INSILICON CORP
10-Q, 2000-05-12
SEMICONDUCTORS & RELATED DEVICES
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<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549

                                    FORM 10-Q
(Mark One)

/X/  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

For the quarterly period ended MARCH 31, 2000
                                       or

/ /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

For the transition period ____________ to ____________ .

                        Commission file number 000-29513

                              INSILICON CORPORATION
             (Exact name of Registrant as specified in its charter)

             DELAWARE                                77-0526155
  (State or other jurisdiction of       (I.R.S. Employer Identification Number)
   incorporation ororganization)

            411 EAST PLUMERIA DRIVE, SAN JOSE, CALIFORNIA 95134
                (Address of principal executive offices,
                           including zip code)

                                 (408) 894-1900
              (Registrant's telephone number, including area code)


     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                 YES             NO      X
                     ----------     -------------

     As of April 30, 2000 there were 14,051,330 outstanding shares of the
Registrant's common stock, $.001 par value.


                                     Page 1
<PAGE>

                              INSILICON CORPORATION

                                    FORM 10-Q

                                      INDEX

<TABLE>
<CAPTION>
                                                                                        Page
                                                                                        ----
<S>                                                                                     <C>
PART  I.  FINANCIAL INFORMATION
     Item 1.  Financial Statements

              Condensed Consolidated Balance Sheets as of
              March 31, 2000 and September 30, 1999.......................................3

              Condensed Consolidated Statements of Operations for the
              Three and Six Months Ended March 31, 2000 and 1999..........................4

              Condensed Consolidated Statements of Cash Flows for the
              Six Months Ended March 31, 2000 and 1999....................................5

              Notes to Condensed Consolidated Financial Statements........................6

     Item 2.  Management's Discussion and Analysis of Financial
              Condition and Results of Operations.........................................8

     Item 3.  Quantitative and Qualitative Disclosures about Market Risk.................11


PART  II.  OTHER INFORMATION

     Item 2.  Changes in Securities and Use of Proceeds..................................13

     Item 6.  Exhibits and Report on Form 8-K

              Exhibits...................................................................13

              Reports on Form 8-K........................................................13
</TABLE>


                                     Page 2
<PAGE>

PART  I.      FINANCIAL INFORMATION

ITEM 1.       FINANCIAL STATEMENTS

                              INSILICON CORPORATION
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    (in thousands, except per share amounts)

<TABLE>
<CAPTION>
                                                                                     March 31,        September 30,
                                                                                       2000               1999
                                                                                   -------------      -------------
                                                                                   (unaudited)
<S>                                                                                 <C>                <C>
                                      Assets
Current assets:
      Cash and cash equivalents                                                          $40,025            $    -
      Accounts receivable, net of allowances of $239 at
         March 31, 2000 and $364 at September 30, 1999                                     5,377             5,104
      Other current assets                                                                   632               135
                                                                                   -------------      -------------
         Total current assets                                                             46,034             5,239

Other marketable securities                                                                  838               838
Property and equipment, net                                                                  922             1,174
Computer software costs, net                                                               5,874             6,974
Goodwill and other intangible assets, net                                                  9,110            10,220
Other assets                                                                                   2                36
                                                                                   -------------      -------------
      Total assets                                                                       $62,780           $24,481
                                                                                   =============      =============

                     Liabilities and Stockholder's Net Investment/
                                 Stockholders' Equity
Current liabilities:
      Accounts payable                                                                   $   796           $   205
      Payroll and related liabilities                                                      1,282             1,776
      Deferred revenue                                                                     1,540             1,589
      Payable to Phoenix Technologies Ltd.                                                 3,409                 -
      Accrued merger costs                                                                   756             1,560
      Other accrued liabilities                                                              606               502
                                                                                   -------------      -------------
         Total current liabilities                                                         8,389             5,632

Long-term obligations                                                                      2,736                45

Commitments and contingencies                                                                  -                 -

Stockholder's net investment /stockholders' equity:
      Preferred stock, par value $0.001; 15,000 shares authorized,
         none outstanding                                                                      -                 -
      Common stock, par value $0.001; 100,000 shares authorized,
         14,051 shares issued and outstanding at March 31, 2000                               14                 -
      Additional paid-in capital                                                          77,453                 -
      Net contribution from stockholder                                                        -            41,632
      Deferred stock-based compensation                                                   (1,360)                -
      Accumulated deficit                                                                (24,496)          (22,828)
      Accumulated translation adjustment                                                      44                 -
                                                                                   -------------      -------------
         Total stockholder's net investment/stockholders' equity                          51,655            18,804
                                                                                   -------------      -------------
      Total liabilities and stockholder's net
      investment/stockholders' equity
                                                                                         $62,780           $24,481
                                                                                   =============      =============
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.


                                     Page 3
<PAGE>

                              INSILICON CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    (in thousands, except per share amounts)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                   Three Months Ended              Six Months Ended
                                                                        March 31,                     March 31,
                                                                  --------------------          -----------------------
                                                                   2000           1999           2000             1999
                                                                  -------        ------         ------           ------
<S>                                                               <C>           <C>            <C>              <C>
Revenue:
      License fees (1)                                            $ 4,588       $ 4,003        $ 8,445          $ 7,680
      Services                                                      1,250           922          2,650            2,111
                                                                  -------        ------         ------           ------
     Total revenue                                                  5,838         4,925         11,095            9,791

Cost of revenue:
     License fees                                                     307           274            860              432
     Services                                                         394           311            602              338
     Amortization of purchased technology                             314           533            628            1,066
                                                                  -------        ------         ------           ------
     Total cost of revenue                                          1,015         1,118          2,090            1,836
                                                                  -------        ------         ------           ------

Gross margin                                                        4,823         3,807          9,005            7,955

Operating expenses:
     Research and development                                       1,994         2,191          4,001            4,539
     Sales and marketing                                            2,026         1,710          3,738            3,332
     General and administrative                                       873           725          1,604            1,577
     Amortization of intangible assets                                555           555          1,110            1,110
     Stock-based compensation                                         125            --            361               --
     Restructuring charge                                              --            --             --               86
                                                                  -------        ------         ------           ------
     Total operating expenses                                       5,573         5,181         10,814           10,644

Loss from operations                                                (750)       (1,374)        (1,809)          (2,689)

Interest and other income, net                                         25            --             25                -
                                                                  -------        ------         ------           ------
Loss before income taxes                                            (725)       (1,374)        (1,784)          (2,689)
Income tax benefit                                                   (48)            --          (116)               --
                                                                  -------        ------         ------           ------
Net loss                                                          $ (677)      $(1,374)       $(1,668)         $(2,689)
                                                                  =======        ======         ======           ======
Net loss per share (pro forma for the six-month period):
         Basic and diluted                                        $(0.06)                      $(0.16)
                                                                  ======                        ======
Shares used in per share calculation (pro forma for the
six-month period):
         Basic and diluted                                         10,830                       10,612
                                                                  =======                       ======

(1) Includes revenue from Phoenix Technologies Ltd.               $   402        $   --        $   402           $   --
                                                                  =======        =======        ======            =====
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.


                                     Page 4
<PAGE>

                              INSILICON CORPORATION
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                     (unaudited)

<TABLE>
<CAPTION>
                                                                                          Six Months Ended
                                                                                                March 31
                                                                                        ----------------------
                                                                                           2000          1999
                                                                                        --------      --------
<S>                                                                                     <C>           <C>
Cash flows from operating activities:
     Net loss                                                                           $(1,668)      $(2,689)
     Reconciliation of net loss to net cash provided by (used in)
       operating activities:
         Depreciation and amortization                                                    2,506         2,744
         Stock-based compensation                                                           361             -
         Change in operating assets and liabilities:
              Accounts receivable                                                          (273)       (3,273)
              Other assets                                                                 (463)          113
              Accounts payable                                                              591          (657)
              Payroll and related liabilities                                              (494)          299
              Deferred revenue                                                              (49)           50
              Payable to Phoenix Technologies Ltd.                                        3,409             -
              Other accrued liabilities                                                    (700)         (562)
              Long term obligations                                                         (45)           51
                                                                                        --------      --------
                  Total adjustments                                                       4,843        (1,235)
                                                                                        --------      --------
         Net cash provided by (used in) operating activities                              3,175        (3,924)

Cash flows from investing activities:
     Purchases of property and equipment                                                    (44)         (193)
     Additions to computer software costs                                                     -          (371)
                                                                                        --------      --------
         Net cash used in investing activities                                              (44)         (564)

Cash flows from financing activities:
     Increase (decrease) in net contribution from stockholder                           (1,529)         4,488
     Proceeds from stock purchases under stock option and
           stock purchase plans                                                             665             -
     Proceeds from initial public offering of common stock, net                          37,714             -
                                                                                        --------      --------
         Net cash provided by financing activities                                       36,850         4,488
                                                                                        --------      --------
Effect of exchange rate changes on cash and cash equivalents                                 44             -
                                                                                        --------      --------
Net increase in cash and cash equivalents                                                40,025             -
Cash and cash equivalents at beginning of period                                              -             -
                                                                                        --------      --------
Cash and cash equivalents at end of period                                              $40,025        $    -
                                                                                        ========      ========
Supplemental disclosure of cash flow information:
     Deferred stock-based compensation                                                     1,721            -
     Issuance of common and preferred stock upon
           capitalization, net of deferred taxes                                           2,736            -
</TABLE>


THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.


                                     Page 5
<PAGE>

                              INSILICON CORPORATION
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)


NOTE 1.     BASIS OF PRESENTATION

         The accompanying condensed consolidated financial statements of
inSilicon Corporation and its subsidiaries (the "Company") have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (the "SEC"). Certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The information included in this report
should be read in conjunction with the Company's consolidated financial
statements and related notes thereto included in the Company's Registration
Statement on Form S-1 filed with the SEC on January 13, 2000, as amended.

         In the opinion of management, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (consisting only of
normal recurring adjustments) necessary to summarize fairly the Company's
financial position, results of operations and cash flows for the interim periods
presented. All significant intercompany accounts and transactions have been
eliminated. The operating results for the three months ended March 31, 2000 are
not necessarily indicative of the results that may be expected for the fiscal
year ending September 30, 2000 or for any other future period.

         The Company was incorporated in November 1999. Prior to that date, the
Company was operated as a division of Phoenix Technologies Ltd. ("Phoenix"). The
Company's condensed consolidated financial statements 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 March 2000, 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.


NOTE 2.    INITIAL PUBLIC OFFERING OF COMMON STOCK

         On March 22, 2000, the Company sold 3,500,000 shares of common stock in
an initial public offering at a price of $12.00 per share, raising $42.0 million
in gross proceeds. After underwriters' discounts and commissions of $2.9 million
and $1.4 million in related expenses, net proceeds were $37.7 million.


NOTE 3.     EARNINGS PER SHARE

         Prior to November 30, 1999, the Company was not a separate legal entity
and, as a division of Phoenix, had no historical capital structure. Therefore,
fiscal 1999 net loss per share amounts have not been presented in the
consolidated financial statements. Basic loss per share is computed on the basis
of the weighted average number of common shares outstanding. Diluted loss per
share is computed on the basis of the weighted average number of common shares
and outstanding stock options using the "treasury stock" method. In periods in
which a net loss is generated, the Company does not include the effects of
outstanding options and warrants when calculating diluted net loss per share, as
their inclusion would be anti-dilutive. If the Company had reported net income,
diluted earnings per share would have included the shares used in the
computation of basic net loss per share as well as an additional 689,586 of
common equivalent shares related to the outstanding options and warrants
(determined using the treasury stock method).


                                     Page 6
<PAGE>

                              INSILICON CORPORATION
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (unaudited)


NOTE 4.     COMPREHENSIVE INCOME (LOSS)

          The Company has adopted Statement of Financial Accounting Standards
No. 130 ("SFAS 130"), "Reporting Comprehensive Income," which requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income or losses (revenue, expenses, gains and
losses) be included in comprehensive income or loss. The Company adopted SFAS
130 effective October 1, 1998. Comprehensive losses were not materially
different from net losses incurred for all periods presented.


NOTE 5.     RELATED PARTY TRANSACTIONS

          Following the completion of the initial public offering, Phoenix owned
approximately 74% of the Company's outstanding common stock. The combined impact
on the consolidated statements of operations of all related party transactions
with Phoenix is summarized below (in thousands).

<TABLE>
<CAPTION>
                                                                    Three Months Ended        Six Months Ended
                                                                          March 31,                March 31,
                                                                       --------------        ---------------------
                                                                        2000    1999          2000          1999
                                                                       ------  ------        ------        -------
<S>                                                                    <C>     <C>           <C>           <C>
COSTS AND EXPENSES THROUGH OCTOBER 1999 REPRESENTING ALLOCATIONS
  FROM PHOENIX:
         Cost of revenue                                              $    -   $    -       $     -        $     -
         Research and development                                          -      421           321           927
         Sales and marketing                                               -      971           293         1,815
         General and administrative                                        -      727           691         1,542
                                                                      -------  ------        ------        -------
         Total costs and expenses                                     $    -   $2,119        $1,305        $4,284
                                                                      =======  ======        ======        =======
REVENUE, COSTS AND EXPENSES BASED UPON THE SERVICES AND
   COST-SHARING AGREEMENT AND TECHNOLOGY DISTRIBUTOR
   AGREEMENT WITH PHOENIX:
     Revenue                                                          $  402   $   -        $  402         $   -

     Costs and expenses:
         Cost of revenue                                                 306       -           306             -
         Research and development                                        257       -           257             -
         Sales and marketing                                             128       -           128             -
         General and administrative                                      445       -           445             -
                                                                      -------  ------        ------        -------
         Total costs and expenses                                     $1,136   $   -        $1,136         $   -
                                                                      =======  ======        ======        =======
</TABLE>


                                     Page 7
<PAGE>

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

         THIS REPORT ON FORM 10-Q, INCLUDING WITHOUT LIMITATION THIS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS, CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
21E AND SECTION 27A OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THESE
FORWARD-LOOKING STATEMENTS ARE BASED ON CURRENT EXPECTATIONS THAT INVOLVE RISKS
AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
THOSE PROJECTED. FACTORS THAT MAY CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED HEREIN AND UNDER THE SECTION ENTITLED "RISK FACTORS"
BEGINNING ON PAGE 7 OF THE COMPANY'S FORM S-1 FILED WITH THE SEC ON JANUARY 13,
2000, AS AMENDED, AND IN OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.

COMPANY OVERVIEW

         inSilicon Corporation ("inSilicon" or the "Company") 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. The Company provides 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, Phoenix transferred certain assets to inSilicon
substantially in exchange for 10,400,000 shares of inSilicon's Series A
Preferred Stock and the assumption of certain liabilities. In March 2000,
inSilicon completed its initial public offering in which it sold 3,500,000
shares of common stock, which generated net proceeds of $37.7 million. In
conjunction with the initial public offering, all shares of Series A Preferred
Stock converted on a one-to-one basis into common stock.

         The Company has 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. The discussion below refers to
the historical operating results and activities and the assets and liabilities
assigned to inSilicon by Phoenix included in the Company's condensed
consolidated financial statements.

         Phoenix has provided a number of administrative services to the Company
on which it continues to rely. The Company's condensed consolidated financial
statements prior to November 30, 1999, were derived from the historical books
and records of Phoenix. The consolidated balance sheets include all assets and
liabilities directly attributable to us. The condensed consolidated statements
of operations include all revenue and expenses attributable to the Company,
including direct charges and allocated costs for shared facilities, functions
and services used by the Company and provided by Phoenix. A significant amount
of expenses have been allocated to the Company 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. You should not consider the historical financial statements of
inSilicon to be representative of the operating results, financial position or
cash flows to be expected in future periods or what the results of operations,
financial position or cash flows would have been had inSilicon been a separate,
stand-alone entity during the periods presented.

         The Company has entered into a Services and Cost-Sharing Agreement with
Phoenix effective as of November 30, 1999. This agreement covers various
services that Phoenix provides to the Company, and the method by which the
Company and Phoenix will share certain costs. The services include data
processing, telecommunications, information technology support, accounting,
financial management, tax


                                     Page 8
<PAGE>

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 charged to the Company
is equal to the aggregate cost to Phoenix and inSilicon of the services and
costs multiplied by a percentage representing the number of inSilicon 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 the Company can terminate any
one or more of the services at any time on 30 days' written notice. The Services
and Cost-Sharing Agreement is renewed on a month-to-month basis. Phoenix can
terminate after those dates on 30 days' written notice.

REVENUE

         Revenue for the three and six months ended March 31, 2000 was $5.8
million and $11.1 million, increases of 19% and 13% from $4.9 million and $9.8
million for the comparable periods of fiscal 1999. These increases consist of
growth in license fees revenue ($585,000 and $765,000 for the three and six
months ended March 31, 2000) and services revenue ($328,000 and $539,000 for the
three and six months ended March 31, 2000) due to the greater market acceptance
of semiconductor intellectual property. In addition, services revenue increased
due to increased maintenance revenue generated from the Company's growing
installed base of customers.

         Revenue by geographic region for the three months and six months ended
March 31, 2000 and 1999 was as follows (DOLLARS IN THOUSANDS):

<TABLE>
<CAPTION>
                                                                                                % of Consolidated
                                                           Amount                                    Revenue
                                                     --------------------                       ------------------
                                                      2000          1999        % CHANGE        2000        1999
                                                     ------        ------        -------        -----        -----
<S>                                                  <C>           <C>           <C>            <C>          <C>
  Three months ended March 31:
   North America                                    $ 3,524        $3,218            10%           60%         65%
   Asia                                               1,724         1,132            52%           30%         23%
   Europe                                               590           575             3%           10%         12%
                                                     ------        ------                       -----        -----
       Total revenue                                $ 5,838        $4,925            19%          100%        100%
                                                     ======        ======                       =====        =====
  Six months ended March 31:
   North America                                    $ 6,994        $7,023            (4)%          63%         72%
   Asia                                               2,954         1,805            64%           27%         18%
   Europe                                             1,147           963            19%           10%         10%
                                                     ------        ------                       -----        -----
       Total revenue                                $11,095        $9,791            13%          100%        100%
                                                     ======        ======        =======        =====        =====
</TABLE>

         Asian revenue in the three and six months ended March 31, 2000, and
North American revenue in the three months ended March 31, 2000 increased as
semiconductor and systems companies are increasingly licensing semiconductor
intellectual property for their system-on-chip designs. Also contributing was an
increase in the Company's firmware revenue in Japan.

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 and six months ended March 31,
2000 were $4.8 million and $9.0 million, increases of 27% and 13% from $3.8
million and $7.9 million for the comparable periods of fiscal 1999. These
increases


                                     Page 9
<PAGE>

were principally due to revenue growth ($913,000 and $1.3 million in the three
and six month periods, respectively).

RESEARCH AND DEVELOPMENT EXPENSES

         Research and development expenses consist principally of payroll and
related costs associated with the development of semiconductor intellectual
property and related software, net of amounts capitalized. Research and
development expenses for the three and six months ended March 31, 2000 declined
$197,000 (9%) and $538,000 (12%) from the comparable periods in fiscal 1999. The
declines were principally attributable to the completion of an outsourced design
contract and the Company's reduced use of software consultants.

         The Company did not capitalize any internal software development costs
for the three and six month periods ended March 31, 2000 as compared to $209,226
and $371,029 for the same periods in fiscal 1999. These decreases in
capitalization were due to products that have not yet reached technological
feasibility.

SALES AND MARKETING EXPENSES

         Sales and marketing expenses consist of costs related to advertising,
public relations, and other marketing, as well as direct selling, channel
development and other sales activities. These costs include direct out-of-pocket
and payroll expenses. Sales and marketing expenses for the three months and six
months ended March 31, 2000 increased $316,000 (18%) and $406,000 (12%) from the
comparable periods in fiscal 1999. These increases were due to headcount
increases in direct sales and product marketing. The Company expects sales and
marketing expenses to increase throughout the remainder of fiscal year 2000 to
support and drive further revenue growth.

GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses consist of expenditures for
executive, accounting, legal, personnel, recruiting and other administrative
functions. These costs represent allocations from Phoenix through October 31,
1999. Beginning November 1, 1999, the date of the Company's incorporation, these
costs include both direct administrative costs incurred by the Company and an
allocation of costs under the Company's Services and Cost-Sharing Agreement with
Phoenix. General and administrative expenses for the three months and six months
ended March 31, 2000 increased $148,000 (20%) and $27,000 (2%) from the
comparable periods in fiscal 1999 due to headcount increases in finance, human
resources, legal and operations associated with becoming an independent public
company.

 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 Microelectronics, Inc. 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.

STOCK-BASED COMPENSATION

         Stock-based compensation charges for the three months and six months
ended March 31, 2000 were $125,000 and $361,000 respectively. These charges were
due to stock options granted during the first and second quarter of fiscal 2000
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 for the three
months and


                                    Page 10
<PAGE>

six months ended March 31, 2000 were $125,000 and $1.7 million respectively. The
remaining compensation will be amortized by charges to operations over the
vesting periods of the options, generally straight-line over four years.

INCOME TAX BENEFIT

         The Company recorded income tax benefits of $48,000 and $116,000 for
the three months and six months ended March 31, 2000 respectively. These amounts
represent the benefit to be realized from Phoenix for the income tax effect of
our losses subsequent to November 30, 1999. Prior to the Company's
capitalization on November 30, 1999, the Company operated as a division of
Phoenix, and the net losses 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.

LIQUIDITY AND CAPITAL RESOURCES

         Our principal capital requirements are to fund working capital needs
and capital expenditures to support our revenue growth. Prior to the Company's
initial public offering in March 2000, Phoenix performed cash management
services and provided the funds necessary to satisfy our working capital
requirements. As of March 31, 2000, the Company's sources of liquidity include
cash, cash equivalents, short-term investments, other marketable securities of
$40.0 million and a $5.0 million unsecured line of credit with a commercial bank
that expires in January 2001. There were no borrowings outstanding under the
credit facility at March 31, 2000.

         Cash used in operating activities was $3.2 million for the six months
ended March 31, 2000 and $3.9 million for the six months ended March 31, 1999.
Cash provided by operating activities during the six months ended March 31, 2000
was primarily attributable an increase in the intercompany payable to Phoenix,
depreciation and amortization and stock-based compensation, offset by a net
loss, an increase in accounts receivable, and decreases in payroll and related
liabilities and other accrued liabilities. Cash used in operating activities
during the six months ended March 31, 1999 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 used in investing activities was $44,000 and $564,000 for the six
months ended March 31, 2000 and 1999. Cash used in both periods was primarily
due to purchases of computer equipment. Cash used in the six months ended March
31, 1999 also included additions to computer software costs.

         Net cash provided by financing activities was $36.9 million and $4.5
million for the six months ended March 31, 2000 and 1999. Net cash provided for
the six months ended March 31, 2000 related to the proceeds from the Company's
initial public offering, partially offset by a decrease in the net contribution
from Phoenix. Net cash provided for the six months ended March 31, 1999 related
to capital contributions from Phoenix.

         The Company believes that the net proceeds from the offering,
together with cash generated from operations, if any, will be sufficient to
meet its operating and capital requirements for at least the next 12 months.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         We are exposed to the impact of interest rate changes, foreign
currency fluctuations, and changes in the market values of our investments.

                                    Page 11
<PAGE>

         INTEREST RATE RISK

         The Company's exposure to market rate risk for changes in interest
rates relates primarily to its investment portfolio. The Company's investments
are in debt instruments of the U.S. Government and its agencies and of
high-quality corporate issuers. Investments in both fixed rate and floating rate
interest earning instruments carry a degree of interest rate risk. Fixed rate
securities may have their fair market value adversely impacted due to a rise in
interest rates, while floating rate securities may produce less income than
expected if there is a decline in interest rates. Due in part to these factors,
the Company's future investment income may fall short of expectations, or the
Company may suffer a loss in principal if it is forced to sell securities which
have declined in market value due to changes in interest rates.

         FOREIGN CURRENCY RISK

         International sales are primarily from the Company's foreign sales
subsidiaries in their respective countries and are typically denominated in the
local currency of each country. These subsidiaries incur most of their expenses
in the local currency.

         Accordingly, all foreign subsidiaries use the local currency as their
functional currency. The Company's international business is subject to risks
typical of an international business, including, but not limited to differing
economic conditions, changes in political climate, differing tax structures,
other regulations and restrictions, and foreign exchange rate volatility.
Accordingly, the Company's future results could be materially adversely impacted
by changes in these or other factors. The Company's exposure to foreign exchange
rate fluctuations arises in part from intercompany accounts in which costs
incurred in the United States are charged to the Company's foreign sales
subsidiaries. These intercompany accounts are typically denominated in the
functional currency of the foreign subsidiary in order to centralize foreign
exchange risk with the parent company in the United States. The Company is also
exposed to foreign exchange rate fluctuations as the financial results of
foreign subsidiaries are translated into U.S. dollars in consolidation. As
exchange rates vary, these results, when translated, may vary from expectations
and adversely impact overall expected profitability.

         INVESTMENT RISK

         The Company invests in equity instruments of privately-held,
information technology companies for business and strategic purposes. These
investments are included in other long-term assets and are accounted for under
the cost method when ownership is less than 20%. For these non-quoted
investments, the Company's policy is to regularly review the assumptions
underlying the operating performance and cash flow forecasts in assessing the
carrying values. The Company identifies and records impairment losses on
long-lived assets when events and circumstances indicate that such assets might
be impaired. To date, no such impairment has been recorded. If certain of these
investments in privately-held companies became marketable equity securities when
the investees complete initial public offerings in the future, then they are
subject to significant fluctuations in fair market value due to the volatility
of the stock market, and are recorded as long-term investments.


                                    Page 12
<PAGE>

PART  II.     OTHER INFORMATION


ITEM 2.      CHANGES IN SECURITIES AND USE OF PROCEEDS

         On March 22, 2000, the Company sold 3,500,000 shares of common stock in
an initial public offering at a price of $12.00 per share, raising $42.0 million
in gross proceeds. After underwriters' discounts and commissions of $2.9 million
and $1.4 million in related expenses, net proceeds were $37.7 million. All
shares of common stock sold in the offering were registered on Form S-1 filed
with the SEC (SEC File No. 333-94573) on January 13, 2000, as amended. The SEC
declared the Registration Statement effective on March 21, 2000. The managing
underwriters were FleetBoston Robertson Stephens Inc., Prudential Securities
Incorporated and Needham & Company, Inc.

         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, no portion of the net proceeds of this offering has been earmarked
for any specific purpose. The Company expects to use the net proceeds for
general corporate purposes, including working capital, sales and marketing, and
research and development. In addition, the Company may use a portion of the net
proceeds to acquire complementary products, technologies or companies. Pending
use, the net proceeds will be invested in short-term securities.


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K.

                  (a) EXHIBITS.

                      See Exhibit Index on page 15 hereof.

                  (b) REPORTS ON FORM 8-K.

         No reports on Form 8-K were filed by the Company during the quarter
ended March 31, 2000.


                                    Page 13
<PAGE>

                                    SIGNATURE


           Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                                           INSILICON CORPORATION


Date:  MAY 12, 2000                        By:  /s/ WILLIAM E. MEYER
                                                ------------------------------
                                                William E. Meyer
                                                Executive Vice President and
                                                     Chief Financial Officer
                                                  (Duly Authorized Officer and
                                                  Principal Financial Officer)


                                    Page 14
<PAGE>

                                  EXHIBIT INDEX

Exhibit
- -------

3.1      Restated Certificate of Incorporation of inSilicon Corporation

3.2      By-Laws of inSilicon Corporation

27       Financial Data Schedule


                                    Page 15

<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 27th day of March, 2000.



                                    /s/ Wayne C. Cantwell
                                    --------------------------------------------
                                    Wayne C. Cantwell, President


ATTEST:           /s/ David J. Power
              -----------------------------------------
              David J. Power, 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 80% 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 February 28, 2000

                            Effective March 27, 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 February 28, 2000

                            Effective March 27, 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


<PAGE>

mailed to the Secretary and received at the General Offices, 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 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, (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 or, (iii) prior to
the Trigger Date (as defined in the Certificate of Incorporation), by Phoenix
Technologies Ltd. or any of its affiliates that is a stockholder of the
Corporation.

                  (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 and the class and
number of shares of the


                                       3
<PAGE>

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


                                       4
<PAGE>

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 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

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<PAGE>
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<PERIOD-TYPE>                   3-MOS
<FISCAL-YEAR-END>                          SEP-30-2000
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<PERIOD-END>                               MAR-31-2000
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                                0
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