phoenix's and in
Silicon's option plans for all employees of the Company. Phoenix shares have
been restated to equivalent inSilicon shares based upon the appropriate exchange
ratio. See further discussion of the exchange ratio below in Note 10.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES EXERCISE PRICE
--------- --------------
<S> <C> <C>
Shares under option, September 30, 1996.............. 493,268 $3.60
Options granted...................................... 361,476 5.64
Options exercised.................................... (87,086) 0.17
Options canceled..................................... (31,885) 5.38
--------- -----
Shares under option, September 30, 1997.............. 735,773 4.94
Options granted...................................... 494,128 2.78
Options exercised.................................... (28,029) 0.17
Options canceled..................................... (57,798) 6.98
--------- -----
Shares under option, September 30, 1998.............. 1,144,074 4.02
Options granted...................................... 639,390 5.33
Options exercised.................................... (156,767) 0.80
Options canceled..................................... (154,749) 6.00
--------- -----
Shares under option, September 30, 1999.............. 1,471,948 4.72
Options granted (unaudited).......................... 1,036,621 7.37
Options exercised (unaudited)........................ (14,092) 1.76
Phoenix options not exchanged (unaudited)............ (133,486) 6.87
--------- -----
Shares under option, December 31, 1999 (unaudited)... 2,348,844 $6.14
========= =====
</TABLE>
F-19
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table summarizes information about Phoenix's stock options
outstanding at September 30, 1999, on an as-converted basis to the Company's
shares:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------------
NUMBER AVERAGE WEIGHTED NUMBER
OUTSTANDING REMAINING AVERAGE EXERCISABLE WEIGHTED
AT SEPT. 30, CONTRACTUAL EXERCISE AT SEPT. 30, AVERAGE
RANGE OF EXERCISE PRICES 1999 LIFE (YEARS) PRICE 1999 EXERCISE PRICE
- ------------------------ ------------ ------------ -------- ------------ --------------
<S> <C> <C> <C> <C> <C>
$0.06 - $0.44........................ 76,789 6.89 $0.18 33,294 $0.19
$0.56 - $2.82........................ 254,815 6.45 0.72 90,410 1.02
$2.96 - $4.66........................ 394,565 8.72 4.12 100,328 4.00
$4.70 - $7.42........................ 513,076 9.50 5.91 52,620 6.37
$7.45 - $10.67....................... 232,703 7.33 8.99 167,176 9.29
--------- ---- ----- ------- -----
1,471,948 8.28 $4.72 443,828 $5.38
========= ==== ===== ======= =====
</TABLE>
In December 1999, the Company's stockholder authorized the 1999 Stock Option
Plan for the issuance of up to 2,700,000 shares of common stock to employees,
officers, directors and independent contractors. Incentive stock options may be
granted under this plan at a price not less than 100% (110% in some cases) of
the fair market value of the shares on the date of grant. Non-qualified options
may be granted at a price not less than 85% of the fair value of the shares on
the date of the grant.
In December 1999, the Company implemented a program under which options to
purchase shares of Phoenix common stock held by inSilicon employees could be
exchanged for options to purchase the Company's common stock under the 1999
Stock Option Plan. The exchange was based upon a ratio of 1.862 shares of
inSilicon common stock for each share of Phoenix common stock. Options to
purchase 1,358,779 shares of inSilicon common stock with an average exercise
price of $5.25 were issued under this exchange program. The new options have
comparable terms and vesting schedules and, at the date of the exchange, had
equivalent intrinsic value and ratio of exercise price to fair value of common
stock as the exchanged Phoenix options.
In December 1999, the Company granted options to employees, directors and
consultants to purchase 990,065 shares of common stock under the 1999 Stock
Option Plan. These options have exercises prices that were less than the per
share value of the Company's common stock on the date of grant, and therefore
the Company recorded deferred stock compensation associated with these grants of
approximately $1.6 million. This deferred stock compensation will be amortized
over the vesting period of the underlying options, generally four years. As of
December 31, 1999, options to purchase 1,651,156 shares were available for
future grants under this plan.
FAIR VALUE DISCLOSURES. Pro forma information regarding net loss is
required by SFAS 123. This information is required to be determined as if
Phoenix had accounted for its employee stock options granted to inSilicon
employees under the fair value method of that statement. The fair value of
options
F-20
<PAGE>
INSILICON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(INFORMATION AS OF DECEMBER 31, 1999 AND FOR THE THREE MONTHS ENDED
DECEMBER 31, 1998 AND 1999 IS UNAUDITED)
NOTE 10. EMPLOYEE BENEFIT PLANS (CONTINUED)
granted in fiscal 1997, 1998 and 1999, reported below has been estimated as of
the date of the grant using a Black-Scholes multiple option pricing model with
the following assumptions:
<TABLE>
<CAPTION>
EMPLOYEE STOCK PURCHASE
EMPLOYEE STOCK OPTIONS PLAN
------------------------------ ------------------------------
1997 1998 1999 1997 1998 1999
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Expected life from vest date (in years).......... 0.70 0.70 0.70 0.50 0.50 0.50
Risk-free interest rate.......................... 6-7% 6-7% 5-6% 6-7% 6-7% 5-6%
Volatility....................................... 0.63 0.57 0.56 0.63 0.57 0.56
Dividend yield................................... None None None None None None
</TABLE>
The weighted average estimated fair value of employee stock options granted
during fiscal 1997, 1998 and 1999, was $4.25, $4.03 and $2.35 per share,
respectively. The weighted average estimated fair value of shares granted under
the Purchase Plan during fiscal 1997, 1998 and 1999 was $2.21, $1.97 and $1.15,
respectively. For purposes of pro forma disclosures, the estimated fair value of
the options is amortized to expense over the vesting period of the options. Had
compensation costs for inSilicon's stock-based compensation plans been
determined based on the fair value at the grant date for awards under those
plans consistent with the method of SFAS 123, inSilicon's net loss for the years
ended September 1997, 1998 and 1999, would have been $2.4 million, $7.7 million,
and $12.2 million, respectively.
NOTE 11. SUBSEQUENT EVENTS
In January 2000, the Board of Directors of the Company approved the filing
of a registration statement by the Company under the Securities Act of 1933, as
amended, relating to an initial public offering of the Company's common stock.
In January 2000, the Company entered into a $5.0 million secured bank line
of credit agreement that will be effective upon the closing of an underwritten
public offering. Borrowings on the line bear interest at the bank's prime rate
plus 0.25%. The line of credit agreement contains various covenants that require
the Company to meet certain financial ratios. The line of credit is secured by
the assets of the Company and expires in January 2001.
In January 2000, the Company's stockholders authorized the 2000 employee
stock purchase plan. Under the terms of the plan, employees may elect to deduct
up to 10% of their total compensation to purchase the Company's common stock.
The plan contains consecutive, overlapping, twenty-four month offering periods,
and each offering period includes four six-month purchase periods. Purchases of
Company stock are made at the end of each purchase period at a price generally
equal to 85% of the lower of the fair market value of the common stock either at
the beginning of the offering period or at the end of the purchase period. A
total of 250,000 shares of common stock have been reserved for issuance under
this 2000 purchase plan, plus annual increases equal to the lesser or
(a) 0.3125% of the outstanding shares on the last day of the prior fiscal year
and (b) 100,000 shares.
F-21
<PAGE>
REPORT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders
of Sand Microelectronics, Inc.
In our opinion, the accompanying balance sheets and the related statements
of operations, of shareholders' equity and of cash flows present fairly, in all
material respects, the financial position of Sand Microelectronics, Inc. at
December 31, 1996 and 1997, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
March 30, 1998
F-22
<PAGE>
SAND MICROELECTRONICS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1996 1997
-------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $601,000 $3,116,000
Accounts receivable....................................... 127,000 188,000
Prepaid expenses and other current assets................. 34,000 22,000
Deferred tax assets....................................... 35,000 158,000
-------- ----------
Total current assets.................................... 797,000 3,484,000
Property and equipment, net................................. 121,000 209,000
Deposits.................................................... 5,000 5,000
-------- ----------
$923,000 $3,698,000
======== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.......................................... $ 45,000 $ 71,000
Accrued liabilities....................................... 26,000 141,000
Income taxes payable...................................... 98,000 897,000
Sales taxes payable....................................... 18,000 24,000
Current portion of capital leases......................... 13,000 32,000
Current portion of notes payable to founders.............. 40,000 20,000
Deferred revenue.......................................... 300,000 730,000
-------- ----------
Total current liabilities............................... 540,000 1,915,000
Notes payable to founders, net of current portion........... 20,000 --
Capital lease obligations, long term........................ 12,000 12,000
-------- ----------
572,000 1,927,000
======== ==========
Commitments (Note 7)
Shareholders' equity:
Common stock, no par value; 50,000,000 shares authorized;
12,000,000 and 12,107,000 shares issued and
outstanding............................................. 5,000 9,000
Retained earnings......................................... 346,000 1,762,000
-------- ----------
Total shareholders' equity.............................. 351,000 1,771,000
-------- ----------
$923,000 $3,698,000
======== ==========
</TABLE>
F-23
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Revenues:
Licenses.................................................. $1,478,000 $4,330,000
Maintenance, engineering services and other services...... 344,000 694,000
---------- ----------
Net revenues............................................ 1,822,000 5,024,000
========== ==========
Cost of net revenue
Licenses.................................................. 8,000 8,000
Maintenance, engineering services and other services...... 140,000 93,000
---------- ----------
Cost of net revenues.................................... 148,000 101,000
---------- ----------
Gross profit................................................ 1,674,000 4,923,000
---------- ----------
Operating expenses:
Research and development.................................. 738,000 1,562,000
Sales and marketing....................................... 437,000 652,000
General and administrative................................ 177,000 416,000
---------- ----------
Total operating expenses................................ 1,352,000 2,630,000
---------- ----------
Income from operations...................................... 322,000 2,293,000
Interest income............................................. 8,000 75,000
Interest expense............................................ (6,000) (8,000)
---------- ----------
Income before provision for income taxes.................... 324,000 2,360,000
Provision for income taxes.................................. (121,000) (944,000)
---------- ----------
Net income.................................................. $ 203,000 $1,416,000
========== ==========
</TABLE>
F-24
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
--------------------- RETAINED SHAREHOLDERS'
SHARES AMOUNT EARNINGS EQUITY
---------- -------- ---------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995..................... 12,000,000 $5,000 $ 143,000 $ 148,000
Net income....................................... -- -- 203,000 203,000
---------- ------ ---------- ----------
Balance at December 31, 1996..................... 12,000,000 5,000 346,000 351,000
Issuance of Common Stock......................... 2,000 1,000 -- 1,000
Exercise of Common Stock options................. 105,000 3,000 -- 3,000
Net income....................................... -- -- 1,416,000 1,416,000
---------- ------ ---------- ----------
Balance at December 31, 1997..................... 12,107,000 $9,000 $1,762,000 $1,771,000
========== ====== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1996 1997
--------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $203,000 $1,416,000
Adjustments to reconcile net income to net cash provided
by
operating activities:
Depreciation.......................................... 37,000 82,000
Changes in assets and liabilities:
Accounts receivable................................. (58,000) (61,000)
Prepaid expenses and other current assets........... (38,000) 12,000
Accounts payable.................................... 56,000 26,000
Accrued liabilities................................. (48,000) 115,000
Taxes payable....................................... 75,000 682,000
Deferred revenue.................................... 278,000 430,000
-------- ----------
Net cash provided by operating activities......... 505,000 2,702,000
-------- ----------
Cash flows from investing activities:
Purchases of property and equipment..................... (93,000) (127,000)
-------- ----------
Net cash used in investing activities............. (93,000) (127,000)
-------- ----------
Cash flows from financing activities:
Proceeds from issuance of Common Stock.................. -- 4,000
Repayment of notes payable.............................. -- (40,000)
Principal payment of capital lease obligations.......... (1,000) (24,000)
-------- ----------
Net cash (provided by) used in financing
activities...................................... (1,000) (60,000)
-------- ----------
Net increase in cash and cash equivalents................... 411,000 2,515,000
Cash and cash equivalents at beginning of year.............. 190,000 601,000
-------- ----------
Cash and cash equivalents at end of year.................... $601,000 $3,116,000
======== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for income taxes.............................. $ 43,000 $ 152,000
Cash paid for interest.................................. 6,000 8,000
Capital leases for equipment............................ 26,000 43,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
THE COMPANY
Sand Microelectronics, Inc., (the "Company"), designs, develops and markets
semiconductor intellectual property ("IP") with a focus on connectivity
standards, such as IEEE 1394, USB and PCI. The Company licenses IP
(synthesizable cores and related tools) to systems and semiconductor companies
in the computer, communication and consumer markets. The Company was
incorporated in California in June 1991.
Following is a summary of the Company's significant accounting policies.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
REVENUE RECOGNITION
The Company's revenues are derived from product licenses, support and
engineering services. Annual maintenance services are charged separately from
product licenses.
Product license fees are recognized upon shipment if no significant vendor
obligations remain and if collection of the resulting receivable is considered
probable. In instances where significant vendor obligations exist, revenue
recognition is delayed until the obligation has been satisfied.
Annual support revenues consist of ongoing support and product updates and
are recognized ratably over the term of the related contract. Payments received
in advance of revenue recognition are recorded as deferred revenue. Engineering
and other services consist of contract consulting, training and development
services and the related revenue is recognized as the services are performed.
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 consist primarily of certificates of deposit, money market accounts
and savings accounts, the fair value of which approximates cost.
SIGNIFICANT CUSTOMERS AND CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to a
concentration of credit risk consist of cash equivalents, short-term investments
and accounts receivable. The Company deposits cash and cash equivalents with
high credit quality financial institutions. The Company's accounts receivable
are derived from revenue earned primarily from customers located in the U.S.,
Japan and Germany. Export sales, principally to Japan and Europe, are generally
transacted in U.S. dollars and represented 4% and 2%, respectively, of net
revenues in 1996 and 14% and 12%, respectively, of net revenues in 1997. The
Company performs ongoing credit evaluations of its customers' financial
condition and, generally,
F-27
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
requires no collateral from its customers. The Company maintains an allowance
for doubtful accounts receivable based upon the expected collectibility of all
accounts receivable.
At December 31, 1996, approximately 78% of total accounts receivable
represented amounts due from three customers. At December 31, 1997,
approximately 81% of total accounts receivable represented amounts due from five
customers. Sales to two of the Company's customers accounted for 33% and 12% of
net revenues for the year ended December 31, 1996, and 14% and 12% of net
revenues for the year ended December 31, 1997.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets,
generally three to seven years.
SOFTWARE DEVELOPMENT COSTS
Software development costs are classified as research and development and
are expensed as incurred and capitalized once technological feasibility is
established. The capitalized costs are then amortized on a straight-line basis
over the estimated product life, or based on the ratio of current revenues to
total projected product revenues, whichever is greater. To date, no software
development costs have been capitalized.
INCOME TAXES
The Company utilizes the liability method of accounting for income taxes.
Under the liability method, deferred tax liabilities and assets are recognized
for the expected future tax consequences of temporary differences between the
carrying amounts and the tax bases of the Company's assets and liabilities.
STOCK-BASED COMPENSATION
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees," ("APB No. 25") and related interpretations in
accounting for its stock-based compensation plans, as permitted by Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS No. 123"). FAS 123 defines a "fair value" based method of
accounting for an employee stock option or similar equity instrument and
encourages, but does not require, entities to adopt that method of accounting
for their employee stock compensation plans. The Company has adopted, as
required, the disclosure provisions of FAS 123. The pro forma disclosures of the
difference between compensation cost included in net income under APB 25 and the
related cost measured by the fair value method of FAS 123 are presented in
Note 6.
RECENT ACCOUNTING PRONOUNCEMENTS
In October 1997, the American Institute of Certified Public Accountants
issued Statement of Position No. 97-2 ("SOP 97-2"), "Software Revenue
Recognition," which the Company is required to adopt for transactions entered
into in the fiscal year beginning January 1, 1998. SOP 97-2 provides guidance on
recognizing revenue on software transactions and supersedes SOP 91-1, "Software
F-28
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
Revenue Recognition." The Company believes that the adoption of SOP 97-2 will
not have a significant impact on its current licensing or revenue recognition
practices.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of the Company's financial instruments, including
accounts receivable, accounts payable and accrued liabilities, approximate fair
value due to their short maturities. The carrying value of the Company's
long-term debt approximates fair value as its interest rates approximate market
rates for borrowings with similar terms and maturities.
NOTE 2--BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
PROPERTY AND EQUIPMENT
Computers, lab equipment and software..................... $198,000 $345,000
Furniture, fixtures and office equipment.................. 4,000 27,000
-------- --------
202,000 372,000
Less: Accumulated depreciation and amortization........... (81,000) (163,000)
-------- --------
$121,000 $209,000
======== ========
ACCRUED LIABILITIES
Vacation.................................................. $ 14,000 $ 31,000
Sales commission.......................................... -- 35,000
Other..................................................... 12,000 75,000
-------- --------
$ 26,000 $141,000
======== ========
</TABLE>
NOTE 3--RELATED PARTY TRANSACTIONS:
SAND MICROELECTRONICS PVT. LTD., INDIA
The Company obtains consulting services from Sand Microelectronics
Pvt. Ltd., India ("Sand India") which is 100% owned by the owners of Sand
Microelectronics, Inc.
Purchases from Sand India for the years ended December 31, 1996 and 1997 of
$61,000 and $178,000, respectively, are for consulting for design and
engineering services. There were no receivables or payables outstanding at
December 31, 1996 and 1997.
On January 22, 1998, the Company entered into a contract for $300,000 for
engineering services from Sand India. Payment terms are $30,000 per month,
commencing in January 1998.
F-29
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--RELATED PARTY TRANSACTIONS: (CONTINUED)
ASPEN TECHNOLOGIES PVT. LTD. INDIA
From time to time the company obtains consulting services from Aspen
Technologies ("Aspen") which is partially owned by the owners of Sand
Microelectronics, Inc.
There were no purchases from Aspen Technologies for the years ended
December 31, 1996 and 1997. There were no receivables/payables outstanding at
December 31, 1996 and 1997.
NOTES PAYABLE TO FOUNDERS
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1996 1997
-------- --------
<S> <C> <C>
10% note; interest payable December 31, 1997; matures
January 1998.............................................. $60,000 $20,000
Less current portion........................................ (40,000) (20,000)
------- -------
Long-term portion of notes payable to founders $20,000 $ --
======= =======
</TABLE>
NOTE 4--INCOME TAXES:
The provisions for income taxes consist of the following, for the years
ended December 31, 1996 and 1997:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1996 1997
-------- ---------
<S> <C> <C>
Current tax expense:
Federal................................................... $124,000 $ 840,000
State..................................................... 27,000 207,000
Foreign................................................... 5,000 20,000
-------- ---------
156,000 1,067,000
-------- ---------
Deferred tax benefit:
Federal................................................... (30,000) (105,000)
State..................................................... (5,000) (18,000)
-------- ---------
(35,000) (123,000)
-------- ---------
Provision for income taxes.................................. $121,000 $ 944,000
======== =========
</TABLE>
Deferred income tax assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
-------- --------
<S> <C> <C>
Deferred revenue.......................................... $30,000 $126,000
Nondeductible reserves and other.......................... 5,000 32,000
------- --------
Total................................................... $35,000 $158,000
======= ========
</TABLE>
F-30
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--INCOME TAXES: (CONTINUED)
Differences between the Company's effective tax rate and the federal
statutory rate were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1996 1997
---- ----
<S> <C> <C>
Federal statutory rate...................................... 35% 35%
Research and development tax credit......................... (8%) (3%)
State taxes (net of federal benefit)........................ 8% 9%
Non deductible expenses..................................... 1% 1%
Other....................................................... 1% (2%)
------- -------
Effective tax rate.......................................... 37% 40%
======= =======
</TABLE>
NOTE 5--BORROWINGS:
LINE OF CREDIT
In December 1997, the Company entered into a line of credit agreement ("Line
of Credit") with a bank, which allows the Company to borrow up to $500,000
through December 14, 1998. At December 31, 1997, the Company has not drawn down
on the Line of Credit. The Line of Credit bears interest at the bank's prime
rate plus 0.5% (8.5% at December 31, 1997). Borrowings are secured by
substantially all of the Company's assets. The credit agreement requires the
Company to meet certain financial covenants including quick ratio, tangible net
worth and profitability requirements. At December 31, 1997, the Company met all
such requirements.
EQUIPMENT LEASE
At December 31, 1996, the Company had $25,000 outstanding and due under
various equipment lease financings. These financings expire in October 1998 and
accrue interest at a rate of 11.8% per annum. At December 31, 1997, the Company
had $44,000 outstanding and due under various equipment lease financings. These
financings expire between January 1998 and May 1999, and accrue interest at a
rate of 11.8% to 15.4% per annum.
NOTE 6--EMPLOYEE STOCK OPTION AND BENEFIT PLANS:
In 1995, the Company adopted a stock option plan (the "Plan"). The Plan
provides for the granting of nonqualified stock options to employees and
consultants of the Company. At December 31, 1997, the Company has reserved
2,000,000 shares of Common Stock for issuance under the Plan.
F-31
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--EMPLOYEE STOCK OPTION AND BENEFIT PLANS: (CONTINUED)
Plan activity was as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------
WEIGHTED
OPTIONS AVERAGE
AVAILABLE NUMBER OF EXERCISE
FOR GRANT OPTIONS PRICE
--------- --------- --------
<S> <C> <C> <C>
Outstanding at December 31, 1995............................ 1,930,000 70,000 $0.03
Options granted........................................... (625,000) 625,000 0.04
Options canceled.......................................... 15,000 (15,000) 0.10
--------- -------- -----
Outstanding at December 31, 1996............................ 1,320,000 680,000 0.04
Options granted........................................... (68,750) 68,750 0.14
Options canceled.......................................... 2,500 (2,500) 0.15
Options exercised......................................... -- (105,000) 0.03
--------- -------- -----
Balance at December 31, 1997................................ 1,253,750 641,250 $0.05
========= ======== =====
</TABLE>
Stock option grants to date have been made at prices that were no less than
fair value of the underlying stock on the date of grant. Fair value of Sand
common stock is determined periodically in good faith by the board of directors.
At December 31, 1996 and 1997, options to purchase 17,500 and 191,250,
respectively, were exercisable.
The following table summarizes information about employee and consultant
stock options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
--------------------------------------- OPTIONS EXERCISABLE
WEIGHTED -----------------------
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
PRICE PER SHARE 1997 LIFE PRICE 1997 PRICE
- --------------- -------------- ----------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
$0.03 488,750 8.64 $0.03 165,000 $0.03
0.10 90,000 8.20 0.10 26,250 0.10
0.15 62,500 9.71 0.15 -- 0.15
------- ---- ----- ------- -----
641,250 8.68 0.05 191,250 0.04
======= ==== ===== ======= =====
</TABLE>
On February 6, 1998, the Company adopted the 1998 Incentive Stock Option
Plan and 1,253,750 shares remaining in the previous plan were reserved for under
this new plan.
F-32
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--EMPLOYEE STOCK OPTION AND BENEFIT PLANS: (CONTINUED)
PRO FORMA DISCLOSURES
Had compensation cost for the Plan been determined based on the fair value
of each stock option grant on its grant date, as prescribed in FAS 123, the
Company's net income would have been as follows:
<TABLE>
<CAPTION>
DECEMBER 31, YEAR ENDED
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Net income after taxes:
As reported............................................... $1,416,000 $ 203,000
Pro forma................................................. $1,414,000 $ 202,000
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following assumptions used for grants during
the respective years:
<TABLE>
<CAPTION>
DECEMBER 31, YEAR ENDED
-----------------------
1996 1997
---------- ----------
<S> <C> <C>
Expected life (in years).................................... 4 4
Risk-free interest rate..................................... 6.48% 6.23%
Volatility.................................................. 0% 0%
Dividend yield.............................................. 0% 0%
</TABLE>
The weighted average fair value of options granted was $0.01 per share for
the year ended December 31, 1996 and $0.03 for the year end December 31, 1997.
Because additional option grants are expected to be made each year, the
above pro forma disclosures are not representative of the pro forma effects on
option grants on reported net income for future years.
The Company offers its employees a 401(k) plan that qualifies as a deferred
salary arrangement under Section 401 of the Internal Revenue Code. Under the
401(k) plan, participating employees may defer a portion of their pretax
earnings not to exceed certain statutorily specified amounts ($9,500 for the
calendar year 1997). The Company, at its discretion, may make contributions for
the benefit of eligible employees. In fiscal 1997, the Company made
contributions of $26,000 under the 401(k) plan.
NOTE 7--COMMITMENTS:
LEASES
The Company leases equipment and office space under noncancelable operating
and capital leases. In January 1998, the Company entered into a sublease
agreement for a portion of its primary office facility with a third party. Rent
expense for the years ended December 31, 1996 and 1997 was $63,000 and $51,000,
respectively. The terms of the facility lease provide for rental payments on a
graduated scale. The Company recognizes rent expense on a straight-line basis
over the lease period, and has accrued for rent expense incurred but not paid.
F-33
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--COMMITMENTS: (CONTINUED)
Future minimum lease payments under noncancelable operating and capital
leases, including lease commitments entered into subsequent to December 31,
1997, and future minimum sub-lease rental receipts under noncancelable operating
leases are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING SUB-LEASE
YEAR ENDED DECEMBER 31, LEASES LEASES INCOME
- ----------------------- -------- --------- ---------
<S> <C> <C> <C>
1998........................................................ $ 38,000 $238,000 $ 97,000
1999........................................................ 9,000 189,000 15,000
2000........................................................ -- 168,000 --
2001........................................................ -- 7,000 --
-------- -------- --------
Total minimum lease payments and sublease income............ 47,000 $602,000 $112,000
======== ========
Less: amount representing interest.......................... 3,000
--------
Present value of capital lease obligations.................. 44,000
Less: current portion....................................... (32,000)
--------
Long-term portion of capital lease obligations.............. $ 12,000
========
</TABLE>
F-34
<PAGE>
SAND MICROELECTRONICS, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 30,
1998
------------
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents................................. $ 2,688,000
Accounts receivable....................................... 1,111,000
Prepaid expenses and other current assets................. 218,000
Deferred tax assets....................................... 103,000
------------
Total current assets.................................... 4,120,000
Property and equipment, net................................. 451,000
Deposits.................................................... 20,000
------------
$ 4,591,000
============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable.......................................... $ 72,000
Accrued liabilities....................................... 382,000
Current portion of capital leases......................... 23,000
Deferred revenue.......................................... 1,113,000
------------
Total current liabilities............................... 1,590,000
Capital lease obligations, long term........................ 8,000
------------
1,598,000
------------
Commitments................................................. --
Shareholders' Equity:
Common Stock, no par value; 50,000,000 shares authorized;
12,218,000 shares issued and outstanding................ 13,000
Retained earnings......................................... 2,980,000
------------
Total shareholders' equity................................ 2,993,000
------------
$ 4,591,000
============
</TABLE>
F-35
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Revenues:
Licenses.................................................. $2,986,000 $3,971,000
Maintenance, engineering services and other services...... 384,000 579,000
---------- ----------
Net revenues............................................ 3,370,000 4,550,000
Cost of net revenues:
Licenses.................................................. 8,000 --
Maintenance, engineering services and other services...... 33,000 157,000
---------- ----------
Cost of net revenues.................................... 41,000 157,000
---------- ----------
Gross profit................................................ 3,329,000 4,393,000
---------- ----------
Operating expenses:
Research and development.................................. 665,000 1,139,000
Sales and marketing....................................... 309,000 880,000
General and administrative................................ 168,000 402,000
---------- ----------
Total operating expenses................................ 1,142,000 2,421,000
---------- ----------
Income from operations...................................... 2,187,000 1,972,000
Interest income............................................. 18,000 60,000
Interest expense............................................ (4,000) (2,000)
---------- ----------
Income before provision for income taxes.................... 2,201,000 2,030,000
Provision for income taxes.................................. (845,000) (812,000)
---------- ----------
Net income.................................................. $1,356,000 $1,218,000
========== ==========
</TABLE>
See notes to condensed financial statements
F-36
<PAGE>
SAND MICROELECTRONICS, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-------------------------
1997 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................ $1,356,000 $1,218,000
Adjustments to reconcile net income to net cash provided
by
operating activities:
Depreciation.......................................... 33,000 71,000
Loss on disposals of assets........................... -- 1,000
Changes in assets and liabilities:
Accounts receivable................................. (850,000) (923,000)
Prepaid expenses and other current assets........... (4,000) (196,000)
Deposits............................................ -- (15,000)
Accounts payable.................................... 7,000 1,000
Accrued liabilities................................. 3,000 241,000
Taxes payable....................................... 658,000 (866,000)
Deferred revenue.................................... 292,000 383,000
---------- ----------
Net cash provided by (used in) operating
activities........................................ 1,495,000 (85,000)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment....................... (43,000) (332,000)
Proceeds from sales of assets............................. -- 18,000
---------- ----------
Net cash used in investing activities............. (43,000) (314,000)
---------- ----------
Cash flows from financing activities:
Repayment of notes payable................................ (40,000) (20,000)
Proceeds from issuance of common stock.................... 4,000 4,000
Principal payments on capital lease obligations........... (8,000) (13,000)
---------- ----------
Net cash used in financing activities............. (44,000) (29,000)
---------- ----------
Net increase (decrease) in cash and cash equivalents........ 1,408,000 (428,000)
Cash and cash equivalents at beginning of period............ 601,000 3,116,000
---------- ----------
Cash and cash equivalents at end of period.................. $2,009,000 $2,688,000
========== ==========
Supplemental disclosure of cash flow information:
Capital leases for equipment........................ $ 43,000 $ --
</TABLE>
See notes to condensed financial statements
F-37
<PAGE>
SAND MICROELECTRONICS, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of Sand
Microelectronics, Inc. These financial statements have been prepared by Sand
Microelectronics, Inc., without audit, and reflect all adjustments, which in the
opinion of management are necessary to present fairly the financial position and
the results of operation for the interim periods. These financial statements
have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission. However, they omit certain information and
footnote disclosures necessary to conform to generally accepted accounting
principles. These statements should be read in conjunction with the audited
financial statements and notes to the financial statements included elsewhere
herein. The results of operations presented are not necessarily indicative of
the results expected for the full fiscal year or for any future period.
F-38
<PAGE>
[LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by inSilicon in connection with
the sale of common stock being registered. All amounts are estimates except the
SEC registration fee, the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
<S> <C> <C>
SEC registration fee........................................ $11,688
NASD filing fee............................................. 4,927
Nasdaq National Market listing fee.......................... 60,000
Printing and engraving expenses............................. *
Legal fees and expenses..................................... *
Accounting fees and expenses................................ *
Blue Sky qualification fees and expenses.................... *
Transfer Agent and Registrar fees........................... *
Miscellaneous fees and expenses............................. *
Total................................................. *
</TABLE>
- ------------------------
* to be filed by amendment
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law")
authorizes a court to award, or a corporation's Board of Directors to grant,
indemnity to directors and officers in terms sufficiently broad to permit such
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the Securities Act of 1933,
as amended (the "Securities Act"). Article VI of inSilicon's By-laws (Exhibits
3.3 and 3.4) provide for indemnification of inSilicon's directors and officers
to the maximum extent permitted by Delaware Law. In addition, inSilicon will
enter into Indemnification Agreements (Exhibit 10.3) with its officers and
directors. The Underwriting Agreement (Exhibit 1.1) also provides for
cross-indemnification among inSilicon, and the Underwriters with respect to
certain matters, including matters arising under the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since its incorporation, inSilicon has sold and issued the following
securities:
1. On November 15, 1999, inSilicon issued 10 shares of its common stock to
Phoenix for an aggregate cash consideration of $1,000.
2. As of November 30, 1999, inSilicon agreed to issue 10,400,000 shares of
Series A Preferred Stock and a warrant to purchase 50,000 shares of common stock
at $0.01 per share to Phoenix in consideration for Phoenix's contribution of
assets to inSilicon, which shares and warrant were subsequently issued.
3. As of December 21, 1999, inSilicon issued 2,348,844 options to purchase
common stock of inSilicon with a weighted average price of $6.14 per share to a
number of employees, directors and consultants of inSilicon.
4. As of February 10, 2000, inSilicon issued 20,000 options to purchase
common stock of inSilicon at $7.75 per share to a director of inSilicon.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES (CONTINUED)
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act as transactions by an issuer not involving any public offering.
In addition, certain issuances described in Item 2 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act. The recipients of securities in each such transaction
represented their intentions 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 warrants issued
in such transactions. All recipients had adequate access, through their
relationships with inSilicon, to information about inSilicon.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Amended and Restated Certificate of Incorporation of
inSilicon Corporation.*
3.2 Amended and Restated Certificate of Incorporation of
inSilicon Corporation (proposed).
3.3 By-laws of inSilicon Corporation.*
3.4 Amended and Restated By-laws of inSilicon Corporation
(proposed).
4.1 Specimen Stock Certificate.
4.2 Common Stock Purchase Warrant.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP regarding the
legality of the common stock being registered.
10.1 Agreement and Plan of Reorganization dated as of
September 17, 1998 by and among Phoenix Technologies Ltd.,
Phoenix Sub Corporation, Sand Microelectronics, Inc. and
Babu Chilukuri, Anand C. Naidu and Ajit Deora.*
10.2 Contribution Agreement dated as of November 30, 1999,
between inSilicon Corporation and Phoenix Technologies Ltd.
(Schedules omitted).
10.3 Form of Indemnification Agreement between inSilicon
Corporation and each of its Officers and Directors.
10.4 1999 Stock Option Plan.
10.5 2000 Stock Plan.
10.6 2000 Employee Stock Purchase Plan.
10.7 Initial Public Offering Agreement dated as of November 30,
1999 by and between inSilicon Corporation and Phoenix
Technologies Ltd.
10.8 Registration Rights Agreement dated as of November 30, 1999
by and between inSilicon Corporation and Phoenix
Technologies Ltd.
10.9 Services and Cost-Sharing Agreement dated as of
November 30, 1999 by and between inSilicon Corporation and
Phoenix Technologies Ltd.
10.10 Employee Matters Agreement dated as of November 30, 1999 by
and between inSilicon Corporation and Phoenix Technologies
Ltd.
10.11 Tax-Sharing Agreement dated as of November 30, 1999 by and
between inSilicon Corporation and Phoenix Technologies Ltd.
10.12 Technology Distributor Agreement dated as of November 30,
1999 by and between inSilicon Corporation and Phoenix
Technologies Ltd.
10.13 Key Executive Officer Severance Agreement with Wayne
Cantwell.
10.14 Key Executive Officer Severance Agreement with William
Meyer.
10.15 Key Executive Officer Severance Agreement with Barry
Hoberman.
</TABLE>
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (CONTINUED)
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
10.16 Key Executive Officer Severance Agreement with Robert
Nalesnik.
10.17 Loan and Security Agreement dated January 18, 2000 between
Silicon Valley Bank and inSilicon Corporation.
21.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.1).
23.4 Consent of Integrated Circuit Engineering.
24.1 Power of Attorney (included on page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed
** To be filed by amendment
(b) Financial Statement Schedules
Schedule II--Valuations and Qualifying Account
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
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described in Item 14, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
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, 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.
(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 that time shall be deemed to be the
initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the city of San
Jose, State of California on February 11, 2000.
<TABLE>
<S> <C> <C>
INSILICON CORPORATION
By: /s/ WAYNE C. CANTWELL
----------------------------------------
Wayne C. Cantwell
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Wayne C. Cantwell
and William E. Meyer, and each of them, as his attorney-in-fact, 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),
and any and all registration statements filed pursuant to Rule 462 under the
Securities Act of 1933, as amended, in connection with or related to the
offering contemplated by this registration statement and its amendments, if any,
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by such attorney to any and all
amendments to such registration statement.
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 1 to the 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/ WAYNE C. CANTWELL President, Chief Executive Officer and February 11, 2000
- ---------------------------- Director (Principal Executive Officer)
Wayne C. Cantwell
/s/ WILLIAM E. MEYER Chief Financial Officer (Principal February 11, 2000
- ---------------------------- Financial Officer and Principal
William E. Meyer Accounting Officer)
/s/ ALBERT E. SISTO Director February 11, 2000
- ----------------------------
Albert E. Sisto
/s/ E. THOMAS HART Director February 11, 2000
- ----------------------------
E. Thomas Hart
/s/ RAYMOND J. FARNHAM Director February 11, 2000
- ----------------------------
Raymond J. Farnham
/s/ JOHN R. HARDING Director February 11, 2000
- ----------------------------
John R. Harding
</TABLE>
II-4
<PAGE>
INSILICON CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
DESCRIPTION BEGINNING OF YEAR PROVISIONS WRITE-OFFS END OF YEAR
- ----------- ----------------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts
Year ended September 30, 1999....... $198 224 $(58) $364
Year ended September 30, 1998....... 224 (21) (5) 198
Year ended September 30, 1997....... 25 199 -- 224
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NUMBER DESCRIPTION
- -------------- -----------
<C> <S>
1.1 Form of Underwriting Agreement.**
3.1 Amended and Restated Certificate of Incorporation of
inSilicon Corporation.*
3.2 Amended and Restated Certificate of Incorporation of
inSilicon Corporation (proposed).
3.3 By-laws of inSilicon Corporation.*
3.4 Amended and Restated By-laws of inSilicon Corporation
(proposed).
4.1 Specimen Stock Certificate.
4.2 Common Stock Purchase Warrant.*
5.1 Opinion of Orrick, Herrington & Sutcliffe LLP regarding the
legality of the common stock being registered.
10.1 Agreement and Plan of Reorganization dated as of
September 17, 1998 by and among Phoenix Technologies Ltd.,
Phoenix Sub Corporation, Sand Microelectronics, Inc. and
Babu Chilukuri, Anand C. Naidu and Ajit Deora.*
10.2 Contribution Agreement dated as of November 30, 1999,
between inSilicon Corporation and Phoenix Technologies Ltd.
(Schedules omitted).
10.3 Form of Indemnification Agreement between inSilicon
Corporation and each of its Officers and Directors.
10.4 1999 Stock Option Plan.
10.5 2000 Stock Plan.
10.6 2000 Employee Stock Purchase Plan.
10.7 Initial Public Offering Agreement dated as of November 30,
1999 by and between inSilicon Corporation and Phoenix
Technologies Ltd.
10.8 Registration Rights Agreement dated as of November 30, 1999
by and between inSilicon Corporation and Phoenix
Technologies Ltd.
10.9 Services and Cost-Sharing Agreement dated as of
November 30, 1999 by and between inSilicon Corporation and
Phoenix Technologies Ltd.
10.10 Employee Matters Agreement dated as of November 30, 1999 by
and between inSilicon Corporation and Phoenix Technologies
Ltd.
10.11 Tax-Sharing Agreement dated as of November 30, 1999 by and
between inSilicon Corporation and Phoenix Technologies Ltd.
10.12 Technology Distributor Agreement dated as of November 30,
1999 by and between inSilicon Corporation and Phoenix
Technologies Ltd.
10.13 Key Executive Officer Severance Agreement with Wayne
Cantwell.
10.14 Key Executive Officer Severance Agreement with William
Meyer.
10.15 Key Executive Officer Severance Agreement with Barry
Hoberman.
10.16 Key Executive Officer Severance Agreement with Robert
Nalesnik.
10.17 Loan and Security Agreement dated January 18, 2000 between
Silicon Valley Bank and inSilicon Corporation.
21.1 List of Subsidiaries.
23.1 Consent of Ernst & Young LLP.
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Orrick, Herrington & Sutcliffe LLP (contained in
Exhibit 5.1).
23.4 Consent of Integrated Circuit Engineering.
24.1 Power of Attorney (included on page II-4).
27.1 Financial Data Schedule.
</TABLE>
- ------------------------
* Previously filed
** To be filed by amendment.
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
INSILICON CORPORATION
A DELAWARE CORPORATION
inSilicon Corporation, a corporation organized and existing under the
General Corporation Law of the State of Delaware which was originally
incorporated in the State of Delaware on November 1, 1999, DOES HEREBY CERTIFY:
The Restated Certificate of Incorporation of inSilicon Corporation in
the form attached hereto as EXHIBIT A has been duly adopted in accordance with
the provisions of Sections 245, 242, 141(f) and 228 of the General Corporation
Law of the State of Delaware by the unanimous written consents of (i) each of
the directors and (ii) the sole stockholder of the Corporation.
The Restated Certificate of Incorporation so adopted reads in full as
set forth in EXHIBIT A attached hereto and incorporated herein by this
reference.
IN WITNESS WHEREOF, we have hereunto set our hands as President and
Secretary, respectively, of inSilicon Corporation and hereby affirm under
penalties of perjury that the foregoing is our act and deed and the facts
herein stated are true, and accordingly have hereunto set forth our hands this
day of __________, 2000.
--------------------------------
Wayne Cantwell, President
ATTEST: -----------------------------
-----------------, Secretary
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
INSILICON CORPORATION
A DELAWARE CORPORATION
ARTICLE I
NAME
The name of the corporation is inSilicon Corporation (the
"Corporation").
ARTICLE II
REGISTERED OFFICE AND AGENT
The address of the registered office of the Corporation in the State
of Delaware is The Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of its registered agent at that
address is The Corporation Trust Company.
ARTICLE III
PURPOSES
The purpose of the Corporation shall be to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware as the same exists or may hereafter be
amended.
ARTICLE IV
CAPITAL STOCK
The Corporation shall be authorized to issue two classes of stock to
be designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares of both classes of stock which the Corporation has authority
to issue is one hundred fifteen million (115,000,000) shares, consisting of:
one hundred million (100,000,000) shares of Common Stock, $0.001 par value per
share, and fifteen million (15,000,000) shares of Preferred Stock, $0.001 par
value per share.
The Board of Directors of the Corporation (the "Board of Directors")
is authorized, subject to limitations prescribed by applicable law and the
provisions of this Article IV, to provide for the issuance of the shares of
Preferred Stock from time to time in one or more series, each of which series
shall have such distinctive designation or title as shall be fixed by the Board
of Directors prior to the issuance of any shares thereof. Each such series of
Preferred Stock shall have such voting powers, shall consist of such number of
shares, shall be issued for such consideration and shall otherwise have such
powers, designations, preferences and relative,
<PAGE>
participating, optional or other rights, if any, and such qualifications,
limitations or restrictions, if any, as shall be stated in such resolution or
resolutions providing for the issue of such series of Preferred Stock as may be
adopted from time to time by the Board of Directors prior to the issuance of
any shares thereof pursuant to the authority hereby expressly vested in it, all
in accordance with applicable law.
The number of authorized shares of any class or classes of stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of at least a majority of
the voting power of the then outstanding Voting Stock, voting together as a
single class.
The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof. Except as may be provided in this
Certificate of Incorporation or in any Certificate of Designation designating
any series of Preferred Stock pursuant to the foregoing provisions of this
Article IV that shall be in effect under the General Corporation Law of the
State of Delaware (a "Preferred Stock Designation"), the holders of shares of
Common Stock shall be entitled to one vote for each such share upon all
questions presented to the stockholders, the Common Stock shall have the
exclusive right to vote for the election of directors and for all other
purposes, and holders of Preferred Stock shall not be entitled to receive
notice of any meeting of stockholders at which they are not entitled to vote.
The Corporation shall be entitled to treat the person in whose name
any share of its stock is registered as the owner thereof for all purposes and
shall not be bound to recognize any equitable or other claim to, or interest
in, such share on the part of any other person, whether or not the Corporation
shall have notice thereof, except as expressly provided by applicable law.
ARTICLE V
ELECTION OF DIRECTORS
Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the number of
directors of the Corporation shall be fixed from time to time exclusively by
the Board of Directors pursuant to a resolution adopted by a majority of the
then authorized number of directors of the Corporation, but in no event shall
the number of directors be fewer than three. The directors, other than those
who may be elected solely by the holders of any series of Preferred Stock
(unless the relevant Preferred Stock Designation shall so provide), shall be
divided into three classes, as nearly equal in number as possible, designated
"Class I," "Class II" and "Class III." Directors of each class shall serve for
a term ending on the third annual meeting of stockholders following the annual
meeting at which such class was elected, except that the term of office of the
initial Class I
2
<PAGE>
director shall expire on the date of the annual meeting in 2001, the term of
office of the initial Class II directors shall expire on the date of the annual
meeting in 2002 and the term of office of the initial Class III directors shall
expire on the date of the annual meeting in 2003. The foregoing
notwithstanding, each director shall serve until his or her successor shall
have been duly elected and qualified, unless such director shall die, resign,
retire or be disqualified or removed.
At all elections of directors, the directors chosen to succeed those
directors whose terms then expire shall be identified as being of the same
class as the directors they succeed. If for any reason the number of directors
in the various classes shall not be as nearly equal as possible, the Board of
Directors may redesignate any director into a different class in order that the
balance of directors in such classes shall be as nearly equal as possible.
Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, and unless the
Board of Directors otherwise determines, vacancies in the Board of Directors
resulting from one or more directors' death, resignation, retirement,
disqualification, removal from office or other cause, and newly created
directorships resulting from any increase in the authorized number of
directors, shall be filled only by the affirmative vote of a majority of the
remaining directors, though less than a quorum of the Board of Directors, or by
a sole remaining director, and directors so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires and until such director's
successor shall have been duly elected and qualified. No decrease in the
number of authorized directors constituting the Board of Directors shall
shorten the term of any incumbent director.
Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, any director may
be removed from office at any time, with or without cause and by the
affirmative vote of the holders of at least a majority of the voting power of
the then-outstanding Voting Stock, voting together as a single class, at a
meeting called for that purpose; PROVIDED, HOWEVER, that effective as of the
date on which Phoenix Technologies Ltd. ("Phoenix") and its affiliates cease to
be the beneficial owner of an aggregate of at least a majority of the then
outstanding shares of common stock (the "Trigger Date"), subject to the rights
of the holders of any series of Preferred Stock to elect additional directors
under specified circumstances, any director may be removed from office at any
time, but only for cause and only by the affirmative vote of the holders of at
least a majority of the voting power of the then-outstanding Voting Stock,
voting together as a single class, at a meeting called for that purpose.
Elections of directors of the Corporation need not be by written
ballot except and to the extent the by-laws of the Corporation (the "By-Laws")
so provide.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, and in addition to approval by the Board of
Directors, the affirmative vote of the holders of at least 80% of the voting
power of the then outstanding Voting Stock, voting together as a single class,
shall be required to amend, repeal or adopt any provision inconsistent with
this Article V. For purposes of this Certificate of Incorporation, "Voting
Stock" shall mean the
3
<PAGE>
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors.
ARTICLE VI
POWERS OF THE BOARD OF DIRECTORS
In furtherance and not in limitation of the powers conferred by
applicable law, the Board of Directors shall have the power to (1) adopt, amend
or repeal By-Laws, subject to the power of the stockholders of the Corporation
under the General Corporation Law of the State of Delaware to adopt, amend or
repeal any By-Law; 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 affirmative
vote of the holders of any series of Preferred Stock required by applicable
law, this Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least [66b%] of the voting power of the
then outstanding Voting Stock, voting together as a single class, shall be
required for stockholders to adopt, amend or repeal any provision of the
By-Laws; and (2) from time to time determine whether and to what extent, and at
what times and places, and under what conditions and regulations, the accounts
and books of the Corporation, or any of them, shall be open to inspection of
stockholders; and, except as so determined or as expressly provided in this
Certificate of Incorporation or in any Preferred Stock Designation, no
stockholder shall have any right to inspect any account, book or document of
the Corporation other than such rights as may be conferred by applicable law.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, and in addition to approval by the Board of Directors, the
affirmative vote of the holders of at least 80% of the voting power of the then
outstanding Voting Stock, voting together as a single class, shall be required
to amend, repeal or adopt any provision inconsistent with clause (1) of the
preceding sentence. The Corporation may in its By-Laws confer powers upon its
Board of Directors in addition to the powers and authorities expressly
conferred upon it by applicable law.
ARTICLE VII
LIABILITY OF DIRECTORS
To the fullest extent permitted by the General Corporation Law of the
State of Delaware, as it exists on the date hereof or as it may hereafter be
amended, no director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director of the Corporation. Without limiting the effect of the
preceding sentence, if the General Corporation Law of the State of Delaware is
hereafter amended to authorize the further elimination or limitation of the
liability of a director, then the liability of a director of the Corporation
shall be eliminated or limited to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as so amended.
Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of this Certificate of Incorporation inconsistent
with this Article VII, shall eliminate, reduce or otherwise adversely affect
any limitation on the personal liability of a director of the Corporation
existing at the time of such amendment, repeal or adoption of such an
inconsistent provision.
4
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Each person who is or was a director or officer of the Corporation,
or each such person who is or was serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, limited
liability company, partnership, joint venture, trust or other enterprise
(including the heirs, executor, administrators or estate of such person),
including service with respect to employee benefit plans, shall be indemnified
and held harmless by the Corporation to the fullest extent permitted by the
General Corporation Law of the State of Delaware as the same exists or may
hereafter be amended (but, if permitted by applicable law, in the case of any
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) and any other applicable laws
as presently or hereafter in effect. The Corporation may, by action of the
Board of Directors, provide indemnification to employees and agents of the
Corporation, and to any such persons serving as directors, officers, employees
or agents of another corporation, limited liability company, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, at the request of the Corporation, with the same scope and
effect as the foregoing indemnification of directors and officers. The
Corporation shall be required to indemnify any person seeking indemnification
in connection with any action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "proceeding") (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors or is a proceeding to enforce such person's right to
indemnification pursuant to the rights granted by this Certificate of
Incorporation or otherwise by the Corporation. Without limiting the generality
or the effect of the foregoing, the Corporation may enter into one or more
agreements with any person which provide for indemnification greater than or
different from that provided in this Article VIII.
ARTICLE IX
ACTION BY STOCKHOLDERS
Any corporate action required or permitted to be taken at any annual
or special meeting of stockholders may be taken without a meeting, without
prior notice and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding stock
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 and shall be delivered to the Corporation
(either by hand or by certified or registered mail, return receipt requested)
at its registered office in the State of Delaware or its principal place of
business, or to an officer or agent of the Corporation having custody of the
book in which proceedings of meetings of stockholders are recorded; PROVIDED,
HOWEVER, that effective as of the Trigger Date, a corporate action required or
permitted to be taken by the stockholders of the Corporation must be effected
only at a duly called annual or special meeting of stockholders and may not be
effected by written consent in lieu of such a meeting.
Effective as of the Trigger Date, unless otherwise prescribed by law
and subject to any preferential rights of any outstanding series of Preferred
Stock, special meetings of the stockholders of the Corporation for any purpose
or purposes may be called at any time by the
5
<PAGE>
Chairman of the Board of Directors, the President or, at the request in writing
of a majority of the members of the Board of Directors, any officer of the
Corporation, and effective as of the Trigger Date, any power of the
stockholders of the Corporation to call a special meeting is specifically
denied.
Notwithstanding anything contained in this Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the Common Stock, voting as a single class, shall be required to amend,
repeal or adopt any provision inconsistent with this Article IX.
ARTICLE X
AMENDMENTS
Except as may be expressly provided in this Certificate of
Incorporation, the Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation or a Preferred Stock Designation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed herein or
by applicable law, and all rights, preferences and privileges of whatsoever
nature conferred upon stockholders, directors or any other persons whomsoever
by and pursuant to this Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article X;
PROVIDED, HOWEVER, that any amendment or repeal of Article VII or Article VIII
of this Certificate of Incorporation shall not adversely affect any right or
protection existing hereunder in respect of any act or omission occurring prior
to such amendment or repeal; and PROVIDED FURTHER that no Preferred Stock
Designation shall be amended after the issuance of any shares of the series of
Preferred Stock created thereby, except in accordance with the terms of such
Preferred Stock Designation and the requirements of applicable law.
6
<PAGE>
BY-LAWS
OF
INSILICON CORPORATION
A DELAWARE CORPORATION
As adopted on _________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I OFFICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .1
Section 1. Registered Office . . . . . . . . . . . . . . . . . . .1
Section 2. General Office and Other Offices. . . . . . . . . . . .1
ARTICLE II STOCKHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . .1
Section 3. Annual Meeting. . . . . . . . . . . . . . . . . . . . .1
Section 5. Special Meetings. . . . . . . . . . . . . . . . . . . .2
Section 6. Place of Meetings . . . . . . . . . . . . . . . . . . .3
Section 7. Notice of Meetings. . . . . . . . . . . . . . . . . . .3
Section 8. Nominations of Directors. . . . . . . . . . . . . . . .3
Section 9. List of Stockholders. . . . . . . . . . . . . . . . . .4
Section 10. Quorum. . . . . . . . . . . . . . . . . . . . . . . . .4
Section 11. Voting and Required Vote. . . . . . . . . . . . . . . .5
Section 12. Proxies . . . . . . . . . . . . . . . . . . . . . . . .5
Section 13. Inspectors of Election; Polls . . . . . . . . . . . . .5
Section 14. Organization. . . . . . . . . . . . . . . . . . . . . .5
ARTICLE III BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . .6
Section 15. General Powers, Number, Term of Office. . . . . . . . .6
Section 16. Vacancies . . . . . . . . . . . . . . . . . . . . . . .6
Section 17. Chairman of the Board . . . . . . . . . . . . . . . . .6
Section 18. Regular Meetings. . . . . . . . . . . . . . . . . . . .7
Section 19. Special Meetings. . . . . . . . . . . . . . . . . . . .7
Section 20. Notices . . . . . . . . . . . . . . . . . . . . . . . .7
Section 21. Conference Telephone Meetings . . . . . . . . . . . . .7
Section 22. Quorum. . . . . . . . . . . . . . . . . . . . . . . . .7
Section 23. Organization. . . . . . . . . . . . . . . . . . . . . .8
Section 24. Resignations. . . . . . . . . . . . . . . . . . . . . .8
Section 25. Action Without a Meeting. . . . . . . . . . . . . . . .8
Section 26. Location of Books . . . . . . . . . . . . . . . . . . .8
Section 27. Dividends . . . . . . . . . . . . . . . . . . . . . . .8
Section 28. Compensation. . . . . . . . . . . . . . . . . . . . . .8
Section 29. Additional Powers . . . . . . . . . . . . . . . . . . .8
ARTICLE IV COMMITTEES OF DIRECTORS. . . . . . . . . . . . . . . . . . . .9
-i-
<PAGE>
Section 30. Designation, Power, Alternate Members . . . . . . . . .9
Section 31. Quorum, Manner of Acting. . . . . . . . . . . . . . . .9
Section 32. Minutes . . . . . . . . . . . . . . . . . . . . . . . .9
ARTICLE V OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Section 33. Designation . . . . . . . . . . . . . . . . . . . . . .9
Section 34. Election and Term . . . . . . . . . . . . . . . . . . 10
Section 35. Removal . . . . . . . . . . . . . . . . . . . . . . . 10
Section 36. Resignations. . . . . . . . . . . . . . . . . . . . . 10
Section 37. Vacancies . . . . . . . . . . . . . . . . . . . . . . 10
Section 38. President . . . . . . . . . . . . . . . . . . . . . . 10
Section 39. Vice Presidents . . . . . . . . . . . . . . . . . . . 10
Section 40. Secretary . . . . . . . . . . . . . . . . . . . . . . 10
Section 41. Assistant Secretaries . . . . . . . . . . . . . . . . 11
Section 42. Chief Financial Officer . . . . . . . . . . . . . . . 11
Section 44. Assistant Treasurers. . . . . . . . . . . . . . . . . 11
Section 45. Controller. . . . . . . . . . . . . . . . . . . . . . 11
Section 46. Assistant Controllers . . . . . . . . . . . . . . . . 11
ARTICLE VI CONTRACTS, INSTRUMENTS AND PROXIES . . . . . . . . . . . . . 12
Section 47. Contracts and Other Instruments . . . . . . . . . . . 12
Section 48. Proxies . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE VII CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . 12
Section 49. Stock Certificates; Book-Entry Accounts . . . . . . . 12
Section 50. Record Ownership. . . . . . . . . . . . . . . . . . . 12
Section 51. Record Dates. . . . . . . . . . . . . . . . . . . . . 13
Section 52. Transfer of Stock . . . . . . . . . . . . . . . . . . 13
Section 53. Lost, Stolen or Destroyed Certificates. . . . . . . . 13
Section 54. Terms of Preferred Stock. . . . . . . . . . . . . . . 13
ARTICLE VIII INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . 14
Section 55. Right of Indemnification Generally. . . . . . . . . . 14
Section 56. Written Request; Determination of Entitlement . . . . 14
Section 57. Recovery of Unpaid Claim. . . . . . . . . . . . . . . 15
Section 58. Exclusivity; Subsequent Modification. . . . . . . . . 15
-ii-
<PAGE>
Section 59. Insurance . . . . . . . . . . . . . . . . . . . . . . 15
Section 60. Other Persons Granted Right of Indemnification. . . . 15
Section 61. Illegality; Unenforceability. . . . . . . . . . . . . 16
Section 62. Form and Delivery of Communications . . . . . . . . . 16
ARTICLE IX MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . 16
Section 63. Corporate Seal. . . . . . . . . . . . . . . . . . . . 16
Section 64. Fiscal Year . . . . . . . . . . . . . . . . . . . . . 16
Section 66. Waiver of Notice. . . . . . . . . . . . . . . . . . . 16
ARTICLE X AMENDMENT TO BY-LAWS . . . . . . . . . . . . . . . . . . . . 17
Section 67. Amendments. . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>
-iii-
<PAGE>
BY-LAWS
OF
INSILICON CORPORATION
A DELAWARE CORPORATION
As adopted on _____, 2000
ARTICLE I
OFFICES
Section 1. REGISTERED OFFICE. The name of the registered agent of
inSilicon Corporation (the "Corporation") is The Corporation Trust Company and
the registered office of the Corporation shall be located in the City of
Wilmington, County of New Castle, State of Delaware.
Section 2. GENERAL OFFICE AND OTHER OFFICES. The Corporation shall
have its General Offices in the City of San Jose, State of California (the
"General Offices"), and may also have offices at such other places in or outside
the State of Delaware as the Board of Directors of the Corporation (the "Board
of Directors") may from time to time designate or the business of the
Corporation may require.
ARTICLE II
STOCKHOLDERS' MEETINGS
Section 3. ANNUAL MEETING. An annual meeting of stockholders shall be
held on such day and at such time as may be designated by the Board of Directors
for the purpose of electing directors and for the transaction of such other
business as properly may come before such meeting. Any previously scheduled
annual meeting of the stockholders may be postponed by resolution of the Board
of Directors upon public notice given on or prior to the date previously
scheduled for such annual meeting of stockholders.
Section 4. BUSINESS TO BE CONDUCTED AT ANNUAL MEETING.
(a) At an annual meeting of stockholders, only such business
shall be conducted as shall have been brought before the meeting (i) pursuant to
the Corporation's notice of the meeting, (ii) by or at the direction of the
Board of Directors or (iii) by any stockholder of the Corporation who is a
stockholder of record at the time of giving of the notice provided for in this
By-Law, who shall be entitled to vote at such meeting and who shall have
complied with the notice procedures set forth in this By-Law.
(b) For business to be properly brought before an annual
meeting by a stockholder pursuant to clause (a)(iii) of this By-Law, notice
in writing must be delivered or mailed to the Secretary and received at the
General Offices, not less than 60 days nor more than
<PAGE>
90 days prior to the first anniversary of the date on which the Corporation
first mailed its proxy materials for the preceding year's annual meeting of
stockholders; PROVIDED, HOWEVER, that in the event that the date of the
meeting is advanced by more than 30 days or delayed by more than 60 days from
such meeting's anniversary date, notice by the stockholder must be received
not earlier than the 90th day prior to such date of mailing proxy materials
and not later than the close of business on the later of the 60th day prior
to such date of mailing of proxy materials or the 10th day following the day
on which public announcement of the date of the annual meeting is first made.
Such stockholder's notice shall set forth as to each matter the stockholder
proposes to bring before the annual meeting (i) a brief description of the
business to be brought before the annual meeting and the reasons for
conducting such business at such meeting; (ii) the name and address, as they
appear on the Corporation's books, of the stockholder proposing such
business, and the name and address of the beneficial owner, if any, on whose
behalf the proposal is made; (iii) the class and number of shares of the
Corporation's stock which are beneficially owned by the stockholder, and by
the beneficial owner, if any, on whose behalf the proposal is made; and (iv)
any material interest of the stockholder, and of the beneficial owner, if
any, on whose behalf the proposal is made, in such business. For purposes of
these By-Laws , "public announcement" shall mean disclosure in a press
release reported by the Dow Jones News Service, Associated Press or
comparable news service or in a document publicly filed by the Corporation
with the Securities and Exchange Commission pursuant to Section 13, 14 or
15(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
(c) Notwithstanding anything in these By-Laws to the contrary,
no business shall be conducted at an annual meeting except in accordance with
the procedures set forth in this By-Law. The chairman of the meeting may, if
the facts warrant, determine that the business was not properly brought before
the meeting in accordance with the provisions of this By-Law; and if the
chairman should so determine, the chairman shall so declare to the meeting, and
any such business not properly brought before the meeting shall not be
transacted. Notwithstanding the foregoing provisions of this By-Law, 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 By-Law. Nothing in this By-Law 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, and any such
proposal so included shall be deemed timely given for purposes of this By-Law.
Section 5. SPECIAL MEETINGS. Special meetings of stockholders for any
proper purpose or purposes, unless otherwise provided by the General Corporation
Law of the State of Delaware or in any Certificate of Designation designating
any series of preferred stock pursuant to Article IV of the Restated Certificate
of Incorporation of the Corporation (the "Certificate of Incorporation") that
shall be in effect under the General Corporation Law of the State of Delaware (a
"Preferred Stock Designation"), may be called by the Chairman of the Board or
the President, or in the absence of each of them, by the Secretary at the
written request of a majority of the directors. Business transacted at a
special meeting of stockholders shall be confined to the purpose or purposes of
the meeting as stated in the notice of the meeting. Any previously scheduled
special meeting of the stockholders may be postponed by resolution of the Board
of Directors upon notice by public announcement given on or prior to the date
previously scheduled for such special meeting of stockholders.
2
<PAGE>
Section 6. PLACE OF MEETINGS. All meetings of stockholders shall be
held at such place as may be determined by resolution of the Board of Directors.
Section 7. NOTICE OF MEETINGS. Except as otherwise required by
applicable law, notice of each meeting of the stockholders, whether annual or
special, shall be given to each stockholder of record entitled to vote at the
meeting at least 10 days but not more than 60 days before the date of the
meeting, by mailing such notice in the U.S. mail, postage prepaid, addressed to
such stockholder at such stockholder's address as the same appears on the
records of the Corporation. Such notice shall state the place, date and hour of
the meeting, and in the case of a special meeting, shall also state the purpose
or purposes thereof.
Section 8. NOMINATIONS OF DIRECTORS.
(a) Only persons who are nominated in accordance with the
procedures set forth in these By-Laws shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors may be
made at a meeting of stockholders (i) by or at the direction of the Board of
Directors or (ii) by any stockholder of the Corporation who is a stockholder of
record at the time of giving of the notice provided for in this By-Law, who
shall be entitled to vote for the election of directors at the meeting and who
complies with the notice procedures set forth in this By-Law.
(b) Nominations by stockholders shall be made pursuant to
notice in writing, delivered or mailed to the Secretary and received at the
General Offices (i) in the case of an annual meeting, not less than 60 days
nor more than 90 days prior to the first anniversary of the date on which the
Corporation first mailed its proxy materials for the preceding year's annual
meeting of stockholders; PROVIDED, HOWEVER, that in the event that the date
of the meeting is advanced by more than 30 days or delayed by more than 60
days from such anniversary date, notice by the stockholder must be received
not earlier than the 90th day prior to such date of mailing of proxy
materials and not later than the close of business on the later of the 60th
day prior to such date of mailing of proxy materials or the 10th day
following the day on which public announcement of the date of the meeting is
first made; or (ii) in the case of a special meeting at which directors are
to be elected, not earlier than the 90th day prior to such special meeting
and not later than the close of business on the later of the 60th day prior
to such special meeting or the 10th day following the day on which public
announcement of the date of the meeting and of the nominees proposed by the
Board of Directors to be elected at such meeting is first made. In the case
of a special meeting of stockholders at which directors are to be elected,
stockholders may nominate a person or persons (as the case may be) for
election only to such position(s) as are specified in the Corporation's
notice of meeting as being up for election at such meeting. Such
stockholder's notice shall set forth (i) as to each person whom the
stockholder proposes to nominate for election or reelection as a director,
all information relating to such person that would be 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
Exchange Act (including such person's written consent to being named as a
nominee and to serving as a Director if elected); (ii) as to the stockholder
giving the notice, the name and address, as they appear on the Corporation's
books, of such stockholder
3
<PAGE>
and the class and number of shares of the Corporation's stock which are
beneficially owned by such stockholder; and (iii) as to any beneficial owner
on whose behalf the nomination is made, the name and address of such person
and the class and number of shares of the Corporation's stock which are
beneficially owned by such person. At the request of the Board of Directors,
any person nominated by the Board of Directors for election as a director
shall furnish to the Secretary that information required to be set forth in a
stockholder's notice of nomination that pertains to the nominee.
Notwithstanding anything in this By-Law 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 statement naming all the
nominees for Director or specifying the size of the increased Board of
Directors made by the Corporation at least 70 days prior to the first
anniversary of the preceding year's annual meeting, a stockholder's notice
required by this By-Law 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 General Offices 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.
(c) No person shall be eligible for election as a director of
the Corporation unless nominated in accordance with the procedures set forth in
these By-Laws. The chairman of the meeting may, if the facts warrant, determine
that a nomination was not made in accordance with the procedures prescribed in
this By-Law; and if the chairman should so determine, the chairman shall so
declare to the meeting, and the defective nomination shall be disregarded.
Notwithstanding the foregoing provisions of this By-Law, 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 By-Law.
Section 9. LIST OF STOCKHOLDERS.
(a) The Secretary of the Corporation shall prepare, at least 10
days before each meeting of stockholders, a complete list of the stockholders
entitled to vote at the meeting, arranged in alphabetical order, and showing the
address of each stockholder and the number of shares registered in the name of
each stockholder. Such list shall be open to the examination of any
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 list shall also be produced and kept at the time and
place of the meeting during the whole time thereof, and may be inspected by any
stockholder who is present.
(b) The stock ledger of the Corporation shall be the only
evidence as to the identity of the stockholders entitled (i) to vote in person
or by proxy at any meeting of stockholders, or (ii) to exercise the rights in
accordance with applicable law to examine the stock ledger, the list required by
this By-Law or the books and records of the Corporation.
Section 10. QUORUM. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum for the transaction of any business at all
meetings of the stockholders, except as otherwise provided by applicable law, by
the Certificate of Incorporation or by these By-Laws. The stockholders present
at any duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal of sufficient stockholders to render
the remaining stockholders less than a quorum. Whether or not a quorum is
present, either the chairman of the
4
<PAGE>
meeting or a majority of the stockholders entitled to vote thereat, present
in person or by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting. If the
adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at the
meeting. At such adjourned meeting at which the requisite amount of Voting
Stock shall be present or represented, any business may be transacted which
might have been transacted at the meeting as originally noticed. For
purposes of these By-Laws, "Voting Stock" shall mean the outstanding shares
of capital stock of the Corporation entitled to vote generally in the
election of directors.
Section 11. VOTING AND REQUIRED VOTE. Subject to the provisions of the
Certificate of Incorporation, each stockholder shall, at every meeting of
stockholders, be entitled to one vote for each share of capital stock held by
such stockholder. Subject to the provisions of the Certificate of Incorporation
and applicable law, directors shall be chosen by the vote of a plurality of the
shares present in person or represented by proxy at the meeting; and all other
questions shall be determined by the affirmative vote of the majority of shares
present in person or represented by proxy at the meeting. Election of directors
shall be by written ballot.
Section 12. PROXIES. Each stockholder entitled to vote at a meeting of
stockholders may authorize another person or persons to act for such stockholder
by proxy, provided the instrument authorizing such proxy to act shall have been
executed in writing in the manner prescribed by applicable law. No proxy shall
be voted or acted upon after three years from its date, unless the proxy
provides for a longer period.
Section 13. INSPECTORS OF ELECTION; POLLS. Before each meeting of
stockholders, the Chairman of the Board or another officer of the Corporation
designated by resolution of the Board of Directors shall appoint one or more
inspectors of election for the meeting and may appoint one or more inspectors to
replace any inspector unable to act. If any of the inspectors appointed shall
fail to attend, or refuse or be unable to serve, substitutes shall be appointed
by the chairman of the meeting. Each inspector shall have such duties as are
provided by applicable law, and shall take and sign an oath faithfully to
execute the duties of inspector with strict impartiality and according to the
best of such person's ability. The chairman of the meeting shall fix and
announce at the meeting the date and time of the opening and closing of the
polls for each matter upon which the stockholders will vote at the meeting.
Section 14. ORGANIZATION. The Chairman of the Board of Directors, or
in the Chairman's absence, the Vice Chairman of the Board of Directors or the
President, or in the absence of each of them, a chairman chosen by a majority of
the directors present, shall act as chairman of the meetings of the
stockholders, and the Secretary or, in the Secretary's absence, an Assistant
Secretary or any individual appointed by the chairman of the meeting, shall act
as secretary of the meeting. The order of business and the procedure at any
meeting of stockholders shall be determined by the chairman of the meeting.
5
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
Section 15. GENERAL POWERS, NUMBER, TERM OF OFFICE. The business of
the Corporation shall be managed under the direction of its Board of Directors.
Subject to the rights of the holders of any series of preferred stock, $0.001
par value per share, of the Corporation ("Preferred Stock") to elect additional
directors under specified circumstances, the number of directors of the
Corporation shall be fixed from time to time exclusively by resolution of a
majority of the then authorized number of directors of the Corporation (the
number of then authorized directors of the Corporation is referred to herein as
the "Whole Board"), but in no event shall the number of directors be fewer than
three. The directors, other than those who may be elected solely by the holders
of any series of Preferred Stock (unless the relevant Preferred Stock
Designation shall so provide), shall be divided into three classes, as nearly
equal in number as possible, designated "Class I," "Class II" and "Class III."
Directors of each class shall serve for a term ending on the third annual
meeting of stockholders following the annual meeting at which such class was
elected, except that the term of office of the initial Class I director shall
expire on the date of the annual meeting in 2001, the term of office of the
initial Class II directors shall expire on the date of the annual meeting in
2002 and the term of office of the initial Class III directors shall expire on
the date of the annual meeting in 2003. The foregoing notwithstanding, each
director shall serve until his or her successor shall have been duly elected and
qualified, unless such director shall die, resign, retire or be disqualified or
removed. At all elections of directors, the directors chosen to succeed those
directors whose terms then expire shall be identified as being of the same class
as the directors they succeed. If for any reason the number of directors in the
various classes shall not be as nearly equal as possible, the Board of Directors
may redesignate any director into a different class in order that the balance of
directors in such classes shall be as nearly equal as possible.
Section 16. VACANCIES. Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, and unless the Board of Directors otherwise determines, vacancies
resulting from death, resignation, retirement, disqualification, removal from
office or other cause, and newly created directorships resulting from any
increase in the authorized number of directors, may be filled only by the
affirmative vote of a majority of the remaining directors, though less than a
quorum of the Board of Directors, or by a sole remaining director. Directors so
chosen shall hold office for a term expiring at the annual meeting of
stockholders at which the term of office of the class to which they have been
elected expires and until such director's successor shall have been duly elected
and qualified. No decrease in the number of authorized directors constituting
the Board of Directors shall shorten the term of any incumbent director.
Section 17. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall be chosen from among the directors. The Chairman of the Board
shall preside at all meetings of the stockholders and of the Board of Directors,
except as may be otherwise required under applicable law. The Chairman shall
act in an advisory capacity with respect to matters of policy and other matters
of importance pertaining to the affairs of the Corporation. The Chairman, alone
or with the President and/or the Secretary shall sign and send out reports and
other messages which are to be sent to stockholders from time to time. The
Chairman shall also
6
<PAGE>
perform such other duties as may be assigned to the Chairman by these By-Laws
or the Board of Directors. The Board of Directors may also choose a Vice
Chairman of the Board of Directors from among the directors, which Vice
Chairman if chosen shall perform such duties as may be assigned by these
By-Laws, the Board of Directors, or the Chairman of the Board.
Section 18. REGULAR MEETINGS. Following the annual meeting of
stockholders, the first meeting of each newly elected Board of Directors may be
held, without notice, on the same day and at the same place as such
stockholders' meeting. The Board of Directors by resolution may provide for the
holding of regular meetings and may fix the times and places at which such
meetings shall be held. Notice of regular meetings shall not be required;
provided that whenever the time or place of regular meetings shall be fixed or
changed, notice of such action shall be given promptly to each director, as
provided in Section 20 below, who was not present at the meeting at which such
action was taken.
Section 19. SPECIAL MEETINGS. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors, the President, or in the absence of each of them, by the Secretary at
the written request of a majority of the directors.
Section 20. NOTICES. Notice of any special meeting of the Board of
Directors shall be addressed to each director at such director's residence or
business address and shall be sent to such director by mail, electronic mail,
telecopier, telegram or telex or telephoned or delivered to such director
personally. If such notice is sent by mail, it shall be sent not later than
three days before the day on which the meeting is to be held. If such notice
is sent by electronic mail, telecopier, telegram or telex, it shall be sent
not later than 12 hours before the time at which the meeting is to be held.
If such notice is delivered personally, it shall be received not later than
12 hours before the time at which the meeting is to be held. If such notice
is telephoned, it shall be to such telephone number or numbers of which the
director from time to time shall advise the Secretary for receiving such
notice. If given by telephone call, notice shall be deemed given to a
director when a message stating the time, place and purpose of the meeting is
left with a person answering the telephone at any such number with a request
that the director be so informed, or if no such telephone number is answered,
then when at least two attempts have been made to reach each telephone number
designated by the director for receiving telephonic notice, with an interval
of not less than one hour. A certification shall be prepared and filed with
the minutes stating the date, time and results of telephonic notice given to
any director not present at a meeting with respect to which his waiver of
notice of meeting is not filed with the minutes. In all cases, such notice
shall state the time, place and purpose or purposes of the meeting.
Section 21. CONFERENCE TELEPHONE MEETINGS. Members of the Board of
Directors or any committee thereof may participate in a meeting of the Board of
Directors or such 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 in a meeting shall
constitute presence in person at such meeting.
Section 22. QUORUM. One-half of the total number of directors
constituting the Whole Board, but not less than two, shall constitute a quorum
for the transaction of business at any meeting of the Board of Directors, but if
less than such required number of directors for a quorum is present at a
meeting, a majority of the directors present may adjourn the meeting from
7
<PAGE>
time to time without further notice. Except as otherwise specifically
provided by applicable law, the Certificate of Incorporation or these
By-Laws, the act of a majority of the directors present at a meeting at which
a quorum is present shall be the act of the Board of Directors.
Section 23. ORGANIZATION. At each meeting of the Board of Directors,
the Chairman of the Board or, in the Chairman's absence, the Vice Chairman of
the Board or the President, if a member of the Board of Directors, or, in the
absence of each of them, a chairman chosen by a majority of the directors
present, shall act as chairman of the meeting, and the Secretary or, in the
Secretary's absence, an Assistant Secretary or any individual appointed by the
chairman of the meeting, shall act as secretary of the meeting.
Section 24. RESIGNATIONS. Any director may resign at any time by
giving written notice to the Chairman of the Board, the President, or the
Secretary of the Corporation. Such resignation shall take effect upon receipt
thereof or at any later time specified therein and, unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective.
Section 25. ACTION WITHOUT A MEETING. Unless otherwise restricted by
the Certificate of Incorporation or these By-Laws, any action required or
permitted to be taken at any meeting of the Board of Directors or of any
committee thereof may be taken without a meeting if all members of the Board of
Directors or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board of
Directors or committee.
Section 26. LOCATION OF BOOKS. Except as otherwise provided by
resolution of the Board of Directors and subject to applicable law, the books of
the Corporation may be kept at the General Offices and at such other places as
may be necessary or convenient for the business of the Corporation.
Section 27. DIVIDENDS. Subject to the provisions of the Certificate of
Incorporation and applicable law, dividends upon the capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property, or in shares of the
Corporation's capital stock.
Section 28. COMPENSATION. Unless otherwise restricted by the
Certificate of Incorporation or these By-Laws, the Board of Directors shall have
the authority to fix from time to time the compensation of directors. The
directors may be paid their expenses, if any, from attendance at each Board of
Directors or committee meeting and for the performance of their responsibilities
as directors. Directors may also be paid a fixed sum for attendance at each
Board of Directors or committee meeting and/or a stated salary as director. No
such payment shall preclude any director from serving the Corporation or its
parent or subsidiary corporations in any other capacity and receiving
compensation therefor.
Section 29. ADDITIONAL POWERS. In addition to the powers and
authorities by these By-Laws expressly conferred upon it, the Board of Directors
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by statute or by the Certificate of
8
<PAGE>
Incorporation or by these By-Laws directed or required to be exercised or
done by the stockholders.
ARTICLE IV
COMMITTEES OF DIRECTORS
Section 30. DESIGNATION, POWER, ALTERNATE MEMBERS. The Board of
Directors may, by resolution or resolutions passed by a majority of the Whole
Board, designate an Executive Committee and one or more additional committees,
each committee to consist of one or more of the directors of the Corporation.
Any such committee, to the extent provided in said resolution or resolutions and
subject to any limitations provided by applicable law, shall have and may
exercise the powers of the Board of Directors in the management of the business
and affairs of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. If at a meeting of any
committee one or more of the members thereof is absent or disqualified, and if
either the Board of Directors has not so designated any alternate member or
members, or the number of absent or disqualified members exceeds the number of
alternate members who are present at such meeting, then the member or members of
such committee (including alternates) present at any meeting and not
disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another Director to act at the meeting in the place of such
absent or disqualified member. The term of office of the members of each
committee shall be as fixed from time to time by the Board of Directors;
PROVIDED, HOWEVER, that any committee member who ceases to be a member of the
Board of Directors shall automatically cease to be a committee member.
Section 31. QUORUM, MANNER OF ACTING. At any meeting of a committee,
the presence of one-half of its members then in office shall constitute a quorum
for the transaction of business; and the act of a majority of the members
present at a meeting at which a quorum is present shall be the act of the
committee. Each committee may provide for the holding of regular meetings, make
provision for the calling of special meetings and, except as otherwise provided
in these By-Laws or by resolution of the Board of Directors, make rules for the
conduct of its business.
Section 32. MINUTES. The committees shall keep minutes of their
proceedings and report the same to the Board of Directors when required; but
failure to keep such minutes shall not affect the validity of any acts of the
committee or committees.
ARTICLE V
OFFICERS
Section 33. DESIGNATION. The officers of the Corporation shall be the
President and a Secretary. The Board of Directors may also elect a Chief
Financial Officer, one or more Vice Presidents, Assistant Secretaries, Assistant
Treasurers, a Controller, one or more Assistant Controllers and such other
officers as it shall deem necessary. Any number of offices may be held by the
same person.
9
<PAGE>
Section 34. ELECTION AND TERM. At its first meeting after each annual
meeting of stockholders, the Board of Directors shall elect the officers of the
Corporation and at any time thereafter the Board of Directors may elect
additional officers of the Corporation, and each such officer shall hold office
until the officer's successor is elected and qualified or until the officer's
earlier death, resignation or removal. Alternatively, at the last regular
meeting of the Board of Directors prior to an annual meeting of stockholders,
the Board of Directors may elect the officers of the Corporation, contingent
upon the election of the persons nominated to be directos by the Board of
Directors; and each such officer so elected shall hold such office until the
officer's successor is elected and qualified or until the officer's earlier
death, resignation or removal.
Section 35. REMOVAL. Any officer shall be subject to removal or
suspension at any time, for or without cause, by the affirmative vote of a
majority of the Whole Board.
Section 36. RESIGNATIONS. Any officer may resign at any time by giving
written notice to the Chairman of the Board, the President or to the Secretary.
Such resignation shall take effect upon receipt thereof or at any later time
specified therein; and, unless otherwise specified therein, the acceptance of
such resignation shall not be necessary to make it effective.
Section 37. VACANCIES. A vacancy in any office because of death,
resignation, removal or any other cause may be filled for the unexpired portion
of the term by the Board of Directors.
Section 38. PRESIDENT. Subject to such supervisory powers, if any, as
may be given to the Board of Directors to the Chairman of the Board, the
President shall be the chief executive officer of the Corporation and shall have
the general and active management and supervision of the business of the
Corporation. The President, if a member of the Board of Directors, shall, in
the absence of the Chairman of the Board, preside at all meetings of the
stockholders and of the Board of Directors. The President shall see that all
orders and resolutions of the Board of Directors are carried into effect. The
President shall also perform such other duties as may be assigned to the
President by these By-Laws or the Board of Directors. The President shall
designate who shall perform the duties of the chief executive officer in the
President's absence.
Section 39. VICE PRESIDENTS. Each Vice President shall perform the
duties and functions and exercise the powers assigned to such Vice President by
the Board of Directors or the President.
Section 40. SECRETARY. The Secretary shall attend all meetings of the
Board of Directors and of the stockholders and record all votes and the minutes
of all proceedings in a book to be kept for that purpose. The Secretary shall
give, or cause to be given, notice of all meetings of the stockholders and
special meetings of the Board of Directors and, when appropriate, shall cause
the corporate seal to be affixed to any instruments executed on behalf of the
Corporation. The Secretary shall also perform all duties incident to the office
of Secretary and such other duties as may be assigned to the Secretary by these
By-Laws, the Board of Directors, the Chairman of the Board or the President.
10
<PAGE>
Section 41. ASSISTANT SECRETARIES. The Assistant Secretaries shall,
during the absence of the Secretary, perform the duties and functions and
exercise the powers of the Secretary. Each Assistant Secretary shall perform
such other duties as may be assigned to such Assistant Secretary by the Board of
Directors, the Chairman of the Board, the President or the Secretary.
Section 42. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall
have overall responsibility for causing (1) the funds and securities of the
Corporation to be deposited in the name and to the credit of the Corporation in
such depositories as may be designated by the Board of Directors or by any
officer or officers authorized by the Board of Directors to designate such
depositories; (2) the disbursement of funds of the Corporation when properly
authorized by vouchers prepared and approved by the Controller; (3) the
investment of funds of the Corporation when authorized by the Board of Directors
or a committee thereof; and (4) to be kept full and accurate account of receipts
and disbursements in books of the Corporation. The Chief Financial Officer
shall render to the Board of Directors or the President, whenever requested, an
account of all transactions as Chief Financial Officer and shall also perform
all duties incident to the office of Chief Financial Officer and such other
duties as may be assigned to the Chief Financial Officer by these By-Laws, the
Board of Directors, or the President.
Section 43. TREASURER. The Treasurer shall have custody of the funds
and securities of the Corporation and shall deposit them in the name and to the
credit of the Corporation in such depositories as may be designated by the Board
of Directors or by any officer or officers authorized by the Board of Directors
to designate such depositories; disburse funds of the Corporation when properly
authorized by vouchers prepared and approved by the Controller; and invest funds
of the Corporation when authorized by the Board of Directors or a committee
thereof. The Treasurer shall render to the Board of Directors, the President,
or the Chief Financial Officer, whenever requested, an account of all
transactions as Treasurer and shall also perform all duties incident to the
office of Treasurer and such other duties as may be assigned to the Treasurer by
these By-Laws, the Board of Directors, the President or the Chief Financial
Officer.
Section 44. ASSISTANT TREASURERS. The Assistant Treasurers shall,
during the absence of the Chief Financial Officer, perform the duties and
functions and exercise the powers of the Chief Financial Officer. Each
Assistant Treasurer shall perform such other duties as may be assigned to such
Assistant Treasurer by the Board of Directors, the President or the Chief
Financial Officer.
Section 45. CONTROLLER. The Controller shall serve as the principal
accounting officer of the Corporation and shall keep full and accurate account
of receipts and disbursements in books of the Corporation and render to the
Board of Directors, the President or the Chief Financial Officer, whenever
requested, an account of all transactions as Controller and of the financial
condition of the Corporation. The Controller shall also perform all duties
incident to the office of Controller and such other duties as may be assigned to
the Controller by these By-Laws, the Board of Directors, the President or the
Chief Financial Officer.
Section 46. ASSISTANT CONTROLLERS. The Assistant Controllers shall,
during the absence of the Controller, perform the duties and functions and
exercise the powers of the Controller.
11
<PAGE>
Each Assistant Controller shall perform such other duties as may be assigned
to such Assistant Controller by the Board of Directors, the President, the
Chief Financial Officer or the Controller.
ARTICLE VI
CONTRACTS, INSTRUMENTS AND PROXIES
Section 47. CONTRACTS AND OTHER INSTRUMENTS. Except as otherwise
required by applicable law, the Certificate of Incorporation or these By-Laws,
any contracts or other instruments may be signed by such person or persons as
from time to time may be designated by the Board of Directors or by any officer
or officers authorized by the Board of Directors to designate such signers; and
the Board of Directors or such officer or officers may determine that the
signature of any such authorized signer may be facsimile. Such authority may be
general or confined to specific instances as the Board of Directors or such
officer or officers may determine.
Section 48. PROXIES. Except as otherwise provided by resolution of the
Board of Directors, any officer of the Corporation shall each have full power
and authority, on behalf of the Corporation, to exercise any and all rights of
the Corporation with respect to any meeting of stockholders of any corporation
in which the Corporation holds stock, including the execution and delivery of
proxies therefor, and to consent in writing to action by such corporation
without a meeting.
ARTICLE VII
CAPITAL STOCK
Section 49. STOCK CERTIFICATES; BOOK-ENTRY ACCOUNTS. The interest of
each stockholder of the Corporation shall be evidenced by (1) certificates
signed by, or in the name of the Corporation by, the Chairman of the Board, the
President, any Vice President, the Chief Financial Officer or the Treasurer, and
by the Secretary or any Assistant Secretary of the Corporation, certifying the
number of shares owned by such holder in the Corporation, or (2) registration in
book-entry accounts without certificates for shares of stock in such form as the
appropriate officers of the Corporation may from time to time prescribe. Any of
or all the signatures on a stock certificate may be a 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 Corporation with the same effect as if such person were such officer,
transfer agent or registrar at the date of issue.
Section 50. RECORD OWNERSHIP. The Corporation shall be entitled to
treat the person in whose name any share, right or option is registered as the
owner thereof, for all purposes, and shall not be bound to recognize any
equitable or other claim to or interest in such share, right or option on the
part of any other person, whether or not the Corporation shall have notice
thereof, except as otherwise provided by applicable law.
12
<PAGE>
Section 51. RECORD DATES. In order that the Corporation may determine
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled 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 fix a record
date, which shall not precede the date upon which the resolution fixing the
record date is adopted by the Board of Directors and which shall not be more
than 60 nor less than 10 days before the date of such meeting, nor more than 60
days prior to any other action.
Section 52. TRANSFER OF STOCK. Transfers of shares of stock of the
Corporation shall be made only on the books of the Corporation by the registered
holder thereof, or by the registered holder's attorney thereunto authorized by
power of attorney duly executed and filed with the Secretary or a transfer agent
of the Corporation, and on surrender of the certificate or certificates for such
shares properly endorsed and the payment of all taxes thereon, or by appropriate
book-entry procedures.
Section 53. LOST, STOLEN OR DESTROYED CERTIFICATES. The Board of
Directors may authorize a new certificate or certificates to be issued in place
of any certificate or certificates theretofore issued by the Corporation alleged
to have been lost, stolen or destroyed, upon the making of an affidavit of the
fact by the person claiming the certificate of stock to be lost, stolen or
destroyed. When authorizing such issue of a new certificate or certificates, the
Board of Directors may, in its discretion and as a condition precedent to the
issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or the owner's legal representative, to give the
Corporation a bond sufficient to indemnify it against any claim that may be made
against the Corporation on account of the alleged loss, theft or destruction of
such certificate or the issuance of such new certificate.
Section 54. TERMS OF PREFERRED STOCK. The provisions of these By-Laws,
including those pertaining to voting rights, election of directors and calling
of special meetings of stockholders, are subject to the terms, preferences,
rights and privileges of any then outstanding class or series of Preferred Stock
as set forth in the Certificate of Incorporation, any Preferred Stock
Designation and in any resolutions of the Board of Directors providing for the
issuance of such class or series of Preferred Stock; PROVIDED, HOWEVER, that the
provisions of any such Preferred Stock shall not affect or limit the authority
of the Board of Directors to fix, from time to time, the number of directors
which shall constitute the Whole Board as provided in Section 16 above, subject
to the right of the holders of any class or series of Preferred Stock to elect
additional directors as and to the extent specifically provided by the
provisions of such Preferred Stock.
13
<PAGE>
ARTICLE VIII
INDEMNIFICATION
Section 55. RIGHT OF INDEMNIFICATION GENERALLY.
(a) 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
(hereinafter a "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 a director or officer of
the Corporation or is or was serving at the request of the Corporation as a
legal representative, director, officer, employee or agent of another
corporation or of a limited liability company, partnership, joint venture, trust
or other enterprise, including service with respect to employee benefit plans,
shall be indemnified and held harmless by the Corporation to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as the same
exists or may hereafter be amended (but, if permitted by applicable law, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law permitted
the Corporation to provide prior to such amendment), and any other applicable
laws as presently or hereafter in effect, against all expense, 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; PROVIDED, HOWEVER, that except
as provided in Section 57 below, the Corporation shall indemnify any such person
seeking indemnification 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.
(b) ADVANCE OF EXPENSES. Each person referred to in paragraph
(a) of this By-Law shall be paid by the Corporation the expenses incurred in
connection with any proceeding described in paragraph (a) of this By-Law in
advance of its final disposition upon receipt by the Corporation of an
undertaking by or on behalf of such person, to repay all amounts so advanced if
it shall ultimately be determined that such person is not entitled to be
indemnified under this Article VII or otherwise.
(c) CONTRACT RIGHT. The right to indemnification conferred in
this Article VII shall be a contract right.
Section 56. WRITTEN REQUEST; DETERMINATION OF ENTITLEMENT. To obtain
indemnification under this Article VII, a claimant shall submit to the
Corporation a written request, including therein or therewith such documentation
and information as is reasonably available to the claimant and is reasonably
necessary to determine whether and to what extent the claimant is entitled to
indemnification. Any determination regarding whether indemnification of any
person is proper in the circumstances because such person has met the applicable
standard of conduct set forth in the General Corporation Law of the State of
Delaware shall be made, at the option of the person seeking indemnification, by
the directors as set forth in the General Corporation Law of the State of
Delaware or by independent legal counsel selected by such person with the
consent of the Corporation (which consent shall not unreasonably be withheld).
14
<PAGE>
Section 57. RECOVERY OF UNPAID CLAIM. If a claim under Section 55
above is not paid in full by the Corporation within 60 days after a written
claim pursuant to Section 56 above 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 actions brought to
enforce a claim for expenses incurred in defending any proceeding in advance of
its final disposition where the required undertaking, if any is required, has
been tendered to the Corporation) that the claimant has not met the standard of
conduct which makes it permissible under the General Corporation Law of the
State of Delaware for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its directors, independent
legal counsel or 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 General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its directors, independent legal
counsel or stockholders) that the claimant has not met such applicable standard
of conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
Section 58. EXCLUSIVITY; SUBSEQUENT MODIFICATION. The right to
indemnification and the payment of expenses incurred in connection with a
proceeding in advance of its final disposition conferred in this Article VII
shall not be exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of Incorporation,
By-Laws, agreement, vote of stockholders or directors or otherwise. No
repeal or modification of this Article VII shall in any way diminish or
adversely affect the rights hereunder of any director, officer or employee or
of any agent who has been expressly granted indemnification by the
Corporation pursuant to Section 60 below in respect of any occurrence or
matter arising prior to any such repeal or modification.
Section 59. INSURANCE. The Corporation may maintain insurance, at its
expense, to protect itself and any legal representative, director, officer,
employee or agent of the Corporation or another corporation, limited liability
company, 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
General Corporation Law of the State of Delaware or otherwise. To the extent
that the Corporation maintains any policy or policies providing such insurance,
each such legal representative, director, officer or employee, and each such
agent to which rights to indemnification have been granted as provided in
Section 60 below shall be covered by such policy or policies in accordance with
its or their terms to the maximum extent of the coverage thereunder for any such
legal representative, director, officer, employee or agent.
Section 60. OTHER PERSONS GRANTED RIGHT OF INDEMNIFICATION. The
Corporation may, to the extent authorized from time to time by the Board of
Directors, grant rights to indemnification, and rights to be paid by the
Corporation the expenses incurred in defending any proceeding in advance of its
final disposition, to any agent of the Corporation to the fullest extent of the
provisions of this Article VII with respect to the indemnification and
advancement of expenses of directors, officers and employees of the Corporation.
15
<PAGE>
Section 61. ILLEGALITY; UNENFORCEABILITY. If any provision or
provisions of this Article VII shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (1) the validity, legality and
enforceability of the remaining provisions of this Article VII (including,
without limitation, each portion of any Section or subsection of this Article
VII containing any such provision held to be invalid, illegal or unenforceable,
that is not itself held to be invalid, illegal or unenforceable) shall not in
any way be affected or impaired thereby; and (2) to the fullest extent possible,
the provisions of this Article VII (including, without limitation, each such
portion of any Section or subsection of this Article VII containing any such
provision held to be invalid, illegal or unenforceable that is not itself held
to be invalid, illegal or unenforceable) shall be construed so as give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
Section 62. FORM AND DELIVERY OF COMMUNICATIONS. Any notice, request
or other communication required or permitted to be given to the Corporation
under this Article VII shall be in writing and either delivered in person or
sent by telecopy, telex, telegram, overnight mail or courier service, or
certified or registered mail, postage prepaid, return receipt requested, to the
Secretary of the Corporation.
ARTICLE IX
MISCELLANEOUS
Section 63. CORPORATE SEAL. The seal of the Corporation shall be
circular in form, containing the words "inSilicon Corporation" and the word
"Delaware" on the circumference surrounding the word "Seal." Said seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 64. FISCAL YEAR. The fiscal year of the Corporation shall end
on September 30 of each year.
Section 65. AUDITORS. The Board of Directors shall select certified
public accountants to audit the books of account and other appropriate corporate
records of the Corporation annually and at such other times as the Board of
Directors shall determine by resolution.
Section 66. WAIVER OF NOTICE. Whenever notice is required to be given
pursuant to applicable law, the Certificate of Incorporation or these By-Laws, 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 of stockholders or the Board of Directors or
a committee thereof shall constitute a waiver of notice of such meeting, except
when the stockholder or director attends such 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 or the Board of Directors or committee thereof need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or by these By-Laws.
16
<PAGE>
ARTICLE X
AMENDMENT TO BY-LAWS
Section 67. AMENDMENTS. These By-Laws may be altered, amended or
repealed, and new By-Laws may be adopted by the affirmative vote of the holders
of at least 80% of the Voting Stock then outstanding, voting together as a
single class or (b) by the affirmative vote of a majority of the Whole Board.
17
<PAGE>
Exhibit 4.1
Number Shares
INS
INSILICON CORPORATION
INCORPORATED UNDER THE LAWS
OF THE STATE OF DELAWARE
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP 45769H 10 8
This Certifies that
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF
INSILICON CORPORATION
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this certificate properly
endorsed. This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated:
COUNTERSIGNED AND REGISTERED:
EquiServe Trust Company, N.A.
TRANSFER AGENT
AND REGISTRAR
BY
AUTHORIZED SIGNATURE
[INSILICON SEAL]
<PAGE>
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional, or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the CorporationOs Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<S> <C>
TEN COM N as tenants in common UNIF GIFT MIN ACT N ................... ....................... Custodian
TEN ENT N as tenants by the entireties (Cust) (Minor)
JT TEN N as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as tenants Act ......................................................
in common (State)
UNIF TRF MIN ACT N ................. Custodian (until age ...............)
(Cust)
.............................. under Uniform Transfers
(Minor)
to Minors Act .........................................
(State)
Additional abbreviations may also be used though not in the above list.
</TABLE>
For Value Received,______________________________________________________
hereby sell(s), assign(s) and transfer(s) unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- -----------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- ------------- Shares of the common stock represented by the within Certificate,
and do hereby irrevocably constitute and appoint______________________________
Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated
X_________________________________
X_________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By
THE SIGNATURE(S) MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
[Letterhead of Orrick, Herrington & Sutcliffe LLP]
February 13, 2000
inSilicon Corporation
411 East Plumeria Drive
San Jose, California 95134
Re: inSilicon Corporation
Registration Statement on Form S-1
----------------------------------
Ladies and Gentlemen:
At your request, we are rendering this opinion in connection
with a proposed sale by inSilicon Corporation, a Delaware corporation (the
"Company") of up to 4,025,000 shares of common stock, $.001 par value (the
"Common Stock").
We have examined instruments, documents, and records which we
deemed relevant and necessary for the basis of our opinion hereinafter
expressed. In such examination, we have assumed the following: (a) the
authenticity of original documents and the genuineness of all signatures; (b)
the conformity to the originals of all documents submitted to us as copies; and
(c) the truth, accuracy, and completeness of the information, representations,
and warranties contained in the records, documents, instruments, and
certificates we have reviewed.
Based on such examination, we are of the opinion that the
4,025,000 shares of Common Stock to be issued and sold by the Company (of which
up to 525,000 shares are to be issued to cover over-allotments, if any) are
validly authorized shares of Common Stock, and, when issued against payment of
the purchase price therefor, will be legally issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1
to the above referenced Registration Statement and to the use of our name
wherever it appears in the Registration Statement and in the Prospectus included
therein, and any amendment or supplement thereto. In giving such consent, we do
not consider that we are "experts" within the meaning of such term as used in
the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission issued thereunder, with respect to any part
of the Registration Statement, including this opinion as an exhibit or
otherwise.
Very truly yours,
/s/ORRICK, HERRINGTON & SUTCLIFFE LLP
<PAGE>
CONTRIBUTION AGREEMENT
dated as of November 30, 1999
between
PHOENIX TECHNOLOGIES LTD.
and
INSILICON CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS................................................................................1
Section 1.1. Definitions...........................................................................1
Section 1.2. Internal References...................................................................5
ARTICLE II CONTRIBUTION OF ASSETS AND ASSUMPTION OF LIABILITIES; ISSUANCE OF INSILICON SHARES.........5
Section 2.1. Contribution of Assets................................................................5
Section 2.2. Assignment and Assumption of Liabilities..............................................6
Section 2.3. Transfers Not Effected On or Prior to the Separation Date.............................7
Section 2.4. No Representations or Warranties; Consents............................................7
Section 2.5. Documents Relating to Transfer of Assets and Assignment and Assumption of
Liabilities.........................................................................8
Section 2.6. Issuance of inSilicon Shares..........................................................8
ARTICLE III REPRESENTATIONS AND WARRANTIES.............................................................9
Section 3.1. Representations and Warranties of inSilicon...........................................9
Section 3.2. Representations and Warranties of Phoenix; Legends....................................9
ARTICLE IV RIGHT OF FIRST OFFER......................................................................10
Section 4.1. Grant of Right of First Offer........................................................10
Section 4.2. Terms of Offer and Purchase..........................................................10
ARTICLE V BRIDGE LOAN...............................................................................11
Section 5.1. Request for Advance..................................................................11
Section 5.2. Advances by inSilicon................................................................11
Section 5.3. Interest.............................................................................11
Section 5.4. Repayment............................................................................11
ARTICLE VI MISCELLANEOUS.............................................................................11
Section 6.1. Expenses.............................................................................11
Section 6.2. Notices..............................................................................12
Section 6.3. Amendment and Waiver.................................................................12
Section 6.4. Counterparts.........................................................................12
Section 6.5. Governing Law........................................................................12
Section 6.6. Entire Agreement.....................................................................12
Section 6.7. Parties in Interest..................................................................12
Section 6.8. Exhibits and Schedules...............................................................13
</TABLE>
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 6.9. Legal Enforceability.................................................................13
Section 6.10. Covenants of inSilicon...............................................................13
Section 6.11. Titles and Headings..................................................................14
Section 6.12. Conflicting Agreements...............................................................14
Section 6.13. Disputes.............................................................................14
Section 6.14. Adjustments for Stock Splits and Recapitalizations...................................14
SCHEDULE 1.1(a) INSILICON CONTRACTS..............................................................................1
SCHEDULE 2.1(f) EQUIPMENT AND OTHER ASSETS.......................................................................1
SCHEDULE 2.1(g) INTELLECTUAL PROPERTY............................................................................1
SCHEDULE 2.1(j) INDUSTRY ASSOCIATIONS............................................................................1
SCHEDULE 2.4(a) SPECIFIED INTELLECTUAL PROPERTY..................................................................1
</TABLE>
<PAGE>
CONTRIBUTION AGREEMENT
This Contribution Agreement (this "Agreement") is entered into
effective as of November 30, 1999 by and between Phoenix Technologies Ltd., a
Delaware corporation ("Phoenix"), and inSilicon Corporation, a Delaware
corporation and a wholly owned subsidiary of Phoenix ("inSilicon").
RECITALS
WHEREAS, the Board of Directors of Phoenix has determined that it is
in the best interests of Phoenix and inSilicon to separate the Business from
Phoenix's other operations; and
WHEREAS, in furtherance of the foregoing, it is appropriate and
desirable to transfer the Semiconductor Intellectual Property Assets to
inSilicon and to cause inSilicon to assume the Semiconductor Intellectual
Property Liabilities, all as more fully described in this Agreement (such
transfer of assets and assumption of liabilities are hereinafter referred to
as the "Separation");
WHEREAS, it is appropriate and desirable to set forth the principal
corporate transactions required to effect the Separation.
NOW, THEREFORE, in consideration of the foregoing premises and the
mutual agreements, provisions and covenants contained in this Agreement, the
parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"ACTION" means any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or regulatory or
administrative agency or commission or any other tribunal or other
Governmental Authority.
"AFFILIATE" of any specified Person means any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such specified Person.
"AGREEMENT" has the meaning set forth in the preamble hereof, as
such agreement may be amended and supplemented from time to time in
accordance with its terms.
"ANCILLARY AGREEMENTS" means the IPO Agreement and the Services and
Cost-Sharing Agreement and each of the following agreements between Phoenix
and inSilicon dated as of November 30, 1999, as the same may be amended from
time to time: the Tax-Sharing Agreement, the Employee Matters Agreement and
the Registration Rights Agreement and Technology Distributor Agreement.
<PAGE>
"BUSINESS" means the business and operations of Phoenix engaged in
the development and licensing of semiconductor intellectual property cores,
silicon subsystems, firmware stacks and drivers and test environments,
simulation models and verification systems related thereto, as well as
service, maintenance and customizations of same.
"COMMON STOCK" means the common stock, par value $0.001 per share,
of inSilicon.
"CONSENTS" means any consents, waivers or approvals from, or
notification requirements to, any third parties.
"CONTRACTS" means any contract, agreement, lease, license, sales
order, purchase order, instrument or other commitment that is binding on any
Person or any part of its property under applicable law.
"GAAP" shall have the meaning set forth in Section 6.10(a).
"GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign
or international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental
authority.
"INSILICON" has the meaning set forth in the preamble of this
Agreement.
"INSILICON BALANCE SHEET" means the audited balance sheet of
inSilicon, including the notes thereto, as of September 30, 1999.
"INSILICON CAPITAL STOCK" means any shares of or securities
convertible into or exercisable for any shares of any class of capital stock
of inSilicon.
"INSILICON CONTRACTS" means the following Contracts related to the
Business to which Phoenix or any of its Affiliates is a party or by which it
or any of its Affiliates or their respective assets is bound, whether or not
in writing, including but not limited to:
(a) all Contracts listed or described on Schedule 1.1(a);
(b) any Contracts entered into in the name of, or expressly on
behalf of, inSilicon (including its former names, RaviCad, Virtual Chips,
Sand, Award (as related to the IFG group of Award), and semiconductor IP
Group); and
(c) any guarantee, indemnity, representation, warranty or other
Liability of inSilicon or Phoenix in respect of any other inSilicon Contract,
any Semiconductor Intellectual Property Liability or the Business.
"INTELLECTUAL PROPERTY" means (a) inventions, whether or not
patentable, whether or not reduced to practice or whether or not yet made the
subject of a pending patent application or applications or draft applications
(b) ideas and conceptions of potentially patentable subject matter,
including, without limitation, any patent disclosures invention disclosures,
whether or not reduced to practice and whether or not yet made the subject of
a pending patent application or applications, (c) national (including the
United States) and multinational statutory invention
2
<PAGE>
registrations, patents, patent registrations and patent applications
(including all reissues, divisions, continuations, continuations-in-part,
extensions and reexaminations and all patents issuing thereon) and all rights
therein provided by multinational treaties or conventions and all
improvements to the inventions disclosed in each such registration, patent or
application, (d) trademarks, service marks, trade dress, logos, trade names
domain names, web addresses and corporate names, whether or not registered,
including all common law rights, and registrations and applications for
registration thereof, including, but not limited to, all marks registered in
the United States Patent and Trademark Office, the Trademark Offices of the
States and Territories of the United States of America, and the Trademark
offices of other nations throughout the world, and all rights therein
provided by multinational treaties or conventions, (e) copyrights (registered
existing commerce or otherwise) and registrations and applications for
registration thereof, and all rights therein provided by multinational
treaties or conventions, (f) moral rights (including, without limitation,
rights of paternity and integrity), and waivers of such rights by others, (g)
computer software, including, without limitation, source code, object code,
programming notes, operating systems and specifications, data, data bases,
files, documentation and other materials related thereto, data and
documentation, (h) trade secrets and confidential, technical or business
information (including ideas, formulas, systems, methodologies, compositions,
inventions, and conceptions of inventions whether patentable or unpatentable
and whether or not reduced to practice), (i) whether or not confidential,
technology (including know-how and show-how), manufacturing, production,
design and verification processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing and business data, pricing
and cost information, business and marketing plans and customer and supplier
lists and information, (j) copies and tangible embodiments of all the
foregoing, in whatever form or medium, (k) all rights to obtain and rights to
apply for patents, and to register trademarks and copyrights, and all other
intelectual property rights anywhere in the world, and (l) all rights to sue
and recover and retain damages and costs and attorneys' fees for present and
past infringement of any of the Intellectual Property rights hereinabove set
out.
"IPO AGREEMENT" means that certain Initial Public Offering Agreement
between inSilicon and Phoenix dated as of November 30, 1999, as the same may
be amended from time to time.
"IPO DATE" means the date of the closing of the first qualified IPO.
"LIABILITIES" means any and all claims, charges, debts, demands,
Actions, causes of Action, suits, damages, obligations, payments, costs and
expenses, accounts, bonds, indemnities and similar obligations, covenants,
Contracts, agreements, promises, guarantees and other liabilities, including
all contractual obligations, whether absolute or contingent, matured or not
matured, liquidated or unliquidated, accrued or not accrued, known or
unknown, whenever arising, and including those arising under any law, rule,
regulation, Action, threatened or contemplated Action (including the costs
and expenses of demands, assessments, judgments, settlements and compromises
relating thereto), order or consent decree of any Governmental Authority or
any award of any arbitrator or mediator of any kind, and those arising under
any contract, commitment or undertaking, including those arising under this
Agreement, whether or not recorded or reflected or required to be recorded or
reflected on the books and records or financial statements of any Person.
3
<PAGE>
"NOTICE" has the meaning set forth in Section 4.2.
"PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability company, any other entity and any Governmental Authority.
"PHOENIX" has the meaning set forth in the preamble of this
Agreement.
"PHOENIX GROUP" means Phoenix and each Person (other than inSilicon
and its subsidiaries) that is an Affiliate of Phoenix immediately after the
Separation Date.
"QUALIFIED IPO" means a firm commitment underwritten public
offering by inSilicon of shares of its Common Stock pursuant to a
registration statement under the Securities Act, the public offering price of
which is not less than $7.50 per share (appropriately adjusted for any stock
split, dividend, combination or other recapitalization after the date hereof
and which results in aggregate cash proceeds to inSilicon of $10 million.
"SECURITIES" means the Series A Preferred Stock, the Warrant and
the Common Stock issuable upon conversion or exercise thereof.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any successor statute.
"SEMICONDUCTOR INTELLECTUAL PROPERTY ASSETS" has the meaning set
forth in Section 2.1(a).
"SEMICONDUCTOR INTELLECTUAL PROPERTY LIABILITIES" has the meaning
set forth in Section 2.2.
"SEPARATION" has the meaning specified in the second recital of this
Agreement.
"SEPARATION DATE" means November 30, 1999.
"SERIES A PREFERRED STOCK" means the Series Preferred Stock, par
value $.001 per share, of inSilicon.
"SERVICES AND COST-SHARING AGREEMENT" means that certain Services
and Cost-Sharing Agreement between inSilicon and Phoenix dated as of November
30, 1999, as the same may be amended from time to time.
"SHORTFALL AMOUNT" has the meaning set forth in Section 5.1.
"SHORTFALL REQUEST" has the meaning set forth in Section 5.1.
"WARRANT" means the warrant to purchase shares of Common Stock in
the form set forth on Exhibit A.
Unless otherwise specified, any reference to any "subsidiary" or
"subsidiaries" of Phoenix shall not include inSilicon.
4
<PAGE>
Section 1.2. INTERNAL REFERENCES. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and
references to the parties shall mean the parties to this Agreement.
ARTICLE II
CONTRIBUTION OF ASSETS AND
ASSUMPTION OF LIABILITIES; ISSUANCE OF INSILICON SHARES
Section 2.1. CONTRIBUTION OF ASSETS. Phoenix hereby assigns,
transfers, conveys and delivers to inSilicon as of the Separation Date, and
agrees to cause each of its subsidiaries to assign, transfer, convey and
deliver to inSilicon as of the Separation Date, and inSilicon hereby accepts
from Phoenix and such subsidiaries as of the Separation Date, all of
Phoenix's and such subsidiaries' respective right, title and interest in or
under the following assets primarily related to the Business (the
"Semiconductor Intellectual Property Assets"):
(a) all assets reflected in the inSilicon Balance Sheet as
"Assets" of inSilicon, subject to any dispositions of such assets after the
date of the inSilicon Balance Sheet;
(b) all assets that have been written off, expensed or fully
depreciated that, had they not been written off, expensed or fully
depreciated, would have been reflected in the inSilicon Balance Sheet in
accordance with the principles and accounting policies under which the
inSilicon Balance Sheet was prepared; and
(c) all assets acquired by Phoenix or its subsidiaries after
the date of the inSilicon Balance Sheet that would have been reflected in the
consolidated balance sheet of inSilicon as of the Separation Date if such
consolidated balance sheet was prepared using the same principles and
accounting policies under which the inSilicon Balance Sheet was prepared; and
(d) all assets that are used primarily by the Business at the
Separation Date but are not reflected in the inSilicon Balance Sheet due to
mistake or unintentional omission; PROVIDED, HOWEVER, that no such asset
shall be a Semiconductor Intellectual Property Asset unless inSilicon has, on
or before the first anniversary of the IPO Date, given notice that such asset
is a Semiconductor Intellectual Property Asset and thereafter cooperate for
transfer of those assets agreed to as being assets related to the Business;
(e) the inSilicon Contracts;
(f) the equipment and other assets used primarily by employees
of Phoenix that will become employees of inSilicon in connection with the
Separation, a list of which is set forth in Schedule 2.1(f).
(g) the Intellectual Property set forth on Schedule 2.1(g);
(h) the right to use all corporate documentation, license
agreements and forms necessary to conduct the Business that are owned by
Phoenix on the date hereof ;
5
<PAGE>
(i) Services and costs to inSilicon under the Services and
Cost-Sharing Agreement for the month of December 1999 equal to the lesser of
the amount that would otherwise be due and payable thereunder and $550,000;
and
(j) Phoenix's membership's in the industry associations listed
on Schedule 2.1(j).
Section 2.2. ASSIGNMENT AND ASSUMPTION OF LIABILITIES. inSilicon
hereby assumes and agrees as of the Separation Date faithfully to pay,
perform and fulfill all obligations under the following in accordance with
their respective terms (the "SEMICONDUCTOR INTELLECTUAL PROPERTY
LIABILITIES"):
(a) all Liabilities reflected as "Liabilities" or obligations
of inSilicon in the inSilicon Balance Sheet, subject to any discharge of such
Liabilities after the date of the inSilicon Balance Sheet.
(b) all Liabilities of Phoenix or its subsidiaries that arise
after the date of the inSilicon Balance Sheet that would be reflected in the
consolidated balance sheet of inSilicon as of the Separation Date if such
consolidated balance sheet was prepared using the same principles and
accounting policies under which the inSilicon Balance Sheet was prepared;
(c) all Liabilities that are related primarily to the Business
at the Separation Date but are not reflected in the inSilicon Balance Sheet
due to mistake or unintentional omission; PROVIDED, HOWEVER, that no such
Liability shall be a Semiconductor Intellectual Property Liability unless
Phoenix, on or before the first anniversary of the IPO Date, has given
inSilicon notice that such Liability is a Semiconductor Intellectual Property
Liability;
(d) except as may be explicitly provided in an Ancillary
Agreement, all Liabilities whether arising before, on or after the Separation
Date, primarily related to, arising out of or resulting from:
(i) the operation of the Business, as conducted at any
time prior to, on or after the Separation Date (including any
Liability relating to, arising out of or resulting from any act or
failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or
was within such Person's authority));
(ii) the operation of any business conducted directly or
indirectly by inSilicon at any time after the Separation Date
(including any Liability relating to, arising out of or resulting from
any act or failure to act by any director, officer, employee, agent or
representative (whether or not such act or failure to act is or was
within such Person's authority));
(iii) the Semiconductor Intellectual Property Assets; or
(iv) the acquisition of Sand Microelectronics, Inc.,
including, but not limited to those related to, arising out of or
resulting from the Agreement and Plan of Reorganization dated as of
September 17, 1998 by and among Phoenix Technologies Ltd., Phoenix
SubCorp., Sand Microelectronics Inc. and Babu Chilukuri, Anand Naidu
6
<PAGE>
and Ajit Deora, the agreements referred to therein and the retention
bonus program established in connection therewith.
Section 2.3. TRANSFERS NOT EFFECTED ON OR PRIOR TO THE SEPARATION
DATE. To the extent any transfers contemplated by this Article II shall not
have been fully effected on or before the Separation Date, Phoenix and
inSilicon shall cooperate to effect such transfers as promptly as possible
following the Separation Date. Nothing herein shall be deemed to require the
transfer of any assets or the assignment or assumption of any Liabilities
that by their terms or by operation of law cannot be so transferred, assigned
or assumed; PROVIDED, HOWEVER, that any such asset shall be deemed a
Semiconductor Intellectual Property Asset for purposes of determining whether
any Liability is a inSilicon Liability or any benefit received related to the
Business and should be held for the benefit of inSilicon; and PROVIDED,
FURTHER, that Phoenix and inSilicon and their respective Affiliates shall
cooperate in seeking to obtain any necessary Consents for the transfer of all
assets and the assignment or assumption of all Liabilities as contemplated by
this Article II. In the event that any transfer of assets or assignment or
assumption of Liabilities contemplated by this Article II has not been
consummated effective as of the Separation Date, (a) the party retaining such
assets shall thereafter hold such assets in trust for the use and benefit of
the party entitled thereto (at the expense of the party entitled thereto);
and (b) the party retaining such Liabilities shall thereafter hold such
Liabilities for the account of the party assuming such Liability or to whom
such Liability is to be assigned pursuant hereto (at the expense of the party
assuming such Liability or to whom such Liability is to be assigned), and in
each such case shall take such other actions as it may be commercially
reasonable for the Person to whom such asset is to be transferred to request
in order to place such Person, insofar as reasonably possible, in the same
position as if such asset had been transferred as contemplated hereby and so
that all the benefits and burdens relating to such Semiconductor Intellectual
Property Assets (or such Non-Semiconductor Intellectual Property Assets, as
the case may be), including possession, use, revenue, risk of loss, potential
for gain, and dominion, control and command over such assets, are to inure
from and after the Separation Date to inSilicon (or the Phoenix Group, as the
case may be). As and when any such asset or Liability becomes transferable,
assignable or assumable, as the case may be, such transfer, assignment or
assumption, as the case may be, shall be effected forthwith. Phoenix and
inSilicon agree that, as of the Separation Date, each party hereto shall be
deemed to have acquired complete and sole beneficial ownership over all of
the assets, together with all of the rights, powers and privileges incidental
thereto, that such party is entitled to acquire pursuant to the terms of this
Agreement.
Section 2.4. NO REPRESENTATIONS OR WARRANTIES; CONSENTS. (a) Each of
the parties hereto understands and agrees that no party hereto is, in this
Agreement representing or warranting in any way as to the value or freedom
from encumbrance of, or any other matter concerning, any assets of such
party, or as to the legal sufficiency to convey title to an asset transferred
pursuant to this Agreement, including, without limitation, any conveyancing
or assumption instruments. It is also agreed and understood that there are no
warranties whatsoever, express or implied, given by either party to this
Agreement, as to the condition, quality, merchantability or fitness of any of
the assets, businesses or other rights transferred or retained by the
parties, as the case may be, and all such assets, businesses and other rights
shall be "as is, where is" and "with all faults" (provided that the absence
of warranties given by the parties shall not negate the allocation of
Liabilities under this Agreement and shall have no effect on any
manufacturers, sellers, or other third party warranties that are intended to
be transferred
7
<PAGE>
with such assets), and inSilicon shall bear the economic and legal risks that
any conveyance shall prove to be insufficient to vest in it good and
marketable title, free and clear of any security interest, pledge, lien,
charge, claim, option, right to acquire, covenant, condition, restriction on
transfer or other encumbrance of any nature whatsoever. Notwithstanding the
foregoing, Phoenix represents and warrants to inSilicon that it has good and
marketable title to the Intellectual Property listed on Schedule 2.4(a).
(b) Each party hereto understands and agrees that no party
hereto is, in this Agreement or any other agreement or document contemplated
by this Agreement or otherwise, representing or warranting in any way that
the obtaining of any Consents, the execution and delivery of any amendatory
agreements and the taking of any filings or applications contemplated by this
Agreement will satisfy the provisions of any or all applicable laws or
judgments or other instruments or agreements relating to such assets.
Notwithstanding the foregoing, the parties shall use commercially
reasonable efforts in the United States (and best efforts in jurisdictions
outside the United States) to obtain all Consents (including such Consents as
may be required by any Governmental Authority). The parties shall also use
commercially reasonable efforts to make all filings and applications
contemplated by this Agreement, and shall take all such further actions as
shall be deemed reasonably necessary to preserve for each of Phoenix and
inSilicon, to the greatest extent reasonably feasible, consistent with this
Agreement, the economic and operational benefits of the allocation of assets
and liabilities provided for in this Agreement.
Section 2.5. DOCUMENTS RELATING TO TRANSFER OF ASSETS AND ASSIGNMENT
AND ASSUMPTION OF LIABILITIES. In connection with the transfer of the
Semiconductor Intellectual Property Assets pursuant to Section 2.1 of this
Agreement and the assignment and assumption of the Semiconductor Intellectual
Property Liabilities pursuant to Section 2.2 of this Agreement,
simultaneously with the execution and delivery hereof or as promptly as
practicable thereafter, (a) Phoenix shall execute and deliver such bills of
sale, deeds, stock powers, certificates of title, assignments of Contracts
and other instruments or transfer, conveyance and assignment as and to the
extent necessary to evidence the transfer, conveyance and assignment of all
of Phoenix's right, title and interest in and to the Semiconductor
Intellectual Property Assets to inSilicon and (b) inSilicon shall execute and
deliver to Phoenix such bills of sale, certificates of title, assumptions of
Contracts and other instruments or assumption as may be necessary to evidence
the valid and effective assumption of the Semiconductor Intellectual Property
Liabilities by inSilicon.
Section 2.6. ISSUANCE OF INSILICON SHARES. As of the Separation
Date, in consideration of the transfer of the Semiconductor Intellectual
Property Assets, inSilicon shall, in addition to assuming the Semiconductor
Intellectual Property Liabilities, issue and deliver to Phoenix 10,400,000
shares of Series A Preferred Stock and the Warrant.
8
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Section 3.1. REPRESENTATIONS AND WARRANTIES OF INSILICON. inSilicon
hereby represents and warrants to Phoenix that:
(a) The Series A Preferred Stock that is being issued to
Phoenix in connection with this Agreement will be duly and validly issued,
fully paid and nonassessable and free of restrictions on transfer other than
restrictions on transfer under applicable federal and state securities laws.
(b) The Warrant will be a valid and binding obligation of
inSilicon enforceable against inSilicon in accordance with its terms and free
of restrictions on transfer other than restrictions under applicable federal
and state securities laws.
(c) The Series A Preferred Stock and the Warrant will be issued
in compliance with all applicable federal and state securities laws.
(d) The Common Stock issuable upon conversion of the Series A
Preferred Stock and exercise of the Warrant has been duly and validly
reserved for issuance, and upon issuance in accordance with the terms of the
Amended and Restated Certificate of Incorporation of inSilicon, will be duly
and validly issued, fully paid and nonassessable and free of restrictions on
transfer other than restrictions on transfer under applicable federal and
state securities laws and will be issued in compliance with all applicable
federal and state securities laws.
Section 3.2. REPRESENTATIONS AND WARRANTIES OF PHOENIX; LEGENDS. (a)
Phoenix hereby represents and warrants to inSilicon that:
(i) The Securities to be acquired by Phoenix will be
acquired for investment for Phoenix's own account, and not with a
view to the resale or distribution of any part thereof, and that
Phoenix has no present intention of selling, granting any
participation in, or otherwise distributing the same in a manner
contrary to applicable laws.
(ii) The Securities have not been registered under the
Securities Act, by reason of a specific exemption from the
registration provisions of the Securities Act which depends upon,
among other things, the bona fide nature of the investment intent
and the accuracy of Phoenix's representations as expressed herein.
Phoenix understands that the Securities are "restricted securities"
under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Phoenix must hold the Securities indefinitely
unless they are registered with the Securities and Exchange
Commission and qualified by state authorities, or an exemption from
such registration and qualification requirements is available.
(b) LEGENDS. Phoenix understands that the Securities and any
securities issued in respect of or exchange for the Securities, may bear one
or all of the following legends:
9
<PAGE>
(i) "THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN
CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO INSILICON THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933."
(ii) Any legend required by the Blue Sky laws of any
state to the extent such laws are applicable to the shares
represented by the certificate so legended.
ARTICLE IV
RIGHT OF FIRST OFFER
Section 4.1. GRANT OF RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this Article IV, inSilicon hereby grants to Phoenix a
right of first offer with respect to future sales by inSilicon of inSilicon
Capital Stock. As long as Phoenix owns 50,000 shares of Series A Preferred
Stock (or the Common Stock issued upon conversion thereof) Phoenix may
designate as purchasers under such right itself or its Affiliates in such
proportions as it deems appropriate.
Section 4.2. TERMS OF OFFER AND PURCHASE. Each time inSilicon
proposes to offer any shares of inSilicon Capital Stock, inSilicon shall
first make an offering of such inSilicon Capital Stock to Phoenix in
accordance with the following provisions:
(a) inSilicon shall deliver a notice (the "Notice") to Phoenix
stating (i) its bona fide intention to offer such inSilicon Capital Stock,
(ii) the number of shares of such inSilicon Capital Stock to be offered, and
(iii) the price and terms, if any, upon which it proposes to offer such
inSilicon Capital Stock.
(b) Within fifteen (15) calendar days after delivery of the
Notice, Phoenix may elect to purchase or obtain, at the price and on the
terms specified in the Notice, up to that portion of such inSilicon Capital
Stock which equals the proportion that the number of shares of Common Stock
issued and held, or issuable upon conversion and exercise of all convertible
or exercisable securities then held, by Phoenix bears to the total number of
shares of Common Stock then outstanding (assuming full conversion and
exercise of all options, warrants and convertible or exercisable securities).
Such purchase shall be completed at the same closing as that of any third
party purchasers or at an additional closing thereunder.
(c) inSilicon may, during the forty five (45)-day period
following the expiration of the period provided in Section 4.2(b) hereof,
offer the remaining unsubscribed portion of the inSilicon Capital Stock to
any Person or Persons at a price not less than, and upon terms no more
favorable to the offeree than those specified in the Notice. If inSilicon
does not enter into a Memorandum of Understanding ("MOU") for the sale of the
inSilicon Capital Stock within such period, or if such agreement is not
consummated within sixty (60) days following the execution
10
<PAGE>
of the MOU, the right provided hereunder shall be deemed to be revived and
such Stock shall not be offered unless first reoffered to Phoenix in
accordance herewith.
(d) The right of first offer in this Article IV shall not be
applicable (i) to the issuance or sale of 2,700,000 shares of Common Stock
(or options therefor) to employees, consultants or directors pursuant to the
1999 Employee Stock Option Plan approved by the Board of Directors; (ii) to
the issuance of securities in connection with a bona fide business
acquisition of or by inSilicon, whether by merger, consolidation, sale of
assets, sale or exchange of stock or otherwise; (iii) to the issuance of
securities to financial institutions or lessors in connection with commercial
credit arrangements, equipment financings, or similar transactions; (iv) to
the shares issued upon the conversion of the Series A Preferred Stock; (v) to
the securities issued pursuant to or after consummation of a Qualified IPO;
(vi) to the issuance of securities pursuant to the Warrant; or (vii) to
securities issued pursuant to stock splits, stock dividends or similar
transactions.
ARTICLE V
BRIDGE LOAN
Section 5.1. REQUEST FOR ADVANCE. If from time to time prior to a
Qualified IPO, the Liabilities of inSilicon then due and payable shall exceed
its cash and cash equivalents (as determined under GAAP), inSilicon may
require Phoenix to provide to inSilicon up to an amount of cash equal to the
amount by which such Liabilities exceed such cash and cash equivalents (a
"Shortfall Amount") by delivering a request therefor to Phoenix (a "Shortfall
Request").
Section 5.2. ADVANCES BY INSILICON. Within two (2) business days
after delivery of a Shortfall Request, Phoenix shall deposit or cause to be
deposited into an account designated by inSilicon the Shortfall Amount set
forth in the Shortfall Request in immediately available funds.
Section 5.3. INTEREST. Amounts advanced by Phoenix under Section 5.2
shall bear interest at the rate of 8% per annum, computed from the date of
deposit in the applicable inSilicon account to the date of repayment to
Phoenix.
Section 5.4. REPAYMENT. The principal amounts advanced by Phoenix
under Section 5.2 and/or interest thereon under Section 5.3 may be paid by
inSilicon to Phoenix at any time and from time to time, in whole or in part;
PROVIDED, THAT, all principal and interest that remains outstanding as of the
date of the closing of a Qualified IPO shall become due and payable to
Phoenix concurrent with the closing of the Qualified IPO.
ARTICLE VI
MISCELLANEOUS
Section 6.1. EXPENSES. All costs and expenses of third parties
incurred by Phoenix and all costs and expenses incurred by inSilicon in
connection with the interpretation, execution,
11
<PAGE>
delivery and implementation of this Agreement and with the consummation of
the transactions contemplated by this Agreement shall be paid by inSilicon.
Section 6.2. NOTICES. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly given when received addressed as follows:
If to Phoenix, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
If to inSilicon, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
Any party may, by written notice so delivered to the other party,
change the address to which delivery of any notice shall thereafter be made.
Section 6.3. AMENDMENT AND WAIVER. This Agreement may not be altered
or amended, nor may rights hereunder be waived, except by an instrument in
writing executed by the party or parties to be charged with such amendment or
waiver. No waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this Agreement,
in any one or more instances shall be deemed to be, or construed as, a
further or continuing waiver of any such term, provision, condition, right or
remedy or as a waiver of any other term, provision or condition of this
Agreement. Notwithstanding the foregoing, this Agreement may not be altered
or amended, nor may rights hereunder be waived by inSilicon after the closing
of a Qualified IPO without the affirmative vote or written consent of a
majority of the directors of inSilicon who are not Affiliates of Phoenix.
Section 6.4. COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
Section 6.5. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California,
without regard to the conflicts of law rules of such state.
Section 6.6. ENTIRE AGREEMENT. This Agreement including the
schedules and the other agreements referenced specifically in this Agreement
constitute the entire understanding of the parties with respect to the
subject matter of this Agreement, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter.
Section 6.7. PARTIES IN INTEREST. Neither of the parties hereto may
assign its rights or delegate any of its duties under this Agreement without
the prior written consent of each other
12
<PAGE>
party which shall not be unreasonably withheld. This Agreement shall be
binding upon, and shall inure to the benefit of, the parties hereto and their
respective successors and permitted assigns. Nothing contained in this
Agreement, express or implied, is intended to confer any benefits, rights or
remedies upon any Person other than Phoenix and inSilicon.
Section 6.8. EXHIBITS AND SCHEDULES. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 6.9. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
Section 6.10. COVENANTS OF INSILICON. For as long as Phoenix owns
50,000 shares of Series A Preferred Stock (or shares of Common Stock onto
which such Series A Preferred Stock is converted) but not after the date of a
Qualified IPO, inSilicon shall deliver to Phoenix:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of inSilicon, an income statement for
such fiscal year, a balance sheet of inSilicon and statement of stockholder's
equity as of the end of such year, and a statement of cash flows for such
year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP"), and
audited and certified by an independent public accounting firm of nationally
recognized standing selected by inSilicon;
(b) within thirty (30) days of the end of each month and each
quarter, an unaudited income statement and a statement of cash flows and
balance sheet for and as of the end of such quarter or month, as the case may
be, in reasonable detail;
(c) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, and, as soon as prepared, any other
budgets or revised budgets prepared by inSilicon; and
(d) with respect to the financial statements called for in
subsection (b), an instrument executed by the Chief Financial Officer or
President of the Corporation and certifying that such financials were
prepared in accordance with GAAP consistently applied with prior practice for
earlier periods (with the exception of footnotes that may be required by
GAAP) and fairly present the financial condition of inSilicon and its results
of operation for the period specified, subject to year-end audit adjustment,
provided that the foregoing shall not restrict the right of inSilicon to
change its accounting principles consistent with GAAP, if the Board of
Directors determines that it is in the best interest of inSilicon to do so.
13
<PAGE>
Section 6.11. TITLES AND HEADINGS. Titles and headings to Sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
Section 6.12. CONFLICTING AGREEMENTS. In the event of conflict
between this Agreement and any Ancillary Agreement executed in connection
herewith, the provisions of the Ancillary Agreement and shall prevail.
Section 6.13. DISPUTES. All disputes arising out of, related to or
resulting from this Agreement, including the interpretation hereof shall be
resolved in accordance with the procedures set forth in the IPO Agreement.
Section 6.14. ADJUSTMENTS FOR STOCK SPLITS AND RECAPITALIZATIONS.
Notwithstanding the other provisions of this Agreement, all references to
numbers of shares of the Common Stock and Series A Preferred Stock provided
in Article IV and Section 6.10 shall be deemed automatically amended to give
effect to any stock split, stock dividend recapitalization or similar
transactions that occur after the issuance of the Series A Preferred Stock
and the Warrant.
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Linda Moore
------------------------------------
Name: Linda V. Moore
Title: VP, General Counsel & Secretary
INSILICON CORPORATION
By: /s/ David J. Power
------------------------------------
Name: David J. Power
Title: Vice President, General Counsel
14
<PAGE>
INDEMNIFICATION AGREEMENT
This Indemnification Agreement (the "Agreement") is made as of
_______________ by and between inSilicon Corporation, a Delaware corporation
(the "Corporation"), and ____________________ (the "Indemnitee").
RECITALS
The Corporation and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers and key employees, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance. The Corporation and Indemnitee further
recognize the substantial increase in corporate litigation in general,
subjecting directors, officers and key employees to expensive litigation risks
at the same time as the availability and coverage of liability insurance has
been severely limited. Indemnitee does not regard the current protection
available as adequate under the present circumstances, and Indemnitee and agents
of the Corporation may not be willing to continue to serve as agents of the
Corporation without additional protection. The Corporation desires to attract
and retain the services of highly qualified individuals, such as Indemnitee, and
to indemnify its directors, officers and key employees so as to provide them
with the maximum protection permitted by law.
AGREEMENT
In consideration of the mutual promises made in this Agreement, and for
other good and valuable consideration, receipt of which is hereby acknowledged,
the Corporation and Indemnitee hereby agree as follows:
1. INDEMNIFICATION.
(a) THIRD-PARTY PROCEEDINGS. The Corporation shall indemnify
Indemnitee if Indemnitee is or was a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the Corporation) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Corporation, or any subsidiary of
the Corporation, by reason of any action or inaction on the part of Indemnitee
while an officer or director or by reason of the fact that Indemnitee is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, liabilities, damages and losses (including
attorneys' fees), judgments, fines, excise taxes and amounts paid in settlement
(if the Corporation approves such settlement in advance, not be to unreasonably
withheld) actually and reasonably incurred or suffered by Indemnitee in
connection with such action, suit or proceeding if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in or not opposed to
the best interests of the Corporation and, with respect to any criminal action
or proceeding, had no reasonable cause to believe Indemnitee's conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, 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
<PAGE>
in or not opposed to the best interests of the Corporation, and, with respect
to any criminal action or proceeding, shall not create a presumption that
Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE CORPORATION. The
Corporation shall indemnify Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action
or proceeding by or in the right of the Corporation or any subsidiary of the
Corporation to procure a judgment in its favor by reason of the fact that
Indemnitee is or was a director, officer, employee or agent of the
Corporation, or any subsidiary of the Corporation, by reason of any action or
inaction on the part of Indemnitee while an officer or director or by reason
of the fact that Indemnitee is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses,
liabilities, damages and losses (including attorneys' fees) and, to the
fullest extent permitted by law, amounts paid in settlement (if the
Corporation approves such settlement in advance, not to be unreasonably
withheld), in each case to the extent actually and reasonably incurred by
Indemnitee in connection with the defense or settlement of such action or
suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation,
except that no indemnification shall be made with respect to any claim, issue
or matter as to which Indemnitee shall have been finally adjudicated by court
order or judgment to be liable to the Corporation unless and only to the
extent that the Delaware Court of Chancery or the court in which such action
or proceeding is or was pending shall determine upon application that, in
view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for the Court of Chancery or such expenses
which such court shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Section l(a) or Section l(b) or the
defense of any claim, issue or matter therein, Indemnitee shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
Indemnitee in connection therewith.
2. NO EMPLOYMENT RIGHTS. Nothing contained in this Agreement is
intended to create in Indemnitee any right to continued employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Corporation shall advance
all expenses incurred by Indemnitee in connection with the investigation,
defense, settlement or appeal of any civil or criminal action, suit or
proceeding referred to in Section l(a) or Section l(b) of this Agreement
(including amounts actually paid in settlement of any such action, suit or
proceeding as to which Indemnitee is entitled to indemnification hereunder).
Indemnitee hereby undertakes to repay such amounts advanced only if, and to
the extent that, it shall ultimately be determined that Indemnitee is not
entitled to be indemnified by the Corporation as authorized hereby.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his or her right to be indemnified under this Agreement,
give the Corporation notice in writing as soon as practicable of any claim made
against Indemnitee for which
2
<PAGE>
indemnification will or could be sought under this Agreement. Notice to the
Corporation shall be directed to the Chief Executive Officer of the
Corporation and shall be given in accordance with the provisions of Section
12(d) below. In addition, Indemnitee shall give the Corporation such
information and cooperation as it may reasonably require and as shall be
within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided
for in Section 1 and this Section 3 shall be made no later than sixty (60)
days after receipt of the written request of Indemnitee. If a claim under
this Agreement, under any statute, or under any provision of the
Corporation's Certificate of Incorporation or By-laws providing for
indemnification, is not paid in full by the Corporation within sixty (60)
days after a written request for payment thereof has first been received by
the Corporation, Indemnitee may, but need not, at any time thereafter bring
suit against the Corporation to recover the unpaid amount of the claim and,
subject to Section 11 of this Agreement, Indemnitee shall also be entitled to
be paid for the expenses (including attorneys' fees) of bringing such suit.
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 is required,
has been tendered to the Corporation) that Indemnitee has not met the
standards of conduct which makes it permissible under the General Corporation
Law of the State of Delaware for the Corporation to indemnify Indemnitee for
the amount claimed, but the burden of proving such defense shall be on the
Corporation and Indemnitee shall be entitled to receive interim payments of
expenses pursuant to Section 3(i) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Corporation contests
Indemnitee's right to indemnification, such question shall be for the court
to decide, and neither the failure of the Corporation (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because
Indemnitee has met the applicable standard of conduct required by applicable
law, nor an actual determination by the Corporation (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) that Indemnitee has not met such
applicable standard of conduct, shall create a presumption that Indemnitee
has or has not met the applicable standard of conduct.
(d) NOTICE TO INSURERS. If, at the time the Corporation
receives notice of a claim pursuant to Section 3(b) hereof, it has director
and officer liability insurance in effect, the Corporation shall give prompt
notice of such proceedings to the insurers in accordance with the procedures
set forth in the respective policies. The Corporation shall thereafter take
all necessary or desirable action to cause such insurers to pay, on behalf of
the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event Section 3(a) hereof
obligates the Corporation to pay the expenses of any proceeding against
Indemnitee, the Corporation, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Corporation, the Corporation will not be
liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same
3
<PAGE>
proceeding, provided that (i) Indemnitee shall have the right to employ
counsel in any such proceeding at Indemnitee's expense; and (ii) if (a) the
Corporation previously authorized the Indemnitee's employment, (b) Indemnitee
shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Indemnitee in the conduct of any such defense or
(c) the Corporation shall not, in fact, have employed counsel to assume the
defense of such proceeding, then the fees and expenses of Indemnitee's
counsel shall be at the expense of the Corporation.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this
Agreement, the Corporation hereby agrees to indemnify the Indemnitee to the
fullest extent permitted by law, notwithstanding that such indemnification is
not specifically authorized by the other provisions of this Agreement, the
Corporation's Certificate of Incorporation, the Corporation's By-laws or by
statute. In the event of any change, after the date of this Agreement, in
any applicable law, statute, or rule expanding the right of a Delaware
corporation to indemnify a member of its board of directors or an officer,
such changes shall be deemed to be within the purview of Indemnitee's rights
and the Corporation's obligations under this Agreement. In the event of any
change in any applicable law, statute or rule narrowing the right of a
Delaware corporation to indemnify a member of its board of directors or an
officer, such changes, to the extent not otherwise required by such law,
statute or rule to be applied to this Agreement shall have no effect on this
Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Corporation's Certificate of Incorporation, its By-laws, any
agreement, any vote of stockholders or disinterested members of the
Corporation's Board of Directors, the General Corporation Law of the State of
Delaware, or otherwise, both as to action in Indemnitee's official capacity and
as to action in another capacity while holding such office. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity even though he or
she may have ceased to serve in any such capacity at the time of any action,
suit or other covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Corporation for some or
a portion of the expenses, judgments, fines or penalties actually or
reasonably incurred in the investigation, defense, appeal or settlement of
any civil or criminal action, suit or proceeding, but not, however, for the
total amount thereof, the Corporation shall nevertheless indemnify Indemnitee
for the portion of such expenses, judgments, fines or penalties to which
Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Corporation and Indemnitee
acknowledge that in certain instances, federal law or public policy may
override applicable state law and prohibit the Corporation from indemnifying
its directors and officers under this Agreement or otherwise. For example,
the Corporation and Indemnitee acknowledge that the Securities and Exchange
Commission (the "SEC") has taken the position that indemnification is not
permissible for liabilities arising under certain federal securities laws,
and federal legislation prohibits indemnification for certain violations of
the Employee Retirement Income Security Act of 1974
4
<PAGE>
("ERISA"). Indemnitee understands and acknowledges that the Corporation has
undertaken or may be required in the future to undertake with the SEC to
submit the question of indemnification to a court in certain circumstances
for a determination of the Corporation's right under public policy to
indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Corporation
shall, from time to time, make the good faith determination whether or not it
is practicable for the Corporation to obtain and maintain a policy or
policies of insurance with reputable insurance companies providing the
officers and directors of the Corporation with coverage for losses from
wrongful acts, or to ensure the Corporation's performance of its
indemnification obligations under this Agreement. Among other
considerations, the Corporation will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage. In all
policies of director and officer liability insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits as are accorded to the most favorably insured of the
Corporation's directors, if Indemnitee is a director; or of the Corporation's
officers, if Indemnitee is not a director of the Corporation but is an
officer; or of the Corporation's key employees, if Indemnitee is not an
officer or director but is a key employee. Notwithstanding the foregoing,
the Corporation shall have no obligation to obtain or maintain such insurance
if the Corporation determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided
by such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a
parent or subsidiary of the Corporation.
8. SEVERABILITY. Nothing in this Agreement is intended to require
or shall be construed as requiring the Corporation to do or fail to do any
act in violation of applicable law. The Corporation's inability, pursuant to
court order, to perform its obligations under this Agreement shall not
constitute a breach of this Agreement. The provisions of this Agreement
shall be severable as provided in this Section 8. If this Agreement or any
portion hereof shall be invalidated on any ground by any court of competent
jurisdiction, then the Corporation shall nevertheless indemnify Indemnitee to
the full extent permitted by any applicable portion of this Agreement that
shall not have been invalidated, and the balance of this Agreement not so
invalidated shall be enforceable in accordance with its terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Corporation shall not be obligated pursuant to the terms
of this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law or otherwise
as required under Section 145 of the Delaware General Corporation Law, but
such indemnification or advancement of expenses may be provided by the
Corporation in specific cases if the Board of Directors finds it to be
appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this
5
<PAGE>
Agreement, if a court of competent jurisdiction determines that each of the
material assertions made by Indemnitee in such proceeding was not made in
good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) if,
and then only to the extent that, such expenses or liabilities have been paid
directly to Indemnitee by an insurance carrier under a policy of officers'
and directors' liability insurance maintained by the Corporation; or
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Corporation" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a constituent) absorbed
in a consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers, and
employees or agents, so that if Indemnitee is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at
the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, Indemnitee shall stand in the same position under the provisions
of this Agreement with respect to the resulting or surviving corporation as
Indemnitee would have with respect to such constituent corporation if its
separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to an
employee benefit plan; and references to "serving at the request of the
Corporation" shall include any service as a director, officer, employee or
agent of the Corporation imposing duties on, or involving services by, such
director, officer, employee or agent with respect to an employee benefit
plan, its participants, or beneficiaries; and if Indemnitee acted in good
faith and in a manner Indemnitee reasonably believed to be in the interest of
the participants and beneficiaries of an employee benefit plan, Indemnitee
shall be deemed to have acted in a manner "not opposed to the best interests
of the Corporation" as referred to in this Agreement.
11. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable attorneys' fees, incurred by Indemnitee with respect to
such action, unless as a part of such action, the court of competent
jurisdiction determines that each of the material assertions made by
Indemnitee as a basis for such action were not made in good faith or were
frivolous. In the event of an action instituted by or in the name of the
Corporation under this Agreement or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all court costs
and expenses, including attorneys' fees, incurred by Indemnitee in defense of
such action (including with respect to
6
<PAGE>
Indemnitee's counterclaims and cross-claims made in such action), unless as a
part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.
12. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the
laws of the State of Delaware, without giving effect to principles of
conflicts of law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement
sets forth the entire agreement and understanding of the parties relating to
the subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless signed in writing by the
parties to this Agreement. The failure by either party to enforce any rights
under this Agreement shall not be construed as a waiver of any rights of such
party.
(c) CONSTRUCTION. This Agreement is the result of
negotiations between and has been reviewed by each of the parties hereto and
their respective counsel, if any; accordingly, this Agreement shall be deemed
to be the product of all of the parties hereto, and no ambiguity shall be
construed in favor of or against any one of the parties hereto.
(d) NOTICES. Any notice, demand or request required or
permitted to be given under this Agreement shall be in writing and shall be
deemed sufficient when delivered personally or sent by telegram or fax or
forty-eight (48) hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, and addressed to the party to be
notified at such party's address as set forth below or as subsequently
modified by written notice.
(e) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon the Corporation and its successors and assigns, and inure to the benefit of
Indemnitee and Indemnitee's heirs, legal representatives and assigns.
(g) SUBROGATION. In the event of payment under this
Agreement, the Corporation shall be subrogated to the extent of such payment
to all of the rights of recovery of Indemnitee, who shall execute all
documents required and shall do all acts that may be necessary to secure such
rights and to enable the Corporation to effectively bring suit to enforce
such rights.
[Signature Page Follows]
7
<PAGE>
The parties hereto have executed this Agreement as of the day and year
set forth on the first page of this Agreement.
inSilicon Corporation
By:
----------------------------
Title:
-------------------------
Address: 411 East Plumeria Drive
San Jose, CA 95134
AGREED TO AND ACCEPTED:
- ---------------------------------------
Address:
------------------------------
------------------------------
8
<PAGE>
INSILICON CORPORATION
1999 STOCK OPTION PLAN
EFFECTIVE AS OF DECEMBER 21, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. INTRODUCTION...............................................................................1
SECTION 2. DEFINITIONS................................................................................1
(a) "Affiliate"...........................................................................1
(b) "Board"...............................................................................1
(c) "Change In Control"...................................................................1
(d) "Code"................................................................................2
(e) "Committee"...........................................................................2
(f) "Common Stock"........................................................................2
(g) "Company".............................................................................2
(h) "Consultant"..........................................................................2
(i) "Director"............................................................................2
(j) "Disability"..........................................................................3
(k) "Employee"............................................................................3
(l) "Exchange Act"........................................................................3
(m) "Exercise Price"......................................................................3
(n) "Fair Market Value"...................................................................3
(o) "Grant"...............................................................................3
(p) "Incentive Stock Option" or "ISO".....................................................3
(q) "Key Employee"........................................................................3
(r) "Non-Employee Director"...............................................................3
(s) "Nonstatutory Stock Option" or "NSO"..................................................4
(t) "Option"..............................................................................4
(u) "Optionee"............................................................................4
(v) "Parent"..............................................................................4
(w) "Plan"................................................................................4
(x) "Securities Act"......................................................................4
(y) "Service".............................................................................4
(z) "Share"...............................................................................4
(aa) "Stock Option Agreement"..............................................................4
(bb) "Subsidiary"..........................................................................4
(cc) "10-Percent Shareholder"..............................................................4
SECTION 3. ADMINISTRATION.............................................................................4
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Committee Composition.................................................................4
(b) Authority of the Committee............................................................5
(c) Indemnification.......................................................................5
(d) Financial Reports.....................................................................5
SECTION 4. ELIGIBILITY................................................................................6
(a) General Rules.........................................................................6
(b) Incentive Stock Options...............................................................6
SECTION 5. SHARES SUBJECT TO PLAN.....................................................................6
(a) Basic Limitation......................................................................6
(b) Additional Shares.....................................................................6
(c) Dividend Equivalents..................................................................6
SECTION 6. TERMS AND CONDITIONS OF OPTIONS............................................................6
(a) Stock Option Agreement................................................................6
(b) Number of Shares......................................................................6
(c) Exercise Price........................................................................6
(d) Exercisability and Term...............................................................7
(e) Modifications or Assumption of Options................................................7
(f) Transferability of Options............................................................7
(g) No Rights as a Stockholder............................................................7
(h) Restrictions on Transfer..............................................................7
SECTION 7. PAYMENT FOR OPTION SHARES..................................................................8
(a) General Rule..........................................................................8
(b) Surrender of Stock....................................................................8
(c) Promissory Note.......................................................................8
(d) Other Forms of Payment................................................................8
SECTION 8. PROTECTION AGAINST DILUTION................................................................8
(a) Adjustments...........................................................................8
(b) Optionee Rights.......................................................................8
SECTION 9. EFFECT OF A CHANGE IN CONTROL..............................................................9
(a) Merger or Reorganization..............................................................9
(b) Acceleration..........................................................................9
SECTION 10. LIMITATIONS ON RIGHTS......................................................................9
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(a) Retention Rights......................................................................9
(b) Stockholders' Rights..................................................................9
(c) Regulatory Requirements...............................................................9
SECTION 11. WITHHOLDING TAXES.........................................................................10
(a) General..............................................................................10
(b) Share Withholding....................................................................10
SECTION 12. DURATION AND AMENDMENTS...................................................................10
(a) Term of the Plan.....................................................................10
(b) Right to Amend or Terminate the Plan.................................................10
SECTION 13. EXECUTION.................................................................................11
</TABLE>
-iii-
<PAGE>
INSILICON CORPORATION
1999 STOCK OPTION PLAN
EFFECTIVE AS OF DECEMBER 21, 1999
SECTION 1. INTRODUCTION.
The Company's Board of Directors adopted the inSilicon Corporation
1999 Stock Option Plan on December 21, 1999, subject to approval by the
Company's stockholders.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of shareholder value by offering Key Employees an
opportunity to acquire a proprietary interest in the success of the Company,
or to increase such interest, and to encourage such selected persons to
continue to provide services to the Company and to attract new individuals
with outstanding qualifications.
The Plan seeks to achieve this purpose by providing for Options
(which may constitute Incentive Stock Options or Nonstatutory Stock Options).
The Plan shall be governed by, and construed in accordance with, the
laws of the State of California (except its choice-of-law provisions).
Capitalized terms shall have the meaning provided in Section 2 unless
otherwise provided in this Plan or Stock Option Agreement.
SECTION 2. DEFINITIONS.
(a) "AFFILIATE" means any entity other than a Subsidiary, if
the Company and/or one or more Subsidiaries own not less than 50% of such
entity. For purposes of determining an individual's "Service," this
definition shall include any entity other than a Subsidiary, if the Company,
a Parent and/or one or more Subsidiaries own not less than 50% of such entity.
(b) "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
(c) "CHANGE IN CONTROL" except as may otherwise be provided in
the Stock Option Agreement, means the occurrence of any of the following:
(i) The consummation of a merger or consolidation of
the Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other reorganization is owned
by persons who were not stockholders of the Company immediately
prior to such merger, consolidation or other reorganization;
<PAGE>
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
(iii) Any transaction as a result of which any person
becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing at least 20% of the total voting power represented
by the Company's then outstanding voting securities. For purposes
of this Paragraph (iii), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the Exchange
Act but shall exclude:
(A) A trustee or other fiduciary holding
securities under an employee benefit plan of the Company
or a subsidiary of the Company;
(B) A corporation owned directly or
indirectly by the stockholders of the Company in
substantially the same proportions as their ownership
of the common stock of the Company; and
(C) Any direct or indirect acquisition of the
Company's voting securities by Phoenix Technologies Ltd.
A transaction shall not constitute a Change of Control if its sole
purpose is to change the state of the Company's incorporation or to create a
holding company that will be owned in substantially the same proportions by
the persons who held the Company's securities immediately before such
transactions.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee consisting of one or more
members of the Board that is appointed by the Board (as described in Section
3) to administer the Plan.
(f) "COMMON STOCK" means the Company's common stock.
(g) "COMPANY" means inSilicon Corporation, a Delaware
corporation.
(h) "CONSULTANT" means an individual who performs bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate other than as
an Employee or Director or Non-Employee Director.
(i) "DIRECTOR" means a member of the Board who is also an
Employee.
(j) "DISABILITY" means that the Key Employee is unable to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to last for a continuous period
of not less than 12 months.
(k) "EMPLOYEE" means any individual who is a common-law
employee of the Company, a Parent, a Subsidiary or an Affiliate.
2
<PAGE>
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(m) "EXERCISE PRICE" means the amount for which a Share may be
purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.
(n) "FAIR MARKET VALUE" means the market price of Shares,
determined by the Committee as follows:
(i) If the Shares were traded over-the-counter on the
date in question but were not classified as a national market
issue, then the Fair Market Value shall be equal to the mean between
the last reported representative bid and asked prices quoted by
the NASDAQ system for such date;
(ii) If the Shares were traded over-the-counter on the
date in question and were classified as a national market issue,
then the Fair Market Value shall be equal to the last-transaction
price quoted by the NASDAQ system for such date;
(iii) If the Shares were traded on a stock exchange on
the date in question, then the Fair Market Value shall be equal to
the closing price reported by the applicable composite transactions
report for such date; and
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the Committee in
good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the WALL STREET
JOURNAL. Such determination shall be conclusive and binding on
all persons.
(o) "GRANT" means any grant of an Option under the Plan.
(p) "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock
option described in Code section 422(b).
(q) "KEY EMPLOYEE" means an Employee, Director, Non-Employee
Director or Consultant who has been selected by the Committee to receive an
Option under the Plan.
(r) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is
not an Employee.
(s) "NONSTATUTORY STOCK OPTION" or "NSO" means a stock option
that is not an ISO.
(t) "OPTION" means an ISO or NSO granted under the Plan
entitling the Optionee to purchase Shares.
(u) "OPTIONEE" means an individual, estate or other entity that
holds an Option.
3
<PAGE>
(v) "PARENT" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing fifty percent (50%)
or more of the total combined voting power of all classes of stock in one of
the other corporations in such chain. A corporation that attains the status
of a Parent on a date after the adoption of the Plan shall be considered a
Parent commencing as of such date.
(w) "PLAN" means this inSilicon Corporation 1999 Stock Option
Plan as it may be amended from time to time.
(x) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(y) "SERVICE" means service as an Employee, Director,
Non-Employee Director or Consultant.
(z) "SHARE" means one share of Common Stock.
(aa) "STOCK OPTION AGREEMENT" means the agreement described in
Section 6 evidencing each Grant of an Option.
(bb) "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 fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
A corporation that attains the status of a Subsidiary on a date after the
adoption of the Plan shall be considered a Subsidiary commencing as of such
date.
(cc) "10-PERCENT SHAREHOLDER" means an individual who owns more
than ten percent (10%) of the total combined voting power of all classes of
outstanding stock of the Company, its Parent or any of its subsidiaries. In
determining stock ownership, the attribution rules of section 424(d) of the
Code shall be applied.
SECTION 3. ADMINISTRATION.
(a) COMMITTEE COMPOSITION. A Committee appointed by the Board
shall administer the Plan. The Board shall designate one of the members of
the Committee as chairperson. If no Committee has been approved, the entire
Board shall constitute the Committee. Members of the Committee shall serve
for such period of time as the Board may determine and shall be subject to
removal by the Board at any time. The Board may also at any time terminate
the functions of the Committee and reassume all powers and authority
previously delegated to the Committee.
Effective with the Company's initial public offering, the Committee
shall consist either (i) of those individuals who shall satisfy the
requirements of Rule 16b-3 (or its successor) under the Exchange Act with
respect to Options to persons who are officers or directors of the Company
under Section 16 of the Exchange Act or (ii) of the Board itself.
4
<PAGE>
The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who need not
qualify under Rule 16b-3, who may administer the Plan with respect to Key
Employees who are not considered officers or directors of the Company under
Section 16 of the Exchange Act, may grant Options under the Plan to such Key
Employees and may determine all terms of such Options.
(b) AUTHORITY OF THE COMMITTEE. Subject to the provisions of
the Plan, the Committee shall have full authority and discretion to take any
actions it deems necessary or advisable for the administration of the Plan.
Such actions shall include:
(i) selecting Key Employees who are to receive Options
under the Plan;
(ii) determining the type, number, vesting requirements
and other features and conditions of such Options;
(iii) interpreting the Plan; and
(iv) making all other decisions relating to the operation
of the Plan.
The Committee may adopt such rules or guidelines, as it deems
appropriate to implement the Plan. The Committee's determinations under the
Plan shall be final and binding on all persons.
(c) INDEMNIFICATION. Each member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against and from
(i) any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in
which he or she may be involved by reason of any action taken or failure to
act under the Plan or any Stock Option Agreement, and (ii) from any and all
amounts paid by him or her in settlement thereof, with the Company's
approval, or paid by him or her in satisfaction of any judgment in any such
claim, action, suit, or proceeding against him or her, provided he or she
shall give the Company an opportunity, at its own expense, to handle and
defend the same before he or she undertakes to handle and defend it on his or
her own behalf. The foregoing right of indemnification shall not be exclusive
of any other rights of indemnification to which such persons may be entitled
under the Company's Certificate of Incorporation or Bylaws, by contract, as a
matter of law, or otherwise, or under any power that the Company may have to
indemnify them or hold them harmless.
(d) FINANCIAL REPORTS. To the extent required by applicable
law, the Company shall furnish to Optionees the Company's summary financial
information including a balance sheet regarding the Company's financial
condition and results of operations, unless such Optionees have duties with
the Company that assure them access to equivalent information. Such financial
statements need not be audited.
SECTION 4. ELIGIBILITY.
(a) GENERAL RULES. Only Employees, Directors, Non-Employee
Directors and Consultants shall be eligible for designation as Key Employees
by the Committee.
5
<PAGE>
(b) INCENTIVE STOCK OPTIONS. Only Key Employees who are
common-law employees of the Company, a Parent or a Subsidiary shall be
eligible for the grant of ISOs. In addition, a Key Employee who is a
10-Percent Shareholder shall not be eligible for the grant of an ISO unless
the requirements set forth in section 422(c)(5) of the Code are satisfied.
SECTION 5. SHARES SUBJECT TO PLAN.
(a) BASIC LIMITATION. The stock issuable under the Plan shall
be authorized but unissued Shares or treasury Shares. The aggregate number of
Shares reserved for Grants under the Plan shall not exceed 2,700,000 Shares
on a fully diluted basis, subject to adjustment pursuant to Section 8.
(b) ADDITIONAL SHARES. If Options are forfeited or terminate
for any other reason before being exercised, then such Options shall again
become available for Grants under the Plan.
(c) DIVIDEND EQUIVALENTS. Any dividend equivalents distributed
under the Plan shall not be applied against the number of Options available
for Grants.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each Grant under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the
Plan and may be subject to any other terms and conditions that are not
inconsistent with the Plan and that the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical. A Stock
Option Agreement may provide that new Options will be granted automatically
to the Optionee when he or she exercises the prior Options. The Stock Option
Agreement shall also specify whether the Option is an ISO or an NSO.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify
the number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 8.
(c) EXERCISE PRICE. An Option's Exercise Price shall be
established by the Committee and set forth in a Stock Option Agreement. To
the extent required by applicable law the Exercise Price of an ISO shall not
be less than 100% of the Fair Market Value (110% for 10-Percent Shareholders)
of a Share on the date of Grant. In the case of an NSO, a Stock Option
Agreement may specify an Exercise Price that varies in accordance with a
predetermined formula while the NSO is outstanding. To the extent required by
applicable law, the Exercise Price for an NSO shall not be less than 85% of
the Fair Market Value (110% for 10-Percent Shareholders) of a Share on the
date of Grant.
(d) EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to become
exercisable. To the extent required by
6
<PAGE>
applicable law, Options shall vest at least as rapidly as 20% annually over a
five-year period. The Stock Option Agreement shall also specify the term of
the Option; provided that the term of an ISO, and to the extent required by
applicable law a NSO, shall in no event exceed ten (10) years from the date
of Grant. An ISO that is granted to a 10-Percent Shareholder shall have a
maximum term of five (5) years. To the extent required by applicable law,
vested Options shall be exercisable for a minimum period of six (6) months
following termination of employment due to death or Disability and thirty
(30) days following any other termination of employment (other than
terminations for cause, as defined in the Company's personnel policies).
Notwithstanding the previous sentence, no Option can be exercised after the
expiration date provided in the applicable Stock Option Agreement. A Stock
Option Agreement may provide for accelerated exercisability in the event of
the Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service. A Stock Option Agreement may permit an
Optionee to exercise an Option before it is vested, subject to the Company's
right of repurchase over any Shares acquired under the unvested portion of
the Option (an "early exercise"), which right of repurchase shall lapse at
the same rate the Option would have vested had there been no early exercise.
In no event shall the Company be required to issue fractional Shares upon the
exercise of an Option.
(e) MODIFICATIONS OR ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or assume
outstanding options or may accept the cancellation of outstanding options
(whether granted by the Company or by another issuer) in return for the grant
of new Options for the same or a different number of Shares and at the same
or a different Exercise Price. The foregoing notwithstanding, no modification
of an Option shall, without the consent of the Optionee, alter or impair his
or her rights or obligations under such Option.
(f) TRANSFERABILITY OF OPTIONS. Except as otherwise provided in
the applicable Stock Option Agreement and then only to the extent permitted
by applicable law, no Option shall be transferable by the Optionee other than
by will or by the laws of descent and distribution. Except as otherwise
provided in the applicable Stock Option Agreement, an Option may be exercised
during the lifetime of the Optionee only or by the guardian or legal
representative of the Optionee. No Option or interest therein may be
assigned, pledged or hypothecated by the Optionee during his lifetime,
whether by operation of law or otherwise, or be made subject to execution,
attachment or similar process.
(g) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of
an Optionee, shall have no rights as a stockholder with respect to any Common
Stock covered by an Option until such person becomes entitled to receive such
Common Stock by filing a notice of exercise and paying the Exercise Price
pursuant to the terms of such Option.
(h) RESTRICTIONS ON TRANSFER. Any Shares issued upon exercise
of an Option shall be subject to such rights of repurchase, rights of first
refusal and other transfer restrictions as the Committee may determine. Such
restrictions shall apply in addition to any restrictions that may apply to
holders of Shares generally and shall also comply to the extent necessary
with applicable law.
7
<PAGE>
SECTION 7. PAYMENT FOR OPTION SHARES.
(a) GENERAL RULE. The entire Exercise Price of Shares issued
upon exercise of Options shall be payable in cash at the time when such
Shares are purchased, except as follows:
(i) In the case of an ISO granted under the Plan,
payment shall be made only pursuant to the express provisions of
the applicable Stock Option Agreement. The Stock Option Agreement
may specify that payment may be made in any form(s) described in
this Section 7.
(ii) In the case of an NSO granted under the Plan, the
Committee may in its discretion, at any time accept payment in any
form(s) described in this Section 7.
(b) SURRENDER OF STOCK. To the extent that this Section 7(b) is
applicable, payment for all or any part of the Exercise Price may be made
with Shares which have already been owned by the Optionee for such duration
as shall be specified by the Committee. Such Shares shall be valued at their
Fair Market Value on the date when the new Shares are purchased under the
Plan.
(c) PROMISSORY NOTE. To the extent that this Section 7(c) is
applicable, payment for all or any part of the Exercise Price may be made
with a full-recourse promissory note.
(d) OTHER FORMS OF PAYMENT. To the extent that this Section
7(d) is applicable, payment may be made in any other form that is consistent
with applicable laws, regulations and rules.
SECTION 8. PROTECTION AGAINST DILUTION.
(a) ADJUSTMENTS. In the event of a subdivision of the
outstanding Shares, a declaration of a dividend payable in Shares, a
declaration of a dividend payable in a form other than Shares in an amount
that has a material effect on the price of Shares, a combination or
consolidation of the outstanding Shares (by reclassification or otherwise)
into a lesser number of Shares, a recapitalization, a spin-off or a similar
occurrence, the Committee shall make such adjustments as it, in its sole
discretion, deems appropriate in one or more of:
(i) the number of Options available for future Grants
under Section 5;
(ii) the number of Shares covered by each outstanding
Option; or
(iii) the Exercise Price under each outstanding Option.
(b) OPTIONEE RIGHTS. Except as provided in this Section 8, an
Optionee shall have no rights by reason of any issue by the Company of stock
of any class or securities convertible into stock of any class, any
subdivision or consolidation of shares of stock of any class, the payment of
any stock dividend or any other increase or decrease in the number of shares
of stock of any class.
8
<PAGE>
SECTION 9. EFFECT OF A CHANGE IN CONTROL.
(a) MERGER OR REORGANIZATION. In the event that the Company is
a party to a merger or other reorganization, outstanding Options shall be
subject to the agreement of merger or reorganization. Such agreement may
provide, without limitation, for the assumption of outstanding Options by the
surviving corporation or its parent, for their continuation by the Company
(if the Company is a surviving corporation), for accelerated vesting or for
their cancellation with or without consideration, in all cases without the
consent of the Optionee.
(b) ACCELERATION. Except as otherwise provided in the
applicable Stock Option Agreement, in the event that a Change in Control
occurs with respect to the Company and the applicable agreement of merger or
reorganization provides for assumption or continuation of Options pursuant to
Section 9(a) or Options will otherwise continue, no acceleration of vesting
shall occur. In the event that a Change in Control occurs with respect to the
Company and there is no assumption or continuation of Options, all Options
shall vest and become immediately exercisable.
SECTION 10. LIMITATIONS ON RIGHTS.
(a) RETENTION RIGHTS. Neither the Plan nor any Option granted
under the Plan shall be deemed to give any individual a right to remain an
employee, consultant or director of the Company, a Parent, a Subsidiary or an
Affiliate. The Company and its Parents and Subsidiaries and Affiliates
reserve the right to terminate the Service of any person at any time, and for
any reason, subject to applicable laws, the Company's Certificate of
Incorporation and Bylaws and a written employment agreement (if any).
(b) STOCKHOLDERS' RIGHTS. An Optionee shall have no dividend
rights, voting rights or other rights as a stockholder with respect to any
Shares covered by his or her Option prior to the issuance of a stock
certificate for such Shares. No adjustment shall be made for cash dividends
or other rights for which the record date is prior to the date when such
certificate is issued, except as expressly provided in Section 8.
(c) REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under the Plan
shall be subject to all applicable laws, rules and regulations and such
approval by any regulatory body as may be required. The Company reserves the
right to restrict, in whole or in part, the delivery of Shares pursuant to
any Option prior to the satisfaction of all legal requirements relating to
the issuance of such Shares, to their registration, qualification or listing
or to an exemption from registration, qualification or listing.
SECTION 11. WITHHOLDING TAXES.
(a) GENERAL. An Optionee or his or her successor shall make
arrangements satisfactory to the Company for the satisfaction of any
withholding tax obligations that arise in connection with his or her Option.
The Company shall not be required to issue any Shares or make any cash
payment under the Plan until such obligations are satisfied.
9
<PAGE>
(b) SHARE WITHHOLDING. If a public market for the Company's
Shares exists, the Committee may permit an Optionee to satisfy all or part of
his or her withholding or income tax obligations by having the Company
withhold all or a portion of any Shares that otherwise would be issued to him
or her or by surrendering all or a portion of any Shares that he or she
previously acquired. Such Shares shall be valued at their Fair Market Value
on the date when taxes otherwise would be withheld in cash. Any payment of
taxes by assigning Shares to the Company may be subject to restrictions,
including, but not limited to, any restrictions required by rules of the
Securities and Exchange Commission.
SECTION 12. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall
become effective on the date of its adoption by the Board, subject to the
approval of the Company's stockholders. No Options shall be exercisable until
such stockholder approval is obtained. In the event that the stockholders
fail to approve the Plan within twelve (12) months after its adoption by the
Board, any Options made shall be null and void and no additional Grants shall
be made. To the extent required by applicable law, the Plan shall terminate
on the date that is ten (10) years after its adoption by the Board and may be
terminated on any earlier date pursuant to Section 12(b).
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board may amend
or terminate the Plan at any time and for any reason. The termination of the
Plan, or any amendment thereof, shall not affect any Option previously
granted under the Plan. No Options shall be granted under the Plan after the
Plan's termination. An amendment of the Plan shall be subject to the approval
of the Company's stockholders only to the extent required by applicable laws,
regulations or rules.
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board, the Company has
caused its duly authorized officer to execute this Plan on behalf of the
Company.
INSILICON CORPORATION
By /s/ David J. Power
-----------------------------------
Title Vice President, General Counsel
--------------------------------
10
<PAGE>
INSILICON CORPORATION
2000 STOCK PLAN
EFFECTIVE AS OF [EFFECTIVE DATE]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. INTRODUCTION..........................................................................1
SECTION 2. DEFINITIONS...........................................................................1
(a) "Affiliate"...........................................................................1
(b) "Award"...............................................................................1
(c) "Board"...............................................................................1
(d) "Change In Control"...................................................................1
(e) "Code"................................................................................2
(f) "Committee"...........................................................................2
(g) "Common Stock"........................................................................2
(h) "Company".............................................................................2
(i) "Consultant"..........................................................................2
(j) "Director"............................................................................2
(k) "Disability"..........................................................................2
(l) "Employee"............................................................................2
(m) "Exchange Act"........................................................................3
(n) "Exercise Price"......................................................................3
(o) "Fair Market Value"...................................................................3
(p) "Grant"...............................................................................3
(q) "Incentive Stock Option" or "ISO".....................................................3
(r) "Key Employee"........................................................................3
(s) "Non-Employee Director"...............................................................3
(t) "Nonstatutory Stock Option" or "NSO"..................................................3
(u) "Option"..............................................................................3
(v) "Optionee"............................................................................3
(w) "Parent"..............................................................................3
(x) "Participant".........................................................................4
(y) "Plan"................................................................................4
(z) "Restricted Stock"....................................................................4
(aa) "Restricted Stock Agreement"..........................................................4
(bb) "Securities Act"......................................................................4
(cc) "Service".............................................................................4
(dd) "Share"...............................................................................4
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
(ee) "Stock Option Agreement"..............................................................4
(ff) "Subsidiary"..........................................................................4
(gg) "10-Percent Shareholder"..............................................................4
SECTION 3. ADMINISTRATION........................................................................4
(a) Committee Composition.................................................................4
(b) Authority of the Committee............................................................5
(c) Indemnification.......................................................................5
SECTION 4. ELIGIBILITY...........................................................................6
(a) General Rules.........................................................................6
(b) Incentive Stock Options...............................................................6
(c) Non-Employee Directors................................................................6
SECTION 5. SHARES SUBJECT TO PLAN................................................................7
(a) Basic Limitation......................................................................7
(b) Annual Addition.......................................................................7
(c) Additional Shares.....................................................................7
(d) Dividend Equivalents..................................................................7
(e) Limits on Options.....................................................................7
(f) Limits on Restricted Stock............................................................7
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.......................................................7
(a) Stock Option Agreement................................................................7
(b) Number of Shares......................................................................7
(c) Exercise Price........................................................................7
(d) Exercisability and Term...............................................................8
(e) Modifications or Assumption of Options................................................8
(f) Transferability of Options............................................................8
(g) No Rights as Stockholder..............................................................8
(h) Restrictions on Transfer..............................................................8
SECTION 7. PAYMENT FOR OPTION SHARES.............................................................9
(a) General Rule..........................................................................9
(b) Surrender of Stock....................................................................9
(c) Promissory Note.......................................................................9
(d) Other Forms of Payment................................................................9
</TABLE>
-ii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 8. TERMS AND CONDITIONS FOR AWARDS OF RESTRICTED STOCK...................................9
(a) Time, Amount and Form of Awards.......................................................9
(b) Restricted Stock Agreement............................................................9
(c) Payment for Restricted Stock..........................................................9
(d) Vesting Conditions....................................................................9
(e) Assignment or Transfer of Restricted Stock...........................................10
(f) Trusts...............................................................................10
(g) Voting and Dividend Rights...........................................................10
SECTION 9. PROTECTION AGAINST DILUTION..........................................................10
(a) Adjustments..........................................................................10
(b) Participant Rights...................................................................11
SECTION 10. EFFECT OF A CHANGE IN CONTROL........................................................11
(a) Merger or Reorganization.............................................................11
(b) Acceleration.........................................................................11
SECTION 11. LIMITATIONS ON RIGHTS................................................................11
(a) Retention Rights.....................................................................11
(b) Stockholders' Rights.................................................................11
(c) Regulatory Requirements..............................................................11
SECTION 12. WITHHOLDING TAXES....................................................................12
(a) General..............................................................................12
(b) Share Withholding....................................................................12
SECTION 13. DURATION AND AMENDMENTS..............................................................12
(a) Term of the Plan.....................................................................12
(b) Right to Amend or Terminate the Plan.................................................12
SECTION 14. EXECUTION............................................................................13
</TABLE>
-iii-
<PAGE>
INSILICON CORPORATION
2000 STOCK PLAN
EFFECTIVE AS OF [EFFECTIVE DATE]
SECTION 1. INTRODUCTION.
The Company's Board of Directors adopted the inSilicon Corporation
2000 Stock Plan on January 12, 2000 and the Company's stockholder
approved the Plan on January 12, 2000. The Plan is effective on
[EFFECTIVE DATE], the date of the Company's initial public offering.
The purpose of the Plan is to promote the long-term success of the
Company and the creation of shareholder value by offering Key
Employees an opportunity to acquire a proprietary interest in the
success of the Company, or to increase such interest, and to
encourage such selected persons to continue to provide services to
the Company and to attract new individuals with outstanding
qualifications.
The Plan seeks to achieve this purpose by providing for Options
(which may constitute Incentive Stock Options or Nonstatutory Stock
Options) and Awards of Restricted Stock.
The Plan shall be governed by, and construed in accordance with, the
laws of the State of California (except its choice-of-law
provisions). Capitalized terms shall have the meaning provided in
Section 2 unless otherwise provided in this Plan or Stock Option
Agreement or Restricted Stock Agreement.
SECTION 2. DEFINITIONS.
(a) "AFFILIATE" means any entity other than a Subsidiary, if the
Company and/or one or more Subsidiaries own not less than 50% of
such entity. For purposes of determining an individual's "Service,"
this definition shall include any entity other than a Subsidiary, if
the Company, a Parent and/or one or more Subsidiaries own not less
than 50% of such entity.
(b) "AWARD" means any award of an Option or Restricted Stock
under the Plan.
(c) "BOARD" means the Board of Directors of the Company, as
constituted from time to time.
(d) "CHANGE IN CONTROL" except as may otherwise be provided in
the Stock Option Agreement or Restricted Stock Agreement, means the
occurrence of any of the following:
(i) The consummation of a merger or
consolidation of the Company with or into another entity or
any other corporate reorganization, if more than
<PAGE>
50% of the combined voting power of the continuing or
surviving entity's securities outstanding immediately
after such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation
or other reorganization;
(ii) The sale, transfer or other disposition
of all or substantially all of the Company's assets;
(iii) Any transaction as a result of which any
person becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing at least 20% of the
total voting power represented by the Company's then
outstanding voting securities. For purposes of this
Paragraph (iii), the term "person" shall have the same
meaning as when used in sections 13(d) and 14(d) of the
Exchange Act but shall exclude:
(A) A trustee or other fiduciary
holding securities under an employee benefit plan
of the Company or a subsidiary of the Company;
(B) A corporation owned directly or
indirectly by the stockholders of the Company in
substantially the same proportions as their
ownership of the common stock of the Company; and
(C) Any direct or indirect acquisition
of the Company's voting securities by Phoenix
Technologies Ltd.
A transaction shall not constitute a Change of Control if
its sole purpose is to change the state of the Company's
incorporation or to create a holding company that will be owned in
substantially the same proportions by the persons who held the
Company's securities immediately before such transactions.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" means a committee consisting of one or more
members of the Board that is appointed by the Board (as described
in Section 3) to administer the Plan.
(g) "COMMON STOCK" means the Company's common stock.
(h) "COMPANY" means inSilicon Corporation, a Delaware
corporation.
(i) "CONSULTANT" means an individual who performs bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate
other than as an Employee or Director or Non-Employee Director.
(j) "DIRECTOR" means a member of the Board who is also an
Employee.
(k) "DISABILITY" means that the Key Employee is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment
2
<PAGE>
which can be expected to result in death or which has lasted or can
be expected to last for a continuous period of not less than 12
months.
(l) "EMPLOYEE" means any individual who is a common-law
employee of the Company, a Parent, a Subsidiary or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(n) "EXERCISE PRICE" means the amount for which a Share may be
purchased upon exercise of such Option, as specified in the
applicable Stock Option Agreement.
(o) "FAIR MARKET VALUE" means the market price of Shares,
determined by the Committee as follows:
(i) If the Shares were traded over-the-counter on the
date in question but were not classified as a national
market issue, then the Fair Market Value shall be equal to
the mean between the last reported representative bid and
asked prices quoted by the NASDAQ system for such date;
(ii) If the Shares were traded over-the-counter on the
date in question and were classified as a national market
issue, then the Fair Market Value shall be equal to the
last-transaction price quoted by the NASDAQ system for such
date;
(iii) If the Shares were traded on a stock exchange on
the date in question, then the Fair Market Value shall be
equal to the closing price reported by the applicable
composite transactions report for such date; and
(iv) If none of the foregoing provisions is applicable,
then the Fair Market Value shall be determined by the
Committee in good faith on such basis as it deems
appropriate.
Whenever possible, the determination of Fair Market Value by the
Committee shall be based on the prices reported in the WALL STREET
JOURNAL. Such determination shall be conclusive and binding on all
persons.
(p) "GRANT" means any grant of an Option under the Plan.
(q) "INCENTIVE STOCK OPTION" or "ISO" means an incentive stock
option described in Code section 422(b).
(r) "KEY EMPLOYEE" means an Employee, Director, Non-Employee
Director or Consultant who has been selected by the Committee to
receive an Award under the Plan.
(s) "NON-EMPLOYEE DIRECTOR" means a member of the Board who is
not an Employee.
(t) "NONSTATUTORY STOCK OPTION" or "NSO" means a stock option
that is not an ISO.
3
<PAGE>
(u) "OPTION" means an ISO or NSO granted under the Plan
entitling the Optionee to purchase Shares.
(v) "OPTIONEE" means an individual, estate or other entity that
holds an Option.
(w) "PARENT" means any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each
of the corporations other than the Company owns stock possessing
fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
A corporation that attains the status of a Parent on a date after
the adoption of the Plan shall be considered a Parent commencing as
of such date.
(x) "PARTICIPANT" means an individual or estate or other entity
that holds an Award.
(y) "PLAN" means this inSilicon Corporation 2000 Stock Plan as
it may be amended from time to time.
(z) "RESTRICTED STOCK" means a Share awarded under the Plan.
(aa) "RESTRICTED STOCK AGREEMENT" means the agreement described
in Section 8 evidencing each Award of Restricted Stock.
(bb) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(cc) "SERVICE" means service as an Employee, Director,
Non-Employee Director or Consultant.
(dd) "SHARE" means one share of Common Stock.
(ee) "STOCK OPTION AGREEMENT" means the agreement described in
Section 6 evidencing each Grant of an Option.
(ff) "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 fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of
the other corporations in such chain. A corporation that attains the
status of a Subsidiary on a date after the adoption of the Plan
shall be considered a Subsidiary commencing as of such date.
(gg) "10-PERCENT SHAREHOLDER" means an individual who owns more
than ten percent (10%) of the total combined voting power of all
classes of outstanding stock of the Company, its Parent or any of
its subsidiaries. In determining stock ownership, the attribution
rules of section 424(d) of the Code shall be applied.
4
<PAGE>
SECTION 3. ADMINISTRATION.
(a) COMMITTEE COMPOSITION. A Committee appointed by the Board
shall administer the Plan. The Board shall designate one of the
members of the Committee as chairperson. If no Committee has been
approved, the entire Board shall constitute the Committee. Members
of the Committee shall serve for such period of time as the Board
may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated
to the Committee.
With respect to officers or directors subject to Section 16 of the
Exchange Act, the Committee shall consist of those individuals who
shall satisfy the requirements of Rule 16b-3 (or its successor)
under the Exchange Act with respect to Awards granted to persons who
are officers or directors of the Company under Section 16 of the
Exchange Act.
The Board may also appoint one or more separate committees of the
Board, each composed of one or more directors of the Company who
need not qualify under Rule 16b-3, who may administer the Plan with
respect to Key Employees who are not considered officers or
directors of the Company under Section 16 of the Exchange Act, may
grant Awards under the Plan to such Key Employees and may determine
all terms of such Awards.
Notwithstanding the foregoing, the Board shall constitute the
Committee and shall administer the Plan with respect to Options
granted to Non-Employee Directors under Section 4(c).
(b) AUTHORITY OF THE COMMITTEE. Subject to the provisions of
the Plan, the Committee shall have full authority and discretion to
take any actions it deems necessary or advisable for the
administration of the Plan. Such actions shall include:
(i) selecting Key Employees who are to receive Awards
under the Plan;
(ii) determining the type, number, vesting
requirements and other features and conditions of such
Awards;
(iii) interpreting the Plan; and
(iv) making all other decisions relating to the
operation of the Plan.
The Committee may adopt such rules or guidelines, as it deems
appropriate to implement the Plan. The Committee's determinations
under the Plan shall be final and binding on all persons.
(c) INDEMNIFICATION. Each member of the Committee, or of the
Board, shall be indemnified and held harmless by the Company against
and from (i) any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him or her in connection with
or resulting from any claim, action, suit, or proceeding to which he
or she may be a party or in which he or she may be involved by
reason of any action taken or failure to act under the Plan or any
Stock Option Agreement or any Restricted Stock Agreement, and (ii)
from any and all amounts paid by him or her in settlement thereof,
5
<PAGE>
with the Company's approval, or paid by him or her in satisfaction
of any judgment in any such claim, action, suit, or proceeding
against him or her, provided he or she shall give the Company an
opportunity, at its own expense, to handle and defend the same
before he or she undertakes to handle and defend it on his or her
own behalf. The foregoing right of indemnification shall not be
exclusive of any other rights of indemnification to which such
persons may be entitled under the Company's Certificate of
Incorporation or Bylaws, by contract, as a matter of law, or
otherwise, or under any power that the Company may have to indemnify
them or hold them harmless.
SECTION 4. ELIGIBILITY.
(a) GENERAL RULES. Only Employees, Directors, Non-Employee
Directors and Consultants shall be eligible for designation as Key
Employees by the Committee.
(b) INCENTIVE STOCK OPTIONS. Only Key Employees who are
common-law employees of the Company, a Parent or a Subsidiary shall
be eligible for the grant of ISOs. In addition, a Key Employee who
is a 10-Percent Shareholder shall not be eligible for the grant of
an ISO unless the requirements set forth in section 422(c)(5) of the
Code are satisfied.
(c) NON-EMPLOYEE DIRECTORS. Non-Employee Directors shall also
be eligible to receive Options as described in this Section 4(c)
from and after the date the Board has determined to implement this
provision.
(i) Each eligible Non-Employee Director shall
automatically be granted an NSO to purchase 20,000 Shares (subject
to adjustment under Section 9) as a result of his or her initial
election or appointment as a Non-Employee Director. Upon the
conclusion of each regular annual meeting of the Company's
stockholders following his or her initial appointment, each eligible
Non-Employee Director who will continue serving as a member of the
Board thereafter shall receive an NSO to purchase 7,500 Shares
(subject to adjustment under Section 9). In addition, upon his or
her appointment to the Audit Committee or Compensation Committee of
the Board, each Non-Employee Director will receive an NSO to
purchase 5,000 Shares (subject to adjustment under Section 9). All
NSOs granted pursuant to this Section 4 shall vest and become
exercisable at the rate of six and twenty-five hundredths percent
(6.25%) of the Shares subject to the Options per quarter grant from
the date of grant, provided the Non-Employee Director is serving as
a director of the Company as of the vesting date.
(ii) All NSOs granted to Non-Employee Directors under
this Section 4(c) shall become exercisable in full in the event of
Change in Control with respect to the Company while the Director is
providing service.
(iii) The Exercise Price under all NSOs granted to a
Non-Employee Director under this Section 4(c) shall be equal to one
hundred percent (100%) of the Fair Market Value of a Common Share on
the date of grant, payable in one of the forms described in Section
7.
6
<PAGE>
(iv) All NSOs granted to a Non-Employee Director under
this Section 4(c) shall terminate on the earlier of:
(1) The 10th anniversary of the date of grant;
or
(2) The date ninety (90) days after the
termination of such Non-Employee Director's service for
any reason.
SECTION 5. SHARES SUBJECT TO PLAN.
(a) BASIC LIMITATION. The stock issuable under the Plan shall be
authorized but unissued Shares or treasury Shares. The aggregate
number of Shares reserved for Awards under the Plan shall not exceed
1,300,000 plus such number of shares as shall be available for grant
under the Company's 1999 Stock Plan on the Effective Date of the
Plan. The foregoing limit is subject to adjustment pursuant to
Section 9.
(b) ANNUAL ADDITION. Beginning with the first fiscal year of the
Company beginning after the Effective Date, on the first day of each
fiscal year, Shares will be added to the Plan equal to the lesser of
(i) 2,000,000 Shares, or (ii) five percent (5%) of the outstanding
shares in the last day of the prior fiscal year.
(c) ADDITIONAL SHARES. If Awards are forfeited or terminate for
any other reason before being exercised, then the Shares underlying
such Awards shall again become available for Awards under the Plan.
(d) DIVIDEND EQUIVALENTS. Any dividend equivalents distributed
under the Plan shall not be applied against the number of Shares
available for Awards.
(e) LIMITS ON OPTIONS. No Key Employee shall receive Options to
purchase Shares during any fiscal year covering in excess of
2,000,000 Shares; provided, however, a newly hired Key Employee may
receive Options to purchase up to 1,000,000 Shares during the fiscal
year of his or her date of hire.
(f) LIMITS ON RESTRICTED STOCK. No Key Employee shall receive
Award(s) of Restricted Stock during any fiscal year covering in
excess of 200,000 Shares.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each Grant under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and
conditions of the Plan and may be subject to any other terms and
conditions that are not inconsistent with the Plan and that the
Committee deems appropriate for inclusion in a Stock Option
Agreement. The provisions of the various Stock Option Agreements
entered into under the Plan need not be identical. A Stock Option
Agreement may provide that new Options will be granted automatically
to
7
<PAGE>
the Optionee when he or she exercises the prior Options. The Stock
Option Agreement shall also specify whether the Option is an ISO or
an NSO.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify
the number of Shares that are subject to the Option and shall
provide for the adjustment of such number in accordance with Section
9.
(c) EXERCISE PRICE. An Option's Exercise Price shall be
established by the Committee and set forth in a Stock Option
Agreement. To the extent required by applicable law the Exercise
Price of an ISO shall not be less than 100% of the Fair Market Value
(110% for 10-Percent Shareholders) of a Share on the date of Grant.
In the case of an NSO, a Stock Option Agreement may specify an
Exercise Price that varies in accordance with a predetermined
formula while the NSO is outstanding.
(d) EXERCISABILITY AND TERM. Each Stock Option Agreement shall
specify the date when all or any installment of the Option is to
become exercisable. The Stock Option Agreement shall also specify
the term of the Option; provided that the term of an ISO shall in no
event exceed ten (10) years from the date of Grant. An ISO that is
granted to a 10-Percent Shareholder shall have a maximum term of
five (5) years. No Option can be exercised after the expiration date
provided in the applicable Stock Option Agreement. A Stock Option
Agreement may provide for accelerated exercisability in the event of
the Optionee's death, disability or retirement or other events and
may provide for expiration prior to the end of its term in the event
of the termination of the Optionee's service. A Stock Option
Agreement may permit an Optionee to exercise an Option before it is
vested, subject to the Company's right of repurchase over any Shares
acquired under the unvested portion of the Option (an "early
exercise"), which right of repurchase shall lapse at the same rate
the Option would have vested had there been no early exercise. In no
event shall the Company be required to issue fractional Shares upon
the exercise of an Option.
(e) MODIFICATIONS OR ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Committee may modify, extend or assume
outstanding options or may accept the cancellation of outstanding
options (whether granted by the Company or by another issuer) in
return for the grant of new Options for the same or a different
number of Shares and at the same or a different Exercise Price. The
foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair his or her
rights or obligations under such Option.
(f) TRANSFERABILITY OF OPTIONS. Except as otherwise provided in
the applicable Stock Option Agreement and then only to the extent
permitted by applicable law, no Option shall be transferable by the
Optionee other than by will or by the laws of descent and
distribution. Except as otherwise provided in the applicable Stock
Option Agreement, an Option may be exercised during the lifetime of
the Optionee only or by the guardian or legal representative of the
Optionee. No Option or interest therein may be assigned, pledged or
hypothecated by the Optionee during his lifetime, whether by
operation of law or otherwise, or be made subject to execution,
attachment or similar process.
8
<PAGE>
(g) NO RIGHTS AS STOCKHOLDER. An Optionee, or a transferee of
an Optionee, shall have no rights as a stockholder with respect to
any Common Stock covered by an Option until such person becomes
entitled to receive such Common Stock by filing a notice of exercise
and paying the Exercise Price pursuant to the terms of such Option.
(h) RESTRICTIONS ON TRANSFER. Any Shares issued upon exercise
of an Option shall be subject to such rights of repurchase, rights
of first refusal and other transfer restrictions as the Committee
may determine. Such restrictions shall apply in addition to any
restrictions that may apply to holders of Shares generally and shall
also comply to the extent necessary with applicable law.
SECTION 7. PAYMENT FOR OPTION SHARES.
(a) GENERAL RULE. The entire Exercise Price of Shares issued
upon exercise of Options shall be payable in cash at the time when
such Shares are purchased, except as follows:
(i) In the case of an ISO granted under the Plan,
payment shall be made only pursuant to the express provisions of the
applicable Stock Option Agreement. The Stock Option Agreement may
specify that payment may be made in any form(s) described in this
Section 7.
(ii) In the case of an NSO granted under the Plan, the
Committee may in its discretion, at any time accept payment in any
form(s) described in this Section 7.
(b) SURRENDER OF STOCK. To the extent that this Section 7(b) is
applicable, payment for all or any part of the Exercise Price may be
made with Shares which have already been owned by the Optionee for
such duration as shall be specified by the Committee. Such Shares
shall be valued at their Fair Market Value on the date when the new
Shares are purchased under the Plan.
(c) PROMISSORY NOTE. To the extent that this Section 7(c) is
applicable, payment for all or any part of the Exercise Price may be
made with a full-recourse promissory note.
(d) OTHER FORMS OF PAYMENT. To the extent that this Section
7(d) is applicable, payment may be made in any other form that is
consistent with applicable laws, regulations and rules.
SECTION 8. TERMS AND CONDITIONS FOR AWARDS OF RESTRICTED STOCK.
(a) TIME, AMOUNT AND FORM OF AWARDS. Awards under the Plan may
be granted in the form of Restricted Stock.
(b) RESTRICTED STOCK AGREEMENT. Each Award of Restricted Stock
under the Plan shall be evidenced by a Restricted Stock Agreement
between the Participant and the Company. Such Award shall be subject
to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions that are not inconsistent
with the
9
<PAGE>
Plan and that the Committee deems appropriate for inclusion in a
Restricted Stock Agreement. The provisions of the various Restricted
Stock Agreements entered into under the Plan need not be identical.
(c) PAYMENT FOR RESTRICTED STOCK. Restricted Stock may be
issued with or without cash consideration under the Plan.
(d) VESTING CONDITIONS. Each Award of Restricted Stock shall
become vested, in full or in installments, upon satisfaction of the
conditions specified in the Restricted Stock Agreement. A Restricted
Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, Disability or retirement or other events.
(e) ASSIGNMENT OR TRANSFER OF RESTRICTED STOCK. Except as
provided in Section 12, or in a Restricted Stock Agreement, or as
required by applicable law, a Restricted Stock granted under the
Plan shall not be anticipated, assigned, attached, garnished,
optioned, transferred or made subject to any creditor's process,
whether voluntarily, involuntarily or by operation of law. Any act
in violation of this Section 8(e) shall be void. However, this
Section 8(e) shall not preclude a Participant from designating a
beneficiary who will receive any outstanding Restricted Stocks in
the event of the Participant's death, nor shall it preclude a
transfer of Restricted Stocks by will or by the laws of descent and
distribution.
(f) TRUSTS. Neither this Section 8 nor any other provision of
the Plan shall preclude a Participant from transferring or assigning
Restricted Stock to (a) the trustee of a trust that is revocable by
such Participant alone, both at the time of the transfer or
assignment and at all times thereafter prior to such Participant's
death, or (b) the trustee of any other trust to the extent approved
in advance by the Committee in writing. A transfer or assignment of
Restricted Stock from such trustee to any person other than such
Participant shall be permitted only to the extent approved in
advance by the Committee in writing, and Restricted Stock held by
such trustee shall be subject to all of the conditions and
restrictions set forth in the Plan and in the applicable Restricted
Stock Agreement, as if such trustee were a party to such Agreement.
(g) VOTING AND DIVIDEND RIGHTS. The holders of Restricted Stock
awarded under the Plan shall have the same voting, dividend and
other rights as the Company's other stockholders. A Restricted Stock
Agreement, however, may require that the holders of Restricted Stock
invest any cash dividends received in additional Restricted Stock.
Such additional Restricted Stock shall be subject to the same
conditions and restrictions as the Award with respect to which the
dividends were paid. Such additional Restricted Stock shall not
reduce the number of Shares available under Section 5.
SECTION 9. PROTECTION AGAINST DILUTION.
(a) ADJUSTMENTS. In the event of a subdivision of the
outstanding Shares, a declaration of a dividend payable in Shares, a
declaration of a dividend payable in a form other than Shares in an
amount that has a material effect on the price of Shares, a
combination or consolidation of the outstanding Shares (by
reclassification or otherwise) into a lesser
10
<PAGE>
number of Shares, a recapitalization, a spin-off or a similar
occurrence, the Committee shall make such adjustments as it, in its
sole discretion, deems appropriate in one or more of:
(i) the number of Shares available for future Awards
and the per-person Share limits under Section 5;
(ii) the number of Shares covered by each outstanding
Award;
(iii) the Exercise Price under each outstanding Option;
or
(iv) the number of Shares subject to Option grants
under Section 4(c).
(b) PARTICIPANT RIGHTS. Except as provided in this Section 9, a
Participant shall have no rights by reason of any issue by the
Company of stock of any class or securities convertible into stock
of any class, any subdivision or consolidation of shares of stock of
any class, the payment of any stock dividend or any other increase
or decrease in the number of shares of stock of any class.
SECTION 10. EFFECT OF A CHANGE IN CONTROL.
(a) MERGER OR REORGANIZATION. In the event that the Company is
a party to a merger or other reorganization, outstanding Awards
shall be subject to the agreement of merger or reorganization. Such
agreement may provide, without limitation, for the assumption of
outstanding Awards by the surviving corporation or its parent, for
their continuation by the Company (if the Company is a surviving
corporation), for accelerated vesting or for their cancellation with
or without consideration, in all cases without the consent of the
Participant.
(b) ACCELERATION. The Committee may determine, at the time of
granting an Award or thereafter, that such Award shall become fully
vested as to all Shares subject to such Award in the event that a
Change in Control occurs with respect to the Company.
SECTION 11. LIMITATIONS ON RIGHTS.
(a) RETENTION RIGHTS. Neither the Plan nor any Award granted
under the Plan shall be deemed to give any individual a right to
remain an employee, consultant or director of the Company, a Parent,
a Subsidiary or an Affiliate. The Company and its Parents and
Subsidiaries and Affiliates reserve the right to terminate the
Service of any person at any time, and for any reason, subject to
applicable laws, the Company's Certificate of Incorporation and
Bylaws and a written employment agreement (if any).
(b) STOCKHOLDERS' RIGHTS. A Participant shall have no dividend
rights, voting rights or other rights as a stockholder with respect
to any Shares covered by his or her Award prior to the issuance of a
stock certificate for such Shares. No adjustment shall be made for
11
<PAGE>
cash dividends or other rights for which the record date is prior to
the date when such certificate is issued, except as expressly
provided in Section 9.
(c) REGULATORY REQUIREMENTS. Any other provision of the Plan
notwithstanding, the obligation of the Company to issue Shares under
the Plan shall be subject to all applicable laws, rules and
regulations and such approval by any regulatory body as may be
required. The Company reserves the right to restrict, in whole or in
part, the delivery of Shares pursuant to any Award prior to the
satisfaction of all legal requirements relating to the issuance of
such Shares, to their registration, qualification or listing or to
an exemption from registration, qualification or listing.
SECTION 12. WITHHOLDING TAXES.
(a) GENERAL. A Participant shall make arrangements satisfactory
to the Company for the satisfaction of any withholding tax
obligations that arise in connection with his or her Award. The
Company shall not be required to issue any Shares or make any cash
payment under the Plan until such obligations are satisfied.
(b) SHARE WITHHOLDING. If a public market for the Company's
Shares exists, the Committee may permit a Participant to satisfy all
or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any Shares that
otherwise would be issued to him or her or by surrendering all or a
portion of any Shares that he or she previously acquired. Such
Shares shall be valued at their Fair Market Value on the date when
taxes otherwise would be withheld in cash. Any payment of taxes by
assigning Shares to the Company may be subject to restrictions,
including, but not limited to, any restrictions required by rules of
the Securities and Exchange Commission.
SECTION 13. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall
become effective on the date of its adoption by the Board, subject
to the approval of the Company's stockholders. No Options shall be
exercisable until such stockholder approval is obtained. In the
event that the stockholders fail to approve the Plan within twelve
(12) months after its adoption by the Board, any Awards made shall
be null and void and no additional Awards shall be made. To the
extent required by applicable law, the Plan shall terminate on the
date that is ten (10) years after its adoption by the Board and may
be terminated on any earlier date pursuant to Section 13(b).
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board may amend
or terminate the Plan at any time and for any reason. The
termination of the Plan, or any amendment thereof, shall not affect
any Award previously granted under the Plan. No Awards shall be
granted under the Plan after the Plan's termination. An amendment of
the Plan shall be subject to the approval of the Company's
stockholders only to the extent required by applicable laws,
regulations or rules.
12
<PAGE>
SECTION 14. EXECUTION.
To record the adoption of the Plan by the Board, the Company has
caused its duly authorized officer to execute this Plan on behalf of
the Company.
INSILICON CORPORATION
By /s/ David J. Power
------------------------------------
Title Vice President, General Counsel
---------------------------------
13
<PAGE>
INSILICON CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1 PURPOSE....................................................................................1
Section 2 DEFINITIONS................................................................................1
2.1 "1934 Act".....................................................................................1
2.2 "Board"........................................................................................1
2.3 "Code".........................................................................................1
2.4 "Committee"....................................................................................1
2.5 "Common Stock".................................................................................1
2.6 "Company"......................................................................................1
2.7 "Compensation".................................................................................1
2.8 "Eligible Employee"............................................................................1
2.9 "Employee".....................................................................................2
2.10 "Employer" or "Employers"......................................................................2
2.11 "Enrollment Date"..............................................................................2
2.12 "Grant Date"...................................................................................2
2.13 "Participant"..................................................................................2
2.14 "Plan".........................................................................................2
2.15 "Purchase Date"................................................................................2
2.16 "Subsidiary"...................................................................................2
Section 3 SHARES SUBJECT TO THE PLAN.................................................................2
3.1 Number Available...............................................................................2
3.2 Adjustments....................................................................................3
Section 4 ENROLLMENT.................................................................................3
4.1 Participation..................................................................................3
4.2 Payroll Withholding............................................................................3
Section 5 OPTIONS TO PURCHASE COMMON STOCK...........................................................3
5.1 Grant of Option................................................................................3
5.2 Duration of Option.............................................................................3
5.3 Number of Shares Subject to Option.............................................................4
5.4 Other Terms and Conditions.....................................................................4
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 6 PURCHASE OF SHARES.........................................................................4
6.1 Exercise of Option.............................................................................4
6.2 Delivery of Shares.............................................................................5
6.3 Exhaustion of Shares...........................................................................5
Section 7 WITHDRAWAL.................................................................................5
7.1 Withdrawal.....................................................................................5
Section 8 CESSATION OF PARTICIPATION.................................................................5
8.1 Termination of Status as Eligible Employee.....................................................5
Section 9 DESIGNATION OF BENEFICIARY.................................................................5
9.1 Designation....................................................................................5
9.2 Changes........................................................................................5
9.3 Failed Designations............................................................................6
Section 10 ADMINISTRATION.............................................................................6
10.1 Plan Administrator.............................................................................6
10.2 Actions by Committee...........................................................................6
10.3 Powers of Committee............................................................................6
10.4 Decisions of Committee.........................................................................7
10.5 Administrative Expenses........................................................................7
10.6 Eligibility to Participate.....................................................................7
10.7 Indemnification................................................................................7
Section 11 AMENDMENT, TERMINATION, AND DURATION.......................................................7
11.1 Amendment, Suspension, or Termination..........................................................7
11.2 Duration of the Plan...........................................................................8
Section 12 GENERAL PROVISIONS.........................................................................8
12.1 Participation by Subsidiaries..................................................................8
12.2 Inalienability.................................................................................8
12.3 Severability...................................................................................8
12.4 Requirements of Law............................................................................8
12.5 Compliance with Rule 16b-3.....................................................................8
12.6 No Enlargement of Employment Rights............................................................9
12.7 Apportionment of Costs and Duties..............................................................9
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
12.8 Construction and Applicable Law................................................................9
12.9 Captions.......................................................................................9
EXECUTION ...........................................................................................9
</TABLE>
-iii-
<PAGE>
INSILICON CORPORATION
2000 EMPLOYEE STOCK PURCHASE PLAN
(AS ADOPTED ON JANUARY 12, 2000)
SECTION 1
PURPOSE
inSilicon Corporation hereby establishes the inSilicon
Corporation 2000 Employee Stock Purchase Plan, effective as of the first
Enrollment Date, in order to provide eligible employees of the Company and
its participating Subsidiaries with the opportunity to purchase Common Stock
through payroll deductions. The Plan is intended to qualify as an employee
stock purchase plan under Section 423(b) of the Code.
SECTION 2
DEFINITIONS
2.1 "1934 ACT" means the Securities Exchange Act of 1934,
as amended. Reference to a specific Section of the 1934 Act or regulation
thereunder shall include such Section or regulation, any valid regulation
promulgated under such Section, and any comparable provision of any future
legislation or regulation amending, supplementing or superseding such Section
or regulation.
2.2 "BOARD" means the Board of Directors of the Company.
2.3 "CODE" means the Internal Revenue Code of 1986, as
amended. Reference to a specific Section of the Code or regulation thereunder
shall include such Section or regulation, any valid regulation promulgated
under such Section, and any comparable provision of any future legislation or
regulation amending, supplementing or superseding such Section or regulation.
2.4 "COMMITTEE" shall mean the committee appointed by
the Board to administer the Plan. Any member of the Committee may resign at
any time by notice in writing mailed or delivered to the Secretary of the
Company. As of the effective date of the Plan, the Plan shall be administered
by the Compensation Committee of the Board.
2.5 "COMMON STOCK" means the common stock of the Company.
2.6 "COMPANY" means inSilicon Corporation, a Delaware
corporation.
2.7 "COMPENSATION" means a Participant's regular wages.
The Committee, in its discretion, may (on a uniform and nondiscriminatory
basis) establish a different definition of Compensation prior to an
Enrollment Date for all options to be granted on such Enrollment Date.
2.8 "ELIGIBLE EMPLOYEE" means every Employee of an
Employer, except (a) any Employee who immediately after the grant of an
option under the Plan, would own stock and/or hold outstanding options to
purchase stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of stock of the Company or of any
Subsidiary
<PAGE>
of the Company (including stock attributed to such Employee pursuant to
Section 424(d) of the Code), or (b) as provided in the following sentence.
The Committee, in its discretion, from time to time may, prior to an
Enrollment Date for all options to be granted on such Enrollment Date,
determine (on a uniform and nondiscriminatory basis) that an Employee shall
not be an Eligible Employee if he or she: (1) has not completed at least two
years of service since his or her last hire date (or such lesser period of
time as may be determined by the Committee in its discretion), (2)
customarily works not more than 20 hours per week (or such lesser period of
time as may be determined by the Committee in its discretion), (3)
customarily works not more than 5 months per calendar year (or such lesser
period of time as may be determined by the Committee in its discretion), or
(4) is an officer or other manager.
2.9 "EMPLOYEE" means an individual who is a common-law
employee of any Employer, whether such employee is so employed at the time
the Plan is adopted or becomes so employed subsequent to the adoption of the
Plan.
2.10 "EMPLOYER" or "EMPLOYERS" means any one or all of
the Company, and those Subsidiaries which, with the consent of the Board,
have adopted the Plan.
2.11 "ENROLLMENT DATE" means such dates as may be
determined by the Committee (in its discretion and on a uniform and
nondiscriminatory basis) from time to time.
2.12 "GRANT DATE" means any date on which a Participant
is granted an option under the Plan.
2.13 "PARTICIPANT" means an Eligible Employee who (a)
has become a Participant in the Plan pursuant to Section 4.1 and (b) has not
ceased to be a Participant pursuant to Section 8 or Section 9.
2.14 "PLAN" means the inSilicon Corporation 2000
Employee Stock Purchase Plan, as set forth in this instrument and as
hereafter amended from time to time.
2.15 "PURCHASE DATE" means such dates as may be
determined by the Committee (in its discretion and on a uniform and
nondiscriminatory basis) from time to time prior to an Enrollment Date for
all options to be granted on such Enrollment Date.
2.16 "SUBSIDIARY" means any corporation in an unbroken
chain of corporations beginning with the Company if each of the corporations
other than the last corporation in the unbroken chain then owns stock
possessing fifty percent (50%) or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
SECTION 3
SHARES SUBJECT TO THE PLAN
3.1 NUMBER AVAILABLE. A maximum of 250,000 shares of
Common Stock shall be available for issuance pursuant to the Plan. Beginning
with the first fiscal year of the Company beginning after the effective date
of the Plan, on the first day of each fiscal year of the Company, Shares will
be added to the Plan equal to the lesser of (a) 0.3125% of the outstanding
2
<PAGE>
Shares on the last day of the prior fiscal year, or (b) 100,000 Shares.
Shares sold under the Plan may be newly issued shares or treasury shares.
3.2 ADJUSTMENTS. In the event of any reorganization,
recapitalization, stock split, reverse stock split, stock dividend,
combination of shares, merger, consolidation, offering of rights or other
similar change in the capital structure of the Company, the Board may make
such adjustment, if any, as it deems appropriate in the number, kind and
purchase price of the shares available for purchase under the Plan and in the
maximum number of shares subject to any option under the Plan.
SECTION 4
ENROLLMENT
4.1 PARTICIPATION. Each Eligible Employee may elect to
become a Participant by enrolling or re-enrolling in the Plan effective as of
any Enrollment Date. In order to enroll, an Eligible Employee must complete,
sign and submit to the Company an enrollment form in such form, manner and by
such deadline as may be specified by the Committee from time to time (in its
discretion and on a nondiscriminatory basis). Any Participant whose option
expires and who has not withdrawn from the Plan automatically will be
re-enrolled in the Plan on the Enrollment Date immediately following the
Purchase Date on which his or her option expires. Any Participant whose
option has not expired and who has not withdrawn from the Plan automatically
will be deemed to be un-enrolled from the Participant's current option and be
enrolled as of a subsequent Enrollment Date if the price per Share on such
subsequent Enrollment Date is lower than the price per Share on the
Enrollment Date relating to the Participant's current option.
4.2 PAYROLL WITHHOLDING. On his or her enrollment form,
each Participant must elect to make Plan contributions via payroll
withholding from his or her Compensation. Pursuant to such procedures as the
Committee may specify from time to time, a Participant may elect to have
withholding equal to a whole percentage from 1% to 15% (or such lesser
percentage that the Committee may establish from time to time for all options
to be granted on any Enrollment Date). A Participant may elect to increase or
decrease his or her rate of payroll withholding by submitting a new
enrollment form in accordance with such procedures as may be established by
the Committee from time to time. A Participant may stop his or her payroll
withholding by submitting a new enrollment form in accordance with such
procedures as may be established by the Committee from time to time. In order
to be effective as of a specific date, an enrollment form must be received by
the Company no later than the deadline specified by the Committee, in its
discretion and on a nondiscriminatory basis, from time to time. Any
Participant who is automatically re-enrolled in the Plan will be deemed to
have elected to continue his or her contributions at the percentage last
elected by the Participant.
SECTION 5
OPTIONS TO PURCHASE COMMON STOCK
5.1 GRANT OF OPTION. On each Enrollment Date on which
the Participant enrolls or re-enrolls in the Plan, he or she shall be granted
an option to purchase shares of Common Stock.
3
<PAGE>
5.2 DURATION OF OPTION. Each option granted under the
Plan shall expire on the earliest to occur of (a) the completion of the
purchase of shares on the last Purchase Date occurring within 27 months of
the Grant Date of such option, (b) such shorter option period as may be
established by the Committee from time to time prior to an Enrollment Date
for all options to be granted on such Enrollment Date, or (c) the date on
which the Participant ceases to be such for any reason. Until otherwise
determined by the Committee for all options to be granted on an Enrollment
Date, the period referred to in clause (b) in the preceding sentence shall
mean the period from the applicable Enrollment Date through the last business
day prior to the immediately following Enrollment Date.
5.3 NUMBER OF SHARES SUBJECT TO OPTION. The number of
shares available for purchase by each Participant under the option will be
established by the Committee from time to time prior to an Enrollment Date
for all options to be granted on such Enrollment Date.
5.4 OTHER TERMS AND CONDITIONS. Each option shall be
subject to the following additional terms and conditions:
(a) payment for shares purchased under the option shall
be made only through payroll withholding under Section 4.2;
(b) purchase of shares upon exercise of the option will
be accomplished only in accordance with Section 6.1;
(c) the price per share under the option will be
determined as provided in Section 6.1; and
(d) the option in all respects shall be subject to such
other terms and conditions (applied on a uniform and nondiscriminatory
basis), as the Committee shall determine from time to time in its
discretion.
SECTION 6
PURCHASE OF SHARES
6.1 EXERCISE OF OPTION. Subject to Section 6.2, on each
Purchase Date, the funds then credited to each Participant's account shall be
used to purchase whole shares of Common Stock. Any cash remaining after whole
shares of Common Stock have been purchased shall be carried forward in the
Participant's account for the purchase of shares on the next Purchase Date.
The price per Share of the Shares purchased under any option granted under
the Plan shall be eighty-five percent (85%) of the lower of:
(a) the closing price per Share on the Grant Date for
such option on the NASDAQ National Market System; or
(b) the closing price per Share on the Purchase Date
on the NASDAQ National Market System;
provided, however, that with respect to any Grant Date under the Plan that
coincides with the date of the final prospectus for the initial public
offering of the Common Stock, the price in
4
<PAGE>
clause (a) above shall be the price per Share at which shares of Common Stock
are initially offered for sale to the public by the Company's underwriters in
such offering.
6.2 DELIVERY OF SHARES. As directed by the Committee in
its sole discretion, shares purchased on any Purchase Date shall be delivered
directly to the Participant or to a custodian or broker (if any) designated
by the Committee to hold shares for the benefit of the Participants. As
determined by the Committee from time to time, such shares shall be delivered
as physical certificates or by means of a book entry system.
6.3 EXHAUSTION OF SHARES. If at any time the shares
available under the Plan are over-enrolled, enrollments shall be reduced
proportionately to eliminate the over-enrollment. Such reduction method shall
be "bottom up", with the result that all option exercises for one share shall
be satisfied first, followed by all exercises for two shares, and so on,
until all available shares have been exhausted. Any funds that, due to
over-enrollment, cannot be applied to the purchase of whole shares shall be
refunded to the Participants (without interest thereon).
SECTION 7
WITHDRAWAL
7.1 WITHDRAWAL. A Participant may withdraw from the
Plan by submitting a completed enrollment form to the Company. A withdrawal
will be effective only if it is received by the Company by the deadline
specified by the Committee (in its discretion and on a uniform and
nondiscriminatory basis) from time to time. When a withdrawal becomes
effective, the Participant's payroll contributions shall cease and all
amounts then credited to the Participant's account shall be distributed to
him or her (without interest thereon).
SECTION 8
CESSATION OF PARTICIPATION
8.1 TERMINATION OF STATUS AS ELIGIBLE EMPLOYEE. A
Participant shall cease to be a Participant immediately upon the cessation of
his or her status as an Eligible Employee (for example, because of his or her
termination of employment from all Employers for any reason). As soon as
practicable after such cessation, the Participant's payroll contributions
shall cease and all amounts then credited to the Participant's account shall
be distributed to him or her (without interest thereon). If a Participant is
on a Company-approved leave of absence, his or her participation in the Plan
shall continue for so long as he or she remains an Eligible Employee and has
not withdrawn from the Plan pursuant to Section 7.1.
SECTION 9
DESIGNATION OF BENEFICIARY
9.1 DESIGNATION. Each Participant may, pursuant to such
uniform and nondiscriminatory procedures as the Committee may specify from
time to time, designate one or more Beneficiaries to receive any amounts
credited to the Participant's account at the time of his or her death.
Notwithstanding any contrary provision of this Section 9, Sections 9.1 and
9.2 shall be operative only after (and for so long as) the Committee
determines (on a uniform and nondiscriminatory basis) to permit the
designation of Beneficiaries.
5
<PAGE>
9.2 CHANGES. A Participant may designate different
Beneficiaries (or may revoke a prior Beneficiary designation) at any time by
delivering a new designation (or revocation of a prior designation) in like
manner. Any designation or revocation shall be effective only if it is
received by the Committee. However, when so received, the designation or
revocation shall be effective as of the date the designation or revocation is
executed (whether or not the Participant still is living), but without
prejudice to the Committee on account of any payment made before the change
is recorded. The last effective designation received by the Committee shall
supersede all prior designations.
9.3 FAILED DESIGNATIONS. If a Participant dies without
having effectively designated a Beneficiary, or if no Beneficiary survives
the Participant, the Participant's Account shall be payable to his or her
estate.
SECTION 10
ADMINISTRATION
10.1 PLAN ADMINISTRATOR. The Plan shall be administered
by the Committee. The Committee shall have the authority to control and
manage the operation and administration of the Plan.
10.2 ACTIONS BY COMMITTEE. Each decision of a majority
of the members of the Committee then in office shall constitute the final and
binding act of the Committee. The Committee may act with or without a meeting
being called or held and shall keep minutes of all meetings held and a record
of all actions taken by written consent.
10.3 POWERS OF COMMITTEE. The Committee shall have all
powers and discretion necessary or appropriate to supervise the
administration of the Plan and to control its operation in accordance with
its terms, including, but not by way of limitation, the following
discretionary powers:
(a) To interpret and determine the meaning and validity
of the provisions of the Plan and the options and to determine any
question arising under, or in connection with, the administration,
operation or validity of the Plan or the options;
(b) To determine any and all considerations affecting
the eligibility of any employee to become a Participant or to remain
a Participant in the Plan;
(c) To cause an account or accounts to be maintained
for each Participant;
(d) To determine the time or times when, and the number
of shares for which, options shall be granted;
(e) To establish and revise an accounting method or
formula for the Plan;
(f) To designate a custodian or broker to receive shares
purchased under the Plan and to determine the manner and form in which
shares are to be delivered to the designated custodian or broker;
6
<PAGE>
(g) To determine the status and rights of Participants
and their Beneficiaries or estates;
(h) To employ such brokers, counsel, agents and
advisers, and to obtain such broker, legal, clerical and other
services, as it may deem necessary or appropriate in carrying out
the provisions of the Plan;
(i) To establish, from time to time, rules for
the performance of its powers and duties and for the administration
of the Plan;
(j) To adopt such procedures and subplans as are
necessary or appropriate to permit participation in the Plan by
employees who are foreign nationals or employed outside of the
United States;
(k) To delegate to any one or more of its members or
to any other person, severally or jointly, the authority to perform
for and on behalf of the Committee one or more of the functions of
the Committee under the Plan.
10.4 DECISIONS OF COMMITTEE. All actions,
interpretations, and decisions of the Committee shall be conclusive and
binding on all persons, and shall be given the maximum possible deference
allowed by law.
10.5 ADMINISTRATIVE EXPENSES. All expenses incurred in
the administration of the Plan by the Committee, or otherwise, including
legal fees and expenses, shall be paid and borne by the Employers, except any
stamp duties or transfer taxes applicable to the purchase of shares may be
charged to the account of each Participant. Any brokerage fees for the
purchase of shares by a Participant shall be paid by the Company, but fees
and taxes (including brokerage fees) for the transfer, sale or resale of
shares by a Participant, or the issuance of physical share certificates,
shall be borne solely by the Participant.
10.6 ELIGIBILITY TO PARTICIPATE. No member of the
Committee who is also an employee of an Employer shall be excluded from
participating in the Plan if otherwise eligible, but he or she shall not be
entitled, as a member of the Committee, to act or pass upon any matters
pertaining specifically to his or her own account under the Plan.
10.7 INDEMNIFICATION. Each of the Employers shall, and
hereby does, indemnify and hold harmless the members of the Committee and the
Board, from and against any and all losses, claims, damages or liabilities
(including attorneys' fees and amounts paid, with the approval of the Board,
in settlement of any claim) arising out of or resulting from the
implementation of a duty, act or decision with respect to the Plan, so long
as such duty, act or decision does not involve gross negligence or willful
misconduct on the part of any such individual.
SECTION 11
AMENDMENT, TERMINATION, AND DURATION
11.1 AMENDMENT, SUSPENSION, OR TERMINATION. The Board,
in its sole discretion, may amend or terminate the Plan, or any part thereof,
at any time and for any reason.
7
<PAGE>
If the Plan is terminated, the Board, in its discretion, may elect to
terminate all outstanding options either immediately or upon completion of
the purchase of shares on the next Purchase Date, or may elect to permit
options to expire in accordance with their terms (and participation to
continue through such expiration dates). If the options are terminated prior
to expiration, all amounts then credited to Participants' accounts which have
not been used to purchase shares shall be returned to the Participants
(without interest thereon) as soon as administratively practicable.
11.2 DURATION OF THE PLAN. The Plan shall commence on
the date specified herein, and subject to Section 11.1 (regarding the Board's
right to amend or terminate the Plan), shall remain in effect for ten (10)
years from the effective date.
SECTION 12
GENERAL PROVISIONS
12.1 PARTICIPATION BY SUBSIDIARIES. One or more
Subsidiaries of the Company may become participating Employers by adopting
the Plan and obtaining approval for such adoption from the Board. By adopting
the Plan, a Subsidiary shall be deemed to agree to all of its terms,
including (but not limited to) the provisions granting exclusive authority
(a) to the Board to amend the Plan, and (b) to the Committee to administer
and interpret the Plan. An Employer may terminate its participation in the
Plan at any time. The liabilities incurred under the Plan to the Participants
employed by each Employer shall be solely the liabilities of that Employer,
and no other Employer shall be liable for benefits accrued by a Participant
during any period when he or she was not employed by such Employer.
12.2 INALIENABILITY. In no event may either a
Participant, a former Participant or his or her Beneficiary, spouse or estate
sell, transfer, anticipate, assign, hypothecate, or otherwise dispose of any
right or interest under the Plan; and such rights and interests shall not at
any time be subject to the claims of creditors nor be liable to attachment,
execution or other legal process. Accordingly, for example, a Participant's
interest in the Plan is not transferable pursuant to a domestic relations
order.
12.3 SEVERABILITY. In the event any provision of the
Plan shall be held illegal or invalid for any reason, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the Plan
shall be construed and enforced as if the illegal or invalid provision had
not been included.
12.4 REQUIREMENTS OF LAW. The granting of options and
the issuance of shares shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or securities
exchanges as the Committee may determine are necessary or appropriate.
12.5 COMPLIANCE WITH RULE 16b-3. Any transactions under
this Plan with respect to officers (as defined in Rule 16a-1 promulgated
under the 1934 Act) are intended to comply with all applicable conditions of
Rule 16b-3. To the extent any provision of the Plan or action by the
Committee fails to so comply, it shall be deemed null and void, to the extent
permitted by law and deemed advisable by the Committee. Notwithstanding any
contrary
8
<PAGE>
provision of the Plan, if the Committee specifically determines that
compliance with Rule 16b-3 no longer is required, all references in the Plan
to Rule 16b-3 shall be null and void.
12.6 NO ENLARGEMENT OF EMPLOYMENT RIGHTS. Neither the
establishment or maintenance of the Plan, the granting of options, the
purchase of shares, nor any action of any Employer or the Committee, shall be
held or construed to confer upon any individual any right to be continued as
an employee of the Employer nor, upon dismissal, any right or interest in any
specific assets of the Employers other than as provided in the Plan. Each
Employer expressly reserves the right to discharge any employee at any time,
with or without cause.
12.7 APPORTIONMENT OF COSTS AND DUTIES. All acts
required of the Employers under the Plan may be performed by the Company for
itself and its Subsidiaries, and the costs of the Plan may be equitably
apportioned by the Committee among the Company and the other Employers.
Whenever an Employer is permitted or required under the terms of the Plan to
do or perform any act, matter or thing, it shall be done and performed by any
officer or employee of the Employers who is thereunto duly authorized by the
Employers.
12.8 CONSTRUCTION AND APPLICABLE LAW. The Plan is
intended to qualify as an "employee stock purchase plan" within the meaning
of Section 423(b) of the Code. Any provision of the Plan which is
inconsistent with Section 423(b) of the Code shall, without further act or
amendment by the Company or the Committee, be reformed to comply with the
requirements of Section 423(b). The provisions of the Plan shall be
construed, administered and enforced in accordance with such Section and with
the laws of the State of California (excluding California's conflict of laws
provisions).
12.9 CAPTIONS. The captions contained in and the table
of contents prefixed to the Plan are inserted only as a matter of
convenience, and in no way define, limit, enlarge or describe the scope or
intent of the Plan nor in any way shall affect the construction of any
provision of the Plan.
EXECUTION
IN WITNESS WHEREOF, inSilicon Corporation, by its duly
authorized officer, has executed this Plan.
INSILICON CORPORATION
Dated: January 12, 2000 By: /s/ David J. Power
----------------------------------
Title: Vice President,
General Counsel
9
<PAGE>
INITIAL PUBLIC OFFERING AGREEMENT
dated as of November 30, 1999
between
PHOENIX TECHNOLOGIES LTD.
and
INSILICON CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS................................................................................1
Section 1.1. Definitions.......................................................................1
ARTICLE II THE INITIAL PUBLIC OFFERING................................................................4
Section 2.1. Cooperation Before to the Initial Public Offering.................................4
Section 2.2. Conditions Precedent to the Initial Public Offering...............................5
ARTICLE III INDEMNIFICATION............................................................................6
Section 3.1. Release of Claims.................................................................6
Section 3.2. Indemnification by inSilicon......................................................7
Section 3.3. Indemnification by Phoenix........................................................8
Section 3.4. Notice and Payment of Claims......................................................8
Section 3.5. Notice and Defense of Third-Party Claims..........................................9
Section 3.6. Insurance Proceeds...............................................................10
Section 3.7. Contribution.....................................................................10
Section 3.8. Subrogation......................................................................10
Section 3.9. No Third-Party Beneficiaries.....................................................11
Section 3.10. Remedies Cumulative..............................................................11
Section 3.11. Survival of Indemnities..........................................................11
Section 3.12. After-Tax Indemnification Payments...............................................11
ARTICLE IV CERTAIN ADDITIONAL MATTERS................................................................11
Section 4.1. Company Officers and Board of Directors..........................................11
Section 4.2. The Company Certificate of Incorporation and Bylaws..............................11
Section 4.3. Insurance Policies and Claims Administration.....................................11
Section 4.4. Non-Solicitation of Employees....................................................13
ARTICLE V ACCESS TO INFORMATION.....................................................................14
Section 5.1. Agreement For Exchange of Information............................................14
Section 5.2. Auditors and Audits; Annual and Quarterly Statements and Accounting..............15
Section 5.3. Confidentiality; Protection......................................................17
Section 5.4. Mail.............................................................................17
ARTICLE VI DISPUTE RESOLUTION........................................................................18
Section 6.1. Dispute Resolution...............................................................18
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
Section 6.2. Continuity of Service and Performance............................................19
ARTICLE VII STANDSTILL; COVENANT NOT TO COMPETE.......................................................19
Section 7.1. Standstill.......................................................................19
Section 7.2. Non-Compete......................................................................19
ARTICLE VIII MISCELLANEOUS.............................................................................20
Section 8.1. Termination......................................................................20
Section 8.2. Expenses.........................................................................20
Section 8.3. Notices..........................................................................21
Section 8.4. Amendment and Waiver.............................................................21
Section 8.5. Counterparts.....................................................................21
Section 8.6. Governing Law....................................................................22
Section 8.7. Entire Agreement.................................................................22
Section 8.8. Assignment.......................................................................22
Section 8.9. Parties in Interest..............................................................22
Section 8.10. Tax Sharing Agreement............................................................22
Section 8.11. Exhibits and Schedules...........................................................22
Section 8.12. Legal Enforceability.............................................................22
Section 8.13. Titles and Headings..............................................................23
Section 8.14. Conflicting Agreements...........................................................23
</TABLE>
-ii-
<PAGE>
INITIAL PUBLIC OFFERING AGREEMENT
This Initial Public Offering Agreement (this "Agreement") is entered
into effective as of November 30, 1999 by and between Phoenix Technologies,
Ltd., a Delaware corporation ("Phoenix"), and inSilicon Corporation, a
Delaware corporation and a wholly owned subsidiary of Phoenix ("inSilicon").
RECITALS
WHEREAS, the Board of Directors of Phoenix has determined that it is
in the best interests of Phoenix to separate the business and operations of
Phoenix engaged in the development and licensing of semiconductor
intellectual property cores, silicon subsystems, firmware stocks and drivers
(the "Business") from Phoenix's other operations by transferring the assets
of the Business to inSilicon and causing inSilicon to assume the liabilities
of the Business (the "Separation");
WHEREAS, the parties have determined that it is desirable and in the
best interests of inSilicon to obtain funds for the operation of the Business
by causing inSilicon to sell, in an initial public offering (the "Initial
Public Offering"), additional shares of its common stock, par value $.001 per
share ("Common Stock");
WHEREAS, it is appropriate and desirable to set forth certain
agreements that will govern certain matters relating to the Separation and
the Initial Public Offering and the relationship of Phoenix and inSilicon and
their respective subsidiaries after the Initial Public Offering.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, provisions and covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. As used herein, the following terms have
the following meanings:
"ACTION" means any claim, suit, arbitration, inquiry, proceeding or
investigation by or before any court, governmental or regulatory or
administrative agency or commission or any other tribunal or other
Governmental Authority.
"AFFILIATE" of any specified Person means any other Person that,
directly or indirectly, controls, is controlled by or is under common control
with such specified Person.
"AGREEMENT" has the meaning set forth in the preamble, as such
agreement may be amended and supplemented from time to time in accordance
with its terms.
<PAGE>
"ANCILLARY AGREEMENTS" means each of the following agreements
between Phoenix and inSilicon dated as of November 30, 1999, as the same may
be amended from time to time: the Services and Cost-Sharing Agreement, the
Employee Matters Agreement, the Tax-Sharing Agreement, the Registration
Rights Agreement and the Technology Distributor Agreement.
"BUSINESS" has the meaning set forth in the first recital of this
Agreement.
"CLOSING DATE" means the first time at which any shares of Common
Stock are sold to the Underwriters pursuant to the Initial Public Offering in
accordance with the terms of the Underwriting Agreement.
"COMMISSION" means the Securities and Exchange Commission.
"COMMON STOCK" has the meaning set forth in the second recital of
this Agreement.
"COMPANY BYLAWS" means the bylaws of inSilicon in the form to take
effect immediately prior to the Closing Date filed as an exhibit to the
Registration Statement.
"COMPANY CERTIFICATE" means the restated certificate of
incorporation of inSilicon in the form to take effect immediately prior to
the Closing Date filed as an exhibit to the Registration Statement.
"CONTRIBUTION AGREEMENT" means that certain Contribution Agreement
between inSilicon and Phoenix dated as of November 30, 1999, as the same may
be amended from time to time.
"DISPUTES" has the meaning set forth in Section 6.1.
"EFFECTIVE INITIAL PUBLIC OFFERING DATE" means the date on which
the Registration Statement is declared effective by the Commission.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"GOVERNMENTAL AUTHORITY" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau,
agency, official or other regulatory, administrative or governmental
authority.
"INDEMNIFIED PARTY" has the meaning set forth in Section 3.4.
"INDEMNIFYING PARTY" has the meaning set forth in Section 3.4.
"INFORMATION" means information, whether or not patentable or
copyrightable, in written, oral, electronic or other tangible or intangible
forms, stored in any medium, including studies, reports, records, books,
contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes,
tapes, computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under
their
2
<PAGE>
direction (including attorney work product), and other technical, financial,
employee or business information or data.
"INITIAL PUBLIC OFFERING" has the meaning set forth in the second
recital of this Agreement.
"INSILICON CONTRACT" shall have the meaning set forth in the
Contribution Agreement.
"INSILICON INDEMNITEES" has the meaning set forth in Section 3.3.
"INSILICON'S AUDITORS" has the meaning set forth in Section 5.2(a).
"INSURANCE CHARGES" has the meaning set forth in Section 4.3(c).
"LIABILITY" shall have the meaning set forth in the Contribution
Agreement.
"PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a
limited liability entity, any other entity and any Governmental Authority.
"PHOENIX'S AUDITORS" has the meaning set forth in Section 5.2(b).
"PHOENIX GROUP" means Phoenix and each Person (other than inSilicon
and its subsidiaries) that is an Affiliate of Phoenix immediately after the
Separation Date.
"PHOENIX INDEMNITEES" has the meaning set forth
"POLICY" has the meaning set forth in Section 4.3(a).
"PROSPECTUS" means each preliminary, final or supplemental
prospectus forming a part of the Registration Statement.
"REGISTRATION STATEMENT" means the registration statement on Form
S-1 filed by inSilicon with the Commission to effect the registration of the
Common Stock pursuant to the Securities Act, as such registration statement
may be amended from time to time.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SEMICONDUCTOR INTELLECTUAL PROPERTY LIABILITIES" shall have the
meaning set forth in the Contribution Agreement.
"SEPARATION" has the meaning set forth in the second recital of this
Agreement.
"SEPARATION DATE" means November 30, 1999.
"TAX" or "TAXES" has the meaning set forth in the Tax-Sharing
Agreement.
"THIRD-PARTY CLAIM" has the meaning set forth in Section 3.5.
3
<PAGE>
Unless otherwise specified, any reference to any "subsidiary" or
"subsidiaries" of Phoenix shall not include inSilicon.
ARTICLE II
THE INITIAL PUBLIC OFFERING
Section 2.1. COOPERATION BEFORE TO THE INITIAL PUBLIC OFFERING. (a)
TRANSACTIONS BEFORE THE INITIAL PUBLIC OFFERING.
(i) Subject to the conditions specified in Section 3.3,
Phoenix and inSilicon shall use their reasonable efforts to consummate
the Initial Public Offering. Such actions shall include, but not
necessarily be limited to, those specified in this Section 2.1.
(ii) inSilicon shall file the Registration Statement, and such
amendments or supplements thereto, as may be necessary in order to
cause the same to become and remain effective as required by law or by
the Underwriters, including, but not limited to, filing such amendments
to the Registration Statement as may be required by the Underwriting
Agreement, the Commission or federal, state or foreign securities laws.
inSilicon also shall prepare, file with the Commission and cause to
become effective a registration statement registering the Common Stock
under the Exchange Act, and any registration statements or amendments
thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or
appropriate in connection with the Separation and the Initial Public
Offering or the other transactions contemplated by this Agreement and
the Ancillary Agreements.
(iii) inSilicon shall enter into the Underwriting Agreement,
in form and substance reasonably satisfactory to inSilicon and shall
comply with its obligations thereunder.
(iv) Phoenix and inSilicon shall consult with each other and
the Underwriters regarding the timing, pricing and other material
matters with respect to the Initial Public Offering.
(v) inSilicon shall use its best efforts to take all such
action as may be necessary or appropriate under state securities and
blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) in connection with the Initial Public Offering.
(vi) inSilicon shall prepare, file and use best efforts to
seek to make effective, a listing application for quotation of the
Common Stock issued in the Initial Public Offering in the Nasdaq
National Market, subject to official notice of issuance.
(vii) inSilicon shall participate in the preparation of
materials and presentations as the Underwriters shall deem necessary or
desirable.
(viii) inSilicon shall pay the costs and expenses set forth in
Section 8.2.
4
<PAGE>
(b) PROCEEDS OF THE INITIAL PUBLIC OFFERING. The Initial Public
Offering will consist of a primary offering of Common Stock by inSilicon.
inSilicon will receive the net proceeds of the Initial Public Offering, but
shall remain subject to any obligations to Phoenix under this Agreement, the
Contribution Agreement or any Ancillary Agreement required to be paid
therefrom .
Section 2.2. CONDITIONS PRECEDENT TO THE INITIAL PUBLIC OFFERING. In
no event shall the Initial Public Offering occur unless the following
conditions shall, unless waived by Phoenix in its sole discretion, have been
satisfied:
(a) The Registration Statement shall have been filed and declared
effective by the Commission, and there shall be no stop-order in effect with
respect thereto.
(b) The actions and filings with regard to state securities and blue
sky laws of the United States (and any comparable laws under any foreign
jurisdictions) described in Section 2.1 shall have been taken and, where
applicable, have become effective or been accepted.
(c) inSilicon's Board of Directors, as named in the Registration
Statement, shall have been elected by Phoenix, as sole stockholder of
inSilicon, and the Company Certificate and Company Bylaws shall be in effect.
(d) inSilicon and Phoenix shall have entered into the Underwriting
Agreement and all conditions to the obligations of inSilicon and the
Underwriters shall have been satisfied or waived.
(e) The Common Stock shall have been approved for quotation in the
Nasdaq National Market, subject to official notice of issuance.
(f) Each of the Ancillary Agreements, in form and substance
satisfactory to Phoenix, shall have been executed by the parties thereto and
shall remain in full force and effect and each of the transactions
contemplated by the Ancillary Agreements to be consummated on or before the
Effective Initial Public Offering Date shall have been consummated.
(g) No preliminary or permanent injunction or other order, decree or
ruling issued by a court of competent jurisdiction or by a government,
regulatory or administrative agency or commission, and no statute, rule,
regulation or executive order promulgated or enacted by any Governmental
Authority, shall be in effect preventing the Initial Public Offering or any
of the other transactions contemplated by this Agreement or any Ancillary
Agreement shall be in effect.
(h) Phoenix shall have been released from any Liabilities,
guarantees or other obligations with respect to any indebtedness or otherwise
of inSilicon or its subsidiaries.
(i) Such other actions as the parties may, based upon the advice of
counsel, reasonably request to be taken before the Initial Public Offering in
order to assure the successful completion of the Initial Public Offering and
the other transactions contemplated by this Agreement shall have been taken.
(j) This Agreement shall not have been terminated.
5
<PAGE>
ARTICLE III
INDEMNIFICATION
Section 3.1. RELEASE OF CLAIMS. (a) Except as provided in Section
3.1(c), effective as of the Separation Date, inSilicon does hereby, for
itself and its Affiliates (other than any member of the Phoenix Group),
successors and assigns, and all Persons who at any time prior to the
Separation Date have been stockholders, directors, officers, agents or
employees of inSilicon (in each case, in their respective capacities as
such), remise, release and forever discharge Phoenix and each member of the
Phoenix Group, their respective successors and assigns, and all Persons who
at any time prior to the Separation Date have been stockholders, directors,
officers, agents or employees of Phoenix or any member of the Phoenix Group
(in each case, in their respective capacities as such), and their respective
heirs, executors, administrators, successors and assigns, from any and all
Liabilities whatsoever, whether at law or in equity (including any right of
contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any facts or events occurring
or failing to occur or alleged to have occurred or to have failed to occur or
any conditions existing or alleged to have existed on or before the
Separation Date, including in connection with the transactions and all other
activities to implement the Separation and the Initial Public Offering.
(b) Except as provided in Section 3.1(c), effective as of the
Separation Date, Phoenix does hereby, for itself and each member of the
Phoenix Group, successors and assigns, and all Persons who at any time prior
to the Separation Date have been stockholders, directors, officers, agents or
employees of Phoenix or any member of the Phoenix Group (in each case, in
their respective capacities as such), remise, release and forever discharge
inSilicon and its subsidiaries, their respective successors and assigns, and
all Persons who at any time prior to the Separation Date have been
stockholders, directors, officers, agents or employees of inSilicon or any of
its subsidiaries (in each case, in their respective capacities as such), and
their respective heirs, executors, administrators, successors and assigns,
from any and all Liabilities whatsoever, whether at law or in equity
(including any right of contribution), whether arising under any contract or
agreement, by operation of law or otherwise, existing or arising from any
facts or events occurring or failing to occur or alleged to have occurred or
to have failed to occur or any conditions existing or alleged to have existed
on or before the Separation Date, including in connection with the
transactions and all other activities to implement the Separation and the
Initial Public Offering.
(c) Nothing contained in Sections 3.1(a) or (b) shall impair any
right of any Person to enforce this Agreement, the Contribution Agreement or
any Ancillary Agreement. Nothing contained in Sections 3.1(a) and (b) shall
release any Person from:
(i) any Liability, contingent or otherwise, assumed,
transferred or assigned to such Person in accordance with, or any other
Liability of any Person under, this Agreement, the Contribution
Agreement or any Ancillary Agreement;
(ii) any Liability that the parties may have with respect to
indemnification or contribution pursuant to this Agreement for claims
brought against the parties by third Persons, which Liability shall be
governed by the provisions of this Article III and, if
6
<PAGE>
applicable, the appropriate provisions of the Contribution Agreement
or the Ancillary Agreements; or
(iii) any Liability the release of which would result in the
release of any Person other than a Person released pursuant to this
Section 3.1; provided that the parties agree not to bring suit or
permit any of their subsidiaries to bring suit against any Person with
respect to any Liability to the extent that such Person would be
released with respect to such Liability by this Section 3.1 but for the
provision of this clause (iii).
(d) inSilicon shall not make, and shall not permit any of its
subsidiaries to make, any claim or demand or commence any Action asserting
any claim or demand, including any claim of contribution or indemnification,
against Phoenix or any member of the Phoenix Group or any other Person
released pursuant to Section 3.1(a), with respect to any Liabilities released
pursuant to Section 3.1(a). Phoenix shall not make, and shall not permit any
member of the Phoenix Group to make, any claim or demand or commence any
Action asserting any claim or demand, including any claim of contribution or
indemnification, against inSilicon or any of its subsidiaries or any other
Person released pursuant to Section 3.1(b), with respect to any Liabilities
released pursuant to Section 3.1(b).
(e) It is the intention of each of Phoenix and inSilicon by virtue
of the provisions of this Section 3.1 to provide for a full and complete
release and discharge of all Liabilities existing or arising from all acts
and events occurring or failing to occur or alleged to have occurred or
failed to occur and all conditions existing or alleged to have existed on or
before the Separation Date, between or among inSilicon or any of its
subsidiaries, on the one hand, and Phoenix or any member of the Phoenix
Group, on the other hand (including any contractual agreements or
arrangements existing or alleged to exist between or among such Persons on or
before the Separation Date), except as expressly set forth in Section 3.1(c).
At any time, at the request of the other party, each party shall execute and
deliver, or shall cause such other appropriate Persons to execute and
deliver, releases reflecting the provisions hereof.
Section 3.2. INDEMNIFICATION BY INSILICON. Except as provided in
Section 3.5 and except as otherwise expressly provided in the Contribution
Agreement or any of the Ancillary Agreements, from and after the Separation
Date, inSilicon shall indemnify, defend and hold harmless Phoenix, each
member of the Phoenix Group and each of their respective directors, officers,
employees and agents and each of the heirs, executors, successors and assigns
of any of the foregoing (collectively, the "Phoenix Indemnitees") from and
against any and all Liabilities of the Phoenix Indemnitees arising out of,
relating to or resulting from any of the following items (without
duplication):
(a) the failure of inSilicon or any other Person to pay, perform or
otherwise promptly discharge any Semiconductor Intellectual Property
Liability or inSilicon Contract in accordance with their respective terms,
whether before or after the Separation Date;
(b) the Business, any Semiconductor Intellectual Property Liability
or any inSilicon Contract;
7
<PAGE>
(c) any breach by inSilicon or any of its subsidiaries of this
Agreement, the Contribution Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
with respect to all information contained in the Registration Statement or
Prospectus, other than information pertaining solely to Phoenix.
Section 3.3. INDEMNIFICATION BY PHOENIX. Except as provided in
Section 3.5 and except as otherwise expressly provided in the Contribution
Agreement or any of the Ancillary Agreements, from and after the Separation
Date, Phoenix shall indemnify, defend and hold harmless inSilicon and each of
its subsidiaries and each of their respective directors, officers, employees
and agents and each of the heirs, executors, successors and assigns of any of
the foregoing (collectively, the "inSilicon Indemnitees") from and against
any and all Liabilities of the inSilicon Indemnitees arising out of, relating
to or resulting from any of the following items (without duplication):
(a) the failure of Phoenix or any other member of the Phoenix Group
or any other Person to pay, perform or otherwise promptly discharge any
Liability of the Phoenix Group other than the Semiconductor Intellectual
Property Liabilities in accordance with its terms, whether before or after
the Separation Date;
(b) any Liability of any member of the Phoenix Group other than the
Semiconductor Intellectual Property Liabilities and the business of any
member of the Phoenix group other than the Business;
(c) any breach by Phoenix or any member of the Phoenix Group of this
Agreement, the Contribution Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a material
fact or omission or alleged omission to state a material fact required to be
stated therein or necessary to make the statements therein not misleading,
with respect to the information pertaining solely to Phoenix contained in the
Registration Statement or Prospectus.
Section 3.4. NOTICE AND PAYMENT OF CLAIMS. If any Phoenix Indemnitee
or inSilicon Indemnitee (the "Indemnified Party") determines that it is or
may be entitled to indemnification under this Article III (other than in
connection with any Action subject to Section 3.5), the Indemnified Party
shall deliver to the Person from whom such indemnification is sought (the
"Indemnifying Party"), a written notice specifying, to the extent reasonably
practicable, the basis for its claim for indemnification and the amount for
which the Indemnified Party reasonably believes it is entitled to be
indemnified. After the Indemnifying Party shall have been notified of the
amount for which the Indemnified Party seeks indemnification, the
Indemnifying Party shall, within 30 days after receipt of such notice, either
(i) pay the Indemnified Party such amount in cash or other immediately
available funds (or reach agreement with the Indemnified Party as to a
mutually agreeable alternative payment schedule) or (ii) object to the claim
for indemnification or the amount thereof by giving the Indemnified Party
written notice setting forth the grounds therefor. Any objection shall be
resolved in accordance with Article VI. If the Indemnifying
8
<PAGE>
Party does not give such notice within such 30-day period, the Indemnifying
Party shall be deemed to have acknowledged its liability for such claim and
the Indemnified Party may exercise any and all of its rights under applicable
law to collect such amount.
Section 3.5. NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS. Promptly
following the earlier of (A) receipt of written notice of the commencement by
a third party of any Action against or otherwise involving any Indemnified
Party or (B) receipt of written information from a third party alleging the
existence of a claim against an Indemnified Party, in either case, with
respect to which indemnification may be sought pursuant to this Agreement (a
"Third-Party Claim"), the Indemnified Party shall give the Indemnifying Party
prompt written notice thereof. Failure of the Indemnified Party to give
notice as provided in this Section 3.5 shall not relieve the Indemnifying
Party of its obligations under this Agreement, except to the extent that the
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail.
(a) Within 30 days after receipt of such notice, the Indemnifying
Party may by giving written notice thereof to the Indemnified Party, (i)
elect to assume the defense of such Third-Party Claim at its sole cost and
expense or (ii) object to the claim of indemnification for such Third-Party
Claim setting forth the grounds therefor. Any objection shall be resolved in
accordance with Article VI. If the Indemnifying Party does not give such
notice within such 30-day period, the Indemnifying Party shall be deemed to
have acknowledged its liability for such Third-Party Claim.
(b) Any defense of a Third-Party Claim as to which the Indemnifying
Party has elected to assume the defense shall be conducted by counsel
employed by the Indemnifying Party and reasonably satisfactory to Phoenix in
the case of Phoenix Indemnitees and inSilicon in the case of inSilicon
Indemnitees. The Indemnified Party shall have the right to participate in
such proceedings and to be represented by counsel of its own choosing at the
Indemnified Party's sole cost and expense; PROVIDED that if the defendants or
parties against which relief is sought in any such claim include both the
Indemnifying Party and one or more Indemnified Parties and, in the reasonable
judgment of Phoenix in the case of Phoenix Indemnitees and inSilicon in the
case of inSilicon Indemnitees, a conflict of interest between such
Indemnified Parties and such Indemnifying Party exists in respect of such
claim, such Indemnified Parties shall have the right to employ one firm of
counsel selected by Phoenix for Phoenix Indemnitees or inSilicon for
inSilicon Indemnitees and in that event the reasonable fees and expenses of
such separate counsel (but not more than one separate counsel reasonably
satisfactory to the Indemnifying Party) shall be paid by such Indemnifying
Party. If the Indemnifying Party assumes the defense of a Third-Party Claim,
the Indemnifying Party may settle or compromise the claim without the prior
written consent of the Indemnified Party; PROVIDED that without the prior
written consent of Phoenix in the case of Phoenix Indemnitees and inSilicon
in the case of inSilicon Indemnitees, the Indemnifying Party may not agree to
any such settlement unless as a condition to such settlement the Indemnified
Party receives a written release from any and all liability relating to such
Third-Party Claim and such settlement or compromise does not include any
remedy or relief to be applied to or against the Indemnified Party, other
than monetary damages for which the Indemnifying Party shall be responsible
hereunder.
9
<PAGE>
(c) If the Indemnifying Party does not assume the defense of a
Third-Party Claim for which it has acknowledged liability for indemnification
under this Article III, Phoenix in the case of Phoenix Indemnitees and
inSilicon in the case of inSilicon Indemnitees may pursue the defense of such
Third-Party Claim and choose one firm of counsel in connection therewith. The
Indemnifying Party is required to reimburse Phoenix or inSilicon, as the case
may be, on a current basis for its reasonable expenses of investigation,
reasonable attorneys' fees and reasonable out-of-pocket expenses incurred by
Phoenix in the case of Phoenix Indemnitees and inSilicon in the case of
inSilicon Indemnitees in defending against such Third-Party Claim and the
Indemnifying Party shall be bound by the result obtained with respect
thereto, PROVIDED that the Indemnifying Party shall not be liable for any
settlement effected without the consent of the Indemnifying Party, which
consent shall not be unreasonably withheld.
(d) The Indemnifying Party shall pay to the Indemnified Party in
cash the amount for which the Indemnified Party is entitled to be indemnified
(if any) no later than the later of (i) the date on which the Indemnified
Party makes any payment in satisfaction (partial or otherwise) of the
Third-Party Claim or (ii) the date on which such Indemnifying Party's
objection, if any, to its responsibility for indemnification under this
Article III has been resolved pursuant to Article VI or by settlement or
compromise or the final nonappealable judgment of a court of competent
jurisdiction.
Section 3.6. INSURANCE PROCEEDS. The amount that any Indemnifying
Party is or may be required to pay to any Indemnified Party pursuant to this
Article III shall be reduced (including, without limitation, retroactively)
by any insurance proceeds or other amounts actually recovered by or on behalf
of such Indemnified Parties in reduction of the related Liability. If an
Indemnified Party shall have received the payment required by this Agreement
from an Indemnifying Party in respect of a Liability and shall subsequently
actually receive insurance proceeds, or other amounts in respect of such
Liability as specified above, then such Indemnified Party shall pay to such
Indemnifying Party a sum equal to the amount of such insurance proceeds or
other amounts actually received after deducting therefrom all of the
Indemnifying Party's costs and expenses associated with such Liability.
Section 3.7. CONTRIBUTION. If the indemnification provided for in
this Article III is unavailable to an Indemnified Party in respect of any
Liability arising out of or related to information contained in or omitted
from the Registration Statement or the Prospectus, then the inSilicon
Indemnitees, or Phoenix Indemnitees, as the case may be, in lieu of
indemnifying the Phoenix Indemnitees or inSilicon Indemnitees, as the case
may be, shall contribute to the amount paid or payable by the Phoenix
Indemnitees or inSilicon Indemnitees, as the case may be, as a result of such
Liability in such proportion as is appropriate to reflect the relative fault
of inSilicon, on the one hand, and Phoenix, on the other hand, in connection
with the statements or omissions which resulted in such Liability. If the
untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information pertaining
solely to Phoenix, then Phoenix shall bear any resulting Liability;
otherwise, inSilicon shall bear any resulting Liability.
Section 3.8. SUBROGATION. In the event of payment by an Indemnifying
Party to any Indemnified Party in connection with any Third-Party Claim, such
Indemnifying Party shall be subrogated to and shall stand in the first place
of such Indemnified Party as to any events or
10
<PAGE>
circumstances in respect of which such Indemnified Party may have any right
or claim relating to such Third-Party Claim. Such Indemnified Party shall
cooperate with such Indemnifying Party in a reasonable manner, and at the
cost and expense of such Indemnifying Party, in prosecuting any subrogated
right or claim.
Section 3.9. NO THIRD-PARTY BENEFICIARIES. This Article III shall
inure to the benefit of, and be enforceable by Phoenix, the Phoenix
Indemnitees, inSilicon and the inSilicon Indemnitees and their respective
successors and permitted assigns. The indemnification provided for by this
Article III shall not inure to the benefit of any other third party or
parties and shall not relieve any insurer who would otherwise be obligated to
pay any claim of the responsibility with respect thereto or, solely by virtue
of the indemnification provisions hereof, provide any subrogation rights with
respect thereto and each party agrees to waive such rights against the other
to the fullest extent permitted.
Section 3.10. REMEDIES CUMULATIVE. The remedies provided in this
Article III shall be cumulative and shall not preclude assertion by any
Indemnified Party of any other rights or the seeking of any and all other
remedies against an Indemnifying Party. The procedures set forth in this
Article III, however, shall be the exclusive procedures governing any
indemnity action brought under this Article III or otherwise relating to
Liabilities.
Section 3.11. SURVIVAL OF INDEMNITIES. The rights and obligations of
each of Phoenix and inSilicon and their respective Indemnitees under this
Article III shall survive the sale or other transfer by it of any assets or
businesses or the assignment by it of any Liabilities.
Section 3.12. AFTER-TAX INDEMNIFICATION PAYMENTS. Except as
otherwise expressly provided in this Agreement, the Contribution Agreement or
in an Ancillary Agreement, indemnification payments made by either party
under this Article shall give effect to, and be reduced by the value of, any
and all applicable deductions, losses, credits, offsets or other items for
Federal, state or other Tax purposes attributable to the payment of the
indemnified Liability by the Indemnified Party.
ARTICLE IV
CERTAIN ADDITIONAL MATTERS
Section 4.1. COMPANY OFFICERS AND BOARD OF DIRECTORS. On or prior to
the Closing Date, Phoenix shall take and shall cause inSilicon to take all
actions necessary to appoint as officers and directors of inSilicon those
persons named in the Registration Statement to constitute the officers and
directors of inSilicon on the Closing Date.
Section 4.2. THE COMPANY CERTIFICATE OF INCORPORATION AND BYLAWS.
Prior to the Closing Date, Phoenix shall take all action necessary to cause
the Company Certificate and Company Bylaws to be amended and restated
substantially in the form attached to the Registration Statement as exhibits
thereto.
Section 4.3. INSURANCE POLICIES AND CLAIMS ADMINISTRATION.
11
<PAGE>
(a) MAINTENANCE OF INSURANCE COVERAGE PRIOR TO SEPARATION DATE.
Phoenix and inSilicon shall use reasonable efforts to maintain in full force
and effect at all times up to and including the Separation Date and for the
periods set forth in the Services and Cost-Sharing Agreement, its current
property and casualty insurance programs, including, without limitation,
primary and excess general liability, automobile, workers' compensation,
property and crime insurance policies (collectively, the "Policies" and
individually, a "Policy"). inSilicon and its subsidiaries shall retain with
respect to any insured claims relating to periods before the Separation Date
or termination of the applicable period set forth in the Services and
Cost-Sharing Agreement with respect to each such Policy (whichever is later),
all of their respective rights, benefits and privileges, if any, under such
Policies. To the extent not already provided for by the terms of a Policy,
Phoenix shall use reasonable efforts to cause inSilicon and its subsidiaries,
as appropriate, to be named as additional insureds under such Policy in
respect of Covered Claims arising or relating to periods prior to the
Separation Date or termination of the applicable period set forth in the
Services and Cost-Sharing Agreement with respect to each such Policy
(whichever is later); PROVIDED, however, that nothing contained herein shall
be construed to require Phoenix or any of its subsidiaries to pay any
additional premium or other charges in respect to, or waive or otherwise
limit any of its rights, benefits or privileges under, any such Policy to
effect the naming of inSilicon and its subsidiaries as such additional
insureds except as required by the Services and Cost-Sharing Agreement and
then only to the extent the charge, if any, is borne by inSilicon.
(b) COMPANY RESPONSIBLE FOR ESTABLISHING INSURANCE COVERAGE ON AND
AFTER SEPARATION DATE. Except as provided under the Services and Cost-Sharing
Agreement or any other Ancillary Agreement, commencing on and as of the
Separation Date, inSilicon and each of its subsidiaries shall be responsible
for establishing and maintaining its own separate insurance programs
(including, without limitation, primary and excess general liability,
automobile, workers, compensation, property, director and officer liability,
fire, crime, surety and other similar insurance policies) for activities and
claims relating to any period on or after the Separation Date involving
inSilicon or any of its subsidiaries. Notwithstanding any other agreement or
understanding to the contrary, except as set forth in the Services and
Cost-Sharing Agreement or any such Ancillary Agreement or Section 4.3(c) with
respect to claims administration and financial administration of the
Policies, neither Phoenix nor any of its subsidiaries shall have any
responsibility for or obligation to inSilicon or its subsidiaries relating to
liability and casualty insurance matters for any period, whether before, at
or after the Separation Date except to the extent set forth in the Services
and Cost-Sharing Agreement.
(c) ADMINISTRATION AND PROCEDURE. (i) Phoenix or a subsidiary of
Phoenix, as appropriate, shall be responsible for the claims administration
and financial administration of all Policies for insured claims relating to
the assets, ownership or operation of the Business prior to the Separation
Date or termination of the applicable period set forth in the Services and
Cost-Sharing Agreement with respect to each such Policy (whichever is later);
PROVIDED, HOWEVER, that such retention by Phoenix of the Policies and the
responsibility for claims administration and financial administration of the
Policies are in no way intended to limit, inhibit or preclude any right to
insurance coverage for any insured claims under the Policies by inSilicon.
Phoenix shall direct each insurance carrier to pay to inSilicon any proceeds
for the insured claims of inSilicon or, if Phoenix receives such proceeds, it
shall forward them promptly to inSilicon. inSilicon or a subsidiary thereof,
as appropriate, shall be responsible for all administrative and financial
matters
12
<PAGE>
relating to insurance policies established and maintained by inSilicon and
its subsidiaries for claims relating to any period on or after the Separation
Date involving inSilicon or any of its subsidiaries.
(ii) inSilicon shall notify Phoenix of any insured claim
relating to inSilicon or a subsidiary thereof under one or more of the
Policies, and inSilicon agrees to cooperate and coordinate with Phoenix
concerning any strategy Phoenix may reasonably elect to pursue to
secure coverage and payment for such insured claim by the appropriate
insurance carrier. Notwithstanding the foregoing, Phoenix shall not be
entitled to settle any insured claim relating to inSilicon or a
subsidiary thereof without inSilicon's consent, which consent will not
be unreasonably withheld.
(iii) inSilicon or an appropriate subsidiary thereof shall
assume responsibility for, and shall pay to the appropriate insurance
carriers or otherwise, any premiums, retrospectively-rated premiums,
defense costs, indemnity payments, deductibles, retentions or other
charges, as appropriate (collectively, "Insurance Charges"), whenever
arising, which shall become due and payable under the terms and
conditions of any applicable Policy in respect of any liabilities,
losses, claims, actions or occurrences, whenever arising or becoming
known, involving or relating to any of the assets, businesses,
operations or liabilities of inSilicon or any of its subsidiaries, to
the extent set forth in Section 4.3(a) and any such charges that relate
to the period after the Separation Date or, if later, termination of
the applicable period set forth in the Services and Cost-Sharing
Agreement with respect to each such Policy. To the extent that the
terms of any applicable Policy provide that Phoenix or a subsidiary
thereof, as appropriate, shall have an obligation to pay or guarantee
the payment of any Insurance Charges, Phoenix or such subsidiary shall
be entitled to demand that inSilicon or a subsidiary thereof make such
payment directly to the Person entitled thereto. In connection with any
such demand, Phoenix shall submit to inSilicon or a subsidiary thereof
a copy of any invoice received by Phoenix or a subsidiary pertaining to
such Insurance Charges, together with appropriate supporting
documentation, if available. In the event that inSilicon or its
subsidiary fails to pay any Insurance Charges when due and payable,
whether at the request of the party entitled to payment or upon demand
by Phoenix or a subsidiary of Phoenix, Phoenix or a subsidiary of
Phoenix may (but shall not be required to) pay such Insurance Charges
for and on behalf of inSilicon or its subsidiary and, thereafter,
inSilicon or its subsidiary shall forthwith reimburse Phoenix or such
subsidiary of Phoenix for such payment.
Section 4.4. NON-SOLICITATION OF EMPLOYEES. Each party agrees not to
directly solicit or recruit the other party's employees for a period of one
year after the Separation Date if such solicitation or recruitment would be
disruptive or damaging or would interfere with the operation or business of
the other party. This prohibition on solicitation does not apply to actions
taken by a party (i) as a result of an employee's affirmative response to a
general recruitment effort carried out through a public solicitation or a
general solicitation or (ii) as a result of an employee's initiative.
13
<PAGE>
ARTICLE V
ACCESS TO INFORMATION
Section 5.1. AGREEMENT FOR EXCHANGE OF INFORMATION. Each of Phoenix
and inSilicon agrees to provide, or cause to be provided, to each other, at
any time before or after the Separation Date, as soon as reasonably
practicable after written request therefor, any Information in the possession
or under the control of such party that the requesting party reasonably needs
(i) to comply with reporting, disclosure, filing or other requirements
imposed on the requesting party (including under applicable securities laws)
by a Governmental Authority having jurisdiction over the requesting party,
(ii) for use in any other judicial, regulatory, administrative or other
proceeding or in order to satisfy audit, accounting, claims, regulatory,
litigation or other similar requirements, (iii) to comply with its
obligations under this Agreement, the Contribution Agreement or any ancillary
Agreement or (iv) in connection with the ongoing businesses of Phoenix or
inSilicon, as the case may be; provided, however, that in the event that any
party determines that any such provision of Information could be commercially
detrimental, violate any law or agreement, or waive any attorney-client
privilege, the parties shall take all reasonable measures to permit the
compliance with such obligations in a manner that avoids any such harm or
consequence.
(a) INTERNAL ACCOUNTING CONTROLS; FINANCIAL INFORMATION. Except as
provided in the Services and Cost-Sharing Agreement, after the Separation
Date, (i) each party shall maintain in effect at its own cost and expense
adequate systems and controls for its business to the extent necessary to
enable the other party to satisfy its reporting, accounting, audit and other
obligations, and (ii) each party shall provide, or cause to be provided, to
the other party and its subsidiaries in such form as such requesting party
shall request, at no charge to the requesting party, all financial and other
data and information as the requesting party determines necessary or
advisable in order to prepare its financial statements and reports or filings
with any Governmental Authority.
(b) OWNERSHIP OF INFORMATION. Any Information owned by a party that
is provided to a requesting party pursuant to this Section 5.1 shall be
deemed to remain the property of the providing party. Unless specifically set
forth herein, nothing contained in this Agreement shall be construed as
granting or conferring rights of license or otherwise in any such Information.
(c) RECORD RETENTION. To facilitate the possible exchange of
Information pursuant to this Section 5.1 and other provisions of this
Agreement after the Separation Date, each party agrees to use its reasonable
commercial efforts to retain all Information in their respective possession
or control on the Separation Date substantially in accordance with the
policies of Phoenix as in effect on the Separation Date. However, except as
set forth in the Tax Sharing Agreement, at any time after the Separation
Date, each party may amend their respective record retention policies at such
party's discretion; PROVIDED, however, that if a party desires to effect the
amendment within three (3) years after the Separation Date, the amending
party must give thirty (30) days prior written notice of such change in the
policy to the other party to this Agreement. No party will destroy, or permit
any of its subsidiaries to destroy, any Information that exists on the
Separation Date (other than Information that is permitted to be destroyed
under the current record retention policy of Phoenix) without first using its
reasonable commercial
14
<PAGE>
efforts to notify the other party of the proposed destruction and giving the
other party the opportunity to take possession of such Information prior to
such destruction.
(d) LIMITATION OF LIABILITY. No party shall have any liability to
any other party in the event that any Information exchanged or provided
pursuant to this Section 5.1 is found to be inaccurate, in the absence of
willful misconduct by the party providing such Information. No party shall
have any liability to any other party if any Information is destroyed or lost
after reasonable commercial efforts by such party to comply with the
provisions of Section 5.1(c).
(e) OTHER AGREEMENTS PROVIDING FOR EXCHANGE OF INFORMATION. The
rights and obligations granted under this Section 5.1 are subject to any
specific limitations, qualifications or additional provisions on the sharing,
exchange or confidential treatment of Information set forth in this
Agreement, the Contribution Agreement and any Ancillary Agreement.
(f) PRODUCTION OF WITNESSES; RECORDS; COOPERATION. After the
Separation Date, except in the case of a legal or other proceeding by one
party against the other party, each party shall use its reasonable commercial
efforts to make available to the other party, upon written request, the
former, current and future directors, officers, employees, other personnel
and agents of such party as witnesses and any books, records or other
documents within its control or which it otherwise has the ability to make
available, to the extent that any such Person (giving consideration to
business demands of such directors, officers, employees, other personnel and
agents) or books, records or other documents may reasonably be required in
connection with any legal, administrative or other proceeding in which the
requesting party may from time to time be involved, regardless of whether
such legal, administrative or other proceeding is a matter with respect to
which indemnification may be sought hereunder. The requesting party shall
bear all costs and expenses in connection therewith.
Section 5.2. AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS
AND ACCOUNTING. Each party agrees that, for so long as Phoenix is required in
accordance with United States generally accepted accounting principles to
consolidate inSilicon's results of operations and financial position:
(a) SELECTION OF AUDITORS. inSilicon shall not select a different
accounting firm than Ernst & Young LLP (or its successors) to serve as its
(and its subsidiaries') independent certified public accountants
("inSilicon's Auditors") for purposes of providing an opinion on its
consolidated financial statements without Phoenix's prior written consent
(which shall not be unreasonably withheld).
(b) DATE OF AUDITORS' OPINION AND QUARTERLY REVIEWS. inSilicon shall
use its reasonable commercial efforts to enable the inSilicon Auditors to
complete their audit such that they will date their opinion on inSilicon's
audited annual financial statements on the same date that Phoenix's
independent certified public accountants ("Phoenix's Auditors") date their
opinion on Phoenix's audited annual financial statements, and to enable
Phoenix to meet its timetable for the printing, filing and public
Dissemination of Phoenix's annual financial statements. inSilicon shall use
its reasonable commercial efforts to enable the inSilicon Auditors to
complete their quarterly review procedures such that they will provide
clearance on
15
<PAGE>
inSilicon's quarterly financial statements on the same date that Phoenix's
Auditors provide clearance on Phoenix's quarterly financial statements.
(c) ANNUAL AND QUARTERLY FINANCIAL STATEMENTS. inSilicon shall
provide to Phoenix on a timely basis all Information that Phoenix reasonably
requires to meet its schedule for the preparation, printing, filing, and
public dissemination of Phoenix's annual and quarterly financial statements.
Without limiting the generality of the foregoing, inSilicon will provide all
required financial Information with respect to inSilicon and its subsidiaries
to inSilicon's Auditors in a sufficient and reasonable time and in sufficient
detail to permit inSilicon's Auditors to take all steps and perform all
reviews necessary to provide sufficient assistance to Phoenix's Auditors with
respect to Information to be included or contained in Phoenix's annual and
quarterly financial statements. Similarly, Phoenix shall provide to inSilicon
on a timely basis all Information that inSilicon reasonably requires to meet
its schedule for the preparation, printing, filing, and public dissemination
of inSilicon's annual and quarterly financial statements. Without limiting
the generality of the foregoing, Phoenix will provide all required financial
Information with respect to Phoenix and its subsidiaries to Phoenix's
Auditors in a sufficient and reasonable time and in sufficient detail to
permit Phoenix's Auditors to take all steps and perform all reviews necessary
to provide sufficient assistance to inSilicon's Auditors with respect to
Information to be included or contained in inSilicon's annual and quarterly
financial statements.
(d) IDENTITY OF PERSONNEL PERFORMING THE ANNUAL AUDIT AND QUARTERLY
REVIEWS. inSilicon shall authorize inSilicon's Auditors to make available to
Phoenix's Auditors both the personnel who performed or are performing the
annual audits and quarterly reviews of inSilicon and work papers related to
the annual audits and quarterly reviews of inSilicon, in all cases within a
reasonable time prior to inSilicon's Auditors' opinion date, so that
Phoenix's Auditors are able to perform the procedures they consider necessary
to take responsibility for the work of inSilicon's Auditors as it relates to
Phoenix's Auditors' report on Phoenix's financial statements, all within
sufficient time to enable Phoenix to meet its timetable for the printing,
filing and public dissemination of Phoenix's annual and quarterly statements.
Similarly, Phoenix shall authorize Phoenix's Auditors to make available to
inSilicon's Auditors both the personnel who performed or are performing the
annual audits and quarterly reviews of Phoenix and work papers related to the
annual audits and quarterly reviews of Phoenix, in all cases within a
reasonable time prior to the Auditors' opinion date, so that inSilicon's
Auditors are able to perform the procedures they consider necessary to take
responsibility for the work of Phoenix's Auditors as it relates to
inSilicon's Auditors' report on inSilicon's statements, all within sufficient
time to enable inSilicon to meet its timetable for the printing, filing and
public dissemination of inSilicon's annual and quarterly financial statements.
(e) ACCESS TO BOOKS AND RECORDS. inSilicon shall provide Phoenix's
internal auditors and their designees access to inSilicon's and its
subsidiaries' books and records so that Phoenix may conduct reasonable audits
relating to the financial statements provided by inSilicon pursuant hereto as
well as to the internal accounting controls and operations of inSilicon and
its subsidiaries. Similarly, Phoenix shall provide inSilicon's internal
auditors and their designees access to Phoenix's and its subsidiaries' books
and records so that inSilicon may conduct reasonable audits relating to the
financial statements provided by Phoenix pursuant hereto as well as to the
internal accounting controls and operations of Phoenix and its subsidiaries.
16
<PAGE>
(f) NOTICE OF CHANGE IN ACCOUNTING PRINCIPLES. inSilicon shall give
Phoenix as much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its accounting estimates or
accounting principles from those in effect on the Separation Date. inSilicon
will consult with Phoenix and, if requested by Phoenix, inSilicon will
consult with Phoenix's independent public accountants with respect thereto.
Phoenix shall give inSilicon as much prior notice as reasonably practical of
any proposed determination of, or any significant changes in, its accounting
estimates or accounting principles from those in effect on the Separation
Date.
(g) CONFLICT WITH THIRD-PARTY AGREEMENTS. Nothing in Sections 5.1
and 5.2 shall require inSilicon to violate any agreement with any third
parties regarding the confidentiality of confidential and proprietary
Information relating to that third party or its business; PROVIDED, however,
that in the event that inSilicon is required under Sections 5.1 and 5.2 to
disclose any such Information, inSilicon shall use commercially reasonable
efforts to seek to obtain such customer's consent to the disclosure of such
Information.
Section 5.3. CONFIDENTIALITY; PROTECTION.
(a) CONFIDENTIAL INFORMATION. Except as otherwise expressly provided
in this Agreement, each party and each of its subsidiaries shall hold and
shall cause its respective directors, officers, employees, agents,
consultants and advisors to hold, in strict confidence, unless compelled to
disclose by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law, all Information concerning the other
party (except to the extent that such Information can be shown to have been
(i) in the public domain through no fault of such party, (ii) later lawfully
acquired on a non-confidential basis from other sources by the party to which
it was furnished, (iii) independently generated without reference to any
proprietary or confidential Information of the other party, or (iv)
Information that may be disclosed pursuant to any Ancillary Agreement).
Neither party shall release or disclose any such Information to any other
Person, except its auditors, attorneys, financial advisors, bankers and other
consultants and advisors who shall be advised of and agree to comply with the
provisions of this Section 5.3. For purposes of this Section 5.3,
confidential Information of third parties that is known to, in the possession
of or acquired by a party shall be deemed Information of that party.
(b) PROTECTIVE ARRANGEMENTS. In the event that either party (or any
of its subsidiaries) either determines on the advice of its counsel that it
is required to disclose any information pursuant to applicable law or
receives any demand under lawful process or from any Governmental Authority
to disclose or provide information of the other party (or any of its
subsidiaries) that is subject to the confidentiality provisions hereof, such
party shall notify the other party prior to disclosing or providing such
Information and shall cooperate at the expense of the requesting party in
seeking any reasonable protective arrangements requested by such other party.
Subject to the foregoing, the Person that received such request may
thereafter disclose or provide Information to the extent required by such law
(as so advised by counsel) or by lawful process or such Governmental
Authority.
Section 5.4. MAIL. After the Separation Date, each of Phoenix and
inSilicon may receive mail and other communications properly belonging to the
other. Accordingly, at all times
17
<PAGE>
after the Separation Date, each of Phoenix and inSilicon authorizes the other
to receive and open all mail and other communications received by it and not
unambiguously intended for the other party or any of the other party's
officers or directors specifically in their capacities as such, and to retain
the same to the extent that they relate to the business of the receiving
party or, to the extent that they do not relate to the business of the
receiving party and do relate to the business of the other party, or to the
extent that they relate to both businesses, the receiving party shall
promptly contact the other party by telephone for delivery instructions and
such mail or other communications (or, in case the same relate to both
businesses, copies thereof) shall promptly be forwarded to the other party in
accordance with its delivery instructions. The foregoing provisions of this
Section 5.4 shall constitute full authorization to the postal authorities and
courier companies and all other persons to make deliveries to Phoenix or
inSilicon, as the case may be, addressed to either of them or to any of their
officers or directors specifically in their capacities as such. The
provisions of this Section 5.4 are not intended to and shall not be deemed to
constitute an authorization by either Phoenix or inSilicon to permit the
other to accept service of process on its behalf, and neither party is or
shall be deemed to be the agent of the other for service of process purposes
or for any other purpose.
ARTICLE VI
DISPUTE RESOLUTION
Section 6.1. DISPUTE RESOLUTION. Except as otherwise set forth in
any Ancillary Agreement, resolution of any and all disputes arising from or
in connection with this Agreement, whether based on contract, tort, or
otherwise (collectively, "Disputes"), shall be exclusively governed by and
settled in accordance with the provisions of this Section 6.1.
(a) NEGOTIATION. The parties shall make a good faith attempt to
resolve any Dispute arising out of, relating to or resulting from this
Agreement through negotiation. Within thirty (30) days after notice of a
Dispute is given by either party to the other party, each party shall select
a first tier negotiating team comprised of vice president level employees of
such party and shall meet and make a good faith attempt to resolve such
Dispute and shall continue to negotiate in good faith in an effort to resolve
the Dispute or renegotiate the applicable section or provision without the
necessity of any formal proceedings. If the first tier negotiating teams are
unable to agree within thirty (30) days of their first meeting, then each
party shall select a second tier negotiating team comprised of the chief
executive officers of such party and shall meet within thirty (30) days after
the end of the first thirty (30) day negotiating period to attempt to resolve
the matter. During the course of negotiations under this Section 6.1(a), all
reasonable requests made by one party to the other for Information, including
requests for copies of relevant documents, will be honored. The specific
format for such negotiations will be left to the discretion of the designated
negotiating teams but may include the preparation of agreed upon statements
of fact or written statements of position furnished to the other party.
(b) NON-BINDING MEDIATION. In the event that any Dispute arising out
of or related to this Agreement is not settled by the parties within fifteen
(15) days after the first meeting of the second tier negotiating teams under
Section 6.1(a), the parties will attempt in good faith to resolve such
Dispute by non-binding mediation in accordance with the American Arbitration
18
<PAGE>
Association Commercial Mediation Rules. The mediation shall be held within
thirty (30) days of the end of such fifteen (15) day negotiation period of
the second tier negotiating teams. Except as provided below in Section
6.1(c), no litigation for the resolution of such dispute may be commenced
until the parties try in good faith to settle the dispute by such mediation
in accordance with such rules and either party has concluded in good faith
that amicable resolution through continued mediation of the matter does not
appear likely. The costs of mediation shall be shared equally by the parties
to the mediation. Any settlement reached by mediation shall be recorded in
writing, signed by the parties, and shall be binding on them.
(c) PROCEEDINGS. Nothing herein, however, shall prohibit either
party from initiating litigation or other judicial or administrative
proceedings if such party would be substantially harmed by a failure to act
during the time that such good faith efforts are being made to resolve the
Dispute through negotiation or mediation. In the event that litigation is
commenced under this Section 6.1(c), the parties agree to continue to attempt
to resolve any Dispute according to the terms of Sections 6.1(a) and 6.1(b)
during the course of such litigation proceedings under this Section 6.1(c).
(d) PAY AND DISPUTE. Except as provided herein or in any Ancillary
Agreement, in the event of any dispute regarding payment of a third-party
invoice (subject to standard verification of receipt of products or
services), the party named in a third party's invoice must make timely
payment to such third party, even if the party named in the invoice desires
to pursue the dispute resolution procedures outlined in this Section 6.1. If
the party that paid the invoice is found pursuant to this Section 6.1 to not
be responsible for such payment, such paying party shall be entitled to
reimbursement, with interest accrued at the prime interest rate announced by
Bank of America NT&SA plus one percent per annum compounded monthly for the
period such amount remains unpaid from the party found responsible for such
payment.
Section 6.2. CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise
agreed in writing, the parties will continue to provide service and honor all
other commitments under this Agreement and each Ancillary Agreement during
the course of dispute resolution pursuant to the provisions of this Article
VI with respect to all matters not subject to such Dispute.
ARTICLE VII
STANDSTILL; COVENANT NOT TO COMPETE
Section 7.1. STANDSTILL. Phoenix agrees that so long as Phoenix
beneficially owns, directly or indirectly, fifty percent (50%) or more of
inSilicon's outstanding voting securities, it shall not acquire by purchases
in "brokers' transactions" (as defined in the Securities Act) or in
transactions directly with a "market maker" (as defined in the Exchange Act)
during any twelve (12-) month period shares of Common Stock that exceed two
percent (2%) of the number of shares of Common Stock outstanding at the
commencement of that period, without inSilicon's prior consent.
Section 7.2. NON-COMPETE.
19
<PAGE>
(a) During the "Phoenix Restricted Period," as defined below,
Phoenix agrees it will not carry on or become involved, directly or
indirectly (whether as owner, partner, agent, consultant or stockholder) in
any business or activity competitive with any business conducted by inSilicon
as of the Separation Date without the consent of inSilicon. For this purpose,
the "Phoenix Restricted Period" for any business or activity conducted by
inSilicon as of the Separation Date means the earliest of (i) November 30,
2004, (ii) the date Phoenix no longer owns, directly or indirectly, ten
percent (10%) or more of inSilicon's outstanding voting securities and (iii)
the date on which inSilicon no longer engages in such business or activity.
(b) During the "inSilicon Restricted Period," as defined below,
inSilicon agrees it will not carry on or become involved, directly or
indirectly (whether as owner, partner, agent, consultant or stockholder) in
any business or activity competitive with any business conducted by Phoenix
as of the Separation Date (other than the Business) without the consent of
Phoenix. For this purpose, the "inSilicon Restricted Period" for any business
or activity conducted by Phoenix as of the Separation Date means the earliest
of (i) November 30, 2004, (ii) the date Phoenix no longer owns, directly or
indirectly, ten percent (10%) or more of inSilicon's outstanding voting
securities and (iii) the date on which Phoenix no longer engages in such
business or activity.
(c) Each of Phoenix and inSilicon agrees that it will not
unreasonably withhold its consent to any request by the other to carry on or
become involved in any business or activity competitive with any business
conducted by the other as of the Separation Date, which request relates to
activities which occur following a "change in control" of the requesting
party. For this purpose, a "change of control" shall be deemed to have
occurred on the earliest date on or by which (i) the beneficial ownership of
the equity securities of the affected party on the part of any Person or
group (other than Phoenix in the case of inSilicon), together with the
beneficial ownership thereof on the part of the affiliates and/or associates
of such Person or group, first equals or exceeds fifty percent (50%) of the
equity securities of the affected party or (ii) any Person or group acquires
assets of the affected party, which together with any assets acquired from
such party by any affiliates and/or associates of such Person or group
constitute fifty percent (50%) or more of the assets of the affected party. A
party shall not be deemed to be "unreasonable" in withholding its consent if
the Person acquiring control of a party competes with the party from which
consent is sought.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. TERMINATION. This Agreement may be terminated and/or
the Initial Public Offering may be deferred, modified or abandoned at any
time prior to the Closing Date by and in the sole discretion of the Board of
Directors of Phoenix without the approval of inSilicon. In the event of such
termination, no party hereto (or any of its respective directors or officers)
shall have any liability to any other party pursuant to this Agreement.
Section 8.2. EXPENSES. Except as specifically provided in Services
and Cost-Sharing Agreement or in this Agreement and except for the expenses
of Phoenix that are not third party
20
<PAGE>
expenses, all costs and expenses incurred in connection with the
interpretation, execution, delivery and implementation of this Agreement and
with the consummation of the transactions contemplated by this Agreement
shall be paid by inSilicon. The expenses payable by inSilicon shall include
without limitation the filing, legal, accounting, printing and other
out-of-pocket expenditures in connection with (i) the preparation, printing
and filing of the Registration Statement and (ii) sale of the shares of
Common Stock in the Initial Public Offering, including, without limitation,
third party costs, fees and expenses relating to the Initial Public Offering,
and all of the reimbursable expenses of the Underwriters pursuant to the
Underwriting Agreement, and all of the costs of producing, printing, mailing
and otherwise distributing the Prospectus. After the Closing Date, all costs
and expenses that are not subject to the Services and Cost-Sharing Agreement
or any other agreement between the parties shall be borne by the party
incurring the expense.
Section 8.3. NOTICES. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder
shall be deemed to have been duly given when received addressed as follows:
If to Phoenix, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
If to inSilicon, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
Any party may, by written notice so delivered to the other party,
change the address to which delivery of any notice shall thereafter be made.
Section 8.4. AMENDMENT AND WAIVER. This Agreement may not be altered
or amended, nor may rights hereunder be waived, except by an instrument in
writing executed by the party or parties to be charged with such amendment or
waiver. No waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this Agreement,
in any one or more instances shall be deemed to be, or construed as, a
further or continuing waiver of any such term, provision, condition, right or
remedy or as a waiver of any other term, provision or condition of this
Agreement. Notwithstanding the foregoing, this Agreement may not be altered
or amended, nor may rights hereunder be waived by inSilicon after the Closing
Date without the affirmative vote or written consent of a majority of the
directors of inSilicon who are not Affiliates of Phoenix.
Section 8.5. COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
21
<PAGE>
Section 8.6. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California,
without regard to the conflicts of law rules of such state.
Section 8.7. ENTIRE AGREEMENT. This Agreement including the
schedules and the other agreements referenced specifically in this Agreement
constitute the entire understanding of the parties with respect to the
subject matter of this Agreement, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter.
Section 8.8. ASSIGNMENT.
(a) No party to this Agreement shall (i) consolidate with or merge
into any Person or permit any Person to consolidate with or merge into such
party (other than a merger or consolidation in which the party is the
surviving or continuing corporation), or (ii) sell, assign, transfer, lease
or otherwise dispose of, in one transaction or a series of related
transactions, all or substantially all of its assets, unless the resulting,
surviving or transferee Person expressly assumes, by instrument in form and
substance reasonably satisfactory to the other parties, all of the
obligations of the party under this Agreement.
(b) Except as expressly provided in paragraph (a) above, neither
this Agreement nor any of the rights, interests or obligations hereunder
shall be assignable, directly or indirectly, by any party without the prior
written consent of the party, and any attempt to so assign without such
consent shall be void.
Section 8.9. PARTIES IN INTEREST. Subject to Section 8.8, this
Agreement shall be binding upon, and shall inure to the benefit of, the
parties hereto and their respective successors and permitted assigns. Nothing
contained in this Agreement, express or implied, is intended to confer any
benefits, rights or remedies upon any person or entity other than Phoenix and
inSilicon, and Phoenix Indemnitees and inSilicon Indemnitees under Article
III hereof.
Section 8.10. TAX SHARING AGREEMENT. Notwithstanding any other
provision of this Agreement to the contrary, any and all matters relating to
Taxes shall be exclusively governed by the Tax Sharing Agreement.
Section 8.11. EXHIBITS AND SCHEDULES. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 8.12. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
22
<PAGE>
Section 8.13. TITLES AND HEADINGS. Titles and headings to Sections
herein are inserted for convenience of reference only and are not intended to
be a part of or to affect the meaning or interpretation of this Agreement.
Section 8.14. CONFLICTING AGREEMENTS. In the event of conflict
between this Agreement and the Contribution Agreement, the provisions of this
Agreement and shall prevail.
23
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement as of the date first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Linda Moore
------------------------------------
Name: Linda V. Moore
Title: VP, General Counsel & Secretary
INSILICON CORPORATION
By: /s/ David J. Power
------------------------------------
Name: David J. Power
Title: Vice President, General Counsel
24
<PAGE>
Exhibit 10.8
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is entered into
as of November 30, 1999 by and between Phoenix Technologies Ltd., a Delaware
corporation ("Phoenix"), and inSilicon Corporation, a Delaware corporation and a
wholly owned subsidiary of Phoenix ("inSilicon").
RECITALS
WHEREAS, Phoenix currently owns ten shares of common stock of
inSilicon, par value $.001 per share (the "Common Stock"), 10,400,000 shares of
Series A Preferred Stock of inSilicon, par value $.001 per share (the "Series A
Preferred Stock") and a warrant to purchase 50,000 shares of Common Stock (the
"Warrant").
WHEREAS, the parties have determined that it is desirable and in the
best interest of inSilicon to issue and sell additional shares of Common Stock
of inSilicon in an initial public offering (the "Initial Public Offering")
registered under the Securities Act of 1933, as amended.
WHEREAS, the parties desire to enter into this Agreement to set forth
their agreement regarding certain registration rights with respect to the Common
Stock, and the Common Stock issuable upon the conversion of the Series A
Preferred Stock and the exercise of the Warrant (and any other securities issued
in respect thereof or in exchange therefor) and securities of inSilicon that are
hereafter acquired by Phoenix.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE I
DEFINITIONS
Section 1.1. DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:
"AFFILIATE" of any specified Persons means, any other Person that,
directly or indirectly controls, is controlled by or is under common control
with such specified Person.
"AGREEMENT" has the meaning set forth in the preamble hereto, as such
agreement may be amended and supplemented from time to time in accordance with
its terms.
"CAPITAL STOCK" means (a) in the case of a corporation, corporate
stock, (b) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (c) in the case of a partnership, partnership interests
(whether general or limited) and (d) any other interest or participation that
confers on a Person the right to receive a share of the profits and losses of,
or distributions of assets of, the issuing Person.
"COMMON STOCK" has the meaning set forth in the first recital to this
Agreement.
<PAGE>
"COMPANY SECURITIES" has the meaning set forth in Section 2.2(b)(i).
"DISADVANTAGEOUS CONDITION" has the meaning set forth in
Section 2.1(a)(ii).
"HOLDER" means Phoenix, the other Phoenix Entities and any Transferee.
"HOLDER SECURITIES" has the meaning set forth in Section 2.2(b).
"INITIAL PUBLIC OFFERING" has the meaning set forth in the second
recital to this Agreement.
"INITIAL PUBLIC OFFERING DATE" means the date of closing of the
initial sale of Common Stock in the Initial Public Offering.
"INSILICON" has the meaning set forth in the preamble to this
Agreement.
"INSILICON ENTITIES" means inSilicon and its Subsidiaries, and
"inSilicon Entity" shall mean any of inSilicon Entities.
"MARKET PRICE" of any shares of Common Stock (or other Capital Stock)
on any date means (a) the average of the last sale price of such shares on each
of the five (5) trading days immediately preceding such date on the Nasdaq
National Market or, if such shares are not listed or quoted thereon, on the
principal national securities exchange or automated interdealer quotation system
on which such shares are traded or (b) if such sale prices are unavailable or
such shares are not so traded, the value of such shares on such date determined
in accordance with procedures reasonably satisfactory to inSilicon and Phoenix.
"OTHER SECURITIES" has the meaning set forth in Section 2.2.
"PERSON" means an individual, a general or limited partnership, a
corporation, a trust, a joint venture, an unincorporated organization, a limited
liability company, any other entity and any governmental authority (and any
department or agency thereof.)
"PHOENIX" has the meaning set forth in the preamble hereto.
"PHOENIX ENTITIES" means Phoenix and Affiliates of Phoenix (other than
Affiliates that constitute inSilicon Entities), and "Phoenix Entity" shall mean
any of the Phoenix Entities.
"PHOENIX OWNERSHIP REDUCTION" means any decrease at any time in the
Phoenix ownership of inSilicon voting securities to less than fifty percent
(50%) of inSilicon's outstanding voting securities.
"REGISTRABLE SECURITIES" means at any time the (a) shares of Common
Stock owned by the Phoenix Entities on the date hereof or hereafter acquired,
(b) the shares of Common Stock issuable upon conversion of the Series A
Preferred Stock and the exercise of the Warrant and (c) shares of Common Stock
that are issued in respect of shares described in clauses (a) and (b) in any
reclassification, share combination, share subdivision, share dividend, share
exchange, merger, consolidation or similar transaction or event. As to any
particular Registrable
2
<PAGE>
Securities, such Registrable Securities shall cease to be Registrable
Securities when (a) a registration statement with respect to the sale by the
Holder thereof shall have been declared effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (b) such Registrable Securities are sold by a Person in
a transaction in which the rights under the provisions of this Agreement are
not assigned or (c) the Registrable Securities held by the Holder shall
represent one percent of the class of Registrable Securities and otherwise may
be sold pursuant to Rule 144, (d) such Registrable Securities shall have been
otherwise transferred, new certificates for them not bearing a legend
restricting further transfer shall have been delivered by inSilicon and
subsequent disposition of them shall not require registration or qualification
of them under the Securities Act or any state securities or Blue Sky Law then
in effect or (e) they shall have ceased to be outstanding.
"REGISTRATION EXPENSES" means any and all expenses incident to
performance of or compliance with any registration of securities pursuant to
Article II, including, without limitation, (a) the fees, disbursements and
expenses of inSilicon's counsel and accountants and the fees and expenses of
counsel selected by the Holders in accordance with this Agreement in connection
with the registration of the securities to be disposed of, such fees and
expenses of such counsel selected by the Holders to be reasonable in the
reasonable discretion of inSilicon; (b) all expenses, including filing fees, in
connection with the preparation, printing and filing of the registration
statement, any preliminary prospectus or final prospectus, any other offering
document and amendments and supplements thereto and the mailing and delivering
of copies thereof to any underwriters and dealers; (c) the cost of printing or
producing any underwriting agreements and blue sky or legal investment memoranda
and any other documents in connection with the offering, sale or delivery of the
securities to be disposed of; (d) all expenses in connection with the
qualification of the securities to be disposed of for offering and sale under
state securities laws, including the fees and disbursements of counsel for the
underwriters or the Holders of securities in connection with such qualification
and in connection with any blue sky and legal investment surveys; (e) the filing
fees incident to securing any required review by the National Association of
Securities Dealers, Inc. of the terms of the sale of the securities to be
disposed of; (f) transfer agents' and registrars' fees and expenses and the fees
and expenses of any other agent or trustee appointed in connection with such
offering; (g) all security engraving and security printing expenses; (h) all
fees and expenses payable in connection with the listing of the securities on
any securities exchange or automated interdealer quotation system or the rating
of such securities; (i) any other fees and disbursements of underwriters
customarily paid by the sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any; and (j) other reasonable
out-of-pocket expenses of Holders.
"RULE 144" means Rule 144 (or any successor rule to similar effect)
promulgated under the Securities Act.
"RULE 415 OFFERING" means an offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule to similar effect) promulgated under
the Securities Act.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
successor statute.
3
<PAGE>
"SERIES A PREFERRED STOCK" has the meaning set forth in the first
recital of this Agreement.
"SELLING HOLDER" has the meaning ascribed thereto in Section 2.4(e).
"SUBSIDIARY" means, as to any Person, any corporation, association,
partnership, joint venture or other business entity of which more than fifty
percent (50%) of the voting capital stock or other voting ownership interests is
owned or controlled, directly or indirectly, by such Person or by one or more of
the Subsidiaries of such Person or by a combination thereof. "Subsidiary," when
used with respect to Phoenix or inSilicon, shall also include any other entity
affiliated with Phoenix or inSilicon, as the case may be, that Phoenix and
inSilicon may hereafter agree in writing shall be treated as a "Subsidiary" for
the purposes of this Agreement.
"TRANSFEREE" has the meaning ascribed thereto in Section 2.9.
"WARRANT" has the meaning set forth in the first recital of this
Agreement.
Section 1.2. INTERNAL REFERENCES. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Agreement and references
to the parties shall mean the parties to this Agreement.
ARTICLE II
REGISTRATION RIGHTS
Section 2.1. DEMAND REGISTRATION. (a) Upon written notice provided
at any time after the Initial Public Offering Date from any Holder or Holders of
Registrable Securities requesting that inSilicon effect the registration under
the Securities Act of any or all of the Registrable Securities held by such
Holder(s), which notice shall specify the intended method or methods of
disposition of such Registrable Securities, inSilicon shall use its best efforts
to effect the registration under the Securities Act and applicable state
securities laws of such Registrable Securities for disposition in accordance
with the intended method or methods of disposition stated in such request
(including in a Rule 415 Offering, if inSilicon is then eligible to register
such Registrable Securities on Form S-3 (or a successor form) for such
offering); PROVIDED that:
(i) the Holder(s) of Registrable Securities must request a minimum of
$25,000,000 of shares in any request made pursuant to this Section 2.1.
(ii) with respect to any registration statement filed, or to be filed,
pursuant to this Section 2.1, if inSilicon shall furnish to the Holders of
Registrable Securities that have made such request a certified resolution
of the Board of Directors of inSilicon stating that in the Board of
Directors' good faith judgment it would (because of the existence of any
acquisition or any other event or condition of similar significance to
inSilicon) be materially disadvantageous (a "Disadvantageous Condition") to
inSilicon for such a registration statement to be filed and become
effective, and setting forth the general reasons for such judgment,
inSilicon shall be entitled not to file any such registration statement,
until such Disadvantageous Condition no longer exists (notice of which
inSilicon shall promptly deliver to such Holders); PROVIDED, that the
filing of any
4
<PAGE>
such registration statement may not be delayed for a period in excess of
ninety (90) days due to the occurrence of any particular Disadvantageous
Condition and no more than one (1) resolution regarding Disadvantageous
Conditions may be made by the Board of Directors in any twelve (12) month
period;
(iii) after any Phoenix Ownership Reduction, the Holders may
exercise its rights under this Section 2.1 on not more than four (4)
occasions (it being acknowledged that prior to any Phoenix Ownership
Reduction, there shall be no limit to the number of occasions on which the
Holders may exercise such rights); and
(iv) after any Phoenix Ownership Reduction, the Holders of Registrable
Securities shall not be entitled to more than two (2) registrations
pursuant to this Section 2.1 during any twelve- (12-) month period.
(b) Notwithstanding any other provision of this Agreement to the
contrary, a registration requested by a Holder of Registrable Securities
pursuant to this Section 2.1 shall not be deemed to have been effected (and,
therefore, not requested for purposes of paragraph (a) above), (i) unless it has
become effective, (ii) if after it has become effective such registration is
interfered with by any stop order, injunction or other order or requirement of
the SEC or other governmental agency or court for any reason other than a
misrepresentation or an omission by such Holder and, as a result thereof, the
Registrable Securities requested to be registered cannot be completely
distributed in accordance with the plan of distribution set forth in the related
registration statement or (iii) if the conditions to closing specified in the
purchase agreement or underwriting agreement entered into in connection with
such registration are not satisfied or waived other than by reason of some act
or omission by such Holder of Registrable Securities.
(c) In the event that any registration pursuant to this Section 2.1
shall involve, in whole or in part, an underwritten offering, the Holders of a
majority of the Registrable Securities to be registered shall have the right to
designate an underwriter or underwriters reasonably acceptable to inSilicon as
the lead or managing underwriters of such underwritten offering and, in
connection with each registration pursuant to this Section 2.1, such Holders may
select one counsel reasonably acceptable to inSilicon to represent all such
Holders.
(d) inSilicon shall have the right to cause the registration of
additional equity securities for sale for its account in any registration of
Registrable Securities requested by the Holders pursuant to paragraph (a) above;
PROVIDED that without the Holder's consent, in the first registration effected
pursuant to this Agreement (whether under this Section 2.1 or under Section
2.2), inSilicon shall only be entitled to include equity securities equal to up
to forty percent (40%) of the aggregate of the equity securities registered (up
to fifty percent (50%) if the equity securities registered have a maximum
aggregate offering price of $50 million or less) and in all subsequent
registrations effected pursuant to this Agreement (whether under this Section
2.1 or under Section 2.2), inSilicon shall only be entitled to include equity
securities equal to up to fifty percent (50%) of the aggregate equity securities
registered. The Holders of the Registrable Securities to be offered may require
that any such additional equity securities be included in the offering proposed
by such Holders on the same conditions as the Registrable Securities that are
included therein. In the event that a nationally recognized investment banking
or commercial banking firm selected by such Holders reasonably acceptable to
inSilicon (which shall be the
5
<PAGE>
lead underwriter or a managing underwriter in the case of an underwritten
offering) advises inSilicon and the Holders in writing that the number of
equity securities requested to be included in a registration statement by the
Holders of Registrable Securities and inSilicon exceeds the number which, in
the good faith view of such investment banking firm, can be sold without
adversely affecting the price, timing, distribution or sale of securities in
the offering, the number shall be allocated between inSilicon and the Holders
in accordance with the percentages set forth above in this Section 2.1(d) and
the number allocated to the Holders shall be reallocated among the requesting
Holders on the basis of the number of Registrable Securities each has requested
to be registered.
Section 2.2. PIGGYBACK REGISTRATION. In the event that inSilicon
at any time after the Initial Public Offering Date proposes to register any
of its Common Stock, any other of its equity securities or securities
convertible into or exchangeable for its equity securities (collectively,
including Common Stock, "Other Securities") under the Securities Act, whether
or not for sale for its own account, in a manner that would permit
registration of Registrable Securities for sale for cash to the public under
the Securities Act, it shall at each such time give prompt written notice to
each Holder of Registrable Securities of its intention to do so and of the
rights of such Holder under this Section 2.2. Subject to the terms and
conditions hereof, such notice shall offer each such Holder the opportunity
to include in such registration statement such number of Registrable
Securities as such Holder may request. Upon the written request of any such
Holder made within fifteen (15) days after the receipt of inSilicon's notice
(which request shall specify the number of Registrable Securities intended to
be disposed of and the intended method of disposition thereof), inSilicon
shall use its best efforts to effect, in connection with the registration of
the Other Securities, the registration under the Securities Act of all
Registrable Securities which inSilicon has been so requested to register, to
the extent required to permit the disposition (in accordance with such
intended method of disposition thereof) of the Registrable Securities so
requested to be registered; PROVIDED, that without inSilicon's consent, in
the first registration effected pursuant to this Agreement (whether under
this Section 2.2 or under Section 2.1), the Holders shall be entitled to
include other securities equal to no more than sixty percent (60%) of the
aggregate Other Securities and Registrable Securities registered (no more
than fifty percent (50%) if the Other Securities and Registrable Securities
have a maximum aggregate offering price of $50 million or less) and in all
subsequent registrations effected pursuant to this Agreement (whether under
this Section 2.2 or under Section 2.1), the Holders shall be entitled to
include Other Securities equal to no more than fifty percent (50%) of the
Other Securities and Registrable Securities registered. inSilicon may
require that any such Registrable Securities of the Holders be included in
the offering proposed by inSilicon on the same conditions as the Other
Securities. In the event that the number of Registrable Securities requested
to be included in the registration statement by the Holders of Registrable
Securities in the first registration effected pursuant to this Agreement
(whether under this Section 2.2 or under Section 2.1) exceed the maximum
aggregate number the Holders are entitled to include in the Registration
Statement as provided above the number of Registrable Securities that the
Holders shall be entitled to include shall be reduced to equal no more than
sixty percent (60%) of the aggregate Other Securities and Registrable
Securities registered (no more than fifty percent (50%) if the Other
Securities and Registrable Securities have a maximum aggregate offering price
of $50 million or less and in all subsequent registrations effected pursuant
to this Agreement (whether under this Section 2.2 or under Section 2.1) the
number of Registrable Securities that the Holders shall be entitled to
include shall be reduced to equal no more than fifty percent (50%) of the
aggregate
6
<PAGE>
Other Securities and Registrable Securities. The number of shares allocated
to the Holders shall be reallocated among the requesting Holders on the basis
of the number of Registrable Securities each has requested to be registered;
PROVIDED further, that:
(a) if, at any time after giving such written notice of its intention
to register any Other Securities and prior to the effective date of the
registration statement filed in connection with such registration, inSilicon
shall determine for any reason not to register the Other Securities, inSilicon
may, at its election, give written notice of such determination to such Holders
and thereupon inSilicon shall be relieved of its obligation to register such
Registrable Securities in connection with the registration of such Other
Securities, without prejudice, however, to the rights of the Holders of
Registrable Securities immediately to request that such registration be effected
as a registration under Section 2.1 to the extent permitted thereunder;
(b) if the registration referred to in the first sentence of this
Section 2.2 is to be an underwritten registration on behalf of inSilicon, and a
nationally recognized investment banking or commercial banking firm selected by
inSilicon advises inSilicon in writing that, after giving effect to any
reduction set forth previously in this Section 2.2 the aggregate number of Other
Securities and Registrable Securities requested to be included in such
Registration Statement by inSilicon and the Holders of Registration Securities
exceeds the number which in the good faith view of such investment banking firm,
can be sold without adversely affecting the price, timing, distribution or sale
of the Other Securities and the Registrable Securities in the offering,
inSilicon shall include in such registration that number of the Other Securities
and the Registrable Securities requested to be included by inSilicon and the
Holders as will cause the number of Other Securities and Registrable Securities
to be sold in such offering which, in the good faith view of such investment
banking or commercial banking firm is equal to the number that can be sold
without adversely affecting such offering; PROVIDED, that without inSilicon's
consent, in the first registration effected pursuant to this Agreement (whether
under this Section 2.2 or under Section 2.1), the Holders shall be entitled to
include other securities equal to no more than sixty percent (60%) of the
aggregate Other Securities and Registrable Securities registered (no more than
fifty percent (50%) if the Other Securities and Registrable Securities have a
maximum aggregate offering price of $50 million or less) and in all subsequent
registrations effected pursuant to this Agreement (whether under this Section
2.2 or under Section 2.1), the Holders shall be entitled to include Other
Securities equal to no more than fifty percent (50%) of the Other Securities and
Registrable Securities registered. The number of Shares allocated to the
Holders shall be reallocated among the requesting Holders on the basis of the
number of Registrable Securities each has requested to be registered;
(c) inSilicon shall not be required to effect any registration of
Registrable Securities under this Section 2.2 incidental to the registration of
any of its securities in connection with mergers, acquisitions, exchange offers,
subscription offers, dividend reinvestment plans or stock option or other
executive or employee benefit or compensation plans; and
(d) no registration of Registrable Securities effected under this
Section 2.2 shall relieve inSilicon of its obligation to effect a registration
of Registrable Securities pursuant to Section 2.1.
7
<PAGE>
Section 2.3. EXPENSES. inSilicon and each Holder shall pay its pro
rata share, according to the percentage of shares sold for its account, of any
registration in which it participates. Notwithstanding the foregoing, each
Holder shall only be obligated to pay for underwriting discounts and commissions
attributable to the Registrable Securities sold by such Holder.
Section 2.4. REGISTRATION AND QUALIFICATION. If and whenever
inSilicon is required to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 2.1 or 2.2, inSilicon shall as
promptly as practicable:
(a) prepare, file and use its best efforts to cause to become
effective a registration statement under the Securities Act relating to the
Registrable Securities to be offered;
(b) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection therewith as
may be necessary to keep such registration statement effective and to comply
with the provisions of the Securities Act with respect to the disposition of all
Registrable Securities until the earlier of (i) such time as all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition set forth in such registration statement and (ii) the
expiration of six months after such registration statement becomes effective;
PROVIDED, that such six (6)-month period shall be extended for such number of
days that equals the number of days elapsing from (x) the date the written
notice contemplated by paragraph (f) below is given by inSilicon to (y) the date
on which inSilicon delivers to the Holders of Registrable Securities the
supplement or amendment contemplated by paragraph (f) below;
(c) furnish to the Holders of Registrable Securities and to any
underwriter of such Registrable Securities such number of conformed copies of
such registration statement and of each such amendment and supplement thereto
(in each case including all exhibits), such number of copies of the prospectus
included in such registration statement (including each preliminary prospectus
and any summary prospectus), in conformity with the requirements of the
Securities Act, such documents incorporated by reference in such registration
statement or prospectus, and such other documents, as the Holders of Registrable
Securities or such underwriter may reasonably request, and upon request a copy
of any and all transmittal letters or other correspondence to or received from,
the SEC or any other governmental agency or self-regulatory body or other body
having jurisdiction (including any domestic or foreign securities exchange)
relating to such offering;
(d) use its best efforts to register or qualify all Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such U.S. jurisdictions as the Holders of such Registrable
Securities or any underwriter to such Registrable Securities shall request, and
use its best efforts to obtain all appropriate registrations, permits and
consents in connection therewith, and do any and all other acts and things which
may be necessary or advisable to enable the Holders of Registrable Securities or
any such underwriter to consummate the disposition in such jurisdictions of its
Registrable Securities covered by such registration statement; PROVIDED, that
inSilicon shall not for any such purpose be required to qualify generally to do
business as a foreign corporation in any such jurisdiction wherein it is not so
qualified or to consent to general service of process in any such jurisdiction;
8
<PAGE>
(e) (i) use its best efforts to furnish to each Holder of Registrable
Securities included in such registration (each, a "Selling Holder") and to any
underwriter of such Registrable Securities an opinion of independent counsel for
inSilicon addressed to each Selling Holder and dated the date of the closing
under the underwriting agreement (if any) (or if such offering is not
underwritten, dated the effective date of the registration statement) and
(ii) use its best efforts to furnish to each Selling Holder a "cold comfort"
letter addressed to each Selling Holder and signed by the independent public
accountants who have audited the financial statements of inSilicon included in
such registration statement, in each such case covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to underwriters in underwritten public offerings
of securities and such other matters as the Selling Holders may reasonably
request and, in the case of such accountants' letter, with respect to events
subsequent to the date of such financial statements;
(f) as promptly as practicable, notify the Selling Holders in writing
(i) at any time when a prospectus relating to a registration pursuant to
Sections 2.1 or 2.2 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 any material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading and (ii) of any request by the SEC or any
other regulatory body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document relating to such
offering, and in either such case, at the request of the Selling Holders prepare
and furnish to the Selling Holders a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such Registrable Securities, such prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they are made, not
misleading;
(g) enter into customary agreements (including if the method of
distribution is by means of an underwriting, an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of the Registrable Securities to be so
included in the registration statement;
(h) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders to the extent not already provided, as soon as reasonably practicable,
but not later than eighteen (18) months after the effective date of the
registration statement, an earnings statement covering the period of at least
twelve (12) months beginning with the first full month after the effective date
of such registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act;
(i) use its best efforts to list all such Registrable Securities
covered by such registration on each securities exchange and automated
interdealer quotation system on which a class of common equity securities of
inSilicon is then listed;
9
<PAGE>
(j) to the extent reasonably requested by the lead or managing
underwriters, send appropriate officers of inSilicon to attend any "road shows"
scheduled in connection with any such registration, with all out-of-pocket costs
and expense incurred by inSilicon or such officers in connection with such
attendance to be paid by inSilicon; and
(k) furnish for delivery in connection with the closing of any
offering of Registrable Securities pursuant to a registration effected pursuant
to Sections 2.1 or 2.2 unlegended certificates representing ownership of the
Registrable Securities being sold in such denominations as shall be requested by
the Selling Holders or the underwriters.
Section 2.5. CONVERSION OF OTHER SECURITIES, ETC. In the event that
any Holder offers any options, rights, warrants or other securities issued by it
or any other Person that are offered with, convertible into or exercisable or
exchangeable for any Registrable Securities, the Registrable Securities
underlying such options, rights, warrants or other securities shall continue to
be eligible for registration pursuant to Sections 2.1 and 2.2.
Section 2.6. UNDERWRITING; DUE DILIGENCE. (a) If requested by the
underwriters for any underwritten offering of Registrable Securities pursuant
to a registration requested under this Article II, inSilicon shall enter into
an underwriting agreement with such underwriters for such offering, which
agreement will contain such representations and warranties by inSilicon and
such other terms and provisions as are customarily contained in underwriting
agreements of inSilicon to the extent relevant and as are customarily contained
in underwriting agreements generally with respect to secondary distributions to
the extent relevant, including, without limitation, indemnification and
contribution provisions substantially to the effect and to the extent provided
in Section 2.7, and agreements as to the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in Section
2.4(e). The Selling Holders on whose behalf the Registrable Securities are to
be distributed by such underwriters shall be parties to any such underwriting
agreement and the representations and warranties by, and the other agreements
on the part of, inSilicon to and for the benefit of such underwriters, shall
also be made to and for the benefit of such Selling Holders. Such underwriting
agreement shall also contain such representations and warranties by such
Selling Holders and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary distributions,
when relevant, including, without limitation, indemnification and contribution
provisions substantially to the effect and to the extent provided in Section
2.7.
(b) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the Securities
Act pursuant to this Article II, inSilicon shall give the Holders of such
Registrable Securities and the underwriters, if any, and their respective
counsel and accountants, such reasonable and customary access to its books and
records and such opportunities to discuss the business of inSilicon with its
officers and the independent public accountants who have certified the financial
statements of inSilicon as shall be necessary, in the opinion of such Holders
and such underwriters or their respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
Section 2.7. INDEMNIFICATION AND CONTRIBUTION. (a) In the case of
each offering of Registrable Securities made pursuant to this Article II,
inSilicon agrees to indemnify and hold harmless, to the extent permitted by law,
each Selling Holder, each underwriter of Registrable
10
<PAGE>
Securities so offered and each Person, if any, who controls any of the
foregoing Persons within the meaning of the Securities Act and the officers,
directors, affiliates, employees and agents of each of the foregoing, against
any and all losses, liabilities, costs (including reasonable attorneys' fees
and disbursements), claims and damages, joint or several, to which they or any
of them may become subject, under the Securities Act or otherwise, including
any amount paid in settlement of any litigation commenced or threatened,
insofar as such losses, liabilities, costs, claims and damages (or actions or
proceedings in respect thereof, whether or not such indemnified Person is a
party thereto) arise out of or are based upon any untrue statement by inSilicon
or alleged untrue statement by inSilicon of a material fact contained in the
registration statement (or in any preliminary or final prospectus included
therein) or in any offering memorandum or other offering document relating to
the offering and sale of such Registrable Securities prepared by inSilicon or
at its direction, or any amendment thereof or supplement thereto, or in any
document incorporated by reference therein, or any omission by inSilicon or
alleged omission by inSilicon to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading;
PROVIDED, however that inSilicon shall not be liable to any Person in any such
case to the extent that any such loss, liability, cost, claim or damage arises
out of or relates to any untrue statement or alleged untrue statement, or any
omission, if such statement or omission shall have been made in reliance upon
and in conformity with information relating to a Selling Holder, another holder
of securities included in such registration statement or underwriter furnished
in writing to inSilicon by or on behalf of such Selling Holder, other holder or
underwriter specifically for use in the registration statement (or in any
preliminary or final prospectus included therein), offering memorandum or other
offering document, or any amendment thereof or supplement thereto. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of any Selling Holder, any other holder or any underwriter
and shall survive the transfer of such securities. The foregoing indemnity
agreement is in addition to any liability that inSilicon may otherwise have to
each Selling Holder, other holder or underwriter of the Registrable Securities
or any controlling person of the foregoing and the officers, directors,
affiliates, employees and agents of each of the foregoing; PROVIDED, further,
that, in the case of an offering with respect to which a Selling Holder has
designated the lead or managing underwriters (or a Selling Holder is offering
Registrable Securities directly, without an underwriter), this indemnity does
not apply to any loss, liability, cost, claim or damage arising out of or
relating to any untrue statement or alleged untrue statement or omission or
alleged omission in any preliminary prospectus or offering memorandum if a copy
of a final prospectus or offering memorandum was not sent or given by or on
behalf of any underwriter (or such Selling Holder or other Holder, as the case
may be) to such Person asserting such loss, liability, cost, claim or damage at
or prior to the written confirmation of the sale of the Registrable Securities
as required by the Securities Act and such untrue statement or omission had
been corrected in such final prospectus or offering memorandum.
(b) In the case of each offering made pursuant to this Agreement,
each Selling Holder, by exercising its registration rights hereunder, agrees to
indemnify and hold harmless inSilicon, each underwriter of Registrable
Securities so offered, each other Selling Holder or other holder with securities
included in such offering and in the case of an underwriter, such Selling Holder
or other holder, and each Person, if any, who controls any of the foregoing
within the meaning of the Securities Act and the officers, directors,
affiliates, employees and agents of each of the foregoing, against any and all
losses, liabilities, costs (including reasonable attorneys'
11
<PAGE>
fees and disbursements), claims and damages to which they or any of them may
become subject, under the Securities Act or otherwise, including any amount
paid in settlement of any litigation commenced or threatened, insofar as such
losses, liabilities, costs, claims and damages (or actions or proceedings in
respect thereof, whether or not such indemnified Person is a party thereto)
arise out of or are based upon any untrue statement or alleged untrue statement
by such Selling Holder of a material fact contained in the registration
statement (or in any preliminary or final prospectus included therein) or in
any offering memorandum or other offering document relating to the offering and
sale of such Registrable Securities prepared by inSilicon or at its direction,
or any amendment thereof or supplement thereto, or any omission or alleged
omission by such Selling Holder of a material fact required to be stated
therein or necessary to make the statements therein not misleading, but in each
case only to the extent that such untrue statement of a material fact is
contained in, or such material fact is omitted from information relating to
such Selling Holder furnished to inSilicon in writing by or on behalf of such
Selling Holder specifically for use in such registration statement (or in any
preliminary or final prospectus included therein), offering memorandum or other
offering document, or any amendment thereof or supplement thereto. The
foregoing indemnity is in addition to any liability which such Selling Holder
may otherwise have to inSilicon, or controlling persons and the officers,
directors, affiliates, employees, and agents of each of the foregoing;
PROVIDED, however, that, in the case of an offering made pursuant to this
Agreement with respect to which inSilicon has designated the lead or managing
underwriters (or inSilicon is offering securities directly, without an
underwriter), this indemnity does not apply to any loss, liability, cost,
claim, or damage arising out of or based upon any untrue statement or alleged
untrue statement or omission or alleged omission in any preliminary prospectus
or offering memorandum if a copy of a final prospectus or offering memorandum
was not sent or given by or on behalf of any underwriter (or inSilicon, as the
case may be) to such Person asserting such loss, liability, cost, claim or
damage at or prior to the written confirmation of the sale of the Registrable
Securities as required by the Securities Act and such untrue statement or
omission had been corrected in such final prospectus or offering memorandum.
(c) Each party indemnified under paragraph (a) or (b) above shall,
promptly after receipt of notice of a claim or action against such indemnified
party in respect of which indemnity may be sought hereunder, notify the
indemnifying party in writing of the claim or action; PROVIDED, that the
failure to notify the indemnifying party shall not relieve it from any
liability that it may have to an indemnified party under this Section 2.7
(except that the failure to notify an indemnifying party promptly of the
commencement of any such action to the extent prejudicial to the indemnifying
party's ability to defend such action, shall relieve such indemnifying party of
any liability to the indemnified party to the extent the indemnifying party is
prejudiced under this Section 2.7, but the omission so to notify the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 2.7). If any such claim or
action shall be brought against an indemnified party, and it shall have
notified the indemnifying party thereof, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified party and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate therein, and, to the extent that it wishes,
jointly with any other similarly notified indemnifying party, to assume the
defense thereof with counsel satisfactory to the indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party). After notice from the indemnifying party to the
indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 2.7 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation. If the indemnifying party does not assume
the defense
12
<PAGE>
of such claim or action, it is understood that the indemnifying party shall
not, in connection with any one such claim or action or separate but
substantially similar or related claims or actions in the same jurisdiction
arising out of the same general allegations or circumstances, be liable for the
fees and expenses of more than one separate firm of attorneys (in addition to
one separate firm of local attorneys in each such jurisdiction) at any time for
all such indemnified parties. Any indemnifying party against whom indemnity
may be sought under this Section 2.7 shall not be liable to indemnify an
indemnified party if such indemnified party settles such claim or action
without the consent of the indemnifying party, which consent shall not be
unreasonably withheld.
(d) If the indemnification provided for in this Section 2.7 shall
for any reason be unavailable (other than in accordance with its terms) to an
indemnified party in respect of any loss, liability, cost, claim or damage
referred to therein, then each indemnifying party shall, in lieu of
indemnifying such indemnified party, contribute to the amount paid or payable
by such indemnified party as a result of such loss, liability, cost, claim or
damage in such proportion as shall be appropriate to reflect (i) the relative
benefits received by the indemnifying party on the one hand and the indemnified
party on the other hand or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law or if the indemnified party failed to give
the notice required under paragraph (c) above, the relative benefits and the
relative fault of the indemnifying party on the one hand and the indemnified
party on the other with respect to the statements or omissions which resulted
in such loss, liability, cost, claim or damage as well as any other relevant
equitable considerations. The relative benefits received by the indemnifying
party and the indemnified party shall be deemed to be in the same respective
proportion as the net proceeds (before deducting expenses) of the offering
received by such party (or, in the case of an underwriter, such underwriter's
discounts and commissions) bear to the aggregate offering price of the
Registrable Securities or Other Securities. The relative fault shall be
determined by reference to whether the untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact relates
to information supplied by the indemnifying party on the one hand or the
indemnified party on the other, the intent of the parties and their relative
knowledge, access to information and opportunity to correct or prevent such
statement or omission, but not by reference to any indemnified party's stock
ownership in inSilicon. The amount paid or payable by an indemnified party as
a result of the loss, cost, claim, damage or liability, or action in respect
thereof, referred to above in this paragraph (d) shall be deemed to include,
for purposes of this paragraph (d), any legal or other expenses reasonably
incurred by such indemnified party in connection with investigating or
defending any such action or claim.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 2.7(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediate preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
13
<PAGE>
(e) Indemnification and contribution similar to that specified in the
preceding paragraphs of this Section 2.7 (with appropriate modifications) shall
be given by inSilicon, the Selling Holders and underwriters with respect to any
required registration or other qualification of securities under any state law
or regulation or governmental authority.
(f) In no event shall Phoenix be liable pursuant to this Section 2.7
for any amounts in excess of the net proceeds received by Phoenix pursuant to
its sales of securities in the offering in connection with which its liability
hereunder arises.
(g) The obligations of the parties under this Section 2.7 shall be in
addition to any liability which any party may otherwise have to any other party.
Section 2.8. RULE 144 AND FORM S-3. Commencing ninety (90) days
after the Initial Public Offering Date, inSilicon shall use its best efforts to
ensure that the conditions to the availability of Rule 144 set forth in
paragraph (c) thereof shall be satisfied. Upon the request of any Holder of
Registrable Securities, inSilicon will deliver to such Holder a written
statement as to whether it has complied with such requirements. inSilicon
further agrees to use its reasonable efforts to cause all conditions to the
availability of Form S-3 (or any successor form) under the Securities Act of the
filing of registration statements under this Agreement to be met as soon as
practicable after the Closing Date.
Section 2.9. TRANSFER OF REGISTRATION RIGHTS. Any Holder may
transfer all or any portion of its rights under Article II to any transferee of
a number of Registrable Securities owned by such Holder exceeding two percent
(2%) of the outstanding class or series of such securities immediately after the
time of transfer (each transferee that receives such minimum number of
Registrable Securities, a "Transferee"); PROVIDED, that Phoenix may transfer
without restrictions to any Phoenix entity; and PROVIDED, FURTHER, each
Transferee of Registrable Securities to which Registrable Securities are
transferred, sold or assigned directly by a Phoenix Entity, shall be entitled to
request the registration of Registrable Securities pursuant to Section 2.1 only
to the extent Phoenix specifically assigns such rights to the Transferee and
shall otherwise only be entitled to request the registration of Registrable
Securities pursuant to Section 2.2. Any transfer of registration rights
pursuant to this Section 2.9 shall be effective upon receipt by inSilicon of
(i) written notice from such Holder stating the name and address of any
Transferee and identifying the number of Registrable Securities with respect to
which the rights under this Agreement are being transferred and the nature of
the rights so transferred and (ii) a written agreement from such Transferee to
be bound by the terms of this Article II, Article III and Sections 4.3, 4.5,
4.7, 4.8, 4.9, and 4.12 of this Agreement. The Holders may exercise their
rights hereunder in such priority as they shall agree upon among themselves.
Section 2.10. HOLDBACK AGREEMENT. If any registration pursuant to
this Article II shall be in connection with an underwritten public offering of
Registrable Securities, each Selling Holder agrees not to effect any public sale
or distribution, including any sale under Rule 144, of any equity security of
inSilicon or any security convertible into or exchangeable or exercisable for
any equity security of inSilicon, in the case of Registrable Securities
(otherwise than through the registered public offering then being made), within
seven (7) days prior to or ninety (90) days (or such lesser period as the lead
or managing underwriters may permit) after the effective date of the
registration statement (or the commencement of the offering to the
14
<PAGE>
public of such Registrable Securities in the case of Rule 415 offerings).
inSilicon hereby also so agrees and agrees to cause each other holder of equity
securities or securities convertible into or exchangeable or exercisable for
such securities purchased from inSilicon otherwise than in a public offering to
so agree; PROVIDED that, subject to Section 2.6(a) hereof, inSilicon shall not
be so restricted from effecting any public sale or distribution of any security
in connection with any merger, acquisition, exchange offer, subscription offer,
dividend reinvestment plan or stock option or other executive or employee
benefit or compensation plan.
ARTICLE III
MISCELLANEOUS
Section 3.1. LIMITATION OF LIABILITY. Neither Phoenix nor inSilicon
shall be liable to the other for any special, indirect, incidental or
consequential damages of the other arising in connection with this Agreement.
Section 3.2. TERM. This Agreement shall remain in effect until all
Registrable Securities held by Holders have been transferred by them to Persons
other than Transferees; PROVIDED, that the provisions of Section 2.7 shall
survive any such expiration.
Section 3.3. NOTICES. All notices and communications under this
Agreement shall be in writing and any communication or delivery hereunder shall
be deemed to have been duly given when received addressed as follows:
If to Phoenix, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
If to inSilicon, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
Any party may, by written notice so delivered to the other party,
change the address to which delivery of any notice shall thereafter be made.
Section 3.4. AMENDMENT AND WAIVER. This Agreement may not be
altered or amended, nor may rights hereunder be waived, except by an instrument
in writing executed by inSilicon and Holders of a majority of the Registrable
Securities. No waiver of any terms, provision or condition of or failure to
exercise or delay in exercising any rights or remedies under this Agreement, in
any one or more instances shall be deemed to be, or construed as, a further or
continuing waiver of any such term, provision, condition, right or remedy or as
a waiver of any other term, provision or condition of this Agreement.
Notwithstanding the foregoing, this Agreement may not be altered or amended, nor
may rights hereunder be waived by inSilicon after the Initial Public Offering
Date without the affirmative vote or written consent of a majority of the
directors of inSilicon who are not Affiliates of Phoenix.
15
<PAGE>
Section 3.5. COUNTERPARTS. This Agreement may be executed in
counterparts each of which shall be deemed an original instrument, but all of
which together shall constitute but one and the same Agreement.
Section 3.6. GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by, the laws of the State of California, without
regard to the conflicts of law rules of such state.
Section 3.7. ENTIRE AGREEMENT. This Agreement including the
schedules and the other agreements referenced specifically in this Agreement
constitute the entire understanding of the parties with respect to the subject
matter of this Agreement, superseding all negotiations, prior discussions and
prior agreements and understandings relating to such subject matter.
Section 3.8. LEGAL ENFORCEABILITY. Any provision of this Agreement
which is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 3.9. TITLES AND HEADINGS. Titles and headings to Sections
herein are inserted for convenience of reference only and are not intended to be
a part of or to affect the meaning or interpretation of this Agreement.
Section 3.10. CONFLICTING AGREEMENTS. In the event of conflict
between this Agreement and the Contribution Agreement between Phoenix and
inSilicon of even date herewith, the provisions of this Agreement shall prevail.
Section 3.11. DISPUTES. All disputes arising out of, related to or
resulting from this Agreement, including the interpretation hereof shall be
resolved in accordance with the procedures set forth in the Initial Public
Offering Agreement between Phoenix and inSilicon of even date herewith.
Section 3.12. FURTHER ASSURANCES. Phoenix and inSilicon shall
execute, acknowledge and deliver, or cause to be executed, acknowledged and
delivered, such instruments and take such other action as may be necessary or
advisable to carry out their obligations under this Agreement and under any
exhibit, document or other instrument delivered pursuant hereto.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Linda V. Moore
-----------------------
Name: Linda V. Moore
Title: V.P., General Counsel & Secretary
INSILICON CORPORATION
By: /s/ David J. Power
-----------------------
Name: David J. Power
Title:
17
<PAGE>
SERVICES AND COST-SHARING AGREEMENT
This Services and Cost-Sharing Agreement (this "Agreement")
is entered into effective as of November 30, 1999 by and between Phoenix
Technologies Ltd., a Delaware corporation ("Phoenix"), and inSilicon
Corporation, a Delaware corporation and a wholly owned subsidiary of Phoenix
("inSilicon").
RECITALS
WHEREAS, Phoenix is providing, directly or indirectly,
certain administrative, financial, management and other services to
inSilicon, its wholly owned subsidiary and shares certain costs with
inSilicon;
WHEREAS, inSilicon is issuing shares of its common stock,
$0.001 par value per share ("Common Stock"), to the public in an offering
(the "Initial Public Offering") registered under the Securities Act of 1933,
as amended, and will no longer be a wholly owned subsidiary of Phoenix;
WHEREAS, on the terms and subject to the conditions set
forth in this Agreement, inSilicon desires to retain Phoenix as an
independent contractor to continue to provide, directly or indirectly,
certain of these services to inSilicon effective on the date of this
Agreement (the "Effective Date") and to continue to share certain costs with
Phoenix for the period set forth herein; and
WHEREAS, on the terms and subject to the conditions set
forth in this Agreement, Phoenix desires to provide, directly or indirectly,
such services to inSilicon and to continue to share such costs.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:
ARTICLE I
PURCHASE AND SALE OF SERVICES
Section 1.1 PURCHASE AND SALE OF SERVICES. On the terms and
subject to the conditions of this Agreement and in consideration of the
payments to be made by inSilicon under Section 2.1, Phoenix agrees to provide
to inSilicon, and inSilicon agrees to purchase from Phoenix, the services
described in Schedule I (the "Services"). At its option, Phoenix may cause
any Service it is required to provide under this Agreement to be provided by
any of Phoenix or its Subsidiaries (other than inSilicon)(each, a "Phoenix
Entity" and collectively, the "Phoenix Entities") or, subject to Section 1.3,
a qualified third party. Unless otherwise specifically agreed by Phoenix and
inSilicon, the Services to be provided by Phoenix under this Agreement shall
be substantially similar in scope, quality and nature to those provided by
Phoenix to inSilicon prior to the Effective Date and shall be performed by
the same or similarly qualified personnel; PROVIDED, HOWEVER, that the
selection of personnel to perform the Services shall be at the sole
discretion of Phoenix; and PROVIDED, FURTHER, that Phoenix shall not be
required to significantly increase the volume, scope or quality of the
Services provided to inSilicon beyond that which has
<PAGE>
been provided to inSilicon prior to the Effective Date, however small
increases based on the growth of inSilicon as can be reasonably foreseen
shall be provided.
Section 1.2 ADDITIONAL SERVICES. In addition to the
Services to be provided by Phoenix pursuant to Section 1.1, if requested by
inSilicon, and to the extent that Phoenix and inSilicon may mutually agree,
Phoenix shall provide additional services (including services not provided by
Phoenix to inSilicon prior to the Effective Date) to inSilicon. The scope of
any such services, as well as the term, costs and other terms and conditions
applicable to such services, shall be set forth in writing as an addendum to
this Agreement at a cost determined in accordance with Section 2.2(b). Each
such addendum shall be executed on behalf of both Phoenix and inSilicon,
shall be effective as of its date and shall, upon such effective date, be
incorporated into and made an integral part of this Agreement.
Section 1.3 SERVICES PERFORMED BY THIRD PARTIES. At its
option, Phoenix may cause any Service it is required to provide under this
Agreement to be provided by any qualified third party that is providing, or
may from time to time provide, the same or similar services for Phoenix (an
"Outsourced Service"). Phoenix shall remain responsible, in accordance with
the terms of this Agreement, for performance of any Service it causes to be
so provided.
Section 1.4 COST-SHARING. On the terms and subject to the
conditions of this Agreement, Phoenix and inSilicon also agree to share the
costs described in Schedule II (the "Shared Costs"). Such shared costs shall
initially be paid for by Phoenix subject to reimbursement by inSilicon for
its allocable portion thereof as provided in Section 2.2(b).
Section 1.5 IMPRACTICABILITY AND FORCE MAJEURE. Phoenix
shall not be required to provide any Service to the extent the performance of
such Service becomes impracticable as a result of a cause or causes outside
the reasonable control of Phoenix or to the extent the provision of such
Service would require Phoenix to violate any applicable laws, rules or
regulations or would result in the breach of any applicable contract or
contracts. Phoenix shall have no obligation to perform or cause the services
to be performed if its failure to do so is caused by or results from any act
of God, governmental action, natural disaster, strike, failure of essential
equipment or any other cause or circumstance beyond the control of Phoenix
or, if applicable, third party providers of services to Phoenix (an "Event of
Force Majeure"). Phoenix will notify inSilicon of any Event of Force Majeure
affecting its services to inSilicon. Phoenix agrees that following any Event
of Force Majeure, inSilicon shall have no obligation to pay for the services
affected thereby and Phoenix will use its reasonable best efforts to restore
such services.
ARTICLE II
SERVICE CHARGES
Section 2.1 SERVICE CHARGES; SHARED COSTS. (a) The charge
to inSilicon for each Service provided to inSilicon pursuant to this
Agreement by Phoenix or any Phoenix Entity or for any Outsourced Service
shall be equal to the amount indicated on Schedule I for such Service, or
determined in accordance with the formula provided on such Schedule I.
2
<PAGE>
(b) The reimbursement to Phoenix for each Shared Cost
pursuant to this Agreement shall be equal to the amount indicated on Schedule
II for such Shared Cost, or determined in accordance with the formula
provided on such Schedule II.
(c) Phoenix shall apply usual and accepted accounting
conventions in determining the amounts due hereunder and/or the basis on
which a formula is to be applied and Phoenix or its agents shall keep and
maintain such books and records as may be reasonably necessary to support the
charges and reimbursements. Phoenix shall make copies of such books and
records available to inSilicon upon request and upon reasonable prior notice.
Section 2.2 INVOICING AND SETTLEMENT OF COSTS. (a) Phoenix
shall invoice inSilicon for all Service Charges and Shared Cost
reimbursements for each calendar month within thirty (30) days following the
end of such month, provided that any failure by Phoenix to provide an invoice
within such time period shall not relieve inSilicon of its obligation to pay
such amounts following receipt of an invoice therefor. All invoices shall
reflect in reasonable detail a description of the Service performed or the
Shared Cost incurred.
(b) inSilicon shall pay within thirty (30) days following
its receipt of any invoice from Phoenix pursuant to paragraph (a), by wire
transfer of immediately available funds payable to the order of Phoenix, all
amounts invoiced by Phoenix during the preceding calendar month. If inSilicon
fails to pay any monthly payment within 30 days following its receipt of any
invoice from Phoenix pursuant to Section 2.2(a), inSilicon shall pay, in
addition to the amount indicated in such invoice, interest on such amount at
the prime interest rate announced by Bank of America NT&SA plus one percent
per annum compounded monthly for the period such amount remains unpaid.
Notwithstanding the foregoing, under the terms of the Contribution Agreement
of even date herewith between Phoenix and inSilicon (the "Contribution
Agreement"), Phoenix shall credit inSilicon for Service charges and Shared
Cost reimbursements for the month of December 1999 in a fixed amount of
$550,000.
(c) In the event of a dispute as to the propriety of the
amount invoiced, inSilicon shall pay all undisputed amounts, but shall be
entitled to withhold payment of any amount in dispute (and shall not be
obligated to pay interest on the amount so withheld) and shall notify Phoenix
within ten (10) business days from receipt of any disputed invoice of the
disputed amount and the reasons each such charge is disputed by inSilicon.
Phoenix shall provide to inSilicon, or shall cause its subsidiaries to so
provide, records relating to the disputed amount so as to enable the parties
to resolve the dispute. The parties shall use reasonable efforts to resolve
any such dispute promptly.
(d) Any invoice or payment not disputed in writing by
either party within 90 days of such invoice or payment, as the case may be,
shall be considered final and no longer subject to adjustment.
3
<PAGE>
ARTICLE III
LIMITATION OF LIABILITY; INDEMNIFICATION
Section 3.1 LIMITATION OF LIABILITY. inSilicon agrees that
none of Phoenix and its affiliates and their respective directors, officers,
agents, and employees (each, a "Phoenix Indemnified Person") shall have any
liability, whether direct or indirect, in contract or tort or otherwise, to
inSilicon for or in connection with the Services rendered or to be rendered
by any Phoenix Indemnified Person pursuant to this Agreement, the
transactions and other activities contemplated hereby that result in the
Shared Costs or any Phoenix Indemnified Person's actions or inactions in
connection with any such Service, transaction or activity except for damages
which have resulted from such Phoenix Indemnified Person's gross negligence
or willful misconduct in connection therewith.
Section 3.2 INDEMNIFICATION OF PHOENIX BY INSILICON.
inSilicon agrees to indemnify and hold harmless each Phoenix Indemnified
Person from and against any damages, and to reimburse each Phoenix
Indemnified Person for all reasonable expenses as they are incurred in
investigating, preparing, pursuing, or defending any claim, action,
proceeding, or investigation, whether or not in connection with pending or
threatened litigation and whether or not any Phoenix Indemnified Person is a
party (collectively, "Actions"), arising out of, relating to or resulting
from the Services rendered or to be rendered by any Phoenix Indemnified
Person pursuant to this Agreement, the transactions and other activities
contemplated hereby that result in the Shared Costs or any Phoenix
Indemnified Person's actions or inactions in connection with any such
Service, transaction or activity; PROVIDED that inSilicon will not be
responsible for any damages of any Phoenix Indemnified Person that are
allocable to the Phoenix portion of such Services or transactions or
activities that result in the Shared Costs or that have resulted from such
Phoenix Indemnified Person's gross negligence or willful misconduct in
connection therewith.
Section 3.3 INDEMNIFICATION OF INSILICON BY PHOENIX.
Phoenix agrees to indemnify and hold harmless inSilicon and its Subsidiaries
and their respective directors, officers, agents, and employees (each, an
"inSilicon Indemnified Person") from and against any damages, and will
reimburse each inSilicon Indemnified Person for all reasonable expenses as
they are incurred in investigating, preparing, pursuing or defending any
Action, arising out of the gross negligence or willful misconduct of any
Phoenix Indemnified Person in connection with the Services rendered or to be
rendered pursuant to this Agreement and the transactions and other activities
contemplated hereby that result in the Shared Costs.
ARTICLE IV
TERM AND TERMINATION
Section 4.1 TERM. Except as otherwise provided in this
Article IV or as otherwise agreed in writing by the parties, this Agreement
shall have an initial term (the "Initial Term") that extends until June 30,
2000 for all Shared Costs and for all Services other than Services labeled as
"accounting services" on Schedule I and an initial term that extends to
September 30, 2000 with respect to Services labeled as "accounting services"
on Schedule I.
4
<PAGE>
This Agreement will automatically renew with respect to the applicable Shared
Costs and Services on a month-to month basis after such dates unless
terminated in accordance with Section 4.2.
Section 4.2 TERMINATION. (a) Notwithstanding the Initial
Term of this Agreement, inSilicon may at any time terminate this Agreement
with respect to one or more of the Services or Shared Costs, by giving at
least 30 days' prior written notice to Phoenix.
(b) After the Initial Term of this Agreement, Phoenix may
at any time terminate this Agreement with respect to one or more of the
Services or by giving at least 30 days' prior written notice to inSilicon.
(c) Phoenix may terminate any affected Service or Shared
Cost at any time if inSilicon shall have failed to perform any of its
material obligations under this Agreement relating to any such Service or
Shared Cost, Phoenix has notified inSilicon in writing of such failure, and
such failure is not cured and shall have continued for a period of 60 days
after inSilicon's receipt of notice of such failure.
(d) Each of inSilicon and Phoenix agrees that before
exercising its rights under this Section 4.2 it will consult for a reasonable
period with the other party in advance of such termination as to its
implementation.
Section 4.3 EFFECT OF TERMINATION. Other than as required
by law, upon termination of any Service or Shared Cost pursuant to Section
4.1 or Section 4.2, and upon termination of this Agreement in accordance with
its terms, Phoenix will have no further obligation to provide the terminated
Service or share the cost of any transaction or activity (or any Service or
Shared Cost, in the case of termination of this Agreement) and inSilicon will
have no obligation to pay any amounts relating to such Service or Shared Cost
or make any other payments under this Agreement and no further obligations
under Article III shall accrue following such termination; PROVIDED that
notwithstanding such termination, inSilicon shall remain liable to Phoenix
for amounts owed and payable in respect of Services or Shared Costs actually
provided and not in dispute provided before the effective date of the
termination and the parties shall remain liable for indemnification
obligations under Article III arising out of, relating to or resulting from
the period prior to such termination.
ARTICLE V
MISCELLANEOUS
Section 5.1 INTERNAL REFERENCES. Unless the context
indicates otherwise, references to Articles, Sections and paragraphs shall
refer to the corresponding articles, sections and paragraphs in this
Agreement and references to the parties shall mean the parties to this
Agreement.
Section 5.2 PERFORMANCE UNDER THE CONTRIBUTION AGREEMENT.
Notwithstanding anything to the contrary contained in this Agreement,
inSilicon shall not be charged anything under this Agreement for any services
that are specifically required to be performed or costs required to be
assumed under the Contribution Agreement.
5
<PAGE>
Section 5.3 NO AGENCY. Nothing in this Agreement shall
constitute or be deemed to constitute a partnership or joint venture between
Phoenix and inSilicon or constitute or be deemed to constitute any party the
agent or employee of the other party for any purpose whatsoever and neither
party shall have authority or power to bind the other or to contract in the
name of, or create a liability against, the other in any way or for any
purpose.
Section 5.4 INSILICON AS SOLE BENEFICIARY. inSilicon
acknowledges that the Services shall be provided only with respect to the
business of inSilicon as currently operated or as mutually agreed upon by
Phoenix and inSilicon. inSilicon shall not request performance of any Service
for the benefit of any entity other than inSilicon. inSilicon represents and
agrees that inSilicon will use the Services only in accordance with all
applicable federal, state and local laws and regulations, and in accordance
with the reasonable conditions, rules, regulations and specifications which
may be set forth in any manuals, materials, documents and instructions
furnished from time to time by Phoenix to inSilicon. Phoenix reserves the
right to take all actions, including termination of any particular Service,
that Phoenix reasonably believes to be necessary to assure compliance with
applicable laws and regulations. Phoenix will notify inSilicon of the reasons
for any such termination of Services.
Section 5.5 ENTIRE AGREEMENT. This Agreement including the
schedules and the other agreements referenced specifically in this Agreement
constitute the entire understanding of the parties with respect to the
subject matter of this Agreement, superseding all negotiations, prior
discussions and prior agreements and understandings relating to such subject
matter. Nothing contained in this Agreement, express or implied, is intended
to confer any benefits, rights or remedies upon any Person other than Phoenix
and inSilicon.
Section 5.6 EXHIBITS AND SCHEDULES. The Schedules shall be
construed with and as an integral part of this Agreement to the same extent
as if the same had been set forth verbatim herein.
Section 5.7 INFORMATION. Subject to applicable law and
privileges, each party covenants and agrees to provide the other party with
all information regarding itself and transactions under this Agreement that
the other party reasonably believes is required to comply with all applicable
federal, state, county and local laws, ordinances, regulations and codes.
Section 5.8 CONFIDENTIAL INFORMATION. inSilicon and Phoenix
hereby covenant and agree to hold in trust and maintain confidential all
Confidential Information relating to the other party. "Confidential
Information" shall mean all information disclosed by either party to the
other in connection with this Agreement whether orally, visually, in writing
or in any other tangible form, and includes, but is not limited to, economic,
business, legal and technical data, business plans, and the like, but shall
not include (i) information which becomes publicly available other than by
release in violation of the provisions of this Section 5.7, (ii) information
which becomes available on a nonconfidential basis to a party from a source
other than the other party to this Agreement provided the party in question
or was not bound to hold such information confidential, (iii) information
acquired or developed independently as evidenced by competent written proof
by a party without violating this Section 5.7 or any other confidentiality
agreement with the other party and (iv) information that any party to this
Agreement is required to disclose by law, provided that it first notifies the
other party of such requirement and allows such party a
6
<PAGE>
reasonable opportunity to seek a protective order or other appropriate remedy
to prevent such disclosure. Without prejudice to the rights and remedies of
either party to this Agreement, a party disclosing any Confidential
Information to the other party in accordance with the provisions of this
Agreement shall be entitled to equitable relief by way of an injunction if
the other party breaches or threatens to breach any provision of this Section
5.7. The obligations of confidentiality hereunder shall, after termination of
this Agreement, survive for a period of 5 years. Upon termination, all
confidential material of one party related to the other party will be
returned to such party along with all copies thereof.
Section 5.9 DISPUTES. All disputes arising out of, related
to or resulting from this Agreement, including the interpretation hereof
shall be resolved in accordance with the procedures set forth in that certain
Initial Public Offering Agreement between inSilicon and Phoenix dated as of
November 30, 1999, as the same may be amended from time to time.
Section 5.10 NOTICES. All notices and communications under
this Agreement shall be in writing and any communication or delivery
hereunder shall be deemed to have been duly given when received addressed as
follows:
If to Phoenix, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
If to inSilicon, to:
411 East Plumeria Drive
San Jose, CA 94134
Attn: General Counsel
Any party may, by written notice so delivered to the other
party, change the address to which delivery of any notice shall thereafter be
made.
Section 5.11 GOVERNING LAW. This Agreement shall be
construed in accordance with, and governed by, the laws of the State of
California, without regard to the conflicts of laws rules of such state.
Section 5.12 LEGAL ENFORCEABILITY. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the
obligations of the parties hereunder shall be specifically enforceable.
7
<PAGE>
Section 5.13 ASSIGNMENT. (a) No party to this Agreement
shall (i) consolidate with or merge into any Person or permit any Person to
consolidate with or merge into such party (other than a merger or
consolidation in which the party is the surviving or continuing corporation),
or (ii) sell, assign, transfer, lease or otherwise dispose of, in one
transaction or a series of related transactions, all or substantially all of
its assets, unless the resulting, surviving or transferee Person expressly
assumes, by instrument in form and substance reasonably satisfactory to the
other parties, all of the obligations of the party under this Agreement, such
satisfaction shall be provided in writing and not unreasonably withheld.
(b) Except as expressly provided in paragraph (a), neither
this Agreement nor any of the rights, interests or obligations under this
Agreement shall be assignable, directly or indirectly, by any party without
the prior written consent of the other party, and any attempt to so assign
without such consent shall be void.
Section 5.14 SUCCESSORS AND ASSIGNS. Subject to Section
5.12, this Agreement shall be binding upon and shall inure to the benefit of
the parties and their respective successors and permitted assigns.
Section 5.15 AMENDMENT AND WAIVER. This Agreement may not
be altered or amended, nor may rights hereunder be waived, except by an
instrument in writing executed by the party or parties to be charged with
such amendment or waiver. No waiver of any terms, provision or condition of
or failure to exercise or delay in exercising any rights or remedies under
this Agreement, in any one or more instances shall be deemed to be, or
construed as, a further or continuing waiver of any such term, provision,
condition, right or remedy or as a waiver of any other term, provision or
condition of this Agreement. Notwithstanding the foregoing, this Agreement
may not be altered or amended, nor may rights hereunder be waived by
inSilicon after the closing of the Initial Public Offering without the
affirmative vote or written consent of a majority of the directors of
inSilicon who are not affiliates of Phoenix.
Section 5.16 COUNTERPARTS. This Agreement may be executed
in counterparts each of which shall be deemed an original instrument, but all
of which together shall constitute but one and the same Agreement.
Section 5.17 TITLES AND HEADINGS. Titles and headings to
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
Section 5.18 CONFLICTING AGREEMENTS. In the event of
conflict between this Agreement and the Contribution Agreement, the
provisions of this Agreement shall prevail.
8
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered
this Agreement as of the date first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Linda Moore
--------------------------------------
Name: Linda V. Moore
Title: VP, General Counsel & Secretary
INSILICON CORPORATION
By: /s/ David J. Power
--------------------------------------
Name: David J. Power
Title: Vice President, General Counsel
9
<PAGE>
Schedule I
NOTE: AS USED HEREIN, "EMPLOYEES" REFERS TO COMMON-LAW EMPLOYEES PLUS
FULL-TIME EQUIVALENT CONTRACTORS.
<TABLE>
<CAPTION>
SERVICE DESCRIPTION CHARGE OR BILLING FORMULA
- ------- ----------- -------------------------
<S> <C> <C>
Depreciation of Depreciation related to all assets jointly used by Total joint asset depreciation costs
common assets (*) Phoenix and inSilicon, such as networking equipment, multiplied by the percentage of
furniture and leasehold improvements. inSilicon employees to total
employees.
IT (*) IT costs dedicated to both Phoenix and inSilicon, Total joint IT costs multiplied by
such as networking, telecommunications, help desk the percentage of inSilicon
support and applications services. employees to total employees.
Corporate Top executive costs incurred by Phoenix that benefit Total joint corporate administration
Administration (*) both Phoenix and inSilicon, such as the cost of the costs multiplied by the percentage
CEO and his or her administrative support. of inSilicon employees to total
employees.
Corporate Marketing Corporate marketing costs incurred by Phoenix that Total joint corporate marketing
(*) benefit both Phoenix and inSilicon. costs multiplied by the percentage
of inSilicon employees to total
employees.
Accounting Services All accounting and finance services incurred by Total joint accounting and finance
(**) Phoenix that benefit both Phoenix and inSilicon, costs multiplied by the percentage
including billings, collections, payables of inSilicon employees to total
processing, general ledger, revenue accounting, employees.
financial planning, treasury and tax functions.
Legal, Human All other administrative functions incurred by Phoenix Total joint other administrative
Resources and that benefit both Phoenix and inSilicon, including costs multiplied by the
Other legal, human resources, purchasing, facilities percentage of inSilicon
Administrative management and operations functions. employees to total employees.
Services (**)
</TABLE>
(*) It is estimated that these costs will be billable by Phoenix to inSilicon
until inSilicon moves into a separate facility, at which time no such costs
will be billable.(**) It is estimated that these costs will be billable by
Phoenix to inSilicon for so long as services continue to be provided.
<PAGE>
Schedule II
NOTE: AS USED HEREIN, "EMPLOYEES" REFERS TO COMMON-LAW EMPLOYEES PLUS
FULL-TIME EQUIVALENT CONTRACTORS.
<TABLE>
<CAPTION>
SHARED COST DESCRIPTION CHARGE OR BILLING FORMULA
- ----------- ----------- -------------------------
<S> <C> <C>
Facilities (*) Rent, utilities and maintenance costs associated with On a facility-by-facility basis,
any facility that one or more inSilicon employee(s) total costs incurred by Phoenix
occupies. multiplied by the percentage of
inSilicon employees to total
employees in the facility.
Insurance (**) Insurance costs that include inSilicon coverage, Total costs incurred by Phoenix
including General Corporate Liability, Directors' and multiplied by the percentage of
Officers' Liability and Workers' Compensation. inSilicon employees to total
employees.
</TABLE>
(*) It is estimated that these costs will be billable by Phoenix to inSilicon
until inSilicon moves into a separate facility, at which time no such costs
will be billable.
(**) It is estimated that these costs will be billable by Phoenix to
inSilicon for so long as inSilicon continues to be covered under the Phoenix
insurance policies.
<PAGE>
EMPLOYEE MATTERS AGREEMENT
BETWEEN
PHOENIX TECHNOLOGIES LTD.
AND
INSILICON CORPORATION
DATED AS OF
NOVEMBER 30, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I DEFINITIONS................................................................................1
ARTICLE II GENERAL PRINCIPLES.........................................................................4
2.1 Assumption of inSilicon Liabilities............................................................4
2.2 Establishment of inSilicon Plans...............................................................4
2.3 inSilicon's Participation in Phoenix Plans.....................................................5
2.4 Disputes.......................................................................................5
2.5 Foreign Employees..............................................................................5
ARTICLE III DEFINED CONTRIBUTION PLAN..................................................................6
3.1 401(k) Plan....................................................................................6
ARTICLE IV HEALTH AND WELFARE PLANS...................................................................6
4.1 Assumption of Health and Welfare Plan Liabilities..............................................6
4.2 Claims for Health and Welfare Plans............................................................6
4.3 Vendor Arrangements............................................................................7
ARTICLE V EQUITY COMPENSATION........................................................................7
5.1 Stock Options..................................................................................7
6.1 Payment of Liabilities, Plan Expenses and Related Matters......................................7
6.2 Sharing of Participant Information.............................................................7
6.3 Reporting and Disclosure Communications to Participants........................................8
6.4 Audits Regarding Vendor Contracts..............................................................8
6.5 Requests for IRS and DOL Opinions..............................................................8
6.6 Fiduciary Matters..............................................................................8
6.7 Consent of Third Parties.......................................................................8
ARTICLE VII EMPLOYMENT-RELATED MATTERS.................................................................9
7.1 Employment of Employees with U.S. Work Visas...................................................9
7.2 Confidentiality and Proprietary Information....................................................9
7.3 Consistency of Tax Positions; Duplication......................................................9
7.4 Personnel and Pay Records......................................................................9
7.5 Non-Termination of Employment; No Third-Party Beneficiaries....................................9
7.6 Pre-Separation Service........................................................................10
ARTICLE VIII GENERAL PROVISIONS........................................................................10
8.1 Relationship of Parties.......................................................................10
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
8.2 Affiliates....................................................................................10
8.3 Governing Law.................................................................................10
8.4 Severability..................................................................................10
8.5 Amendment.....................................................................................10
8.6 Conflict......................................................................................10
8.7 Counterparts..................................................................................11
</TABLE>
-ii-
<PAGE>
EMPLOYEE MATTERS AGREEMENT
This EMPLOYEE MATTERS AGREEMENT (this "Agreement") is entered into
as of November 30, 1999, between Phoenix Technologies Ltd. ("Phoenix"), a
Delaware corporation, and inSilicon Corporation ("inSilicon"), a Delaware
corporation. Capitalized terms used herein and not otherwise defined shall
have the respective meanings assigned to them in the Contribution Agreement
of even date herewith between Phoenix and inSilicon (the "Contribution
Agreement").
WHEREAS, the Board of Directors of Phoenix has determined that it is
in the best interests of Phoenix and inSilicon to separate the Business from
Phoenix's other operations; and;
WHEREAS, in furtherance of the foregoing, Phoenix and inSilicon have
agreed to enter into this Agreement to allocate between them assets,
liabilities and responsibilities with respect to certain employee
compensation, benefit plans and programs, and certain employment matters; and
NOW, THEREFORE, in consideration of the foregoing and the covenants
and agreements set forth below, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Wherever used in this Agreement, the following terms shall have the
meanings indicated below, unless a different meaning is plainly required by
the context. The singular shall include the plural, unless the context
indicates otherwise. Headings of sections are used for convenience of
reference only, and in case of conflict, the text of this Agreement, rather
than such headings, shall control:
"AFFILIATE" means, with respect to Phoenix, an entity in which
Phoenix holds a fifty percent (50%) or more ownership and with respect to
inSilicon, any entity in which inSilicon holds a fifty percent (50%) or more
ownership.
"COBRA" means the continuation coverage requirements for "group
health plans" under Title X of the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended from time to time, and as codified in Code Section
4980B and ERISA Sections 601 through 608.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"DOL" means the United States Department of Labor.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time.
"FMLA" means the Family and Medical Leave Act of 1993, as amended
from time to time.
<PAGE>
"FRINGE BENEFITS," when immediately preceded by "Phoenix" means all
fringe benefits, plans, programs and arrangements sponsored and maintained by
Phoenix. When immediately preceded by "inSilicon," "Fringe Benefits" means
the fringe benefits, plans, programs and arrangements established by
inSilicon that correspond to the respective Phoenix Fringe Benefits.
"HEALTH AND WELFARE PLANS," when immediately preceded by "Phoenix,"
means the Phoenix Health Plans, the health and welfare plans established and
maintained by Phoenix for the benefit of employees and retirees of the
Phoenix Group, and such other welfare plans or programs as may apply to such
employees and retirees as of the Separation Date. When immediately preceded
by "inSilicon," "Health and Welfare Plans" means the health and welfare plans
to be established by inSilicon.
"HMO" means a health maintenance organization that provides benefits
under the Phoenix Health Plans or the inSilicon Health Plans.
"INSILICON EMPLOYEE" means any individual who is: (a) either
actively employed by, or on leave of absence from, the inSilicon Group on the
Separation Date; (b) either actively employed by, or on leave of absence
from, the Phoenix Group as either part of a work group or organization, or
common support function that, at any time after the Separation Date and
before inSilicon ceases to be a Phoenix Affiliate, moves to the employ of the
inSilicon Group from the employ of the Phoenix Group; (c) an employee or
group of employees designated as inSilicon Employees (as of the specified
date) by Phoenix and inSilicon by mutual agreement; and (d) an alternate
payee under a QDRO, alternate recipient under a QMCSO, beneficiary, covered
dependent, or qualified beneficiary (as such term is defined under COBRA), in
each case, of an employee, described in (a) through (c) with respect to that
employee's benefit under the applicable Plan(s). (Unless specified otherwise
in this Agreement, such an alternate payee, alternate recipient, beneficiary,
covered dependent, or qualified beneficiary shall not otherwise be considered
an inSilicon Employee with respect to any benefits he or she accrues or
accrued under any applicable Plan(s), unless he or she is an inSilicon
Employee by virtue of (a) through (c)).
"INSILICON GROUP" means inSilicon and each Affiliate of inSilicon as
of the Separation Date, or that is contemplated to be a Subsidiary or
Affiliate of inSilicon after the Separation Date.
"IPO" means the initial public offering of inSilicon common stock
pursuant to a registration statement on Form S-1 pursuant to the Securities
Act of 1933, as amended.
"IRS" means the United States Internal Revenue Service.
"OPTION," when immediately preceded by "Phoenix," means an option to
purchase Phoenix common stock pursuant to a Stock Plan. When immediately
preceded by "inSilicon," "Option" means an option to purchase inSilicon
common stock pursuant to a Stock Plan.
"PARTICIPATING COMPANY" means: (a) Phoenix; (b) any Person (other
than an individual) that Phoenix has approved for participation in, has
accepted participation in, and which is participating in, a Plan sponsored by
Phoenix; or (c) any Person (other than an individual) which,
2
<PAGE>
by the terms of such Plan, participates in such Plan or any employees of
which, by the terms of such Plan, participate in or are covered by such Plan.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust, a
joint venture, an unincorporated organization, and a governmental entity or
any department, agency or political subdivision thereof.
"PHOENIX EMPLOYEE" means any individual who is: (a) either actively
employed by, or on leave of absence from, the Phoenix Group on the Separation
Date; (b) either actively employed by, or on leave of absence from, the
inSilicon Group as either part of a work group or organization, or common
support function that, at any time after the Separation Date and before
inSilicon ceases to be a Phoenix Affiliate, moves to the employ of the
Phoenix Group from the employ of the inSilicon Group; (c) an employee or
group of employees designated as Phoenix Employees (as of the specified date)
by Phoenix and inSilicon by mutual agreement; and (d) an alternate payee
under a QDRO, alternate recipient under a QMCSO, beneficiary, covered
dependent, or qualified beneficiary (as such term is defined under COBRA), in
each case, of an employee, described in (a) through (c) with respect to that
employee's benefit under the applicable Plan(s). (Unless specified otherwise
in this Agreement, such an alternate payee, alternate recipient, beneficiary,
covered dependent, or qualified beneficiary shall not otherwise be considered
an Phoenix Employee with respect to any benefits he or she accrues or accrued
under any applicable Plan(s), unless he or she is an Phoenix Employee by
virtue of (a) through (c)).
"PHOENIX GROUP" means Phoenix and each Affiliate of Phoenix other
than inSilicon or an Affiliate of inSilicon.
"PLAN," means any plan, policy, program, payroll practice,
arrangement, contract, trust, insurance policy, or any agreement or funding
vehicle providing compensation or benefits to employees, former employees or
directors of Phoenix or inSilicon.
"QDRO" means a domestic relations order which qualifies under Code
Section 414(p) and ERISA Section 206(d) and which creates or recognizes an
alternate payee's right to, or assigns to an alternate payee, all or a
portion of the benefits payable to a participant under any of the Phoenix
Retirement Plans.
"QMCSO" means a medical child support order which qualifies under
ERISA Section 609(a) and which creates or recognizes the existence of an
alternate recipient's right to, or assigns to an alternate recipient the
right to, receive benefits for which a participant or beneficiary is eligible
under any of the Health Plans.
"STOCK PLAN," when immediately preceded by "Phoenix," means any
plan, program or arrangement, other than the Stock Purchase Plan, pursuant to
which employees and other service providers hold Phoenix Options, Phoenix
Restricted Stock, or other Phoenix equity incentives. When immediately
preceded by "inSilicon," "Stock Plan" means stock-based plans, programs or
arrangements that may be established by inSilicon.
3
<PAGE>
"STOCK PURCHASE PLAN," when immediately preceded by "Phoenix," means
the Phoenix Employee Stock Purchase Plan. When immediately preceded by
"inSilicon," "Stock Purchase Plan" means the employee stock purchase plan
that may be established by inSilicon.
ARTICLE II
GENERAL PRINCIPLES
2.1 ASSUMPTION OF INSILICON LIABILITIES. Except as specified
otherwise in this Agreement, or as mutually agreed upon by inSilicon and
Phoenix from time to time, inSilicon hereby assumes and agrees to pay,
perform, fulfill and discharge, in accordance with their respective terms,
all of the following: (a) all Liabilities to or relating to inSilicon
Employees, in each case relating to, arising out of or resulting from
employment by the inSilicon Group from and after becoming inSilicon
Employees, respectively (including Liabilities arising under or relating to
Phoenix Plans and inSilicon Plans); (b) all other Liabilities to or relating
to inSilicon Employees, to the extent relating to, arising out of, or
resulting from future, present or former employment with the inSilicon Group
(including Liabilities arising under or relating to Phoenix Plans and
inSilicon Plans); (c) all Liabilities relating to, arising out of or
resulting from any other actual or alleged employment relationship with the
inSilicon Group; and (d) all other Liabilities relating to, arising out of,
or resulting from obligations, liabilities and responsibilities expressly
assumed or retained by the inSilicon Group, or an inSilicon Plan pursuant to
this Agreement.
2.2 ESTABLISHMENT OF INSILICON PLANS.
(a) HEALTH AND WELFARE PLANS. Effective from and after the
Separation Date or such other date(s) as Phoenix and inSilicon may mutually
agree, inSilicon shall adopt the inSilicon Health and Welfare Plans.
(b) RETIREMENT PLANS AND FRINGE BENEFITS. Effective from and
after the Separation Date or such other date(s) as Phoenix and inSilicon may
mutually agree, inSilicon shall adopt the inSilicon Retirement Plans and the
inSilicon Fringe Benefits.
(c) EQUITY AND OTHER COMPENSATION. Effective from and after the
Separation Date or such other date(s) as Phoenix and inSilicon may mutually
agree, inSilicon shall adopt the inSilicon Stock Plans. Effective on or after
the IPO or such other date as Phoenix and inSilicon may mutually agree,
inSilicon shall adopt the inSilicon Stock Purchase Plan.
(d) INSILICON PLAN TERMS. The inSilicon Plans need not provide
the same or similar benefits terms or features as the comparable Phoenix
Plans.
(e) INSILICON UNDER NO OBLIGATION TO MAINTAIN PLANS. Except as
specified otherwise in this Agreement, nothing in this Agreement shall
preclude inSilicon, at any time after the Separation Date from amending,
merging, modifying, terminating, eliminating, reducing, or otherwise altering
in any respect any inSilicon Plan, any benefit under any inSilicon Plan or
any trust, insurance policy or funding vehicle related to any inSilicon Plan
(to the extent permitted by law).
4
<PAGE>
2.3 INSILICON'S PARTICIPATION IN PHOENIX PLANS.
(a) PARTICIPATION IN PHOENIX PLANS. Except as specified
otherwise in this Agreement, or as Phoenix and inSilicon may mutually agree,
effective as of the Separation Date, inSilicon may continue as or become, as
the case may be, a Participating Company in the Phoenix Plans in effect as of
the Separation Date, to the extent that inSilicon has not yet established a
comparable Plan.
(b) PHOENIX'S GENERAL OBLIGATIONS AS PLAN SPONSOR. To the extent
that inSilicon is a Participating Company in any Phoenix Plan(s), Phoenix
shall continue to administer, or cause to be administered, in accordance with
their terms and applicable law, such Phoenix Plan(s), and shall have the sole
and absolute discretion and authority to interpret the Phoenix Plan(s), as
set forth therein. Except as specified otherwise in this Agreement, nothing
in this Agreement shall preclude Phoenix, at any time after the Separation
Date from amending, merging, modifying, terminating, eliminating, reducing,
or otherwise altering in any respect any Phoenix Plan, any benefit under any
Phoenix Plan or any trust, insurance policy or funding vehicle related to any
Phoenix Plan (to the extent permitted by law).
(c) INSILICON'S GENERAL OBLIGATIONS AS PARTICIPATING COMPANY.
inSilicon shall perform with respect to its participation in the Phoenix
Plans, the duties of a Participating Company as set forth in each such Plan
or any procedures adopted pursuant thereto, including (without limitation):
(i) assisting in the administration of claims, to the extent requested by the
claims administrator of the applicable Phoenix Plan; (ii) cooperating fully
with Phoenix Plan auditors, benefit personnel and benefit vendors; (iii)
preserving the confidentiality of all financial arrangements Phoenix has or
may have with any vendors, claims administrators, trustees or any other
entity or individual with whom Phoenix has entered into an agreement relating
to the Phoenix Plans; and (iv) preserving the confidentiality of participant
information (including, without limitation, health information in relation to
FMLA leaves) to the extent not specified otherwise in this Agreement.
(d) TERMINATION OF PARTICIPATING COMPANY STATUS. Except as
otherwise may be mutually agreed upon by Phoenix and inSilicon, effective as
of such date as inSilicon establishes a comparable Plan (as specified in
Section 2.2 or otherwise in this Agreement), inSilicon shall automatically
cease to be a Participating Company in the corresponding Phoenix Plan, unless
such automatic cessation is prohibited by applicable law.
2.4 DISPUTES. All disputes arising out of, related to or resulting
from this Agreement, including the interpretation hereof, shall be resolved
in accordance with the procedures set forth in the IPO Agreement.
2.5 FOREIGN EMPLOYEES. inSilicon and Phoenix each authorize their
non-U.S. subsidiaries to enter into separate local agreements with the
counterpart of the other party ("Local Agreements"). inSilicon and Phoenix
intend that the Local Agreements will generally specify the terms under which
Phoenix and inSilicon agree to allocate between them all assets, liabilities
and responsibilities relating to, and arising from Foreign Plans and certain
employment matters. To the extent, however, that any such Local Agreement
does not address a particular
5
<PAGE>
principle or plan, then the intent of the parties relating to comparable U.S.
matters or issues as reflected in this Agreement shall govern (to the extent
permitted by law).
ARTICLE III
DEFINED CONTRIBUTION PLAN
3.1 401(k) PLAN. Effective from and after the Separation Date as of
such date as Phoenix and inSilicon may mutually agree, inSilicon shall adopt
a 401(k) plan (the "inSilicon 401(k) Plan").
(a) 401(k) TRUST: ASSETS AND LIABILITIES. Effective from and
after the Separation Date as of such date(s) as inSilicon and Phoenix may
mutually agree: (i) the inSilicon 401(k) Plan may assume and be solely
responsible for all Liabilities for or relating to inSilicon Employees under
the Phoenix 401(k) Plan (such date referred to as the "401(k) Transfer
Date"); and (ii) Phoenix may cause the accounts of the inSilicon Employees
under the Phoenix 401(k) Plan that are held by its related trust as of the
401(k) Transfer Date to be transferred to the inSilicon 401(k) Plan and its
related trust, and inSilicon shall cause such transferred accounts to be
accepted by such plan and its related trust. As soon as reasonably
practicable after the Separation Date, inSilicon shall use its commercially
reasonable best efforts to enter into agreements satisfactory to inSilicon to
accomplish such assumption and transfer, the maintenance of the necessary
participant records, the appointment of an initial trustee under the
inSilicon 401(k) Plan, and the engagement of an initial recordkeeper under
the inSilicon 401(k) Plan. inSilicon and Phoenix each agree to use their
commercially reasonable best efforts to accomplish this spin-off.
(b) NO DISTRIBUTION TO INSILICON EMPLOYEES. The inSilicon 401(k)
Plan and the Phoenix 401(k) Plan shall provide that no distribution of
account balances shall be made to any inSilicon Employee on account of the
inSilicon Group ceasing to be an Affiliate of the Phoenix Group.
ARTICLE IV
HEALTH AND WELFARE PLANS
4.1 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES. Except as
specified otherwise in this Agreement, as of the Separation Date, all
Liabilities for or relating to inSilicon Employees under the Phoenix Health
and Welfare Plans shall be reimbursed by inSilicon on a pro rata basis.
4.2 CLAIMS FOR HEALTH AND WELFARE PLANS. Phoenix shall administer
claims incurred under the Phoenix Health and Welfare Plans by inSilicon
Employees but only to the extent that inSilicon has not established and
assumed administrative responsibility for a comparable Plan. Any
determination made or settlements entered into by Phoenix with respect to
such claims shall be final and binding.
6
<PAGE>
4.3 VENDOR ARRANGEMENTS. Phoenix shall use its commercially
reasonable best efforts for and on behalf of inSilicon to procure, effective
as of such date as Phoenix and inSilicon mutually agree upon: (a) third party
ASO contracts; (b) group insurance policies; and (c) HMO agreements. In each
case, inSilicon shall, as of such date as Phoenix and inSilicon may mutually
agree upon, establish, adopt and/or implement such contracts, agreements or
arrangements.
ARTICLE V
EQUITY COMPENSATION
5.1 STOCK OPTIONS. After the Separation Date and as of such date as
inSilicon and Phoenix may mutually agree, inSilicon may offer to inSilicon
Employees inSilicon Options in exchange for the cancellation of Phoenix
Options. Any such exchange shall generally preserve the economic value of the
cancelled Phoenix Options and shall preserve the terms and features of the
Phoenix Options. This Agreement shall not in any way limit the ability of
inSilicon to offer additional inSilicon Options or other inSilicon equity
incentives to inSilicon Employees.
ARTICLE VI
ADMINISTRATIVE PROVISIONS
6.1 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.
(a) SHARED COSTS. inSilicon shall pay its share, as determined
by Phoenix in good faith, of any contributions made to any trust maintained
in connection with an Phoenix Plan while inSilicon is a Participating Company
in that Phoenix Plan.
(b) CONTRIBUTIONS TO TRUSTS. With respect to Phoenix Plans to
which inSilicon Employees make contributions, Phoenix shall use reasonable
procedures to determine inSilicon Liabilities associated with such Plans,
taking into account such contributions, settlements, refunds and similar
payments.
(c) ADMINISTRATIVE EXPENSES NOT CHARGEABLE TO A TRUST. To the
extent not otherwise agreed to by Phoenix and inSilicon, and to the extent
not chargeable to a trust established in connection with an Phoenix Plan,
inSilicon shall be responsible, through either direct payment or
reimbursement to Phoenix, for its allocable share of expenses incurred by
Phoenix in the administration of (i) the Phoenix Plans while inSilicon
participates in such Plans, and (ii) the inSilicon Plans, to the extent
Phoenix administers such Plans. For this purpose, inSilicon's allocable share
of such expenses shall be that portion of the total of such expenses as the
number of inSilicon Employees who are participants in the applicable Plan
bears to the total number of participants in such Plan.
6.2 SHARING OF PARTICIPANT INFORMATION. Phoenix and inSilicon shall
share, or cause to be shared, all participant information that is necessary
or appropriate for the efficient and accurate administration of each of the
Phoenix Plans and the inSilicon Plans during the respective periods
applicable to such Plans as inSilicon and Phoenix may mutually agree.
7
<PAGE>
Phoenix and inSilicon and their respective authorized agents shall, subject
to applicable laws of confidentiality and data protection, be given
reasonable and timely access to, and may make copies of, all information
relating to the subjects of this Agreement in the custody of the other party
or its agents, to the extent necessary or appropriate for such administration.
6.3 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS. While
inSilicon is a Participating Company in the Phoenix Plans, inSilicon shall
take, or cause to be taken, all actions necessary or appropriate to
facilitate the distribution of all Phoenix Plan-related communications and
materials to employees, participants and beneficiaries, including (without
limitation) summary plan descriptions and related summaries of material
modification(s), summary annual reports, investment information,
prospectuses, notices and enrollment material for the Phoenix Plans and
inSilicon Plans. inSilicon shall reimburse Phoenix for the costs and expenses
relating to the copies of all such documents provided to inSilicon. inSilicon
shall assist, and inSilicon shall cause each other applicable member of the
inSilicon Group to assist, Phoenix in complying with all reporting and
disclosure requirements of ERISA, including the preparation of Form Series
5500 annual reports for the Phoenix Plans, where applicable.
6.4 AUDITS REGARDING VENDOR CONTRACTS. From the period beginning as
of the Separation Date and ending on such date as Phoenix and inSilicon may
mutually agree, Phoenix and inSilicon and their duly authorized
representatives shall have the right to conduct joint audits with respect to
any vendor contracts that relate to both the Phoenix Health and Welfare Plans
and the inSilicon Health and Welfare Plans. The scope of such audits shall
encompass the review of all correspondence, account records, claim forms,
canceled drafts (unless retained by the bank), provider bills, medical
records submitted with claims, billing corrections, vendor's internal
corrections of previous errors and any other documents or instruments
relating to the services performed by the vendor under the applicable vendor
contracts. Phoenix and inSilicon shall agree on the performance standards,
audit methodology, auditing policy and quality measures, reporting
requirements, and the manner in which costs incurred in connection with such
audits will be shared.
6.5 REQUESTS FOR IRS AND DOL OPINIONS. Phoenix and inSilicon shall
make such applications to regulatory agencies, including the IRS and DOL, as
may be necessary or appropriate. inSilicon and Phoenix shall cooperate fully
with one another on any issue relating to the transactions contemplated by
this Agreement for which Phoenix and/or inSilicon elects to seek a
determination letter or private letter ruling from the IRS or an advisory
opinion from the DOL.
6.6 FIDUCIARY MATTERS. Phoenix and inSilicon each acknowledge that
actions contemplated to be taken pursuant to this Agreement may be subject to
fiduciary duties or standards of conduct under ERISA or other applicable law,
and no party shall be deemed to be in violation of this Agreement if such
party fails to comply with any provisions hereof based upon such party's good
faith determination that to do so would violate such a fiduciary duty or
standard.
6.7 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
dependent on the consent of any third party (such as a vendor) and such
consent is withheld, Phoenix and inSilicon shall use their commercially
reasonable best efforts to implement the applicable provisions of
8
<PAGE>
this Agreement. If any provision of this Agreement cannot be implemented due
to the failure of such third party to consent, Phoenix and inSilicon shall
negotiate in good faith to implement the provision in a mutually satisfactory
manner.
ARTICLE VII
EMPLOYMENT-RELATED MATTERS
7.1 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. inSilicon
Employees who, on the Separation Date, are employed in the U.S. pursuant to a
work or training visa which authorizes employment only by the Phoenix Group
shall remain employed by the Phoenix Group until the visa is amended or a new
visa is granted to authorize employment by the inSilicon Group and, at that
time, shall become an employee of the inSilicon Group with substantially
similar rights as all other inSilicon Employees. During the period from the
Separation Date until the amended or new visa is issued, such employee shall
continue to participate in Phoenix Plans and inSilicon shall, as and when
invoiced by Phoenix, promptly reimburse Phoenix for its direct and indirect
costs and expenses relating to compensation and benefits.
7.2 CONFIDENTIALITY AND PROPRIETARY INFORMATION. No provision of the
Separation Agreement or any Ancillary Agreement shall be deemed to release
any individual for any violation of the Phoenix non-competition guideline or
any agreement or policy pertaining to confidential or proprietary information
of any member of the Phoenix Group, or otherwise relieve any individual of
his or her obligations under such non-competition guideline, agreement, or
policy.
7.3 CONSISTENCY OF TAX POSITIONS; DUPLICATION. Phoenix and inSilicon
shall individually and collectively make commercially reasonable best efforts
to avoid unnecessarily duplicated federal, state or local payroll taxes,
insurance or workers' compensation contributions, or unemployment
contributions arising on or after the Separation Date. Phoenix and inSilicon
shall take consistent reporting and withholding positions with respect to any
such taxes or contributions.
7.4 PERSONNEL AND PAY RECORDS. For the period beginning on the
Separation Date and ending on any substantially complete disposition of
Phoenix's ownership interest in inSilicon (and for such additional period as
Phoenix and inSilicon may mutually agree), Phoenix shall make reasonably
available to inSilicon, subject to applicable laws on confidentiality and
data protection, all current and historic forms, documents or information, no
matter in what format stored, relating to pre-Separation Date personnel,
medical records, and payroll information with respect to inSilicon Employees.
Such forms, documents or information may include, but is not limited to: (a)
information regarding an inSilicon Employee's ranking or promotions; (b) the
existence and nature of garnishment orders or other judicial or
administrative actions or orders affecting an employee's or service
provider's compensation; and (c) performance evaluations. inSilicon shall
fully reimburse Phoenix for the cost associated with such availability and
access.
7.5 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
provision of this Agreement, the Separation Agreement, or any Ancillary
Agreement shall be construed to
9
<PAGE>
create any right, or accelerate entitlement, to any compensation or benefit
whatsoever on the part of any inSilicon Employee or other future, present or
former employee of Phoenix or inSilicon under any Phoenix Plan or inSilicon
Plan or otherwise.
7.6 PRE-SEPARATION SERVICE. As of the Separation Date, the legal
responsibility for claims relating to pre-Separation Date Service remain with
Phoenix. All claims with respect to post-Separation Date Service of inSilicon
Employees with inSilicon shall be the exclusive legal responsibility of
Phoenix.
ARTICLE VIII
GENERAL PROVISIONS
8.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, the understanding and agreement being that no provision contained
herein, and no act of the parties, shall be deemed to create any relationship
between the parties other than the relationship set forth herein.
8.2 AFFILIATES. Each of Phoenix and inSilicon shall cause to be
performed, and hereby guarantee the performance of, any and all actions of
the Phoenix Group or the inSilicon Group, respectively.
8.3 GOVERNING LAW. To the extent not preempted by applicable federal
law, this Agreement shall be governed by, construed and interpreted in
accordance with the laws of the State of California, without regard to the
conflicts of law rules of such state.
8.4 SEVERABILITY. If any term or other provision of this Agreement
is determined to be invalid, illegal or incapable of being enforced by any
rule of law or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to either party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties
as closely as possible and in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest possible extent.
8.5 AMENDMENT. The Board of Directors of inSilicon and Phoenix may
mutually agree to amend the provisions of this Agreement at any time or
times, either prospectively or retroactively, to such extent and in such
manner as the Boards mutually deem advisable. Each Board may delegate its
amendment power, in whole or in part, to one or more Persons or committees as
it deems advisable. Accordingly, each Board hereby gives its Vice President,
Human Resources the full power and authority to mutually adopt an amendment
to this Agreement (subject to each of their authority to amend Plans).
8.6 CONFLICT. In the event of any conflict between the provisions of
this Agreement and the Separation Agreement, any Ancillary Agreement, or
Plan, the provisions of this
10
<PAGE>
Agreement shall control. In the event of any conflict between the provisions
of this Agreement and any Local Agreement, the provisions of the Local
Agreement shall control.
8.7 COUNTERPARTS. 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 but one and the same Agreement.
IN WITNESS WHEREOF, each of the parties have caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized on the
day and year first above written.
PHOENIX TECHNOLOGIES LTD.
By: /s/ Linda V. Moore
------------------------------------
Name: Linda V. Moore
Title: VP, General Counsel & Secretary
INSILICON CORPORATION
By: /s/ David J. Power
------------------------------------
Name: David J. Power
Title: Vice President & General Counsel
11
<PAGE>
TAX-SHARING AGREEMENT
This agreement (the "Agreement") is entered into as of November 30, 1999
by and between Phoenix Technologies Ltd. ("Phoenix"), a Delaware corporation,
and inSilicon Corporation ("inSilicon"), a Delaware corporation.
RECITALS
WHEREAS, as of the date hereof Phoenix is the common parent of an
affiliated group of corporations which has elected to file a consolidated U.S.
federal income tax return ("Consolidated Group"); and
WHEREAS, inSilicon is a newly-formed corporation wholly owned by Phoenix
and inSilicon has elected to join the Consolidated Return filed by Phoenix; and
WHEREAS, Phoenix is in the business of creating and distributing BIOS
software and providing related services; and
WHEREAS, inSilicon is in the business of creating software used in the
silicon industry (the "inSilicon Business"); and
WHEREAS, inSilicon expects to sell a portion of its shares to the public
in an initial public offering ("IPO"); and
WHEREAS, in connection with the proposed IPO, Phoenix recently
contributed to inSilicon the assets used in its business; and
WHEREAS, in connection with the proposed IPO, inSilicon expects it will
cease to be a member of Phoenix's U.S. consolidated group and it will cease to
join in Phoenix's consolidated U.S. federal income tax return; and
WHEREAS, Phoenix and inSilicon desire to provide for and agree upon the
allocation between the parties of liabilities for Taxes arising prior to and as
a result of the IPO and to provide for and agree upon other matters relating to
Taxes. For purposes of this Agreement, all references to Phoenix shall refer to
Phoenix and all members of its U.S. consolidated group existing immediately
following the IPO. All references to inSilicon shall refer to inSilicon and all
members of its U.S. consolidated group existing immediately following the IPO.
NOW, THEREFORE, in consideration for the mutual agreements contained
herein the parties hereby agree as follows:
1. DEFINITIONS
1.1 "Code" means the U.S. Internal Revenue Code of 1986, as amended,
or any successor law.
<PAGE>
1.2 "IPO Date" means the date on which the IPO is completed.
1.3 "Post-IPO Period" means any Tax Period beginning after the IPO
Date, and, in the case of any Straddle Period, the portion of such Straddle
Period beginning the day after the IPO Date.
1.4 "Pre-IPO Period" means any Tax Period ending on or before the IPO
Date, and, in the case of any Straddle Period, the portion of such Straddle
Period ending on the IPO Date.
1.5 "Straddle Period" means any Tax Period that begins on or before
the IPO Date and ends after the IPO Date.
1.6 "Tax" or "Taxes" means any income, gross income, gross receipts,
profits, capital stock, franchise, withholding, payroll, social security,
workers' compensation, unemployment, disability, property, ad valorem, stamp,
excise, occupation, service, sales, use, license, lease, transfer, import,
export, value added, alternative minimum, estimated or other similar tax
(including any fee, assessment, or other charge in the nature of or in lieu of
any tax) imposed by any governmental entity or political subdivision thereof,
and any interest, penalties, additions to tax, or additional amounts in respect
of the foregoing.
1.7 "Tax Authority" means, with respect to any Tax, the governmental
entity or political subdivision thereof that imposes such Tax, and the agency
(if any) charged with the collection of such Tax for such entity or subdivision
1.8 "Tax Contest" means an audit, review, examination, or any other
administrative or judicial proceeding with the purpose or effect of
redetermining Taxes of any of the parties or their affiliates (including any
administrative or judicial review of any claim for refund) for any Pre-IPO
Period or any Straddle Period.
1.9 "Tax Item" means, with respect to any income Tax, any item of
income, gain, loss, deduction, or credit, or any other income Tax attribute.
1.10 "Tax Law" means the law of any governmental entity or political
subdivision thereof relating to any Tax.
1.11 "Tax Period" means, with respect to any Tax, the period for which
the Tax is reported as provided under the Code or other applicable Tax Law.
1.12 "Tax Records" means Tax Returns, Tax Return workpapers,
documentation relating to any Tax Contests, and any other books of account or
records required to be maintained under the Code or other applicable Tax Laws or
under any record retention agreement with any Tax Authority.
1.13 "Tax Return" means any report of Taxes due, any claims for refund
of Taxes paid, any information return with respect to Taxes, or any other
similar report, statement, declaration, or document required to be filed
2
<PAGE>
under the Code or other Tax Law, including any attachments, exhibits, or other
materials submitted with any of the foregoing, and including any amendments or
supplements to any of the foregoing.
2. ALLOCATION OF TAX LIABILITIES
2.1 GENERAL RULE
2.1.1 PHOENIX LIABILITY
Phoenix shall be liable for all Taxes not specifically allocated
to inSilicon under this Agreement. Phoenix shall indemnify and hold inSilicon
harmless from and against any liabilities and Taxes for which Phoenix is liable
under this Agreement.
2.1.2 INSILICON LIABILITY
inSilicon shall be liable for and shall indemnify and hold Phoenix
harmless from and against any liability for Taxes which are allocated to
inSilicon under this Agreement.
2.2 ALLOCATION OF U.S. FEDERAL INCOME TAX
With respect to any Phoenix Consolidated Return filed after
November 30, 1999 (i.e., the date inSilicon commenced operations as a separate
legal entity) that includes the results of inSilicon, a pro forma Tax Return
shall be prepared for inSilicon as if it were a separate entity and not a member
of the Phoenix consolidated group, and inSilicon shall be liable to Phoenix for
the amount of Tax reflected on such return. In addition, with respect to any
such period, to the extent that inSilicon generates losses that reduce the U.S.
federal income Tax liability of Phoenix, then Phoenix shall make a payment to
inSilicon equal to the amount of the Tax savings it receives as a result of the
inSilicon losses. In making these calculations, both inSilicon and Phoenix will
be liable to the other party only for Tax Items arising after November 30, 1999,
and neither party shall be liable to the other for any Tax arising from the
operation of the inSilicon Business prior to such date. The payments for Tax
liability and for losses required by this section shall be paid pursuant to the
provisions of section 5 of this Agreement.
2.3 ALLOCATION OF STATE INCOME TAXES
With respect to any Phoenix combined or unitary state Tax Return
filed after November 30, 1999 (i.e., the date inSilicon commenced operations as
a separate legal entity) that includes the results of inSilicon, Phoenix and
inSilicon shall each be treated as if it filed a combined or unitary return
based solely on its own income, apportionment factors and its other Tax Items,
without any reapportionment based on the factors of the other. With respect to
any such period, inSilicon shall be liable to Phoenix for the amount of Tax
reflected on the pro form Tax Return prepared under these principles. In
addition, to the extent that inSilicon generates losses that reduce the state
Tax
3
<PAGE>
liability of Phoenix, then Phoenix shall make a payment to inSilicon equal to
the amount of the Tax savings it receives as a result of inSilicon's losses. In
making these calculations, both inSilicon and Phoenix will be liable to the
other party only for Tax Items arising after November 30, 1999, and neither
party shall be liable to the other for any Tax arising from the operation of
the inSilicon Business prior to such date. The payments for Tax liability and
for losses required by this section shall be paid pursuant to the provisions of
section 5 of this Agreement.
2.4 ALLOCATION OF TAX ADJUSTMENTS
If there is any adjustment of the U.S. federal or state income tax
liability with respect to any Phoenix Consolidated Return or any combined or
unitary Tax Return for any Pre-IPO Period or any Straddle Period, Phoenix shall
be liable to inSilicon for any resulting decrease in Tax liability allocable to
inSilicon in accordance with the method prescribed in sections 2.2 and 2.3 of
this Agreement, and inSilicon shall be liable to Phoenix for any resulting
increase in Tax liability allocable to inSilicon.
2.5 TRANSACTION TAXES
inSilicon shall be liable for all Taxes resulting from the IPO.
2.6 PRORATION OF TAXES FOR STRADDLE PERIODS
In the case of any Straddle Period, the Taxes shall be
apportioned between the Pre-IPO Period and the Post-IPO Period in accordance
with the principles of Treas. Reg. Section 1.1502-76(b) as reasonably
interpreted and applied by the parties hereto. No election shall be made under
Treas. Reg. Section 1.1502-76(b)(2)(ii) (relating to the ratable allocation of
a year's items). If the IPO Date is not a date on which there is a closing of
the financial accounting records for inSilicon, the provisions of Treas. Reg.
Section 1.1502-76(b)(2)(iii) will be applied to ratably allocate the items
(other than "extraordinary items" as defined in Treas. Reg. Section
1.1502-76(b)(2)(ii)(C)) for the month which includes the IPO Date.
3. PREPARATION AND FILING OF TAX RETURNS
3.1 GENERAL
Except as otherwise provided herein, all Tax Returns (including
the pro forma Tax Returns required by section 2 of this Agreement) shall be
prepared and filed when due (including extensions) by the persons obligated to
file such Tax Returns under the Code or applicable Tax Law.
3.2 CONSISTENT TAX ACCOUNTING PRACTICES
Any Tax Return for Pre-IPO Period or any Straddle Period and any
Tax Return for Post-IPO Period to the extent Tax Items reported on such Tax
Return might reasonably affect Tax Items reported on any Tax Return for any
Pre-IPO Period shall be prepared in accordance with past Tax accounting
4
<PAGE>
practices used with respect to the Tax Returns in question, unless such past
practices are no longer permissible under the Code or other applicable Tax Law,
and to the extent any such Tax Items are not covered by past practices or are
covered by past practices that are no longer permissible in accordance with
reasonable tax accounting practices selected by the party preparing the Tax
Return.
3.3 RIGHT TO REVIEW RETURNS
The party preparing any Tax Return shall make such Tax Return and
the related work papers available for review by the other parties to this
Agreement, if requested, to the extent such Tax Return relates to Taxes for
which the requesting party may be liable. The party preparing Tax Returns under
this Agreement shall use its reasonable best efforts to make such Tax Returns
available for review as required under this paragraph sufficiently in advance of
the due date for filing such Tax Returns to provide the requesting party with a
meaningful opportunity to analyze and comment on such Tax Returns and have such
Tax Returns modified before filing. The parties shall attempt in good faith to
resolve any issues arising out of the review of such Tax Returns.
4. TAX BENEFITS ARISING PRIOR TO THE CAPITALIZATION OF INSILICON
Phoenix will not make any payments to inSilicon as compensation for
favorable Tax Items, if any, generated by the inSilicon Business prior to
December 1, 1999.
5. TAX PAYMENTS AND INTERCOMPANY BILLINGS
5.1 COMPUTATION AND PAYMENT OF TAX LIABILITY
In the case of a Tax Return for any Pre-IPO Period or Straddle
Period filed after the IPO Date, the party required to prepare the Tax Return
under this Agreement shall compute the total Tax liability and the Tax liability
of the other party, if any, at least three days prior to the due date for the
Tax Return (including extensions). The party preparing any such Tax Return
shall pay any such Tax on a timely basis, and the other party shall pay any
resulting liability, as determined under this Agreement (taking into account any
payments or deposits already made and paid over by such party), within ten days
of such payment.
5.2 PAYMENT OF TAX UNDERPAYMENTS ARISING FROM ADJUSTMENTS
In the case of any adjustments to any Tax Return for any Pre-IPO
Period or any Straddle Period, inSilicon and Phoenix agree that they will make
payments for any resulting tax liabilities in accordance with Section 2.4 of
this Agreement within 30 days of the date the adjusted Tax was paid by or
refunded to Phoenix.
5
<PAGE>
6. ASSISTANCE AND COOPERATION AND RECORDS
6.1 GENERAL
After the IPO Date, each of the parties shall cooperate (and cause
their respective affiliates to cooperate) with each other and with each other's
agents, including accounting firms and legal counsel, in connection with Tax
matters relating to the parties including (i) preparation and filing of Tax
Returns, (ii) determining the liability for and amount of any Taxes due
(including estimated Taxes) or the right to and amount of any refund of Taxes,
(iii) examinations of Tax Returns, and (iv) any administrative or judicial
proceeding in respect of Taxes assessed or proposed to be assessed. Such
cooperation shall include making all information and documents in their
possession relating to the other party available to such other. Each of the
parties shall also make available to each other, as reasonably requested and
available, personnel (including officers, directors, employees and agents of the
parties) responsible for preparing, maintaining, and interpreting information
and documents relevant to Taxes, and personnel reasonably required as witnesses
or for purposes of providing information or documents in connection with any
administrative or judicial proceedings relating to Taxes. Any information or
documents provided under this Section 6 shall be kept confidential by the
parties receiving the information or documents, except as may otherwise be
necessary in connection with the filing of Tax Returns or in connection with any
administrative or judicial proceedings relating to Taxes.
6.2 RETENTION OF TAX RECORDS
The parties shall preserve and keep all other Tax Records
relating to Taxes for Pre-IPO Periods and Straddle Periods, for so long as
the contents thereof may become material in the administration of any matter
under the Code or other applicable Tax Law until the prior of (i) the
expiration of any applicable statutes of limitation, and (ii) the time a copy
of such Tax Records are provided to the other party pursuant to section 6.3
of this Agreement. If prior to the expiration of the applicable statute of
limitation and providing a copy of such Tax Records pursuant to section 6.3
of this Agreement, a party reasonably determines that any Tax Records which
it is required to preserve and keep under this Section 6.2 are no longer
material in the administration of any matter under the Code or other
applicable Tax Law, such party may dispose of such records upon 90 days prior
notice to the other party. Such notice shall include a list of the records
to be disposed of describing in reasonable detail each file, book, or other
record accumulation being disposed. The notified party shall have the
opportunity, at their cost and expense, to copy or remove, within such 90-day
period, all or any part of such Tax Records.
6.3 ACCESS TO TAX RECORDS
Phoenix shall provide to inSilicon within 90 days of the IPO Date
a copy of all Tax Records in its possession that reflect any Tax Items of
inSilicon. For each Tax Return filed by Phoenix after the IPO Date that
reflects Tax Items of inSilicon, Phoenix shall provide inSilicon with a copy of
the Tax Return and
6
<PAGE>
the related Tax Records within tens days of filing such Tax Return. For each
Tax Return filed by inSilicon after the IPO Date that reflects Tax Items of
Phoenix, inSilicon shall provide Phoenix with a copy of the Tax Return and the
related Tax Records within tens days of filing such Tax Return.
7. TAX CONTESTS
7.1 NOTICE
Each of the parties shall provide prompt notice to the other party
of any pending or threatened Tax Contest of which it becomes aware related to
Taxes for Tax Periods for which it is indemnified by the other party hereunder.
Such notice shall contain factual information (to the extent known) describing
any asserted Tax liability in reasonable detail and shall be accompanied by
copies of any notice and other documents received from any Tax Authority in
respect of any such matters. If an indemnified party has knowledge of an
asserted Tax liability with respect to a matter for which it is to be
indemnified hereunder and such party fails to provide the indemnifying party
with prompt notice of such asserted Tax liability, then (i) if the indemnifying
party is precluded from contesting the asserted Tax liability in any forum as a
result of the failure to give prompt notice, the indemnifying party shall have
no obligation to indemnify the indemnified party for any Taxes arising out of
such asserted Tax liability, and (ii) if the indemnifying party is not precluded
from contesting the asserted Tax liability in any forum, but such failure to
give prompt notice results in a monetary detriment to the indemnifying party,
then any amount which the indemnifying party is otherwise required to pay the
indemnified party pursuant to this Agreement shall be reduced by the amount of
such detriment.
7.2 CONTROL
Except as otherwise specifically provided herein, Phoenix shall
have complete control of all Tax Contests relating to Tax Returns filed by
Phoenix. To the extent that any Tax Contest could result in indemnity liability
to inSilicon under this Agreement, inSilicon shall have the right to participate
in the defense or prosecution of the Tax Contest, including any decision to
extend the statute of limitations. To the extent that any issues arising in
such a Tax Contest (including any decision to extend the statute of limitations)
relate solely to inSilicon, it shall control the defense or prosecution of such
portion of the Tax Contest, provided that inSilicon may not prevent or otherwise
delay the settlement of any other issues impacting Phoenix that could otherwise
be closed.
8. GENERAL PROVISIONS
8.1 TREATMENT OF TAX INDEMNITY PAYMENTS
In the absence of any change in Tax treatment under the Code or
other applicable Tax Law, any Tax indemnity payments made by a party under this
Agreement shall be reported for Tax purposes by the payor and the
7
<PAGE>
recipient as distributions or capital contributions as appropriate, occurring
immediately prior to the IPO.
8
<PAGE>
8.2 DISAGREEMENTS
If after good faith negotiations the parties cannot agree on the
application of this Agreement to any matter, then the matter will be referred to
a nationally recognized accounting firm acceptable to each of the parties (the
"Accounting Firm"). The Accounting Firm shall furnish written notice to the
parties of its resolution of any such disagreement as soon as practical, but in
any event no later than 45 days after its acceptance of the matter for
resolution. Any such resolution by the Accounting Firm will be conclusive and
binding on all parties to this Agreement. In accordance with Section 8.4, each
party shall pay its own fees and expenses (including the fees and expenses of
its representatives) incurred in connection with the referral of the matter to
the Accounting Firm. All fees and expenses of the Accounting Firm in connection
with such referral shall be shared equally by the parties affected by the
matter.
8.3 LATE PAYMENTS
Any amount owed by one party to another party under this Agreement
which is not paid when due shall bear interest at the applicable federal rate,
compounded semiannually, from the due date of the payment to the date paid.
8.4 EXPENSES
Except as provided in Section 8.2, each party shall bear their own
expenses incurred in connection with preparation of Tax Returns, Tax Contests,
and other matters related to Taxes under the provisions of this Agreement.
8.5 ADDRESSES AND NOTICES
Any notice, demand, request or report required or permitted to be
given or made to any party under this Agreement shall be in writing and shall be
deemed given or made when delivered in party or when sent by first class mail or
by other commercially reasonable means of written communication (including
delivery by an internationally recognized courier service or by facsimile
transmission) to the party at the party's address as follows:
If to Phoenix: Phoenix Technologies Ltd.
411 East Plumeria Drive
San Jose, CA 95134
Attn: General Counsel
If to inSilicon: inSilicon Corporation
411 East Plumeria Drive
San Jose, CA 95134
Attn: General Counsel
9
<PAGE>
8.6 BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their successors and assigns.
8.7 WAIVER
No failure by any party to insist upon the strict performance of any
obligation under this Agreement or to exercise any right or remedy under this
Agreement shall constitute the waiver of any such obligation, right, or remedy
or any other obligation, right, or remedy under this Agreement.
8.8 INVALIDITY OF PROVISIONS
If any provision of this Agreement is or becomes invalid, illegal
or unenforceable in any respect, the validity, legality, and enforceability of
the remaining provisions contained herein shall not be affected thereby.
8.9 FURTHER ACTION
The parties shall execute and deliver all documents, provide all
information, and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement, including the execution
and delivery to the other parties and their affiliates and representatives of
such powers of attorney or other authorizing documentation as is reasonably
necessary or appropriate in connection with Tax Contests (or portions thereof)
under the control of such other parties in accordance with Section 8.
8.10 INTEGRATION
This Agreement constitutes the entire agreement among the parties
pertaining to the subject matter of this Agreement and supersedes all prior
agreements and understandings pertaining thereto. In the event of any
inconsistency between this Agreement and the Contribution Agreement or any other
agreements relating to the transactions contemplated by the Contribution
Agreement, the provisions of this Agreement shall control.
8.11 CONSTRUCTION
The language in all parts of this Agreement shall in all cases be
construed according to its fair meaning and shall not be strictly construed for
or against any party .
8.12 NO DOUBLE RECOVERY: SUBROGATION
No provision of this Agreement shall be construed to provide an
indemnity or other recovery for any costs, damages, or other amounts for which
the damaged party has been fully compensated under any other provision of this
Agreement or under any other Agreement or action at law or equity. Unless
expressly required in this Agreement, a party shall not be required to exhaust
all remedies available under other Agreements or at law or equity
10
<PAGE>
before recovering under the remedies provided in this Agreement. Subject to
any limitations provided in this Agreement (for example, the limitation on
filing claims for refund in Section 4.08), the indemnifying party shall be
subrogated to all rights of the indemnified party for recovery from any third
party.
8.13 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, and all of which taken together shall
constitute one and the same instrument.
8.14 GOVERNING LAW
This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts executed in and
to be performed in that State.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by the respective officers as of the date set forth above.
Phoenix Technologies Ltd.
By: /s/ Linda Moore
-----------------------
Its: VP, General Counsel & Secretary
-------------------------------
inSilicon Corporation
By: /s/ David J. Power
-----------------------
Its: Vice President, General Counsel
-------------------------------
11
<PAGE>
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
This Technology Distributor Agreement ("Agreement") is made effective as of
January 1, 2000, ("Effective Date") by and between INSILICON CORPORATION, a
Delaware corporation doing business at 411 East Plumeria Drive, San Jose,
California 95134 U.S.A. (hereinafter "InSilicon"), and PHOENIX TECHNOLOGIES
LTD. ("Distributor") a Delaware corporation doing business at 411 East
Plumeria Drive, San Jose, California 95134 U.S.A. As used in this Agreement
InSilicon and Distributor shall collectively be referred to herein as
"Parties" or singularly as "Parties".
WITNESSETH
Whereas, InSilicon owns, distributes and licenses communications
semiconductor intellectual property ("SIP") software used for the design and
testing of application specific integrated circuits; and
Whereas, Distributor desires to acquire limited rights to market certain
InSilicon SIP software in the Territory, as hereinafter defined, and to
perform Non-Recurring Engineering ("NRE") services to customize InSilicon SIP
software for InSilicon licensees.
NOW, THEREFORE, InSilicon and Distributor hereby agree as follows:
1. DEFINITIONS
1.1 "Confidential Information" means all information identified in writing
by a Party as confidential and/or proprietary, or reasonably understood as
being confidential by its nature. Confidential Information shall not include
information of a Party which: (i) is independently developed by the other
Party without having access to, or use of, the Confidential Information of
the other Party; (ii) is rightfully obtained by the other Party from a third
Party without an obligation of confidentiality; or (iii) is disclosed to the
public by the owner of the Confidential Information.
1.2 "Core" means inSilicon's synthesizable core software product
representing an integrated circuit function in hardware description language
(e.g. Verilog/VHDL) source code which can be synthesized using conventional
design tools, and which can be instantiated (replicated or otherwise
represented) in an integrated circuit design, and associated design files, as
licensed under this Agreement.
1.3 "Customer" means a manufacturer or designer of computer and
communications hardware products in the geographic Territory that, as a
result of the marketing and sales efforts of Distributor, has executed a
valid Customer License Agreement, IFG Customer License
<PAGE>
Agreement or other such licensing arrangement with or approved by InSilicon,
providing rights to use the Software, and will instantiate the Software into
such products for resale and distribution.
1.4 "Customer License Agreement" means an InSilicon Technology License
Agreement, or a similar InSilicon agreement, for the licensing of Cores, Test
Environments, and other SIP software products made commercially available by
InSilicon. For the purposes of licensing IFG Code, "IFG Customer License
Agreement" shall mean a form of Distributor's agreement containing
Distributor's name, that contains terms and conditions the same as, or
similar to, those terms and conditions contained in InSilicon's standard
Technology License Agreement, and which has been reviewed and approved by
InSilicon.
1.5 "Defect" means a means any mistake, problem, or error which is capable
of reproduction by InSilicon and which causes: (a) an incorrect functioning
or non-functioning of the Software; (b) renders the Software inoperable; or
(c) causes the Software to fail to materially meet the specifications set
forth in the Software Documentation.
1.6 "Derivative Work" means a computer program and any subsequent design,
including any resultant integrated circuit, which is a Modification made by
or on behalf of Distributor, or any Customer, based on or incorporating
material from the Software so that the Modification, as a whole, represents
an original work of authorship.
1.7 "Documentation" means InSilicon's technical manuals designed for
Customers and other licensees of the Software, relating to the use of the
Software.
1.8 "IFG Code" means the object code and/or the source code of the driver,
protocol, stack, test applications, applications and/or firmware and all
other material, documentation or software licensed under this Agreement.
1.9 "Localized Versions" means the adaptations made to the Documentation
by or for Distributor and/or Distributor's design house in the Territory.
Such adaptions shall include, without limitation, translations of the
Documentation in language(s) specified in Exhibit A of this Agreement.
1.10 "Maintenance" means technical support services provided by Distributor
to Customers with respect to the Software.
1.11 "Marks" means all trademarks, service marks, trade names, logos or
other words or symbols identifying the Software or InSilicon's business.
1.12 "Materials" means any literature, advertising, promotional, and
marketing materials relating to the Software.
1.13 "Modification(s)" means a revision, augmentation, abridgment, upgrade,
addition, adaptation, or other modification to the Software, but will not
include Defect corrections.
1.14 "NRE Work" means the results of the consulting and development
services to be performed under this Agreement by Distributor and/or
Distributor's design house for Customers,
<PAGE>
as agreed upon by the Parties from time to time, and includes without
limitation Modifications and Derivative Works of the Software prepared by
Distributor and/or Distributor's design house.
1.15 "Reference Price List" means InSilicon's listing of commercially
available Software products and prices.
1.16 "Sales Quota" means the minimum Net Revenue Distributor must achieve
in the specified period. "Net Revenue" shall mean the actual amount of
license and update revenue recognized by InSilicon under this Agreement,
exclusive of shipping charges, customs and import duties, sales taxes, value
added taxes and other taxes and duties.
1.17 "Second-line Support" means technical support provided by InSilicon to
Distributor's technical support organization in accordance with the terms and
conditions of this Agreement.
1.18 "Software" means Core, IFG Code and Test Environment and any other
InSilicon SIP product made commercially available by InSilicon and offered to
Distributor under this Agreement, and as more specifically defined in Exhibit
A.
1.19 "Term" means the period specified in Section 15, Term and Termination,
of this Agreement, subject to earlier termination as set forth in this
Agreement.
1.20 "Territory" means the market segment(s) and/or geographic area(s)
listed in Exhibit A of this Agreement.
1.21 "Test Environment" means InSilicon's simulation and test software in
source code form and any associated design files, as licensed under this
Agreement , and includes the following: (a) "Simulation Model", a model in
hardware description language (e.g. the Verilog/VHDL) source code which
simulates the functionality and timing of an integrated circuit function in
order to provide system level simulation and debugging capabilities; and (b)
"Analyzer", a software tool to monitor and analyze simulation data.
2. GRANT OF LICENSES
2.1 APPOINTMENT. During the Term and subject to the terms and conditions
of this Agreement, InSilicon grants Distributor a non-exclusive,
non-transferable copyright license to: (i) promote the licensing of the
Software; (ii) identify prospective Customers; (iii) solicit orders for the
Software from Customers and prospective Customers in the Territory; (iv)
provide copies of Software to Customers, as may be agreed to from time to
time by InSilicon; (v) modify the Documentation, exclusive of third party
software and documentation, solely for the purpose of creating Localized
Versions; (vi) modify the Software solely for the purpose of performing NRE
Work for Customers, directly or indirectly through a Design House as provided
for herein; (vii) prepare copies of the IFG Code alone, and no other
Software, for distribution to Customers under IFG Customer Licenses
Agreements; and (viii) use the Software solely in connection with the
exercise of its rights and performance of its obligations under this
Agreement. InSilicon reserves the right, in its sole discretion, to add or
delete Software licensed under this Agreement from time to time, after
providing Distributor with thirty (30) days prior written notice thereof.
Distributor agrees and acknowledges that portions of the Software, or the
Software itself, may be licensed by InSilicon from third parties. InSilicon
will have no obligation to provide Distributor with such third party software.
<PAGE>
2.2 INTERNAL USE LICENSES. During the Term, InSilicon grants Distributor
a limited, non-exclusive, non-transferable copyright license, solely to use
the Software internally at Distributor's business locations in the Territory
to allow Distributor to understand the logic and organization of the
Software, conduct Customer and employee training programs, and provide
Maintenance support and NRE Work for Customers, and make copies of the IFG
Code for distribution to licensed Customers, pursuant to Distributor's
performance of this Agreement. Distributor shall notify InSilicon in writing
of the location at which such Software is being used ("Authorized Location"),
and shall notify InSilicon before transferring the Software to a different
location. The internal licenses granted to Distributor may not, under any
circumstances, be used for production purposes, or provided to any Customer
or potential Customer as a sublicense of rights, and shall be subject to the
terms of this Agreement.
2.3 DEMONSTRATION LICENSE. During the Term, InSilicon grants Distributor
a non-exclusive, non-transferable limited copyright license to demonstrate
the Software, to its Customers and potential Customers, at Distributors'
Authorized Location. Distributor shall obtain a signed non-disclosure
agreement in the form specified in Exhibit C of this Agreement, prior to
demonstrating the Software to any Customer or prospective Customer. Should
Distributor desire to allow a potential Customer to evaluate the Software at
the Customer location, Distributor will first obtain approval from InSilicon,
and upon identifying the potential Customer and obtaining approval from
InSilicon, utilize a form of non-disclosure agreement or limited use
agreement approved by InSilicon prior to allowing the Customer or potential
Customer to access and evaluate the Software.
2.4 LICENSE EXCLUSIONS. Except as specifically permitted in this
Agreement, or under additional written license or agreement with InSilicon,
Distributor shall not (nor shall it permit any third party to): (i) copy or
manufacture the Software (except for Distributor's right to copy the IFG Code
for distribution to Customers as provided in Section 2.1(vii)); (ii)
translate, decompile, disassemble, reverse engineer or attempt to
reconstruct, identify or discover any source code, underlying ideas,
underlying user interface techniques or algorithms of the Software by any
means whatever, or disclose any of the foregoing, except as specifically
authorized in this Agreement; (iii) provide, lease, lend or rent the
Software, except as permitted hereunder; (iv) use or allow others to use the
Software for the benefit of third parties except as provided in this
Agreement; (v) transfer the Software; (vi) develop functional equivalents of
the Software, except in the case where the functionally equivalent software
is developed independently by Distributor's employees or contractors who have
not had direct or indirect access to any of inSilicon's Software, and such
development is properly documented; (vi) permit any third party to license,
sublicense, distribute, assign or transfer the Software. Distributor will
notify InSilicon, and obtain InSilicon's advance written approval, if
Distributor intends to create any supplemental software that will be
combined, packaged or marketed with the Software.
2.5 EXPORT CONTROLS. This Agreement is subject to and conditioned upon
compliance with the U. S. Export Administration Act and the applicable
regulations thereunder, as well as any other laws of the U. S. or the
Territory affecting the export of technology and information. Distributor
will not, directly or indirectly, export or re-export the Software or any
technical data, Documentation or other Materials related thereto, or any
direct product thereof, except in strict compliance with the US Export
Administration Act, and similar acts or laws within the Territory, and all
regulations thereunder. Distributor agrees to comply with any other
applicable export laws and regulations and to use its best endeavors to
ensure its Customers abide by the terms contained in this clause.
Distributor shall indemnify InSilicon against any loss related to
Distributor's failure to conform to these regulations.
2.6 LIMITATIONS. All Software shall be provided to Customers under
InSilicon's trademarks and subject to the terms and conditions of a Customer
License Agreement or IFG Customer
<PAGE>
License Agreements, executed directly with InSilicon (sample attached as
Exhibit D), unless otherwise stated in an attached Exhibit E which shall set
forth any exceptions to the requirement that Software be provided to
Customers under InSilicon's standard licenses and be executed by InSilicon.
Distributor shall not, nor shall it permit any third party to, actively
solicit orders for the use, licensing, sublicensing or distribution of the
Software outside the Territory. Except as expressly specified in this
Section 2 of this Agreement, Distributor will have no licenses to the
Software except those limited rights as provided under this Agreement.
3. DISTRIBUTOR'S OBLIGATIONS
3.1 QUOTAS AND PAYMENTS. Distributor shall use all reasonable commercial
efforts to meet or exceed each of the quarterly Sales Quotas provided by
InSilicon pursuant to an annual plan established each fiscal year.
Distributor shall pay all amounts due to InSilicon as set forth in this
Agreement and as may be specified in an attached Exhibit.
3.2 MARKETING EFFORTS. Distributor will use all reasonable commercial
efforts to promote the Software to Customers and potential Customers, and to
solicit orders for the Software from Customers and potential Customers.
Distributor will provide to InSilicon, upon execution of this Agreement, a
business and promotional plan for the ensuing year. Distributor agrees to
operate its business, apply its resources and promote and advertise the
Software in accordance with the approved business and promotional plan.
Except as otherwise specifically set forth herein, Distributor shall bear and
be liable for all costs and expenses initiated and incurred by it in
advertising, promoting and marketing the Software and fulfilling its other
responsibilities under this Agreement.
3.3 FACILITIES AND PERSONNEL. Distributor will provide and maintain, at
Distributor's expense, a sufficient number of technical and sales personnel
having the knowledge and skills necessary to inform Customers properly
concerning the features and capabilities of the Software, and to maintain and
support Software in accordance with Distributor's obligations under this
Agreement. Without limitation of this obligation, Distributor specifically
agrees to: (i) employ the number of staff to comply with the minimum staff
requirements necessary to fulfill the requirements under this Agreement; and
(ii) assure that such staff satisfactorily complete the minimum level of
training to perform all obligations required under this Agreement.
Distributor shall also own or have regular access to sufficient computer
hardware and software to enable Distributor to demonstrate the Software to
prospects and Customers, to conduct Customer and employee training programs,
to provide Maintenance (including duplicating Customer problems) and to
communicate on-line with InSilicon.
3.4 CUSTOMER-RELATED RESPONSIBILITIES. Distributor will: (a) locate
prospective Customers and provide prospective Customers with all pertinent
information concerning the Software; (b) promptly transmit to InSilicon all
Customer inquiries, complaints and other important information Distributor
obtains from or with respect to such Customers; (c) assist InSilicon in its
negotiations with prospective Customers and facilitate the execution of
Customer License Agreements, unless such Customer qualifies for an exception
to this requirement under Exhibit E; (d) receive Customers orders for
Software and promptly place such orders to InSilicon for acceptance or
rejection by InSilicon as set forth in this Agreement; (e) assist, at
InSilicon's direction, in expediting deliveries of Software to Customers; and
(f) accept payment for Software from Customers and promptly transmit such
payment to InSilicon as set forth in this Agreement, unless differing payment
terms are set forth in Exhibit E.
3.5 CUSTOMER SERVICES. Distributor shall perform, at no expense to
InSilicon, any of the following services required by Customers: (i) provide
Customers with assistance and consultation on the use of the Software; (ii)
timely respond to Customers' general questions
<PAGE>
concerning use of Software and assist Customers in the diagnosis and
correction of problems encountered in using the Software; (iii) train
Customer personnel in the use of the Software; (iv) provide Maintenance to
Customers; (v) provide Modifications and Defect corrections, where such
Defect corrections are made by InSilicon, to Customers promptly; and (vi) may
provide Software NRE Work as set forth in Section 3.7 below. Distributor
shall provide all services in a good and workmanlike manner and of a standard
substantially similar to that provided by InSilicon to Distributor.
Distributor agrees to implement appropriate call tracking and logging
procedures to record all Customer maintenance calls and their resolution.
Distributor shall make such records available to InSilicon, upon reasonable
written notice. InSilicon shall have the right to inspect, at Distributor
office, such records for the purpose of determining if Distributor is
complying with the terms of this Agreement. In the event Distributor
prepares Modifications to the Software and/or provides Enhancements or Defect
corrections, Distributor shall immediately provide copies of such modified
Software to InSilicon. Distributor understands and agrees that all such
Modifications, Enhancements and/or Defect corrections shall be owned by
InSilicon.
3.6 CUSTOMER LICENSE AGREEMENT /CUSTOMER PURCHASE ORDERS. Distributor
shall obtain purchase orders for Software (other than IFG Code wherein orders
shall be secured through an amendment under Distributor's license agreements
as provided in Exhibit E) from Customers pursuant to the terms of a Customer
License Agreement, IFG Customer License Agreement, or other agreement as
authorized by InSilicon pursuant to Exhibit E. All material variations of
the terms and conditions of any Customer License Agreement or IFG Customer
license Agreement, that would affect InSilicon's title and ownership to the
Software, creates any additional liability or obligation to any third party
other than as provided in a Customer License Agreement or IFG Customer
License Agreement, or provides for any additional liability or obligation
other than as set forth in this Agreement, requires advance review and
approval in writing by InSilicon. Distributor shall provide InSilicon with a
copy of the translated Customer License Agreement and IFG Customer License
Agreement, if one is to be provided to any Customers in the Territory. Such
translated Customer License Agreement or IFG Customer License Agreement shall
be used for exhibition purposes only and the Customer License Agreement or
IFG Customer License Agreement executed by the Customer will be in the
English language unless otherwise authorized in writing by InSilicon. All
Customer License Agreements shall be entered into directly between InSilicon
and each Customer, and all IFG Customer License Agreements shall be entered
into between Distributor and Customer, with copies of same promptly delivered
to InSilicon. InSilicon reserves the right to reject any Customer at
InSilicon's sole discretion, and to the extent it is able, will provide
Distributor with the basis for its rejection.
Any Customer License Agreements, IFG Customer License Agreements, and
agreements for NRE Work entered into between Distributor and Customer, or
other license agreements generated by Distributor and authorized by
InSilicon, used for the licensing or modification of the Software, shall be
assignable to InSilicon, as set forth in Section 16.3 of this Agreement, at
InSilicon's sole discretion and upon InSilicon's request. Distributor shall
prepare all paperwork and assignment letters, and shall perfect the
assignment by Customer of the Customer License Agreement (and all other
agreement used for the licensing of Software) to InSilicon.
3.7 TRANSLATIONS, LOCALIZED VERSIONS, AND NRE WORK
(a) TRANSLATIONS, LOCALIZED VERSIONS. Distributor will use all reasonable
commercial efforts to produce, at its expense, and will promptly deliver to
InSilicon, all modified Documentation for all Localized Versions. In
addition, Distributor will translate, at Distributor's discretion, all
service and instruction manuals and InSilicon Materials used in connection
with Software into the local language for the Territory, unless previously
translated, and will provide such material to Customers, prospective
Customers, and InSilicon unless otherwise notified by InSilicon. Distributor
will obtain InSilicon's written approval of the translated Materials prior to
distributing or using any such Materials. InSilicon's approval shall be
based in part upon
<PAGE>
Distributors warrant that the translation is a true copy of the
Documentation. Distributor understands and agrees that it shall have full
responsibility and liability for any conflict or variation between the
English version of the Documentation, service and instruction manuals and the
Localized Version, and shall indemnify InSilicon for all costs, expense, and
liability resulting from any conflict or variation between the Localized
Version and the controlling English version.
(b) NRE WORK. Distributor, or an authorized Design House as provided in
Section 3.11, shall provide all NRE Work in a good and workmanlike manner,
and of a standard substantially similar to that provided by InSilicon to its
customers, in general. Distributor shall upon completion of any NRE Work,
promptly deliver to InSilicon a copy of such NRE Work. InSilicon reserves
the right to elect to use InSilicon internal resources to perform NRE Work
for InSilicon products at InSilicon's standard man day rate. Neither
Distributor nor any Design House, shall be authorized to deliver to a
Customer any NRE Work performed on any Software, including IFG Code, unless
and until a written agreement containing terms and conditions the same as, or
similar to, those provided in Exhibit G is executed by Distributor, Customer
and InSilicon as a basis for performing the NRE Work. Additional terms
governing NRE Work are specified in the attached Exhibit E.
3.8 PACKAGING. Distributor shall provide the Software, Documentation and
Materials provided hereunder to its Customers in the same packaging and with
the same trademarks affixed as provided by InSilicon and with such markings
and notices as InSilicon shall prescribe. Distributor will not (nor will it
permit any third party to) remove or add, without the prior written
authorization of InSilicon, any copyright symbol, legend or other proprietary
notice affixed to the Software, Documentation, or Materials, and will
reproduce such notices on any InSilicon authorized copies of the Software
made by Distributor.
3.9 ENFORCEMENT. Distributor shall use best efforts, consistent with any
rights it may have under any agreement between Distributor and Customer or
InSilicon and Customer to ensure compliance by its Customers with all of the
terms of the Customer License Agreement, IFG Customer License Agreement, or
any other InSilicon authorized agreement for the licensing of Software or
performance of NRE services, including without limitation: (i) enforcement of
applicable license or agreement restrictions; and (ii) protection of
InSilicon's proprietary rights in and to the Software, Marks, Materials,
Documentation, and Confidential Information. If Distributor learns that any
Customer has breached the applicable contract restrictions, it shall promptly
notify InSilicon and take all steps reasonably available to enforce the
Customer License Agreement. If Distributor fails to take these steps in a
timely or adequate manner, InSilicon may take them in its own or in
Distributor's name and at Distributor's expense. Distributor also agrees to
notify InSilicon of any improper or wrongful use of InSilicon's copyrights,
trademarks, trade names, patents and other intellectual property rights of
which it is aware, or may suspect, and will use every reasonable effort to
safeguard InSilicon's proprietary rights; provided that InSilicon will bear
Distributor's reasonable costs relating to proprietary rights protection
efforts specifically requested by InSilicon.
3.10 NO COMPETING PRODUCTS. Distributor agrees that it will not license,
provide, or distribute to Customers during the Term of this Agreement any
product which is competitive with any of the Software.
3.11 DESIGN HOUSE. Distributor shall obtain InSilicon's prior written
approval should it be necessary for Distributor to utilize a third party
design house ("Design House") to accomplish any of Distributor's duties or
obligations hereunder. Upon written approval of InSilicon, such Design House
shall execute an approved non-disclosure and limited use agreement with
Distributor, prior to such Design House's receipt of any Software. The
non-disclosure and limited use agreement shall be as specified in Exhibit F
of this Agreement. Any requested changes shall be approved, in
<PAGE>
writing, by an authorized representative of InSilicon. The use rights
provided under such non-disclosure and limited use agreement shall terminate
upon the termination of this Agreement, for whatever reason, with all rights
intending to survive pursuant to the terms of the non-disclosure and limited
use agreement remaining in full force and effect. Distributor accepts
responsibility and liability for the actions or inactions, of such Design
House. InSilicon will have the right to inspect during regular business
hours, upon five (5) days written notice, the Design House's use of the
Software. Such Design House will not disclose, redistribute, or sublicense
the Software, in whole or in part, or in any form, to any other third party.
3.12 COMPLIANCE WITH LAW IN General. Without limitation, each party agrees
to comply with all applicable laws, rules and regulations of its own country
and the other party's subsidiary's country and their respective political
subdivisions, in connection with its activities under this Agreement.
4. INSILICON'S OBLIGATIONS
4.1 TRAINING. From time to time, InSilicon will make available to
Distributor technical training which it generally makes available to its
customers. In addition from time to time, per mutual written agreement
between the Parties and at InSilicon's sole discretion, InSilicon may make
this training available in the Territory.
4.2 SECOND-LINE SUPPORT SERVICE. InSilicon will provide Distributor with
Second-line Support sufficient to enable Distributor to fulfill its
obligations under this Agreement, including but not limited to, expedited
Software Enhancements and Defect corrections for functional problems judged
critical by InSilicon, in its sole discretion, on a best efforts basis;
telephone and written technical support for Distributor to solicit Software
information. InSilicon shall have no obligation to directly support
Distributor's Customers or to provide support or other services outside the
Territory. Any technical support required by Distributor or its Customers
outside the Territory may be negotiated with the local InSilicon office. Any
other services shall be provided by InSilicon only on a basis as agreed to by
InSilicon under a separate written agreement.
4.3 INFORMATION. InSilicon will provide Distributor with non-confidential
marketing and technical information concerning Software in appropriate
amounts for the use of Distributor in connection with this Agreement.
Distributor shall be permitted to reproduce a reasonable number of copies of
such materials in support of its performance of this Agreement or obtain
additional copies from InSilicon. The total number of copies allowed will be
at InSilicon's sole discretion. Distributor will submit to InSilicon a copy
of all Cutomers, potential Customers, leads, and other marketing and sales
information related to, and to facilitate Insilicon's customer relations and
on-going business.
4.4 SOFTWARE, ENHANCEMENTS, DEFECT CORRECTIONS. InSilicon shall provide
Distributor with reasonable prior notice concerning InSilicon's Software
Enhancements. InSilicon shall provide Distributor with Enhancements and
Defect corrections when generally available in accordance with InSilicon's
then current commercial practices. Unless otherwise agreed, on a case by
case basis, Distributor will provide Enhancements and Defect corrections only
as required for Customers. InSilicon shall have no obligation to: (i)
develop and release Enhancements to particular Software; or (ii) customize
the Software to satisfy the particular requirements of Customers.
4.5 INSILICON PRICING APPROVAL. InSilicon must approve all pricing for
Software (other than NRE Work related to Software) prior to Distributor's
submission of any quotation to a potential Customer or existing Customer.
InSilicon will provide Distributor pricing guidelines for
<PAGE>
Distributor's internal use only Distributor shall maintain and treat the
guidelines as Confidential Information of InSilicon, and will not disclose
the referenced pricing to any third party other than for quoting to a
potential Customer or Customer. Should Distributor set its own prices with a
Customer above those initially approved, Distributor will advise InSilicon,
in writing of such price changes, and the Customer to which such price change
was given. Distributor shall not charge Customers for any Defect corrections
provided by InSilicon to Distributor. All quotes will be valid for no longer
than thirty (30) days.
4.6 SALES AND TECHNICAL ASSISTANCE. InSilicon shall, in InSilicon's sole
discretion, provide a reasonable amount of pre-sales support and technical
assistance to Distributor. InSilicon shall have no obligation to provide other
pre-sales support and technical assistance to Distributor. In the event that
InSilicon provides any other pre- sales assistance at Distributor's request,
then prior to providing such additional assistance the Parties will mutually
agree, and set forth in writing, the fees for and extent of such assistance.
5. ORDERING AND SHIPMENT
5.1 FORECASTS. Distributor shall provide InSilicon a forecast of
projected revenue for each fiscal quarter on a deal-by-deal basis, as part of
an annual sales plan. Distributor's quarterly forecast will be submitted to
InSilicon no later than five (5) business days after the start of a new
quarter period. Distributor will provide InSilicon with a weekly written
update of the quarterly forecast; the particular specifics of the type and
detail of the information needed for this forecast will be provided by
InSilicon, but shall at least include: customer name, Software being
considered for license, probability of closing contract, and license fee
amount.
5.2 ACCEPTANCE. Orders will not be binding upon InSilicon unless and
until accepted by InSilicon in writing, or in the case of IFG Code, InSilicon
has verified the and approved the pricing, as set forth in Exhibit E.
InSilicon may accept or reject any order at its reasonable discretion. Any
order for which acceptance or rejection has not been provided after ninety
(90) days shall be deemed rejected. In the event a conflict exists with
respect to any order, InSilicon shall have sole authority to finally
determine the disposition of such orders. Distributor has no right, power or
authority, express or implied, to accept any binding order for Software, and
Distributor will not represent to any third party to the contrary.
Distributor orders, once received by InSilicon, may not be canceled or
amended by Distributor without the prior written consent of InSilicon. The
terms of this Agreement shall apply to all orders and shall supersede the
pre-printed terms and conditions of any Distributor purchase order.
5.3 SHIPMENT. Unless otherwise agreed or set forth as an exception in
Exhibit E, Software shall be shipped by InSilicon to Distributor at
Distributor's address set forth above or such other address in the Territory
as Distributor may notify InSilicon as its delivery address. InSilicon shall
have no obligation to ship directly to Distributor's Customers, unless
otherwise agreed to in Exhibit E or a separate writing executed by
InSilicon. InSilicon will select the appropriate method of shipment for
Distributor's account and obtain all licenses required to export the Software
from the country of origin. Distributor will: (i) obtain all licenses
required to import the Software; (ii) clear the Software through local
customs promptly upon their arrival in the Territory; and (iii) pay all
customs duties and other charges assessed on such imports into the Territory,
if applicable. Distributor shall be responsible for shipment of Software,
including any Enhancements and Defect corrections to its Customers. If, at
any time, Distributor is in default in the performance of its obligations
under this Agreement, InSilicon shall be entitled for so long as such default
continues (but without prejudice to its other rights and remedies) to
withhold shipment of Software to Distributor.
<PAGE>
5.4 DELIVERY. Delivery and risk of loss will pass to Distributor "EX
WORKS". Any use of "EX WORKS" or other INCOTERMS will apply only to delivery
and risk of loss and shall not imply any passage of title to the Software
delivered. Distributor agrees to pay shipment charges and customs duties as
specified in this Agreement.
6. PRICES AND PAYMENT
6. PRICES AND FEES. License fees received from Customer for the Software
and for NRE Work performed shall be payable as set forth in Exhibit E.
Distributor understands and agrees that it is responsible for all related
shipping charges, taxes, customs duties and other amounts due to InSilicon
under this Agreement. Such amounts will be paid within thirty (30) days of
the date of the invoice therefor or, if required by InSilicon following
submission of a purchase order by Distributor on a cash-in-advance basis.
6.2 CURRENCY AND TIMING. Unless otherwise authorized in Exhibit E,
Distributor shall make all payments to InSilicon in U.S. dollars by corporate
check to the InSilicon address as first stated in this Agreement, or by wire
transfer to a bank account identified by InSilicon., or to such other account
as indicated by InSilicon from time to time upon written notice to
Distributor. Payment of fees due is an absolute commitment, and payments
shall not be withheld or offset under any circumstances. Unless otherwise
specified herein, all payments are due within thirty (30) days of the end of
the month in which the invoice is received.
6.3 OVERDUE PAYMENTS. Overdue payments shall accrue interest at the
lesser of one and one-half percent (1.5%) per month or the maximum rate
permitted by applicable law. In the event that payments due to InSilicon are
not made in accordance with the terms of this Agreement, then InSilicon shall
have the right to: (i) exclude from the computation of Sales Quota any and
all amounts for which prompt payment is not received; (ii) exclude such
amounts from the computation of Distributor achieving more favorable
compensation "tiers", if any, under this Agreement and/or (iii) pursue all
other available legal remedies.
6.4 TAXES. amounts payable by Distributor under this Agreement are
exclusive of any tax, duty levy or similar governmental charge that may be
assessed, whether based on gross revenue, the delivery, possession or use of
the Software, performance of NRE Work, the execution, delivery and
performance of this Agreement or otherwise. Distributor shall be responsible
for payment of all taxes and duties associated with this Agreement
(including, without limitation any applicable value added or sales taxes)
other than taxes assessed on InSilicon's net income or net worth. If
Distributor is legally required to withhold any income or remittance tax from
amounts payable to InSilicon, then: (a) Distributor will promptly notify
InSilicon; (b) the amount payable will be automatically increased to the full
extent required to offset such tax, so that the amount remitted to InSilicon,
net of all taxes, equals the amount stated in the invoice; and (c)
Distributor will provide InSilicon with the official receipt of payment of
such taxes to the appropriate taxing authority. Distributor will be
responsible for payment of any withholding taxes and shall indemnify
InSilicon from and against any claim for unpaid withholding taxes, interest
and penalties which may be claimed by the applicable tax authorities relating
to payment of such taxes.
7. RECORDS AND REPORTS
7.1 RECORDS. Distributor will maintain, for at least two (2) years after
expiration or termination of this Agreement, full, true and accurate records
and accounts in accordance with generally accepted accounting practices to
show all sales transactions with Customers, including, without limitation,
copies of correspondence and other documents relating to Distributor's
<PAGE>
activities in connection with this Agreement and copies of records and
accounts, and will permit examination thereof by InSilicon personnel at
reasonable times.
7.2 AUDITS. Distributor shall keep all such records and accounts at
Distributor's address first listed in this Agreement. InSilicon shall have
the right to conduct audits of the records to determine Distributor's
compliance with this Agreement. InSilicon shall bear the expenses of the
audit, however, in the event any such audit reveals that Distributor has
understated the amount that Distributor is obligated to pay InSilicon under
this Agreement by an amount of more than five percent (5%) of the amount paid
to InSilicon during the period audited, Distributor shall pay, in addition to
the amounts due, all reasonable costs associated with the audit.
7.3 NOTIFICATION. Distributor will promptly notify InSilicon in writing:
(a) of any claim or proceeding involving Software of which it has knowledge,
or has any reason to suspect such a claim or proceeding may exists; and (b)
of any change in the address, ownership or control of Distributor.
8. COMPLIANCE WITH LAWS
8.1 GOVERNMENT AUTHORIZATIONS. Distributor will, at its expense, obtain
and maintain the governmental authorizations, registrations and filings that
may be required under the laws of the Territory to execute or perform this
Agreement. Distributor will consult InSilicon and obtain InSilicon's approval
before registering this Agreement with any government authorities.
Distributor will otherwise comply with all laws, regulations and other legal
requirements that apply to this Agreement, including tax and foreign exchange
legislation, and will promptly notify InSilicon of any change in legislation
that may affect Distributor's performance of this Agreement.
8.2 LAWFUL PAYMENTS. Distributor will not (nor will it permit any third
party to) use any payment or other benefit derived from InSilicon to offer,
promise or pay any money, gift or any other thing of value to any person for
the purpose of influencing official actions or decisions affecting this
Agreement, while knowing or having reason to know that any portion of this
money, gift or thing will, directly or indirectly, be given, offered or
promised to: (i) an employee, officer or other person acting in an official
capacity for any government or its instrumentalities; or (ii) any political
party, party official or candidate for political office.
8.3 APPROVALS. The execution and continued performance of this Agreement
by InSilicon is conditional on any other governmental approval required for
the performance of this Agreement.
8.4 FURTHER ASSURANCES. Distributor will provide InSilicon with the
assurances and official documents that InSilicon may reasonably request to
verify Distributor's compliance with this Section 8 of this Agreement.
9. OWNERSHIP AND PROTECTION OF SOFTWARE AND CONFIDENTIAL INFORMATION
9.1 OWNERSHIP. InSilicon and its suppliers retain ownership of all
intellectual property rights (including patents, copyrights, trademarks and
trade secrets) in and relating to the Software, Enhancements, Derivative
Works, Defect corrections, Materials, Marks, and Documentation. Except as
otherwise agreed by InSilicon in writing, any enhancements, improvements,
translations or other modifications made to or derived from the Software,
Materials, Documentation, and related intellectual property, including
Enhancements, Derivative Works,
<PAGE>
Defect corrections, and NRE Work (as it relates to the Software) shall belong
to InSilicon and its suppliers. InSilicon and its suppliers shall have all
right, title and intellectual property interest to such work. At the request
of InSilicon, Distributor agrees to assign the same to InSilicon and its
suppliers or its designee and to execute any document properly required to
assign any such intellectual property legally to InSilicon or its designee
(at InSilicon's expense). Distributor hereby irrevocably and unconditionally
waives all rights granted by any applicable law that may vest in Distributor
in connection with any modifications, translations or other work made to or
derived from the Software, Enhancements, Defect corrections, Materials, and
Documentation, wherever in the world enforceable, including without
limitation the right to be identified as the author of any such works and the
right not to have such works altered. Distributor will take all steps
necessary to enable compliance with its obligations set forth in this Section
including, without limitation, obtaining appropriate agreements with its
employees and Customers requesting NRE Work, so that such agreements are
consistent with the terms of this Agreement. Distributor hereby assigns to
InSilicon all of its right, title and interest in all Translations, Localized
Versions of the Documentation, NRE Work, Modifications and Defect
corrections, including but not limited to all related copyrights and moral
rights. Upon InSilicn's request, Distributor will from time to time execute
any and all documents needed to perfect or record such assignment in all
jurisdictions and hereby appoints InSilicon as its attomey-in-fact to execute
such documents on Distributor's behalf.
9.1 CONFIDENTIALITY. Confidential Information shall be deemed to include,
but not be limited to trade secret, processes, techniques, algorithms,
designs, drawings, formulas, test data, any work in process related to future
development, marketing, servicing, financing, Software, terms of the Customer
Software License Agreements, and Customer lists and contact information.
Distributor recognizes and agrees that the Confidential Information is
extremely valuable property of InSilicon and its suppliers and are trade
secrets of InSilicon and its suppliers. The unauthorized use or disclosure
of which would cause InSilicon and its suppliers great harm. Accordingly,
Distributor agrees to hold the Confidential Information in strict confidence,
solely for the benefit of InSilicon, and to take all reasonable precautions
that Distributor takes to protect its own proprietary information of similar
importance, but no less than a reasonable degree of care to prevent the
unauthorized use or disclosure of the Confidential Information. In
particular, with regard to the Confidential Information, such precautions
will include, without limitation, disclosing the Confidential Information
only to those employees or agents of Distributor who have signed a
confidentiality agreement with Distributor that adequately protects InSilicon
and its suppliers' proprietary and Confidential Information. Each party shall
only use such Confidential Information in connection with its performance of
this Agreement.
9.3 EXCLUSIONS. Distributor's obligations under this Section 9 will not
apply to any information that: (a) was in the public domain at the time of
communication or delivery to Distributor by InSilicon; or (b) becomes part of
the public domain through no fault of Distributor.
9.4 INSPECTION. InSilicon may, from time to time, inspect Distributor's
premises to evaluate Distributor's compliance with its obligations under this
Section 9. Such inspections will be during regular business hours and at
InSilicon's expense.
10. LIMITED USE OF INSILICON TRADEMARKS
10.1 USE DURING AGREEMENT. Subject to the terms and conditions of this
Agreement, Distributor is hereby licensed by InSilicon to use, and will use,
the trademarks, trade names, logos and designations used by InSilicon for the
Software, solely in connection with Distributor's authorized activities under
this Agreement. Distributor's use of such trademarks, trade names, logos and
designations will be in accordance with InSilicon's trademark usage policies
provided
<PAGE>
to or communicated to Distributor from time to time. InSilicon reserves the
right to require Distributor to submit all advertising and marketing material
to InSilicon for review and approval prior to release by Distributor.
InSilicon also reserves the right to require Distributor to discontinue use
of any advertising or marketing materials that InSilicon reasonably believes
will have a detrimental effect on InSilicon's business. Distributor shall not
knowingly make any false or misleading representations concerning InSilicon
or the Software. Distributor shall have the right, during the Term, to
indicate that it is "An Independent Authorized Distributor of InSilicon
Corporation in the Territory."
10.2 DISTRIBUTOR DOES NOT ACQUIRE RIGHTS. Distributor has paid no
consideration for the use of InSilicon's trademarks, trade names, logos, or
designations, and nothing contained in this Agreement will give Distributor
any right, title or interest in any of them. The Marks are, and will remain,
the exclusive property of InSilicon. Distributor will not take any action
that jeopardizes InSilicon's proprietary rights or acquire any rights in the
Marks, except the limited use rights specified herein. Except as otherwise
agreed by InSilicon in writing, Distributor will not: (i) register, directly
or indirectly, any trademark, service mark, trade name, copyright, company
name or other proprietary or commercial right which is identical or
confusingly similar to the Marks or which are translations thereof in any
other language(s); or (ii) use or permit any subsidiary, affiliate, or
Customer of Distributor to use the Marks as part of its trade name or company
name. Upon InSilicon's request and at InSilicon's expense, Distributor will
execute such instruments and take such actions that may be appropriate to
protect InSilicon's interest in the Marks.
10.3 NO CONTINUING RIGHTS. Upon expiration or termination of this
Agreement, Distributor will immediately cease all display, advertising and
use of all InSilicon trademarks, trade names, logos and designations and will
not thereafter use, advertise or display any trademark, trade name, logo or
designation which is, or any part of which is, similar to or confusing with
any trademark, trade name, logo or designation associated with InSilicon or
the Software.
11. WARRANTIES AND LIMITATIONS OF LIABILITY
11.1 WARRANTIES. Both parties represent that they have the right to enter
into this Agreement . InSilicon warrants that the then current, unmodified
version of the Software will perform substantially in accordance with
InSilicon's Documenatation for a period of three (3) months from delivery to
Distributor. InSilicon's sole obligation to remedy any breach of this
warranty shall be to provide Second-line Support in an effort to remedy any
defects. InSilicon does not represent that the Software is error-free or that
the Software will satisfy all of Distributor's or Customer's requirements.
Distributor shall make no representation or warranty concerning the Software
which would expand the scope of the representations and warranties made by
InSilicon in this Agreement.
11.2 DISCLAIMER. The warranties in this section will not apply if the
Software: (i) is modified or altered by Distributor or any party other than
InSilicon; (ii) is combined or used with any software not supplied by
InSilicon; or (iii) is not the then current version established by the most
recent release of the Software. This Section 11 states the sole warranty of
InSilicon relating to the Software. All other warranties, conditions, and
representations, express, implied or verbal, statutory or otherwise,
howsoever arising, are hereby excluded. INSILICON MAKES NO FURTHER WARRANTY
UNDER THIS AGREEMENT, EXPRESS OR IMPLIED, AND EACH PARTY DISCLAIMS ANY
IMPLIED WARRANTIES INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NONINFRINGEMENT.
<PAGE>
12. LIMITATION OF LIABILITY
NEITHER PARTY WILL BE LIABLE TO THE OTHER OR TO ANY CUSTOMERS (AND
DISTRIBUTOR WILL ENSURE THIS LIMITATION IS SET FORTH WITH ALL CUSTOMERS) FOR
ANY SPECIAL, CONSEQUENTIAL, OR INCIDENTAL DAMAGES ARISING OUT OF ANY BREACH
OF THIS AGREEMENT, WHETHER ARISING IN TORT (INCLUDING NEGLIGENCE), CONTRACT,
OR OTHERWISE, EVEN IF A PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH
DAMAGES, EXCEPT AS PROVIDED BELOW. IN NO EVENT WILL EITHER PARTY'S LIABILITY
FOR DAMAGES HEREUNDER, REGARDLESS OF THE NATURE OF THE LEGAL THEORY OF ANY
CLAIM ASSERTED OR THREATENED, EXCEPT AS PROVIDED BELOW, UNDER ANY OR ALL
PROVISIONS OF THIS AGREEMENT FOR ALL CAUSES OF ACTION ON A CUMULATIVE BASIS
EXCEED THE GREATER OF: (1) THE AGGREGATE PAYMENT IT MAY RECEIVE FROM
CUSTOMERS UNDER THIS AGREEMENT DURING THE PREVIOUS TWELVE MONTHS; OR (2)
THREE MILLION DOLLARS ("CAP"). THIS SECTION NOTWITHSTANDING, THE CAP
SPECIFIED HEREIN, AND THE PROHIBITION OF CONSEQUENTIAL, INDIRECT, INCIDENTAL
OR SPECIAL DAMAGES, SHALL NOT APPLY TO: (1) ANY BREACH OF THE CONFIDENTIALITY
OBLIGATIONS SET FORTH HEREIN, PARTICULARILY AS APPLIED TO THE SOFTWARE; AND
(2) ANY BREACH OR MISUSE OF THE RIGHTS GRANTED HEREUNDER.
13. INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS
The following states the entire liability and obligation of InSilicon to
Distributor for infringement of the intellectual property rights of any third
party. InSilicon disclaims any liability for incidental or consequential
damages relating to the infringement of intellectual property rights.
13.1 ASSUMPTION OF RISK BY DISTRIBUTOR OF INFRINGEMENT. Distributor
acknowledges and agrees that InSilicon has provided Distributor and
Distributor's attorneys with an opportunity to examine in confidence
InSilicon's specifications for the Software and other documentation relating
to the operation, creation and development of the Software. Distributor
agrees that, after either examining or declining to make such examination,
Distributor is, except as otherwise explicitly provided in Section 11 of this
Agreement, assuming full responsibility for any and all risks and liability
of any type, whether known or unknown, relating to its exercise of the
license rights to the Software granted to Distributor herein. InSilicon shall
under no circumstances be liable to Distributor for damages of any kind
whatsoever arising out of or based upon a claim or allegation that the
Software violates any patent, copyright, trade secret or other intellectual
property right of any third party.
13.2 LIMITED ASSISTANCE BY INSILICON. In the event that a claim or suit is
brought against Distributor alleging that any of the Software infringes a
patent, copyright, trademark, trade secret or other intellectual property
right of a third party, Distributor shall immediately notify InSilicon in
writing of all relevant details concerning such claim or suit and furnish
InSilicon with copies of all relevant documents (including but not limited to
all correspondence and pleadings other than attorney-client communications or
in-house memoranda), and shall continue to keep InSilicon informed of the
status of the claim or suit and provide InSilicon with copies of any and all
additional related documents as they become available. Provided Distributor
complies with the foregoing sentence, InSilicon shall, at its own expense,
provide Distributor with the following limited assistance:
<PAGE>
a) InSilicon will provide Distributor, pursuant to a confidentiality
agreement acceptable to InSilicon, with all relevant documents in its
possession concerning the development of the Software (provided that
Distributor shall not disclose any of the same to others except under the
protection of a court order preserving their confidentiality) and will
provide, to the extent reasonably available, the assistance and testimony of
InSilicon's senior technical personnel to assist Distributor in defense of
such claim or suit.
b) If the claim or suit is based on an alleged infringement of any copyright,
patent, trade secret or other intellectual property right under the laws of
the United States, InSilicon may provide, to the extent reasonably available,
legal counsel to assist, in an advisory capacity, Distributor's own counsel
in preparing a defense. Except as provided in Section 13.3 of this Agreement,
InSilicon's legal counsel will not appear in such claim or suit as counsel of
record or otherwise and will have no responsibility to defend Distributor in
any manner.
13.3 RIGHT TO INTERVENE. InSilicon reserves the right, at its own expense,
to intervene in and to control the proceedings with respect to any such claim
or suit as a party with counsel of InSilicon's choosing. In such event,
Distributor's counsel shall cooperate fully with InSilicon's counsel in
defending such claim or suit.
13.4 ALTERNATIVE REMEDY. If a claim of infringement as described in
Section 13.1 of this Agreement may be or has been asserted, InSilicon may, at
InSilicon's option and expense, elect to: (i) procure the right to continue
using the relevant Software; (ii) replace or alter the Software so as to make
it non-infringing while providing equivalent performance; or (iii) InSilicon
shall have the right to terminate this Agreement with respect to the
infringing Software.
13.5 LIMITATION. Notwithstanding the foregoing, InSilicon shall have no
obligation or liability for any claim for infringement of the intellectual
property rights of any party which is based on or results from: (i)
modifications or alterations to the Software made by Distributor, or any
party other than InSilicon, including NRE Work performed by or on behalf of
Distributor; (ii) combination or use of the Software with any software not
supplied by InSilicon; (iii) use of the Software in a manner not authorized
or contemplated by this Agreement; or (iv) failure to promptly use the latest
version of the Software.
14. DISTRIBUTOR INDEMNITY
Subject to the liability limitations set forth in Section 12, Distributor
shall defend and indemnify InSilicon against any damage, loss, liability or
expense (including attorneys' fees) that InSilicon may incur as a result of:
(i) any modification or amendment of the prescribed terms of any Customer
License Agreement that InSilicon did not specifically approve; (ii) any
warranty, condition, representation, indemnity or guarantee granted by
Distributor with respect to the Software in addition to or in lieu of the
limited warranties specified in this Agreement; (iii) any omission or
inaccuracy in Distributor's advertisements or promotional materials that
relate to InSilicon or the Software or Documentation, including Localized
versions; (iv) any customization or other modification of the Software or
Documentation by Distributor or its employees, including NRE Work; (v) any
third party claim for loss, damage, liability or expense arising out of any
misrepresentations by Distributor to a Customer regarding the Software or any
Software delivery dates; or (vi) Distributor's failure to comply with the
sections of this Agreement titled "License Exclusions", "Export Controls",
"Compliance with Laws" or "Ownership and Protection of Software and
Confidential Information." This Section will not be construed to limit or
exclude any other claims or remedies which InSilicon may assert under this
Agreement or by law.
<PAGE>
15. TERM AND TERMINATION
15.1 TERM. This Agreement shall commence on the date identified above as
the Effective Date and shall have an initial term of One (1) year, unless it
is sooner terminated in accordance with the provisions hereof. Upon
expiration of the initial term, this Agreement will automatically renew on a
month-to-month basis unless renewed for a subsequent term by written
agreement of the Parties or terminated as set forth in Section 15.3. 15.4,
or elsewhere in this Agreement. Prior to expiration of the initial term or
any subsequent renewal term, either Party may terminate this Agreement by
providing thirty (30) days written notice to the other Party of its intention
not to renew this Agreement.
15.2 TERMINATION.
a) MUTUAL TERMINATION RIGHTS. Either Party may terminate this Agreement
at any time if the other Party commits a breach of this Agreement and fails
to remedy such breach to the satisfaction of the non-breaching Party, within
Thirty (30) days after receiving written notice thereof . InSilicon may
terminate this Agreement at any time, without cause, upon giving Ninety (90)
days written notice.
b TERMINATION BY INSILICON. InSilicon will have the right to terminate
this Agreement immediately upon notice and without judicial or administrative
notice or resolution upon occurrence of any of the following events: (i)
Distributor fails to meet any Sales Quota; (ii) Distributor fails to pay any
sum due in the time period specified in this Agreement and such failure is
not cured within thirty (30) days after receipt of written notice thereof;
(iii) Distributor fails to perform any of its other obligations under this
Agreement and such failure is not remedied within thirty (30) days after
receipt of written notice thereof. (iv) Distributor, in InSilicon's
reasonable belief, is about to take on the status of any the Subsections
specified in Section 15.3, and after receipt of InSilicon's reasonable belief
and basis therefor, has not rebutted the basis supplied by InSilicon within
thirty (30) days after receipt of such notice .
15.3 AUTOMATIC TERMINATION. To the extent permitted by applicable law, this
Agreement will automatically terminate without notice if either Party: (a)
becomes insolvent, unable or ceases to pay its debts as they mature; (b)
makes an assignment for the benefit of its creditors; (c) is liquidated or
dissolved; or (d) has proceedings commenced (whether voluntary or
involuntary) with respect to it under any bankruptcy, insolvency or debtor's
relief law and such proceedings are not vacated or set aside within sixty
(60) days from the date of commencement thereof.
15.4 CHANGE OF CONTROL. In addition to the above, InSilicon may elect to
terminate this Agreement (without liability or obligation to Distributor) on
notice to Distributor in the event of a merger, or sale of substantially all
of the assets or change of control, of Distributor. A "change of control"
shall be deemed to occur when an entity acquires fifty percent (50%) or more
of the voting shares or equity interest in Distributor or in the event of a
change of a majority of the Board not approved by the then members of the
Board, (or majority of the partners if a partnership) within a one (1) year
period, of Distributor. InSilicon will not exercise the election to terminate
this Agreement as set forth above unless in InSilicon's reasonable business
judgment InSilicon perceives that the merger or change of control of
Distributor: (i) would adversely effect Distributor's ability to perform its
duties as set forth in this Agreement; or (ii) would be harmful to
InSilicon's business interests.
15.5 PAYMENT ON TERMINATION OR EXPIRATION. If this Agreement is terminated
by InSilicon in accordance with Sections 15.2, 15.3 or 15.4, or terminated by
Distributor, then Distributor will have no right whatsoever to receive any
commission or other payments of any kind from InSilicon at any time after the
effective date of such termination. The Parties agree Distributor
<PAGE>
shall have a period of six (6) months from the date of termination or
expiration to submit to InSilicon any claim for commission or other payments
due from InSilicon to Distributor, at which time any additional commissions
verified by InSilicon as being due, will be paid in accordance with the terms
of this Agreement. This Section 15.5 notwithstanding, upon expiration, all
Customer licenses for specified rights to use such Software in accordance
with the Customer License Agreement, IFG Customer License Agreement or other
authorized agreement, including those specified in Exhibit E, for which the
appropriate use fees have been paid and received, shall continue.
16. EFFECT OF TERMINATION
16.1 RIGHTS. Upon the expiration or termination of this Agreement, all
rights and licenses to use and distribute the Software granted by InSilicon
to Distributor will immediately cease.
16.2 OBLIGATIONS UPON TERMINATION. Upon termination of this Agreement,
Distributor shall immediately: (i) cease to use any Documentation or
advertising material identifying it as a Distributor of InSilicon or the
Software; (ii) unless otherwise agreed by InSilicon in writing: (a) cease
using and purge from its systems all copies of the Software, Materials, and
Documentation and Confidential Information (including all internal use and
demonstration licenses granted under Section I of this Agreement); (b)
destroy or return such items to InSilicon; and (c) certify, in writing,
through one of its officers, to InSilicon that it has returned or destroyed
all items listed in 16.2(ii)(a) hereof within its possession or under its
control and shall not retain any copies thereof; and (iii) remove promptly
all signs, cancel all business listings, and take such other reasonable
action as may be necessary to remove its identification as a Distributor of
InSilicon or of the Software.. Distributor shall simultaneously disclose to
InSilicon the identity of all Customers and contacts therein, and the current
state of negotiations with, all potential Customers within the Territory, and
a list thereof, including contacts therein, together with copies of all
applicable correspondence with such potential Customers. Immediately upon
termination, Distributor shall immediately pay InSilicon all sums that are
outstanding under this Agreement, the due dates of which shall be
automatically accelerated to the date of termination
16.3 ASSIGNING AGREEMENTS. Upon termination, Distributor shall offer to
assign or perfect the assignment to InSilicon or its nominee of any license
agreements (and any other Maintenance contracts) previously entered into by
Distributor. If InSilicon or its nominee shall accept such assignment of a
contract, then Distributor shall notify the Customer and shall pay to
InSilicon or its nominee: (i) all future revenues received by Distributor
under any Customer License Agreement, except future installment payments for
which Distributor has already paid InSilicon in full; and (ii) such portion
of any Customer prepayments for Maintenance as fairly reflects the
proportionate balance of the Maintenance term and, in consideration thereof,
InSilicon or its nominee shall hold Distributor harmless against all future
liability, obligation, cost or expenses arising thereafter; but nothing in
this Section requires InSilicon or its nominee to indemnify Distributor from
any liability, obligation, cost or expense in connection with the performance
or non-performance of any Customer License Agreement by Distributor before
assignment.
16.4 SURVIVAL OF TERMS. The provisions of this Agreement which shall
survive any termination or expiration for what ever reason, shall include:
Sections 9, 10.2, 11, 12, 13, 14, and 17 of this Agreement.
16.5 NO DAMAGES FOR TERMINATION. Neither party will be liable to the
other for damages of any type solely as a result of not renewing this
Agreement or terminating this Agreement in accordance with its terms.
<PAGE>
16.6 NONEXCLUSIVE REMEDY. Termination of this Agreement by either Party
will be a nonexclusive remedy and will be without prejudice to any other
right or remedy of such Party.
17. GENERAL
17.1 NOTICES. All notices or demands shall be in writing in the English
language and sent to each party's address set forth above by registered mail
or airmail as appropriate, properly addressed and mailed with postage prepaid
or sent by fax or express courier if delivery is confirmed by such form of
transmission and if a copy is also sent by mail as set forth above. Any
notice or other communication properly sent: (i) by courier will be deemed to
have been received on the second business day after its date of posting; and
(ii) by registered airmail will be deemed to have been received on the fifth
business day after its posting. Either party may change its address for
notice by giving ten (10) days prior written notice to the other party.
17.2 ASSIGNMENT. Because of the personal nature of the services to be
provided by Distributor under this Agreement, Distributor may not assign its
rights or delegate its duties hereunder without the prior written consent of
InSilicon. Any attempted assignment in violation of this provision will be
void. No assignment by Distributor shall relieve Distributor of its
obligations hereunder. InSilicon may assign this Agreement, upon thirty (30)
days written notice, to any parent or entity of InSilicon, or in the event of
a merger, acquisition or change in the effective control of InSilicon, to the
successor entity. Any permitted assignee shall be bound by all of the terms
and conditions of this Agreement.
17.3 INDEPENDENT CONTRACTORS. Distributor's relationship with InSilicon
during the Term of this Agreement will be that of an independent contractor.
Distributor will not have, and will not represent that it has, any authority
to bind InSilicon, to assume or create any obligation, express or implied, to
enter into any agreement regarding Software, or to make any warranties or
representations on behalf of InSilicon or in InSilicon's name, except as may
be specifically authorized by InSilicon in writing. Except as set out in this
Agreement nothing shall constitute the parties as partners, joint ventures or
co-owners, nor constitute Distributor as the agent, employee of InSilicon, or
empower Distributor to act for, bind or otherwise create or assume any
obligation on behalf of InSilicon or any of its parents, subsidiaries,
associates or affiliates.
17.4 FORCE MAJEURE. Neither InSilicon nor Distributor will be responsible
for any failure to perform due to unforeseen circumstances, or to causes
beyond InSilicon's or Distributor's reasonable control, including but not
limited to acts of God, war, riot, embargoes, acts of civil or military
authorities, fire, floods, accidents, strikes, or shortages of
transportation, facilities, fuel, energy, labor or materials.
17.5 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable, in whole or in part, such holding will not affect the validity
of the other provisions of this Agreement, all of which shall remain in full
force and effect. No waiver, amendment or modification of this Agreement
shall be effective unless in writing and signed by the party against whom
enforcement is sought. No waiver or neglect to enforce a provision of this
Agreement in one instance shall be construed as a general waiver of a party's
rights to enforce such provision.
17.6 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the state of California, U.S.A.. All proceedings
related to this Agreement shall be conducted in English, and venue for any
such proceeding shall be in California. Distributor consents to said
jurisdiction. Nothing in this Section will prevent InSilicon from seeking
injunctive relief against Distributor, or filing legal actions for payment of
outstanding amounts in the courts of the Territory. InSilicon and Distributor
expressly exclude the United Nations
<PAGE>
Convention on Contracts for the International Sale of Goods from this
Agreement and any transaction between the parties that may be implemented in
connection with this Agreement.
17.7 REMEDIES. InSilicon will have the right to preliminary and permanent
injunctive relief, and specific performance against Distributor, in addition
to any other rights or remedies it may have under this Agreement or under
law, for any breach by Distributor of this Agreement. Notwithstanding the
terms and conditions of Section 17.6 of this Agreement, any claim by
InSilicon under this section may be heard, at InSilicon's option, in a court
of competent jurisdiction located in the Territory.
17.8 CHOICE OF LANGUAGE. The original of this Agreement has been written
in English. Distributor waives any right it may have under the law of the
Territory to have this Agreement written in the local language.
17.9 WAIVER. The waiver by either party of any default will not waive
subsequent defaults of the same or a different kind.
17.10 ENTIRE AGREEMENT. This Agreement (including the attached Exhibits
referenced in this document) is the entire agreement between the parties, and
supersedes any prior proposals, communications or agreements between the
parties concerning the subject matter referenced herein, and may only be
amended by a written instrument signed by authorized officers of both
parties. The headings of this Agreement are for convenience only and are not
intended to affect the meaning or interpretation of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized Distributors as of the Effective Date.
INSILICON CORPORATION PHOENIX TECHNOLOGIES LTD.
By: /s/ Dave J. Power By: /s/ Linda V. Moore
--------------------------- ------------------------------------
Name: /s/ Dave J. Power Name: /s/ Linda V. Moore
------------------------- ----------------------------------
Title: V.P. & General Counsel Title: VP, General Counsel & Secretary
------------------------ ---------------------------------
Date: 12 Feb 2000 Date: Feb 12, 2000
------------------------- ----------------------------------
<PAGE>
EXHIBIT A
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
SOFTWARE: The Semiconductor IP Products licensed pursuant to this Agreement
are those Software products as defined in the Agreement, as well as all
modification and derivative works previously developed by Distributor based
upon the Software, and all other software and firmware related to the
Semiconductor IP Business that has been developed by Distributor and
Distributor's subsidiary Phoenix Technologies KK (Japan) and assigned to
inSilicon Corporation pursuant to the Contribution Agreement between Phoenix
Technologies Ltd. and inSilicon Corporation dated November 30, 1999.
TERRITORY: Distributor shall have the right to distribute the Software only
in the following territories, and only pursuant to the terms of this
Agreement and its Exhibits:
- Japan
- Korea
- Taiwan
- Singapore
- Other territories in Asia upon written approval by inSilicon
Corporation.
LANGUAGES FOR LOCALIZED VERSIONS: distributor is authorized to translate,
subject to the terms of the Agreement, the Software and/or Documentation into
the local languages of the countries in the Territories identified above.
<PAGE>
[LOGO] inSilicon Agreement #
Draft #
EXHIBIT B
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
IFG CODE TECHNOLOGY LICENSE AGREEMENT
This IFG Code Technology License Agreement ("Agreement") is entered
into in San Jose, California on , 2000, (the "Effective Date")
between INSILICON CORPORATION ("inSilicon") a Delaware corporation having its
principal place of business at 411 E. Plumeria Drive, San Jose, California
95134, USA and ("Licensee"), a corporation having
its principal place of business at . Collectively
inSilicon and Licensee shall be referred to as "Parties" or individually as
"Party".
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS.
1.1 "Licensee's Product" means the equipment manufactured or purchased by
Licensee, as specifically referenced in an inSilicon official quotation,
which is used with or incorporates the Object Code as licensed under this
Agreement.
1.2 "Media" means diskette or CD-ROM, and in the case of Firmware includes
an integrated circuit.
1.3 "Manufacturer" is a third party that the Licensee may use to
manufacture Licensee's Product.
1.5 "Object Code" means the IFG Code, in binary machine executable form as
licensed hereunder.
1.6 "IFG Code" means the Object Code and/or the Source Code of the driver,
protocol, stack, test applications, applications and/or firmware and all
other material, documentation or software licensed under this Agreement as
referenced in an Official Quotation and Licensee's purchase order, whether in
whole or in part, and any and all updates, copies and modifications of same
regardless of the form or media in or on which they may exist.
1.7 "Shrink Wrap License" means a license, the terms of which are at
least as restrictive as those set forth in Exhibit A of this Agreement.
1.89 "Use" means one or more of the following as appropriate: configure,
evaluate, design, verify, analyze, or compile,. Use with respect to the IFG
Code shall be restricted to authorized reproductions of the delivered IFG
Code only for Licensee's Product.
1.90 "OEM(s)" means Licensee's OEM customers who have purchased Licensee's
Product.
1.10 "OEM's Product" means product designed and manufactured by or for
OEM(s), and include third party product including Licensee's Product.
1.11 "Platform" means the unique combination of processor, operating system
and controller for the Licensee's Product as referenced in an Official
Quotation and Licensee's purchase order.
1.12 "Source Code" means the IFG Code and related programs and
documentation in human readable form.
2. LICENSE GRANT.
The IFG Code licensed under this license Agreement are protected by United
States and worldwide copyright laws and treaties. Licensee acknowledges
inSilicon's claim of copyright protection with respect to the IFG Code.
2.1 Subject to the terms and conditions of this Agreement and
additionally, subject to the copyright licenses granted hereunder, and
contingent upon payment of all amounts due hereunder, inSilicon grants to
Licensee the following non-exclusive, non-transferable, worldwide copyright
licenses for Use of the IFG Code by the Licensee for Licensee's designated
Licensee Product:
2.1.1 Licensee may Use the Source Code solely for the purposes of
understanding the Source Code, making modifications thereto necessary for
configuring the Source Code for its use with Licensee's Product, and creating
assembled and compiled Object Code of such modified Source Code. Such Object
Code shall contain a copyright attribution as follows: "Copyright 1999 (or
other applicable year) inSilicon Corporation, All Rights Reserved". Such
Object Code may be installed on Media and distributed ONLY with Licensee's
Product to Licensee's customers, or as an upgrade to existing customers for
Licensee's Product, provided however that distribution of such Media includes
a Shrink-Wrap License. Notwithstanding anything else contained in this
Agreement, Licensee and OEM may ship the Object Code without a Shrink Wrap
license if the Object Code is embedded in the Licensee's Product.
2.1.2 A license to have Manufacturer(s) install the Object Code onto
Media. Provided, however, any disclosure to Manufacturer is made ONLY in
Object Code, solely for the limited purpose of having Manufacturer(s) install
the Object Code onto Media. Prior to disclosure of the Object Code, such
Manufacturer(s) shall sign an agreement with Licensee which includes: (a) a
confidentiality provision at least as restrictive as set forth in Section 10
of this Agreement, and (b) a provision that Manufacturer may not use the
Object Code for anyone other than Licensee or for any purpose other than for
the purposes set forth in this Section 2.1.2.
2.1.3 A license to copy the IFG Code only as necessary for Licensee's
Use of the IFG Code as set forth in this Section 2, and for backup purposes.
2.2 Distribution Of The Object Code
2.2.1 inSilicon grants to Licensee a right to distribute the Object
Code only with the Licensee's Product to OEMs, for the sole purpose of having
the OEM install such Object Code on Media and distribute such media with
OEM's Product to OEM's customers,
<PAGE>
provided however that distribution of such Media includes a Shrink Wrap
License, and for no other purpose by the OEM whatsoever. Licensee may also
distribute the Object Code as an upgrade to existing OEMs / customers for
Licensee's Product
2.2.2 Licensee accepts full responsibility and liability for the
actions of OEMs, or the OEMs failure to act. Licensee will indemnify and hold
inSilicon harmless from any actions of OEMs, or the OEMs failure to act.
Licensee will be responsible for the maintenance and support of Object Code
supplied to OEMs.. Licensee agrees it will be responsible for payment to
inSilicon of all License Fees due as a result of the distribution by OEMs of
the Object Code, as set forth herein.
2.2.3 Prior to disclosure of the Object Code by Licensee to OEMs,
Licensee shall execute a written agreement with said OEM. Said agreement
shall include, at a minimum, the following: (a) a provision indicating
confidentiality terms at least as restrictive as set forth in Section 10 of
this Agreement; (b) a provision indicating that each OEM agrees to use the
Object Code only for incorporation into OEM's Product, and for no other
purpose; (c) a provision indicating that OEM agrees not to distribute the
Object Code, as a stand alone product, thereof to any third party except
Licensee. OEM may also distribute the Object Code as an upgrade to OEM's
existing customers; (d) a provision indicating that OEM agrees not to alter
or remove inSilicon and its suppliers' copyright notices from the Object
Code; (e) a provision indicating that OEM is prohibited from and will not
develop, market, license or sell the OEM Product based upon or incorporating
technology derived from the Object Code as a standalone product; (f) a
provision indicating that OEM agrees not to disassemble or reverse engineer
the Object Code; (g) a provision indicating that OEM agrees that inSilicon
shall not be responsible or liable to OEM with respect to the Object Code;
(h) a provision indicating ownership by inSilicon and its suppliers of the
underlying work of the Object Code (if such work has been modified by
Licensee); or ownership by inSilicon and its suppliers of the Object Code (if
such work has not been modified by Licensee); (i) a provision indicating that
OEM agrees that inSilicon will not be responsible for the maintenance and
support of the Object Code to OEM; (j) a provision indicating that inSilicon
provides no warranty of any kind to OEM, and that the Object Code is being
provided "AS-IS' by inSilicon; (k) a provision indicating that OEM agrees
that inSilicon will not be responsible for indemnifying OEM under any legal
theory; (l) a provision indicating that termination of the agreement between
inSilicon and Licensee will terminate Licensee's agreement with OEM with
respect to the Object Code.
2.3 inSilicon will have no liability or responsibility for IFG Code
modified in any way by anyone other than inSilicon, whether or not permitted
hereunder. Licensee has the sole responsibility for supporting Licensee's
modifications. Licensee will indemnify and hold inSilicon harmless for any
defects that arise from Licensee's modifications. Licensee will not be
obligated to provide inSilicon with Licensee's modifications. If Licensee
provides inSilicon with a copy of any modification, unless otherwise agreed
in a separate writing signed by authorized representatives of the Parties,
Licensee will be deemed to have granted inSilicon a non-exclusive, perpetual,
irrevocable, worldwide, royalty free license to use, modify, and sublicense,
distribute, and allow others to distribute any such Licensee's modification,
alone or in conjunction with inSilicon's own products, for any purpose
inSilicon deems fit.
2.4 TITLE. Except for any third party software which may be included as a
part of the IFG Code, and which inSilicon has the rights to license,
inSilicon retains all rights, title and ownership of the IFG Code, design
techniques and documentation, including all intellectual property rights
embodied therein, and all subsequent copies, modifications (including but not
limited to any Object Code), and updates, regardless of the form or media in
or on which the original and other copies may exist. This license is not a
sale of the IFG Code, such design techniques or documentation or any copies
thereof, and title to same shall at all times remain with inSilicon or its
suppliers.
2.5. LICENSE RESTRICTIONS. Licensee acknowledges that the scope of the
licenses granted hereunder does NOT permit Licensee to (a) disclose,
sublicense, distribute, transfer, use or allow access to the Source Code,
(or any portion thereof) to a third-party without prior written consent
signed by an authorized representative of inSilicon. inSilicon may grant or
withhold such consent at its sole discretion; (b) decompile, disassemble,
reverse engineer or attempt to reconstruct, identify or discover any Source
Code from Object Code, underlying ideas, underlying user interface techniques
or algorithms of the IFG Code by any means whatever, or disclose any of the
foregoing, except as specifically authorized in this Agreement; (c) provide,
lease, lend, use for timesharing or service bureau purposes the IFG Code; (d)
Use or allow others to Use the IFG Code for the benefit of third parties
except as provided in this Agreement; (e) disclose the results of any
benchmarking of the IFG Code (whether or not obtained with inSilicon's
assistance) to third parties, (f) Transfer the IFG Code; (g) develop
functional equivalents of the IFG Code, except in the case where the
functionally equivalent IFG Code is developed independently by Licensee's
employees who have not had direct or indirect access or exposure to any of
inSilicon's IFG Code, and such development is properly documented as
independent; or (h) distribute the Object Code to third parties, except as
provided in Section 2.2; or (i) Licensee to alter or remove, or permit any
third party to alter or remove, inSilicon and its suppliers' copyright
notices from the IFG Code.
3. Reserved
4. DELIVERY.
4.1 DELIVERY. The IFG Code shall be shipped to Licensee as specified in
the Official Quotation after receipt and acceptance by inSilicon of
Licensee's purchase order.
5. Reserved
6. CONSIDERATION.
6.1 ASSOCIATED FEES. Licensee will pay inSilicon the associated license
fees for the IFG Code, any applicable per unit royalties, Reuse, training,
and/or other service fees ["Associated Fee(s)"], as set forth in the
inSilicon official quotation and invoiced by inSilicon. Licensee's commitment
to pay the Associated Fees to inSilicon will be non-cancelable and the
payment due will be an absolute commitment. No payment will be refundable
under any circumstances, except as set forth in Section 8 below. All payments
are payable in United States dollars and if credit is approved in advance by
inSilicon's finance department, payment terms are Net 30 days from the date
of inSilicon's invoice to Licensee, except with regard to per unit royalties
where payment will be due and payable as set forth in this Section 6.
6.2 TAXES. Associated Fees and all other amounts payable by Licensee to
inSilicon hereunder do not include any taxes, duties or charges by what ever
name called imposed by any federal, state, local, or foreign jurisdiction.
Licensee will pay any and all such taxes, duties and charges by whatever name
called (other than taxes based on inSilicon's net income) and will provide
inSilicon with satisfactory evidence of such payment on request. If a foreign
government requires taxes to be withheld on payments to be made by Licensee
hereunder, then Licensee may deduct such taxes from the amount owed to
inSilicon and pay them to the appropriate tax authority. Licensee shall
obtain and deliver to inSilicon a receipt and
-2-
<PAGE>
all other documents necessary for inSilicon to claim a Foreign Tax Credit.
6.3 ROYALTIES. If per unit royalties are applicable, Licensee will report
and pay such royalties as set forth herein. If Licensee is required to pay
per unit royalties, Licensee will submit royalty reports to inSilicon, on the
Royalty Report form attached as Exhibit B, before the end of the month
following each calendar quarter after the Effective Date of this Agreement.
Each royalty report will accurately set forth the number of units of each
Licensee's Product sold, or otherwise distributed or disposed of by Licensee
during such quarter. Each such report will be accompanied by payment of all
Associated Fees due to inSilicon pursuant to said report. Licensee's
obligations to furnish quarterly royalty reports and to make quarterly
royalty payments to inSilicon will continue as long as Licensee sells or
distributes Licensee's Product, the design of which integrates the IFG Code.
Royalty reports are required even if Licensee reports no such sales or other
distributions or disposals of Licensee's Product. If Licensee stops selling
Licensee's Product, Licensee will promptly submit to inSilicon a written
notice, a final quarterly royalty report, a final royalty payment in the full
amount of all Associated Fees due to inSilicon and a written certification
that it has stopped selling Licensee's Product.
6.4 ASSOCIATED FEE AUDIT inSilicon may audit or have a third party audit
once per calendar year Licensee's records relating to the IFG Code to
determine whether Licensee has correctly reported and calculated all of the
Associated Fees due inSilicon. Licensee will give the auditors reasonable
access during normal business hours to Licensee's premises where such records
and documentation are located. If an audit discloses an underpayment of
Associated Fees, Licensee will immediately pay inSilicon the additional fees
due with interest, from the original payment due date, at the rate of one
percent per month. inSilicon and Licensee will bear their own expenses
incurred in the audit; however, if an audit discloses an underpayment of
Associated Fees of five percent (5%) or more of the total Associated Fees
originally due for any quarter, Licensee will reimburse inSilicon for all
reasonable expenses incurred by inSilicon in the audit.
7. TERM AND TERMINATION.
7.1 TERM. The term of this Agreement shall begin upon the Effective Date
and shall continue for a period of three (3) years, and shall automatically
renew for subsequent one (1) year periods thereafter unless sooner terminated
in accordance with the terms hereinafter set forth.
7.2 BREACH. If Licensee breaches a material provision of this Agreement,
and does not cure such breach within thirty (30) days after written notice
from inSilicon and provide inSilicon with written notice of such cure,
inSilicon shall have the right at its option to: (a) suspend performance
until such breach is cured; (b) terminate this Agreement; or (c) seek a
combination of (a) and (b) and those remedies available at law or equity to
the extent not limited by the terms of this Agreement. The election of (a),
(b), or (c) above shall not excuse the Licensee from any obligation arising
prior to the date of such election.
7.3 INSOLVENCY. Should Licensee: (a) become insolvent; (b) make an
assignment for the benefit of creditors; (c) file or have filed against it a
petition in bankruptcy or seeking reorganization; (d) have a receiver
appointed; (e) institute any proceedings for liquidation or winding up; then
inSilicon may, in addition to other rights and remedies it may have,
terminate this Agreement immediately by written notice.
7.4 CONSEQUENCES. Upon termination of this Agreement, the licenses, rights
and covenants granted hereunder and the obligations imposed hereunder shall
cease except as otherwise expressly set forth herein. Upon termination,
Licensee shall destroy the IFG Code including all copies and documentation in
Licensee's possession and control , and provide to inSilicon written notice
of such destruction, signed by an officer of Licensee, within thirty (30)
days of termination, provided, however, that Licensee shall have the right to
sell or otherwise dispose of any inventory of Licensee's Product then on hand
as of the date of termination to the extent the quantity of such inventory is
in a reasonable amount under then current business conditions. inSilicon will
not be liable to the Licensee for damages of any sort solely as a result of
terminating this Agreement in accordance with its terms, and termination of
this Agreement will be without prejudice to any other right or remedy of
either Party.
8. WARRANTY.
8.1 LIMITED WARRANTY. If the IFG Code has been delivered by inSilicon on
physical media, inSilicon warrants that, for a period of thirty (30) days
from shipment, the media will be free from material physical defects under
normal use. If such a defect is found, return the media to inSilicon for
replacement or alternate delivery of the IFG Code as inSilicon may select.
inSilicon further warrants that for a period of thirty (30) days from
shipment, the unmodified IFG Code, as delivered, will materially meet
inSilicon's published specifications. inSilicon's obligations under this
warranty at inSilicon's option are limited to providing the Licensee with a
copy of corrected IFG Code or requesting the return of the IFG Code and upon
its return terminating this Agreement and refunding the license fee and any
maintenance charges paid hereunder. This limited warranty shall be VOID if
the IFG Code is modified by Licensee in any manner. THIS WARRANTY IS
EXPRESSED IN LIEU OF, AND INSILICON DISCLAIMS, ALL OTHER WARRANTIES, EXPRESS,
IMPLIED, OR STATUTORY, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE, AND WARRANTIES OF NON-INFRINGEMENT OF THE
RIGHTS OF THIRD PARTIES (INCLUDING WITHOUT LIMITATION RIGHTS UNDER PATENT,
COPYRIGHT AND TRADE SECRETS), AND OF ALL OTHER OBLIGATIONS OR LIABILITIES ON
INSILICON'S PART. LICENSEE ACCEPTS THE IFG CODE IN "AS IS" CONDITION.
INSILICON SHALL NOT BE LIABLE OR OBLIGATED IN ANY MANNER FOR ANY DIRECT,
INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES EVEN IF INSILICON HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
9. INDEMNITY AND REQUIRED LICENSES
9.1 INDEMNITY. inSilicon shall NOT have any obligation whatsoever to
indemnify Licensee against any claim, suit or proceeding that the IFG Code
infringes any intellectual property rights including trade secret of any
party. inSilicon shall have no liability for, and Licensee shall indemnify
and hold inSilicon harmless from all claims arising out of Licensee's
modification or Licensee's Use of the IFG Code.
9.2 REQUIRED LICENSES: Licensee is solely responsible for determining and
obtaining any and all lawfully required licenses from third parties,
including for the lawful import, export, use, sales, manufacture,
distribution or other disposal of Licensee's Product. Without limiting the
generality of the foregoing, Licensee acknowledges that Licensee is aware
that implementation or use of the IFG Code, whether to comply with industry
specifications or standards or otherwise, may require Licensee to obtain
certain licenses. Licensee agrees that it shall be solely responsible for
determining whether its use of the IFG Code requires licenses from third
parties, and to obtain any such license. inSilicon disclaims any
-3-
<PAGE>
obligation to bring information about such required licenses to Licensee's
attention.
10. CONFIDENTIALITY
10.1 CONFIDENTIAL INFORMATION. For purposes of this Section 10,
"Confidential Information" means all technical, financial, commercial, legal
or other information, in whatever form or media, that is not generally known
to the public, whether or not it is patented, registered or otherwise
publicly protected, and includes, without limitation, the IFG Code. Included
in this definition are the terms and conditions of this Agreement, which
shall remain confidential; however, the Parties may disclose the existence of
this Agreement and the licensor/ licensee relationship created thereby.
10.2 NONDISCLOSURE. Licensee shall maintain in confidence all Confidential
Information communicated, discussed, delivered or made available to Licensee,
and except as required to fulfill the purposes of this Agreement, shall not
use or disclose this information to any third party, firm or corporation,
including any agent, affiliate, subsidiary, consultant, or contractor of the
Parties, without the prior written consent of inSilicon.
10.3 TERM. The obligations imposed by this Section 10 shall expire five (5)
years after the final expiration or termination of this Agreement by either
Party, except for the Source Code for which Licensee's obligations under this
Section 10 shall remain in perpetuity.
10.4 ACCESS TO IFG CODE. In partial discharge of the obligations set forth
in Sub-Section 10.1 to 10.3 above, Licensee agrees that the IFG Code and
documentation furnished hereunder shall be treated as proprietary trade
secrets of inSilicon. Licensee shall keep all Confidential Information in a
secure location and restrict access to authorized personnel only. Licensee
will not make the IFG Code or the documentation available in any form to any
person other than to Licensee's employees with a need to know at the
Licensees location(s). Licensee further agrees that in no event shall it
decompile, disassemble or reverse engineer the IFG Code.
11. GENERAL PROVISIONS.
11.1 SEVERABILITY. If any provision of this Agreement is held to be
ineffective, unenforceable or illegal for any reason, such decision shall not
affect the validity or enforceability of any or all of the remaining portions
thereof.
11.2 NON-ASSIGNMENT. Without inSilicon's prior written consent, neither
this Agreement nor any interest therein or part thereof shall be transferable
or assignable by the Licensee, by operation of law or otherwise.
11.3 DAMAGE LIMITATION. INDEPENDENT OF ANY REMEDY LIMITATION HEREOF, AND
REGARDLESS OF WHETHER THE PURPOSE OF SUCH REMEDY IS SERVED, IT IS AGREED THAT
IN NO EVENT SHALL EITHER INSILICON OR ITS SUPPLIERS BE LIABLE FOR ANY DAMAGES
WHATSOEVER INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, INTERRUPTION OF
SERVICE, OR LOST INFORMATION, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND UNDER THIS AGREEMENT ARISING OUT OF THE USE OF OR
INABILITY TO USE THE IFG CODE, EVEN IF INSILICON HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. . IN NO EVENT SHALL INSILICON'S TOTAL MONETARY
OBLIGATION, UNDER ANY CLAIM FOR ANY CAUSES OF ACTION UNDER ANY LEGAL THEORY
PURSUANT TO THIS AGREEMENT, EXCEED THE LICENSE FEE PAID TO INSILICON FOR THE
IFG CODE THAT GAVE RISE TO THE ACTION OR CLAIM.
11.4 GOVERNING LAW. This Agreement shall be governed by and enforced in
accordance with California law and exclusive of any law or principle which
would apply the law of any other jurisdiction.
11.5 WAIVER. No failure or delay on the part of either Party in the
exercise of any power, right or privilege hereunder shall operate as a waiver
thereof.
11.6 USE AUDIT. Licensee shall keep full, clear and accurate records with
respect to its Use of the IFG Code. inSilicon shall have the right to examine
and audit upon notice at all reasonable times all such records and such other
records and accounts as may contain information bearing upon Licensee's
compliance with the terms of this Agreement.
11.7 OTHER LICENSES. Nothing contained in this Agreement shall be construed
as conferring by implication, estoppel or otherwise upon either Party
hereunder any license or other right except the licenses and rights expressly
granted hereunder to a Party hereto. All rights reserved.
11.8 EXPORT. Licensee agrees that neither the IFG Code nor any direct
product thereof shall be exported or re-exported directly or indirectly in
violation of U.S. export laws.
11.9 NOTICE. Unless either Party notifies the other of a different address,
any notice or other communication required or permitted hereunder shall be
sufficiently given, if sent by certified or registered mail, postage prepaid,
return receipt requested, to the addresses set forth in the preamble of this
Agreement to the attention of the Legal Counsel, or to such other address as
may be designated by a Party by giving written notice to the other Party.
11.10 SURVIVAL. The provisions of Sections 1. (Definitions), 2.4 (Title),
2.5. (License Restrictions), 6 (Consideration) 7.4 (Consequences), 8
(Warranty), 9 (Indemnity and Required Licenses), 10 (Confidentiality), 11.3
(Damage Limitation), 11.4 (Governing Law), 11.6 (Use Audit), 11.7 (Other
Licenses), 11.11 (Survival), 11.8 (Export) and 11.16 (Government Restricted
Rights) shall survive the termination of this Agreement.
11.11 NO AGENCY. Nothing herein contained shall be construed to constitute
the Parties hereto as partners or joint venturers or the agent of another
Party in any sense of those terms whatsoever.
11.12 PUBLICITY. This Agreement expressly allows both Parties to disclose
the existence of this license and Licensee's name to third parties. Both
Parties agree to cooperate to issue a press release.
11.13 GOVERNMENT RESTRICTED RIGHTS. The IFG Code is provided with
"RESTRICTED RIGHTS." Use, duplication, or disclosure by the Government is
subject to restrictions as set forth hereunder. Use of the IFG Code by the
Government constitutes acknowledgment of inSilicon's proprietary rights
therein. In the event that Licensee is required, due to its contract or
pending contract with the United States Government, to provide the IFG Code
or Object Code to the United States Government, then Licensee shall sign an
Addendum for such rights. Licensee shall not provide the IFG Code or Object
Code to the United States Government for a proposal or bid.
11.14 ENTIRE AGREEMENT. This Agreement and its Exhibits contain the entire
Agreement and understanding between the Parties with respect to the subject
matter hereof and merges and supersedes all prior oral and written
agreements, understandings and representations. No addition or modification
to this Agreement is valid unless made in writing and signed by both Parties
hereto. The printed terms and conditions of any purchase order form issued by
Licensee shall not modify or be a part of this Agreement.
11.15 MULTIPLE COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but such counterpart
together shall constitute only one and the same instrument.
11.16 NO MODIFICATION. Licensee represents and warrants that it has not
modified the terms of this Agreement in any way, and is signing the latest
version of the Agreement provided by inSilicon as of the date Licensee has
signed below.
-4-
<PAGE>
IN WITNESS WHEREOF, the duly authorized representatives of the Parties
have executed this Agreement. Each signatory, by signing below, certifies
that he or she has the authority to bind to this Agreement the respective
Party for which he or she signs.
LICENSEE:
By FOR SAMPLE PURPOSES ONLY
--------------------------------------
Signature
Name
--------------------------------------
Type or Print
Title
--------------------------------------
Date
--------------------------------------
INSILICON CORPORATION
By FOR SAMPLE PURPOSES ONLY
--------------------------------------
Signature
Name David J. Power
--------------------------------------
Type or Print
Title General Counsel
--------------------------------------
Date
--------------------------------------
-5-
<PAGE>
[LOGO] inSilicon Agreement #
Draft #
EXHIBIT A
SHRINK WRAP LICENSE
BY PUTTING THE DISKETTE INTO YOUR DISK DRIVE OR PUTTING THE CD-ROM
INTO YOUR CD-ROM DRIVE YOU, THE END USER ("LICENSEE") INDICATE YOUR
ACCEPTANCE OF THE TERMS OF THIS SHRINK WRAP LICENSE AGREEMENT ("AGREEMENT")
BETWEEN YOU AND _________________________("COMPANY"). COMPANY WILL ONLY GRANT
YOU A LICENSE TO THE SOFTWARE, HEREIN DEFINED ("SOFTWARE"), ON THE CONDITION
THAT YOU AGREE TO THE TERMS OF THIS AGREEMENT. IF YOU DO NOT AGREE TO THE
TERMS OF THIS AGREEMENT, PROMPTLY RETURN THE DISKETTE OR CD-ROM TO COMPANY OR
ITS AUTHORIZED DEALER.
1. LICENSE GRANT. Subject to Company's receipt of payment for this
license and Licensee's compliance with the terms and conditions of this
Agreement. Company hereby grants to Licensee a non-exclusive, nontransferable
copyright license to allow Licensee's employees to install such object code
copies of the programs loaded onto the media provided by Company (the
"Software"), only on Licensee's computers which use Company's product, and
for no other purpose whatsoever. The rights and licenses with respect to the
Software granted by this Agreement are not transferable or sublicenseable by
Licensee (even to other entities, which control, are controlled by or are
under common control with Licensee). Licensee shall neither itself nor allow
third parties to, under any circumstances, disassemble, decompile, or reverse
engineer the Software, or disclose the Software to any third parties.
2. COPIES. Licensee may not copy the Software or any part of the
Software, except when making a single copy of the Software for backup or
archival purposes only, and such single copy must bear all proprietary
legends that are on the original Software program. Licensee may be held
legally responsible for any copying or copyright infringement, which is
caused or encouraged by Licensee's failure to abide by the terms of this
restriction.
3. PROPRIETARY SOFTWARE. The Software is proprietary to inSilicon
Corporation located at 411 East Plumeria Drive, San Jose, California 95134
("inSilicon") and its suppliers. All applicable rights to patents,
copyrights, trademarks and trade secrets in the Software or any modifications
made by inSilicon and its suppliers to the Software are and shall remain in
inSilicon and its suppliers.
4. CONFIDENTIALITY. By accepting this license, Licensee acknowledges
that the Software and accompanying materials, and any proprietary information
contained in the media, are proprietary in nature and were developed or
acquired at great expense. Licensee agrees not to disclose to others or
utilize such trade secrets or proprietary information except as provided
herein. To satisfy its confidentiality obligations with regard to the
Software, Licensee agrees to secure and protect the Software, and any
documentation thereof, in a manner consistent with the maintenance of Company
and inSilicon and its suppliers' rights therein and to take appropriate
action by written agreement with its employees, who shall only be provided
access to the Software if they have a demonstrable "need to know" such
Software.
5. NO EXPORT. Licensee certifies that no confidential information or any
portion thereof, will be exported to any country in violation of the United
States Export Administration Act and regulations there under.
6. WARRANTIES AND LIMITATION OF LIABILITY
Licensee understands that some or all of the technology addressed by this
Addendum is owned by inSilicon and its suppliers ("inSilicon Technology").
Licensee understands and agrees that the inSilicon Technology is provided "AS
IS" WITH NO WARRANTIES WHATSOEVER FROM INSILICON AND ITS SUPPLIERS, WHETHER
EXPRESS, IMPLIED OR STATUTORY, INCLUDING, BUT NOT LIMITED TO ANY WARRANTY OF
MERCHANTABILITY, NONINFRINGEMENT, FITNESS FOR ANY PARTICULAR PURPOSE, OR ANY
WARRANTY OTHERWISE ARISING OUT OF ANY PROPOSAL, SPECIFICATION, OR SAMPLE. IN
NO EVENT WILL INSILICON OR ITS SUPPLIERS BE LIABLE TO LICENSEE FOR ANY LOSS
OF PROFITS, LOSS OF USE, INCIDENTAL, CONSEQUENTIAL, INDIRECT, OR SPECIAL
DAMAGES ARISING OUT OF THIS AGREEMENT, WHETHER OR NOT INSILICON OR ITS
SUPPLIERS HAVE ADVANCE NOTICE OF THE POSSIBILITY OF SUCH DAMAGES.
7. TERMINATION. This Agreement is effective until terminated. This
Agreement will terminate immediately without any notice from Company if
Licensee fails to comply with any provision of this Agreement. Upon
termination, Licensee must destroy the Software, any copies, and any related
documentation. The confidentiality obligations set forth in Section 4 of this
Agreement shall survive the termination of this Agreement and will continue
in effect until such time as inSilicon may make the Software available to the
public without restrictions on disclosure.
GENERAL. (a) Licensee acknowledges that it has read this Agreement,
understands it, and agrees to be bound by its terms, and further agrees that
this Agreement is the complete and exclusive agreement between the parties,
which supersedes and merges all prior oral or written understandings between
the parties relating to this Agreement; (b) This Agreement shall be construed
in accordance with the laws of the United States and the State of California,
exclusive of any conflict of law principles; (c) Licensee shall be liable
for and shall pay all charges and taxes (local, state, federal and foreign),
including all sales and use taxes, which may now or hereafter be imposed or
levied upon the license or possession of the Software, excluding, however,
taxes based on Company's income.
-1-
<PAGE>
[LOGO] inSilicon Agreement #
Draft #
EXHIBIT C
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
INSILICON CORPORATION - UNILATERAL NON-DISCLOSURE AGREEMENT
This Agreement ("Agreement") is entered into and made effective as
of , 2000, by INSILICON CORPORATION, having an office at 411
East Plumeria Drive, San Jose, California 95134 U.S.A., ("inSilicon" herein)
and having an office at ("Recipient"
herein); (referred to collectively herein as "Parties").
The following applies when inSilicon discloses Information (as defined
herein) to Recipient. In consideration of the foregoing, Recipient and
inSilicon agree as follows:
1. The term "Information" shall mean the confidential information
relating to the following, which may include, without limitation, the
products, data, know-how, documentation, business information, or other
information of inSilicon or which inSilicon is authorized to disclose:
inSilicon may disclose certain Information, which is software in
binary executable form. If at any future time inSilicon discloses any updated
versions of such Information, such disclosure shall be subject to the terms
and conditions of this Agreement. Recipient shall neither themselves nor
allow any third party to, disassemble, decompile, or reverse engineer such
software, or disclose such software to any third party. SOURCE CODE WILL NOT
BE DISCLOSED UNDER THE TERMS OF THIS AGREEMENT.
2. Recipient will use the Information solely for evaluation and
testing purposes in conjunction with business discussions and/or the
possibility of entering into a licensing agreement with inSilicon, and for no
other purpose whatsoever. Recipient assumes all risk, known and unknown,
incident to its use of the Information and inSilicon shall have no liability
of any kind to Recipient or any third parties arising out of such use.
INSILICON DISCLAIMS ALL WARRANTIES INCLUDING, WITHOUT LIMITATION, THE
WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, AND
WARRANTIES OF NON-INFRINGEMENT OF THE RIGHTS OF THIRD PARTIES (INCLUDING
WITHOUT LIMITATION RIGHTS UNDER PATENT, COPYRIGHT, TRADE SECRETS OR OTHER
INTELLECTUAL PROPERTY RIGHTS). RECIPIENT ACCEPTS THE INFORMATION IN "AS IS"
CONDITION. INSILICON SHALL NOT BE LIABLE OR OBLIGATED IN ANY MANNER FOR ANY
DIRECT, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES EVEN IF INSILICON HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
3. For a period of three (3) years from the date of each
disclosure of the Information, Recipient will treat the Information as
confidential and secret and will not disclose any of the Information to
anyone other than those of its employees (i) who have a need to know the
Information in furtherance of the purpose set forth in Paragraph 2 above and
(ii) who have signed an agreement with Recipient obligating them (a) not to
disclose any of the Information to anyone other than employees of Recipient
who have signed similar agreements with Recipient and (b) not to use any of
the Information for any purpose other than that purpose set forth in
Paragraph 2 above.
4. Before disclosing any of the Information to any of its
employees, Recipient will advise each such employee that the Information is
confidential and subject to the restrictions stated in Paragraph 3 above.
Recipient further agrees to receive and maintain the Information using at
least the same degree of care with which Recipient uses to protect its most
valuable information, but in no event less than a reasonable degree of care.
Recipient shall not make nor permit any other party to make, any copies or
abstracts of the Information, in whole or in part.
5. Recipient and its employees will make no further use of any of
the Information for any purpose and will return all of the Information,
received in a tangible form, to inSilicon upon the earlier of (i) fulfillment
of the purpose set forth in Paragraph 2, above; (ii) a request by inSilicon
that Recipient return the Information; or (iii) ________________ days
(if no days are specified, then it will be assumed to be 60 days) from the
date of this Agreement.
6. Nothing in this Agreement, nor the disclosure of the
Information by inSilicon to Recipient, shall be construed to grant to
Recipient any rights of any kind in any of the Information, by license or
otherwise. The Information shall at all times remain the property of
inSilicon.
7. inSilicon shall be entitled to seek temporary and/or permanent
equitable relief (including injunctive relief) in the event of any actual or
threatened breach of this Agreement by Recipient, it being agreed that
monetary damages may be insufficient to adequately compensate inSilicon.
Recipient shall indemnify inSilicon against all losses and expenses incurred
by inSilicon (including but not limited to reasonable counsel fees), which
result from the breach of any portion of this Agreement by Recipient.
8. This Agreement shall not apply to information that: (i) on the
date of this Agreement was already known, lawfully and without any
confidentiality restrictions by Recipient or available to the public; (ii)
after the date of this Agreement, becomes known to Recipient other than by
unauthorized disclosure or becomes available to the public other than by
unauthorized disclosure; or (iii) was or is developed by Recipient
independently without any use of any of the Information.
9. Recipient agrees that the Information hereof shall not be
exported or re-exported, directly or indirectly, in violation of United
States export laws and regulations.
10. This Agreement may not be assigned by Recipient. This Agreement
sets forth the entire understanding of the individual Parties with respect to
the subject matter of this Agreement, and may only be
-1-
<PAGE>
amended or modified in writing and signed by the Parties. This Agreement shall
be deemed to be executed, and governed by the laws of the State of California,
U.S.A. The persons executing this Agreement below represent that they have the
requisite authority to do so.
INSILICON CORPORATION
By: FOR SAMPLE PURPOSES ONLY
----------------------------
Name:
-------------------------------------------------------
Title:
-------------------------------------------------------
Recipient: FOR SAMPLE PURPOSES ONLY
By:
----------------------------------------------------------
Name:
--------------------------------------------------------
Title:
-------------------------------------------------------
-2-
<PAGE>
[LOGO] inSilicon Agreement #
Draft #
EXHIBIT D
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
TECHNOLOGY LICENSE AGREEMENT
This Technology License Agreement ("Agreement") is entered into in San
Jose, California on , 2000 (the "Effective Date") between
INSILICON CORPORATION ("INSILICON") a Delaware corporation having its principal
place of business at 411 E. Plumeria Drive, San Jose, California 95134, USA
and ("Licensee"), a corporation having its
principal place of business at . Collectively
inSilicon and Licensee shall be referred to as "Parties" or individually
as "Party".
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS.
1.1 "Competitor" means a company, corporation, or other entity that develops,
markets, and/or licenses products similar in function to inSilicon's line of
commercially available semiconductor IP products.
1.2 "Contractor(s)" means a company, corporation, or other entity that
provides services to Licensee's Design Group, and which will have access to
or Use of the Core or Test Environment, as part of the services provided for
Licensee. No Competitor shall be a Contractor.
1.3 "Core" means inSilicon's synthesizable core software product
representing an integrated circuit function in hardware description language
(e.g. Verilog/VHDL) source code which can be synthesized using conventional
design tools, and which can be Instantiated in an integrated circuit design,
as referenced in a Purchase Order specifying the Use and/or Reuse of the Core
in said integrated circuit design, whether in whole or in part, and any and
all updates, copies, modifications, regardless of the form or media in or on
which they may exist. The Core includes all associated design files, as
licensed under this Agreement.
1.4 "Defect(s)" means any mistake, problem, or error which is capable of
reproduction by inSilicon and which causes: (a) an incorrect functioning or
non-functioning of the Software; (b) renders the Software inoperable; or (c)
causes the Software to fail to materially meet the specifications set forth
in the Software documentation.
1.5 "Design Group" means a group within Licensee, which is a single design
team designated to design Licensee's IC and/or test Licensee's IC, in the
country indicated in the Licensee's address above. Such Design Group and it's
location(s) must be identified on the relevant Purchase Order for the
Software licensed under this Agreement.
1.6 "Instantiate" or "Instantiation" or "Instantiating" means to replicate
or otherwise represent the Core in a Licensee's IC.
1.7 "Licensee's IC" means (a) a single Instantiation of a Core, either in
whole or in part, in the device created from integrated circuit designs by
the Design Group, as identified in the Purchase Order accepted by inSilicon,
and/or (b) the device created from integrated circuit designs by the Design
Group which is tested using the Test Environment.
1.8 "Purchase Order(s)" means the order form issued by Licensee to
inSilicon specifying the Software, Reuse, new and/or additional Design Group,
training, and/or services Licensee orders from inSilicon, and any Associated
Fee(s) based on a corresponding Official Quotation.
1.9 "Reuse" means a single Instantiation of a reproduced Core, either in
whole or in part, by the Design Group in a new or functionally different
integrated circuit. A Reuse occurs at synthesis of Licensee's IC. Changes to
fix functional problems (bugs), timing problems will not be considered a
Reuse.
1.10 "SGN Format" means Core represented in a synthesized gate level net
list format and other formats authorized by inSilicon, based on the
Licensee's foundry process and technology as part of the process of
manufacturing an integrated circuit.
1.11. "Software" means the Core and/or the Test Environment and all other
material, documentation or software (including firmware) licensed under this
Agreement, whether in whole or in part, and any and all updates, copies and
modifications of same regardless of the form or media in or on which they may
exist.
1.12 "Test Environment" means the inSilicon simulation and test software in
source code form, and any associated design files, as licensed under this
Agreement, and includes the following: (a) "Simulation Model" - a model in
hardware description language (e.g. the Verilog/VHDL) source code which
simulates the functionality and timing of an integrated circuit function in
order to provide system level simulation and debugging capabilities and as
more particularly specified in the Official Quotation, whether in whole or in
part, and any and all updates, copies, modifications, regardless of the form
or media in or on which they may exist; (b) "Analyzer" - a software tool to
monitor and analyze simulation data and as more particularly specified in the
Official Quotation, whether in whole or in part, and any and all updates,
copies, modifications, regardless of the form or media in or on
-1-
<PAGE>
which they may exist.
1.13 "Transfer(able)" means the removal and/or Use of the Software to or at
any address not listed as a Design Group location in a Purchase Order .
1.14 "Use" means one or more of the following as appropriate: configure,
evaluate, synthesize, simulate, design, verify, monitor, analyze, compile,
incorporate, embed, integrate, or Instantiate. Use with respect to the Core
shall be restricted to reproductions of the Core.
2. LICENSE GRANT.
The Software licensed under this Agreement are protected by United States and
worldwide copyright laws and treaties. Licensee acknowledges inSilicon's
claim of copyright protection with respect to the Software.
2.1 CORE LICENSE GRANT. Subject to the terms and conditions of this
Agreement and all copyrights in the Core, and contingent upon payment of all
Associated Fees due hereunder, as indicated in an Official Quotation and
Licensee Purchase Order accepted by inSilicon, inSilicon hereby grants to
Licensee's Design Group the following personal, nonexclusive,
non-Transferable copyright licenses, without the right to sublicense:
(a) a license to the Design Group to internally Use, by reproducing in
whole or in part, the Core and use such reproductions of the Core to design
Licensee's IC for manufacture and sale;
(b) a license to Use Licensee's reproductions of the Core in the
manufacture and sale of Licensee's ICs world-wide. The reproduced Core (or
Licensee's IC) is to be incorporated into Licensee's products;
(c) a world-wide license to have Licensee's IC, which Instantiates all or
any part of the reproduced Core, manufactured by a semiconductor manufacturer
for sale or use only by Licensee provided: (i) the designs and specifications
for such Licensee's IC are furnished by and originate with Licensee; (ii)
said designs and specifications are in sufficient detail (excluding source
code which may not be furnished) that no additional designing by the
semiconductor manufacturer is required other than adaptation to such
semiconductor manufacturer's normal production process and standards; (iii)
all designs furnished to such semiconductor manufacturer are disclosed for
the limited purpose of manufacture of Licensee's IC solely for Licensee under
confidentiality provisions at least as restrictive as those contained in this
Agreement; (iv) that the source code of the Software or reproduced Core is
never disclosed to any third party; (v) Licensee obtains any and all lawfully
required licenses from third parties which are required for the lawful
import, export, use, sales, manufacture, distribution or other disposal of
Licensee's IC.
(d) a license to Reuse the Core pursuant to the terms of Section 5.
Licensee shall give inSilicon fifteen (15) days prior written notice of each
such Reuse, and pay the applicable Reuse Fee and/or royalties stated in the
Official Quotation for each such Reuse. Upon the receipt of a Purchase Order
reflecting the terms of the Official Quotation, and payment of all Reuse
Fees, a Reuse shall become a Licensee's IC for purposes of this Agreement.
2.2 SIMULATION MODEL GRANT. If applicable, and subject to the terms and
conditions of this Agreement, and contingent upon payment of all Associated
Fees due hereunder as indicated in an Official Quotation and Licensee
Purchase Order accepted by inSilicon, inSilicon hereby grants to Licensee's
Design Group a personal, nonexclusive, non-Transferable copyright license,
(without the right to sublicense) to Use the Simulation Model by an user
internally at the Design Group location to test Licensee's IC.
2.3 PATENT NON-ASSERTION: Both Parties agree not to assert against the
other Party any patents that they may own or control related to the Software
licensed under this Agreement.
2.4 TITLE. Except for any third party software which may be included as a
part of the Software, and which inSilicon represents it has the rights to
license, inSilicon retains all rights, title and ownership of the Software,
design techniques and documentation, including all intellectual property
rights embodied therein, and all subsequent copies, modifications (including
but not limited to any SGN Format), and updates, regardless of the form or
media in or on which the original and other copies may exist. This license is
not a sale of the Software, such design techniques or documentation or any
copies thereof.
2.5. LICENSE RESTRICTIONS. Licensee acknowledges that the scope of the
licenses granted hereunder does NOT permit Licensee to (a) sublicense and/or
manufacture as a standalone product the Software (or any portion thereof);
(b) decompile, disassemble, reverse engineer or attempt to reconstruct,
identify or discover any source code, underlying ideas, underlying user
interface techniques or algorithms of the Software by any means whatever, or
disclose any of the foregoing, except as specifically authorized in this
Agreement; (c) provide, lease, lend, or rent the Software; (d) Use or allow
others to Use the Software for the benefit of third parties except as
provided in this Agreement; (e) Transfer the Software; (f) develop
functional equivalents of the Software, except in the case where the
functionally equivalent software is developed independently by Licensee's
employees or contractors who have not had direct or indirect access to any of
inSilicon's Software, and such development is properly documented; or (h)
distribute the SGN Format to third parties, except as provided in
Section 2.1 (c).
3. QUOTATIONS AND PURCHASE ORDERS.
This is a "master agreement" to provide for licensing of Software by Licensee
requesting an Official Quotation from inSilicon and Licensee issuing a
Purchase Order based on the Official Quotation.
3.1 OFFICIAL QUOTATION. Upon Licensee's request, inSilicon will provide a
written quotation for any Associated Fees, defined below, for Software,
Reuse, new Design Group, training, and/or other products or services
requested by Licensee ("Official Quotation").
3.2 PURCHASE ORDER. Licensee will have no obligation to license any
particular Software from inSilicon, except as expressly set forth in Purchase
Orders issued by Licensee, and accepted by inSilicon. The Purchase Order must
contain all of the information set forth on the Official Quotation; any
failure to reflect all terms referenced in an Official Quotation will render
the Purchase Order void. Any terms, including pre-printed terms, contained on
a Purchase Order, contrary to the Official Quotation, shall be deemed
rejected
-2-
<PAGE>
by inSilicon unless approval of such additional terms is indicated in writing
by inSilicon. Any pre-printed terms contained in Licensee's Purchase Orders
shall be considered void. Notwithstanding anything to the contrary on the
Purchase Order, should Licensee accept delivery of any Software or services
from inSilicon, the information on an Official Quotation shall take
precedence over the corresponding Purchase Order, and all Official
Quotation(s) shall be subject to the terms and conditions of this Agreement.
3.3 Licensee will notify inSilicon if Licensee desires to license
additional Software and/or an additional Design Group, Reuse of the Software
previously licensed, and/or obtain other products or services, and inSilicon
will issue an Official Quotation to Licensee pursuant to this Section 3. Such
other services, including maintenance and support, and consulting may be
subject to execution of a separate addendum to this Agreement.
4. DELIVERY
The Software shall be shipped to Licensee within ten (10) business days after
receipt and acceptance by inSilicon of a Purchase Order.
5. SOFTWARE REUSE.
As condition of, and prior to, activation of the Reuse license set forth in
Section 2.1(d), Licensee agrees to notify inSilicon in writing when a Core or
any portion of the design based upon the Core is to be Instantiated into a
new and functionally different integrated circuit design, or is to be used in
combination with other Cores licensed hereunder in Licensee's IC. Upon
Licensee's request, inSilicon will provide Licensee an Official Quotation,
pursuant to Section 3, for such Reuse. Upon issuance of a valid Purchaser
Order by Licensee, inSilicon will invoice Licensee for the applicable Reuse
fee(s).
6. CONSIDERATION.
6.1 ASSOCIATED FEES. Licensee will pay inSilicon the associated license
fees for the Software, any applicable per unit royalties, Reuse, new Design
Group, training, and/or other service fees ["Associated Fee(s)"], as set
forth in the Official Quotation and invoiced by inSilicon. Licensee's
commitment to pay the Associated Fees to inSilicon will be non-cancelable and
the payment due will be an absolute commitment. No payment will be refundable
under any circumstances, except as set forth in Section 8 below. All payments
are payable in United States dollars and if credit is approved in advance by
inSilicon's finance department, payment terms are Net 30 days from the date
of inSilicon's invoice to Licensee, except with regard to per unit royalties
where payment will be due and payable as set forth in this Section 6.
6.2 TAXES. Associated Fees and all other amounts payable by Licensee to
inSilicon hereunder do not include any taxes, duties or charges by what ever
name called imposed by any federal, state, local, or foreign jurisdiction.
Licensee will pay any and all such taxes, duties and charges by what ever
name called (other than taxes based on inSilicon's net income) and will
provide inSilicon with satisfactory evidence of such payment on request. If a
foreign government requires taxes to be withheld on payments to be made by
Licensee hereunder, then Licensee may deduct such taxes from the amount owed
to inSilicon and pay them to the appropriate tax authority. Licensee shall
obtain and deliver to inSilicon a receipt and all other documents necessary
for inSilicon to claim a Foreign Tax Credit.
6.3 ROYALTIES. If per unit royalties are applicable, Licensee will report
and pay such royalties as set forth herein. If Licensee is required to pay
per unit royalties, Licensee will submit royalty reports to inSilicon, on a
form approved by inSilicon, before the end of the month following each
calendar quarter after the Effective Date of this Agreement. Each royalty
report will accurately set forth the number of units of each Licensee's IC
sold, or otherwise distributed or disposed of by Licensee during such
quarter. Each such report will be accompanied by payment of all Associated
Fees due to inSilicon pursuant to said report. Licensee's obligations to
furnish quarterly royalty reports and to make quarterly royalty payments to
inSilicon will continue as long as Licensee sells or distributes Licensee's
IC, the design of which is based in part on the Core. Royalty reports are
required even if Licensee reports no such sales or other distributions or
disposals of Licensee's IC. If Licensee stops selling Licensee's IC, Licensee
will promptly submit to inSilicon a written notice, a final quarterly royalty
report, a final royalty payment in the full amount of all Associated Fees due
to inSilicon and a written certification that it has stopped selling
Licensee's IC.
7. TERM AND TERMINATION.
7.1 TERM. The term of this Agreement shall begin upon the Effective Date
and shall continue for a period of one (1) year, and shall automatically
renew for subsequent one (1) year periods thereafter unless sooner terminated
in accordance with the terms hereinafter set forth.
7.2 BREACH. If Licensee breaches a material provision of this Agreement,
and does not cure such breach within thirty (30) days after written notice
from inSilicon and provide inSilicon with written notice of such cure,
inSilicon shall have the right at its option to: (a) suspend performance
until such breach is cured; (b) terminate this Agreement; or (c) seek a
combination of (a) and (b) and those remedies available at law or equity to
the extent not limited by the terms of this Agreement. The election of (a),
(b), or (c) above shall not excuse the Licensee from any obligation arising
prior to the date of such election.
7.3 INSOLVENCY. Should Licensee: (a) become insolvent; (b) make an
assignment for the benefit of creditors; (c) file or have filed against it a
petition in bankruptcy or seeking reorganization; (d) have a receiver
appointed; (e) institute any proceedings for liquidation or winding up; and
such proceeding or status has not been dismissed or remedied within ninety
days of commencement of such event, then inSilicon may, in addition to other
rights and remedies it may have, terminate this Agreement immediately by
written notice.
7.4 CONSEQUENCES. Upon final expiration or termination of this Agreement,
the licenses, rights and covenants granted hereunder and the obligations
imposed hereunder shall cease except as otherwise expressly set forth herein.
Upon final expiration or termination, Licensee shall return to inSilicon or
destroy all Confidential Information including the Software, including all
copies thereof in written or other tangible form and documentation in
Licensee's possession or control of Licensee, its agents, affiliates or
Contractors, and
-3-
<PAGE>
those copies furnished to semiconductor manufacturers, and provide to
inSilicon written notice of such return and/or destruction, signed by an
officer of Licensee, within thirty (30) days of termination, provided,
however, that Licensee shall have the right to sell or otherwise dispose of
any inventory of Licensee's IC then on hand as of the date of termination to
the extent the quantity of such inventory is in a reasonable amount under
then current business conditions. Licensee shall pay to inSilicon the
applicable Royalties if any for such Licensee's ICs. inSilicon will not be
liable to the Licensee for damages of any sort solely as a result of
terminating this Agreement in accordance with its terms, and termination of
this Agreement will be without prejudice to any other right or remedy of
either Party.
8. LIMITED WARRANTY.
If the Software has been delivered by inSilicon on physical media, inSilicon
warrants that, for a period of ninety (90) days from initial shipment, the
media will be free from material physical defects under normal use. If such a
defect is found, return the media to inSilicon for replacement or alternate
delivery of the Software as inSilicon may select. inSilicon further warrants
that for a period of ninety (90) days from initial shipment, the unmodified
Software, as delivered, will materially meet inSilicon's published
specifications. inSilicon's obligations under this warranty at inSilicon's
option are limited to providing the Licensee with a copy of corrected
Software or requesting the return of the Software and upon its return
terminating this Agreement and refunding the license fee and any maintenance
charges paid hereunder. This limited warranty shall be VOID if the Software
is modified by Licensee or any third party in any manner. THIS WARRANTY IS
EXPRESSED IN LIEU OF, AND INSILICON DISCLAIMS, ALL OTHER WARRANTIES, EXPRESS,
IMPLIED, OR STATUTORY, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY,
NONINFRINGEMENT AND FITNESS FOR A PARTICULAR PURPOSE, AND OF ALL OTHER
OBLIGATIONS OR LIABILITIES ON INSILICON'S PART.
9. INDEMNITY AND REQUIRED LICENSES
9.1 INDEMNITY. inSilicon will defend any action, or at inSilicon's option
settle any third party claims, against Licensee claiming that the unmodified
Core directly infringes a Berne Convention signatory country copyright
registered as of the date of initial delivery of the particular Core,
provided inSilicon has the sole control of any such action or settlement of
the claim, and provided Licensee notifies inSilicon within seven (7) days in
writing of the claim and gives authority, information and assistance at
inSilicon's expense necessary to settle or defend such claim. Subject to the
foregoing and the monetary limitation hereinafter stated, inSilicon shall pay
the reasonable legal and court costs and any final judgment or settlement
against Licensee which may be entered by a court of competent jurisdiction
resulting from such action.
9.2 REMEDIES. Should the Use of the unmodified Core in creating Licensee's
IC design be found to directly infringe a Berne Convention signatory country
copyright registered as of the date of initial delivery of the particular
Core, and Licensee's right to Use the unmodified Core be enjoined, then
inSilicon's sole obligations, at inSilicon's option, shall be limited to the
following: (i) obtain for Licensee the right to continue the Use the Core;
(ii) modify the Core so that it no longer infringes; (iii) replace the Core
with other functionally equivalent software that does not infringe; or (iv)
if the above remedies (i), (ii) and (iii) are in inSilicon's opinion not
reasonably commercially feasible, request the return of the Core and upon its
return terminate this Agreement.
9.3 EXCLUSIONS. inSilicon shall have no liability for, and Licensee shall
indemnify and hold inSilicon harmless from any claims arising out of: (i) the
Use of other than a current unmodified release of the Software; (ii) the Use
of the Software modified by or merged with other hardware or software by
Licensee; (iii) the Use of the Software in combination with other programs;
(iv) Licensee continuing the Use of the alleged infringing Software after
being notified thereof or after being informed of modifications that would
have avoided the alleged infringement; (v) Use of the Software which is not
strictly in accordance with the terms of this Agreement; or (vi) the Use of
the Software for any purpose not stipulated in the specifications or
documentation provided by inSilicon, (vii) if the infringement is necessary
to comply with or implement a specification or standard, or (viii)
Licensee's specifications or requirements.
9.4 REQUIRED LICENSES: Licensee is solely responsible for determining and
obtaining any and all lawfully required licenses from third parties,
including for the lawful import, export, use, sales, manufacture,
distribution or other disposal of Licensee's IC. Without limiting the
generality of the foregoing, Licensee acknowledges that Licensee is aware
that implementation or use of the Software, whether to comply with industry
specifications or standards or otherwise, may require Licensee to obtain
certain licenses. Licensee agrees that it shall be solely responsible for
determining whether its use of the Software requires licenses from third
parties, and to obtain any such license. inSilicon disclaims any obligation
to bring information about such required licenses to Licensee's attention.
9.5 SOLE LIABILITY. THE FOREGOING STATES THE SOLE LIABILITY OF INSILICON
FOR INFRINGEMENT OF ANY THIRD PARTY'S INTELLECTUAL PROPERTY RIGHTS OF ANY
KIND AND IS IN LIEU OF ANY OTHER WARRANTY AGAINST INFRINGEMENT OF ANY KIND
EXPRESS, IMPLIED, OR STATUTORY. INSILICON DISCLAIMS ALL SUCH WARRANTIES, AND
ANY REMEDY, STATUTORY OR OTHERWISE, NOT SPECIFICALLY SET FORTH IN THIS
AGREEMENT. IN NO EVENT SHALL INSILICON'S TOTAL MONETARY OBLIGATION PURSUANT
TO THIS SECTION EXCEED AN AMOUNT EQUAL TO TWICE THE LICENSE FEE, REUSE FEE
AND ROYALTIES, UP TO A MAXIMUM OF ONE (1) MILLION US DOLLARS, PAID TO
INSILICON FOR THE PARTICULAR SOFTWARE THAT GAVE RISE TO THE ACTION OR CLAIM.
10. CONFIDENTIALITY
10.1 CONFIDENTIAL INFORMATION. For purposes of this
-4-
<PAGE>
Section 10, "Confidential Information" means all technical, financial,
commercial, legal or other information, in whatever form or media, that is
not generally known to the public, whether or not it is patented, registered
or otherwise publicly protected, and includes, without limitation, the
Software. Included in this definition are the terms and conditions of this
Agreement, which shall remain confidential; however, the Parties may disclose
the existence of this Agreement and the licensor / licensee relationship
created thereby.
10.2 NONDISCLOSURE. Licensee shall maintain in confidence all Confidential
Information communicated, discussed, delivered or made available to
Licensee., Without the prior written consent of inSilicon, except as
required to fulfill the purposes of this Agreement, Licensee shall not
disclose this information to any third party, firm or corporation, including
any agent, affiliate, subsidiary, or Contractor of the Parties, other than at
Licensee's Design group location. Licensee's obligations in this Sub-Section
10.2 shall not apply if and to the extent that the Licensee documents and
establishes that the Confidential Information:
(i) was lawfully known to Licensee prior to its first receipt of the same
from inSilicon; as shown by Licensee's records in existence at the time the
Licensee received it, and at a time when the Licensee was under no obligation
to keep such information confidential;
(ii) is rightfully in the public domain on the Effective Date or is
subsequently placed in public domain by inSilicon;
(iii) was received by Licensee in good faith from a third party lawfully in
possession thereof and without an obligation of confidentiality and without
breach of this Agreement;
(iv) was developed independently by Licensee's employees or contractors who
have not had either direct or indirect access to any of inSilicon's
Confidential Information; or
(v) is disclosed with the prior written consent of inSilicon in each
instance, and only so far as the consent applies.
Licensee shall have the burden of proving the applicability of any of the
above exceptions that Licensee claims may apply. If any portion of the
Confidential Information falls within any of the above exceptions, the
remainder of the inSilicon's Confidential Information shall continue to be
subject to the requirements of this Agreement.
10.3 COPY. Licensee shall not directly or indirectly cause or permit any
Confidential Information to be copied or reproduced unless such copy or
reproduction is necessary to fulfill the purposes of this Agreement. Any such
copy shall be marked "confidential" and, when appropriate, marked as
"proprietary" to inSilicon. In addition, Licensee may make one copy for
archival purposes. No other copies may be made without inSilicon's prior
written consent.
10.4 TERM. The obligations imposed by this Section 10 shall expire five (5)
years after the final expiration or termination of this Agreement by either
Party, except for the source code of the Software for which Licensee's
obligations under this Section 10 shall remain in perpetuity
10.5 COMPLIANCE. Licensee shall take all reasonable steps to ensure
compliance of its directors, officers, employees and Contractors with the
confidentiality provisions of this Agreement. Without limiting the foregoing,
Licensee agrees to take any step, which inSilicon reasonably requests to
ensure compliance with this Section 10.
10.6 RELIEF. Licensee acknowledges that any disclosure, or use of the
Confidential Information or any part thereof, except as expressly permitted
under this Agreement, shall diminish substantially the value to inSilicon of
its proprietary rights and interests and that legal remedies in such
circumstances would be wholly inadequate. In such instance, Licensee agrees
that inSilicon shall be entitled to equitable relief to protect its interest
in and to the Confidential Information or any part thereof, including but not
limited to, injunctive relief, to Licensee's compliance with the provisions
of this Agreement, as well as monetary and other damages available to it
under any applicable law.
10.7 ACCESS TO SOFTWARE. In partial discharge of the obligations set forth
in Sub-Section 10.1 to 10.6 above, Licensee agrees that the Software and
documentation furnished hereunder shall be treated as proprietary trade
secrets of inSilicon. Licensee shall keep all Confidential Information in a
secure location and restrict access to authorized personnel only. Licensee
will not make the Software or the documentation available in any form to any
person other than to Licensee's employees and Contractors with a need to know
at the Design Group's location(s) and to semiconductor manufacturers under
the terms of Section 2.1.(c) above. Licensee represents that it maintains a
reasonable system consistent with semiconductor industry standards to protect
its own confidential business information; including written agreements
(which may be general in form) with its employees and Contractors, and that
Software and documentation will be protected by such system to the same
extent. Licensee accepts full responsibility and liability for the actions or
omissions to act of its employees, Contractors and semiconductor
manufacturers.
11. GENERAL PROVISIONS.
11.1 SEVERABILITY. If any provision of this Agreement is held to be
ineffective, unenforceable or illegal for any reason, such decision shall not
affect the validity or enforceability of any or all of the remaining portions
thereof.
11.2 NON-ASSIGNMENT. Without inSilicon's prior written consent, neither
this Agreement nor any interest therein or part thereof shall be transferable
or assignable by the Licensee, by operation of law or otherwise.
11.3 DAMAGE LIMITATION. INDEPENDENT OF ANY REMEDY LIMITATION HEREOF, AND
REGARDLESS OF WHETHER THE PURPOSE OF SUCH REMEDY IS SERVED, IT IS AGREED THAT
IN NO EVENT SHALL EITHER INSILICON OR ITS SUPPLIERS BE LIABLE FOR ANY DAMAGES
WHATSOEVER INCLUDING, WITHOUT LIMITATION, LOSS OF PROFITS, INTERRUPTION OF
SERVICE, OR LOST INFORMATION, INDIRECT, SPECIAL, INCIDENTAL OR CONSEQUENTIAL
DAMAGES OF ANY KIND UNDER THIS AGREEMENT ARISING OUT OF THE USE OF OR
INABILITY TO USE THE SOFTWARE, EVEN IF INSILICON HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. IN NO EVENT
-5-
<PAGE>
SHALL INSILICON'S TOTAL MONETARY OBLIGATION, UNDER ANY CLAIM FOR ANY CAUSES
OF ACTION UNDER ANY LEGAL THEORY PURSUANT TO THIS AGREEMENT, EXCEED THE
LICENSE FEE PAID TO INSILICON FOR THE SOFTWARE THAT GAVE RISE TO THE ACTION
OR CLAIM.
11.4 GOVERNING LAW. This Agreement shall be governed by and enforced in
accordance with California law as applied to contracts entered into in
California by California residents to be performed entirely within the State
of California and exclusive of any law or principle which would apply the law
of any other jurisdiction, and excluding the United Nations Convention on the
Sale of Goods. Any action arising out of any dispute between any of the
Parties to this Agreement shall be brought in either the Superior Court for
the County of Santa Clara or the United States District Court for the
Northern District of California, and each of the Parties hereto hereby
submits itself to the jurisdiction of such courts for purposes of any such
action.
11.5 WAIVER. Either party's failure to enforce any provision, right, or
remedy under this Agreement shall not constitute a waiver of such provision,
right, or remedy.
11.6 AUDIT. Licensee shall keep full, clear and accurate records with
respect to its Use of the Software. inSilicon shall have the right to have an
independent third party audit, upon thirty (30) days notice at all reasonable
times, all records as may contain information bearing upon Licensee's
compliance with the terms of this Agreement. inSilicon may also have an
independent third party audit once per calendar year Licensee's records
relating to the Software to determine whether Licensee has correctly reported
and calculated all of the Associated Fees due inSilicon. Licensee will give
the auditors reasonable access during normal business hours to Licensee's
premises where such records and documentation are located. If an audit
discloses an underpayment of Associated Fees, Licensee will immediately pay
inSilicon the additional fees due with interest, from the original payment
due date, at the rate of one percent per month. inSilicon and Licensee will
bear their own expenses incurred in the audit; however, if an audit discloses
an underpayment of Associated Fees of five percent (5%) or more of the total
Associated Fees originally due for any quarter, Licensee will reimburse
inSilicon for all reasonable expenses incurred by inSilicon in the audit.
11.7 OTHER LICENSES. Nothing contained in this Agreement shall be construed
as conferring by implication, estoppel or otherwise upon Licensee hereunder
any license or other right except the licenses and rights expressly granted
hereunder to Licensee. All rights reserved
11.8 EXPORT. Licensee agrees that neither the Software nor any direct
product thereof shall be exported or re-exported directly or indirectly in
violation of U.S. export laws.
11.9 NOTICE. Unless either Party notifies the other of a different address,
any notice or other communication required or permitted hereunder shall be
sufficiently given, if sent by certified or registered mail, postage prepaid,
return receipt requested, to the addresses set forth in the preamble of this
Agreement to the attention of the Legal Counsel, or to such other address as
may be designated by a Party by giving written notice to the other Party.
11.10 SURVIVAL. The provisions of Sections 1. (Definitions), 2.4 (Title),
2.5. (License Restrictions), 6 (Consideration) 7.4 (Consequences), 8 (Limited
Warranty), 9 (Indemnity and Required Licenses), 10 (Confidentiality), 11.3
(Damage Limitation), 11.4 (Governing Law), 11.6 (Audit), 11.7 (Other
Licenses), 11.8 (Export), 11.10 (Survival) and 11.13 (Government Restricted
Rights) shall survive the termination of this Agreement.
11.11 FORCE MAJEURE. Either Party shall not be responsible or liable to the
other Party for failure or delay in the performance of any of its obligations
under this Agreement for the time and to the extent such failure or delay is
caused by Force Majeure.
11.12 PUBLICITY. This Agreement expressly allows both Parties to disclose
the existence of this license and Licensee's name to third parties. Both
Parties agree to cooperate to issue a press release.
11.13 GOVERNMENT RESTRICTED RIGHTS. The Software is provided with
"RESTRICTED RIGHTS." Use, duplication, or disclosure by the Government is
subject to restrictions as set forth hereunder. Use of the Software by the
Government constitutes acknowledgment of inSilicon's proprietary rights
therein. Contractor or Manufacturer, for the purposes of this Section, is
inSilicon Corporation, 411 E. Plumeria Drive, San Jose, CA 95134. In the
event that Licensee is required, due to its contract or pending contract with
the United States Government, to provide the Core or SGN Format to the United
States Government, then Licensee shall sign an Addendum for such rights.
Licensee shall not provide the Core or SGN Format or Test Environment to the
United States Government for a proposal or bid. In the event Licensee
executes an addendum with inSilicon for the disclosure of Core or SGN Format
to the United States Government, then Licensee warrants that any agreement
Licensee may have with the United States Government, for the licensing of the
Core or SGN Format, will be in compliance with the terms and conditions of
this Agreement, and inSilicon shall have no liability or responsibility to
the United States Government for the Core or SGN Format provided by Licensee
to the United States Government. The Core or SGN Format and any accompanying
documentation provided under this Agreement are commercial computer software
and documentation developed exclusively at private expense, and in all
respects are proprietary data belonging solely to inSilicon and its
suppliers. If the Core or SGN Format and any accompanying documentation are
acquired by or on behalf of agencies or units of the United States Department
of Defense (DoD), then, pursuant to DoD FAR Supplement Section 227.7202 and
its successors (48 C.F.R. 227.7202), the United States Government's right to
use, reproduce or disclose the Core or SGN Format and/or any associated
documentation acquired under this Agreement are subject to the restrictions
of this Technology License Agreement. If the Core or SGN Format and any
accompanying documentation are acquired by or on behalf of civilian agencies
of the United States Government, then, pursuant to FAR Section 12.212 and its
successors (48 C.F.R. 12.212), the United States Government's right to use,
reproduce or
-6-
<PAGE>
disclose Core or SGN Format and/or any associated documentation acquired
under this Agreement are subject to the restrictions of this Technology
License Agreement.
11.14 ENTIRE AGREEMENT. This Agreement and its attachments contain the
entire Agreement and understanding between the Parties with respect to the
subject matter hereof and merges and supersedes all prior oral and written
agreements, understandings and representations. No addition or modification
to this Agreement is valid unless made in writing and signed by both Parties
hereto. The printed terms and conditions of any purchase order form issued by
Licensee shall not modify or be a part of this Agreement.
IN WITNESS WHEREOF, the duly authorized representatives of the Parties
have executed this Agreement effective as of the date first written above.
Each signatory, by signing below, certifies that he or she has the authority
to bind to this Agreement the respective Party for which he or she signs.
LICENSEE:
By FOR SAMPLE PURPOSES ONLY
-------------------------------------------------------
Signature
Name
-----------------------------------------------------
Type or Print
Title
-----------------------------------------------------
Date
------------------------------------------------------
INSILICON CORPORATION
By FOR SAMPLE PURPOSES ONLY
--------------------------------------------------------
Signature
Name David J. Power
------------------------------------------------------
Type or Print
Title General Counsel
-----------------------------------------------------
Date
------------------------------------------------------
-7-
<PAGE>
EXHIBIT E
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
SPECIAL TERMS FOR LICENSING OF SOFTWARE AND PERFORMANCE OF NRE WORK
IN JAPAN (RIGHTS TO IFG CODE ONLY, NO OTHER SOFTWARE):
IFG CODE: Customers will enter into a direct license with Distributor
using Distributor's license agreements currently in place whose material
terms and conditions are similar to those in the IFG Code Technology
License Agreement attached as Exhibit B; or new license agreements that
have terms and conditions the same as, or substantially similar to, the
terms and conditions of Exhibit B. As provided in the attached
Agreement, no material changes shall be made to any standard terms
without the consent of InSilicon.
InSilicon must approve all pricing for IFG licenses prior to Distributor
providing a quotation, or other offer for licensing IFG Code, to a
potential Customer or existing Customer. Such pricing shall not change
unless InSilicon provides new approval.
Distributor will remit to InSilicon a license fee of Eighty (80%) percent
of the net licensing revenue Distributor receives and recognizes. Third
party commissions and fees, if any, shall be paid by Distributor.
After execution of the license agreement Distributor will promptly
provide an executed copy of the license to InSilicon, along with a copy
of the Customer purchase order (or order amendment if license is not
purchase order based).
IFG CODE NRE WORK: Customers will enter into a NRE services agreement for
NRE Work on IFG Code with Distributor and InSilicon using service
agreements containing the provisions of Exhibit G incorporated as part of
the agreement's terms. These NRE services agreements will be executed in
the Japanese language, Distributor will provide InSilicon a translated
copy in English of the terms and conditions of such agreements.
Distributor is not authorized to perform any NRE Work on any Software
other than IFG Code unless prior written authorization is provided by
InSilicon.
The terms of Distributor's service agreement for NRE Work will establish
InSilicon as contracting directly with Customer for the NRE Work, and
InSilicon subcontracting the NRE Work to Distributor. Distributor will
invoice Customer for the NRE services performed on behalf of InSilicon.
Distributor will collect all
<PAGE>
service fees for NRE Work, and will remit to InSilicon the service fees
billed and received, less a subcontracting fee of Eighty (80%) percent.
Payment for services will be made by Customer in Japanese Yen.
After execution of the NRE service agreement by Distributor and Customer,
Distributor will promptly provide a copy of the partially executed
agreement and/or work order to InSilicon, along with a translated copy of
the Customer work order.
ALL OTHER TERRITORIES (EXCLUDING JAPAN)
SOFTWARE (OTHER THAN IFG CODE): Customers will enter into a direct
licensing arrangements with InSilicon Corporation.
InSilicon will have approval over all pricing prior to a quoted price
being submitted to the Customer or proposed Customer. Distributor will
collect all license fees, on behalf of, and for the benefit of InSilicon.
InSilicon will remit back to Distributor a commission of Twenty (20%)
percent of the net licensing revenue InSilicon receives and recognizes.
After receipt of an approved purchase order from Customer, InSilicon will
ship the Software directly to the Customer.
SOFTWARE (OTHER THAN IFG CODE ) NRE WORK: Distributor will not perform
NRE Work unless inSilicon has provided prior written approval of the
proposed work, and authorizes the terms for the NRE Work.
IFG CODE: Customers will enter into a direct license with Distributor
using Distributor's license agreements currently in place whose material
terms and conditions are similar to those in the IFG Code Technology
License Agreement attached as Exhibit B; or new license agreements that
have terms and conditions the same as, or substantially similar to, the
terms and conditions of Exhibit B. As provided in the attached
Agreement, no material changes shall be made to any standard terms
without the consent of InSilicon.
InSilicon must approve all pricing for IFG licenses prior to Distributor
providing a quotation, or other offer for licensing IFG Code, to a
potential Customer or existing Customer. Such pricing shall not change
unless InSilicon provides new approval.
Distributor will remit to InSilicon a license fee of Eighty (80%) percent
of the net licensing revenue Distributor receives and recognizes. Third
party commissions and fees, if any, shall be paid by Distributor.
After execution of the license agreement Distributor will promptly
provide an executed copy of the license to InSilicon, along with a copy
of the Customer purchase order (or order amendment if license is not
purchase order based).
<PAGE>
IFG CODE NRE WORK: Customers will enter into a NRE services agreement for
NRE Work on IFG Code with Distributor and InSilicon using service
agreements containing the provisions of Exhibit G incorporated as part of
the agreement's terms. These NRE services agreements will be executed in
the local language of the Territory. Distributor will provide InSilicon a
translated copy in English of the terms and conditions of such
agreements. Distributor is not authorized to perform any NRE Work on any
Software other than IFG Code unless prior written authorization is
provided by InSilicon.
The terms of Distributor's service agreement for NRE Work will establish
InSilicon as contracting directly with Customer for the NRE Work, and
InSilicon subcontracting the NRE Work to Distributor. Distributor will
invoice Customer for the NRE services performed on behalf of InSilicon.
Distributor will collect all service fees for NRE Work, and will remit to
InSilicon the service fees billed and received, less a subcontracting fee
of Eighty (80%) percent. Payment for services will be made by Customer in
local currency.
After execution of the NRE service agreement by Distributor and Customer,
Distributor will promptly provide a copy of the partially executed
agreement and/or work order to InSilicon, along with a translated copy of
the Customer work order.
<PAGE>
[LOGO] inSilicon Agreement #
Draft #
EXHIBIT F
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD.
INSILICON CORPORATION
LIMITED USE AGREEMENT
This LIMITED USE AGREEMENT ("Agreement") is entered into and made
effective as of , 2000 ("Effective Date") by and between
INSILICON CORPORATION, a Delaware corporation having an office at
411 East Plumeria Drive, San Jose, California 95134 U.S.A. ("inSilicon")
and , a corporation having its principal place of
business at ("Company"), and is made
with reference to the following:
WITNESSETH
WHEREAS, inSilicon designs, develops, markets and licenses proprietary
software products for Original Equipment Manufacturers ("OEM"s) including
synthesizable cores, test environments, and related system software for
personal computers, and
WHEREAS, Company is an OEM, semiconductor manufacturer, and/or a
Design House for computer systems and/or peripheral products and desires to
evaluate certain inSilicon software products as provided herein, and
WHEREAS, in order to assist Company in furtherance of the purposes set
forth in this Agreement, inSilicon is willing to disclose, and Company is
willing to receive the inSilicon product(s), as set forth in Section 1 of
this Agreement (referred to herein as "Source Code"), and such other
materials (referred to herein as "Material") as are made available by
inSilicon pertaining to the inSilicon product(s) (referred to collectively
herein as the "Information"); all on the terms stated in this Agreement.
NOW, THEREFORE, inSilicon and Company agree as follows:
1. inSilicon will disclose to Company the Information regarding the
inSilicon product(s), which may include but shall not be limited to the
Source Code. If at any future time inSilicon discloses any other technology
to Company, including without limitation any updated versions of the
inSilicon product(s), such disclosure shall be subject to each of the terms
and conditions of this Agreement. inSilicon will disclose to Company the
Source Code of the inSilicon product(s) that is specifically referenced in
this Section 1. The Source Code may be used by Company only at the site
designated by Company below. Company shall not use any part of the Source
Code for any purpose other than as permitted under Section 2 of this
Agreement, and for no other purpose. Company shall not disclose any part of
the Source Code other than to those employees who (i) need to know said
Source Code in order to understand and evaluate the Source Code and (ii) who
have signed an agreement with Company obligating them (a) not to disclose any
of the Source Code except to Company's employees who have signed similar
agreements and (b) not to use any part of the Source Code for any purpose
other than those permitted in this Agreement. Company agrees that it shall be
responsible for all actions or omissions to act of its employees. Company
acknowledges that the Source Code is the intellectual property of inSilicon
and its suppliers. Company agrees to maintain the Source Code in a secure
fashion, exercise the same degree of care to avoid publication and
unauthorized use and disclosure as Company employs with Company's own
proprietary and confidential information, but no less than a reasonable
degree of care, and shall take all reasonable
-1 of 3-
<PAGE>
precautions to protect the Source Code from theft and unauthorized disclosure
or use. Company shall promptly report any unauthorized disclosure and take
any further actions as are reasonably requested by inSilicon to prevent or
remedy any such violation.
<TABLE>
<CAPTION>
SOURCE CODE:
<S> <C>
- -------------------------------------------------------------------------------
inSilicon part number Description
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
COMPANY'S SITE COVERED BY SOURCE CODE DISCLOSURE:
Company shall not distribute Source Code to additional sites or third parties.
2. Company will USE THE INFORMATION SOLELY FOR THE PURPOSE OF EVALUATION
and to understand the logic and organization of the Source Code, and for no
other purpose whatsoever. Company assumes all risk, known and unknown,
incident to its use of the Information and inSilicon shall have no liability
of any kind to Company or any third parties arising out of such use. Company
agrees not to use the Information in any other way, including but not limited
to (i) distributing the Source Code, net lists, object code or any resultant
Company product to anyone other than inSilicon without first executing a
"Technology License Agreement" with inSilicon; or (ii) making any
modifications or creating any derivative work of the Source Code.
3. The confidentiality provisions of this Agreement shall survive any
termination of this Agreement. The confidentiality of the Source Code shall
continue in effect until such time as inSilicon may make the Source Code
available to the public without restrictions on disclosure. For a period of
five (5) years from the date of this Agreement, Company will consider the
Materials to be confidential and secret and will not disclose any of the
Materials to anyone other than those of its employees (i) who have a need to
know the Materials in furtherance of the purpose set forth in Section 2 of
this Agreement; and (ii) in accordance with the provisions of Section 1 of
this Agreement. Company agrees to not disclose to third parties the existence
or terms of this Agreement, except where obligated by law to do so.
4. Before disclosing any of the Information to any of its employees,
Company will advise each such employee that the Information is confidential
and subject to the restrictions stated in Sections 1, 2 and 3 of this
Agreement. Company further shall not make nor permit any other party to make,
any copies or abstracts of the Information, in whole or in part. Company
shall not alter or remove copyright notices from inSilicon's Information.
5. Company and its employees and agents will return to inSilicon and
shall certify through one of Company's officers that Company has (a) returned
to inSilicon, all originals, copies and abstracts of the Source Code and
Information and all versions thereof within Company's possession or under its
control and has not retained any copies thereof, (b) destroyed any copies on
computer systems of Company; and (c) will make no further use of any of the
Information for any purpose, upon the earlier of (i) fulfillment of the
purpose set forth in Section 2 of this Agreement; (ii) a request by inSilicon
that Company return the Information; or (iii) DAYS from the
Effective Date of this Agreement.
6. Nothing in this Agreement, nor the disclosure of the Information by
inSilicon to Company, shall be construed to grant to Company any rights of
any kind in any of the Information, by license or otherwise except as
expressly set forth in this Agreement. inSilicon and its suppliers retain
ownership of all intellectual property rights (including patents, copyrights,
and trademarks) in and relating to the Information.
7. This Agreement shall not apply to information that (i) on the date of
this Agreement was already known to Company or available to the public; (ii)
after the date of this Agreement becomes known to Company other
-2 of 3-
<PAGE>
than by unauthorized disclosure or becomes available to the public other than
by unauthorized disclosure; or (iii) was or is developed by Company
independently without any use of any of the Information.
8. This Agreement may not be assigned by either Party without the prior
written consent of the other party, and any attempt to assign such consent
shall be void.
9. INSILICON MAKES NO REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED,
WITH RESPECT TO THE CONFIDENTIAL INFORMATION, AND INSILICON DISCLAIMS ALL
WARRANTIES INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES OF NON-INFRINGEMENT OF THE
RIGHTS OF THIRD PARTIES (INCLUDING WITHOUT LIMITATION RIGHTS UNDER PATENT,
COPYRIGHT AND TRADE SECRETS). COMPANY ACCEPTS THE CONFIDENTIAL INFORMATION IN
"AS IS" CONDITION. INSILICON SHALL NOT BE LIABLE OR OBLIGATED IN ANY MANNER
FOR ANY DIRECT, INDIRECT, CONSEQUENTIAL OR INCIDENTAL DAMAGES EVEN IF
INSILICON HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. inSilicon shall be entitled to seek temporary and/or permanent
equitable relief (including injunctive relief) in the event of any actual or
threatened breach of this Agreement by Company, it being agreed that monetary
damages may be insufficient to adequately compensate inSilicon. Company shall
indemnify inSilicon against all losses and expenses incurred by inSilicon
(including but not limited to reasonable counsel fees) which result from the
breach of any portion of this Agreement by Company.
11. This Agreement shall be governed as a sealed instrument under
California law and is deemed to have been delivered and executed within the
State of California.
12. This Agreement constitutes the entire agreement of the parties and
supersedes any and all prior and contemporaneous oral and/or written
agreements concerning the subject matter hereof. This Agreement may not be
modified or amended except by a written instrument executed by the parties.
13. The persons executing this Agreement represent that they have
requisite corporate authority to do so.
INSILICON CORPORATION COMPANY:
By: By:
-------------------------- ------------------------------
Name: David J. Power Name:
------------------------ ----------------------------
Title: General Counsel Title:
----------------------- --------------------------
Date of Signing: Date of Signing:
------------- -----------------
-3 of 3-
<PAGE>
EXHIBIT G
TO
TECHNOLOGY DISTRIBUTOR AGREEMENT
BETWEEN INSILICON CORPORATION
AND
PHOENIX TECHNOLOGIES LTD
ADDITIONAL TERMS FOR INCORPORATION INTO DISTRIBUTOR'S SERVICE AGREEMENTS FOR NRE
WORK ON IFG CODE; DISTRIBUTOR SHALL INCLUDE THE FOLLOWING:
- "WORK PRODUCT" - shall mean all programs, systems, processes,
inventions, concepts, techniques, data, materials, or work of
authorship in whatsoever form, first produced or created by
Phoenix or for Phoenix as a result of, or related to, directly or
indirectly, to the performance of NRE work or services to IFG
Code under this Agreement, and shall include all works which may
have copyrights, trade secrets, patents, and all other
intellectual property rights, and which shall to the full manner
permissible under law be considered work made for hire.
- OWNERSHIP OF CONSULTANT'S WORK PRODUCT: Customer understand and
agrees that all Work product, to the extent it is based upon or
utilizes IFG Code, shall be owned by inSilicon Corporation, and
that Phoenix is acting as an agent in performing the NRE work or
services on behalf of inSilicon Corporation; therefore Phoenix and
Customer hereby unconditionally assigns to inSilicon Corporation:
(i) Customers entire right, title and interest, in the Work
Product to the extent the Work Product is based upon or utilizes
inSilico's firmware, including all patents, copyrights, trade
secrets, and other proprietary rights, in or based on the Work
Product; and (ii) Phoenix's entire right, title and interest, in
the Work Product to the extent the Work Product is based upon or
utilizes inSilicon's firmware, including all patents, copyrights,
trade secrets, and other proprietary rights, in or based on the
Work Product. All work performed by Phoenix pursuant to this
Agreement shall be considered work for hire and all rights and
interests flowing from such doctrine shall belong to inSilicon
Corporation.
- INDEMNITIES: Customer agrees to indemnify and hold harmless
Phoenix and inSilicon Corporation against all losses, damages and
liabilities arising out of or resulting from: (i) all injuries or
death or damage to property, including theft, on account of
performance of work or services by Phoenix employees or
subcontractors pursuant to this Agreement; (ii) any claims, suits,
allegation or actions (threatened or filed) that result from or
are related to the performance of NRE services or relate to the
Work Product. Phoenix agrees that inSilicon shall incur no
liability and shall be held harmless from, and indemnified against
all losses, damages and liabilities arising out of or resulting
from its performance of NRE Work.
<PAGE>
- WARRANTY. THE PARTIES WARRANT THAT THE WORK PRODUCT IS
PROVIDED "AS IS" WITHOUT ANY WARRANTY, INCLUDING, BUT NOT LIMITED
TO, ANY IMPLIED WARRANTIES OF OWNERSHIP, MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE. FURTHER, NO WARRANTY IS MADE
THAT THE WORK PRODUCT IS FREE OF PATENT, COPYRIGHT, TRADEMARK
AND/OR TRADE SECRET INFRINGEMENT CLAIMS BY THIRD PARTIES. EXCEPT
AS EXPRESSLY SET FORTH IN THIS SECTION, NEITHER PARTY MAKES ANY
WARRANTIES OR REPRESENTATIONS OF ANY KIND, EXPRESS OR IMPLIED,
WITH RESPECT TO INFORMATION WORK PRODUCT OR ANY OTHER WORK OR
OTHERWISE UNDER THIS AGREEMENT, AND EACH PARTY HEREBY EXPRESSLY
DISCLAIMS ALL WARRANTIES, INCLUDING, BUT NOT LIMITED TO, THE
IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR
PURPOSE AND TITLE.
- LIMITATION OF LIABILITIES. NEITHER PHOENIX NOR INSILICON SHALL BE
LIABLE FOR INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES,
INCLUDING LOST PROFITS IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT, EVEN IF ADVISED OF THE LIKELIHOOD OF SUCH DAMAGES, OR
FOR ANY DIRECT DAMAGES.
- INSILICON INDEMNIFICATION. InSilicon will not indemnify any Work
Product.
<PAGE>
KEY EXECUTIVE OFFICER SEVERANCE AGREEMENT
This Key Executive Officer Severance Agreement (the "Agreement") is effective
as of November 30, 1999 ("Effective Date"), and is by and between WAYNE
CANTWELL (the "Key Executive"), an individual currently residing at 849
Valparaiso Ave., Menlo Park, CA 94025 and INSILICON CORPORATION, a Delaware
corporation (the "Company"), with its principal place of business at 411 East
Plumeria Drive, San Jose, CA 95134.
R E C I T A L S
A. The Company desires to employ Key Executive and Key Executive
desires to provide employment services to the Company, on all the terms and
conditions set forth herein.
B. The Board of Directors of the Company believes it to be in the
best interest of the Company and its stockholders to provide the Key Executive
with certain severance benefits should Key Executives employment with the
Company terminate under certain circumstances, and the parties wish to provide
Key Executive with financial security and with sufficient incentive and
encouragement for Key Executive to remain with the Company
C. Certain capitalized terms used in the Agreement are defined in
Section 9 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Key Executive by the Company, the
parties agree as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. The Board of Directors has appointed
Key Executive as President and Chief Executive Officer of Company. Key
Executive shall have such other or additional duties or positions with the
Company, its subsidiaries or affiliates as the Board of Directors of the
Company shall determine. The Key Executive shall comply with and be bound by
the Company's operating policies, by-laws, procedures and practices from
time to time in effect during his employment. Key Executive shall devote his
full time, skill and attention to his duties and responsibilities, and shall
perform them faithfully, diligently and competently, and the Key Executive
will use his best efforts to further the business of the Company and its
affiliated entities. In connection with his employment under this agreement,
Key Executive shall be based at the Company's principal place of business
which is currently located in San Jose, California, but Key Executive
understands and agrees that he may be required to perform services anywhere
in the world, and will perform his employment at such location or locations
as may be determined by the Board of Directors of the Company.
2. BASE COMPENSATION. The Company will pay Key Executive an annual base
salary as authorized by the Compensation Committee of the Board of Directors. As
of the Effective Date of this Agreement Key Executive's annual base salary will
be $200,000.00 ("Base Compensation"). The Company will pay the Base
Compensation in accordance with normal Company payroll practices. The
<PAGE>
Base Compensation shall be reviewed annually and may be increased from time
to time, in which case the "Base Compensation" will refer to the base salary
earned by Key Executive at the time in question.
3. KEY EXECUTIVE'S BENEFITS. The Key Executive shall be eligible to
participate in the employee benefit plans and Executive compensation programs
maintained by the Company applicable to other Executives of the Company,
including (without limitation) retirement plans, savings or profit-sharing
plans, stock option and employee stock purchase plans, incentive or other bonus
plans, life, disability, health, medical and hospital, accident and other
insurance programs, paid vacations, and similar plans or programs, subject in
each case to the terms and conditions of the plan or program in question and to
the sole determination of the Board of Directors, or any committee administering
such plan or program. The Company agrees that Key Executive shall maintain and
carry over to Company his current accrued vacation and sick time from his
employment with Phoenix Technologies Ltd., and thereafter while being employed
by Company earn vacation at a rate of 20 days per year provided Key Executive
does not accrue a total of more than 40 days of vacation. After Key Executive
has accrued 40 days of vacation, Key Executive shall no longer be eligible to
earn further vacation until he uses some vacation, at which point Key Executive
can again begin to accrue vacation up to the 40 day vacation cap. The following
additional Key Executive benefits will be made available:
(a) EXCHANGE OF PHOENIX STOCK OPTIONS. Key Executive shall be able to
participate in Company's option exchange plan, allowing Key Executive to
exchange his vested and unvested Phoenix stock options for Company stock options
at an exchange ratio of 1.862 Company stock options for each Phoenix stock
option. The vesting schedule for all stock options exchanged under the plan will
remain unchanged, generally over four years. The 35,000 stock options granted
on July 1, 1999, will continue to vest according to the terms of the agreed upon
schedule between Key Executive and Phoenix, a copy of which is attached hereto
as Exhibit B.
(b) ADDITIONAL STOCK OPTION GRANTS. Key Executive will receive an
additional grant of stock options as of December 21, 1999, in the amount of
205,009 shares at $7.36 per share. These options will vest ratably over a
four-year term and expire on December 21, 2009. In addition, Key Executive
will be entitled to receive future annual grants of options during the term
of this Agreement at the discretion of the Compensation Committee of the
Board of Directors.
(b) BONUS ELIGIBILITY AND PAYMENT. The target amount of Key
Executive's fiscal year 2000 bonus will be $100,000.00. Actual payments
under the bonus plan will be based on application of the terms of the
published Executive Bonus Plan.
(c) DIRECTORS AND OFFICERS INSURANCE. The Company shall purchase
and maintain in force Directors and Officers insurance, from a company
qualified to conduct such business in California, having an A.M. Best rating
of at least A (or equivalent rating), insuring against claims resulting from
the Key Employee's performance of duties and responsibilities on behalf of
Company. Such coverage shall be in an amount at least equal to any coverage
in effect on behalf of the Key Employee with respect to his duties as an
officer of Phoenix Technologies Ltd., having standard coverage for past
present and future directors, with Key Executive having the benefit of such
coverage after leaving Company.
2
<PAGE>
4. OTHER BUSINESS AFFILIATIONS. In addition to Key Executive's obligations
under Section 8, Key Executive agrees that, without the approval of the Board of
Directors of the Company, he shall not, during the term hereof, devote any time
to any business affiliation which would interfere with or derogate from his
obligations under this Agreement with respect of the Company and any of its
subsidiaries, parents or affiliates, except that Key Executive may serve as a
member of a Board of Directors with outside companies, for which Key Executive
shall be unrestricted in becoming a member, provided his fiduciary duties to
Company are at all times maintained and Key Executive has received prior
approval from the Board of Directors.
5. EXPENSES. The Company shall reimburse Key Executive for all reasonable
business expenses incurred in the performance of his duties hereunder on behalf
of the Company, upon submission of expense reports to the extent necessary to
substantiate the Company's federal income tax deductions for such expenses under
the Internal Revenue Code (as amended) and the Regulations thereunder and
according to such expense report regulations as may be established by the Board
of Directors of the Company.
6. TERM AND TERMINATION.
(a) TERM OF AGREEMENT. Key Executive's employment with the Company
under this Agreement shall continue from the Effective Date until terminated in
accordance with the terms of this Agreement.
(b) TERMINATION FOR CAUSE. The Board Of Directors may terminate this
Agreement and the employment of Key Executive hereunder, with immediate effect,
including, without limitation, the termination of all compensation and benefits
(except as may be expressly provided in this Agreement), for Cause, as defined
hereunder. However, the Key Executive shall remain eligible for severance and
other benefits (if any) as may then be available under the Company's then
existing severance and benefit plans and policies at the time of Key Executive's
termination.
(c) TERMINATION NOT FOR CAUSE If the Company terminates Key
Executive's employment for any reason other than Cause, or Key Executive's
employment is terminated by Constructive Termination as defined in this
Agreement, the Key Executive shall be entitled to receive the severance benefits
stated in Section 7(a) below unless the termination or Constructive Termination
is the result of death or disability, in which event Key Executive shall be
entitled to receive the benefits set forth in Section 7(b), if any. Both Company
and Key Executive agree that Key Executive's employment is "at will" and may be
terminated be either party at any time for any reason.
(d) EXECUTIVE'S RESIGNATION. In the event Key Executive voluntarily
resigns, Key Executive shall give the Board of Directors thirty (30) days
written notice of resignation. Upon such notice, the Board of Directors, at its
discretion, may terminate the relationship immediately, but in such event the
Company's obligation to Key Executive shall be limited to compensation through
the remainder of the thirty (30) days resignation notice period.
(e) RETURN OF INFORMATION. On termination of employment for any
reason, Key Executive will return to the Company all originals and copies of all
or any part of: lists and sources of customers and suppliers; lists of
employees; proposals to clients or drafts of proposals; business plans and
3
<PAGE>
projections; reports; job notes; specifications; and drawings pertaining to the
Company or its customers; or any and all other things, equipment and written
materials obtained by Key Executive during the course of employment from the
Company or from any client of the Company, unless Company provided in writing
its waiver of the forgoing.
7. SEVERANCE BENEFITS.
(a) TERMINATION NOT FOR CAUSE. If the Board of Directors terminates
Key Executive's employment for any reason other than Cause, or Key Executive's
employment is terminated by Constructive Termination as defined in this
Agreement, the Key Executive shall be entitled to receive the following
severance benefits:
(1) GUARANTEED SEVERANCE PAYMENTS. Subject to Key
Executive entering into a Release of Claims (in a form substantially
similar to the form of release of claims attached as Exhibit A), Key
Executive shall be entitled to receive severance payments for twelve (12)
months from the date of termination at Key Executive's then current base
salary, which may be greater than, but will not be less than the Base
Compensation (the "Guaranteed Severance Payment"). The Guaranteed
Severance Payment will be paid to Key Executive in accordance with the
Company's standard payroll practices. Upon termination, Key Executive
will also be entitled to receive a pro-rated portion of his then current
targeted bonus for the fiscal year of his termination as described in
Section 3(b) based on the date that Key Executive's employment is
terminated.
(2) MEDICAL BENEFITS. The Company, at the Company's sole
expense, shall provide Key Executive (and, if applicable, his eligible
dependents) with the same level of health coverage and benefits as in
effect for Key Executive (and, if applicable, his eligible dependents) on
the day immediately preceding the day of the Key Executive's termination
of employment (the "Company-Paid Coverage"); provided, however, that: (i)
Key Executive and each eligible dependent constitutes a qualified
beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue
Code of 1986, as amended (collectively, "Qualified Beneficiaries"); (ii)
each Qualified Beneficiary elects continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), within the time period prescribed pursuant to COBRA; and (iii)
if the health coverage is no longer offered by the Company to its current
employees, then the Company shall be under no obligation to continue the
existing coverage for Key Executive (and, if applicable, his eligible
dependents). Such Company-Paid Coverage shall continue in effect for
each Qualified Beneficiary until the earlier of (i) the Qualified
Beneficiary is no longer eligible to receive continuation coverage under
COBRA, or (ii) thirty (30) months following termination of employment.
Except as described in subsection(2)(ii) above, the Company's obligations under
paragraphs 1 and 2 of this Section 7(a) shall terminate upon Key Executive's
breach of his agreements under Section 8 hereof.
(b) DISABILITY; DEATH. If the Company terminates the Key Executive's
employment as a result of the Executive's Disability or if the Key Executive's
employment terminates due to the death of the Key Executive, then the Key
Executive shall not be entitled to receive severance or other benefits pursuant
to this Agreement, unless the Company has no benefit plan in place to account
for death or disability of employees, in which case Key Executive will be
entitled to receive the Guaranteed
4
<PAGE>
Severance Payment specified in Section 7(a)(1). Key Executive shall remain
eligible for those severance and other benefits (if any) as may then be
available under the Company's then existing severance and benefits plans and
policies at the time of Executive's termination or death.
(c) STOCK OPTIONS. All of Key Executive's options not otherwise
forfeited under the terms of this Agreement will continue to vest during the
twelve month Severance Benefits Period. Key Executive will forfeit options
that have not vested as of the end of the twelve month Severance Benefits
Period. Key Executive and the Company will negotiate a consulting agreement
under which Key Executive will provide advisory services to the Company's
executive management or board of directors during the 12 months after his
termination. In the event the Company undergoes a Change in Control, or other
material event in which the Company or Key Executive's position undergoes a
material change as a result of the material event, Key Executive's stock
options will accelerate vesting such that fifty percent (50%) of the options
will vest at the completion of the Change in Control, or material event, and
the remaining fifty percent (50%) will vest 90 days thereafter. If there is
an inconsistency between this Agreement and the Company's stock option plans
or a stock option agreement, the terms of this Agreement shall prevail.
(d) INSIDER TRADING. While Key Executive receives severance payments,
Executive will no longer be deemed a Section 16(b) officer, but agrees to be
considered an "insider" and comply with the Company's Insider Trading Policy,
unless otherwise agreed to in writing by the Board of Directors for matters
related to reduction of Key Executive's stock holding.
8. COVENANTS NOT TO COMPETE AND NOT TO SOLICIT.
(a) During the term hereof, Key Executive agrees that he shall not,
directly or indirectly, engage on his own behalf, or as owner, manager, advisor,
principal, agent, partner, employee consultant, director, officer, stockholder
or other proprietor owning more than a five percent (5%) interest, in any firm,
corporation, partnership or other organization which is in the business of
manufacturing, selling or distributing products in competition with the products
of the Company. In case of any such ownership or participation, Key Executive
shall furnish a detailed statement thereof to the Board of Directors of the
Company, and, as from time to time requested by said Board, resubmit for
approval a detailed statement thereof, which statement may be approved by said
Board as not constituting such a violation or conflict, and in the event said
Board determines that such violation or conflict exists, Key Executive shall
immediately divest himself of such ownership or participation (or of
representing or promoting others engaged in any such business). It is intended
and agreed that during the term of this Agreement, Key Executive will not
knowingly perform any act which may confer any competitive benefit or advantage
upon any enterprise competing with the Company or any successor.
(b) Upon the termination of the Key Executive 's employment with the
Company within the terms of Section 7(a) and for a period of eighteen (18)
months thereafter, Key Executive agrees that he shall not, on his own behalf, or
as owner, manager, advisor, principal, agent, partner, employee consultant,
director, officer, stockholder or other proprietor owning more than a five
percent (5%) interest of any business entity, or otherwise, in any territory in
which the Company is actively engaged in business: (i) open or operate any
business which is in competition with any business of the Company, (ii) act as
an employee, agent, advisor or consultant of any competitor of the Company,
(iii) take any action to or do anything reasonably intended to divert business
from the Company or influence or attempt to influence any existing customers of
the Company to cease doing business with the Company
5
<PAGE>
or to alter its business relationship with the Company, or (iv) take any
action or do anything reasonably intended to influence any suppliers of the
Company to cease doing business with the Company or to alter its business
relationship with the Company. Key Executive further covenants and agrees
that he will not for himself or on behalf of any other person, partnership,
firm, association or corporation in any territory served by the Company,
directly or indirectly solicit or accept business from any of the Company's
existing customers for the purchase or sale of products or services of a like
kind to those sold or provided the Company. The foregoing covenant shall not
be deemed to prohibit Key Executive from acquiring an investment not more
than one percent (1%) of the capital stock of a competing business, whose
stock is traded on a national securities exchange or through the automated
quotation system of a registered securities association.
(c) During the term of this Agreement, and upon the termination of the
Key Executive's employment with the Company within the terms of Section 7(a) and
for a period of eighteen (18) months thereafter, Key Executive agrees that he
shall not either directly solicit, induce, attempt to hire, recruit, encourage,
take away, hire any employee of the Company or cause any employee of the Company
to leave his or her employment either for Key Executive or for any other entity
or person.
(d) Key Executive represents that he (i) is familiar with the
foregoing covenants not to compete and not to directly solicit, and (ii) is
fully aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants. Key Executive agrees that the provisions of this Section 8 contain
restrictions that are not greater than necessary to protect the interests of the
Company. In the event of the breach or threatened breach by Key Executive of
this Section 8, the Company, in addition to all other remedies available to it
at law or in equity, will be entitled to seek injunctive relief and/or specific
performance to enforce this Section 8.
(e) Company will respond within14 days to any written request by Key
Executive to exclude a particular company or business entity from the scope of
this Section 8. Company will not unreasonably deny such a request. The parties
agree that a passive financial investment by Key Executive in a third party will
not constitute competition within the scope of this Section 8.
9. DEFINITION OF CERTAIN TERMS. The following terms referred to in this
Agreement shall have the following meanings for the purposes of this Agreement
only:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Key Executive in connection with his responsibilities as President
and Chief Executive Officer and intended to result in substantial personal
enrichment of the Key Executive, (ii) conviction of a felony resulting from any
action or failure to act by the Key Executive in the performance of Executive's
duties, that is injurious to the Company, (iii) a willful act by the Key
Executive which constitutes gross misconduct and which results in material
injury to the Company, (iv) continued violations by the Key Executive of the his
material obligations under this Agreement that are demonstrably willful and
deliberate on the Key Executive's part after there has been delivered to the Key
Executive a written demand for performance from the Company which describes the
basis for the Company's belief that the Key Executive has not substantially
performed his duties; and (v) the breach by Key Executive of the non-competition
provisions of this Agreement, or of the Company's standard form of
6
<PAGE>
confidentiality and proprietary inventions agreement, which shall be
supplemental hereto and incorporated by reference herein.
(b) CONSTRUCTIVE TERMINATION. "Constructive Termination" shall mean
any of the following: (1) any material reduction in compensation, including
bonus, unless such a reduction is applied, by resolution of the Board of
Directors, to all members of the Company's officers; (2) reduction of Key
Executive's title; (3) material reduction in Key Executive's responsibilities;
(4) a relocation that is more than 75 miles from San Jose, California; and (5)
material reduction in the number of Company employees in the organization for
which Key Executive is responsible (said reduction not being based on voluntary
resignation of Company employees, but through an internal reorganization, or
other shifting of personnel that is not under the control of Key Executive).
(c) DISABILITY. "Disability" shall mean that Key Executive has been
unable to perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least
ninety (90) days after its commencement, is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the Key
Executive or the Key Executive's legal representative (such Agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 days' written notice by the
Company of its intention to terminate the Key Executive 's employment. In the
event that the Key Executive resumes the performance of substantially all of his
duties hereunder before the termination of his employment becomes effective, the
notice of intent to terminate shall automatically be deemed to have been
revoked.
(d) CHANGE IN CONTROL. "CHANGE IN CONTROL" means the occurrence of
any of the following:
(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other
corporate reorganization, if more than 50% of the
combined voting power of the continuing or surviving
entity's securities outstanding immediately after
such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the
Company immediately prior to such merger,
consolidation or other reorganization;
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
(iii) Any transaction as a result of which any person
becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company
representing at least 20% of the total voting power
represented by the Company's then outstanding voting
securities. For purposes of this Paragraph (iii),
the term "person" shall have the same meaning as
when used in sections 13(d) and 14(d) of the
Exchange Act but shall exclude:
7
<PAGE>
(A) A trustee or other fiduciary holding
securities under an employee benefit plan of the
Company or a subsidiary of the Company;
(B) A corporation owned directly or indirectly by
the stockholders of the Company in substantially the
same proportions as their ownership of the common
stock of the Company; and
(C) Any direct or indirect acquisition of the
Company's voting securities by Phoenix Technologies
Ltd.
A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or
to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company's
securities immediately before such transactions.
10. NO BREACH OF DUTY. Key Executive represents that Key Executive's
performance of this Agreement and as an employee of the Company does not and
will not breach any agreement or duty to keep in confidence proprietary
information acquired by Key Executive in confidence or in trust prior to
employment with the Company. Key Executive has not and will not enter into any
agreement either written or oral in conflict with this Agreement. Key Executive
is not presently restricted from being employed by the Company or entering into
this Agreement.
11. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and assets shall assume the obligations under this Agreement and agree expressly
to perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and assets which
executes and delivers the assumption agreement described in this Section or
which becomes bound by the terms of this Agreement by operation of law.
(b) KEY EXECUTIVE'S SUCCESSORS. The terms of this Agreement, and all
rights of the Key Executive hereunder, shall inure to the benefit of, and be
enforceable by, the Key Executive's personal or legal representatives,
executors, administrators, successors, heirs, devisees and legatees.
8
<PAGE>
12. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Key Executive,
mailed notices shall be addressed to him at the home address that he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Vice President and General Counsel.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
pursuant to Section 6(b) hereof shall be communicated by a notice of termination
to the Key Executive given in accordance with Section 12(a) of this Agreement.
Such notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 15 days after
the giving of such notice).
13. ARBITRATION.
(a) The Company and Key Executive agree that any dispute or
controversy arising out of, relating to, or in connection with this
Agreement, the interpretation, validity, construction, performance, breach,
or termination hereof, or any of the matters herein released, excepting
claims under applicable workers' compensation law and unemployment insurance
claims, shall be settled exclusively by binding arbitration to be held in
Santa Clara County, California in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration
Association (the "Rules"). The arbitrator may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall
be final, conclusive and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having jurisdiction.
This provision confers complete and total jurisdiction for final, binding
arbitration with full and complete relief for any and all covered disputes,
including all contract, tort, and statutory claims, and any other causes of
action unless otherwise prohibited by law. This arbitration provision will
survive after the termination of this Agreement.
(b) The arbitrator(s) shall apply California law to the merits of any
dispute or claim, without reference to conflicts of law rules. Key Executive
hereby consents to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or relating to
this Agreement or relating to any arbitration in which the Parties are
participants, and hereby waives any rights he may have to a jury trial with
respect thereto.
(c) KEY EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. KEY EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS
AGREEMENT, KEY EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, OR ANY OF THE MATTERS
HEREIN TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A
WAIVER OF KEY EXECUTIVE'S RIGHT TO A
9
<PAGE>
JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL DISPUTES RELATING TO ALL
ASPECTS OF THIS SEVERANCE AGREEMENT AND RELEASE OF ALL CLAIMS.
14. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Key Executive and by an authorized officer of the
Company (other than the Key Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(b) WHOLE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes in its entirety any and all prior undertakings and agreements of the
Company and Key Executive with respect to the subject matter hereof.
(c) CHOICE OF LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal substantive
laws but not the choice of law rules of the State of California.
(d) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(e) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 14(e) shall be
void.
(f) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and year
first above written.
INSILICON CORPORATION Key Executive: PRESIDENT AND CEO
/s/ Albert E. Sisto /s/ Wayne Cantwell
- --------------------------------- -----------------------------------
By: Albert E. Sisto By: Wayne Cantwell
Chairman of the Board Date: 2/11/2000
-----------------
10
<PAGE>
EXHIBIT A
In consideration for Key Executive accepting the benefits under his Key
Executive Officer Severance Agreement dated November 30, 1999, Key Executive
agrees to release Company of all claims arising from or relating to his
employment as set forth below.
Key Executive hereby forever waives for himself, his attorneys, heirs,
executors, administrators, successors and assigns any claim against Company,
including its subsidiaries, affiliates, insurers, shareholders, officers,
directors and employees (the "Parties Released"), for any action, loss, expense
or any damages arising from any occurrence from the beginning of time until the
date of the signing of this Agreement and arising or in any way resulting from
Executive's employment with Company or the termination thereof. The only
exceptions to the above waiver are claims by Employee under any worker's
compensation or unemployment statutes and any right arising under this
Agreement. Employee represents that he has no current intention to assert any
claim on any basis against the Parties Released. Company releases its claims on
intellectual property created by Employee after the date of execution of this
Agreement.
KEY EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN GIVEN AT LEAST TWENTY-ONE
(21) DAYS WITHIN WHICH TO CONSIDER SIGNING THIS RELEASE. KEY EXECUTIVE MAY
REVOKE THIS AGREEMENT BY WRITTEN NOTICE TO COMPANY WITHIN SEVEN DAYS FOLLOWING
ITS EXECUTION. THIS RELEASE SHALL NOT BECOME EFFECTIVE AND BINDING UNTIL SUCH
PERIOD HAS EXPIRED. KEY EXECUTIVE WILL RETURN ALL CONSIDERATION AND BENEFITS
PROVIDED IN CONNECTION WITH THE GRANTING OF THIS RELEASE IF HE REVOKES THE
RELEASE.
In the event of breach of this Agreement by Company, Executive's
exclusive remedy for such breach shall be limited to the enforcement of the
terms of this Agreement.
COMPANY: KEY EXECUTIVE:
INSILICON CORPORATION
- --------------------------------- -----------------------------------
By: Name:
---------------------------- -----------------------------
Title:
-------------------------
11
<PAGE>
EXHIBIT B
INCENTIVES. As a retention and performance incentive, Company agrees to grant
to Executive a non-qualified option to purchase 35,000 shares of the Company's
common stock at an exercise price of $9.30 per share, the vesting of which will
be according to the terms set forth below.
a. QUARTERLY OBJECTIVES. Company and Executive have agreed that
22,500 shares (the "Objectives Shares") will vest ratably over a four-year
period from the date of grant. Vesting will accelerate, however, upon the
completion of each of the three sets of objectives identified in Exhibit B.
The number of shares subject to accelerated vesting will be based upon: 1)
the number of the three objectives met times 7,500 shares (the "Total
Accelerated Shares"), less 2) the number of Objectives Shares previously
vested. The Company will have the right to repurchase up to 50% of: 1) the
exercised Objectives Shares, less 2) the Total Accelerated Shares, at a
repurchase price of $9.30 per share. The determination of whether Executive
has completed objectives will be in Company's sole discretion.
b. CORPORATE RE-STRUCTURING. If the Company completes a Corporate
Re-Structuring, options on 12,500 shares will immediately vest in full as of
the date of such transaction. Until such a restructuring event occurs, this
portion of options will vest according to the Company's standard four-year
vesting schedule commencing on the date of grant. . "Corporate
Re-Structuring" shall mean the sale, divestiture, or merger of the Company's
Semiconductor Intellectual Property Group with another entity such that
Company no longer owns the majority of its net assets or equity, or controls
its operations
12
<PAGE>
KEY EXECUTIVE OFFICER SEVERANCE AGREEMENT
This Key Executive Officer Severance Agreement (the "Agreement") is effective
as of December 21, 1999 ("Effective Date"), and is by and between WILLIAM E.
MEYER (the "Key Executive"), an individual currently residing at 20380 Stevens
Creek Blvd. #103, Cupertino, CA 95014 and INSILICON CORPORATION, a Delaware
corporation (the "Company"), with its principal place of business at 411 East
Plumeria Drive, San Jose, CA 95134.
R E C I T A L S
A. The Company desires to employ Key Executive and Key Executive
desires to provide employment services to the Company, on all the terms and
conditions set forth herein.
B. The Board of Directors of the Company believes it to be in the
best interest of the Company and its stockholders to provide the Key Executive
with certain severance benefits should Key Executives employment with the
Company terminate under certain circumstances, and the parties wish to provide
Key Executive with financial security and with sufficient incentive and
encouragement for Key Executive to remain with the Company
C. Certain capitalized terms used in the Agreement are defined in
Section 9 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Key Executive by the Company, the
parties agree as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. The Board of Directors has appointed
Key Executive as Executive Vice President and Chief Financial Officer of the
Company. Key Executive shall have such other or additional duties or positions
with the Company, its subsidiaries or affiliates as the Board of Directors of
the Company shall determine. The Key Executive shall comply with and be bound by
the Company's operating policies, by-laws, procedures and practices from time to
time in effect during his employment. Key Executive shall devote his full time,
skill and attention to his duties and responsibilities, and shall perform them
faithfully, diligently and competently, and the Key Executive will use his best
efforts to further the business of the Company and its affiliated entities. In
connection with his employment under this agreement, Key Executive shall be
based at the Company's principal place of business which is currently located in
San Jose, California, but Key Executive understands and agrees that he may be
required to perform services anywhere in the world, and will perform his
employment at such location or locations as may be determined by the Board of
Directors of the Company.
2. BASE COMPENSATION. The Company will pay Key Executive an annual base
salary as authorized by the Compensation Committee of the Board of Directors,
or in the absence of a Compensation Committee, by the Board of Directors. As
of the January 1st, 2000, Key Executive's annual base salary will be
$173,250.00 ("Base Compensation"). The Company will pay the Base
Compensation in accordance with normal Company payroll practices. The Base
Compensation shall be reviewed annually
<PAGE>
and may be increased from time to time, in which case the "Base Compensation"
will refer to the base salary earned by Key Executive at the time in question.
3. KEY EXECUTIVE'S BENEFITS. The Key Executive shall be eligible to
participate in the employee benefit plans and Key Executive compensation
programs maintained by the Company applicable to other Key Executives of the
Company, including (without limitation) retirement plans, savings or
profit-sharing plans, stock option and employee stock purchase plans,
incentive or other bonus plans, life, disability, health, medical and
hospital, accident and other insurance programs, paid vacations, and similar
plans or programs, subject in each case to the terms and conditions of the
plan or program in question and to the sole determination of the Board of
Directors, or any committee administering such plan or program. The Company
agrees that Key Executive shall maintain and carry over to Company his
current accrued vacation and sick time from his employment with Phoenix
Technologies Ltd., and thereafter while being employed by Company earn
vacation based upon the Company's standard vacation policy. After Key
Executive has accrued 40 days of vacation, Key Executive shall no longer be
eligible to earn further vacation until he uses some vacation, at which point
Key Executive can again begin to accrue vacation up to the 40 day vacation
cap. The following additional Key Executive benefits will be made available:
(a) EXCHANGE OF PHOENIX STOCK OPTIONS. Key Executive shall be able to
participate in Company's option exchange plan, allowing Key Executive to
exchange his vested and unvested Phoenix stock options for Company stock options
at an exchange ratio of 1.862 Company stock options for each Phoenix stock
option. The vesting schedule for all stock options exchanged under the plan will
remain unchanged, generally over four years.
(b) ADDITIONAL STOCK OPTION GRANTS. Key Executive will receive an
additional grant of stock options as of December 21, 1999, in the amount of
60,000 shares at $7.36 per share. These options will vest on December 31, 2003,
except for performance accelerations to be documented separately, and expire on
December 21, 2009. In addition, Key Executive will be entitled to receive
future annual grants of options during the term of this Agreement at the
discretion of the Compensation Committee of the Board of Directors.
(c) BONUS ELIGIBILITY AND PAYMENT. The target amount of Key
Executive's fiscal year 2000 bonus will be $70,000.00. Actual payments under
the bonus plan will be based on application of the terms of the published Key
Executive Bonus Plan.
(d) DIRECTORS AND OFFICERS INSURANCE. The Company shall use its best
efforts to purchase and maintain in force Directors and Officers insurance, from
a company qualified to conduct such business in California, having an A.M. Best
rating of at least A (or equivalent rating), insuring against claims resulting
from the Key Employee's performance of duties and responsibilities on behalf of
Company. Such coverage shall be in an amount at least equal to any coverage in
effect on behalf of the Key Employee with respect to his duties as an officer of
Phoenix Technologies Ltd., having standard coverage for past present and future
directors, with Key Executive having the benefit of such coverage after leaving
Company for a period of 2 years after termination of employment.
4. OTHER BUSINESS AFFILIATIONS. In addition to Key Executive's
obligations under Section 8, Key Executive agrees that, without the approval
of the Board of Directors of the Company, he shall not, while
2
<PAGE>
employed by the Company, devote any time to any business affiliation which
would interfere with or derogate from his obligations under this Agreement
with respect of the Company and any of its subsidiaries, parents or
affiliates, except that Key Executive may serve as a member of a Board of
Directors with outside companies, for which Key Executive shall be
unrestricted in becoming a member, provided his fiduciary duties to Company
are at all times maintained and Key Executive has received prior approval
from the Board of Directors.
5. EXPENSES. The Company shall reimburse Key Executive for all reasonable
business expenses incurred in the performance of his duties hereunder on behalf
of the Company, upon submission of expense reports to the extent necessary to
substantiate the Company's federal income tax deductions for such expenses under
the Internal Revenue Code (as amended) and the Regulations there under and
according to such expense report regulations as may be established by the Board
of Directors of the Company.
6. TERM AND TERMINATION.
(a) TERM OF EMPLOYMENT. Key Executive's employment with the Company
under this Agreement shall continue from the Effective Date until terminated in
accordance with the terms of this Agreement.
(b) TERMINATION FOR CAUSE. The Board Of Directors may terminate this
Agreement and the employment of Key Executive hereunder, with immediate effect,
including, without limitation, the termination of all compensation and benefits
(except as may be expressly provided in this Agreement), for Cause, as defined
hereunder. However, the Key Executive shall remain eligible for severance and
other benefits (if any) as may then be available under the Company's then
existing severance and benefit plans and policies at the time of Key Executive's
termination.
(c) TERMINATION NOT FOR CAUSE If the Company terminates Key
Executive's employment for any reason other than Cause, or Key Executive's
employment is terminated by Constructive Termination as defined in this
Agreement, the Key Executive shall be entitled to receive the severance benefits
stated in Section 7(a) below unless the termination or Constructive Discharge is
as a result of death or disability, in which event Key Executive shall be
entitled to receive the benefits set forth in Section 7(b), if any. Both the
Company and Key Executive agree that Key Executive's employment is "at will" and
may be terminated by either party at any time for any reason.
(d) KEY EXECUTIVE'S RESIGNATION. In the event Key Executive
voluntarily resigns, Key Executive shall give the Board of Directors thirty (30)
days written notice of resignation. Upon such notice, the Board of Directors,
at its discretion, may terminate the relationship immediately, but in such event
the Company's obligation to Key Executive shall be limited to compensation
through the remainder of the thirty (30) days resignation notice period.
(e) RETURN OF INFORMATION. On termination of employment for any
reason, Key Executive will return to the Company all originals and copies of
all or any part of: lists and sources of customers and suppliers; lists of
employees; proposals to clients or drafts of proposals; business plans and
projections; reports; job notes; specifications; and drawings pertaining to
the Company or its customers; or any and all other things, equipment and
written materials obtained by Key Executive during the course of employment
from the Company or from any client of the Company, unless Company provides
in writing its waiver of the forgoing.
3
<PAGE>
7. SEVERANCE BENEFITS.
(a) TERMINATION NOT FOR CAUSE. Except as provided in Section 7(b), if
the Board of Directors terminates Key Executive's employment for any reason
other than Cause, or Key Executive's employment is terminated by Constructive
Termination as defined in this Agreement, the Key Executive shall be entitled to
receive the following severance benefits:
(1) GUARANTEED SEVERANCE PAYMENTS. Subject to Key Executive
entering into a Release of Claims (in a form substantially similar to the
form of release of claims attached as Exhibit A), Key Executive shall be
entitled to receive severance payments for twelve (12) months from the
date of termination at Key Executive's then current base salary, which
may be greater than, but will not be less than the Base Compensation (the
"Guaranteed Severance Payment"). The Guaranteed Severance Payment will
be paid to Key Executive in accordance with the Company's standard
payroll practices. Upon termination, Key Executive will also be
entitled to receive a pro-rated portion of his then current targeted
bonus for the fiscal year of his termination as described in Section 3(b)
based on the date that Key Executive's employment is terminated.
(2) MEDICAL BENEFITS. The Company, at the Company's sole
expense, shall provide Key Executive (and, if applicable, his eligible
dependents) with the same level of health coverage and benefits as in
effect for Key Executive (and, if applicable, his eligible dependents) on
the day immediately preceding the day of the Key Executive's termination
of employment (the "Company-Paid Coverage"); provided, however, that: (i)
Key Executive and each eligible dependent constitutes a qualified
beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue
Code of 1986, as amended (collectively, "Qualified Beneficiaries"); (ii)
each Qualified Beneficiary elects continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), within the time period prescribed pursuant to COBRA; and (iii)
if the health coverage is no longer offered by the Company to its current
employees, then the Company shall be under no obligation to continue the
existing coverage for Key Executive (and, if applicable, his eligible
dependents). Such Company-Paid Coverage shall continue in effect for
each Qualified Beneficiary until the earlier of (i) the Qualified
Beneficiary is no longer eligible to receive continuation coverage under
COBRA, or (ii) thirty (30) months following termination of employment.
Except as described in subsection (2)(ii) above, the Company's obligations under
paragraphs 1 and 2 of this Section 7(a) shall terminate upon Key Executive's
breach of his agreements under Section 8 hereof.
(b) DISABILITY; DEATH. If the Company terminates the Key
Executive's employment as a result of the Key Executive's Disability or if
the Key Executive's employment terminates due to the death of the Key
Executive, then the Key Executive shall not be entitled to receive severance
or other benefits pursuant to this Agreement, unless the Company has no
benefit plan in place to account for death or disability of employees, in
which case Key Executive will be entitled to receive the Guaranteed Severance
Payment specified in Section 7(a)(1). Key Executive shall remain eligible
for those severance and other benefits (if any) as may then be available
under the Company's then existing severance and benefits plans and policies
at the time of Key Executive's termination or death.
4
<PAGE>
(c) STOCK OPTIONS. All of Key Executive's options not
otherwise forfeited under the terms of this Agreement will continue to vest
during the twelve month Severance Benefits Period. Key Executive will
forfeit options that have not vested as of the end of the twelve month
Severance Benefits Period. Key Executive and the Company will negotiate a
consulting agreement under which Key Executive will provide advisory services
to the Company's Key Executive management or board of directors during the
twelve months after his termination. In the event the Company undergoes a
Change in Control, or other material event in which the Company or Key
Executive's position undergoes a material change as a result of the material
event, Key Executive's stock options will accelerate vesting such that fifty
percent (50%) of the options will vest at the completion of the Change in
Control, or material event, and the remaining fifty percent (50%) will vest
90 days thereafter. If there is an inconsistency between this Agreement and
the Company's stock option plans or a stock option agreement, the terms of
this Agreement shall prevail.
(d) INSIDER TRADING. While Key Executive receives severance payments,
Key Executive will no longer be deemed a Section 16(b) officer, but agrees to be
considered an "insider" and comply with the Company's Insider Trading Policy,
unless otherwise agreed to in writing by the Company for matters related to
reduction of Key Executive's stock holding.
8. COVENANTS NOT TO COMPETE AND NOT TO SOLICIT.
(a) While employed by the Company, Key Executive agrees that he shall
not, directly or indirectly, engage on his own behalf, or as owner, manager,
advisor, principal, agent, partner, employee consultant, director, officer,
stockholder or other proprietor owning more than a five percent (5%) interest,
in any firm, corporation, partnership or other organization which is in the
business of manufacturing, selling or distributing products in competition with
the products of the Company. In case of any such ownership or participation,
Key Executive shall furnish a detailed statement thereof to the Board of
Directors of the Company, and, as from time to time requested by said Board,
resubmit for approval a detailed statement thereof, which statement may be
approved by said Board as not constituting such a violation or conflict, and in
the event said Board determines that such violation or conflict exists, Key
Executive shall immediately divest himself of such ownership or participation
(or of representing or promoting others engaged in any such business). It is
intended and agreed that during the term of this Agreement, Key Executive will
not knowingly perform any act which may confer any competitive benefit or
advantage upon any enterprise competing with the Company or any successor.
(b) Upon the termination of the Key Executive 's employment with
the Company within the terms of Section 7(a) and for a period of eighteen
(18) months thereafter, Key Executive agrees that he shall not, on his own
behalf, or as owner, manager, advisor, principal, agent, partner, employee
consultant, director, officer, stockholder or other proprietor owning more
than a five percent (5%) interest of any business entity, or otherwise, in
any territory in which the Company is actively engaged in business: (i) open
or operate any business which is in competition with any business of the
Company, (ii) act as an employee, agent, advisor or consultant of any
competitor of the Company, (iii) take any action to or do anything
reasonably intended to divert business from the Company or influence or
attempt to influence any existing customers of the Company to cease doing
business with the Company or to alter its business relationship with the
Company, or (iv) take any action or do anything reasonably intended to
influence any suppliers of the Company to cease doing business with the
Company or to alter its business relationship with the Company. Key
Executive further covenants and agrees that he will not
5
<PAGE>
for himself or on behalf of any other person, partnership, firm, association
or corporation in any territory served by the Company, directly or indirectly
solicit or accept business from any of the Company's existing customers for
the purchase or sale of products or services of a like kind to those sold or
provided the Company. The foregoing covenant shall not be deemed to prohibit
Key Executive from acquiring an investment not more than one percent (1%) of
the capital stock of a competing business, whose stock is traded on a
national securities exchange or through the automated quotation system of a
registered securities association.
(c) While employed by the Company and upon the termination of the Key
Executive's employment with the Company within the terms of Section 7(a) and for
a period of eighteen (18) months thereafter, Key Executive agrees that he shall
not either directly solicit, induce, attempt to hire, recruit, encourage, take
away, hire any employee of the Company or cause any employee of the Company to
leave his or her employment either for Key Executive or for any other entity or
person.
(d) Key Executive represents that he (i) is familiar with the
foregoing covenants not to compete and not to directly solicit, and (ii) is
fully aware of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants. Key Executive agrees that the provisions of this Section 8 contain
restrictions that are not greater than necessary to protect the interests of the
Company. In the event of the breach or threatened breach by Key Executive of
this Section 8, the Company, in addition to all other remedies available to it
at law or in equity, will be entitled to seek injunctive relief and/or specific
performance to enforce this Section 8.
(e) Company will respond within 14 days to any written request by to
exclude a particular company or business entity from the scope of this Section
8. Company will not unreasonably deny such a request. The parties agree that a
passive financial investment by Key Executive in a third party will not
constitute competition within the scope of this Section 8.
9. DEFINITION OF CERTAIN TERMS. The following terms referred to in this
Agreement shall have the following meanings for the purposes of this Agreement
only:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Key Executive in connection with his responsibilities as
President and Chief Key Executive Officer and intended to result in
substantial personal enrichment of the Key Executive, (ii) conviction of a
felony resulting from any action or failure to act by the Key Executive in
the performance of Key Executive's duties, that is injurious to the Company,
(iii) a willful act by the Key Executive which constitutes gross misconduct
and which results in material injury to the Company, (iv) continued
violations by the Key Executive of the his material obligations under this
Agreement that are demonstrably willful and deliberate on the Key Executive's
part after there has been delivered to the Key Executive a written demand for
performance from the Company which describes the basis for the Company's
belief that the Key Executive has not substantially performed his duties; and
(v) the breach by Key Executive of the non-competition provisions of this
Agreement, or of the Company's standard form of confidentiality and
proprietary inventions agreement, which shall be supplemental hereto and
incorporated by reference herein.
(b) CONSTRUCTIVE TERMINATION. "Constructive Termination" shall
mean any of the following: (1) any material reduction in compensation,
including bonus, unless such a reduction is applied, by resolution of the
Board of Directors, to all of the Company's officers; (2) reduction of Key
Executive's title; (3) material reduction in Key Executive's
responsibilities; (4) a relocation that is more than 75
6
<PAGE>
miles from San Jose, California; and (5) material reduction in the number of
Company employees in the organization for which Key Executive is responsible
(said reduction not being based on voluntary resignation of Company
employees, but through an internal reorganization, or other shifting of
personnel that is not under the control of Key Executive).
(c) DISABILITY. "Disability" shall mean that Key Executive has been
unable to perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least
ninety (90) days after its commencement, is determined to be total and permanent
by a physician selected by the Company or its insurers and acceptable to the Key
Executive or the Key Executive's legal representative (such Agreement as to
acceptability not to be unreasonably withheld). Termination resulting from
Disability may only be effected after at least 30 days' written notice by the
Company of its intention to terminate the Key Executive's employment. In the
event that the Key Executive resumes the performance of substantially all of his
duties hereunder before the termination of his employment becomes effective, the
notice of intent to terminate shall automatically be deemed to have been
revoked.
(d) CHANGE IN CONTROL. "CHANGE IN CONTROL" means the occurrence of
any of the following:
(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other
corporate reorganization, if more than 50% of the
combined voting power of the continuing or surviving
entity's securities outstanding immediately after
such merger, consolidation or other reorganization
is owned by persons who were not stockholders of the
Company immediately prior to such merger,
consolidation or other reorganization;
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets;
(iii) Any transaction as a result of which any person
becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company
representing at least 20% of the total voting power
represented by the Company's then outstanding voting
securities. For purposes of this Paragraph (iii),
the term "person" shall have the same meaning as
when used in sections 13(d) and 14(d) of the
Exchange Act but shall exclude:
(A) A trustee or other fiduciary holding
securities under an employee benefit plan of the
Company or a subsidiary of the Company; and
(B) A corporation owned directly or indirectly
by the stockholders of the Company in substantially
the same proportions as their ownership of the
common stock of the Company.
(C) Any direct or indirect acquisition of the
Company's voting securities by Phoenix
Technologies Ltd.
7
<PAGE>
A transaction shall not constitute a Change in Control if its sole
purpose is to change the state of the Company's incorporation or
to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company's
securities immediately before such transactions.
10. NO BREACH OF DUTY. Key Executive represents that Key Executive's
performance of this Agreement and as an employee of the Company does not and
will not breach any agreement or duty to keep in confidence proprietary
information acquired by Key Executive in confidence or in trust prior to
employment with the Company. Key Executive has not and will not enter into any
agreement either written or oral in conflict with this Agreement. Key Executive
is not presently restricted from being employed by the Company or entering into
this Agreement.
11. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's business
and assets shall assume the obligations under this Agreement and agree expressly
to perform the obligations under this Agreement in the same manner and to the
same extent as the Company would be required to perform such obligations in the
absence of a succession. For all purposes under this Agreement, the term
"Company" shall include any successor to the Company's business and assets which
executes and delivers the assumption agreement described in this Section or
which becomes bound by the terms of this Agreement by operation of law.
(b) KEY EXECUTIVE'S SUCCESSORS. The terms of this Agreement, and all
rights of the Key Executive hereunder, shall inure to the benefit of, and be
enforceable by, the Key Executive's personal or legal representatives,
executors, administrators, successors, heirs, devisees and legatees.
12. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly given
when personally delivered or when mailed by U.S. registered or certified mail,
return receipt requested and postage prepaid. In the case of the Key Executive,
mailed notices shall be addressed to him at the home address that he most
recently communicated to the Company in writing. In the case of the Company,
mailed notices shall be addressed to its corporate headquarters, and all notices
shall be directed to the attention of its Vice President and General Counsel.
(b) NOTICE OF TERMINATION. Any termination by the Company for Cause
pursuant to Section 6(b) hereof shall be communicated by a notice of termination
to the Key Executive given in accordance with Section 12(a) of this Agreement.
Such notice shall indicate the specific termination provision in this Agreement
relied upon, shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for termination under the provision so indicated, and
shall specify the termination date (which shall be not more than 15 days after
the giving of such notice).
8
<PAGE>
13. ARBITRATION.
(a) The Company and Key Executive agree that any dispute or
controversy arising out of, relating to, or in connection with this
Agreement, the interpretation, validity, construction, performance, breach,
or termination hereof, or any of the matters herein released, excepting
claims under applicable workers' compensation law and unemployment insurance
claims, shall be settled exclusively by binding arbitration to be held in
Santa Clara County, California in accordance with the National Rules for the
Resolution of Employment Disputes then in effect of the American Arbitration
Association (the "Rules"). The arbitrator may grant injunctions or other
relief in such dispute or controversy. The decision of the arbitrator shall
be final, conclusive and binding on the parties to the arbitration. Judgment
may be entered on the arbitrator's decision in any court having jurisdiction.
This provision confers complete and total jurisdiction for final, binding
arbitration with full and complete relief for any and all covered disputes,
including all contract, tort, and statutory claims, and any other causes of
action unless otherwise prohibited by law. This arbitration provision will
survive after the termination of this Agreement.
(b) The arbitrator(s) shall apply California law to the merits of any
dispute or claim, without reference to conflicts of law rules. Key Executive
hereby consents to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or relating to
this Agreement or relating to any arbitration in which the Parties are
participants, and hereby waives any rights he may have to a jury trial with
respect thereto.
(c) KEY EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. KEY EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS
AGREEMENT, KEY EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING
TO, OR IN CONNECTION WITH THIS AGREEMENT, THE INTERPRETATION, VALIDITY,
CONSTRUCTION, PERFORMANCE, BREACH OR TERMINATION THEREOF, OR ANY OF THE MATTERS
HEREIN TO BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A
WAIVER OF KEY EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF
ALL DISPUTES RELATING TO ALL ASPECTS OF THIS SEVERANCE AGREEMENT AND RELEASE OF
ALL CLAIMS.
14. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be modified,
waived or discharged unless the modification, waiver or discharge is agreed to
in writing and signed by the Key Executive and by an authorized officer of the
Company (other than the Key Executive). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(b) WHOLE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes in its entirety any and all prior undertakings and agreements of the
Company and Key Executive with respect to the subject matter hereof.
9
<PAGE>
(c) CHOICE OF LAW. The validity, interpretation, construction
and performance of this Agreement shall be governed by the internal substantive
laws but not the choice of law rules of the State of California.
(d) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.
(e) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or other
creditor's process, and any action in violation of this Section 14(e) shall be
void.
(f) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this
Agreement, in the case of the Company by its duly authorized officer, as of the
day and year first above written.
INSILICON CORPORATION Key Executive: Executive VP & CFO
/s/ Wayne Cantwell /s/ William E. Meyer
- -------------------------------- ----------------------------------
By: Wayne C. Cantwell By: William E. Meyer
President & CEO
10
<PAGE>
EXHIBIT A
In consideration for Key Executive accepting the benefits under his Key
Executive Officer Severance Agreement dated November 30, 1999, Key Executive
agrees to release Company of all claims arising from or relating to his
employment as set forth below.
Key Executive hereby forever waives for himself, his attorneys, heirs,
executors, administrators, successors and assigns any claim against Company,
including its subsidiaries, affiliates, insurers, shareholders, officers,
directors and employees (the "Parties Released"), for any action, loss, expense
or any damages arising from any occurrence from the beginning of time until the
date of the signing of this Agreement and arising or in any way resulting from
Key Executive's employment with Company or the termination thereof. The only
exceptions to the above waiver are claims by Employee under any worker's
compensation or unemployment statutes and any right arising under this
Agreement. Employee represents that he has no current intention to assert any
claim on any basis against the Parties Released. Company releases its claims on
intellectual property created by Employee after the date of execution of this
Agreement.
KEY EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN GIVEN AT LEAST TWENTY-ONE
(21) DAYS WITHIN WHICH TO CONSIDER SIGNING THIS RELEASE. KEY EXECUTIVE MAY
REVOKE THIS AGREEMENT BY WRITTEN NOTICE TO COMPANY WITHIN SEVEN DAYS FOLLOWING
ITS EXECUTION. THIS RELEASE SHALL NOT BECOME EFFECTIVE AND BINDING UNTIL SUCH
PERIOD HAS EXPIRED. KEY EXECUTIVE WILL RETURN ALL CONSIDERATION AND BENEFITS
PROVIDED IN CONNECTION WITH THE GRANTING OF THIS RELEASE IF HE REVOKES THE
RELEASE.
In the event of breach of this Agreement by Company, Key Executive's
exclusive remedy for such breach shall be limited to the enforcement of the
terms of this Agreement.
COMPANY: KEY EXECUTIVE:
INSILICON CORPORATION
- ------------------------------------- ------------------------------------
By: Name:
--------------------------------- -----------------------------
Title:
----------------------------
11
<PAGE>
EXECUTIVE OFFICER SEVERANCE AGREEMENT
This Executive Officer Severance Agreement (the "Agreement") is effective as
of November 30, 1999 ("Effective Date"), and is by and between BARRY HOBERMAN
(the "Executive"), an individual currently residing at 10290 Palo Vista,
Cupertino, CA 95014-2713 and INSILICON CORPORATION, a Delaware corporation
(the "Company"), with its principal place of business at 411 East Plumeria
Drive, San Jose, CA 95134.
R E C I T A L S
A. The Company desires to employ Executive and Executive desires
to provide employment services to the Company, on all the terms and
conditions set forth herein.
B. The Board of Directors of the Company believes it to be in the
best interest of the Company and its stockholders to provide the Executive
with certain severance benefits should Executives employment with the Company
terminate under certain circumstances, and the parties wish to provide
Executive with financial security and with sufficient incentive and
encouragement for Executive to remain with the Company
C. Certain capitalized terms used in the Agreement are defined in
Section 9 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. Executive has been hired as
Executive Vice President and Chief Technical Officer of Company. Executive
shall have such duties with the Company, its subsidiaries or affiliates, as
the Company shall determine. The Executive shall comply with and be bound by
the Company's operating policies, by-laws, procedures and practices from time
to time in effect during his employment. Executive shall devote his full
time, skill and attention to his duties and responsibilities, and shall
perform them faithfully, diligently and competently, and the Executive will
use his best efforts to further the business of the Company and its
affiliated entities. In connection with his employment under this agreement,
Executive shall be based at the Company's principal place of business which
is currently located in San Jose, California, but Executive understands and
agrees that he may be required to perform services anywhere in the world, and
will perform his employment at such location or locations as may be
determined by the Board of Directors of the Company.
2. BASE COMPENSATION. As of the Effective Date of this Agreement
Executive's annual base salary will be $ 173,250.00 ("Base Compensation").
The Company will pay the Base Compensation in accordance with normal Company
payroll practices. The Base Compensation shall be reviewed annually and may
be increased from time to time, in which case the "Base Compensation" will
refer to the base salary earned by Executive at the time in question.
<PAGE>
3. EXECUTIVE'S BENEFITS. The Executive shall be eligible to participate
in the employee benefit plans and Executive compensation programs maintained
by the Company applicable to other Executives of the Company, including
(without limitation) retirement plans, savings or profit-sharing plans, stock
option and employee stock purchase plans, incentive or other bonus plans,
life, disability, health, medical and hospital, accident and other insurance
programs, paid vacations, and similar plans or programs, subject in each case
to the terms and conditions of the plan or program in question and to the
sole determination of the Board of Directors, or any committee administering
such plan or program. The Company agrees that Executive shall maintain and
carry over to Company his current accrued vacation and sick time from his
employment with Phoenix Technologies Ltd., and thereafter while being
employed by Company earn vacation at a rate of 15 days per year provided
Executive does not accrue a total of more than 40 days of vacation. After
Executive has accrued 40 days of vacation, Executive shall no longer be
eligible to earn further vacation until he uses some vacation, at which point
Executive can again begin to accrue vacation up to the 40 day vacation cap.
The following additional Executive benefits will be made available:
(a) EXCHANGE OF PHOENIX STOCK OPTIONS. Executive shall be able to
participate in Company's option exchange plan, allowing Executive to exchange
his vested and unvested Phoenix stock options for Company stock options at an
exchange ratio of 1.862 Company stock options for each Phoenix stock option.
The vesting schedule for all stock options exchanged under the plan will
remain unchanged, generally over four years.
(b) ADDITIONAL STOCK OPTION GRANTS. Executive will receive an
additional grant of stock options as of December 21, 1999, in the amount of
shares designated in the inSilicon Option Memo issued to Executive, at $7.36
per share. These options will vest ratably over a four-year term and expire
on December 21, 2009. In addition, Executive will be entitled to receive
future annual grants of options during the term of this Agreement at the
discretion of the Compensation Committee of the Board of Directors.
(c) BONUS ELIGIBILITY AND PAYMENT. The target amount of Executive's
fiscal year 2000 bonus will be $ 45,000.00. Actual payments under the bonus
plan will be based on application of the terms of the Executive Bonus Plan in
effect at the time of this Agreement.
4. OTHER BUSINESS AFFILIATIONS. In addition to Executive's obligations
under Section 8, Executive agrees that, without the approval of the Company,
he shall not, while employed by the Company, devote any time to any business
affiliation which would interfere with or derogate from his obligations under
this Agreement with respect of the Company and any of its subsidiaries,
parents or affiliates
5. EXPENSES. The Company shall reimburse Executive for all reasonable
business expenses incurred in the performance of his duties hereunder on
behalf of the Company, upon submission of expense reports to the extent
necessary to substantiate the Company's federal income tax deductions for
such expenses under the Internal Revenue Code (as amended) and the
Regulations there under and according to such expense report regulations as
may be established by the Company.
2
<PAGE>
6. TERM AND TERMINATION.
(a) TERM OF EMPLOYMENT. Executive's employment with the Company
under this Agreement shall continue from the Effective Date until terminated
by the Board Of Directors in accordance with the terms of this Agreement.
(b) TERMINATION FOR CAUSE. The Board Of Directors may terminate
this Agreement and the employment of Executive hereunder, with immediate
effect, including, without limitation, the termination of all compensation
and benefits (except as may be expressly provided in this Agreement), for
Cause, as defined hereunder. However, the Executive shall remain eligible for
severance and other benefits (if any) as may then be available under the
Company's then existing severance and benefit plans and policies at the time
of Executive's termination.
(c) TERMINATION NOT FOR CAUSE If the Company terminates
Executive's employment for any reason other than Cause, or Executive's
employment is terminated by Constructive Termination as defined in this
Agreement, the Executive shall be entitled to receive the severance benefits
stated in Section 7(a) below unless the termination or Constructive Discharge
is as a result of death or disability, in which event Executive shall be
entitled to receive the benefits set forth in Section 7(b), if any. Both
Company and Executive agree that Executive's employment is "at will" and may
be terminated at any time by either party.
(d) RETURN OF INFORMATION. On termination of employment for any
reason, Executive will return to the Company all originals and copies of all
or any part of: lists and sources of customers and suppliers; lists of
employees; proposals to clients or drafts of proposals; business plans and
projections; reports; job notes; specifications; and drawings pertaining to
the Company or its customers; or any and all other things, equipment and
written materials obtained by Executive during the course of employment from
the Company or from any client of the Company, unless Company provides in
writing its waiver of the forgoing.
7. SEVERANCE BENEFITS.
(a) TERMINATION NOT FOR CAUSE. Except as provided in Section 7(b),
if the Board of Directors terminates Executive's employment for any reason
other than Cause, or Executive's employment is terminated by Constructive
Termination as defined in this Agreement, the Executive shall be entitled to
receive the following severance benefits:
(1) GUARANTEED SEVERANCE PAYMENTS. Subject to Executive
entering into a Release of Claims (in a form substantially similar to the
form of release of claims attached as Exhibit A), Executive shall be
entitled to receive severance payments for twelve (12) months from the
date of termination at Executive's then current base salary, which may be
greater than, but will not be less than the Base Compensation (the
"Guaranteed Severance Payment"). The Guaranteed Severance Payment will
be paid to Executive in accordance with the Company's standard payroll
practices. Upon termination, Executive will also be entitled to receive
a pro-
3
<PAGE>
rated portion of his then current targeted bonus for the fiscal year
of his termination as described in Section 3(b) based on the date that
Executive's employment is terminated.
(2) MEDICAL BENEFITS. The Company, at the Company's
sole expense, shall provide Executive (and, if applicable, his
eligible dependents) with the same level of health coverage and
benefits as in effect for Executive (and, if applicable, his eligible
dependents) on the day immediately preceding the day of the
Executive's termination of employment (the "Company-Paid Coverage");
provided, however, that: (i) Executive and each eligible dependent
constitutes a qualified beneficiary, as defined in Section 4980B(g)(1)
of the Internal Revenue Code of 1986, as amended (collectively,
"Qualified Beneficiaries"); (ii) each Qualified Beneficiary elects
continuation coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"), within the time
period prescribed pursuant to COBRA; and (iii) if the health coverage
is no longer offered by the Company to its current employees, then the
Company shall be under no obligation to continue the existing coverage
for Executive (and, if applicable, his eligible dependents). Such
Company-Paid Coverage shall continue in effect for each Qualified
Beneficiary until the earlier of (i) the Qualified Beneficiary is no
longer eligible to receive continuation coverage under COBRA, or (ii)
thirty (30) months following termination of employment.
Except for those obligations in subsection (2)(ii) above, the Company's
obligations under paragraphs 1 and 2 of this Section 7(a) shall terminate
upon Executive's breach of his agreements under Section 8 hereof.
(b) DISABILITY; DEATH. If the Company terminates the Executive's
employment as a result of the Executive's Disability or if the Executive's
employment terminates due to the death of the Executive, then the Executive
shall not be entitled to receive severance or other benefits pursuant to this
Agreement, unless the Company has no benefit plan in place to account for
death or disability of employees, in which case Executive will be entitled to
receive the Guaranteed Severance Payment specified in Section 7(a)(1).
Executive shall remain eligible for those severance and other benefits (if
any) as may then be available under the Company's then existing severance and
benefits plans and policies at the time of Executive's termination or death.
(c) STOCK OPTIONS. All of Executive's options not otherwise
forfeited under the terms of this Agreement will continue to vest during the
twelve month Severance Benefits Period. Executive will forfeit options that
have not vested as of the end of the twelve month Severance Benefits Period.
Executive and the Company will negotiate a consulting agreement under which
Executive will provide advisory services to the Company's executive
management or board of directors during the 12 months after his termination.
If there is an inconsistency between this Agreement and the Company's stock
option plans or a stock option agreement, the terms of this Agreement will
prevail.
(d) INSIDER TRADING. While Executive receives severance payments,
Executive will no longer be deemed a Section 16(b) officer, but agrees to be
considered an "insider" and comply with the Company's Insider Trading Policy,
unless otherwise agreed to in writing by the Company for matters related to
reduction of Executive's stock holding.
4
<PAGE>
8. COVENANTS NOT TO COMPETE AND NOT TO SOLICIT.
(a) While employed by the Company, Executive agrees that he shall
not, directly or indirectly, engage on his own behalf, or as owner, manager,
advisor, principal, agent, partner, employee consultant, director, officer,
stockholder or other proprietor owning more than a five percent (5%)
interest, in any firm, corporation, partnership or other organization which
is in the business of manufacturing, selling or distributing products in
competition with the products of the Company. In case of any such ownership
or participation, Executive shall furnish a detailed statement thereof to the
Board of Directors of the Company, and, as from time to time requested by
said Board, resubmit for approval a detailed statement thereof, which
statement may be approved by said Board as not constituting such a violation
or conflict, and in the event said Board determines that such violation or
conflict exists, Executive shall immediately divest himself of such ownership
or participation (or of representing or promoting others engaged in any such
business). It is intended and agreed that during the term of this Agreement,
Executive will not knowingly perform any act which may confer any competitive
benefit or advantage upon any enterprise competing with the Company or any
successor.
(b) Upon the termination of the Executive 's employment with the
Company within the terms of Section 7(a) and for a period of eighteen (18)
months thereafter, Executive agrees that he shall not, on his own behalf, or
as owner, manager, advisor, principal, agent, partner, employee consultant,
director, officer, stockholder or other proprietor owning more than a five
percent (5%) interest of any business entity, or otherwise, in any territory
in which the Company is actively engaged in business: (i) open or operate any
business which is in competition with any business of the Company, (ii) act
as an employee, agent, advisor or consultant of any competitor of the
Company, (iii) take any action to or do anything reasonably intended to
divert business from the Company or influence or attempt to influence any
existing customers of the Company to cease doing business with the Company or
to alter its business relationship with the Company, or (iv) take any action
or do anything reasonably intended to influence any suppliers of the Company
to cease doing business with the Company or to alter its business
relationship with the Company. Executive further covenants and agrees that
he will not for himself or on behalf of any other person, partnership, firm,
association or corporation in any territory served by the Company, directly
or indirectly solicit or accept business from any of the Company's existing
customers for the purchase or sale of products or services of a like kind to
those sold or provided the Company. The foregoing covenant shall not be
deemed to prohibit Executive from acquiring an investment not more than one
percent (1%) of the capital stock of a competing business, whose stock is
traded on a national securities exchange or through the automated quotation
system of a registered securities association.
(c) While employed by the Company and upon the termination of the
Executive's employment with the Company within the terms of Section 7(a) and
for a period of eighteen (18) months thereafter, Executive agrees that he
shall not either directly solicit, induce, attempt to hire, recruit,
encourage, take away, hire any employee of the Company or cause any employee
of the Company to leave his or her employment either for Executive or for any
other entity or person.
(d) Executive represents that he (i) is familiar with the foregoing
covenants not to compete and not to directly solicit, and (ii) is fully aware
of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants. Executive agrees that the provisions of this Section 8 contain
restrictions that are not greater than necessary to protect the interests of
the Company. In the event of the breach or threatened breach by
5
<PAGE>
Executive of this Section 8, the Company, in addition to all other remedies
available to it at law or in equity, will be entitled to seek injunctive
relief and/or specific performance to enforce this Section 8.
(e) Company will respond within 14 days to any written request by
Executive to exclude a particular company or business entity from the scope
of this Section 8. Company will not unreasonably deny such a request. The
parties agree that a passive financial investment by Executive in a third
party will not constitute competition within the scope of this Section 8.
9. DEFINITION OF CERTAIN TERMS. The following terms referred to in this
Agreement shall have the following meanings for the purposes of this
Agreement only:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Executive in connection with his responsibilities as Executive
Vice President and Chief Technical Officer and intended to result in
substantial personal enrichment of the Executive, (ii) conviction of a felony
resulting from any action or failure to act by the Executive in the
performance of Executive's duties, that is injurious to the Company, (iii) a
willful act by the Executive which constitutes gross misconduct and which
results in material injury to the Company, (iv) continued violations by the
Executive of the his material obligations under this Agreement that are
demonstrably willful and deliberate on the Executive's part after there has
been delivered to the Executive a written demand for performance from the
Company which describes the basis for the Company's belief that the Executive
has not substantially performed his duties; and (v) the breach by Executive
of the non-competition provisions of this Agreement, or of the Company's
standard form of confidentiality and proprietary inventions agreement, which
shall be supplemental hereto and incorporated by reference herein.
(b) CONSTRUCTIVE TERMINATION. "Constructive Termination" shall
mean any of the following: (1) any material reduction in compensation,
including bonus, unless such a reduction is applied, by resolution of the
Board of Directors, to all of the Company's officers; (2) reduction of
Executive's title; (3) material reduction in Executive's responsibilities;
(4) a relocation that is more than 75 miles from San Jose, California; and
(5) material reduction in the number of Company employees in the organization
for which Executive is responsible (said reduction not being based on
voluntary resignation of Company employees, but through an internal
reorganization, or other shifting of personnel that is not under the control
of Executive).
(c) DISABILITY. "Disability" shall mean that Executive has been
unable to perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least
ninety (90) days after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
Agreement as to acceptability not to be unreasonably withheld). Termination
resulting from Disability may only be effected after at least 30 days'
written notice by the Company of its intention to terminate the Executive 's
employment. In the event that the Executive resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
10. NO BREACH OF DUTY. Executive represents that Executive's performance
of this Agreement and as an employee of the Company does not and will not
breach any agreement or duty to keep in confidence proprietary information
acquired by Executive in confidence or in trust prior to
6
<PAGE>
employment with the Company. Executive has not and will not enter into any
agreement either written or oral in conflict with this Agreement. Executive
is not presently restricted from being employed by the Company or entering
into this Agreement.
11. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this Section or which becomes bound by the terms of this
Agreement by operation of law.
(b) EXECUTIVE'S SUCCESSORS. The terms of this Agreement, and all
rights of the Executive hereunder, shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.
12. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of
the Executive, mailed notices shall be addressed to him at the home address
that he most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Vice President and
General Counsel.
(b) NOTICE OF TERMINATION. Any termination by the Company for
Cause pursuant to Section 6(b) hereof shall be communicated by a notice of
termination to the Executive given in accordance with Section 12(a) of this
Agreement. Such notice shall indicate the specific termination provision in
this Agreement relied upon, shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination under the
provision so indicated, and shall specify the termination date (which shall
be not more than 15 days after the giving of such notice).
13. ARBITRATION.
(a) The Company and Executive agree that any dispute or controversy
arising out of, relating to, or in connection with this Agreement, the
interpretation, validity, construction, performance, breach, or termination
hereof, or any of the matters herein released, excepting claims under
applicable workers' compensation law and unemployment insurance claims, shall
be settled exclusively by binding arbitration to be held in Santa Clara
County, California in accordance with the National Rules for the Resolution
of Employment Disputes then in effect of the American Arbitration Association
(the "Rules"). The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration.
7
<PAGE>
Judgment may be entered on the arbitrator's decision in any court having
jurisdiction. This provision confers complete and total jurisdiction for
final, binding arbitration with full and complete relief for any and all
covered disputes, including all contract, tort, and statutory claims, and any
other causes of action unless otherwise prohibited by law. This arbitration
provision will survive after the termination of this Agreement.
(b) The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to conflicts of law rules. Executive
hereby consents to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or relating
to this Agreement or relating to any arbitration in which the Parties are
participants, and hereby waives any rights he may have to a jury trial with
respect thereto.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF, OR ANY OF THE MATTERS HEREIN TO
BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THIS SEVERANCE AGREEMENT AND RELEASE OF
ALL CLAIMS.
14. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge
is agreed to in writing and signed by the Executive and by an authorized
officer of the Company (other than the Executive). No waiver by either party
of any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(b) WHOLE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes in its entirety any and all prior undertakings and agreements of
the Company and Executive with respect to the subject matter hereof.
(c) CHOICE OF LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
internal substantive laws but not the choice of law rules of the State of
California.
(d) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.
(e) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or
8
<PAGE>
involuntary assignment or by operation of law, including (without limitation)
bankruptcy, garnishment, attachment or other creditor's process, and any
action in violation of this Section 14(e) shall be void.
(f) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement,
in the case of the Company by its duly authorized officer, as of the day and
year first above written.
INSILICON CORPORATION Executive: BARRY HOBERMAN
/s/ Wayne Cantwell /s/ Barry Hoberman
- ------------------------------------ -------------------------------------
By: Wayne Cantwell By:
President and Chief Executive Officer Febr. 3, 2000
9
<PAGE>
EXHIBIT A
In consideration for Executive accepting the benefits under his
Executive Officer Severance Agreement dated November 30, 1999, Executive
agrees to release Company of all claims arising from or relating to his
employment as set forth below.
Executive hereby forever waives for himself, his attorneys, heirs,
executors, administrators, successors and assigns any claim against Company,
including its subsidiaries, affiliates, insurers, shareholders, officers,
directors and employees (the "Parties Released"), for any action, loss,
expense or any damages arising from any occurrence from the beginning of time
until the date of the signing of this Agreement and arising or in any way
resulting from Executive's employment with Company or the termination
thereof. The only exceptions to the above waiver are claims by Employee
under any worker's compensation or unemployment statutes and any right
arising under this Agreement. Employee represents that he has no current
intention to assert any claim on any basis against the Parties Released.
Company releases its claims on intellectual property created by Employee
after the date of execution of this Agreement.
EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN GIVEN AT LEAST TWENTY-ONE (21)
DAYS WITHIN WHICH TO CONSIDER SIGNING THIS RELEASE. EXECUTIVE MAY REVOKE THIS
AGREEMENT BY WRITTEN NOTICE TO COMPANY WITHIN SEVEN DAYS FOLLOWING ITS
EXECUTION. THIS RELEASE SHALL NOT BECOME EFFECTIVE AND BINDING UNTIL SUCH
PERIOD HAS EXPIRED. EXECUTIVE WILL RETURN ALL CONSIDERATION AND BENEFITS
PROVIDED IN CONNECTION WITH THE GRANTING OF THIS RELEASE IF HE REVOKES THE
RELEASE.
In the event of breach of this Agreement by Company, Executive's
exclusive remedy for such breach shall be limited to the enforcement of the
terms of this Agreement.
COMPANY: EXECUTIVE: BARRY HOBERMAN
INSILICON CORPORATION
- --------------------------------------- ------------------------------------
By: By:
----------------------------------- --------------------------------
Title:
--------------------------------
10
<PAGE>
EXECUTIVE OFFICER SEVERANCE AGREEMENT
This Executive Officer Severance Agreement (the "Agreement") is effective as
of November 30, 1999 ("Effective Date"), and is by and between ROBERT
NALESNIK (the "Executive"), an individual currently residing at 5143 Halifax
Drive, San Jose, CA 95130 and INSILICON CORPORATION, a Delaware corporation
(the "Company"), with its principal place of business at 411 East Plumeria
Drive, San Jose, CA 95134.
R E C I T A L S
A. The Company desires to employ Executive and Executive desires
to provide employment services to the Company, on all the terms and
conditions set forth herein.
B. The Board of Directors of the Company believes it to be in the
best interest of the Company and its stockholders to provide the Executive
with certain severance benefits should Executives employment with the Company
terminate under certain circumstances, and the parties wish to provide
Executive with financial security and with sufficient incentive and
encouragement for Executive to remain with the Company
C. Certain capitalized terms used in the Agreement are defined in
Section 9 below.
A G R E E M E N T
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Executive by the Company, the
parties agree as follows:
1. DUTIES AND SCOPE OF EMPLOYMENT. Executive has been hired as Vice
President of Marketing of Company. Executive shall have such duties with
the Company, its subsidiaries or affiliates, as the Company shall determine.
The Executive shall comply with and be bound by the Company's operating
policies, by-laws, procedures and practices from time to time in effect
during his employment. Executive shall devote his full time, skill and
attention to his duties and responsibilities, and shall perform them
faithfully, diligently and competently, and the Executive will use his best
efforts to further the business of the Company and its affiliated entities.
In connection with his employment under this agreement, Executive shall be
based at the Company's principal place of business which is currently located
in San Jose, California, but Executive understands and agrees that he may be
required to perform services anywhere in the world, and will perform his
employment at such location or locations as may be determined by the Board of
Directors of the Company.
2. BASE COMPENSATION. As of the Effective Date of this Agreement
Executive's annual base salary will be $ 160,000.00 ("Base Compensation").
The Company will pay the Base Compensation in accordance with normal Company
payroll practices. The Base Compensation shall be reviewed annually and may
be increased from time to time, in which case the "Base Compensation" will
refer to the base salary earned by Executive at the time in question.
<PAGE>
3. EXECUTIVE'S BENEFITS. The Executive shall be eligible to participate
in the employee benefit plans and Executive compensation programs maintained
by the Company applicable to other Executives of the Company, including
(without limitation) retirement plans, savings or profit-sharing plans, stock
option and employee stock purchase plans, incentive or other bonus plans,
life, disability, health, medical and hospital, accident and other insurance
programs, paid vacations, and similar plans or programs, subject in each case
to the terms and conditions of the plan or program in question and to the
sole determination of the Board of Directors, or any committee administering
such plan or program. The Company agrees that Executive shall maintain and
carry over to Company his current accrued vacation and sick time from his
employment with Phoenix Technologies Ltd., and thereafter while being
employed by Company earn vacation at a rate of 15 days per year provided
Executive does not accrue a total of more than 40 days of vacation. After
Executive has accrued 40 days of vacation, Executive shall no longer be
eligible to earn further vacation until he uses some vacation, at which point
Executive can again begin to accrue vacation up to the 40 day vacation cap.
The following additional Executive benefits will be made available:
(a) EXCHANGE OF PHOENIX STOCK OPTIONS. Executive shall be able to
participate in Company's option exchange plan, allowing Executive to exchange
his vested and unvested Phoenix stock options for Company stock options at an
exchange ratio of 1.862 Company stock options for each Phoenix stock option.
The vesting schedule for all stock options exchanged under the plan will
remain unchanged, generally over four years.
(b) ADDITIONAL STOCK OPTION GRANTS. Executive will receive an
additional grant of stock options as of December 21, 1999, in the amount of
shares designated in the inSilicon Option Memo issued to Executive, at $7.36
per share. These options will vest ratably over a four-year term and expire
on December 21, 2009. In addition, Executive will be entitled to receive
future annual grants of options during the term of this Agreement at the
discretion of the Compensation Committee of the Board of Directors.
(c) BONUS ELIGIBILITY AND PAYMENT. The target amount of Executive's
fiscal year 2000 bonus will be $ 40,000.00. Actual payments under the bonus
plan will be based on application of the terms of the Executive Bonus Plan in
effect at the time of this Agreement.
4. OTHER BUSINESS AFFILIATIONS. In addition to Executive's obligations
under Section 8, Executive agrees that, without the approval of the Company,
he shall not, while employed by the Company, devote any time to any business
affiliation which would interfere with or derogate from his obligations under
this Agreement with respect of the Company and any of its subsidiaries,
parents or affiliates
5. EXPENSES. The Company shall reimburse Executive for all reasonable
business expenses incurred in the performance of his duties hereunder on
behalf of the Company, upon submission of expense reports to the extent
necessary to substantiate the Company's federal income tax deductions for
such expenses under the Internal Revenue Code (as amended) and the
Regulations there under and according to such expense report regulations as
may be established by the Company.
2
<PAGE>
6. TERM AND TERMINATION.
(a) TERM OF EMPLOYMENT. Executive's employment with the Company under
this Agreement shall continue from the Effective Date until terminated by the
Board Of Directors in accordance with the terms of this Agreement.
(b) TERMINATION FOR CAUSE. The Board Of Directors may terminate
this Agreement and the employment of Executive hereunder, with immediate
effect, including, without limitation, the termination of all compensation
and benefits (except as may be expressly provided in this Agreement), for
Cause, as defined hereunder. However, the Executive shall remain eligible for
severance and other benefits (if any) as may then be available under the
Company's then existing severance and benefit plans and policies at the time
of Executive's termination.
(c) TERMINATION NOT FOR CAUSE If the Company terminates
Executive's employment for any reason other than Cause, or Executive's
employment is terminated by Constructive Termination as defined in this
Agreement, the Executive shall be entitled to receive the severance benefits
stated in Section 7(a) below unless the termination or Constructive Discharge
is as a result of death or disability, in which event Executive shall be
entitled to receive the benefits set forth in Section 7(b), if any. Both
Company and Executive agree that Executive's employment is "at will" and may
be terminated at any time by either party.
(d) RETURN OF INFORMATION. On termination of employment for any
reason, Executive will return to the Company all originals and copies of all
or any part of: lists and sources of customers and suppliers; lists of
employees; proposals to clients or drafts of proposals; business plans and
projections; reports; job notes; specifications; and drawings pertaining to
the Company or its customers; or any and all other things, equipment and
written materials obtained by Executive during the course of employment from
the Company or from any client of the Company, unless Company provides in
writing its waiver of the forgoing.
7. SEVERANCE BENEFITS.
(a) TERMINATION NOT FOR CAUSE. Except as provided in Section 7(b),
if the Board of Directors terminates Executive's employment for any reason
other than Cause, or Executive's employment is terminated by Constructive
Termination as defined in this Agreement, the Executive shall be entitled to
receive the following severance benefits:
(1) GUARANTEED SEVERANCE PAYMENTS. Subject to Executive
entering into a Release of Claims (in a form substantially similar to the
form of release of claims attached as Exhibit A), Executive shall be
entitled to receive severance payments for six (6) months from the date
of termination at Executive's then current base salary, which may be
greater than, but will not be less than the Base Compensation (the
"Guaranteed Severance Payment"). The Guaranteed Severance Payment will
be paid to Executive in accordance with the Company's standard payroll
practices. Upon termination, Executive will also be entitled to receive
a pro-
3
<PAGE>
rated portion of his then current targeted bonus for the fiscal year
of his termination as described in Section 3(b) based on the date that
Executive's employment is terminated.
(2) MEDICAL BENEFITS. The Company, at the Company's sole
expense, shall provide Executive (and, if applicable, his eligible
dependents) with the same level of health coverage and benefits as in
effect for Executive (and, if applicable, his eligible dependents) on the
day immediately preceding the day of the Executive's termination of
employment (the "Company-Paid Coverage"); provided, however, that: (i)
Executive and each eligible dependent constitutes a qualified
beneficiary, as defined in Section 4980B(g)(1) of the Internal Revenue
Code of 1986, as amended (collectively, "Qualified Beneficiaries"); (ii)
each Qualified Beneficiary elects continuation coverage under the
Consolidated Omnibus Budget Reconciliation Act of 1985, as amended
("COBRA"), within the time period prescribed pursuant to COBRA; and (iii)
if the health coverage is no longer offered by the Company to its current
employees, then the Company shall be under no obligation to continue the
existing coverage for Executive (and, if applicable, his eligible
dependents). Such Company-Paid Coverage shall continue in effect for
each Qualified Beneficiary until the earlier of (i) the Qualified
Beneficiary is no longer eligible to receive continuation coverage under
COBRA, or (ii) thirty (30) months following termination of employment.
Except for those obligations in subsection (2)(ii) above, the Company's
obligations under paragraphs 1 and 2 of this Section 7(a) shall terminate
upon Executive's breach of his agreements under Section 8 hereof.
(b) DISABILITY; DEATH. If the Company terminates the Executive's
employment as a result of the Executive's Disability or if the Executive's
employment terminates due to the death of the Executive, then the Executive
shall not be entitled to receive severance or other benefits pursuant to this
Agreement, unless the Company has no benefit plan in place to account for
death or disability of employees, in which case Executive will be entitled to
receive the Guaranteed Severance Payment specified in Section 7(a)(1).
Executive shall remain eligible for those severance and other benefits (if
any) as may then be available under the Company's then existing severance and
benefits plans and policies at the time of Executive's termination or death.
(c) STOCK OPTIONS. All of Executive's options not otherwise
forfeited under the terms of this Agreement will continue to vest during the
six month Severance Benefits Period. Executive will forfeit options that
have not vested as of the end of the six month Severance Benefits Period.
Executive and the Company will negotiate a consulting agreement under which
Executive will provide advisory services to the Company's executive
management or board of directors during the 6 months after his termination.
If there is an inconsistency between this Agreement and the Company's stock
option plans or a stock option agreement, the terms of this Agreement will
prevail.
(d) INSIDER TRADING. While Executive receives severance payments,
Executive will no longer be deemed a Section 16(b) officer, but agrees to be
considered an "insider" and comply with the Company's Insider Trading Policy,
unless otherwise agreed to in writing by the Company for matters related to
reduction of Executive's stock holding.
4
<PAGE>
8. COVENANTS NOT TO COMPETE AND NOT TO SOLICIT.
(a) While employed by the Company, Executive agrees that he shall
not, directly or indirectly, engage on his own behalf, or as owner, manager,
advisor, principal, agent, partner, employee consultant, director, officer,
stockholder or other proprietor owning more than a five percent (5%)
interest, in any firm, corporation, partnership or other organization which
is in the business of manufacturing, selling or distributing products in
competition with the products of the Company. In case of any such ownership
or participation, Executive shall furnish a detailed statement thereof to the
Board of Directors of the Company, and, as from time to time requested by
said Board, resubmit for approval a detailed statement thereof, which
statement may be approved by said Board as not constituting such a violation
or conflict, and in the event said Board determines that such violation or
conflict exists, Executive shall immediately divest himself of such ownership
or participation (or of representing or promoting others engaged in any such
business). It is intended and agreed that during the term of this Agreement,
Executive will not knowingly perform any act which may confer any competitive
benefit or advantage upon any enterprise competing with the Company or any
successor.
(b) Upon the termination of the Executive's employment with the
Company within the terms of Section 7(a) and for a period of eighteen (18)
months thereafter, Executive agrees that he shall not, on his own behalf, or
as owner, manager, advisor, principal, agent, partner, employee consultant,
director, officer, stockholder or other proprietor owning more than a five
percent (5%) interest of any business entity, or otherwise, in any territory
in which the Company is actively engaged in business: (i) open or operate any
business which is in competition with any business of the Company, (ii) act
as an employee, agent, advisor or consultant of any competitor of the
Company, (iii) take any action to or do anything reasonably intended to
divert business from the Company or influence or attempt to influence any
existing customers of the Company to cease doing business with the Company or
to alter its business relationship with the Company, or (iv) take any action
or do anything reasonably intended to influence any suppliers of the Company
to cease doing business with the Company or to alter its business
relationship with the Company. Executive further covenants and agrees that
he will not for himself or on behalf of any other person, partnership, firm,
association or corporation in any territory served by the Company, directly
or indirectly solicit or accept business from any of the Company's existing
customers for the purchase or sale of products or services of a like kind to
those sold or provided the Company. The foregoing covenant shall not be
deemed to prohibit Executive from acquiring an investment not more than one
percent (1%) of the capital stock of a competing business, whose stock is
traded on a national securities exchange or through the automated quotation
system of a registered securities association.
(c) While employed by the Company and upon the termination of the
Executive's employment with the Company within the terms of Section 7(a) and
for a period of eighteen (18) months thereafter, Executive agrees that he
shall not either directly solicit, induce, attempt to hire, recruit,
encourage, take away, hire any employee of the Company or cause any employee
of the Company to leave his or her employment either for Executive or for any
other entity or person.
(d) Executive represents that he (i) is familiar with the foregoing
covenants not to compete and not to directly solicit, and (ii) is fully aware
of his obligations hereunder, including, without limitation, the
reasonableness of the length of time, scope and geographic coverage of these
covenants. Executive agrees that the provisions of this Section 8 contain
restrictions that are not greater than
5
<PAGE>
necessary to protect the interests of the Company. In the event of the
breach or threatened breach by Executive of this Section 8, the Company, in
addition to all other remedies available to it at law or in equity, will be
entitled to seek injunctive relief and/or specific performance to enforce
this Section 8.
(e) Company will respond within 14 days to any written request by
Executive to exclude a particular company or business entity from the scope
of this Section 8. Company will not unreasonably deny such a request. The
parties agree that a passive financial investment by Executive in a third
party will not constitute competition within the scope of this Section 8.
9. DEFINITION OF CERTAIN TERMS. The following terms referred to in this
Agreement shall have the following meanings for the purposes of this
Agreement only:
(a) CAUSE. "Cause" shall mean (i) any act of personal dishonesty
taken by the Executive in connection with his responsibilities as Vice
President of Marketing and intended to result in substantial personal
enrichment of the Executive, (ii) conviction of a felony resulting from any
action or failure to act by the Executive in the performance of Executive's
duties, that is injurious to the Company, (iii) a willful act by the
Executive which constitutes gross misconduct and which results in material
injury to the Company, (iv) continued violations by the Executive of the his
material obligations under this Agreement that are demonstrably willful and
deliberate on the Executive's part after there has been delivered to the
Executive a written demand for performance from the Company which describes
the basis for the Company's belief that the Executive has not substantially
performed his duties; and (v) the breach by Executive of the non-competition
provisions of this Agreement, or of the Company's standard form of
confidentiality and proprietary inventions agreement, which shall be
supplemental hereto and incorporated by reference herein.
(b) CONSTRUCTIVE TERMINATION. "Constructive Termination" shall
mean any of the following: (1) any material reduction in compensation,
including bonus, unless such a reduction is applied, by resolution of the
Board of Directors, to all of the Company's officers; (2) reduction of
Executive's title; (3) material reduction in Executive's responsibilities;
(4) a relocation that is more than 75 miles from San Jose, California; and
(5) material reduction in the number of Company employees in the organization
for which Executive is responsible (said reduction not being based on
voluntary resignation of Company employees, but through an internal
reorganization, or other shifting of personnel that is not under the control
of Executive).
(c) DISABILITY. "Disability" shall mean that Executive has been
unable to perform his duties under this Agreement as the result of his
incapacity due to physical or mental illness, and such inability, at least
ninety (90) days after its commencement, is determined to be total and
permanent by a physician selected by the Company or its insurers and
acceptable to the Executive or the Executive's legal representative (such
Agreement as to acceptability not to be unreasonably withheld). Termination
resulting from Disability may only be effected after at least 30 days'
written notice by the Company of its intention to terminate the Executive 's
employment. In the event that the Executive resumes the performance of
substantially all of his duties hereunder before the termination of his
employment becomes effective, the notice of intent to terminate shall
automatically be deemed to have been revoked.
10. NO BREACH OF DUTY. Executive represents that Executive's performance
of this Agreement and as an employee of the Company does not and will not
breach any agreement or duty to keep in
6
<PAGE>
confidence proprietary information
acquired by Executive in confidence or in trust prior to employment with the
Company. Executive has not and will not enter into any agreement either
written or oral in conflict with this Agreement. Executive is not presently
restricted from being employed by the Company or entering into this Agreement.
11. SUCCESSORS.
(a) COMPANY'S SUCCESSORS. Any successor to the Company (whether
direct or indirect and whether by purchase, lease, merger, consolidation,
liquidation or otherwise) to all or substantially all of the Company's
business and assets shall assume the obligations under this Agreement and
agree expressly to perform the obligations under this Agreement in the same
manner and to the same extent as the Company would be required to perform
such obligations in the absence of a succession. For all purposes under this
Agreement, the term "Company" shall include any successor to the Company's
business and assets which executes and delivers the assumption agreement
described in this Section or which becomes bound by the terms of this
Agreement by operation of law.
(b) EXECUTIVE'S SUCCESSORS. The terms of this Agreement, and all
rights of the Executive hereunder, shall inure to the benefit of, and be
enforceable by, the Executive's personal or legal representatives, executors,
administrators, successors, heirs, devisees and legatees.
12. NOTICE.
(a) GENERAL. Notices and all other communications contemplated by
this Agreement shall be in writing and shall be deemed to have been duly
given when personally delivered or when mailed by U.S. registered or
certified mail, return receipt requested and postage prepaid. In the case of
the Executive, mailed notices shall be addressed to him at the home address
that he most recently communicated to the Company in writing. In the case of
the Company, mailed notices shall be addressed to its corporate headquarters,
and all notices shall be directed to the attention of its Vice President and
General Counsel.
(b) NOTICE OF TERMINATION. Any termination by the Company for
Cause pursuant to Section 6(b) hereof shall be communicated by a notice of
termination to the Executive given in accordance with Section 12(a) of this
Agreement. Such notice shall indicate the specific termination provision in
this Agreement relied upon, shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination under the
provision so indicated, and shall specify the termination date (which shall
be not more than 15 days after the giving of such notice).
13. ARBITRATION.
(a) The Company and Executive agree that any dispute or controversy
arising out of, relating to, or in connection with this Agreement, the
interpretation, validity, construction, performance, breach, or termination
hereof, or any of the matters herein released, excepting claims under
applicable workers' compensation law and unemployment insurance claims, shall
be settled exclusively by binding arbitration to be held in Santa Clara
County, California in accordance with the National Rules for the Resolution
of Employment Disputes then in effect of the American Arbitration Association
(the "Rules"). The arbitrator may grant injunctions or other relief in such
dispute or controversy. The
7
<PAGE>
decision of the arbitrator shall be final, conclusive and binding on the
parties to the arbitration. Judgment may be entered on the arbitrator's
decision in any court having jurisdiction. This provision confers complete
and total jurisdiction for final, binding arbitration with full and complete
relief for any and all covered disputes, including all contract, tort, and
statutory claims, and any other causes of action unless otherwise prohibited
by law. This arbitration provision will survive after the termination of
this Agreement.
(b) The arbitrator(s) shall apply California law to the merits of
any dispute or claim, without reference to conflicts of law rules. Executive
hereby consents to the personal jurisdiction of the state and federal courts
located in California for any action or proceeding arising from or relating
to this Agreement or relating to any arbitration in which the Parties are
participants, and hereby waives any rights he may have to a jury trial with
respect thereto.
(c) EXECUTIVE HAS READ AND UNDERSTANDS THIS SECTION, WHICH
DISCUSSES ARBITRATION. EXECUTIVE UNDERSTANDS THAT BY SIGNING THIS AGREEMENT,
EXECUTIVE AGREES TO SUBMIT ANY CLAIMS ARISING OUT OF, RELATING TO, OR IN
CONNECTION WITH THIS AGREEMENT, THE INTERPRETATION, VALIDITY, CONSTRUCTION,
PERFORMANCE, BREACH OR TERMINATION THEREOF, OR ANY OF THE MATTERS HEREIN TO
BINDING ARBITRATION, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF
EXECUTIVE'S RIGHT TO A JURY TRIAL AND RELATES TO THE RESOLUTION OF ALL
DISPUTES RELATING TO ALL ASPECTS OF THIS SEVERANCE AGREEMENT AND RELEASE OF
ALL CLAIMS.
14. MISCELLANEOUS PROVISIONS.
(a) WAIVER. No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge
is agreed to in writing and signed by the Executive and by an authorized
officer of the Company (other than the Executive). No waiver by either party
of any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other
condition or provision or of the same condition or provision at another time.
(b) WHOLE AGREEMENT. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and
supersedes in its entirety any and all prior undertakings and agreements of
the Company and Executive with respect to the subject matter hereof. This
Paragraph notwithstanding, the Retention Bonus Program ("Bonus Program") that
was created pursuant to the acquisition of Sand Microelectronics, Inc. by
Phoenix Technologies Ltd., shall remain an independent agreement in full
force and effect between Company and Executive, and Executive's payment of
sums pursuant to the Bonus Program shall be subject solely to the terms
specified therein.
(c) CHOICE OF LAW. The validity, interpretation,
construction and performance of this Agreement shall be governed by the
internal substantive laws but not the choice of law rules of the State of
California.
8
<PAGE>
(d) SEVERABILITY. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full
force and effect.
(e) NO ASSIGNMENT OF BENEFITS. The rights of any person to
payments or benefits under this Agreement shall not be made subject to option
or assignment, either by voluntary or involuntary assignment or by operation
of law, including (without limitation) bankruptcy, garnishment, attachment or
other creditor's process, and any action in violation of this Section 14(e)
shall be void.
(f) EMPLOYMENT TAXES. All payments made pursuant to this
Agreement will be subject to withholding of applicable income and employment
taxes.
(g) COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together will constitute one and the same instrument.
IN WITNESS WHEREOF, each of the parties has executed this Agreement, in
the case of the Company by its duly authorized officer, as of the day and
year first above written.
INSILICON CORPORATION Executive: ROBERT NALESNIK
/s/ Wayne Cantwell /s/ Robert Nalesnik 2/3/00
- ------------------------------------ -------------------------------------
By: Wayne Cantwell By:
President and Chief Executive Officer
9
<PAGE>
EXHIBIT A
In consideration for Executive accepting the benefits under his
Executive Officer Severance Agreement dated November 30, 1999, Executive
agrees to release Company of all claims arising from or relating to his
employment as set forth below.
Executive hereby forever waives for himself, his attorneys, heirs,
executors, administrators, successors and assigns any claim against Company,
including its subsidiaries, affiliates, insurers, shareholders, officers,
directors and employees (the "Parties Released"), for any action, loss,
expense or any damages arising from any occurrence from the beginning of time
until the date of the signing of this Agreement and arising or in any way
resulting from Executive's employment with Company or the termination
thereof. The only exceptions to the above waiver are claims by Employee
under any worker's compensation or unemployment statutes and any right
arising under this Agreement. Employee represents that he has no current
intention to assert any claim on any basis against the Parties Released.
Company releases its claims on intellectual property created by Employee
after the date of execution of this Agreement.
EXECUTIVE ACKNOWLEDGES THAT HE HAS BEEN GIVEN AT LEAST TWENTY-ONE (21)
DAYS WITHIN WHICH TO CONSIDER SIGNING THIS RELEASE. EXECUTIVE MAY REVOKE THIS
AGREEMENT BY WRITTEN NOTICE TO COMPANY WITHIN SEVEN DAYS FOLLOWING ITS
EXECUTION. THIS RELEASE SHALL NOT BECOME EFFECTIVE AND BINDING UNTIL SUCH
PERIOD HAS EXPIRED. EXECUTIVE WILL RETURN ALL CONSIDERATION AND BENEFITS
PROVIDED IN CONNECTION WITH THE GRANTING OF THIS RELEASE IF HE REVOKES THE
RELEASE.
In the event of breach of this Agreement by Company, Executive's
exclusive remedy for such breach shall be limited to the enforcement of the
terms of this Agreement.
COMPANY: EXECUTIVE: ROBERT NALESNIK
INSILICON CORPORATION
/s/ Robert Nalesnik 1/31/00
- --------------------------------------- ------------------------------------
By: By: Robert Nalesnik
----------------------------------- --------------------------------
Title:
--------------------------------
10
<PAGE>
Exhibit 10.17
- -------------------------------------------------------------------------------
LOAN AND SECURITY AGREEMENT
INSILICON CORPORATION
- -------------------------------------------------------------------------------
<PAGE>
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 ........................................................7
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 .....................8
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 ..............................................9
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 ...................................10
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
2
<PAGE>
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 ..............................................................13
11 CHOICE OF LAW , VENUE AND JURY TRIAL WAIVER............................13
12 GENERAL PROVISIONS ....................................................13
12.1 Successors and Assigns .........................................13
12.2 Indemnification ................................................13
12.3 Time of Essence ................................................13
12.4 Severability of Provision.......................................13
12.5 Amendments in Writing, Integration..............................13
12.6 Counterparts ...................................................14
12.7 Survival .......................................................14
12.8 Confidentiality ................................................14
12.9 Attorneys' Fees, Costs and Expenses ............................14
13 DEFINITIONS ...........................................................14
13.1 Definitions ....................................................14
</TABLE>
3
<PAGE>
THIS LOAN AND SECURITY AGREEMENT dated January 18, 2000, between SILICON
VALLEY BANK ("Bank"), whose address is 3003 Tasman Drive, Santa Clara,
California 95054 and INSILICON CORPORATION ("Borrower"), whose address is 411
East Plumeria Drive, San Jose, California 95134 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.
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), and minus (iii)
the FX Reserve. 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.
2.1.2 FOREIGN EXCHANGE SUBLIMIT.
If there is availability under the Committed Revolving Line and the
Borrowing Base, then Borrower may enter in foreign exchange forward contracts
with the Bank under which Borrower commits to purchase from or sell to Bank a
set amount of foreign currency more than one business day after the contract
date (the "FX Forward Contract"). Bank will subtract 10% of each outstanding
FX Forward Contract from the foreign exchange sublimit which is a maximum of
$5,000,000(the "FX Reserve"). The total FX Forward Contracts at any one time
may not exceed 10 times the amount of the FX Reserve. Bank may terminate the
FX Forward Contracts if an Event of Default occurs.
2.1.3 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 minus the Cash
Management Services Sublimit or the Borrowing Base minus (ii) the outstanding
principal balance of the Advances (iii) minus the FX Reserve, but the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may not exceed
$5,000,000. Each Letter of Credit will expire no later than 180
4
<PAGE>
days after the Revolving Maturity Date provided Borrower's Letter of Credit
reimbursement obligation is 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.
2.1.4 CASH MANAGEMENT SERVICES SUBLIMIT.
Borrower may use up to $5,000,000 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, 2.1.2, and 2.1.3 exceed
the lesser of either (i) the Committed Revolving Line minus the Cash
Management Services Sublimit or (ii) the Borrowing Base, Borrower must
immediately pay Bank the excess.
2.3 INTEREST RATE, PAYMENTS.
(a) Interest Rate. Advances accrue interest on the outstanding
principal balance at a per annum rate of 0.25 percentage point 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 17th of each month. Bank may debit any of Borrower's deposit accounts
including Account Number 3300187000 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.
2.4 FEES.
Borrower will pay:
(a) Facility Fee. A fully earned, non-refundable Facility Fee of
$18,750 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 and the completion of Borrower's initial public offering.
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:
5
<PAGE>
(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:
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 of 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
6
<PAGE>
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.
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 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.
7
<PAGE>
6.2 FINANCIAL STATEMENTS, REPORTS, CERTIFICATES.
(a) Borrower will deliver to Bank: (i) within 45 days after the last
day of each quarter, copies of all statements, reports and notices made
available to Borrower's security holders or to any holders of Subordinated
Debt and all reports on Form 10Q filed with the Securities and Exchange
Commission; (ii) as soon as available, but no later than 120 days after the
last day of Borrower's fiscal year copies of all statements, reports and
notices made available to Borrower's security holders or to any holders of
Subordinated Debt and all reports on Form 10K filed with the Securities and
Exchange Commission (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, (or within 30 days
after the last day of each quarter, if no Advances are outstanding), 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 45 days after the last day of each quarter, Borrower will
deliver to Bank 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 year
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.
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 quarter:
(i) QUICK RATIO. A ratio of Quick Assets to Current Liabilities
of at least 1.75 to 1.00.
8
<PAGE>
(ii) PROFITABILITY. Borrower may not exceed a loss of not more
than a maximum annual cumulative net loss of $5,000,000.
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.
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.
9
<PAGE>
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.
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 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
10
<PAGE>
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.
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;
11
<PAGE>
(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 drafts
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 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, settlement, extension, or renewal of
12
<PAGE>
accounts, documents, instruments, chattel paper, and guarantees held by Bank
on which Borrower is liable.
10. NOTICES
All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by
an overnight delivery service, by certified mail, postage prepaid, return
receipt requested, or by telefacsimile to the addresses set forth at the
beginning of this Agreement. A party may change its notice address by giving
the other party written notice.
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 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.
13
<PAGE>
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: (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.
14
<PAGE>
"BORROWING BASE" is 80% of Eligible Accounts as determined by Bank from
Borrower's most recent Borrowing Base Certificate; PROVIDED, HOWEVER, that
Bank may lower the percentage of the Borrowing Base after performing an audit
of Borrower's Collateral.
"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 2.1.4.
"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 $5,000,000.
"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, Exchange Contract, 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;
(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 accounts owing in an
aggregate amount not greater than $3,000,000 from TSMC, Hitachi,
Fujitsu, Sony and NEC and Accounts that Bank approves in writing.
(f) Accounts for which the account debtor is a federal, state or local
government entity or any department, agency, or instrumentality;
15
<PAGE>
(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;
(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.
"EQUIPMENT" is all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"ERISA" is the Employment Retirement Income Security Act of 1974, and
its regulations.
"FX FORWARD CONTRACT" is defined in Section 2.1.2.
"FX RESERVE " is defined in Section 2.1.2.
"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 PROCEEDING" 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.
"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,
16
<PAGE>
if any and including interest accruing after Insolvency Proceedings begin and
debts, liabilities, or obligations of Borrower assigned to Bank.
"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 &
Poor's 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) Licenses or sublicenses granted in the ordinary course of
Borrower's business and any interest or title of a licensor or under any
license or sublicense, IF the licenses and sublicenses permit granting Bank a
security interest;
(e) Leases or subleases granted in the ordinary course of Borrower's
business, including in connection with Borrower's leased premises or leased
property;
(f) 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 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.
17
<PAGE>
"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 January 17, 2001.
"SCHEDULE" is any attached schedule of exceptions.
"SUBORDINATED DEBT" is debt incurred by Borrower subordinated to
Borrower's indebtedness owed to Bank and which is reflected in a written
agreement in a manner and form acceptable to Bank and approved by Bank in
writing.
"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 NET 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.
BORROWER:
InSilicon Corporation
By: W. Meyer
---------------------------------------
Title: EVP & CFO
------------------------------------
BANK:
SILICON VALLEY BANK
By: Pamela L. Doyle
---------------------------------------
Title: SVP
------------------------------------
18
<PAGE>
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
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.
<PAGE>
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: InSilicon Corporation
------------------------------------------------------------------------
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>
EXHIBIT C
BORROWING BASE CERTIFICATE
Borrower: InSilicon Corporation Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Commitment Amount: $5,000,000
- -------------------------------------------------------------------------------
<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) $
-------------
** TSMC, Hitachi, Fujitsu, Sony and NEC eligible Foreign
not to exceed an aggregate amount of $3,000,000 allowed
BALANCES
17. Maximum Loan Amount (minus Cash Management
Services Sublimit) $
-------------
18. Total Funds Available [Lesser of #17 or (#16 plus
#ERROR! REFERENCE SOURCE NOT FOUND.)] $
-------------
19. Present balance owing on Line of Credit $
-------------
20. Outstanding under Sublimits (FX, 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:
------------------------------
BANK USE ONLY
Rec'd By:
----------------
Auth. Signer
Date:
--------------------
InSilicon Corporation
Verified:
----------------
Auth. Signer
By:
-------------------------- Date:
Authorized Signer --------------------
--------------------------
------------------------------
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
3003 Tasman Drive
Santa Clara, CA 95054
FROM: INSILICON CORPORATION
The undersigned authorized officer of InSilicon Corporation ("Borrower")
certifies 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>
10-Q Quarterly within 45 days Yes No
10K Annually within 120 days Yes No
A/R & A/P Agings Monthly within 30 days* Yes No
Borrowing Base Certificate Monthly within 30 days* Yes No
</TABLE>
*Quarterly within 30 days if no monthly outstanding Advances.
<TABLE>
<CAPTION>
FINANCIAL COVENANT REQUIRED ACTUAL COMPLIES
------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Quarterly Basis:
Minimum Quick Ratio 1.75:1.00 _____:1.00 Yes No
Profitability: Annually $_________ Yes No
Losses not to exceed: an annual cumulative net loss of $5,000,000 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>
Sincerely,
InSilicon Corporation
- ---------------------------------------
SIGNATURE
- ---------------------------------------
TITLE
- ---------------------------------------
DATE
2
<PAGE>
[LOGO]
SILICON VALLEY BANK
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: INSILICON CORPORATION
LOAN OFFICER: DIANE THOMPSON
DATE: JANUARY 18, 2000
<TABLE>
<S> <C> <C>
REVOLVING LOAN FEE $18,750.00
CREDIT REPORT 35.00
UCC SEARCH FEE 150.00
UCC FILING FEE 20.00
DOCUMENTATION FEE 750.00
TOTAL FEE DUE $19,705.00
-----------
-----------
</TABLE>
PLEASE INDICATE THE METHOD OF PAYMENT:
{ } A CHECK FOR THE TOTAL AMOUNT IS ATTACHED.
{ } DEBIT DDA # __________________ FOR THE TOTAL AMOUNT.
{ } LOAN PROCEEDS
BORROWER:
BY:
-----------------------------------
(AUTHORIZED SIGNER)
Pamela L. Doyle
- ---------------------------------------
SILICON VALLEY BANK (DATE)
ACCOUNT OFFICER'S SIGNATURE
<PAGE>
CORPORATE BORROWING RESOLUTION
BORROWER: INSILICON CORPORATION BANK: SILICON VALLEY BANK
411 EAST PLUMERIA DRIVE 3003 TASMAN DRIVE
SAN JOSE, CA 95134 SANTA CLARA, CA 95054-1191
I, THE SECRETARY OR ASSISTANT SECRETARY OF INSILICON CORPORATION
("BORROWER"), CERTIFY that Borrower is a corporation existing under the laws
of the State of Delaware.
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:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
<S> <C> <C>
Wayne Cantwell CEO and President Wayne C. Cantwell
- -------------------------- --------------------------- --------------------------------
William E. Meyer CFO W. Meyer
- -------------------------- --------------------------- --------------------------------
- -------------------------- --------------------------- --------------------------------
- -------------------------- --------------------------- --------------------------------
</TABLE>
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 drafts, 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 Borrower's 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.
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.
<PAGE>
CERTIFIED TO AND ATTESTED BY:
X Linda V Moore
----------------------------------------------
*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>
Exhibit 21.1
List of Subsidiaries
inSilicon International -- Delaware
inSilicon KK -- Japan
inSilicon Ltd. -- UK
inSilicon GmbH -- Germany
1
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference of our firm under the caption "Experts" and to
the use of our report dated December 17, 1999, except for Notes 5 and 10 as to
which the date is February 11, 2000, in Amendment No.1 to the Registration
Statement (Form S-1) and related Prospectus of inSilicon Corporation for the
registration of 3,500,000 shares of its common stock.
Our audits also included the financial statement schedule listed in
Item 16(b) of this 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, present fairly in all material respects the information set forth
therein.
/s/ ERNST & YOUNG LLP
San Jose, California
February 11, 2000
<PAGE>
EXHIBIT 23.2
CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of
our report dated March 30, 1998, relating to the financial statements of Sand
Microelectronics, Inc., which appears in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/S/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
February 11, 2000
<PAGE>
Exhibit 23.4
CONSENT OF Integreated Circuit Engineering
We consent to the reference of our firm under the caption "Our Business" in
the Registration Statement (Form S-1) and related Prospectus of inSilicon
Corporation for the registration of shares of its common stock.
/s/ Integrated Circuit Engineering Noreen Pfohl
ICE
17350 N. Hartford Drive 2/10/00
Scottsdale, AZ 85255
February 10, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> SEP-30-2000 SEP-30-1999
<PERIOD-START> OCT-01-1999 OCT-01-1998
<PERIOD-END> DEC-31-1999 DEC-31-1998
<CASH> 0 0
<SECURITIES> 0 0
<RECEIVABLES> 3,415 0
<ALLOWANCES> (216) 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 3,508 0
<PP&E> 1,004 0
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 22,023 0
<CURRENT-LIABILITIES> 5,503 0
<BONDS> 0 0
0 0
10 0
<COMMON> 0 0
<OTHER-SE> 13,774 0
<TOTAL-LIABILITY-AND-EQUITY> 22,023 0
<SALES> 5,257 4,866
<TOTAL-REVENUES> 5,257 4,866
<CGS> 553 158
<TOTAL-COSTS> 1,075 718
<OTHER-EXPENSES> 5,241 5,463
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,059) (1,315)
<INCOME-TAX> (68) 0
<INCOME-CONTINUING> (991) (1,315)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (991) (1,315)
<EPS-BASIC> (0.08) 0
<EPS-DILUTED> (0.08) 0
</TABLE>
