TVIA INC, S-1, 2000-04-04

TVIA INC
S-1, 2000-04-04

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<PAGE>

As filed with the Securities and Exchange Commission on April 4, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933

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TVIA, INC.
(Exact name of registrant as specified in its charter)

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<C> <S> <C>
California 3674 94-3175152
(Primary Standard
(State or other jurisdiction Industrial (I.R.S. Employer
of incorporation or Classification Code
organization) Number) Identification No.)
</TABLE>
4001 Burton Drive
Santa Clara, CA 95054
(408) 982-8588
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)

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Kenny Liu
Chief Executive Officer
Tvia, Inc.
4001 Burton Drive
Santa Clara, CA 95054
(408) 982-8588
(Name, address, including zip code, and telephone number, including area code,
of agent for service of process)

Copies to:
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<S> <C>
Gabriella A. Lombardi, Esq. Christopher L. Kaufman, Esq.
Jeffrey S. Harrell, Esq. Bryant B. Edwards, Esq.
P. Christine Lillquist, Esq. Stephen B. Richards, Esq.
Pillsbury Madison & Sutro LLP Latham & Watkins
2550 Hanover Street 135 Commonwealth Drive
Palo Alto, CA 94304 Menlo Park, CA 94025
</TABLE>

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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 (the "Securities Act"), check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement numbers of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]

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CALCULATION OF FILING FEE
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<CAPTION>
Proposed Maximum
Aggregate Offering Amount of
Class of Securities To Be Registered Price(1) Registration Fee
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Common Stock, no par value............. $51,750,000 $13,662
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</TABLE>
(1) Estimated solely for the purpose of composing the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 4, 2000

[LOGO APPEARS HERE]

Common Stock

Tvia, Inc. is offering shares of its common stock. This is our initial
public offering, and no public market currently exists for our shares. We have
applied to have the shares we are offering approved for quotation on the Nasdaq
National Market under the symbol "TVIA."

We anticipate that the initial public offering price will be between $ and
$ per share.

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Investing in our common stock involves risks.
See "Risk Factors" beginning on page 7.

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<CAPTION>
Per Share Total
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<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Proceeds to Tvia, Inc. ......................................... $ $
</TABLE>

The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.

Tvia, Inc. has granted the underwriters a 30-day option to purchase up to an
additional shares of its common stock to cover over-allotments.

--------------

Robertson Stephens

Banc of America Securities LLC

Dain Rauscher Wessels

The date of this prospectus is , 2000.
<PAGE>

[INSIDE COVER]
Screen shot page

The top of the page has the Tvia logo complete with stylized television.

Three screen shots depicting various displays of rich media content using the
Tvia streaming media gateway solution with:
- -- Microsoft TV
- -- WindRiver VxWorks (complete with WindRiver logo above)
- -- Tvia demo program.
The following text appears below the television screens:
"Consumers with devices using Tvia streaming media gateway integrated circuits
can watch a football game and simultaneously select different camera angles,
look up player statistics, email, chat, or instant message with other fans,
arrange for tickets and airfare to next week's game and order a pizza through
their television."
<PAGE>

Gatefold

The top of the page has the Tvia logo complete with the stylized television.

The top section of the picture depicts multiple input content and sources and
multiple transmission media funneling into the "Tvia Streaming Media Gateway."
The multiple media content and sources shown are: movies, electronic program
guide, Internet audio and video, interactive menu, DVD/VCD/CD, DVR/VCR, video
camera and 3D graphics animation. The multiple transmission media shown are:
television antenna (analog or digital terrestrial broadcast), cable television,
microwave, satellite, digital subscriber line, analog 56K modem and Ethernet.

The bottom sections depicts various output transmission media, formats,
receiving sources and display, that funnel out of the "Tvia Streaming Media
Gateway." The output transmission media and formats shown are: digital video,
various television transmission formats, 1394 standard interface, wireless
interface and universal serial bus. The receiving sources shown are: 16:9
television, liquid crystal display, television, kiosk display, digital
television, high definition television, video camera, video cassette recorder
and stereo audio.

On the right hand side, in the middle of the picture, the following text
appears:
"The Tvia solution enables consumer broadband access of rich media content
coming from multiple transmission media. With its high bandwidth processing,
the Tvia solution provides the consumer with instant access to multiple
content and Internet streams from the broadband network through a standard
television display."
<PAGE>

You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of this
prospectus or of any sale of our common stock. In this prospectus, "Tvia,"
"we," "us," and "our" refer to Tvia, Inc., a California corporation.

Until , 2000 (25 days after commencement of the offering), all dealers
that buy, sell or trade our common stock, whether or not participating in this
offering, may be required to deliver a prospectus. This requirement is in
addition to the dealers' obligation to deliver a prospectus when acting as
underwriters and with respect to their unsold allotments or subscriptions.

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TABLE OF CONTENTS

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Page
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Prospectus Summary....................................................... 4
Risk Factors............................................................. 7
Note Regarding Forward-Looking Statements................................ 17
Use of Proceeds.......................................................... 17
Dividend Policy.......................................................... 17
Capitalization........................................................... 18
Dilution................................................................. 19
Selected Consolidated Financial Data..................................... 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations.......................................................... 21
Business................................................................. 30
Management............................................................... 43
Certain Transactions..................................................... 50
Principal Stockholders................................................... 52
Description of Capital Stock............................................. 53
Shares Eligible for Future Sale.......................................... 56
Underwriting............................................................. 58
Legal Matters............................................................ 60
Experts.................................................................. 60
Where You Can Find Additional Information................................ 60
Index to Consolidated Financial Statements............................... F-1
</TABLE>

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We own various trademarks and trade names used in our business. These
include CyberPro, FlexiBus, Tvia and the Tvia logo. This prospectus also makes
reference to trademarks and trade names of other companies.

3
<PAGE>

PROSPECTUS SUMMARY

This summary is not complete and does not contain all of the information
that you should consider before buying shares in this offering. You should read
the following summary together with the more detailed information and
consolidated financial statements, and the notes to those consolidated
financial statements, appearing elsewhere in this prospectus. This prospectus
contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from the results anticipated in those
forward-looking statements as a result of the factors described under the
heading "Risk Factors" and elsewhere in this prospectus.

Our Business

Tvia designs, develops and markets high performance streaming media gateway
integrated circuits for the Internet appliance, broadband set-top box and
digital television markets. Our semiconductor solutions, together with our
proprietary software, process rich media content streams available from the
Internet and television and enable consumers to have a customized and
interactive television viewing experience. For example, a consumer with an
Internet appliance, broadband set-top box or digital television incorporating
one of our products can watch a football game, and simultaneously select
different camera angles, look up player statistics, email, chat or instant
message with other fans, arrange for tickets and airfare to next week's game
and order a pizza through their television.

According to Nielsen Media Research, virtually all United States households
have television sets. With the addition of a simple and affordable appliance
incorporating our solution, consumers can gain access to the internet and
experience interactive television. Interactive television is expected to grow
rapidly. Forrester Research estimates that by 2005, 70% of a viewer's
television time will be spent watching on demand video content, communicating,
viewing or interacting with data and navigating services, and that only 30% of
television viewing time will be spent watching standard scheduled programming.
Dataquest and International Data Corporation estimate that the total market for
Internet appliances, digital set-top boxes and digital televisions will be over
$26 billion in 2003.

We sell our integrated circuits to manufacturers of Internet appliances,
broadband set-top boxes and digital televisions. Our integrated circuits and
software deliver high performance processing of rich media content. Our
solutions are compatible with various microprocessors, operating systems and
applications software and accept multiple data types from various transmission
pipes. Our solutions also allow easy software upgrades, and are programmable
and customizable. Our integrated circuits, software and reference designs
enable our original equipment manufacturers, or OEMs, to accelerate their time
to market by reducing their systems engineering development.

Our objective is to be the leading provider of high performance integrated
streaming media gateway solutions for the Internet appliance, broadband set-top
box and digital television markets. The key elements of our strategy include
the following:

. focus on television-centric broadband consumer market applications;

. maintain our leadership in streaming media gateway technology;

. maintain our focus on software development;

. expand alliances with major microprocessor and operating system
vendors;

. maintain flexibility to support rapidly evolving applications;

. target leading OEM customers; and

. leverage our technology into new applications.

4
<PAGE>

Corporate Information

We were formed as a California corporation in March 1993. Prior to the
completion of this offering we intend to reincorporate in Delaware. Our
principal executive office is located at 4001 Burton Drive, Santa Clara,
California 95054, and our telephone number at this address is (408) 982-8588.

The Offering

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<C> <S>
Common stock offered................................ shares

Common stock to be outstanding after this offering.. shares

Use of proceeds..................................... We intend to use the
offering proceeds for
working capital, general
corporate purposes and to
repay an aggregate of
$4 million of
indebtedness.

Proposed Nasdaq National Market symbol.............. TVIA
</TABLE>
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The common stock outstanding after this offering is based on the number of
shares outstanding as of December 31, 1999 and excludes:

. 3,725,909 shares subject to outstanding options as of December 31, 1999
at a weighted average exercise price of $0.04 per share;

. 723,943 additional shares available for grant under our stock plans as
of December 31, 1999; and

. 465,000 shares subject to outstanding warrants as of December 31, 1999
at a weighted average exercise price of $1.02 per share.

Except as otherwise noted, all information in this prospectus:

. assumes the automatic conversion of our outstanding preferred stock as
of December 31, 1999 into common stock immediately prior to the closing
of this offering; and

. assumes that the underwriters' over-allotment option will not be
exercised.

5
<PAGE>

Summary Consolidated Financial Data
(in thousands, except per share data)

The pro forma net loss per share is calculated assuming that all
outstanding shares of convertible preferred stock are converted into common
stock at the beginning of the periods presented, or on the date of issuance of
the preferred stock, whichever is later.

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<CAPTION>
December 31, 1999
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Actual As Adjusted
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Consolidated Balance Sheet Data:
Cash and cash equivalents and restricted cash............. $ 3,119 $
Working capital (deficit)................................. (161)
Total assets.............................................. 4,844
Redeemable convertible preferred stock.................... 12,846
Stockholders' equity (deficit)............................ (15,933)
</TABLE>

The consolidated balance sheet data at December 31, 1999, as adjusted,
gives effect to our receipt of the net proceeds from the sale of the shares
offered hereby at the assumed initial public offering price of $ per
share, after deducting the underwriting discounts and commissions and estimated
offering expenses payable by us.

6
<PAGE>

RISK FACTORS

Any investment in our shares of common stock involves a high degree of
risk. You should carefully consider the risks and uncertainties described below
and the other information in this prospectus before deciding to invest in
shares of our common stock. If any of these risks and uncertainties occur, our
business, results of operations and financial condition would likely suffer. In
that case, the market price of our common stock could decline, and you could
lose all or part of your investment. Additional risks and uncertainties not
presently known to us, or that may be currently considered by us to be
immaterial, may also impair our business operations.

Risks Related to Our Operations

We expect continuing losses and may not achieve profitability

We have incurred significant operating losses in each year since our
inception and expect to continue to incur net losses for the foreseeable
future, primarily as a result of increases in expenses for research and
development. Our losses increased as we transitioned our focus away from the
personal computer market toward the Internet appliance, broadband set-top box
and digital television markets in 1996. We have incurred net losses of
approximately $23.1 million from our inception in March 1993 through December
31, 1999. If we continue to incur net losses, we may not be able expand our
business as quickly as we would like. We do not know when or if we will become
profitable and if we do become profitable, we may not be able to sustain or
increase our profitability.

Our operating expenses will increase as we build our business and this increase
may harm our operating results and financial condition

We have made substantial expenditures on research and development and
organizational infrastructure. We expect to continue to spend substantial
financial and other resources on developing and introducing new products and
services, and on expanding our research and development, operating
infrastructure and sales and marketing. We expect that our operating expenses
will continue to increase in absolute dollars and may increase as a percentage
of revenues. If our revenues do not increase, our business and results of
operations could suffer. We base our expense levels in part on our expectations
regarding future revenues. If our revenues for a particular quarter are lower
than we expect, we may be unable to proportionately reduce our operating
expenses for that quarter.

If interactive television does not achieve market acceptance, our business will
be harmed

Our semiconductor solutions are incorporated into products that allow
interactive television. The concept of interactive television and the market
for products that facilitate it are new and developing. As a result, our profit
potential is unproven and may never materialize. Broad acceptance of Internet
appliances, broadband set-top boxes and digital televisions will depend on
whether consumers use devices other than personal computers to access the
Internet. Our success will also depend on the ability of original equipment
manufacturers, or OEMs, and service providers that work with our OEMs to create
demand for and market the products incorporating our semiconductors. Unless a
sufficiently large market for Internet appliances, broadband set-top boxes,
digital televisions and other products that are used for interactive television
develops, demand for products incorporating our semiconductor solutions may not
be sufficient to sustain our business.

Because of our long product development process and sales cycle, we may incur
substantial expenses before we earn revenues and may not ultimately sell as
many units as we forecasted

To develop market acceptance of our products, we must dedicate significant
resources to research and development, production, and sales and marketing. We
develop products based on forecasts of demand and incur substantial product
development expenditures prior to generating associated revenues. Our customers
typically perform numerous tests and extensively evaluate our products before
incorporating them into their systems. The time required for testing,
evaluating and designing our products into a customer's equipment

7
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can take up to six months or more, with an additional three to six months or
more before an OEM customer commences volume production of equipment
incorporating our products, if ever. Because of this lengthy development cycle,
we may experience a delay between the time we accrue expenses for research and
development and sales and marketing efforts and the time when we generate
revenues, if any.

Furthermore, achieving a design win with a customer does not necessarily
mean that this customer will order large volumes of our products. A design win
is not a binding commitment by a customer to purchase our products. Rather, it
is a decision by a customer to use our products in the design process. In
addition, our customers can choose at any time to discontinue using our
products in that customer's designs or product development efforts. If our
products are chosen to be incorporated into a customer's products, we may still
not realize significant revenues from that customer if that customer's products
are not commercially successful. As a result, our profitability from quarter to
quarter and from year to year may be materially affected by the number and
timing of our new product introductions in any period and the level of
acceptance gained by these products.

If we fail to successfully develop, introduce and sell new products, we may be
unable to effectively compete in the future

We operate in a highly competitive, quickly changing environment marked by
new and emerging products and technologies. Our success depends on our ability
to develop, introduce and successfully market new products and enhance our
existing products in the Internet appliance, broadband set-top box and digital
television markets. The development of these new products is highly complex
and, from time to time, we have experienced delays in completing their
development and introduction. Any one of the following factors could affect our
ability to develop, introduce and sell new products and materially harm our
business:

. our failure to complete new product designs in a timely manner;

. our inability to manufacture our new products according to design
specifications;

. our inability to deliver our products to our customers in a timely
manner for any reason, including a lack of manufacturing capacity or
the failure of our contracted foundries to meet targeted manufacturing
yields; and

. our sales force and independent distributors' inability to create
adequate demand for our products.

Our future operating results are likely to fluctuate and may fail to meet
expectations, which could cause our stock price to decline

Our operating results have varied in the past and are likely to do so in
the future as we attempt to meet consumer demand in the emerging markets for
Internet appliances, broadband set-top boxes and digital televisions. Our
future operating results will depend on many factors and may fail to meet our
expectations for a number of reasons. Any failure to meet these expectations or
those of securities analysts and investors could cause our stock price to
fluctuate or decline significantly. A number of factors may cause fluctuations
in our operating results, including the following:

. the rate of adoption by consumers of Internet appliances, broadband
set-top boxes and digital televisions;

. volumes of product sales, changes in product mix and pricing
concessions on sales;

. the timing, rescheduling or cancellation of significant customer
orders;

. the gain or loss of a significant customer;

. the timing of investments in, and the results of, research and
development;

. changes in industry standards;

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. introduction of interactive television services by service providers;

. fluctuation in manufacturing yields and other problems or delays in
the fabrication, assembly, testing or delivery of products;

. availability of manufacturing capacity and raw materials;

. product introductions and price changes by our competitors;

. our ability to specify, develop, introduce and market new products
with smaller geometries, more features and higher levels of design
integration in accordance with design requirements and design cycles;

. seasonality in some areas where we do business, including increased
demand in the months preceding the December holidays and decreased
production and demand in January and through the Chinese New Year in
February;

. uncertainties associated with international operations, primarily
increases in expenses associated with expansion of our research and
development facilities and our operations in the People's Republic of
China; and

. the level of orders received that can be shipped in a given period.

Our industry is highly competitive, and we cannot assure you that we will be
able to effectively compete

The market for Internet appliances, broadband set-top boxes and digital
televisions in particular, and the semiconductor industry in general, are
highly competitive. We compete with a number of domestic and international
suppliers of semiconductors in our targeted markets. We expect competition to
intensify as current competitors expand their product offerings and new
competitors enter our target markets. We believe that we must compete on the
basis of a variety of factors, including:

. functionality;

. performance;

. time to market;

. price;

. conformity to industry standards;

. product road maps; and

. technical support.

We currently compete with ATI Technologies, Inc., Broadcom Corporation, and
TeraLogic, Inc. In addition to these competitors, we expect other major
semiconductor manufacturers will enter our targeted markets as the Internet
appliance, broadband set-top box and digital television markets become more
established. A number of companies, including International Business Machines
Corporation, STMicroelectronics N.V., National Semiconductor Corporation and
TeleCruz Technology, Inc., have announced that they are developing or plan to
introduce competing products in the Internet appliance broadband set-top box
and digital television markets which could result in significant competition.

Some of our current and potential competitors operate their own fabrication
facilities or have a longer operating history and significantly greater
financial, sales and marketing resources. They may also have preexisting
relationships with our customers or potential customers. As a result, these
competitors may be able to adapt more quickly to new or emerging products,
develop new technologies, or address changes in customer requirements or devote
greater resources to the development and promotion of strategic relationships
among themselves or with existing or potential customers. It is possible that
new competitors or alliances among competitors could emerge and rapidly acquire
significant market share. Increased competition could harm our business,
results of operations and financial condition by, for example, increasing
pressure on our profit margin or causing us to lose sales opportunities.

9
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We depend on two independent foundries to manufacture our products and we must
order products from them based on our forecasts for which we do not have firm
orders

We do not own or operate our own fabrication facility. We currently depend
upon two outside foundries, Taiwan Semiconductor Manufacturing Corporation, or
TSMC, and United Manufacturing Corporation, or UMC. We do not have long term
supply agreements with these foundries to manufacture our semiconductor
products. Both of these foundries are located in Taiwan and each has limited
manufacturing capacity.

The foundries require us to provide forecasts of our anticipated
manufacturing orders in advance of receiving purchase orders from our
customers. This may result in product shortages or excess product inventory.
Obtaining additional supply in the face of product shortages may be costly or
not possible, especially in the short term. Our failure to adequately forecast
demand for our products would materially harm our business. The foundries may
allocate capacity to the production of other companies' products while reducing
delivery to us on short notice.

If we have to qualify new independent foundries for any of our products, we may
lose revenues and damage our customer relationships

Processes used to manufacture our products are complex, customized to our
specifications and can only be performed by a limited number of manufacturing
facilities. Our foundries have from time to time experienced lower than
anticipated manufacturing yields, particularly in connection with the
introduction of new products and the installation and start up of new process
technologies. In addition, the foundries we use are located in a seismically
active area, and earthquakes have caused these foundries to close for repairs,
resulting in a delay in manufacturing our products.

Although we primarily utilize two independent foundries, most of our
components are not manufactured at both foundries at any given time. The
inability of one of the foundries to provide components could result in
significant delays and harm our business. In the event either foundry
experienced manufacturing or financial difficulties or suffered any damage or
destruction to its facilities, or in the event of any other disruption of
foundry capacity, we may not be able to qualify alternative manufacturing
sources for existing or new products in a timely manner. For example, in
September 1999, Taiwan experienced a major earthquake. The earthquake and its
resulting aftershocks caused power outages and significant damage to Taiwan's
infrastructure. In addition, as a result of the rapid growth of the
semiconductor industry based in the industrial park where both foundries are
located, severe constraints have been placed on the water and electricity
supply in that region. Any shortages of water or electricity or a natural
disaster could adversely affect our foundries' ability to supply our products,
which could have a material adverse effect on our operating results.

Even our current outside foundries would need to have manufacturing
processes qualified in the event of disruption at the other foundry, which we
may not be able to accomplish in a timely manner sufficient to prevent an
interruption in the supply of the affected products. We cannot assure you that
any existing or new foundries would be able to produce integrated circuits with
acceptable manufacturing yields in the future, or will continue to have
sufficient capacity to meet our needs. If our manufacturing requirements are
not satisfied, our business would be materially harmed.

A significant amount of our revenues comes from a few OEMs and any decrease in
revenues from these few customers could significantly impact our financial
results

Historically we have been, and we expect to continue to be, dependent on a
relatively small number of OEMs for a significant portion of our total
revenues. Most sales to these customers are through distributors. Sales to two
of our distributors, Excelpoint Systems (PTE) Ltd., and Weikeng Industrial Co.,
Ltd., accounted for approximately 14.0% and 14.0% of our total revenues for
fiscal year 1999. Sales to one of our OEMs, Vestelkom, accounted for
approximately 14.0% of our total revenues for fiscal year 1999. For the nine
months ended December 31, 1999, sales to Weikeng Industrial Co. Ltd., a
distributor, accounted for 10% of our total

10
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revenues and sales to Allwell Corporation, an OEM, accounted for approximately
20% of our total revenues. We may not be able to retain our largest customers
or to obtain additional key accounts. Any reduction or delay in sales of our
products to one or more of our key customers or our inability to successfully
develop relationships with additional key customers could have a material
adverse effect on our business.

Customers may cancel or defer significant purchase orders, or our distributors
may return our products, which would cause our inventory levels to increase and
our revenues to decline

We sell our products on a purchase order basis through our direct sales
channel, sales representatives and distributors, and our customers may cancel
or defer purchase orders at any time with little or no penalty. We recognize
revenues from sales to our distributors when they have sold our products to
their customers. We recognize revenues on sales to our OEM customers when we
ship our products to the OEM. Our distributor agreements generally permit our
distributors to return products to us. If our customers cancel or defer
significant purchase orders or our distributors return our products, our
inventories would increase and our revenues would decrease, which would
materially harm our business. Refusal of OEM customers to accept shipped
products or delays or difficulties in collecting accounts receivable could have
an adverse effect on our business.

Our semiconductors are complex to manufacture and may have errors or defects
which could be costly to correct

The manufacture of semiconductors is a complex process. Foundries may not
achieve acceptable product yields from time to time due to integrated circuit
design, inadequate manufacturing processes and other reasons. We refer to the
proportion of final acceptable integrated circuits that have been processed,
assembled and tested relative to the gross number of integrated circuits that
could have been produced from the raw materials as our product yields.
Identifying defects and determining the reason for low yields may be discovered
only after production has begun and at various stages of the production cycle.
Our inability to discover defects early in the production cycle will result in
higher costs and may require a diversion of our technical personnel and
resources away from product development in order to correct the defect. In
addition, defective products that have been released into the market and
distributed to our customers and end users may result in harm to our
reputation, significant warranty costs, diversion of our technical and
managerial resources and potential product liability claims that would be
costly to defend.

Our software is complex and may have bugs or defects which could be costly to
correct

Our products depend on complex software that we develop internally and
license from others. Complex software often contains defects, particularly when
first introduced or when new versions are released. Determining whether our
software has defects may not occur until after our products are released into
the market and distributed to our customers and end users, and may result in
harm to our reputation, significant warranty costs, diversion of our technical
resources and potential product liability claims that would be costly to defend
and divert managerial resources.

We face foreign business, political and economic risks because a majority of
our customers' products are sold outside of the United States

Sales to customers located outside the United States accounted for 96%, 90%
and 81% of our total revenues in fiscal years 1997, 1998, and 1999,
respectively. We anticipate that sales to customers located outside the United
States will continue to represent a significant portion of our total sales in
future periods and the trend of foreign customers accounting for a large
portion of our total sales may continue. In addition, many of our domestic
customers sell their products outside of North America, thereby indirectly
exposing us to risks associated with foreign commerce. Asian economic
instability impacts the sales of products manufactured by

11
<PAGE>

our customers, as does the Chinese New Year, during which time many
manufacturers and businesses close their operations. We could also experience
greater difficulties collecting accounts receivable from customers outside of
the United States. Accordingly, our operations and revenues are subject to a
number of risks associated with foreign commerce.

To date, we have denominated sales of our products in foreign countries
exclusively in United States dollars. As a result, any increase in the value of
the United States dollar relative to the local currency of a foreign country
will increase the price of our products in that country so that our products
become relatively more expensive to customers in the local currency of that
foreign country. As a result, sales of our products in that foreign country may
decline. To the extent any of these types of risks materialize, our business
would be materially harmed.

Our growth has strained and will continue to strain our resources, and our
failure to manage our future growth effectively could harm our business

We are currently experiencing rapid growth and expansion in our business
and operations. For example, we are expanding our research and development
facilities in the People's Republic of China. Our growth has placed, and will
continue to place, a significant strain on our administrative, operational and
financial resources and increased demands on our systems and controls. To
accommodate our growth, we must implement a variety of new and upgraded
operational and financial systems, procedures and controls, including
improvement of our accounting and other internal management systems, all of
which are likely to require substantial managerial effort. We cannot assure you
that these efforts can be accomplished successfully. Our growth has resulted in
a continuing increase in the level of responsibility for both existing and new
management personnel, and will require that we recruit, hire and train a
substantial number of new personnel. Our failure to manage our growth could
prevent us from successfully achieving market acceptance for our products,
disrupt our operations, delay our expansion and harm our business.

We depend on key personnel, the loss of whom would impair our business
operations

Our success depends on the skills, experience and performance of our
executive officers and other key management and technical personnel, many of
whom would be difficult to replace. We are particularly dependent on Kenny Liu,
our Chairman and Chief Executive Officer, and Jack Guedj, our President. We are
also highly dependent on our founders, Jhi-Chung Kuo and Yee Wong, who run our
engineering and manufacturing operations. We also depend upon our experienced
business development personnel, marketing personnel, systems application
engineers, circuit designers, logic engineers and software engineers. The
competition for employees with these skills is intense, particularly in the San
Francisco Bay Area, and we may not be able to attract and retain a sufficient
number of such qualified new personnel in the future. The loss of the service
of one or more of our key employees, or our failure to attract, retain and
motivate qualified personnel would inhibit the growth of our business.

We may encounter periods of semiconductor oversupply, resulting in pricing
pressure, as well as undersupply, resulting in a risk that we could be unable
to fulfill our customers' requirements

The semiconductor industry has historically been characterized by wide
fluctuations in the demand for, and supply of, its products. These fluctuations
have resulted in circumstances when supply and demand for the industry's
products have been widely out of balance. Our operating results may be
materially harmed by industry-wide semiconductor oversupply, which could result
in severe pricing pressure. On the other hand, in a market with undersupply, we
would have to compete with larger companies for limited manufacturing capacity.
If material shortages occur, we may incur additional costs to procure the
scarce components or be unable to have our products manufactured in a timely
manner or in quantities necessary to meet our requirements. Since we outsource
all of our manufacturing, we are particularly vulnerable to supply shortages.
As a result, we may be unable to fill orders and may lose customers. Any future
industry wide oversupply or undersupply of semiconductors would materially harm
our business and have a negative impact on our earnings.

12
<PAGE>

We rely on strategic relationships to commercialize our products, and these
relationships may require that we expend significant resources without
guarantees that our endeavors will be profitable

We rely on strategic relationships with some of our customers who we
believe are the market leaders in our target markets. These relationships often
involve the proposed development by us of new products involving significant
technological challenges. Since the proposed products under development may
offer potential competitive advantages to our customers, considerable pressure
is frequently placed on us to meet development schedules. While an essential
element of our strategy involves establishing such relationships, these
projects require substantial amounts of our limited resources, with no
guarantee of revenues to us, and could materially detract from or delay the
completion of other important development projects. Delays in development could
impair the relationship between us and our customers and negatively impact
sales of the products under development. Moreover, our customers may develop
their own solutions for products currently supplied by us, which could have an
adverse effect on our business.

We depend on third party subcontractors for assembly of our semiconductors,
which reduces our control over the quality of our products

Substantially all of our products are assembled by one of two
subcontractors, both of which are located in Taiwan. Typically, we procure
services from these subcontractors on a purchase order basis. Their
availability to assemble our products could be adversely affected if either
subcontractor experiences financial difficulties or suffers any damage or
destruction to its facilities or any other disruption of its assembly capacity.
Because we rely on third party subcontractors for assembly of our products, we
cannot directly control product delivery schedules. We have experienced in the
past, and may experience in the future, product shortages or quality assurance
problems that could increase the cost of manufacturing or testing of our
products. It is time consuming and difficult to find and qualify alternative
assemblers. If we are forced to find substitute subcontractors, shipments of
our products could be delayed. Any problems associated with the delivery,
quantity or cost of our products could harm our business.

Political instability in the People's Republic of China or Taiwan could harm
our manufacturing and research and development capabilities and negatively
impact our product sales

We operate a facility and are in the process of expanding our research and
development operations in the People's Republic of China. In addition, almost
all of our products are manufactured and assembled outside of the United States
at facilities operated by third parties in Taiwan. The political and economic
conditions in the region, including the People's Republic of China's dispute
with Taiwan, may adversely impact our operations including manufacture and
assembly of our products and research and development efforts. We cannot assure
you that restrictive laws or policies on the part of either the People's
Republic of China or the United States will not constrain our ability to
operate in both countries. If we are required to relocate our facilities, our
business will be disrupted and our costs associated with research and
development will increase.

If we are unable to adequately protect our intellectual property and
proprietary rights, our ability to compete could be harmed

Our success depends in part upon our rights in proprietary technology and
processes that we develop and license from, and to, others. We rely on a
combination of patent, copyright, trademark and trade secret laws, as well as
confidentiality agreements with our employees, consultants and strategic
partners in order to protect proprietary technologies that use our products. We
cannot assure you that these measures will provide meaningful protection for
our proprietary technologies and processes, and they do not prevent independent
third party development of competitive products. In addition, it is difficult
to monitor unauthorized use of technology, particularly in foreign countries
where laws may not protect our proprietary rights as fully as in the United
States.

13
<PAGE>

We currently have patent applications pending in the United States, and we
may seek additional patents in the future. Because the content of patent
applications in the United States is not publicly disclosed until the patent is
issued, applications may have been filed which relate to our products or
processes. We cannot assure you that our current patent applications or any
future patent applications will result in a patent being issued with the scope
of the claims we seek, if at all, or whether any patents we have or may receive
will be challenged or invalidated. The failure of any patents to provide
protection to our technology would make it easier for our competitors to offer
similar products.

If we infringe the intellectual property rights of others, our business may be
harmed

Other parties may assert patent infringement claims against us, including
claims against technology that we license from others, and our products or
processes may infringe issued patents of others. Litigation is common in the
semiconductor industry and any litigation could result in significant expense
to us. Litigation would also divert the efforts of our technical and management
personnel, whether or not the litigation is determined in our favor. Litigation
could also require us to develop non-infringing technology or enter into
royalty or license agreements. These royalty or license agreements may not be
available on acceptable terms, including limitations on representations and
warranties regarding infringement and indemnification in the event of
infringement claims. Our failure or inability to develop non-infringing
technology, license the proprietary rights on a timely basis or receive
appropriate protection on licensed technology would harm our business.

Regulation of our customers' products may slow the process of introducing new
products, which could harm our business

The Federal Communications Commission, or the FCC, has broad jurisdiction
over our target markets. Various international entities or organizations may
also regulate aspects of our business or the business of our customers.
Although our products are not directly subject to regulation by any agency, the
transmission pipes, as well as much of the equipment into which our products
are incorporated, are subject to direct government regulation. For example,
before they can be sold in the United States, Internet appliances, broadband
set-top boxes and digital televisions must be tested and certified by
Underwriters Laboratories and meet FCC regulations. Accordingly, the effects of
regulation on our customers or the industries in which our customers operate
may, in turn, harm our business. FCC regulatory policies affecting the ability
of cable operators or telephone companies to offer certain services and other
terms on which these companies conduct their business may impede sales of our
products. In addition, our business may also be adversely affected by the
imposition of tariffs, duties and other import restrictions on systems of
suppliers or by the imposition of export restrictions on products that we sell
internationally. Changes in current laws or regulations or the imposition of
new laws or regulations in the United States or elsewhere could harm our
business.

Risks Related to this Offering

Our common stock has not been publicly traded and we expect that the price of
our stock may fluctuate substantially

Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this offering or, if developed, may not be sustained. The initial
public offering price has been determined through negotiations between the
underwriters and us. This price will not necessarily reflect the market price
of the common stock following this offering. You may not be able to resell your
shares at or above the initial public offering price due to a number of
factors, including:

. the announcement of new products or product enhancements by us or our
competitors;

. actual or anticipated fluctuations in our operating results;

. changes in expectations as to our future financial performance;

14
<PAGE>

. changes in financial estimates of securities analysts;

. developments in our industry; and

. the operating and stock price performance of other comparable
companies.

In addition, stock prices for technology companies similar to ours have
been highly volatile and valuations have often been unrelated to the operating
performance of the companies. Such factors and fluctuations may materially and
adversely affect the market price of our stock and reduce the value of your
investment.

Management may apply the proceeds of this offering to uses that may not
increase our profits or market value

Our management will have considerable discretion in the application of the
proceeds from this offering, and you will not have the opportunity, as part of
your investment decision, to assess whether the proceeds are being used
appropriately. The proceeds may be used for corporate purposes that may not
increase our profitability or our market value. Pending application of the
proceeds, they may be placed in investments that do not produce income or that
lose value.

New investors will incur substantial and immediate dilution in the value of
their common stock

If you purchase our common stock in this offering you will experience
immediate dilution of $ in the pro forma net tangible book value per
share, based on an assumed initial public offering price of $ per share.
You will experience additional dilution if the underwriters exercise the over-
allotment option. You will also experience additional dilution upon the
exercise of outstanding stock options and warrants. The initial public offering
price is expected to be substantially higher than the book value per share of
our common stock.

Future sales of our common stock may cause the market price of our stock price
to decline

We will have shares of common stock outstanding immediately
after the offering. The shares sold in the offering will be freely
transferable. Additional shares may be sold in the public market to the extent
permitted by Rule 144 or exemptions under the Securities Act. Lock-up
agreements executed by our stockholders limit the number of shares of common
stock that may be sold in the public markets. However, FleetBoston Robertson
Stephens Inc. may, in its sole discretion, release all or some portion of the
securities subject to the lock-up agreements. The market price of our common
stock could decline as a result of sales of a large number of shares of our
common stock in the market after the offering, or the perception that such
sales could occur. These factors also could make it more difficult for us to
raise funds through future offerings of common stock. See "Shares Eligible for
Future Sale."

The holders of an aggregate of 32,732,606 shares of our common stock,
assuming conversion of our preferred stock into common stock, have registration
rights, including the right to require us to register the sale of their shares
and the right to include their shares in public offerings we undertake in the
future.

Our principal stockholders have significant voting power and may take actions
that may not be in the best interests of our other stockholders

After this offering, our officers, directors and principal stockholders
will together beneficially own approximately % of our outstanding common
stock. These stockholders, if they act together, will be able to control our
management and affairs and all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This influence over our affairs might be adverse to the interests
of other stockholders. In addition, this concentration of ownership may delay
or prevent a change in control and might affect the market price of our common
stock.

15
<PAGE>

Provisions in our charter documents may delay or prevent a change in control
even if the change in control would be beneficial to our stockholders

Our articles of incorporation and our bylaws both contain provisions that
could delay or prevent a change in control of Tvia. These provisions could
limit the price that investors might be willing to pay in the future for shares
of our common stock. Some of these provisions:

. authorize the issuance of preferred stock that can be created and
issued by the board of directors without prior stockholder approval,
commonly referred to as "blank check" preferred stock, with rights
senior to those of common stock; and

. prohibit stockholder action by written consent.

16
<PAGE>

NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements, trend analyses and other information contained in this
prospectus regarding markets for our products and trends in revenues, gross
margin and anticipated expense levels, and any statement that contains the
words "anticipate," "believe," "plan," "estimate," "expect," "intend," "seek"
and other similar expressions, constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks,
including those risks identified in "Risk Factors" and elsewhere in this
prospectus and our actual results of operations may differ significantly from
those contained in the forward-looking statements because of such risks. The
cautionary statements made in this prospectus apply to all forward-looking
statements wherever they appear in this prospectus.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the shares of
common stock that we are offering will be approximately $ , assuming an
initial public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering expenses. If the
underwriters fully exercise their over-allotment option, we estimate the net
proceeds will be approximately $ .

We intend to use the net proceeds primarily for working capital
expenditures associated with the purchase of additional inventory related to
the growth of our business and increased receivables and for general corporate
purposes. We also intend to use approximately $4 million to repay the
outstanding balance under two lines of credit. Borrowings under one line of
credit bear interest at the three month commercial paper rate plus 2.3%. The
amount outstanding under this line of credit was approximately $2.9 million as
of December 31, 1999. Borrowings under the second line of credit bear interest
at a fixed rate of 7.38%. The amount outstanding under this line of credit was
approximately $1.1 million as of December 31, 1999. Although we may use a
portion of the net proceeds to acquire technology or businesses that are
complimentary to our business, we have no current plans in this regard. Until
we use the net proceeds, we plan to invest the funds in short term, interest
bearing, investment grade securities. Another purpose of this offering is to
create a public market for our common stock and to facilitate our future access
to public capital markets.

DIVIDEND POLICY

We have never declared or paid dividends on our capital stock. We do not
intend to pay any dividends in the foreseeable future. We currently plan to
retain any earnings for use in the operation of our business and to fund future
growth.

17
<PAGE>

CAPITALIZATION

The following table sets forth our capitalization as of December 31, 1999:

. on an actual basis;

. on a pro forma basis after giving effect to the conversion of all
outstanding shares of preferred stock and warrants to purchase
preferred stock into common stock; and

. on the same pro forma basis as adjusted to reflect the application of
the net proceeds from this offering, assuming an initial public
offering price of $ per share and after deducting estimated
underwriting discounts and commissions and estimated offering
expenses.

<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------
Pro Forma
Actual Pro Forma As Adjusted
------------ ------------ -------------
(in thousands, except share data)
<S> <C> <C> <C>
Redeemable convertible preferred stock:
Series F, G, and H, no par value:
17,707,332 shares authorized;
11,707,332 shares outstanding at
December 31, 1999; 2,344,868 shares
subscribed at December 31, 1999; no
shares outstanding pro forma or pro
forma as adjusted.................... $ 12,846 $ 2,892 $
Warrants to purchase redeemable
convertible preferred stock.......... 301 --
------------ ------------ --------
Stockholders' equity (deficit):
Series A, B, C, D and E convertible
preferred stock, no par value:
15,916,403 shares authorized;
15,916,403 shares outstanding at
December 31, 1999; no shares
outstanding pro forma or pro forma
as adjusted.......................... 5,525 --
Common stock, no par value: 36,000,000
authorized; 13,118,975 shares
outstanding at December 31, 1999;
41,207,710 shares outstanding
pro forma, shares outstanding pro
forma as adjusted.................... 4,117 20,371
Deferred stock compensation............ (2,515) (2,515)
Accumulated deficit.................... (23,060) (23,060)
------------ ------------ --------
Total stockholders' (deficit).......... (15,933) (5,204)
------------ ------------ --------
Total capitalization................. $ (2,786) $ (2,312) $
============ ============ ========
</TABLE>

The information in the table above excludes:

. 3,725,909 shares subject to outstanding options as of December 31,
1999 at a weighted average exercise price of $0.04 per share;

. 723,943 additional shares available for grant under our stock plans as
of December 31, 1999; and

. the issuance of 3,614,869 shares of Series H preferred stock and
1,494,000 shares of Series I preferred stock in March 2000.

This table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Management--
Employee Benefit Plans" and the consolidated financial statements and related
notes included elsewhere in this prospectus.

18
<PAGE>

DILUTION

Our pro forma net tangible book value at December 31, 1999 was
approximately $(2,864), or $(0.07) per share after giving effect to the
conversion of all outstanding shares of our preferred stock into shares of
common stock upon completion of this offering and the assumed exercise of
warrants to purchase 465,000 shares of preferred stock at a weighted average
exercise price of $1.02 per share and the subsequent conversion into common
stock prior to this offering. Pro forma net tangible book value per share is
equal to our total tangible assets less total liabilities, divided by the total
number of shares of our common stock outstanding. After giving effect to the
sale of the shares of our common stock offered in this offering at an
initial public offering price of $ per share, (after giving effect to the
issuance of 3,614,869 shares of Series H preferred stock and 1,494,000 shares
of Series I preferred stock in March 2000 and deducting estimated underwriting
discounts and commissions and estimated offering expenses), our pro forma as
adjusted net tangible book value at December 31, 1999 would have been
approximately $ or $ per share. This represents an immediate increase in
net tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors purchasing shares of our
common stock in this offering. The following table illustrates this per share
dilution to the new investors:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................. $
Pro forma net tangible book value per share at December 31,
1999......................................................... $(0.07)
Increase in pro forma net tangible book value per share
attributable to this offering................................
------
Pro forma net tangible book value per share as adjusted after the
offering.......................................................
-----
Dilution per share to new investors in this offering............. $
=====
</TABLE>

The following table summarizes, on a pro forma basis as of December 31,
1999, the difference between stockholders and new investors with respect to the
number of shares of our common stock purchased from us, the total consideration
paid to us, and the average price per share. The consideration paid by new
investors is before deducting the estimated underwriting discounts and
commissions and estimated offering expenses.

<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.. 41,207,710 % $15,239,000 % $0.37
New investors..........
---------- --- ----------- ---
Total................ 100% $ 100%
========== === =========== ===
</TABLE>

The information in the table above assumes conversion of all shares of
preferred stock outstanding as of December 31, 1999 into common stock.

The information in the table above excludes:

. 3,725,909 shares subject to outstanding options as of December 31,
1999 at a weighted average exercise price of $0.04 per share;

. 723,943 additional shares available for grant under our stock plans as
of December 31, 1999; and

. the issuance of 3,614,869 shares of Series H preferred stock and
1,494,000 shares of Series I preferred stock.

This table should be read in conjunction with "Capitalization,"
"Management--Employee Benefit Plans" and the consolidated financial statements
and related notes included elsewhere in this prospectus.

19
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data should be read in
conjunction with our consolidated financial statements, the related notes and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this prospectus. The consolidated statement
of operations data for the fiscal years ended March 31, 1997, 1998 and 1999 and
for the nine months ended December 31, 1999, and consolidated balance sheet
data at March 31, 1998 and 1999, are derived from our audited financial
statements included in this prospectus. The consolidated statement of
operations data for the nine months ended December 31, 1998 are derived from
our unaudited consolidated financial statements included in this prospectus.
The balance sheet data at March 31, 1997 is derived from our unaudited
financial statements not included in this prospectus. The statement of
operations data for the years ended March 31, 1995 and 1996, and balance sheet
data at March 31, 1995 and 1996, are derived from our unaudited financial
statements not included in this prospectus. Our unaudited financial statements
have been prepared by us on a basis consistent with our audited financial
statements and, in management's opinion, include all adjustments necessary for
a fair presentation of such information. The operating results for the nine
months ended December 31, 1999 are not necessarily indicative of results that
may be expected for the year ended March 31, 2000 or any other interim period
or future fiscal year.

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
------- ------- ------- ------- ------- ----------- -------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
Product sales.......... $ 57 $ 1,819 $ 1,028 $ 2,597 $ 1,432 $ 1,168 $ 3,831
Development contracts
and other............. -- -- 1,324 861 90 90 281
------- ------- ------- ------- ------- ------- -------
Total revenues........ 57 1,819 2,352 3,458 1,522 1,258 4,112
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Product sales.......... 75 1,428 1,879 2,458 1,257 1,082 2,163
Development contracts
and other............. -- -- 757 526 51 51 78
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues............. 75 1,428 2,636 2,984 1,308 1,133 2,241
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... (18) 391 (284) 474 214 125 1,871
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development........... 994 1,724 1,876 3,199 3,357 2,517 2,475
Sales, general and
administrative........ 498 395 1,202 2,203 2,062 1,419 2,322
Amortization of
deferred stock
compensation.......... -- -- -- -- 2 -- 819
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............. 1,492 2,119 3,078 5,402 5,421 3,936 5,616
------- ------- ------- ------- ------- ------- -------
Operating loss.......... (1,510) (1,728) (3,362) (4,928) (5,207) (3,811) (3,745)
------- ------- ------- ------- ------- ------- -------
Interest expense, net... 43 65 55 74 464 375 662
------- ------- ------- ------- ------- ------- -------
Net loss................ $(1,553) $(1,793) $(3,417) $(5,002) $(5,671) $(4,186) $(4,407)
======= ======= ======= ======= ======= ======= =======
Basic net loss per
share.................. $ (0.26) $ (0.29) $ (0.55) $ (0.80) $ (0.85) $ (0.63) $ (0.50)
======= ======= ======= ======= ======= ======= =======
Shares used in computing
basic net loss per
share.................. 6,062 6,096 6,173 6,279 6,657 6,631 8,732
Pro forma basic net loss
per share (unaudited).. $ (0.17) $ (0.12)
======= =======
Shares used in computing
pro forma basic net
loss per share
(unaudited)............ 32,625 36,763
</TABLE>

<TABLE>
<CAPTION>
March 31,
----------------------------------------- December 31,
1995 1996 1997 1998 1999 1999
------ ------ ------ ------- -------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Balance
Sheet Data:
Cash and cash
equivalents and
restricted cash........ $1,050 $ 367 $ 514 $ 8 $ -- $ 3,119
Working capital
(deficit).............. 303 (977) (547) (2,439) (3,476) (161)
Total assets............ 1,420 1,484 2,344 1,795 730 4,844
Redeemable convertible
preferred stock........ -- -- 2,325 5,212 9,704 12,846
Stockholders' equity
(deficit).............. (664) (1,005) (2,326) (7,326) (12,978) (15,933)
</TABLE>

20
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion with our financial statements and
the related notes included elsewhere in this prospectus. The results described
below are not necessarily indicative of the results to be expected in any
future period. Some statements in this discussion and analysis are forward-
looking statements within the meaning of the federal securities laws. These
forward-looking statements are subject to risk and uncertainties that could
cause actual results to differ materially from historical results or our
predictions. See "Note Regarding Forward-Looking Statements."

Overview

Tvia designs, develops and markets high performance streaming media gateway
integrated circuits for the Internet appliance, broadband set-top box and
digital television markets. Our semiconductor solutions, together with our
proprietary software, process rich media content streams available from the
Internet and television and enable consumers to have a customized and
interactive television viewing experience. We currently have three product
families: the CyberPro 2010 family, introduced in calendar 1997; the CyberPro
5000 family, introduced in calendar 1998; and the CyberPro 5300 family,
introduced in calendar 1999. These product families currently generate most of
our revenues.

From our inception through 1996, we were primarily engaged in product
development and the establishment of strategic customer and foundry
relationships. During this period, we generated the majority of our total
revenues from development contracts and the shipment of integrated circuits for
the personal computer market. In 1996 we began to transition our focus away
from the personal computer market to the Internet appliance, broadband set-top
box and digital television markets. As a result of this transition, product
revenues from the personal computer market, along with total revenues,
declined.

We sell our products through three channels. First, we sell our products
directly to original equipment manufacturers, or OEMs, and recognize revenues
at the time of shipment to these OEMs. Second, we sell our products through
sales representatives who receive a commission. Finally, we sell our products
to a number of distributors who have contractual rights to earn a negotiated
margin on the sale of our products. We defer recognition of revenues for sales
to our distributors until after they have sold our products to OEMs. Our
products typically carry a one year warranty. As a result, we provide
allowances for warranty costs upon shipment to OEMs and upon sell through by
distributors. We also generate revenues from development contracts and
licensing software. Since 1997, revenues from development contracts and
software licensing have decreased as a percentage of total revenues and we
believe that those revenues will continue to constitute a low percentage of
total revenues in the future.

Approximately 77% and 81% of our total revenues for the nine months ended
December 31, 1999 and for the fiscal year ended March 31, 1999, respectively,
were derived from customers located outside the United States. All of our
revenues to date have been denominated in United States dollars. Historically,
a relatively small number of customers and distributors have accounted for a
significant portion of our product sales. Our top five customers, including
distributors, accounted for 56% of product sales in the fiscal year ended
March 31, 1999 and 50% of product sales in the nine months ended December 31,
1999. Recently, the percentage of our revenues attributable to sales to
distributors has increased substantially. Much of this increase reflects
revenues from design wins with new OEMs which rely on third party manufacturers
or distributors to provide inventory management and purchasing functions.

Various factors have affected and may continue to affect our gross margin.
These factors include, but are not limited to, our product mix, the position of
our products in their respective life cycles, final test yields and the mix of
our product sales and development contracts and other revenues. For example,
newly introduced products generally have higher average selling prices and
generate higher gross margins. Both average selling prices and the related
gross margins typically decline over product life cycles due to competitive
pressures and

21
<PAGE>

volume price agreements. Our gross margin and operating results in the future
may continue to fluctuate as a result of these and other factors.

The sales cycle for the test and evaluation of our products can range from
three months to six months or more, with an additional three to six months or
more before an OEM customer commences volume production of equipment
incorporating our products. Due to these lengthy sales cycles, we may
experience a delay between incurring operating expenses and inventory costs and
the generation of revenues from design wins.

We have sustained losses on a quarterly and annual basis since inception.
As of December 31, 1999 we had an accumulated deficit of $23.1 million. These
losses resulted from significant costs incurred in the planning and development
of our technology and services and from significant marketing costs. We expect
to experience significant growth in our operating expenses, particularly in
research and development as we design and market new technologies.

In connection with the grant of stock options to employees, we have
recorded stock based compensation related to stock options granted below deemed
fair market value through December 31, 1999 of approximately $3.3 million. Of
this amount, we amortized approximately $819,000 through December 31, 1999.
This amount represents the difference between the exercise price of these stock
option grants and the deemed fair value of the common stock at the time of
grant. We expect to record additional stock based compensation in connection
with options granted during the fourth quarter of fiscal 2000. The remaining
$2.5 million and the additional amount of stock based compensation from grants
in the fourth quarter of fiscal 2000 will be amortized over the remaining
vesting period of the options, generally four years or less. As a result, the
amortization of stock based compensation will impact our reported results of
operations through fiscal 2004.

In connection with the extension of a credit facility and the guarantee of
other credit facilities by related parties, we have issued warrants and
options. As of December 31, 1999, we have calculated the fair value of the
warrants and options using the Black-Scholes model to be $638,000 and have
recorded this amount as a deferred debt issuance cost. The deferred debt
issuance costs are being amortized as additional interest expense over the term
of the guarantees.

We have a subsidiary in the People's Republic of China which performs
research and development, and a branch office in Taiwan which is primarily
engaged in sales efforts.

Recent Events

In March 2000, we issued and sold 3,614,869 shares of Series H preferred
stock to investors for gross proceeds of approximately $4.5 million, including
$2.6 million received prior to December 31, 1999. In March 2000, we issued and
sold 1,430,000 shares of Series I preferred stock for cash proceeds of $3.1
million and the conversion of $500,000 in debt. In addition, $160,000 in
licenses acquired after December 31, 1999 were exchanged for 64,000 shares of
Series I preferred stock. Both the Series H and the Series I preferred stock
will convert to common stock on a one for one basis upon completion of this
offering.

22
<PAGE>

Results of Operations

The following tables set forth, for the periods indicated, certain
consolidated statement of operations data reflected as a percentage of
revenues. Our results of operations are reported as a single business segment.

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
------------------------ ------------------
1997 1998 1999 1998 1999
------ ------ ------ ----------- ------
(unaudited)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues:
Product sales................. 43.7% 75.1% 94.1% 92.8% 93.2 %
Development contracts and
other....................... 56.3 24.9 5.9 7.2 6.8
------ ------ ------ ------ ------
Total revenues............... 100.0 100.0 100.0 100.0 100.0
------ ------ ------ ------ ------
Cost of revenues:
Product sales................. 79.9 71.1 82.5 86.0 52.6
Development contracts and
other....................... 32.2 15.2 3.4 4.1 1.9
------ ------ ------ ------ ------
Total cost of revenues....... 112.1 86.3 85.9 90.1 54.5
------ ------ ------ ------ ------
Gross profit (loss)............ (12.1) 13.7 14.1 9.9 45.5
------ ------ ------ ------ ------
Operating expenses:
Research and development...... 79.8 92.5 220.6 200.0 60.2
Sales, general and
administrative.............. 51.1 63.7 135.5 112.8 56.5
Amortization of deferred stock
compensation................ -- -- 0.1 -- 19.9
------ ------ ------ ------ ------
Total operating expenses..... 130.9 156.2 356.2 312.8 136.6
------ ------ ------ ------ ------
Operating loss................. (143.0) (142.5) (342.1) (302.9) (91.1)
------ ------ ------ ------ ------
Interest expense, net.......... 2.3 2.1 30.5 29.8 16.1
------ ------ ------ ------ ------
Net loss....................... (145.3)% (144.6)% (372.6)% (332.7)% (107.2)%
====== ====== ====== ====== ======
</TABLE>

Results of Operations for the Nine Months Ended December 31, 1999 and 1998

Revenues. Revenues were $4.1 million and $1.3 million for the nine months
ended December 31, 1999 and 1998, respectively. This represents an increase of
215%. The increase in revenues was primarily due to volume shipments of our
CyberPro 2010 and CyberPro 5000 series integrated circuits for the new Internet
appliance, broadband set-top box and digital television markets. Export
revenues, consisting primarily of product sales and development contracts with
OEMs and distributors in Asia, represented 77% and 43% of total revenues in the
nine months ended December 31, 1999 and 1998, respectively.

Gross margin. Gross margin was 45.5% and 9.9% for the nine months ended
December 31, 1999 and 1998, respectively. This improvement was primarily due to
shipments of our CyberPro 2010 and CyberPro 5000 series integrated circuits,
which have higher revenues than the personal computer products, improved
production yields achieved by the third party foundries, and higher revenues
over relatively fixed production costs.

Research and development. Research and development expenses were $2.5
million and $2.5 million for the nine months ended December 31, 1999 and 1998,
respectively. Research and development expenses represented 60.2% and 200.0% of
revenues for the nine months ended December 31, 1999 and 1998, respectively.
The decrease in research and development expenses as a percentage of revenues
is primarily attributable to the increase in revenues between periods.

Sales, general and administrative. Sales, general and administrative
expenses were $2.3 million and $1.4 million for the nine months ended December
31, 1999 and 1998, respectively. Sales, general and

23
<PAGE>

administrative expenses represented 56.5% and 112.8% of revenues for the nine
months ended December 31, 1999 and 1998, respectively. The increase in absolute
dollars was primarily due to increased headcount, including hiring executive
officers, and legal and accounting expenses associated with our financing
activities.

Deferred stock compensation. Stock compensation expenses were $819,000 for
the nine months ended December 31, 1999. No stock compensation expenses were
incurred in the nine months ended December 31, 1998.

Interest expense, net. Interest expense, net were $662,000 and $375,000 for
the nine months ended December 31, 1999 and 1998, respectively. Interest
expenses represented bank interest and costs related to the guarantee of a
related party.

Provision for income taxes. We incurred operating losses for the nine
months ended December 31, 1999 and 1998, and therefore had no provision for
income taxes in either period. As of December 31, 1999, we had federal and
state net cumulative operating losses of approximately $18.1 million and $5.3
million, respectively, which are available to offset future taxable income. If
not used, these net operating losses will expire through 2019.

Results of Operations for the Fiscal Years Ended March 31, 1999, 1998 and 1997

Revenues. Revenues were $1.5 million, $3.5 million, and $2.4 million for
the fiscal years ended March 31, 1999, 1998 and 1997, respectively. Revenues
decreased by $2.0 million from fiscal year 1998 to fiscal year 1999. Product
revenues decreased $1.2 million from fiscal year 1998 to fiscal year 1999,
reflecting the phase out of the personal computer based product line.
Development contract revenues for fiscal year 1999 decreased to $90,000 from
$861,000 for fiscal year 1998, reflecting the substantial completion of a large
development contract with a foreign customer in fiscal year 1998. We anticipate
that development contract revenues in future periods will be lower than those
in fiscal year 1999. The increase in revenues from fiscal year 1997 to fiscal
year 1998 was due to sales of our CyberPro 2000 integrated circuits for the
personal computer market, primarily to customers in the People's Republic of
China.

Export revenues, consisting primarily of product sales and development
contracts to OEMs and distributors in Asia, represented 81%, 90% and 96% of
total revenues in fiscal 1999, 1998 and 1997, respectively. All export revenues
are denominated in United States dollars. We believe export sales will continue
to represent a majority of our revenues in future periods.

Gross margin. Gross margin was 14.1%, 13.7% and (12.1)% for the fiscal
years ended March 31, 1999, 1998 and 1997, respectively. The improvement in
gross margin between periods is attributable primarily to improved production
yields achieved by our third party foundries, cost reduction efforts by moving
to smaller die sizes and, in fiscal year 1999, sales of the higher margin
CyberPro 2010 integrated circuits. In addition, gross margin for fiscal year
1997 on our personal computer products was depressed by declining average
selling prices.

Research and development. Research and development expense includes
personnel and other costs associated with the development of product designs,
process technology, software and programming hardware. Our research and
development expenses reflect our continuing efforts to develop and bring to
market innovative and cost-effective streaming media gateway solutions.
Research and development expenses were $3.4 million, $3.2 million and $1.9
million for the fiscal years ended March 31, 1999, 1998 and 1997, respectively.
As a percentage of revenues, research and development expenses represented
220.6%, 92.5% and 79.8% for the fiscal years ended March 31, 1999, 1998 and
1997, respectively. During fiscal year 1999, in conjunction with the
reorganization of our research and development activities, we reduced the work
force supporting the personal computer market and expanded the personnel for
the Internet appliance, broadband set-top box and digital television markets.
Part of this personnel expansion is due to the establishment of a research and
development operation in the People's Republic of China. Our research and
development activities in the

24
<PAGE>

People's Republic of China provide software and application specific integrated
circuit development support to our domestic operation. We intend to expand our
headcount in the People's Republic of China in future periods. Although we
expect absolute research and development expenses to increase, we expect
research and development expenses as a percentage of revenues to decrease.

Sales, general and administrative. Sales, general and administrative
expenses consist primarily of personnel and other costs associated with the
management of our business and with the sale and marketing of our products.
Sales, general and administrative expenses were $2.1 million, $2.2 million and
$1.2 million for the fiscal years ended March 31, 1999, 1998 and 1997,
respectively. As a percentage of revenues, general and administrative expense
represented 135.5%, 63.7% and 51.1% for the fiscal years ended March 31, 1999,
1998 and 1997, respectively. The increase in sales, general and administrative
expenses as a percentage of revenues from fiscal year 1998 to fiscal year 1999
is primarily attributable to the decrease in revenues between periods. The $1.0
million increase in sales, general and administrative expense from fiscal 1997
to fiscal 1998 is due to additions to sales and marketing personnel in fiscal
1998 and a related increase in sales and marketing activities. We anticipate
that absolute levels of general and administrative expenses will increase in
future periods due to the costs associated with being a public company.
Although we expect sales and marketing expenses to increase in absolute
dollars, we expect these expenses to decrease as a percentage of revenues.

Deferred stock compensation. We grant stock options to hire, motivate and
retain employees. We incurred stock compensation expense of $2,000 for the
fiscal year ended March 31, 1999. No stock compensation expense was incurred
for the fiscal years ended March 31, 1998 or 1997.

Interest expense, net. We incurred interest expenses of $464,000, $74,000
and $55,000 for the fiscal years ended March 31, 1999, 1998 and 1997,
respectively. The increase in interest expense in fiscal year 1999 was due
primarily to the interest on a $2.2 million bank line of credit obtained in
December 1997 and costs of the related guarantee.

Provision for income taxes. We are taxed in our jurisdictions of operations
based on the extent of taxable income generated in each jurisdiction. For
income tax purposes, revenues are attributed to the taxable jurisdiction where
the sales transactions generating the revenues were initiated. We incurred
operating losses for each of the fiscal years as ended March 31, 1999, 1998 and
1997, and therefore made no provision for income tax in these fiscal years. As
of December 31, 1999, we had federal and state net cumulative operating losses
of approximately $18.1 million and $5.3 million, respectively, which are
available to offset future taxable income. If not used, these net operating
losses will expire through 2019.

25
<PAGE>

Quarterly Results of Operations

The following table sets forth unaudited selected quarterly results of
operations data for the seven quarters ended December 31, 1999, as well as such
data expressed as a percentage of revenues. This data has been derived from our
unaudited financial statements that, in the opinion of management, include all
adjustments, consisting only of normal recurring adjustments, necessary for the
fair presentation of such information for the periods presented. The statement
of operations data should be read in conjunction with our audited consolidated
financial statements and the related notes appearing elsewhere in this
prospectus.

<TABLE>
<CAPTION>
Three Months Ended
--------------------------------------------------------------------------
Jun. 30, Sep. 30, Dec. 31, Mar. 31, June 30, Sep. 30, Dec. 31,
1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- --------
(unaudited)
(in thousands and as a percentage of revenues)
<S> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
Product sales.......... $ 447 $ 524 $ 197 $ 264 $ 517 $ 1,147 $ 2,167
Development contracts
and other............ -- 46 44 -- 44 234 3
------- ------- ------- ------- ------- ------- -------
Total revenues....... 447 570 241 264 561 1,381 2,170
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Product sales.......... 385 455 242 175 310 706 1,147
Development contracts
and other............ -- 26 25 -- 19 58 1
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues........... 385 481 267 175 329 764 1,148
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... 62 89 (26) 89 232 617 1,022
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 941 798 778 840 728 787 960
Sales, general and
administrative....... 555 458 406 643 719 734 869
Amortization of
deferred stock
compensation......... -- -- -- 2 88 308 423
------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 1,496 1,256 1,184 1,485 1,535 1,829 2,252
------- ------- ------- ------- ------- ------- -------
Operating loss.......... (1,434) (1,167) (1,210) (1,396) (1,303) (1,212) (1,230)
------- ------- ------- ------- ------- ------- -------
Interest expense, net... 93 136 146 89 59 264 339
------- ------- ------- ------- ------- ------- -------
Net loss................ $(1,527) $(1,303) $(1,356) $(1,485) $(1,362) $(1,476) $(1,569)
======= ======= ======= ======= ======= ======= =======
As a Percentage of
Revenues:
Revenues:
Product sales.......... 100.0 % 91.9 % 81.7 % 100.0 % 92.2 % 83.1 % 99.9 %
Development contracts
and other............ 0.0 8.1 18.3 0.0 7.8 16.9 0.1
------- ------- ------- ------- ------- ------- -------
Total revenues....... 100.0 100.0 100.0 100.0 100.0 100.0 100.0
------- ------- ------- ------- ------- ------- -------
Cost of revenues:
Product sales.......... 86.1 79.8 100.4 66.3 55.3 51.1 52.9
Development contracts
and other............ -- 4.6 10.4 -- 3.4 4.2 --
------- ------- ------- ------- ------- ------- -------
Total cost of
revenues........... 86.1 84.4 110.8 66.3 58.7 55.3 52.9
------- ------- ------- ------- ------- ------- -------
Gross profit (loss)..... 13.9 15.6 (10.8) 33.7 41.3 44.7 47.1
------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 210.5 140.0 322.8 318.1 129.8 57.0 44.2
Sales, general and
administrative....... 124.2 80.4 168.5 243.6 128.1 53.1 40.0
Amortization of
deferred stock
compensation......... 0.0 0.0 0.0 0.8 15.7 22.3 19.5
------- ------- ------- ------- ------- ------- -------
Total operating
expenses........... 334.7 220.4 491.3 562.5 273.6 132.4 103.7
------- ------- ------- ------- ------- ------- -------
Operating loss.......... (320.8) (204.8) (502.1) (528.8) (232.3) (87.9) (56.6)
------- ------- ------- ------- ------- ------- -------
Interest expense, net... 20.8 23.9 60.6 33.7 10.5 19.1 15.6
------- ------- ------- ------- ------- ------- -------
Net loss................ (341.6)% (228.7)% (562.7)% (562.5)% (242.8)% (106.8)% (72.2)%
======= ======= ======= ======= ======= ======= =======
</TABLE>

As a result of our transition to solutions for the Internet appliance,
broadband set-top box and digital television markets, product sales from the
personal computer market declined in the last two quarters of the fiscal year
ended March 31, 1999 from levels achieved in the first two quarters of fiscal
year 1999. We also experienced fluctuations in quarterly revenues due to
seasonal factors. In particular, product sales are impacted in the fourth
fiscal quarter, or first calendar quarter, by holidays in Asia and the United
States, as occurred in

26
<PAGE>

our fourth quarter of fiscal year 1999. The sequential increase in revenues in
the last three quarters of calendar 1999 was primarily due to volume shipments
of our CyperPro 2010 product, which was first released in 1997, as well as
shipment of our CyberPro 5000 product family.

Gross profits and gross margins were depressed in the first three quarters
of fiscal year 1999 due to declining selling prices on our older products for
the personal computer market and lower production yields on our new products.
Gross profit and gross margins improved sequentially from the fourth quarter of
fiscal year 1999 through the first three quarters of fiscal year 2000 due to a
favorable shift in product mix as the newer, higher margin products for the
Internet appliance, broadband set-top box and digital television markets
comprised a higher percentage of our overall revenues.

The increase in selling, general and administrative expenses in the second
and third quarters of fiscal year 2000 was primarily due to increased
headcount, including hiring executive officers, and legal and accounting
expenses associated with our financing activities.

Interest expenses represented bank interest and costs related to the
guarantee of a related party. The increase in interest expense in the second
and third quarters of fiscal year 2000 was primarily due to the amortization of
deferred compensation related to warrants and options issued to guarantors of
our debt.

We believe that period to period comparisons of our operating results
should not be relied upon as an indication of our future performance. Our past
operating results have been, and our future operating results will be, subject
to fluctuations due to a number of factors, including seasonality of the buying
patterns of our OEM customers, the mix of services and products sold, the
concentration of sales to large customers, dependence upon capital spending
budgets and fluctuations in general economic conditions. For a more detailed
discussion of these and other factors, see the section entitled "Risk Factors."

Liquidity and Capital Resources

Since inception, we have financed our operating losses principally through
the sale of preferred stock, which totaled approximately $18.4 million as of
December 31, 1999. For the nine months ended December 31, 1999, we used $2.0
million of cash in operating activities. During the fiscal years ended March
31, 1999, 1998 and 1997, we used $4.2 million, $4.8 million and $2.4 million,
respectively, for operating activities, primarily due to operating losses and
increased working capital requirements.

Net cash used in investing activities was $208,000 for the nine months
ended December 31, 1999, and $380,000, $506,000 and $576,000 for the fiscal
years ended March 31, 1999, 1998 and 1997, respectively, primarily for the
purchase of computers and engineering equipment. As of December 31, 1999, we
did not have any significant capital expenditure commitments.

Net cash provided from financing activities was $5.3 million during the
nine months ended December 31, 1999, and $4.6 million, $4.8 million and $3.1
million for the fiscal years ended March 31, 1999, 1998 and 1997, respectively.
Net cash provided by the sale of Series G and H preferred stock and the sale of
common stock was $3.0 million in the nine months ended December 31, 1999. Net
cash provided by the sale of Series G preferred stock and the sale of common
stock was $4.3 million in the fiscal year ended March 31, 1999. Net cash
provided by the sale of Series F preferred stock and the sale of common stock
was $5.2 million during fiscal 1997 and 1998. Net cash provided by the sale of
Series E preferred stock and the sale of common stock was $2.0 million in the
fiscal year ended March 31, 1997. Proceeds from bank lines of credits were $3.2
million for the nine months ended December 31, 1999, and $3.0 million, $1.9
million and $350,000 for the fiscal years ended March 31, 1999, 1998 and 1997,
respectively.

As of December 31, 1999, we had $3.1 million of cash and cash equivalents.
At December 31, 1999, we had lines of credits with three banks. Two of these
lines are guaranteed by parties who have been compensated with options and
warrants in our company. The first credit line expired on January 31, 2000 and
was converted

27
<PAGE>

to Series I preferred stock in March 2000; the second credit line expires on
July 31, 2001; and the third credit line has no fixed maturity date.

We believe that the net proceeds of the sale of common stock offered in
this offering, together with existing cash resources, will be sufficient to
meet our capital requirements through the next twelve months.

We may raise additional capital during the next 12 months. Our future
capital requirements will depend on many factors, including the rate of growth
in revenues, profitability, timing and extent of spending to support research
and development programs, expansion of selling and marketing and administrative
activities, timing or introduction of new products and product enhancements and
market acceptance of our products. We expect that we may need to raise
additional capital in the future. We cannot assure you that additional equity
or debt financing, if required, will be available on acceptable terms, or at
all. In the event that we raise additional equity financing, stockholders will
be further diluted.

From time to time, we may evaluate acquisitions of business, products, or
technologies that complement our business. Although we have no current plans in
this regard, any transactions, if consummated, may consume a portion of our
working capital or require the issuance of equity securities that may result in
further dilution to existing stockholders.

Quantitative and Qualitative Discussion of Market Interest Rate Risk

Our cash equivalents and short term investments are exposed to financial
market risk due to fluctuation in interest rates, which may affect our interest
income and, in the future, the fair market value of our investments. We manage
the exposure to financial market risk by performing ongoing evaluations of our
investment portfolio and presently invest entirely in certificates of deposit
issued by banks, the value of which does not change based on changes in
interest rates. As our cash balances increase, we anticipate investing in short
term investment grade government and corporate securities. These securities
will be highly liquid and generally mature within 12 months from our purchase
date. Due to the short maturities of our investments, the carrying value should
approximate the fair value. In addition, we do not use our investments for
trading or other speculative purposes. We have performed an analysis to assess
the potential effect of reasonably possible near term changes in interest and
foreign currency exchange rates. The effect of any change in foreign currency
exchange rates is not expected to be material to our results of operations,
cash flows or financial condition. Due to the short duration of our investment
portfolio, an immediate 10% change in interest rates would not have a material
effect on the fair market value of our portfolio. Therefore, we would not
expect our operating results or cash flows to be affected to any significant
degree by the effect of a sudden change in market interest rates on our
securities portfolio.

Foreign Currency Exchange Risk

We are an international company, selling our products globally and, in
particular, in Japan, Korea, the People's Republic of China and Taiwan.
Although we transact our business in United States dollars, we cannot assure
you that future fluctuations in the value of the United States dollar would not
affect the competitiveness of our products, gross profits realized, and results
of operations. Further, we incur expenses in the People's Republic of China,
Taiwan and other countries that are denominated in currencies other than United
States dollars. We cannot estimate the effect that an immediate 10% change in
foreign currency exchange rates would have on our future operating results or
cash flows as a direct result of changes in exchange rate. However, we do not
believe that we currently have any significant direct foreign currency exchange
rate risk and have not hedged exposures denominated in foreign currencies or
any derivative financial instruments.

Inflation

The impact of inflation on our business has not been material for the nine
months ended December 31, 1999 or the fiscal years ended March 31, 1999, 1998
and 1997.

28
<PAGE>

Recently Issued Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Financial
Instruments and for Hedging Activities," which provides a comprehensive and
consistent standard for the recognition and measurement of derivatives and
hedging activities. SFAS 133 is effective for all fiscal quarters for fiscal
years beginning after June 15, 2000 and is not anticipated to have a
significant impact on our operating results or financial condition when
adopted.

29
<PAGE>

BUSINESS

Overview

Tvia designs, develops and markets high performance streaming media gateway
integrated circuits for the Internet appliance, broadband set-top box and
digital television markets. Our semiconductor solutions, together with our
proprietary software, process rich media content streams available on the
Internet and on the broadband network and enable consumers to have a customized
and interactive television viewing experience. For example, a consumer with an
Internet appliance, broadband set-top box or digital television incorporating
one of our products can watch a football game and simultaneously select
different camera angles, look up player statistics, email, chat or instant
message with other fans, arrange for tickets and airfare to next week's game
and order a pizza through their television.

We sell our integrated circuits to manufacturers of Internet appliances,
broadband set-top boxes and digital televisions. Our integrated circuits and
software deliver high performance processing of rich media content. Our
solutions are compatible with various microprocessors, operating systems and
applications software and accept multiple data types from various transmission
pipes. Our solutions also allow easy software upgrades, and are programmable
and customizable. Our integrated circuits, software and reference designs
enable our original equipment manufacturers, or OEMS, to accelerate their time
to market by reducing their systems engineering development.

Industry Background

Demand for High Speed Access to Rich Media Content

In recent years there has been a dramatic increase in demand for high speed
Internet access to information and entertainment, or rich media content, which
combines audio, video, voice, text, graphics, pictures and animation. This
demand is driven by the growth of rich media content available from the
Internet and through television broadcasts and accessible via narrowband phone
lines and broadband transmission pipes such as television antenna (analog or
digital terrestrial broadcast), cable, microwave, satellite, digital subscriber
line, or DSL, and ethernet connection. Demand has also been stimulated by the
increasing availability, affordability and ease of use of consumer appliances
and other devices that feature integrated Internet access.

No longer limited to the personal computer, Internet access is now
available through a variety of devices including Internet appliances, broadband
set-top boxes and digital televisions. Internet appliances include any kind of
consumer electronics device that has expanded functionality through a
connection to the Internet, such as Internet set-top boxes, web access
appliances, mobile telephones, personal video recorders and next generation
digital versatile disks, or DVD. Broadband set-top boxes permit consumer access
to high speed networks through broadband transmission pipes. Digital
televisions are televisions where a digital or analog signal is processed
digitally and enhanced with resolutions ranging from standard resolution to
high definition television, or HDTV. The demand for these alternate devices
that provide access to the Internet is expected to exceed demand for personal
computers over the next three years. Forrester Research, Inc. estimates that in
the United States from 2000 to 2003, the percentage of households with digital
set-top box access to the Internet will grow from 15.3% to over 33.9%,
representing a compound annual growth rate of 30.4%. By comparison,
International Data Corporation estimates that personal computer shipments in
the United States will increase by 9.8% annually between 2000 and 2003.

As rich media content becomes more pervasive, users are demanding faster
access to the Internet. In an effort to meet increasing demand for faster
access to rich media content, the communications industry has begun to deploy
new broadband access technologies that can deliver data at a rate of tens of
megabits per second, or up to 700 times faster than today's 56 kilobits per
second, or Kbps, dial up modems. Users of dial up analog modems over narrowband
telephone lines with maximum transmission rates of 56 Kbps often experience
lengthy delays, failure of transmission and limitations on the volume of data
that can be transmitted in real time. The slow speed of the telephone modem is
frustrating to mainstream consumers who are

30
<PAGE>

accustomed to the immediate point and click interface of a television remote
control and will find broadband connections much more satisfying.

The New Paradigm of Interactive Television

Access to the Internet, which was originally confined to personal computer
users, is now available to the mass consumer through the television. The
television is the ubiquitous consumer product that people are comfortable using
for entertainment and information due to its sound and display qualities.
According to Nielsen Media Research, virtually all United States households
have at least one television set, and three out of every four have multiple
sets. Nielsen estimates that in the average household, the television set is on
more than 7 hours a day, every day of the year. In addition, according to
Nielsen over 75% of United States households have access to broadband
television connections through cable or satellite television. Internet
appliances, broadband set-top boxes and digital televisions can now act as the
medium to access the Internet and traditional television broadcasts and combine
the rich media content and services for an interactive television experience.

According to Cahners In-Stat Group, in 1999 31.1 million households
worldwide used digital television technologies and services. The number of
households is estimated by Cahners to increase to 100.8 million by the end of
2004. According to Forrester, television viewing will change from a primarily
passive activity of watching live or scheduled programming, to a more
interactive experience. By 2005, Forrester estimates that 50% of a viewer's
time will be spent watching on demand video content, 8% on communicating, 7%
viewing or interacting with data, and 5% navigating services, with only 30% of
the time spent watching the standard scheduled or live programming.

Interactive television enables consumers to watch a commercial and access,
at the click of a button, additional information coming from the Internet or an
interactive program. This information, such as an e-commerce website, could be
displayed on a transparent window that would allow the consumer to continue
viewing the commercial, access additional information and complete the purchase
of advertised merchandise. Or, a consumer could be watching a television
program while chatting, emailing or instant messaging with friends. In
addition, interactive television users could access selected additional
information such as personalized stock quotes or program guide information.
Consumers could also play along in a game show and win prizes if they respond
faster and more accurately than the contestants on television, or they could
compete against other online players. This can be done by providing discrete
windows for the interactive content and the main program, or by providing
transparent windows that overlay the main program without obstructing it.
Interactive content windows can be customized and configured, allowing the
consumer to control the viewing experience.

The Challenges to Manufacturers of Internet Appliances, Broadband Set-Top
Boxes and Digital Televisions

The growth of the Internet and the increase in rich media content have
resulted in the convergence of a variety of data from multiple sources. Rich
media content and multiple data streams require high bandwidth and dedicated
processors to allow the consumer to access the wide range of content available
through the broadband network. Manufacturers of products designed to bring rich
media content to the consumer on a single device, such as Internet appliances,
broadband set-top boxes and digital televisions, face an array of challenges.
These challenges include the following:

Technical Challenges:

. High Bandwidth Requirements. The simultaneous processing of real time
rich media content streams requires a significant amount of processing
power, generally through dedicated stream processing engines. A
microprocessor generally can process Internet content consisting
mainly of text and graphics. For streaming video, however, processors
need high bandwidth to handle multiple input streams.

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<PAGE>

. Ability to Handle a Variety of Input Data Types. The information and
entertainment available to consumers via the Internet, broadcast
services, or local sources such as DVD or video cassette recorder, or
VCR, come in a variety of types, formats, aspect ratios and
resolutions, and can be in analog or digital format. Consumers want to
be able to simultaneously access audio, video, voice, text, graphics,
pictures and animation through their Internet appliance, broadband
set-top box or digital television.

. Support for a Variety of Applications Software and Operating
Systems. Different input data types may require different applications
software or operating systems in order to decode the rich media
content available to the consumer. For example, an Internet browser,
such as Netscape Navigator, is required in order to view Internet
text. Similarly, applications software capable of reading file formats
such as gif for graphics, JPEG for pictures, Shockwave for animation,
MPEG for video and MP3 for audio, are necessary to support various
rich media content streams. In addition, OEMs generally do not want to
be reliant on one operating system and therefore most Internet
appliances and broadband set-top boxes are designed with the
capability of running more than one operating system.

. Connectivity to a Variety of Transmission Pipes. The streaming rich
media content available to consumers may be received through a variety
of transmission pipes, all of which must be considered by the
manufacturer of the Internet appliance, broadband set-top box or
digital television. Consumers can choose to access information and
entertainment through telephone lines or broadband transmission pipes
such as television antenna (analog or digital terrestrial broadcast),
cable, microwave, satellite, DSL and ethernet connection, or any
combination thereof.

. Compatibility with a Variety of Output Standards. Manufacturers must
make their products compatible with different standards in different
regions and countries. For example, manufacturers must account for
varying output requirements in designing their devices, including
output interfaces, audio formats, display formats conforming to
regional standards and various display types. In addition, more and
more, the rich media content streams may be transported to other local
communications interfaces including home network, storage devices or a
return communications channel used to send information back through
the broadband network, each of which operate with different standards.

Quality of Consumer Experience. As the methods of delivery of information
and entertainment content converge, consumers will demand the ability to
instantaneously receive varying content on a single platform or through a
single device. For example, consumers may want the ability to watch a
television program, check email and surf the Internet at the same time on the
same display. In addition, it is essential that these appliances are easy to
use, maintain high picture quality, and allow consumers to interact with and
manipulate the available information and entertainment services.

Market Considerations. While competitive pressures are forcing
manufacturers to bring increasingly complex products to market rapidly,
consumers do not want to purchase products which will quickly become obsolete.
As more advanced information and services become available through the
Internet, manufacturers need to design products which are flexible and
intelligent enough to access the new content. In most cases, products need to
be upgradeable via software download in order to limit obsolescence. Finally,
consumers favor reasonably priced devices which produce quality images.

Product Differentiation. In addition to providing the functions and product
attributes required by consumers, manufacturers must differentiate their
products from those of their competitors in order to retain their brand
identity. This is more and more difficult as, with the shift to digital
technology, communications interfaces become standardized. The main remaining
element enabling system differentiation in an Internet appliance, broadband
set-top box or digital television resides in the hardware and applications
software that enables display configuration and the user interface, or the look
and feel, which is customizable to increase ease of use and consumer
personalization.

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Our Solution

We design, develop and market high performance, streaming media gateway
integrated circuits for the Internet appliance, broadband set-top box and
digital television markets. Our semiconductor solutions, together with our
proprietary software, are designed to improve the performance and functionality
of consumer electronics equipment by processing multiple rich media content
streams in real time, enabling the customer to have a customized and
interactive television viewing experience. Our solutions allow the consumer to
customize the appearance of the television screen and manipulate the rich media
content streams to create an interactive television experience. We believe that
we are well positioned to be the leading provider of streaming media gateway
integrated circuits by offering the following advantages:

. High Performance Processing of Rich Media Content. Our solution acts
as a gateway that processes multiple streams of rich media content
that converge from different transmission pipes and format standards
enabling a high quality, clear display. With the advent of digital
transmission, the convergence of multiple rich media content streams
transported by the broadband network requires a process to unify and
match the multiple transmission standards. For example, some of the
broadcast streams are formatted with different resolution and screen
size dimensions, or aspect ratios, than Internet streams, thereby
resulting in a distorted picture. Our technology converts these
varying streams into a uniform stream and delivers an undistorted,
high quality picture. The streams are then merged and blended to offer
visual effects such as picture in picture, or transparency or the
overlay of multiple content types, all enhancing the consumer's
viewing experience. In order to support real time processing of
multiple streams, our stream processor provides high bandwidth with
some internal busses running at data rates over six gigabits per
second.

. Support for Multiple Data Types, Transmission Pipes, Microprocessors,
Operating Systems and Applications Software. Our integrated circuits
can accept any standard rich media content input signals through
narrowband (telephone lines) and any broadband transmission pipes.
Further, our products are designed with a flexible architecture that
can work with most television formats and display types. These modules
have been successfully ported to multiple platforms based on industry
standard microprocessors, operating systems and content application
software. Our focus on compatibility gives our OEM customers
flexibility in design and allows devices using our solution to work
with the end users' existing television equipment.

. Upgradeable Platform. Our applications software provides Internet
appliance, broadband set-top box and digital television manufacturers
with a platform that can be expanded and upgraded over time by the
consumer with only a software change which can be downloaded over a
network. This helps to reduce the risk of product obsolescence and
enables the integration of new features and technologies as they are
developed.

. Programmable and Customizable Platform. Our semiconductor solution is
programmable and allows manufacturers to add new features and
customize the on screen user interface of their products. For example,
manufacturers may program their Internet appliance, broadband set-top
box or digital television to allow varying modes of transparency,
multiple independent media window displays, multiple or combined audio
streams, multiple display aspect ratios and multiple resolutions and
scan modes, which affect the quality of the image and the amount of
flicker on the screen.

. Accelerated Time to Market. Our streaming media integrated circuits,
software and reference designs enable our OEM customers to accelerate
their time to market by reducing their systems engineering
development. We have developed a number of platforms running with
multiple microprocessors, operating systems and applications software
which enable our customers to leverage these predeveloped hardware and
software platforms to reduce their system engineering efforts. Our
software development kits include modules that enable rapid
customization and porting, which allow our customers to speed up their
product development time. Our engineers work closely with our
customers' engineers to facilitate systems design. This benefit
enables our OEM customers to bring products with rich features and
differentiated systems to market quickly.

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Our Strategy

Our objective is to be the leading provider of high performance streaming
media gateway solutions for the Internet appliance, broadband set-top box and
digital television markets. The key elements of our strategy include the
following:

. Focus on Television-Centric Broadband Consumer Market
Applications. According to Nielsen, television sets are in virtually
all United States households, and three out of four households have
multiple sets. Cable television provides up to eight gigabits per
second of bandwidth compared to the 56 kilobits per second of
bandwidth of a dial up telephone modem. This is up to 140,000 times
more bandwidth than dial up modems. We believe that the television
provides the platform of choice for delivering rich media content into
the home, as consumers are comfortable using the television for
entertainment and information. As a result, we intend to continue to
focus our efforts on television-centric applications such as Internet
appliances, broadband set-top boxes and digital televisions.

. Maintain Our Leadership in Streaming Media Gateway Technology. We
intend to continue to invest in our research and development in order
to build upon our leadership as a provider of high performance
streaming media gateway solutions. We intend to continue to refine
picture quality through development of advanced digital and mixed
signal processing techniques including enhancements such as higher
resolution processing and line doubling. We intend to continue to
expand the bandwidth of our streaming media gateway solution to handle
a larger number of rich media content streams simultaneously. Finally,
we plan to continue to integrate additional features into our solution
in order to provide additional value to system manufacturers as well
as to aid in system cost reduction.

. Maintain Our Focus on Software Development. We believe our easy to use
software development kits and our custom software services are key
differentiating factors which enable our OEM customers to facilitate
their systems engineering support and shorten their time to market. We
expect to continue to offer our OEM customers a variety of software
modules and the system engineering support necessary to simplify
design and development processes that permit our OEM customers to
differentiate their products through custom configurations.

. Expand Alliances with Major Microprocessor and Operating System
Vendors. We intend to continue to nurture our relationships with
operating system, applications software and microprocessor industry
leaders in order to enable new features or new content types on our
streaming media gateway hardware. Over the last four years, we have
developed alliances to provide our OEM customers with ready to use
hardware and software reference platforms. These relationships have
allowed us to minimize our customers' evaluation and system
engineering time, thereby accelerating their time to market.

. Maintain Flexibility to Support Rapidly Evolving Applications. We
intend to continue to maintain flexibility as new features and
upgrades become available so that our products interface with and
fully utilize complementary hardware, such as microprocessor and
broadband interface integrated circuits and operating systems and
content applications software. We believe this flexibility has and
will continue to enable our customers to design products that are
field upgradeable via software download. In addition, we plan to
develop our future products to support and be compatible with emerging
communications and television standards.

. Target Leading OEM Customers. We focus our system applications
engineers and our sales and marketing efforts to support leading
manufacturers of Internet appliances, broadband set-top boxes and
digital televisions. We work with industry leading OEMs in the United
States, Europe and Asia. Our efforts initially focused on achieving
early design wins with companies we believed would drive product
innovation and volume in each of our target markets. We are currently
designing our next generation products with the input of these OEMs.
We believe this strategy allows us to provide OEMs with a roadmap to
enhance their products, reduce their system size and costs with
greater

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integration and maintain compatibility to current hardware features,
software and display look and feel provided by our streaming media
gateway solution.

. Leverage Our Technology into New Applications. We intend to extend our
streaming media gateway technology to switch and route rich media
streams to and from new applications such as displays, storage
devices, home networking systems and connecting with other consumer
electronics equipment. For example, a television broadcast stream
could be merged with a video stream coming from a digital camera
through a communications port and displayed on a television while
simultaneously, the digital camera information is being routed to a
printer and the broadcast program is recorded on a VCR.

Our Products

Our products are based on advanced architecture integrated circuits and
system designs that provide real time, cost effective, high quality streaming
media and display processing. We currently offer three product families: the
CyberPro 2010 family, introduced in calendar 1997, the CyberPro 5000 family,
introduced in calendar 1998 and the CyberPro 5300 family, introduced in
calendar 1999. Our integrated circuits include different features which OEMs
can select for inclusion in their products. The following table describes our
current hardware products and their key features:
<TABLE>

<CAPTION>
CyberPro
- --------------------------------------------------------------------
Features 2010 5000 5005 5050 5055 5300 5305 5350 5355
- --------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
2D Graphics/Text X X X X X X X X
- --------------------------------------------------------------------
DuoVision X X X X X X X X X
- --------------------------------------------------------------------
FlexiBus X X X X X X X X X
- --------------------------------------------------------------------
TVDirect X X X X X X X X X
- --------------------------------------------------------------------
Video Port (Number) 1 2 2 2 2 3 3 3 3
- --------------------------------------------------------------------
Video Processor X X X X X X X X X
- --------------------------------------------------------------------
eView X X X X X X X X
- --------------------------------------------------------------------
mView X X X X X X X X
- --------------------------------------------------------------------
tView X X X X X X X X
- --------------------------------------------------------------------
Audio Processor X X X X
- --------------------------------------------------------------------
MacroVision X X X X
- --------------------------------------------------------------------
3D Graphics/Text X X X X
- --------------------------------------------------------------------
Digital Link X X X X
</TABLE>

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<PAGE>

The following table describes the key features of our products in more
detail:
<TABLE>

<CAPTION>
Feature Description
- -------------------------------------------------------------------------------
<C> <S>
2D Graphics/Text Two dimensional text, graphics and animation engine
- -------------------------------------------------------------------------------
DuoVision Simultaneous display of same or different content on
two displays
- -------------------------------------------------------------------------------
FlexiBus Direct interface to multiple embedded and RISC
processors
- -------------------------------------------------------------------------------
TVDirect Integrated television output processor with
broadcast picture quality on television for
animation, text and graphics
- -------------------------------------------------------------------------------
Video Port Direct interface port to broadcast or broadband
video streams including MPEG-2, DVD, video compact
disk
- -------------------------------------------------------------------------------
Video Processor Video processing engine to manipulate multiple video
streams
- -------------------------------------------------------------------------------
eView High picture quality of broadcast or broadband video
on television
- -------------------------------------------------------------------------------
mView Hardware magnified view of text, graphics and HTML
web pages on television
- -------------------------------------------------------------------------------
tView Flexible transparency algorithms applied to multiple
media streams
- -------------------------------------------------------------------------------
Audio Processor Audio digital signal processor to process various
audio formats including MP3, wavetable, MIDI, PCM,
I2S, stereo audio
- -------------------------------------------------------------------------------
MacroVision Industry standard encryption for copy protection
- -------------------------------------------------------------------------------
3D Graphics/Text Three dimensional text, graphics and animation
engine
- -------------------------------------------------------------------------------
Digital Link Digital interface (or output) for display output or
transmission
</TABLE>

The CyberPro 2010, designed for Internet appliances, has high performance
text, graphics and video processing engines. With its direct interface to
embedded processors and installed base of worldwide television formats, it
provides high functionality at a low cost.

The CyberPro 5000 is the first product of the CyberPro 5000 family designed
for broadband digital set-top boxes and digital television. The CyberPro 5000
has enhanced text, graphics and video processing engines and faster frame
buffer bandwidth than our CyberPro 2010 product. It also includes two video
ports for two simultaneous video streams, high picture quality of broadband
video on television, hardware magnified view of web pages on television, and a
flexible transparency algorithm for blending multiple video, text, graphics,
pictures and animation on screen.

The CyberPro 5005 is designed for broadband set-top boxes and digital
televisions with Internet and DVD capability. In addition to CyberPro 5000
features, the 5005 provides MacroVision encryption for copy protection.

The CyberPro 5050 is designed for broadband set-top boxes and digital
televisions which have integrated audio capability. It includes a full duplex
digital signal processor engine with wavetable synthesis, MIDI, I2S, PCM and
stereo audio.

The CyberPro 5055 combines all features of our CyberPro 5000, 5005 and 5050
products. The CyberPro 5055 provides a solution for broadband set-top boxes and
digital televisions that process multiple media streams including DVD and full
duplex audio.

The CyberPro 5300 is the first product in the CyberPro 5300 family designed
for broadband set-top boxes that require 3D animation, 3D effects or 3D
graphics processing capability.

The CyberPro 5305, 5350 and 5355 are similar to our CyberPro 5005, 5050 and
5055 products with 3D animation, 3D effects or 3D graphics processing
capability.

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We are currently working on products that integrate new technologies,
features and enhancements that allow consumers to access, at the click of a
button, high bandwidth rich media content and services with improved picture
quality.

Software

Our software products and services are divided in three categories:
software development kits, applications modules and custom software services.
Our software product strategy is based on providing OEMs a complete solution
which reduces both their system engineering time and their time to market. Our
streaming media gateway hardware is configurable and flexible, and our software
is key in enabling our customers to take advantage of this flexibility.
Finally, our software modules enable us to provide our OEM customers with the
capability to offer systems with differentiated features that enhance the
television experience.

Our software development kits are a set of software modules designed to be
easily and quickly ported on multiple hardware and software platforms. These
kits are modularized in order to cater to different system requirements while
maintaining a small software footprint. These modules have been successfully
ported to multiple platforms based on industry standard microprocessors,
operating systems and content application software.

Finally, by leveraging the comprehensive experience of our software design
team, we provide custom software development for customers using our streaming
media gateway solution. In addition, in many cases, we work closely with third
party system integrators to provide our OEM customers with accelerated system
software development and faster time to market.

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Technology

The processing and delivery of rich media content requires the capability to
process multiple streams simultaneously. It also requires that technology
merge, reformat and route these disparate streams into a unified stream for
storage, transmission and display. Moreover, the stream needs to be compliant
to the multiple input and output requirements including over six output
interfaces, four audio formats, 12 display formats conforming to different
regional standards and four display types.

The following illustrates the processing flow of our streaming media gateway
integrated circuit:

TVIA STREAMING MEDIA GATEWAY PROCESSING

[GRAPHIC APPEARS HERE]

The title "TVIA STREAMING MEDIA GATEWAY PROCESSING" appears at the top of the
diagram.

On the left margin the words "RichMedia Content" appear with bullets audio,
video, voice, text, graphics, pictures and animation appearing below. Arrows
point into a series of four boxes surrounds one large box.

The first box is titled "Stream Input Processor" with bullets Video
processing, Audio processing and Configurable MultiProcessor Interface appearing
below. An arrow points to the next box.

The second box is titled "Stream Data Flow Processor" with the bullet
Temporal Processing appearing below. An arrow points to the next box.

The third box is titled "High Bandwidth Stream Processing" with the bullets
Merging/Blending/Reformating, Spatial Processing and Text/Graphics/Animation
appear below. An arrow points to the next box.

The fourth box is titled "Stream Output Processor" with the bullet High
Speed, Mixed Signal Functions appearing below.

Three arrows point out of the large box on the right side of the diagram
pointing to the words "Customized and Enhanced Rich Media Content."

At the bottom of the diagram is a box with arrows pointing up into the large
box. Inside the box are the words "User Configurable via Tvia and System
Application Software."

Stream Input Processor. In this section of our integrated circuits, multiple
engines work in parallel to capture and process the various rich media content
streams. Separate parallel engines are used for the capture of multiple audio,
video, voice, text, graphics, pictures and animation content. The capture
occurs through multiple separate video and audio ports as well as through a
configurable microprocessor interface. This interface has the flexibility to
provide a direct connection to the multitude of processor types being used in
Internet appliance, broadband set-top box and digital television applications.

Stream Data Flow Processor. The various rich media content streams can be
input to our streaming media gateway at different input rates. Before they are
merged into a single stream for display, storage or transmission, the flow of
data of the streams needs to be adjusted to match the output data rate.
Typically, our integrated circuits perform this adjustment in conjunction with
external memory and retiming circuitry.

High Bandwidth Stream Processor. The convergence of multiple streams
transported by the broadband network requires a processor to unify the streams
and match the multiple transmission standards. For example, some of the
broadcast streams are formatted with different resolutions and aspect ratios
than the Internet streams, thereby resulting in a distorted picture. Our
spatial processing technology optimally converts these varying streams into a
uniform stream while delivering a high quality picture. The streams are then
scaled, merged and blended to offer visual effects such as picture in picture
or transparency overlay of multiple content

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<PAGE>

types to enhance the viewing experience. In order to support real time
processing of multiple streams, our stream processor provides high bandwidth
with some internal busses running at data rates over six gigabits per second.

Stream Output Processor. This section contains the physical layer output
transmission circuitry for the output transmission of the streams as well as
the routing of the streams to the different output ports. We have designed our
proprietary high speed, mixed signal complementary metal oxide semiconductor,
or CMOS, functions to interface with digital and analog output streams. Our
multiple generations of high speed, low jitter phase locked loops, operating in
excess of 800MHz, enable precise timing of the output streams and capability to
handle the streaming media bandwidth. Along with our broadcast quality digital
to analog converter, our stream output processor enables excellent picture
quality.

Software Technology and Software Support Expertise. Our software modules
enable our OEMs to speed up their system development and to fully utilize our
streaming media gateway solution. Moreover, our team of software engineers
assist our OEM customers to customize their platform to the desired consumer
interface and look and feel.

System Specific Applications Expertise. Our semiconductor and system design
teams solve problems related to designing systems using broadcast quality audio
and video performance. Our gateway solution interfaces with a number of
surrounding audio, video, data busses and mixed signal circuits. Our expertise
in solving audio and video compliance related problems enables us to make our
semiconductor solutions easier for our OEM customers to design into their
systems.

Customers

We target customers in the Internet appliance, broadband set-top box and
digital television markets. We began to focus on the Internet appliance market
in 1997, and later expanded our focus to include the broadband set-top box and
digital television markets. Therefore, the majority of our sales to date have
been in the Internet appliance market. However, many of our customers
manufacture or distribute products in more than one of our target markets. The
following table illustrates what we believe is the primary focus of our largest
OEM customers by revenue in each of the target markets that we address:

<TABLE>
<CAPTION>
Internet Appliance Broadband Set-Top Box Digital Television
------------------ --------------------- ------------------
<S> <C> <C>
Acer Acer Hitachi
Allwell Cisco Loewe
eNote.com General Instrument Mitsubishi
LG Electronics Hughes Sony
Philips
Samsung
Vestelkom
</TABLE>

Sales and Marketing

We sell and market our integrated circuits through our direct sales force,
sales representatives and distributors. For our software products, we also use
value added resellers and system integrators that package and use our software
products for resale as standard products or custom software development
services.

Our products are marketed primarily through reference platforms and
evaluation kits designed internally and with industry leading microprocessor,
real time operating systems and other strategic partners directly or indirectly
through our partners' channels to OEMs for evaluation and development. These
reference platforms and evaluation kits (hardware and software) have proven to
be vital to our success in obtaining new design wins. We also promote our
products through trade shows, articles, press releases and joint promotions
with our partners.

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<PAGE>

Our personnel work closely with customers, sales representatives and
authorized distributors to define product features, performance, price and
market timing of new products. We provide technical support and design
assistance directly to OEM customers, regardless of the sales channels used. We
believe that a high level of customer support is necessary to successfully
develop and maintain long term relationships with our customers. These
relationships begin at the design-in phase and develop as customer needs change
and evolve. We provide support through both on site customer service and remote
support from our facilities.

As of December 31, 1999, we employed a sales and marketing force of 10
people. These personnel have the technical expertise and industry knowledge
necessary to support a lengthy and complex sales process. Our sales and
marketing organization includes four field applications engineers that assist
customers in designing, testing and qualifying system designs that incorporate
our integrated circuits and software products. We believe that the depth and
quality of this design support are key to improving our customers' time to
market and maintaining a high level of customer satisfaction. Our two direct
sales offices are located in Santa Clara, California and Taipei, Taiwan. Both
of these sales offices also provide hardware and software applications support.

Research and Development

Our research and development efforts are focused on three areas: device
architecture and logic design, physical layer design software development and
device testing. As of December 31, 1999, our research and development staff
consisted of approximately 50 employees. Our research and development efforts
have been focused on architecture design, streaming media processing
algorithms, high speed digital and mixed signal design and software. Our
software engineering staff represents approximately 45% of our design
engineering staff and gets involved early in the design process to ensure
software compatibility. On a new product, the majority of our hardware
engineers are involved in high speed digital and mixed signal designs and
verification.

We conduct research and development at our design centers in Santa Clara,
California and Hefei, People's Republic of China. Our People's Republic of
China facility is located in a science park near Hefei University of
Technology, and employee costs are lower than those in the San Francisco Bay
Area.

Our research and development expense for fiscal 1997, 1998 and 1999 and for
the nine months ended December 31, 1999 was $1.9 million, $3.2 million, $3.4
million and $2.5 million, respectively. Research and development expense
consists mainly of personnel and other costs associated with the development of
product designs, process technology, software and programming hardware. We
anticipate that we will continue to commit substantial resources to research
and development in the future.

Manufacturing

We have adopted a fabless semiconductor manufacturing model and outsource
all of our semiconductor manufacturing and assembly. This approach allows us to
focus our resources on the design, development, testing and marketing of our
products and significantly reduces our capital requirements. We develop our
designs to be compatible with two foundries, United Manufacturing Corporation,
or UMC, and Taiwan Semiconductor Manufacturing Corporation, or TSMC, both of
which are located in Hsin Chu, Taiwan. This allows us to shift production from
one facility to the other in the event of a capacity constraint at one foundry.
We currently use 0.5 micron, 0.35 and 0.3 micron technology for production. We
intend to use 0.18 micron technologies for new products.

We internally design and optimize digital and analog cells through our
physical layer design group. This allows us to reduce die size and therefore
semiconductor integrated circuit cost. This also gives us greater control over
the quality and reliability of our streaming media gateway integrated circuits.

Assembly of our devices is primarily performed by Caesar Technology
Incorporated and Siliconware Precision Industries Ltd., both of which are
located in Hsin Chu, Taiwan. Final testing is primarily performed by us in
Santa Clara, California. However, we are currently exploring additional
outsourcing of the testing function.

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<PAGE>

Competition

The semiconductor industry in general, and the market for integrated
circuits for Internet appliances, broadband set-top boxes and digital
televisions, in particular, is highly competitive. We believe we compete
favorably in each of the key competitive factors in our target markets. These
factors are:

. functionality;

. performance;

. time to market;

. price;

. conformity to industry standards;

. product road maps; and

. technical support.

Our current and primary competitors in our target markets are ATI, Broadcom
and TeraLogic. In addition to these competitors, we expect other major
semiconductor manufacturers will enter the market as the Internet appliance,
broadband set-top box and digital television markets develop. A number of
companies, including IBM, STMicroelectronics, National Semiconductor TeleCruz,
have announced that they are developing or plan to introduce competing products
in the Internet appliance, broadband set-top box or digital television market
which could result in significant competition. We expect competition to
intensify as current competitors expand their product offerings and new
competitors enter the market.

Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret
laws and contractual restrictions to establish and protect our intellectual
property and proprietary rights that we develop and license from others.

We have filed applications for United States patents containing claims
covering various aspects of programmable integrated circuits, programmable
interconnect structures, programmable antifuse devices, as well as methods and
apparatus for programming antifuse devices. We expect to file patent
applications as we deem appropriate to protect our technology and products. We
cannot be sure that our patent applications will result in the issuance of
patents, or that any issued patents will provide commercially significant
protection to our technology.

We also license certain technology and intellectual property rights from
others. The protections we receive from others against infringement under the
terms of these licensing agreements is limited and we cannot assure you that
alternative technology exists.

We attempt to avoid infringing known proprietary rights of third parties in
our product development efforts. It is difficult to proceed with certainty in a
rapidly evolving technological environment in which there may be numerous
patent applications pending, many of which are confidential when filed, with
regard to similar technologies. If we were to discover that our products
violate third-party proprietary rights, we might not be able to obtain licenses
to continue offering these products without substantial reengineering. Efforts
to undertake this reengineering might not be successful, licenses might be
unavailable on commercially reasonable terms, if at all, and litigation might
not be avoided or settled without substantial expense and damage awards.
CyberPro is a registered trademark, and Tvia and FlexiBus are trademarks
pending registration of Tvia in the United States. In addition, the Tvia logo
is a trademark of Tvia in the United States and other jurisdictions.

Employees

As of December 31, 1999, we had 81 full time employees including 50 engaged
in research and development, 10 engaged in sales and marketing, eight engaged
in manufacturing and 13 engaged in general

41
<PAGE>

management and administration activities. Of the current employees, 41 work in
our Santa Clara facility, six work in our Taiwan office and 34 work at our
facility in the People's Republic of China. Our employees are not represented
by any collective bargaining agreement and we have never experienced a work
stoppage. We believe our relations with our employees are good.

Facilities

Our headquarters, which also serves as our principal administrative,
selling, marketing, customer support, applications engineering and product
development facility, is located in Santa Clara, California, and consists of
approximately 16,500 square feet under a lease that expires in July 2003. We
also lease a sales, marketing and customer support office in Taiwan under a
lease that expires in February 2001. We currently use the services of a
subcontractor to manage facilities and employment for our research and
development operation in the People's Republic of China.

We believe our existing facilities are adequate to meet our needs for the
immediate future and that future growth can be accomplished by leasing
additional or alternative space on commercially reasonable terms.

Legal Proceedings

As of March 29, 2000, we were not a party to any litigation.

42
<PAGE>

MANAGEMENT

Directors, Executive Officers and Key Employees

The directors, executive officers and key employees of Tvia, and their ages
as of March 29, 2000, are as follows:

<TABLE>
<CAPTION>
Name Age Position
- ------------------------ --- -----------------------------------------------------
<S> <C> <C>
Kenny Liu(1)(2)......... 46 Chairman and Chief Executive Officer
Jack Guedj.............. 41 President
Michael Hoberg.......... 48 Vice President of Finance and Chief Financial Officer
Jhi-Chung Kuo........... 47 Vice President of Engineering
Mike Raghavan........... 43 Vice President of Marketing
James Tao............... 50 Vice President of Business Development
Yee Wong................ 47 Vice President of Manufacturing Operations
Bo Liu.................. 46 Vice President, Software Development
James Bunker(1)(2)...... 65 Director
Steven Cheng............ 59 Director
R. David
Dicioccio(1)(2)....... 41 Director
Ming-Kai Tsai........... 49 Director
</TABLE>
- --------
(1)Member of compensation committee.
(2)Member of audit committee.

Kenny Liu has served as our Chairman of the Board and Chief Executive
Officer since January 1995. From January 1989 to March 1994, Mr. Liu served as
Chairman and Chief Executive Officer of OPTi Inc., a manufacturer of core logic
chip sets for the personal computer market. Mr. Liu received a B.S. in
Electrical Engineering from National Cheng-Kung University in Taiwan, an M.S.
in Computer Science from Santa Clara University and an M.S. in Electrical
Engineering from Ohio State University.

Jack Guedj has served as our President since May 1999. From February 1997
to April 1999, Dr. Guedj was President of HTMC, a consulting firm specializing
in advising startup companies. From June 1996 to February 1997, Dr. Guedj was
Vice President of Sales and Marketing for Faroudja, Inc., a manufacturer of
video image enhancement products for the television and broadcast markets. From
June 1994 to June 1996, Dr. Guedj was Director of Multimedia/Consumer Strategic
Market Segment at National Semiconductor Corporation. Dr. Guedj received an
M.B.A. from the University of California, Los Angeles and a Ph.D. in Electrical
Engineering from University of Paris.

Michael Hoberg has served as our Chief Financial Officer since February
2000. From November 1998 to January 2000, Mr. Hoberg served as the Chief
Financial Officer of U.S. Cancer Care, Inc., an oncology radiation company.
From December 1996 to June 1998, Mr. Hoberg served as Chief Financial Officer
of Faroudja, Inc., a manufacturer of video image enhancement products for the
television and broadcast markets, and as an advisor to the Chief Executive
Officer from July 1998 to November 1998. From March 1995 to December 1996, Mr.
Hoberg was the Principal Accounting Officer of DSP Group, Inc., a digital
signal processing semiconductor company. From January 1994 to March 1995, Mr.
Hoberg served as DSP's Corporate Controller. Mr. Hoberg received a B.B.A. in
Accounting from the University of Wisconsin at Madison and is a Certified
Public Accountant.

Jhi-Chung Kuo, a cofounder of the Company, has served as our Vice President
of Engineering since our inception in March 1993. Mr. Kuo received a B.S. in
Physics from National Central University in Taiwan and an M.S. in Electrical
Engineering from Mississippi State University.

Bo Liu has served as Vice President, Software Development since November
1999. He joined Tvia as Software Manager in June 1993, serving in that position
until June 1998. From June 1998 to November 1999,

43
<PAGE>

Mr. Liu was our Director of Software Development. Prior to joining the Company,
Mr. Liu held software development positions at both Micronics Computers, Inc.
and Oak Technology, Inc. Mr. Liu was a candidate for a Ph.D. in Electrical and
Computer Engineering at the University of Wisconsin and has an M.S. in
Electrical Engineering from Wichita State University and a B.S. in Electrical
Engineering from Hefei University of Technology in People's Republic of China.

Mike Raghavan has served as Vice President of Marketing since November
1999. He joined us as Senior Director of Marketing in February 1996. From
February 1994 to February 1996, Mr. Raghavan served as Senior Marketing Manager
at Trident Microsystems, Inc., a multimedia semiconductor company. From 1991 to
1994, Mr. Raghavan was a Founder and Vice President of Sales and Marketing at
Nexel Corporation, a manufacturer of board accelerators. Mr. Raghavan has a
M.S. in Industrial Engineering from the University of Iowa and a B.S. in
Mechanical Engineering from the Indian Institute of Technology in India.

James Tao has served as Vice President of Business Development since
November 1999. He joined us in June 1997 as Senior Director of Business
Development, and is responsible for business development in Japan, Korea and
with major domestic customers. From March 1989 to May 1997, Mr. Tao served as
Vice President of Sales and Marketing at Focus Information Systems, a personal
computer peripheral product company. Mr. Tao received an M.B.A. in
Telecommunication Management from Golden Gate University and an M.S. in
Computer Science from the University of Hawaii.

Yee Wong, a cofounder of the Company, has served as our Vice President of
Operations since January 1995. From March 1993 to December 1994, Mr. Wong
served as our President. Prior to founding the Company, Mr. Wong served as an
ASIC Design Manager for Everex Systems, Inc. and Senior Staff Engineer with
Intel Corporation. Mr. Wong received a B.S. in Electrical Engineering from
National Cheng Kung University in Taiwan and an M.S. in Electrical Engineering
from University of Michigan.

James Bunker has served as a Director since February 2000. From January
1997 to the present, Mr. Bunker has served as a director of Assured Digital
Inc, a telecommunications company, and as a director of Viasat, Inc., a
telecommunications company. From January 1998 to present Mr. Bunker has served
as a director of VNCI, Inc. a video distributor. From July 1998 to December
1999, Mr. Bunker served as President and Chief Executive Officer of Video
Network Communications, Inc. and has served as its Chairman of the Board of
Directors since December 1999. From January 1994 to July 1998, Mr. Bunker was a
consultant to high technology companies. Mr. Bunker received a B.S. in
Electrical Engineering from Northwestern University.

Steven Cheng has served as a Director since October 1998. Dr. Cheng has
served as President of Hontung Venture Capital Corp. since October 1998. Since
August 1977, Dr. Cheng has served as Chief Technology Officer of Communications
at Acer, Inc. From July 1990 to January 1997, Dr. Cheng was General Director of
Computer and Communication Research Laboratories at Industrial Technology
Research Institute. Dr. Cheng has a Ph.D. in Physics from the California
Institute of Technology.

R. David Dicioccio has served as a Director since February 2000. Since
November 1998, Mr. Dicioccio has served as President of RDD Associates, LLC, an
investor in and strategic advisor to early stage and established technology
companies. From 1992 to 1998, Mr. Dicioccio served as a Managing Director and
Head of the Technology and Communications Investment Banking practice at
PaineWebber Incorporated. Mr. Dicioccio received an A.B. in Political Science
from Stanford University and an M.B.A. from Harvard University.

Ming-Kai Tsai has served as a Director since October 1998. Since May 1993,
Mr. Tsai has served as the Chairman of Faraday Technology Corp., an application
specific integrated circuit design services company. From May 1983 to July
1997, Mr. Tsai served at UMC in various capacities including president and vice
president of business units. Mr. Tsai received a B.S. in Electronic Engineering
from Taiwan University and an M.S. in Electronic Engineering from the
University of Cincinnati.

44
<PAGE>

Board of Directors and Committees

Our bylaws require that our board of directors be comprised of six members.
Directors are elected at our annual meeting of stockholders by a vote of the
holders of a majority of the voting power represented at the meeting. Our board
of directors has a compensation committee and an audit committee.

Compensation Committee. Our compensation committee is responsible for,
among other things, determining salaries, incentives and other forms of
compensation for directors, officers and other employees of Tvia and
administering various incentive compensation and benefit plans. As of March
2000, our compensation committee is comprised of James Bunker, R. David
Dicioccio and Kenny Liu. Mr. Liu will be excluded from decisions regarding his
own salary and incentive compensation.

Audit Committee. Our audit committee reviews our annual audit and meets
with our independent auditors to review our internal controls and financial
management practices. As of March 2000, our audit committee is comprised of
James Bunker, R. David Dicioccio and Kenny Liu.

Director Compensation and Other Arrangements

Except for the grant of stock options, we do not currently compensate our
directors for their services as directors. Directors who are also employees are
eligible to participate in our 1999 Stock Incentive Plan. We also reimburse
each member of our board of directors for out-of-pocket expenses incurred in
connection with attending board meetings.

Compensation Committee Interlocks and Insider Participation

With the exception of Mr. Liu, none of the members of the compensation
committee is currently, or has ever been at any time since our formation, one
of our officers or employees. No member of the compensation committee serves as
a member of the board of directors or compensation committee of any entity that
has one or more officers serving as a member of our board of directors or
compensation committee.

Executive Compensation

The following table provides summary information concerning compensation
earned by or paid to our chief executive officer and each of our three other
most highly compensated executive officers whose total annual salary and bonus
exceeded $100,000, for services rendered in all capacities to Tvia during the
fiscal year ended March 31, 1999. These individuals are referred to as the
"named executive officers." Other than the salary and bonus described below,
Tvia did not pay any executive officer named in the Summary Compensation Table
any fringe benefits, perquisites or other compensation in excess of 10% of that
executive officer's salary and bonus during the fiscal year ended March 31,
1999.

Summary Compensation Table

<TABLE>
<CAPTION>
Long Term
Compensation
------------
Annual Compensation Securities
------------------------ Underlying All Other
Name and Principal Position Salary Bonus Options (#) Compensation
- --------------------------- ----------- --------------------- ------------
<S> <C> <C> <C> <C>
Kenny Liu..................... $ 123,077(1) -- -- --
Chief Executive Officer
Jhi-Chung Kuo................. 162,706 -- -- --
Vice President of Engineering
Yee Wong...................... 139,999 -- -- --
Vice President of
Manufacturing Operations
</TABLE>
- -------------------------
(1) Includes $100,000 in accrued salary in fiscal year 1999 which Mr. Liu used
in fiscal year 2000 to exercise options and to purchase our stock.

45
<PAGE>

Option Grants in Last Fiscal Year

The percentage of total options granted is based on an aggregate of 528,000
options granted in fiscal year 1999. The exercise price on the date of grant
was equal to the fair market value on the date of grant as determined by the
board of directors. Options have a maximum term of five years subject to
earlier termination of specified events related to cessation of employment.

The 5% and 10% assumed rates of appreciation are mandated by the rules of
the Securities and Exchange Commission and do not represent Tvia's estimate or
projection of future stock price. The dollar values have been calculated by
determining the difference between the fair market value of the securities
underlying the options at March 31, 1999 and the exercise prices of the
options. Solely for purposes of determining the value of the options at March
31, 1999, we have assumed that the fair market value of shares of common stock
issuable upon exercise of options was $ per share, the initial public
offering price, since the common stock was not traded in an established market
prior to the offering.

<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------
Potential Realizable Value
Number of % of Total at Assumed Annual Rates of
Securities Options Stock Price Appreciation for
Underlying Granted to Option Term
Options Employees Exercise Expiration -----------------------------
Name Granted in Fiscal 1999 Price Date 5% 10%
- ---- ---------- -------------- -------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Kenny Liu............... -- -- -- -- $ -- $ --
Jhi-Chung Kuo........... -- -- -- -- -- --
Yee Wong................ -- -- -- -- -- --
</TABLE>

Aggregate Option Exercises in
Last Fiscal Year and Fiscal Year-End Option Values

The following table sets forth information regarding options that were
exercised by the executive officers during fiscal year 1999 and the number and
value of unexercised, in the money options, at March 31, 1999:

<TABLE>
<CAPTION>
Number of
Securities
Underlying Value of
Unexercised Unexercised In-the-
Options Held at Money Options Held
Shares Value March 31, 1999 at March 31, 1999(1)
Acquired on Realized ------------------ -------------------
Name Exercise ($) Vested Unvested Vested Unvested
- ---- ----------- -------- --------- -------- ---------- -------- ---
<S> <C> <C> <C> <C> <C> <C> <C>
Kenny Liu...... -- -- 2,400,000 -- $2,400,000 --
Jhi-Chung Kuo.. -- -- -- -- -- --
Yee Wong....... -- -- -- -- -- --
</TABLE>
- -------------------------
(1) Based on the fair market value of our common stock as determined by our
board of directors as of March 31, 1999 of $1.00 per share as estimated at
the time, less the exercise price payable for such shares.

Employee Benefit Plans

1999 Stock Incentive Plan

The board of directors in October 1999 adopted our 1999 Stock Incentive
Plan, which will be amended and restated effective upon completion of this
offering. Our 1999 Stock Incentive Plan provides for the grant of incentive
stock options as defined in Section 422 of the Internal Revenue Code to
employees and the grant of nonstatutory stock options and stock purchase rights
to employees, nonemployee directors and consultants. A total of 13,800,000
shares of common stock have been reserved for issuance under our 1999 Stock
Incentive Plan as of March 20, 2000.

46
<PAGE>

Our board of directors administers our 1999 Stock Incentive Plan. The board
of directors may amend our 1999 Stock Plan as desired without further action by
Tvia's stockholders except as required by applicable law. Our 1999 Stock
Incentive Plan will continue in effect until terminated by the board of
directors or for a term of 10 years from its amendment and restatement date,
whichever is earlier.

The consideration for each award under our 1999 Stock Incentive Plan will
be established by our board of director, but in no event will the option price
for incentive stock options be less than 100% of the fair market value of the
stock on the date of grant. Awards will have such terms and be exercisable in
such manner and at such times as the board of directors or any committee
appointed to administer the 1999 Stock Incentive Plan may determine. However,
each incentive stock option must expire within a period of not more than five
years from the date of grant.

Generally, options granted under the 1999 Stock Incentive Plan vest over
five years, and are nontransferable other than by will or the laws of descent
and distribution. In the event of specified changes in control of Tvia, the
acquiring or successor corporation may assume or substitute for options
outstanding under the 1999 Stock Incentive Plan, or these options will become
fully vested and exercisable, be released from any restrictions on transfer
(other than transfer restrictions applicable to options under the 1999 Stock
Incentive Plan) and repurchase or forfeiture rights will terminate. Stock
options awarded under the 1999 Stock Incentive Plan fully accelerate upon a
change in control of Tvia, unless the acquiror or successor company assumes the
stock options. As of March 20, 2000:

. 8,269,541 shares of common stock have been issued upon the exercise of
options; and

. 594,802 shares were available for future awards.

2000 Stock Incentive Plan

Our 2000 Stock Incentive Plan was adopted by our board of directors on
March 20, 2000 and will be submitted for approval by our stockholders prior to
the completion of this offering. The 2000 Stock Incentive Plan will be
administered by our compensation committee. The 2000 Stock Incentive Plan
provides for the direct award or sale of shares of common stock and for the
grant of options to purchase shares of common stock. The 2000 Stock Incentive
Plan provides for the grant of incentive stock options as defined in Section
422 of the Internal Revenue Code and the grant of nonstatutory stock options
and stock purchase rights to employees, non-employee directors, advisors and
consultants.

A total of 3,000,000 shares of common stock have been authorized for
issuance under the 2000 Stock Incentive Plan.

The 2000 Stock Incentive Plan will have the following program features:

. qualified employees will be eligible for the grant of incentive stock
options to purchase shares of common stock;

. qualified non-employee directors will be eligible to receive automatic
option grants, to be made at periodic intervals, to purchase shares of
common stock at an exercise price equal to 100% of the fair market
value of those shares on the date of grant;

. the compensation committee will determine the exercise price of
options or the purchase price of stock purchase rights, but in no
event will the option price for incentive stock options be less than
100% of the fair market value of the stock on the date of grant; and

. the exercise price or purchase price may, at the discretion of the
compensation committee, be paid in, among other things, cash, cash
equivalents, full recourse promissory notes, past services or future
services.

47
<PAGE>

The 2000 Stock Incentive Plan will include change in control provisions
that may result in the accelerated vesting of outstanding option grants and
stock issuances. The committee may grant options or stock purchase rights in
which all or some of the shares will vest in the event of a change in control
of the company. Change in control is defined under the 2000 Stock Incentive
Plan as:

. a change in the composition of the board of directors, as a result of
which fewer than one-half of the incumbent directors are directors who
either:

. had been directors of the company twenty-four months prior to the
change; or

. were elected, or nominated for election, to the board with the
affirmative votes of at least a majority of the directors who had
been directors 24 months prior to the change and who were still in
office at the time of the election or nomination; or

. an acquisition or aggregation of securities by a person, as defined in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended, as a result of which the person becomes the beneficial owner
of 20% or more of the voting power of Tvia's outstanding securities.

The board of directors will be able to amend or modify the 2000 Stock
Incentive Plan at any time, subject to any required stockholder approval. The
2000 Stock Incentive Plan will terminate no later than March 20, 2010.

2000 Employee Stock Purchase Plan

The board of directors adopted our 2000 Employee Stock Purchase Plan on
March 20, 2000, to be effective upon completion of this offering. We will be
submitting it for approval by our stockholders prior to the completion of this
offering. A total of 1,000,000 shares of common stock have been reserved for
issuance under our employee stock purchase plan. The number of shares reserved
for issuance under the 2000 Employee Stock Purchase Plan will be increased on
the first day of each of our fiscal years from 2000 through 2009 by the lesser
of:

. shares;

. % of our outstanding common stock on the last day of the immediately
preceding fiscal year; or

. the number of shares determined by the board of directors.

Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the Internal Revenue Code, is administered by the board of
directors or by a committee appointed by the board. Employees (including
officers and employee directors of Tvia but excluding 5% or greater
stockholders) are eligible to participate if they are customarily employed for
more than 20 hours per week and for at least five months in any calendar year.
Our 2000 Employee Stock Purchase Plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 15% of an
employee's compensation. The maximum number of shares a participant may
purchase during a single offering period is 2,000 shares.

The 2000 Employee Stock Purchase Plan will be implemented by a series of
overlapping offering periods of 24 months' duration, with new offering periods,
other than the first offering period, commencing in November and May of each
year. The board of directors will establish participation periods for our 2000
Employee Stock Purchase Plan, none of which will exceed six months. During each
participation period, payroll deductions will accumulate, without interest. On
the purchase dates set by the board of directors for each participation period,
accumulated payroll deductions will be used to purchase common stock. The
initial offering period is expected to commence on the date of this offering
and end on , 2000. The initial purchase period is expected
to begin on the date of this offering and end on , 2000.

The purchase price will be equal to 85% of the fair market value per share
of common stock on either the first day of the participation period or on the
purchase date, whichever is less. Employees may withdraw their

48
<PAGE>

accumulated payroll deductions at any time. Participation in our 2000 Employee
Stock Purchase Plan ends automatically on termination of employment with Tvia.
Immediately prior to the effective time of a corporate reorganization, the
participation period then in progress shall terminate and stock will be
purchased with the accumulated payroll deductions, unless the 2000 Employee
Stock Purchase Plan is assumed by the surviving corporation or its parent
corporation pursuant to the plan of merger or consolidation. Our 2000 Employee
Stock Purchase Plan will terminate in March 2010, unless sooner terminated by
the board of directors.

401(k) Plan

In January 1997, we established an amended tax-qualified employee savings
and retirement plan for which Tvia's employees will generally be eligible.
Pursuant to the 401(k) Plan, employees may elect to reduce their current
compensation and have the amount of such reduction contributed to the 401(k)
Plan. To date, Tvia has made no matching contributions. The 401(k) Plan is
intended to qualify under Section 401 of the Internal Revenue Code of 1986, as
amended, so that contributions to the 401(k) Plan, and income earned on plan
contributions, are not taxable to employees until withdrawn from the 401(k)
Plan, and so that contributions by Tvia, if any, will be deductible by Tvia
when made.

Limitation of Liability and Indemnification Matters

Prior to completion of the offering, we intend to reincorporate as a
Delaware corporation. The following discussion assumes we are a Delaware
corporation. Our certificate of incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for:

. any breach of their duty of loyalty to the corporation or its
stockholders;

. acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

. unlawful payments of dividends or unlawful stock repurchases or
redemption; or

. any transaction from which the director derived an improper personal
benefit.

This limitation of liability does not apply to liabilities arising under
the federal securities laws and does not affect the availability of equitable
remedies such as injunctive relief or rescission.

Our certificate of incorporation and bylaws provide that we will indemnify
our directors and executive officers and may indemnify its other officers and
employees and other agents to the fullest extent permitted by law. Our bylaws
also permit us to secure insurance on behalf of any officer, director, employee
or other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the bylaws would permit indemnification.

We are entering into agreements to indemnify our directors and executive
officers, in addition to indemnification provided for in our certificate of
incorporation and bylaws. We believe that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.

49
<PAGE>

CERTAIN TRANSACTIONS

Transactions with Management and Others

Between March 31, 1996 and March 20, 2000, we sold an aggregate of
19,969,437 shares of preferred stock in the following rounds of financing:

. in October 1996, we sold 4,647,236 shares of Series E preferred stock at
a price of $0.45 per share;

. in February 1997, we sold 6,957,332 shares of Series F preferred stock
at a price of $0.75 per share;

. between September 1998 and July 1999, we sold 4,750,000 shares of Series
G preferred stock at a price of $1.00 per share;

. in March 2000, we sold 3,614,869 shares of Series H preferred stock at a
price of $1.25 per share; and

. in March 2000, we sold 1,494,000 shares of Series I preferred stock at a
price of $2.50 per share.

The following table summarizes purchases of shares of our preferred stock,
valued in excess of $60,000, by our directors, executive officers and our 5%
stockholders:

<TABLE>
<CAPTION>
Shares
----------------------------------------------
Series
Series E Series F Series G Series H I
--------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Directors and Executive
Officers:
Kenny Liu(1)................ 1,858,041 200,000 250,000 195,200
R. David Dicioccio.......... -- -- -- 25,000 100,000(2)
James Bunker................ -- -- -- 25,000 30,000
5% Stockholders:
Hontung Venture Capital
Corp.(3).................. -- -- 2,000,000 --
Multiventure Marketing
Corp...................... 579,162 -- 750,000 --
MV Holding Co. Ltd.
Vision 2000............... -- 2,000,000 -- --
</TABLE>
- -------------------------
(1) Includes 1,858,041 shares of Series E preferred stock; 200,000 shares of
Series F preferred stock; 250,000 shares of Series G preferred stock; and
195,200 shares of Series H preferred stock purchased by the Liu-Lee Family
Trust, of which Mr. Liu is a trustee and a beneficiary.

(2) Includes 25,000 shares owned by Mr. Dicioccio's brother.

(3) One of our directors, Dr. Steven Cheng, is the President of Hontung Venture
Capital Corp.

These affiliates purchased the securities described above at the same price
and on the same terms and conditions as the unaffiliated investors in the
private financings.

In 1999, Mr. Liu exercised options to purchase 2,400,000 shares of our
common stock at a price of $0.04 per share for an aggregate purchase price of
$96,000.

Business Relationships

From May 1983 to July 1997, one of our directors, M.K. Tsai, served in
various capacities at United Microelectronic Corporation, or UMC, most recently
as president. UMC is one of the two foundries we use to manufacture our
integrated circuits.

One of our line of credit agreements is guaranteed by an individual related
to our chief executive officer. In consideration for providing the guarantee,
the guarantor receives a fee based on the maximum amount available on the line
of credit agreement. In connection with the guarantee given for the period from
December 31, 1997 to December 31, 1999, the related party was issued a warrant
to acquire 220,000 shares of Series G convertible preferred stock in December
1997, a warrant to acquire 80,000 shares of Series G

50
<PAGE>

preferred stock in July 1999 and an option to acquire 240,000 shares of common
stock at $0.04 per share in July, 1999. The price per share, as defined in the
respective warrant agreements, was variable up to December 31, 1999, at which
point it became fixed. The aggregate fair value of the warrants and option is
approximately $426,000. In addition, we paid $215,000 to the guarantor, in
cash, related to the guarantee for fiscal 1999.

In January 2000, we committed to grant the guarantor an additional warrant
to acquire 320,0000 shares of Series H convertible preferred stock for $1.25
per share and granted an option to purchase 320,000 shares of common stock at
$0.125 per share pursuant to an extension of the guarantee over the line of
credit agreement to April 30, 2001. The fair market value of this warrant will
be estimated using the Black-Scholes model.

One of our directors, Dr. Steven Cheng, is an executive officer of Acer,
Inc., a major customer.

Our chief executive officer, Mr. Kenny Liu, was a director of T-Squared
Design. We license audio technology from T-Squared.

Indebtedness of Management

Our current policy is that all transactions between us and our officers,
directors, 5% stockholders and their affiliates will be entered into only if
these transactions are approved by a majority of the disinterested directors,
are on terms no less favorable to us than could be obtained from unaffiliated
parties and are reasonably expected to benefit us.

For information concerning indemnification of directors and officers, see
"Management--Limitation of Liability and Indemnification Matters."

51
<PAGE>

PRINCIPAL STOCKHOLDERS

The table below sets forth information regarding the beneficial ownership of
our common stock as of March 31, 2000, by the following individuals or groups:

. each person or entity who is known by us to own beneficially more than
5% of the outstanding shares of our common stock;

. each of our executive officers;

. each of our directors; and

. all directors and executive officers as a group.

Unless otherwise indicated, the address of each of the individuals listed in
the table is c/o Tvia, Inc., 4001 Burton Drive, Santa Clara, California 95054.
Except as indicated, and subject to community property laws where applicable,
the persons named in the table have sole voting and investment power with
respect to all shares of common stock held by them.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities, subject to community property laws, where
applicable. Shares of our common stock subject to options that are presently
exercisable or exercisable within 60 days of March 31, 2000 are deemed to be
outstanding and beneficially owned by the person holding such options for the
purpose of computing the percentage of ownership of such persons but are not
treated as outstanding for the purpose of computing the percentage of any other
person.

The numbers shown in the table below assume no exercise by the underwriters
of their over-allotment option. Applicable percentage ownership is based on
47,570,472 shares of common stock outstanding as of March 31, 2000 and
shares of common stock sold in this offering.

<TABLE>
<CAPTION>
Amount and Nature of Shares of
Common Stock Beneficially Owned
-----------------------------------------------------------------------
Shares Issuable Percent of
Shares Subject to Pursuant to Options Outstanding Shares
Outstanding a Right of Exercisable Within --------------------
Shares of Repurchase as of 60 Days of Before the After the
Common Stock March 31, 2000(1) March 31, 2000 Offering Offering
------------ ----------------- ------------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
5% Stockholders:
Liu-Lee Family Trust
(2).................... 3,053,241 -- -- 6.4%
Hontung Venture Capital
Corp.(3) .............. 2,222,222 -- -- 4.6
Multiventure Marketing
Corp.(4) .............. 2,062,495 -- -- 4.3
MV Holding Co. Ltd.
Vision 2000(5) ........ 2,000,000 -- -- 4.2
Director and Executive
Officers:
Kenney Liu.............. 3,053,241 -- -- 6.4
Jhi-Chung Kuo........... 1,088,000 -- -- 2.3
Yee Wong................ 2,825,000 -- 5.9
James Bunker............ 130,000 70,834 2,951 *
Steven Cheng (3)........ -- -- 4,080 *
R. David Dicioccio...... 175,000 68,750 12,109 *
M.K. Tsai............... -- -- 4,080 *
All directors and
executive officers as a
group (12 persons)..... 9,039,629 1,739,645 85,280 19.0
</TABLE>
- -----------------
* Less than 1%.
(1) Shares of common stock issued under a repurchase agreement under which we
retain the right to repurchase those shares at a per share purchase price
equal to the original per share purchase price if the holder's employment
is terminated.

(2) Consists of 2,503,241 shares held by the Liu-Lee Family Trust of which Mr.
Liu is a trustee and a beneficiary, and 550,000 shares held in the name of
Mr. Liu's minor childern. Mr. Liu is our chief executive officer.

(3) Dr. Cheng a director of our Company is the president of Hontung Venture
Capital Corp. As such, Dr. Cheng has voting and dispositive power with
respect to the the shares held by Hontung. The address for Hontung Venture
Capital Corp. is 17F, 106, SEC.1, Hish Tai Wu Rd., Taiwan, R.O.C.

(4) The address for Multiventure Marketing Corp. is 6F, 59, Section 2, Tun Hua
South Road, Taipei, Taiwan R.O.C.

(5) The address for MV Holding Co. Ltd. Vision 2000 is P.O.B. 258 First Home
Tower, British American Center, Grand Cayman, B.W.I.

52
<PAGE>

DESCRIPTION OF CAPITAL STOCK

Authorized and Outstanding Capital Stock

Upon completion of this offering, assuming reincorporation in Delaware, and
after giving effect to the conversion of all outstanding preferred stock into
common stock and the amendment of our certificate of incorporation, our
authorized capital stock will consist of 100,000,000 shares of common stock,
par value $0.001 per share, and 5,000,000 shares of preferred stock, par value
$0.001 per share. Upon consummation of this offering, no shares of preferred
stock and shares of common stock ( shares if the
underwriters' over-allotment option is exercised in full) will be outstanding.
The following summary is qualified in its entirety by reference to our
certificate of incorporation and bylaws, copies of which are filed as exhibits
to the registration statement of which this prospectus is a part.

Under our 1999 Stock Incentive Plan, 13,800,000 shares of common stock have
been reserved for issuance and options to purchase 4,935,657 shares were
outstanding as of March 20, 2000.

Common Stock

As of March 20, 2000, there were 15,117,686 shares of common stock
outstanding held by approximately 41 stockholders of record.

Subject to preferences that may be applicable to any preferred stock
outstanding at the time, the holders of common stock are entitled to the
following:

Dividends. Holders of common stock are entitled to receive dividends out of
assets legally available for the payment of dividends at the times and in the
amounts as the board of directors from time to time may determine.

Voting. Holders of common stock are entitled to one vote for each share
held on all matters submitted to a vote of stockholders, including the election
of directors, and will not have cumulative voting rights unless cumulative
voting for the election of directors is authorized by our certificate of
incorporation, which means that the holders of a majority of the shares voted
can elect all of the directors then standing for election.

Preemptive rights, conversion and redemption. The common stock is not
entitled to preemptive rights and is not subject to conversion or redemption.

Liquidation, dissolution and winding up. Upon liquidation, dissolution or
winding up of Tvia, the holders of common stock are entitled to share ratably
in all assets remaining after payment of liabilities and the liquidation of any
preferred stock.

Each outstanding share of common stock is, and all shares of common stock
to be outstanding upon completion of this offering will be, upon payment
therefore, duly and validly issued, fully paid and nonassessable.

Preferred Stock

The board of directors is authorized, without action by the stockholders,
to designate and issue preferred stock in one or more series. The board of
directors can fix the number of shares, rights, preferences and privileges of
the shares of each series and any qualifications, limitations or restrictions
on these shares.

The board of directors may authorize the issuance of preferred stock with
voting or conversion rights that could adversely affect the voting power or
other rights of the holders of common stock. The issuance of preferred stock,
while providing flexibility in connection with possible acquisitions and other
corporate purposes could have the effect of delaying, deferring or preventing a
change in control of Tvia. We have no current plans to issue any shares of
preferred stock.

53
<PAGE>

Warrants

From April 1999 to January 2000, we issued warrants to purchase an
aggregate of 425,000 shares of Series G preferred stock at an exercise price of
$1.00 per share and 440,000 shares of Series H preferred stock at an exercise
price of $1.25 per share. These warrants expire between April 2004 and January
2005. Upon completion of this offering, all of our warrants to purchase
preferred stock will convert into the right to purchase the equivalent number
of shares of common stock at the same exercise price per share.

Registration Rights

Upon completion of this offering, the holders of 32,732,606 shares of
common stock issuable upon conversion of the Series A through I preferred stock
and upon the exercise of warrants have the right to cause us to register these
shares under the Securities Act as follows:

. Demand Registration Rights. At the earlier of July 31, 2001 or six
months after this offering, the holders of 20% of the common stock
issued upon conversion of Series F, G, H or I preferred stock may
request that we register their shares with respect to all or part of
their registrable securities having aggregate gross proceeds exceeding
$10,000,000.

. Piggyback Registration Rights. The holders of common stock issuable
upon conversion of the Series A through I preferred stock may request
to have their shares registered anytime we file a registration
statement to register any of our securities for our own account or for
the account of others subject to a pro rata cutback to a minimum of
25% of any offering.

. S-3 Registration Rights. The holders of common stock issued upon
conversion of the Series F, G, H and I have the right to request up to
three registrations on Form S-3 if we are eligible to use Form S-3 and
have not already effected such an S-3 registration within the past
twelve months, and if the aggregate proceeds are at least $1,000,000.

Registration of shares of common stock pursuant to the exercise of demand
registration rights, piggyback registration rights or S-3 registration rights
under the Securities Act would result in these shares becoming freely tradable
without restriction under the Securities Act immediately upon the effectiveness
of such registration. See "Shares Eligible for Future Sale" and "Certain
Transactions."

Tvia will pay all registration expenses, other than underwriting discounts
and commissions, in connection with any registration. The registration rights
terminate upon completion of this offering, provided that all shares of
registrable securities held or entitled to be held upon conversion by such
holders of registrable securities may immediately be sold under Rule 144 during
any 90-day period, or on such date after completion of this offering as all
shares of registrable securities held or entitled to be held upon conversion by
such holder of registrable securities may immediately be sold under Rule 144
during any 90-day period.

Charter Provisions

Certificate of Incorporation and Bylaws

Under our certificate of incorporation, the board of directors has the
power to authorize the issuance of up to 5,000,000 shares of preferred stock
and to determine the price, rights, preferences, privileges and restrictions,
including voting rights, of those shares without further vote or action by the
stockholders. The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, may:

. delay, defer or prevent a change in control of Tvia;

. discourage bids for the common stock at a premium over the market
price of our common stock;

. adversely affect the voting and other rights of the holders of our
common stock; and

. discourage acquisition proposals or tender offers for our shares and,
as a consequence, inhibit fluctuations in the market price of our
shares that could result from actual or rumored takeover attempts.

54
<PAGE>

Our bylaws provide that:

. stockholder action may be taken without a stockholders' meeting by
written consent; and

. special meetings of stockholders may only be called by the chairman of
the board, the chief executive officer or the board of directors.

The provisions described above, together with the ability of the board of
directors to issue preferred stock may have the effect of deterring a hostile
takeover or delaying a change in control or management of Tvia.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is .

55
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering there has been no public market for our common
stock, and we cannot predict the effect, if any, that market sales of shares or
the availability of shares for sale will have on the market price prevailing
from time to time. As described below, only a limited number of shares will be
available for sale shortly after this offering due to contractual and legal
restrictions on resale. Nevertheless, sales of substantial amounts of our
common stock in the public market after the restrictions lapse could cause the
market price of our common stock to decline.

When this offering is completed, we will have a total of shares
of common stock outstanding, assuming no exercise of outstanding options. The
shares offered by this prospectus will be freely tradable
unless they are purchased by our "affiliates," as defined in Rule 144 under the
Securities Act of 1933. The remaining 47,570,472 shares are "restricted," which
means they were originally sold in offerings that were not subject to a
registration statement filed with the Securities and Exchange Commission. These
restricted shares may be resold only through registration under the Securities
Act of 1933 or under an available exemption from registration, such as provided
through Rule 144.

Lock-up Agreements

The holders of 51,191,135 shares of common stock have agreed to a 180-day
"lock-up" with respect to these shares. This generally means that they cannot
sell these shares during the 180 days following the date of this prospectus.
After the 180-day lock-up period, these shares may be sold in accordance with
Rule 144.

Rule 144

In general, under Rule 144, a person or persons whose shares are
aggregated, who has beneficially owned restricted securities for at least one
year, including the holding period of any holder who is not an affiliate, is
entitled to sell within any three month period a number of our shares of common
stock that does not exceed the greater of:

. 1% of the then outstanding shares of our common stock, which will
equal approximately shares upon completion of this
offering; or

. the average weekly trading volume of our common stock on the Nasdaq
National Market during the four calendar weeks preceding the date on
which notice of sale is filed with the Securities and Exchange
Commission.

Sales under Rule 144 are subject to restrictions relating to manner of
sale, notice and the availability of current public information about us. Under
Rule 144 and subject to volume limitations, of the restricted shares
will be eligible for sale beginning 180 days after the date of the final
prospectus, and the remaining restricted shares will become salable at various
times thereafter.

Rule 144(k)

A person who is not deemed an affiliate of ours at any time during the 90
days preceding a sale and who has beneficially owned shares for at least two
years, including the holding period of any prior owner who is not an affiliate,
would be entitled to sell shares following this offering under Rule 144(k)
without regard to the volume limitations, manner of sale provisions, public
information or notice requirements of Rule 144.

Rule 701 and Options

Rule 701 permits resales of shares in reliance upon Rule 144 but without
compliance with some restrictions, including the holding period requirement, of
Rule 144. Any employee, officer or director or consultant who purchased his or
her shares pursuant to a written compensatory plan or contract may be entitled

56
<PAGE>

to rely on the resale provisions of Rule 701. Rule 701 permits affiliates to
sell their Rule 701 shares under Rule 144 without complying with the holding
period requirements of Rule 144. Rule 701 further provides that non-affiliates
may sell such shares in reliance on Rule 144 without having to comply with the
holding period, public information, volume limitation or notice provisions of
Rule 144. All holders of Rule 701 shares are required to wait 90 days after the
date of this prospectus before selling such shares. However, all shares issued
by us pursuant to Rule 701 are subject to lock-up provisions and will only
become eligible for sale upon the expiration of 180 days after the date of this
prospectus.

Registration

Following this offering, we intend to file a registration statement under
the Securities Act covering shares of common stock subject to outstanding
options or issued or issuable under our 1999 Stock Incentive Plan, 2000 Stock
Incentive Plan and our 2000 Employee Stock Purchase Plan. Based on the number
of shares subject to outstanding options at March 20, 2000, and currently
reserved for issuance under these plans, this registration statement would
cover approximately shares.

This registration statement will automatically become effective upon
filing. Accordingly, shares registered under this registration statement will,
subject to Rule 144 volume limitations applicable to our affiliates, be
available for sale in the open market immediately after the expiration of the
180-day lock-up agreements. Also beginning 180 days after the date of this
prospectus, holders of 32,732,606 shares of common stock will be entitled to
registration rights. See "Description of Capital Stock--Registration Rights."

57
<PAGE>

UNDERWRITING

The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Banc of America Securities LLC and Dain
Rauscher Incorporated, have severally agreed with us, subject to the terms and
conditions of the underwriting agreement, to purchase from us the number of
shares of common stock set forth below opposite their respective names. The
underwriters are committed to purchase and pay for all shares if any are
purchased.

<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
FleetBoston Robertson Stephens Inc................................
Banc of America Securities LLC....................................
Dain Rauscher Incorporated........................................
----
Total...........................................................
====
</TABLE>

The representatives have advised us that the underwriters propose to offer
the shares of common stock to the public at the public offering price set forth
on the cover page of this prospectus and to certain dealers at that price less
a concession of not in excess of $ per share, of which $ may be reallowed
to other dealers. After this offering, the public offering price, concession
and reallowance to dealers may be reduced by the representatives. No such
reduction shall change the amount of proceeds to be received by us as set forth
on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any offer in whole or in part.

Prior to this offering, there has been no public market for the common
stock. Consequently, the public offering price for the common stock offered by
this prospectus has been determined through negotiations among the
representatives and us. Among the factors considered in such negotiations were
prevailing market conditions, certain of our financial information, market
valuations of other companies that we and the representatives believe to be
comparable to us, estimates of our business potential, the present state of our
development and other factors deemed relevant.

The underwriters have advised us that they do not expect sales to
discretionary accounts to exceed five percent of the total number of shares
offered.

Prior to this offering, the representatives purchased shares of our Series
I preferred stock that, when converted to common stock, is at a price per share
lower than the public offering price. The Series I preferred stock will convert
to common stock upon the consummation of this offering. The representatives
will comply with section 2710 of the National Association of Securities Dealers
Rules of Conduct regarding underwriter compensation.

Over-Allotment Option

We have granted to the underwriters an option, exercisable during the 30-
day period after the date of this prospectus, to purchase up to
additional shares of common stock to cover over-allotments, if any, at the
public offering price less the underwriting discount set forth on the cover
page of this prospectus. If the underwriters exercise their over-allotment
option to purchase any of the additional shares of common stock, the
underwriters have severally agreed, subject to certain conditions, to purchase
approximately the same percentage thereof as the number of shares to be
purchased by each of them bears to the total number of shares of common stock
offered in this offering. If purchased, these additional shares will be sold by
the underwriters on the same terms as those on which the shares offered hereby
are being sold. We will be obligated, pursuant to the over-allotment option, to
sell shares to the underwriters to the extent the over-allotment option is
exercised. The underwriters may exercise the over-allotment option only to
cover over-allotments made in connection with the sale of the shares of common
stock offered in this offering.

58
<PAGE>

The following table shows the per share and total underwriting discounts
and commissions to be paid by us to the underwriters. This information is
presented assuming either no exercise or full exercise by the underwriters of
their over-allotment option.

<TABLE>
<CAPTION>
No Exercise of Full Exercise of
Over-Allotment Over-Allotment
--------------- ----------------
<S> <C> <C>
Per Share................................... $ $
Total....................................... $ $
</TABLE>

We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $ .

Indemnity

The underwriting agreement contains covenants of indemnity among the
underwriters and us against certain civil liabilities, including liabilities
under the Securities Act of 1933, and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.

Lock-Up Agreements

Each of our executive officers, directors, all of our existing shareholders
and existing optionholders have agreed with the representatives and us, for a
period of 180 days after the effective date of this prospectus, subject to
specified exceptions, not to offer to sell, contract to sell, or otherwise
sell, dispose of, loan, pledge or grant any rights with respect to any shares
of common stock, any options or warrants to purchase any shares of common
stock, or any securities convertible into or exchangeable for shares of common
stock owned as of the date of this prospectus or thereafter acquired directly
by those holders or with respect to which they have the power of disposition,
without the prior written consent of FleetBoston Robertson Stephens Inc.
However, FleetBoston Robertson Stephens Inc. may, in its sole discretion and at
any time or from time to time, without notice, release all or any portion of
the securities subject to lock-up agreements. There are no existing agreements
between the representatives and any of our existing shareholders and existing
optionholders who have executed a lock-up agreement providing consent to the
sale of shares prior to the expiration of the lock-up period.

In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to certain exceptions, consent to the disposition of any shares held by
shareholders subject to lock-up agreements prior to the expiration of the lock-
up period, or issue, sell, contract to sell, or otherwise dispose of, any
shares of common stock, any options or warrants to purchase any shares of
common stock or any securities convertible into, exercisable for or
exchangeable for shares of common stock other than our sale of shares in this
offering, the issuance of our common stock upon the exercise of outstanding
options or warrants, and the issuance of options under existing stock option
and incentive plans provided that those options do not vest prior to the
expiration of the lock-up period. See "Shares Eligible for Future Sale."

Listing

We have applied to list our common stock on the Nasdaq National Market
under the symbol "TVIA."

Stabilization

The representatives have advised us that, pursuant to Regulation M under
the Securities Act of 1933, some persons participating in the offering may
engage in transactions, including stabilizing bids, syndicate covering
transactions or the imposition of penalty bids, that may have the effect of
stabilizing or maintaining the market price of the shares of common stock at a
level above that which might otherwise prevail in the open

59
<PAGE>

market. A "stabilizing bid" is a bid for or the purchase of shares of common
stock on behalf of the underwriters for the purpose of fixing or maintaining
the price of the common stock. A "syndicate covering transaction" is the bid
for or purchase of common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with the offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member
purchased by the representatives in a syndicate covering transaction and has
therefore not been effectively placed by such underwriter or syndicate member.
The representatives have advised us that such transactions may be effected on
the Nasdaq National Market or otherwise, and if commenced, may be discontinued
at any time.

Directed Share Program

The underwriters have reserved up to five percent of the common stock to be
issued by us and offered for sale in this offering, at the initial public
offering price, to directors, officers, employees, business associates and
persons otherwise connected to Tvia. The number of shares of common stock
available for sale to the general public will be reduced to the extent these
individuals purchase reserved shares. Any reserved shares which are not
purchased will be offered by the underwriters to the general public on the same
basis as the other shares offered in this offering.

LEGAL MATTERS

Selected legal matters with respect to the validity of the common stock
offered by this prospectus are being passed upon for Tvia by Pillsbury Madison
& Sutro LLP, Palo Alto, California. An entity in which attorneys and former
attorneys of Pillsbury Madison & Sutro LLP are members and certain attorneys of
Pillsbury Madison & Sutro LLP beneficially own an aggregate of 117,000 shares
of Tvia common stock. Legal matters in connection with this offering will be
passed upon for the underwriters by Latham & Watkins, Menlo Park, California.

EXPERTS

The audited consolidated financial statements and schedule included in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.

WHERE YOU CAN FIND ADDITIONAL INFORMATION

We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 under the Securities Act with respect to the common stock
offered hereby. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement or the exhibits and schedules which are part of the
registration statement. Statements contained in this prospectus regarding the
contents of any contract or other document are not necessarily complete. For
further information with respect to Tvia and the common stock offered by this
prospectus, we refer you to the registration statement and the exhibits and
schedules filed as part of the registration statement. You may read and copy
any document we file at the SEC's public reference room at 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available
to the public from the SEC's Web site at http://www.sec.gov.

Upon completion of this offering, we will become subject to the information
and periodic reporting requirements of the Securities and Exchange Act, as
amended, and, in accordance therewith, will file periodic reports, proxy
statements and other information with the SEC. These periodic reports, proxy
statements and other information will be available for inspection and copying
at the SEC's public reference rooms and the Web site of the SEC referred to
above.

60
<PAGE>

TVIA, INC.

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants................................. F-2
Consolidated Balance Sheets.............................................. F-3
Consolidated Statements of Operations.................................... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and
Stockholders' Equity (Deficit)......................................... F-5
Consolidated Statements of Cash Flows.................................... F-6
Notes to Consolidated Financial Statements............................... F-7
</TABLE>

F-1
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Board of Directors and Stockholders of Tvia, Inc.:

We have audited the accompanying consolidated balance sheets of Tvia, Inc.
(a California corporation) as of December 31, 1999, March 31, 1999 and 1998,
and the related consolidated statements of operations, stockholders' deficit
and cash flows for the nine months ended December 31, 1999 and for each of the
three years in the period ended March 31, 1999. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Tvia, Inc.
as of December 31, 1999, March 31, 1999 and March 31, 1998, and the results of
its operations and its cash flows for the nine months ended December 31, 1999
and for each of the three years in the period ended March 31, 1999, in
conformity with generally accepted accounting principles in the United States.

Arthur Andersen LLP

San Jose, California
March 17, 2000 (except with respect to the matters referred to in
Note 10, as to which the date is April 3, 2000)

F-2
<PAGE>

TVIA, INC.

CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)

<TABLE>
<CAPTION>
December 31,
1999
March 31, Pro Forma
------------------ December 31 Stockholders'
1998 1999 1999 Deficit (Note 7)
-------- -------- ----------- ----------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents... $ 8 $ -- $ 471
Restricted cash............. -- -- 2,648
Accounts receivable, net of
allowance for doubtful
accounts of $5, $5 and $33,
respectively............... 143 63 481
Inventories................. 1,037 316 761
Prepaid expenses............ 88 38 63
Other assets................ 83 -- 146
-------- -------- --------
Total current assets....... 1,359 417 4,570
Property and Equipment, net... 436 313 274
-------- -------- --------
Total Assets............... $ 1,795 $ 730 $ 4,844
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current Liabilities:
Loan payable guaranteed by
related parties............ $ 1,915 $ 2,214 $ 1,052
Loans payable............... -- -- 500
Accounts payable............ 755 210 1,135
Accrued liabilities and
other...................... 1,128 1,469 2,044
-------- -------- --------
Total current liabilities.. 3,798 3,893 4,731
-------- -------- --------
Commitments and contingencies
(Note 5)
Long-Term Liabilities:
Loan payable guaranteed by
related parties............ -- -- 2,899
Redeemable convertible
preferred stock--Series F,
G and H; no par value,
aggregate liquidation
preference of $12,899
Authorized--17,707,332 at
December 31, 1999 and pro
forma.....................
Outstanding--6,957,332,
11,457,332 and 11,707,332
shares at March 31, 1998
and 1999, and December 31,
1999, 2,344,868 subscribed
at December 31, 1999; no
shares outstanding pro
forma..................... 5,212 9,704 12,846 $ 2,892
Warrants to purchase
redeemable convertible
preferred stock............ 111 111 301 --
-------- -------- --------
Total long-term
liabilities............... 5,323 9,815 16,046
-------- -------- --------
Stockholders' Equity
(Deficit):
Series A, B, C, D and E
convertible preferred
stock, no par value;
aggregate liquidation
preference of $5,632:
Authorized and outstanding--
15,916,403................. 5,525 5,525 5,525 --
Common stock, no par value:
Authorized--36,000,000 at
December 31, 1999 and
42,000,000 pro forma......
Outstanding--6,298,290,
6,735,728 and 13,118,975
at March 31, 1998 and
1999, and December 31,
1999, and 41,207,710
shares outstanding pro
forma..................... 131 180 4,117 20,371
Deferred stock
compensation............... -- (30) (2,515) (2,515)
Accumulated deficit......... (12,982) (18,653) (23,060) (23,060)
-------- -------- -------- --------
Total stockholders' Equity
(Deficit)................. (7,326) (12,978) (15,933) $(2,312)
-------- -------- -------- ========
Total liabilities and
stockholders' Equity
(Deficit)................. $ 1,795 $ 730 $ 4,844
======== ======== ========
</TABLE>

The accompanying notes are an integeral part of these financial statements.

F-3
<PAGE>

TVIA, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
------------------------- -------------------
1997 1998 1999 1998 1999
------- ------- ------- ----------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Product sales................ $ 1,028 $ 2,597 $ 1,432 $ 1,168 $ 3,831
Development contracts and
other...................... 1,324 861 90 90 281
------- ------- ------- ------- -------
Total revenues............ 2,352 3,458 1,522 1,258 4,112
------- ------- ------- ------- -------
Cost of Revenues:
Product sales (excluding
amortization of deferred
stock compensation of $1
in 1999 and $12 in the
nine months ended December
31, 1999).................. 1,879 2,458 1,257 1,082 2,163
Development contracts and
other...................... 757 526 51 51 78
------- ------- ------- ------- -------
Total cost of revenues.... 2,636 2,984 1,308 1,133 2,241
------- ------- ------- ------- -------
Gross profit (loss)....... (284) 474 214 125 1,871
------- ------- ------- ------- -------
Operating Expenses:
Research and development
(excluding amortization of
deferred stock
compensation of $1 in 1999
and $122 in the nine
months ended December 31,
1999)...................... 1,876 3,199 3,357 2,517 2,475
Sales, general and
administrative (excluding
amortization of deferred
stock compensation of $0
in 1999 and $685 in the
nine months ended December
31, 1999).................. 1,202 2,203 2,062 1,419 2,322
Amortization of deferred
stock compensation......... -- -- 2 -- 819
------- ------- ------- ------- -------
Total operating expenses.. 3,078 5,402 5,421 3,936 5,616
------- ------- ------- ------- -------
Operating loss............... (3,362) (4,928) (5,207) (3,811) (3,745)
------- ------- ------- ------- -------
Interest Expense, net:
Bank interest, net........... 55 46 166 131 213
Amortization of debt
guarantee costs and
other...................... -- 28 298 244 449
------- ------- ------- ------- -------
Total interest expense,
net..................... 55 74 464 375 662
------- ------- ------- ------- -------
Net loss....................... $(3,417) $(5,002) $(5,671) $(4,186) $(4,407)
======= ======= ======= ======= =======
Basic net loss per share....... $ (0.55) $ (0.80) $ (0.85) $ (0.63) $ (0.50)
======= ======= ======= ======= =======
Shares used in computing basic
net loss per share........... 6,173 6,279 6,657 6,631 8,732
Pro forma basic net loss per
share (unaudited)............ $ (0.17) $ (0.12)
======= =======
Shares used in computing pro
forma basic net loss per
share (unaudited)............ 32,625 36,763
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-4
<PAGE>

TVIA, INC.

CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)

<TABLE>
<CAPTION>
Redeemable Convertible Convertible
Preferred Stock Preferred Stock Common Stock Deferred
--------------------------- ----------------- ----------------- Stock Accumulated Stockholders'
Shares Amount Warrants Shares Amount Shares Amount Compensation Deficit Deficit
---------- ------- -------- ---------- ------ ---------- ------ ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31,
1996............. -- $ -- $ -- 11,269,167 $3,434 6,112,556 $ 124 $ -- $ (4,563) $ (1,005)
Issuance of
Series E
Convertible
Preferred Stock
at $0.45 per
share.......... -- -- -- 4,647,236 2,091 -- -- -- -- 2,091
Exercise of
options........ -- -- -- -- -- 74,444 3 -- -- 3
Subscription for
issuance of
Series F
Redeemable
Convertible
Preferred Stock
at $0.75 per
share.......... 3,100,000 2,325 -- -- -- -- -- -- -- --
Issuance of
common stock
for services
rendered....... -- -- -- -- -- 47,000 2 -- -- 2
Net loss........ -- -- -- -- -- -- -- -- (3,417) (3,417)
---------- ------- ---- ---------- ------ ---------- ------ ------- -------- --------
Balance, March 31,
1997............. 3,100,000 2,325 -- 15,916,403 5,525 6,234,000 129 -- (7,980) (2,326)
Issuance of
warrants to
guarantor of
line of
credit......... -- -- 111 -- -- -- -- -- -- --
Issuance of
Series F
Redeemable
Convertible
Preferred Stock
at $0.75 per
share, net of
issuance costs
of $6.......... 3,857,332 2,887 -- -- -- -- -- -- -- --
Exercise of
options........ -- -- -- -- -- 7,290 -- -- -- --
Issuance of
common stock
for services
rendered....... -- -- -- -- -- 57,000 2 -- -- 2
Net loss........ -- -- -- -- -- -- -- -- (5,002) (5,002)
---------- ------- ---- ---------- ------ ---------- ------ ------- -------- --------
Balance, March 31,
1998............. 6,957,332 5,212 111 15,916,403 5,525 6,298,290 131 -- (12,982) (7,326)
Issuance of
Series G
Redeemable
Convertible
Preferred Stock
at $1.00 per
share, net of
issuance costs
of $8.......... 4,500,000 4,492 -- -- -- -- -- -- -- --
Exercise of
options........ -- -- -- -- -- 104,272 4 -- -- 4
Issuance of
common stock
for services
rendered....... -- -- -- -- -- 333,166 13 -- -- 13
Deferred stock
compensation... -- -- -- -- -- -- 32 (32) -- --
Amortization of
deferred
compensation... -- -- -- -- -- -- -- 2 -- 2
Net loss........ -- -- -- -- -- -- -- -- (5,671) (5,671)
---------- ------- ---- ---------- ------ ---------- ------ ------- -------- --------
Balance, March 31,
1999............. 11,457,332 9,704 111 15,916,403 5,525 6,735,728 180 (30) (18,653) (12,978)
Fair value of
warrants and
options issued
to guarantors.. -- -- 190 -- -- -- 337 -- -- 337
Exercise of
options........ -- -- -- -- -- 6,364,142 243 -- -- 243
Issuance of
Series G
Redeemable
Convertible
Preferred Stock
at $1.00 per
share.......... 250,000 250 -- -- -- -- -- -- -- --
Subscription for
Series H
Redeemable
Convertible
Preferred Stock
at $1.25 per
share, net of
issuance costs
of $39......... 2,344,868 2,892
Fair value of
options issued
for services
rendered....... -- -- -- -- -- -- 30 -- -- 30
Issuance of
common stock
for services
rendered....... -- -- -- -- -- 19,105 23 -- -- 23
Deferred stock
compensation... -- -- -- -- -- -- 3,304 (3,304) -- --
Amortization of
deferred
compensation... -- -- -- -- -- -- -- 819 -- 819
Net loss........ -- -- -- -- -- -- -- -- (4,407) (4,407)
---------- ------- ---- ---------- ------ ---------- ------ ------- -------- --------
Balance, December
31, 1999......... 14,052,200 $12,846 $301 15,916,403 $5,525 13,118,975 $4,117 $(2,515) $(23,060) $(15,933)
========== ======= ==== ========== ====== ========== ====== ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these financial statements.

F-5
<PAGE>

TVIA, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
------------------------- -------------------
1997 1998 1999 1998 1999
------- ------- ------- ----------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash Flows from Operating
Activities:
Net loss.................... $(3,417) $(5,002) $(5,671) $(4,186) $(4,407)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization.............. 384 494 503 376 247
Common stock and options
issued for services
rendered.................. 2 2 13 -- 53
Amortization of deferred
stock compensation........ -- -- 2 -- 819
Non-cash amortization of
guarantee costs........... -- 28 83 83 449
Changes in assets and
liabilities:
Accounts receivable...... 407 (133) 80 (22) (418)
Inventories.............. (832) 201 721 504 (445)
Prepaid expenses and
other current assets.... (23) (13) 50 (11) (25)
Other assets............. -- -- -- -- (68)
Accounts payable......... 850 (254) (545) (163) 925
Accrued liabilities and
other................... 205 (125) 521 610 915
------- ------- ------- ------- -------
Net cash used in
operating activities.. (2,424) (4,802) (4,243) (2,809) (1,955)
------- ------- ------- ------- -------
Cash Flows from Investing
Activities:
Purchase of property and
equipment.................. (576) (506) (380) (348) (208)
------- ------- ------- ------- -------
Net cash used in
investing activities.... (576) (506) (380) (348) (208)
------- ------- ------- ------- -------
Cash Flows from Financing
Activities:
Proceeds from loans
payable.................... 350 1,915 2,973 1,979 3,198
Payments on loans payable... (1,614) -- (2,674) (2,674) (961)
Proceeds from capital lease
obligations................ 102 -- -- -- --
Proceeds from issuance of
common stock............... 3 -- 4 4 147
Proceeds from issuance of
convertible preferred
stock, net................. 1,981 -- -- -- --
Proceeds from
issuance/subscription of
redeemable convertible
preferred stock, net....... 2,325 2,887 4,312 3,840 2,898
------- ------- ------- ------- -------
Net cash provided by
financing activities.... 3,147 4,802 4,615 3,149 5,282
------- ------- ------- ------- -------
Net increase (decrease) in
cash and cash equivalents and
restricted cash.............. 147 (506) (8) (8) 3,119
Cash and cash equivalents and
restricted cash at beginning
of period.................... 367 514 8 8 --
------- ------- ------- ------- -------
Cash and cash equivalents and
restricted cash at end of
period....................... $ 514 $ 8 $ -- $ -- $ 3,119
======= ======= ======= ======= =======
Supplemental Cash Flow
Information:
Interest paid............... $ 25 $ 43 $ 148 $ 113 $ 113
======= ======= ======= ======= =======
Conversion of accrued salary
to redeemable convertible
preferred stock (Note 8)... $ 94 $ -- $ 180 $ 150 $ 244
======= ======= ======= ======= =======
Issuance of warrant and
options to guarantors of
lines of credit............ $ -- $ 111 $ -- $ -- $ 527
======= ======= ======= ======= =======
Conversion of accrued salary
upon exercise of options
(Note 8)................... $ -- $ -- $ -- $ -- $ 96
======= ======= ======= ======= =======
</TABLE>

The accompanying notes are in integral part of these financial statements.

F-6
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Information for the nine months ended December 31, 1998 is unaudited)

1. ORGANIZATION AND OPERATIONS

Tvia, Inc., formerly known as IGS Technologies, Inc. ("the Company") was
incorporated in California in March 1993. Tvia designs, develops and markets
high performance streaming media gateway integrated circuits for the Internet
appliance, broadband set-top box and digital television markets. The Company's
semiconductor solutions, together with its proprietary software, are designed
to improve the performance and functionality of consumer electronics equipment
by enabling the processing and manipulation of multiple rich media content
streams. These streams include audio, video, voice, text, graphics, pictures
and animation. The Company sells its integrated circuits to manufacturers of
Internet appliances, broadband set-top boxes and digital televisions that
enable a customized and interactive television viewing experience. The Company
currently generates revenues primarily from the sales of integrated circuits
for the Internet appliances and broadband set-top boxes. The Company has a
branch in Taiwan that operates as a sales office and a subsidiary in the
People's Republic of China that supports the Company's research and development
activities.

The Company is subject to the risks associated with similar technology
companies. These risks include, but are not limited to: history of operating
losses, dependence on a small number of key individuals, customers and
suppliers, competition from larger, more established companies, the continued
need for additional financing, the impact of rapid technological changes and
changes in customer demand/requirements.

As shown in the consolidated financial statements, in the nine-month period
ended December 31, 1999, and in the years ended March 31, 1999 and 1998, the
Company incurred losses of $4,407,000, $5,671,000 and $5,002,000, respectively,
and at December 31, 1999 and March 31, 1999, its current liabilities exceeded
current assets by $161,000 and $3,476,000, respectively. The Company's
continuing operations are dependent upon its ability to generate sufficient
cash flow from operations, to raise additional financing as may be required,
and ultimately to attain profitability. The Company has issued 3,614,869 shares
of Series H and 1,230,000 shares of Series I preferred stock in April 2000 for
total gross cash proceeds of $7.6 million, including $2.6 million received
prior to December 31, 1999. The Company has received guarantees from related
parties over two existing line of credit facilities. These guarantees expire in
April 2001.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Significant estimates made in preparing the financial statements include
inventory reserves, allowance for doubtful accounts and income tax valuation
allowances.

Interim Results

The accompanying consolidated statements of operations and cash flows for
the nine months ended December 31, 1998 are unaudited. In the opinion of
management, these statements have been prepared on the same basis as the
audited consolidated financial statements and include all adjustments,
consisting of only normal recurring adjustments, necessary for the fair
presentation of the results for the interim period. The data disclosed in the
notes to the consolidated financial statements as of such date and for that
period are unaudited.

F-7
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

Consolidation

The consolidated financial statements herein presented include the results
and financial position of Tvia and its wholly-owned subsidiary in China. The
functional currency of the Chinese subsidiary is the U.S. dollar; accordingly,
all gains and losses arising from foreign currency transactions in currencies
other than the U.S. dollar are included in the consolidated statements of
operations. All intercompany transactions and balances have been eliminated in
consolidation.

Cash and Cash Equivalents

The Company considers all bank deposits with an original maturity of three
months or less from the date of purchase to be cash and cash equivalents.

Revenue Recognition

Revenue consists primarily of sales of products to original equipment
manufacturers ("OEMs") and distributors. Revenues from sales to OEMs are
recognized upon shipment. The Company also has sales of software development
kits to OEMs. The Company recognizes revenues from the sales of software
development kits upon shipment provided that the Company has no further
obligations at the time of shipment. For the years ended March 31, 1997, 1998
and 1999, and the nine months ended December 31, 1998 and 1999, revenues from
the sale of software development kits was less than 10% of net revenues. The
Company defers revenue recognition relating to sales to distributors until such
products are sold through to the end customer by the distributor, or if sell
through information is not available from the distributor, when cash is
received from the distributors.

The Company also generates revenues from engineering development contracts.
Revenues from engineering development contracts are recognized as contract
milestones are achieved. Costs incurred on engineering contracts, which are
primarily payroll costs, are recorded as cost of sales. If the Company invoices
the customer in advance of services performed under the engineering development
contracts, the invoiced amount is recorded as deferred revenue.

Revenues to significant customers, those representing approximately 10% or
more of total revenue for the respective periods, are summarized as follows:

<TABLE>
<CAPTION>
For the Year For the Nine
Ended Months Ended
March 31, December 31,
---------------- ----------------
1997 1998 1999 1998 1999
---- ---- ---- ----------- ----
(Unaudited)
<S> <C> <C> <C> <C> <C>
Customer A................................... 12% 11% * * *
Customer B................................... 10% 22% 14% * 10%
Customer C................................... * * 14% 17% *
Customer D................................... * * 14% 13% *
Customer E................................... * * * * 20%
Customer F................................... 49% 25% * * *
Customer G................................... * 14% * * *
(* = less than 10%)
</TABLE>

F-8
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

Software Development Costs

The Company accounts for software development costs in accordance with
Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for
the Costs of Computer Software to be Sold, Leased or Otherwise Marketed." The
Company has expensed all software development costs to date as such development
costs have substantially all been incurred prior to the Company's products
attaining technological feasibility.

Research and Development Expenses

Research and development expenses consist primarily of salaries and related
costs of employees engaged in research, design and development activities. The
Company expenses all research and development related expenses in the period in
which such expenses are incurred.

Comprehensive Income

Effective April 1, 1998, the Company adopted SFAS No. 130 "Reporting
Comprehensive Income" which establishes standards for reporting and displaying
comprehensive income in a full set of financial statements. For all periods
presented, comprehensive loss is the same as net loss included in the
accompanying consolidated statements of operations.

Stock-Based Compensation

The Company accounts for its stock-based compensation under Accounting
Principles Board Opinion ("APB") No. 25. Companies that elect to employ APB No.
25 are required to disclose the pro forma net income (loss) that would have
resulted from using the fair value method described in SFAS No. 123,
"Accounting for Stock-Based Compensation," to value stock-based compensation.
Note 7 to the financial statements contains a summary of the disclosure
provisions under SFAS No. 123.

Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share

Historical net loss per share has been calculated under SFAS No. 128,
"Earnings Per Share." Basic net loss per share on a historical basis is
computed using the weighted average number of shares of common stock
outstanding. No diluted loss per share information has been presented in the
accompanying consolidated statements of operations since common shares issuable
upon conversion of the redeemable convertible preferred stock, convertible
preferred stock, stock options and warrants are antidilutive. The total number
of shares excluded from diluted loss per share relating to these securities was
21,279,581, 29,608,789, 34,356,867, 34,082,243 and 31,814,644 for the year
ended March 31, 1997, 1998 and 1999 and for the nine months ended December 31,
1998 and 1999, respectively.

Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletin No. 98, redeemable convertible preferred stock, convertible preferred
stock and common stock issued or granted for nominal consideration prior to the
anticipated effective date of the Initial Public Offering ("IPO") must be
included in the calculation of basic and diluted net loss per common share as
if they had been outstanding for all periods presented. To date, Tvia has not
had any issuances or grants for nominal consideration.

F-9
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

The following table presents the calculation of basic and pro forma basic
net loss per share (in thousands, except per share data):

<TABLE>
<CAPTION>
Nine Months Ended
Year Ended March 31, December 31,
------------------------- -------------------
1997 1998 1999 1998 1999
------- ------- ------- ----------- -------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Net loss...................... $(3,417) $(5,002) $(5,671) $(4,186) $(4,407)
======= ======= ======= ======= =======
Basic:
Weighted average shares of
common stock outstanding.. 6,173 6,279 6,657 6,631 8,869
Less: Weighted average
shares of common stock
subject to repurchase..... -- -- -- -- (137)
------- ------- ------- ------- -------
Weighted average shares used
in computing basic net loss
per share................... 6,173 6,279 6,657 6,631 8,732
Basic net loss per share...... $ (0.55) $ (0.80) $ (0.85) $ (0.63) $ (0.50)
======= ======= ======= ======= =======
Pro forma:....................
Net loss.................... $(5,671) $(4,407)
======= =======
Shares used above............. 6,657 8,732
Pro forma adjustment to
reflect weighted average
effect of assumed conversion
of redeemable convertible
preferred stock and
convertible preferred stock
(unaudited)................. 25,748 27,624
Pro forma adjustment to
reflect assumed exercise and
conversion of preferred
stock warrants to purchase
common shares at a weighted
average exercise price of
$1.02 (unaudited)........... 220 407
------- -------
Weighted average shares used
in computing pro forma basic
net loss per share
(unaudited)................. 32,625 36,763
Pro forma basic net loss per
share (unaudited)........... $ (0.17) $ (0.12)
======= =======
</TABLE>

Concentration of Credit Risk

Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of bank deposits and accounts
receivable. The Company places its cash and cash equivalents in checking and
money market accounts in financial institutions. The Company's accounts
receivable are derived primarily from sales to OEMs and distributors. The
Company performs ongoing credit evaluations of its customers and maintains an
allowance for potential doubtful accounts.

F-10
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

As of March 31, 1998 and 1999, and December 31, 1999, accounts receivable
were concentrated with customers as follows:

<TABLE>
<CAPTION>
March 31,
---------- December 31,
1998 1999 1999
---- ---- ------------
<S> <C> <C> <C>
Accounts Receivable:
Customer A.......................................... 73%
Customer B.......................................... 7%
Customer C.......................................... 14%
Customer D.......................................... 13%
Customer E.......................................... 12%
Customer F.......................................... 16%
Customer G.......................................... 10%
Customer H.......................................... 25%
Customer I.......................................... 50%
</TABLE>

Vendor Concentration

The Company does not own or operate a fabrication facility, and accordingly
relies substantially on two outside foundries, United Manufacturing Corporation
("UMC") and Taiwan Semiconductor Manufacturing Corporation ("TSMC") to supply
all of the Company's semiconductor manufacturing requirements. There are
significant risks associated with the Company's reliance on outside foundries,
including the lack of ensured wafer supply; limited control over delivery
schedules, quality assurance and control, manufacturing yields and production
costs; and the unavailability of or delays in obtaining access to key process
technologies. Any inability of one of the foundries to provide the necessary
components could result in significant delays and could have a material adverse
effect on the Company's business, financial condition and results of
operations. In the event either foundry suffers financial difficulties or
suffers any damage or destruction to its respective facilities, or in the event
of any other disruption of foundry capacity, the Company may not be able to
qualify alternative manufacturing sources for existing or new products in a
timely manner.

Substantially all of the Company's products are assembled and tested by one
of two third-party subcontractors both located in Taiwan. The availability of
assembly and testing services from these subcontractors could be adversely
affected in the event either subcontractor experiences financial difficulties
or suffers any damage or destruction to its respective facilities, or in the
event of any other disruption of assembly and testing capacity. As a result of
this reliance on third-party subcontractors for assembly and testing of its
products, the Company cannot directly control product delivery schedules, which
has in the past, and could have in the future, result in product shortages or
quality assurance problems that could increase the cost of manufacture,
assembly or testing of the Company's products.

Fair Value of Financial Instruments

For certain financial instruments, including cash and cash equivalents,
accounts receivable, accounts payable and accrued liabilities, recorded amounts
approximate fair value due to the relatively short maturity period. Based on
interest rates available to the Company for debt with comparable maturities,
the carrying values of the Company's loans payable approximate fair values.

F-11
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

Recent Accounting Pronouncements

In June 1998, the Financial Accounting Standards Board issued SFAS No. 133
"Accounting for Derivative and Similar Financial Instruments and for Hedging
Activities," which require companies to value derivative financial instruments,
including those used for hedging foreign currency exposures, at current market
value with the impact of any change in market value being charged against
earnings. SFAS No. 133 is effective for fiscal years beginning after June 15,
2000, and cannot be applied retroactively. The Company does not believe that
SFAS No. 133 will have a material effect on its financial statements.

Inventories

Inventories are stated at the lower of cost (first-in, first-out) or market
and include materials, labor and overhead. Provisions when required are made to
reduce excess inventories to their estimated net realizable values. Due to
competitive pressures and technological innovation, it is possible that
estimates of net realizable value would change in the near term. Inventories
consist of the following:

<TABLE>
<CAPTION>
March 31,
---------------- December 31,
1998 1999 1999
------- ------- ------------
(in thousands)
<S> <C> <C> <C>
Raw materials............................... $ 441 $ 268 $ 219
Work in process............................. 177 37 397
Finished goods.............................. 419 11 145
------- ------- -------
Total....................................... $ 1,037 $ 316 $761
======= ======= =======

Property and Equipment

Property and equipment are carried at cost and are depreciated using the
straight-line method over the assets' estimated useful life. (Useful lives
range from 18 months to two years.) Management has determined asset lives based
on their historical experience of technical obsolescence of equipment and the
short life of tooling that is specific to certain product families. Assets
acquired under capital leases are recorded at the present value of the related
lease obligations and are depreciated on a straight-line basis over the shorter
of the estimated useful life or lease term. Property and equipment consist of
the following:

<CAPTION>
March 31,
---------------- December 31,
1998 1999 1999
------- ------- ------------
(in thousands)
<S> <C> <C> <C>
Furniture and fixtures...................... $ 47 $ 47 $ 47
Machinery and equipment..................... 937 1,104 1,187
Software.................................... 617 813 862
------- ------- -------
1,601 1,964 2,096
Less: Accumulated depreciation and
amortization.............................. (1,165) (1,651) (1,822)
------- ------- -------
$ 436 $ 313 $ 274
======= ======= =======
</TABLE>

F-12
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

Assets acquired under capital lease obligations included in property and
equipment consist of the following:

<TABLE>
<CAPTION>
March 31,
---------------- December 31,
1998 1999 1999
------- ------- -------------
(in thousands)
<S> <C> <C> <C>
Cost....................................... $ 467 $ 467 $ 467
Less: Accumulated amortization............. (440) (467) (467)
------- ------- -------
$ 27 $ -- $ --
======= ======= =======

Accrued Liabilities and Other

Accrued liabilities consist of the following:

<CAPTION>
March 31,
---------------- December 31,
1998 1999 1999
------- ------- -------------
(in thousands)
<S> <C> <C> <C>
Deferred revenue........................... $ -- $ -- $ 209
Accrued expenses........................... 46 109 455
Accrued payroll and related taxes.......... 567 696 663
Accrued vacation........................... 239 233 251
Other liabilities.......................... 276 431 466
------- ------- -------
$ 1,128 $ 1,469 $ 2,044
======= ======= =======

3. INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates in effect for the year in
which those temporary differences are expected to be recorded or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.

As a result of the Company's continued losses, there was no provision for
income taxes for each of the years ended March 31, 1997, 1998 and 1999, and for
the nine month periods ended December 31, 1998 and 1999.

The components of the net deferred income tax asset were as follows:

<CAPTION>
March 31,
---------------- December 31,
1998 1999 1999
------- ------- -------------
(in thousands)
<S> <C> <C> <C>
Net operating losses....................... $ 3,820 $ 5,686 $ 6,458
Reserves and accruals not currently
deductible for tax purposes.............. 141 269 716
Available tax credit carryforwards......... 425 638 846
Other timing differences................... 332 305 524
------- ------- -------
4,718 6,898 8,544
Valuation allowance........................ (4,718) (6,898) (8,544)
------- ------- -------
Net deferred tax asset..................... $ -- $ -- $ --
======= ======= =======
</TABLE>

F-13
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

At December 31, 1999, the Company had net cumulative operating loss
carryforwards for federal and state income tax reporting purposes of
approximately $18,100,000 and $5,300,000, respectively. The federal net
operating loss carryforwards expire on various dates through 2019. The state
net operating loss carryforwards expire on various dates through 2004. As of
December 31, 1999, the Company had federal and state research and development
tax credit carryforwards of approximately $807,000 and California
Manufacturers' Investment tax credit carryforwards of approximately $39,000
available to offset future taxes. Utilization of net operating losses may be
subject to annual limitations due to ownership change limitations provided by
the Internal Revenue Service and similar state provisions. A valuation
allowance has been recorded for the entire deferred tax asset as a result of
uncertainty regarding the realization of the asset balance due to the net
losses incurred and lack of taxable income.

4. LOANS PAYABLE

Loans Payable Guaranteed by Related Parties

The Company has entered into two separate line of credit agreements with a
bank which, in aggregate, provide for a $3.0 million revolving credit facility.
Borrowings under the line of credit agreements carry interest at the three
month commercial paper rate plus 2.30% (7.63% as of December 31, 1999). The
line of credit agreements have a maturity date of July 31, 2001. As of December
31, 1999, the Company had $2,899,000 outstanding under the line of credit
agreements. The line of credit agreements are guaranteed by an individual
related to the Chief Executive Officer of the Company. In consideration for
providing the guarantee, the guarantor receives a guarantee fee based on the
maximum amount available on the line of credit agreements.

In connection with the guarantee given for the period from December 31,
1997 to December 31, 1999, the related party was issued a warrant to acquire
220,000 shares of Series G convertible preferred stock in December 1997, a
warrant to acquire 80,000 shares of Series G convertible preferred stock in
July 1999 and an option to acquire 240,000 shares of common stock at $0.04 per
share in July, 1999. The price per share, as defined in the respective warrant
agreements, was variable up to December 31, 1999, at which point it became
fixed. The Company has calculated the fair value of both warrants and the
option using the Black-Scholes model and the following assumptions:

<TABLE>
<S> <C>
Risk-free interest rate............................................ 6.00%
Average computed life of warrants/options.......................... 3-4 years
Dividend yield..................................................... 0%
Volatility of common stock......................................... 70%
</TABLE>

The aggregate fair value of the warrants and option was calculated at
approximately $426,000. This amount has been recognized as a deferred debt
issuance cost and is being recorded over the term of the guarantee. For the
years ended March 31, 1998 and 1999 and the nine month period ended December
31, 1999, interest expense included $28,000, $83,000 and $315,000 of amortized
debt issuance costs related to these warrants and options, respectively. In
addition, the Company paid $215,000 to the guarantor, in cash, related to the
guarantee for fiscal 1999.

In January 2000, the Company committed to grant the related party an
additional warrant to acquire 320,000 shares of Series H convertible preferred
stock for $1.25 per share and granted an option to purchase 320,000 shares of
common stock at $0.125 per share pursuant to an extension of the guarantee over
the line of credit agreements to April 30, 2001. The fair market value of this
warrant will be estimated using the Black-Scholes model and will be amortized
over the term of the guarantee as additional interest expense.

F-14
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

In April 1999, the Company entered into an additional line of credit
agreement with a different bank for a $1.0 million credit facility. Borrowings
under the line of credit facility carry interest at a fixed rate of 7.38%, and
the line of credit has no fixed maturity date. As of December 31, 1999, the
Company had $1,052,000 outstanding under the line of credit agreement. The line
of credit is guaranteed by a venture capital firm, which is both a shareholder
in the Company and related to a former director of the Company. In
consideration for providing the guarantee, the guarantor receives a guarantee
fee based on the maximum amount available on the line of credit.

In connection with the guarantee under this line of credit for the period
from April 30, 1999 to April 30, 2000, the director was issued a warrant to
acquire 100,000 shares of Series G convertible preferred stock in April 1999.
The price per share, as defined in the warrant agreement, was variable up to
December 31, 1999, at which point it became fixed. The director was also issued
an option to acquire 80,000 shares of common stock at $0.04 per share in July
1999. The Company has calculated the fair value of the warrant and option using
the Black-Scholes model and the following assumptions:

<TABLE>
<S> <C>
Risk-free interest rate............................................ 6.00%
Average computed life of warrants/options.......................... 4 years
Dividend yield..................................................... 0%
Volatility of common stock......................................... 70%

The aggregate fair value of the warrant and option was calculated at
approximately $162,000. This amount has been recognized as a deferred debt
issuance cost and is being recorded as additional interest expense over the
term of the guarantee. For the nine month period ended December 31, 1999,
interest expense included $114,000 of amortized debt issuance costs related to
the warrant and option. The Company has $48,000 of unamortized debt issuance
costs at December 31, 1999 for his warrant and option.

In January 2000, the Company committed to grant an additional warrant to
the director to acquire 80,000 shares of Series H convertible preferred stock
for $1.25 per share and granted an option to purchase 80,000 shares of common
stock at $0.125 per share pursuant to an extension of the guarantee over the
line of credit agreement to April 30, 2001. The fair market value of this
warrant will be estimated using the Black-Scholes model and will be amortized
over the term of the guarantee as additional interest expense.

Loan Payable to Bank

In June 1999, the Company entered into a line of credit facility with a
bank for $500,000, bearing interest at a prime lending rate of 8.25% plus 1.5%,
and with a maturity date of January 31, 2000. On March 30, 2000, the loan
balance was converted into Series I preferred stock (see Note 10). This credit
facility is guaranteed and secured by a pledge of the Company's assets. As of
December 31, 1999, $500,000 was outstanding under the line of credit. In June
1999 and December 1999, the Company issued warrants to the bank to acquire
40,000 and 25,000 shares of Series G convertible preferred stock, respectively.
The price per share of the warrant to purchase 25,000 shares was $1.00. The
price per share of the warrant to purchase 40,000 shares was variable and will
be equal to the price at which the Company next sells its equity securities in
an offering in which the Company receives net proceeds of not less than $1
million. The Company has calculated the fair value of the warrant and option
using the Black-Scholes model and the following assumptions:

Risk-free interest rate............................................ 6.00%
Average computed life of warrants.................................. 4-5 years
Dividend yield..................................................... 0%
Volatility of common stock......................................... 70%
</TABLE>

F-15
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

The aggregate fair value of the warrants was approximately $50,000. This
amount has been recognized as a deferred debt issuance cost and is being
recorded as additional interest expense over the term of the guarantee. For the
nine-month period ended December 31, 1999, interest expense included $20,000 of
amortized debt issuance costs related to these warrants. The company has
$30,000 of unamortized debt issuance costs at December 31, 1999. The Company
will continue to calculate the fair value of the warrant for the 40,000 shares
using the Black-Scholes model until the price per share becomes fixed.

5. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases its facilities under non-cancelable operating leases
expiring at various dates through July 2004. Under the terms of the leases, the
Company is responsible for a portion of the facilities' operating expenses,
insurance and property taxes. Future minimum lease payments under all non-
cancelable leases as of December 31, 1999 were as follows:

<TABLE>
<CAPTION>
Operating
--------------
(in thousands)
<S> <C>
2000...................................................... $ 358
2001...................................................... 361
2002...................................................... 364
2003...................................................... 389
2004...................................................... 142
------
$1,614
======
</TABLE>

Rent expense under operating leases for the years ended March 31, 1997,
1998 and 1999 and for the nine months ended December 31, 1999 was approximately
$344,000, $344,000, $344,000 and $258,000, respectively.

Litigation

The Company is subject to various claims which arise in the normal course
of business. In the opinion of management, the Company is unaware of any claims
which would have a material adverse effect on the financial position, liquidity
or results of operations of the Company.

Development Contract Commitment

In October 1999, the Company entered into a development contract with a
vendor. Under the terms of this contract, the Company is required to make a
$25,000 upfront payment and, following commencement of the development work,
six monthly payments of $60,000. As of December 31, 1999, the Company has
accrued $85,000 related to services provided by the vendor prior to the period
end.

The Company has also granted this vendor a right to 20,000 shares of common
stock if the development work required under the contract is completed in less
than six months. If these common shares are issued they will be recorded as
additional research and development expense based on the fair market value of
common stock at the date of issuance. The Company has also given the vendor a
right to receive 100,000 shares of Company common stock, based on the fair
market value of common stock in October 1999, if at least one of the vendor's
employees joins the Company and remains an employee of the Company for at least
one year. If the shares are issued, the Company will record additional expense
related to the difference between the fair market value of common stock at the
date of issuance and the October 1999 fair value per share. As of December 31,
1999, no employees of the vendor had become employees of the Company.

F-16
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

6. REDEEMABLE CONVERTIBLE PREFERRED STOCK

Redeemable convertible preferred stock comprised the following:

<TABLE>
<CAPTION>
March 31,
------------- December 31,
1998 1999 1999
------ ------ ------------ ---
(in thousands)
<S> <C> <C> <C> <C>
Series F--6,957,332 shares authorized and
outstanding................................ $5,212 $5,212 $ 5,212
Series G--4,750,000 shares authorized, no
shares outstanding at March 31, 1998;
4,500,000 shares issued and outstanding at
March 31, 1999; and 4,750,000 shares issued
and outstanding at December 31, 1999 -- 4,492 4,742
Series H--no shares authorized, issued and
outstanding at March 31, 1998 and 1999;
2,344,868 shares subscribed at December 31,
1999....................................... -- -- 2,892
------ ------ -------
$5,212 $9,704 $12,846
====== ====== =======
</TABLE>

In June 1999, the Company authorized the issuance and sale of up to
12,000,000 shares of Series H Preferred Stock ("Series H"). Prior to December
31, 1999, the Company received approximately $2,648,000 in cash proceeds
related to subscriptions for Series H preferred stock. The subscriptions
receivable as of December 31, 1999, have been recorded as restricted cash in
the accompanying consolidated balance sheet. Subsequent to December 31, 1999,
the Company issued 2,344,868 shares of Series H for the subscriptions received
at $1.25 per share. The rights, preferences, and privileges of the holders of
Series F, G and H redeemable convertible preferred stock are as follows:

. Dividends are non-cumulative and payable only upon declaration by the
Board of Directors.

. Holders of Series F, G and H redeemable convertible preferred stock have
a liquidation value of $0.75, $1.00 and $1.25 per share, respectively.

. Each holder of redeemable convertible preferred stock has voting rights
equal to common stock on an "as-if-converted" basis.

. Each share of Series F, G and H redeemable preferred stock may be
converted into common stock at the option of the holder on a one-for-
one-basis, subject to adjustment to protect against dilution. Automatic
conversion of Series F, G and H will occur upon either the option of the
holder or upon completion of a public offering of common stock in which
the aggregate gross cash proceeds is at least $10,000,000 and the
offering price is at least $2.75 per share.

. The holders of a majority of the outstanding shares of Series F, G and H
may require the Company to redeem their shares at the original issue
price at any time after July 31, 2003, if the Company has not completed
a public offering of more than $10,000,000 of Company stock at not less
than $2.75 per share.

F-17
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

7. STOCKHOLDERS' EQUITY

Convertible Preferred Stock

Convertible preferred stock consist of the following, net of issuance
costs:

<TABLE>
<CAPTION>
March 31,
------------- December 31,
1998 1999 1999
------ ------ ------------ ---
(in thousands)
<S> <C> <C> <C> <C>
Series A--600,000 shares authorized and
outstanding............................... $ 110 $ 110 $ 110
Series B--4,800,000 shares authorized and
outstanding............................... 1,107 1,107 1,107
Series C--1,266,667 shares authorized and
outstanding............................... 376 376 376
Series D--4,602,500 shares authorized and
outstanding............................... 1,841 1,841 1,841
Series E--4,647,236 shares authorized and
outstanding............................... 2,091 2,091 2,091
------ ------ ------
$5,525 $5,525 $5,525
====== ====== ======
</TABLE>

The rights, preferences, and privileges of the holders of Series A, B, C, D
and E convertible preferred stock are as follows:

. Dividends are non-cumulative and payable only upon declaration by the
Board of Directors.

. Holders of Series A, B, C, D and E preferred stock have a liquidation
value of $0.20, $0.25, $0.30, $0.40 and $0.45 per share, respectively.

. Each holder of preferred stock has voting rights equal to common stock
on an "as-if-converted" basis.

. Each share of preferred stock may be converted into common stock at the
option of the holder on a one-for-one-basis, subject to adjustment to
protect against dilution. Automatic conversion will occur upon either
the option of the holder or upon completion of a public offering of
common stock in which the aggregate gross cash proceeds is at least
$10,000,000 and the offering price is at least $2.75 per share.

Shares Reserved for Conversion to Common Stock

At December 31, 1999, the Company had reserved the following shares of its
common stock for future issuance as follows:

<TABLE>
<CAPTION>
Conversion of Series A Preferred Stock........................... 600,000
<S> <C>
Conversion of Series B Preferred Stock........................... 4,800,000
Conversion of Series C Preferred Stock........................... 1,266,667
Conversion of Series D Preferred Stock........................... 4,602,500
Conversion of Series E Preferred Stock........................... 4,647,236
Conversion of Series F Redeemable Convertible Preferred Stock.... 6,957,332
Conversion of Series G Redeemable Convertible Preferred Stock.... 4,750,000
1999 Stock Incentive Plan........................................ 4,449,852
Warrants to purchase redeemable preferred stock.................. 465,000
----------
32,538,587
==========
</TABLE>

Pro Forma Stockholders' Deficit

In March 2000, the Board of Directors authorized the filing of a
registration statement with the Securities and Exchange Commission to register
shares of its common stock in connection with a proposed initial public

F-18
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

offering ("IPO"). If the IPO is consummated under the terms presently
anticipated, (1) all of the currently outstanding convertible preferred stock
will be converted into 15,916,403 shares of common stock upon the closing of
the IPO (2) all of the currently outstanding redeemable convertible preferred
stock will be converted into 11,707,332 shares of common stock upon the closing
of the IPO and (3) warrants to purchase 465,000 shares of Series G redeemable
convertible preferred with a weighted average exercise price of $1.02 per share
will be exercised and converted into 465,000 shares of common stock prior to
the effective date of the IPO. The effect of the conversions has been reflected
as unaudited pro forma shareholders' deficit in the accompanying balance sheet
as of December 31, 1999.

401(K) Plan

Substantially all of the Company's employees are eligible to participate in
the Tvia 401(K) Plan. There were no matching contributions for the years ended
March 31, 1997, 1998 and 1999 or for the nine months ended December 31, 1999.

Stock Option Plans

1999 Stock Incentive Plan

The Stock Incentive Plan (the "1999 Plan"), as amended, provides for the
issuance of restricted stock bonuses, restricted stock purchase rights,
incentive stock options or non-qualified stock options to directors, employees
and consultants. Pursuant to the 1999 Plan, the exercise price for incentive
stock options is at least 100% of the fair market value on the date of grant or
for employees owning in excess of 10% of the voting power of all classes of
stock, 110% of the fair market value on the date of grant. For non-qualified
stock options, the exercise price is no less than 85% of the fair market value
on the date of grant.

Options generally expire in 10 years. Vesting periods are determined by the
Board of Directors; however, options generally vest ratably over four years
beginning one year after the date of grant. Options may be exercised prior to
full vesting. Any unvested shares so purchased are subject to a repurchase
right in favor of the Company with the repurchase price to be equal to the
original purchase price of the stock. The right to repurchase at the original
price shall lapse at a minimum rate of 20% per year over five years from the
date the options was granted. As of December 31, 1999, 723,943 shares are
available for grant under the 1999 Plan.

1994 Stock Option Plan

The Stock Option Plan (the "1994 Plan") provides for the issuance of
incentive stock options or non-qualified stock options to directors, employees
and consultants. Pursuant to the 1994 Plan, the exercise price for incentive
stock options is at least 100% of the fair market value on the date of grant or
for employees owning in excess of 10% of the voting power of all classes of
stock, 110% of the fair market value on the date of grant. For non-qualified
stock options, the exercise price is no less than 85% of the fair market value
on the date of grant. Options generally expire in 10 years. Options generally
vest ratably over five years beginning the date of grant. In June 1999, options
outstanding under the 1994 plan were cancelled and reissued under the 1999 plan
with the same terms and conditions as the previous options.

F-19
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

The following table summarizes activity under the Company's stock option
plans:

<TABLE>
<CAPTION>
Outstanding Weighted Average
Options Exercise Price
----------- ----------------
<S> <C> <C>
Balance at March 31, 1996..................... 4,569,682 $0.04
Granted..................................... 915,500 0.04
Exercised................................... (74,444) 0.04
Cancellations............................... (47,560) 0.04
---------- -----
Balance at March 31, 1997..................... 5,363,178 0.04
Granted..................................... 1,240,000 0.04
Exercised................................... (7,290) 0.04
Cancellations............................... (80,834) 0.04
---------- -----
Balance at March 31, 1998..................... 6,515,054 0.04
Granted..................................... 528,000 0.04
Exercised................................... (104,272) 0.04
Cancellations............................... (175,650) 0.04
---------- -----
Balance at March 31, 1999..................... 6,763,132 0.04
Granted..................................... 4,412,519 0.04
Exercised................................... (6,364,142) 0.04
Cancellations............................... (1,085,600) 0.04
---------- -----
Balance at December 31, 1999.................. 3,725,909 $0.04
========== =====
</TABLE>

<TABLE>
<CAPTION>
Options Outstanding and Exercisable
-------------------------------------------------------
Number Weighted Average Exercise Price and
Outstanding at Remaining Weighted Average
December 31, 1999 Contractual Life Exercise Price
----------------- ---------------- ------------------
<S> <C> <C>
26,041 5.21 $0.02
3,569,868 6.93 0.04
130,000 10.0 0.13
--------- ---- -----
3,725,909 7.03 $0.04
========= ==== =====
</TABLE>

The Company accounts for these Plans under APB Opinion No. 25, "Accounting
for Stock Issued to Employees," under which no compensation expense has been
recognized as the grant price equaled the fair market value at date of grant.
Had compensation expense for the stock plans been determined consistent with
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation," the impact on the Company's net loss would be as follows
(in thousands, except per share data):

<TABLE>
<CAPTION>
For the Year Ended For the Nine Months
March 31, Ended December 31,
------------------------- -------------------
1997 1998 1999 1998 1999
------- ------- ------- ----------- -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Net loss:
As reported............... $(3,417) $(5,002) $(5,671) $(4,186) $(4,407)
Pro forma................. (3,419) (5,007) (5,677) (4,189) (5,153)
Basic net loss per share:
As reported............... (0.55) (0.80) (0.85) (0.63) (0.50)
Pro forma................. $ (0.55) $ (0.80) $ (0.85) $ (0.63) $ (0.59)
</TABLE>

F-20
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

The weighted average fair value of options granted in fiscal 1998 and 1999
and the nine months ended December 31, 1999 was $0.99. The fair value of each
option grant is estimated on the date of the grant using the Black-Scholes
option pricing model with the following assumptions:

<TABLE>
<CAPTION>
March 31, December 31,
--------------- ------------
1998 1999 1999
------- ------- ------------
<S> <C> <C> <C>
Risk-free Interest Rate........................ 5.34% 6.07% 6.00%
Expected Life of Options from Grant Date....... 4 years 4 years 4 years
Expected Dividend Yield........................ 0.0% 0.0% 0.0%
Expected Stock Volatility...................... 0.0% 0.0% 0.0%
</TABLE>

Deferred Stock Compensation

Deferred stock compensation represents the aggregate difference, at the
grant date, between the respective exercise price of stock options and the fair
value of the underlying stock. The deferred stock compensation expense is being
amortized on an accelerated basis over the vesting period of the individual
award, generally four years. This method is in accordance with Financial
Accounting Standards Board Interpretation No. 28. The Company had recorded
unearned stock-based compensation of approximately $32,000 in the year ended
March 31, 1999 and approximately $3,304,000 for the nine months ended December
31, 1999 and amortized deferred stock compensation of $2,000 and $819,000,
respectively.

The total unearned stock-based compensation recorded for all options
through December 31, 1999 will be amortized as follows: $433,000 for the
remainder of the year ending March 31, 2000, $1,136,000 for the year ending
March 31, 2001, $602,000 for the year ending March 31, 2002, $286,000 for the
year ending March 31, 2003, and $58,000 for the year ending March 31, 2004. The
amount of deferred stock compensation expense to be recorded in future periods
could decrease if options for which accrued but unvested compensation has been
recorded are forfeited.

Stock Repurchase Agreements

In connection with the exercise of options pursuant to the 1999 Plan,
employees entered into restricted stock purchase agreements with the Company.
Under the terms of these agreements, the Company has a right to repurchase any
unvested shares at the original exercise price of the shares upon termination
of the employee. The repurchase right lapses ratably over the vesting term of
the original grant. As of December 31, 1999, 592,724 shares were subject to
repurchase by the Company.

Options Granted to Non-employees

In July 1999, the Company granted an option to purchase 25,000 shares of
common stock to a consultant under the 1999 Plan. The option had an exercise
price of $0.04 per share and vested upon grant. The Company recorded research
and development expense of approximately $30,000 based on the fair value of the
option at the date of grant calculated using the Black-Scholes model and the
following assumptions:

<TABLE>
<S> <C>
Risk-free interest rate............................................ 6.00%
Average computed life of option.................................... 1 year
Dividend yield..................................................... 0%
Volatility of common stock......................................... 70%
</TABLE>

Stock Issued for Services Rendered

In the year ended March 31, 1997, 1998 and 1999, and the nine months ended
December 31, 1999, the Company issued 47,000, 57,000, 333,166 and 19,105 shares
of common stock, respectively, in exchange for

F-21
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

services rendered. The Company recorded approximately $2,000, $2,000, $13,000
and $23,000 of operating expense, respectively, based on the fair value of the
Company's common stock on the date of issuance.

8. RELATED PARTY TRANSACTIONS

Accrued Salary Converted into Preferred Stock or Used to Exercise Options

The Chief Executive Officer of the Company has elected to have a portion of
his accrued salary forgiven to pay the exercise price of options upon exercise
or converted into convertible preferred stock. For the year ended March 31,
1997, the Chief Executive Officer converted $94,000 into 209,630 shares of
Series E convertible preferred stock at $0.45 per share. For the year ended
March 31, 1999, the Chief Executive Officer converted $150,000 into 200,000
shares of Series F redeemable convertible preferred stock at $0.75 per share
and $30,000 into 30,000 shares of Series G redeemable convertible preferred
stock at $1.00 per share. In the nine months ended December 31, 1999, the Chief
Executive Officer converted $244,000 into a subscription for 195,200 shares of
Series H redeemable preferred stock at $1.25 per share and converted $96,000
upon exercise of options at $0.04 per share. As of December 31, 1999, the
Company has accrued salary payable of approximately $90,000 to the Chief
Executive Officer.

Commission Payments

The President of the Company is entitled to receive a 1.75% commission on
the amount of third party participation in the issuance of Series I preferred
stock. The commission will be payable in a combination of shares of convertible
preferred stock and cash and is expected to total approximately $56,000.

Sales to Related Parties

A member of the Board of Directors is an officer of a company which is an
affiliate company of a major customer. Sales to this customer were $260,000 and
$18,000 for the nine months ended December 31, 1999 and the year ended March
31, 1999, respectively.

Purchases to Related Parties

Members of the Board of Directors are officers of companies which are
affiliated to the Company's major vendors UMC and TSMC. Total combined
purchases from UMC and TSMC amounted to $522,000 and $924,000, for the year
ended March 31, 1999 and the nine months ended December 31, 1999, respectively.
The total combined accounts payable outstanding to UMC and TSMC as of December
31, 1999 and March 31, 1999 amounted to $538,000 and $35,000, respectively.

9. SEGMENT AND GEOGRAPHIC INFORMATION

SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information," establishes standards for disclosures about operating segments,
products and services, geographic areas and major customers. The Company is
organized and operates in one reportable segment which is the development,
manufacture and sales of streaming media integrated circuits for the Set-Top
Box, digital TV and internet appliance markets.

The Company has operations in the United States, Taiwan and China. The
operating expenses of the Taiwan branch and China subsidiary for the years
ended March 31, 1997, 1998 and 1999 and for the nine-month period ended
December 31, 1999, and the total assets as of the respective dates in Taiwan
and China were not material to the Company's consolidated financial statements.

F-22
<PAGE>

TVIA, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Information for the nine months ended December 31, 1998 is unaudited)

The following table summarizes revenue by geographic area as a percentage
of total revenues:

<TABLE>
<CAPTION>
For the Year
Ended For the Nine Months
March 31, Ended December 31,
---------------- ------------------------
1997 1998 1999 1998 1999
---- ---- ---- ------------- ---------
(Unaudited)
<S> <C> <C> <C> <C> <C>
Taiwan............................. 27% 44% 36% 15% 48%
Singapore.......................... * * 14% 17% *
Japan.............................. 49% 26% * * *
Hong Kong.......................... 15% 14% * * *
United States...................... * 10% 19% 57% 24%
(* Less than 10%)
</TABLE>

10. SUBSEQUENT EVENTS

On March 22, 2000, the Company completed the issuance of 3,614,869 shares
of Series H redeemable convertible preferred stock for $1.25 per share, for
gross proceeds of approximately $4,500,000. The gross proceeds include $2.6
million of cash received prior to December 31, 1999 and the conversion of
$244,000 of accrued salary into Series H redeemable convertible preferred
stock.

On April 3, 2000, the Company authorized the issuance and sale of up to
2,000,000 shares of Series I convertible preferred stock. The Company received
approximately $3,075,000 in cash proceeds for 1,230,000 shares of Series I
preferred stock on March 31, 2000. In addition, $160,000 in license fees
acquired after December 30, 1999 were exchanged for a subscription of 64,000
shares of Series I convertible preferred stock and $500,000 outstanding under a
line of credit at December 31, 1999 was converted into 200,000 shares of Series
I convertible preferred stock. The rights, restrictions and preferences of
Series H and I are substantially the same as the Company's previously issued
shares of redeemable convertible preferred stock as described in Note 6.

In March 2000, the Board of Directors approved, subject to stockholder
approval, the following:

. adoption of the 2000 Stock Incentive Plan under which 3,000,000 shares
of common stock have been reserved.

. adoption of the 2000 Employee Stock Purchase Plan, under which 1,000,000
shares of common stock have been reserved to be effective as of the IPO
of the Company's common stock.

. amendment of the 1999 Plan to increase the number of authorized shares
by 2,800,000 to 13,800,000.

In March 2000, the Company authorized the increase of the Company's
authorized common stock from 36,000,000 to 42,000,000 shares, subject to
shareholder approval.

F-23
<PAGE>

[INSIDE BACK COVER]
Product Page
The top of the page has the Tvia logo complete with stylized television. Below
the logo the following title appears:
Internet Appliances, broadband set-top boxes and digital televisions using
Tvia streaming media gateway solution
The page show various Internet appliances, broadband set-top boxes and digital
televisions using the Tvia streaming media gateway solution.
<PAGE>

[LOGO APPEARS HERE]
<PAGE>

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the
securities being registered hereby, other than underwriting discounts and
commissions. All amounts are estimated except the Securities and Exchange
Commission registration fee, the National Association of Securities Dealers,
Inc. filing fee and the Nasdaq National Market listing fee.

<TABLE>
<CAPTION>
Payable by
Registrant
----------
<S> <C>
SEC registration fee............................................. $ 13,600
National Association of Securities Dealers, Inc. filing fee...... 5,675
Nasdaq National Market listing fee............................... *
Accounting fees and expenses..................................... 350,000
Legal fees and expenses.......................................... 400,000
Printing and engraving expenses.................................. 200,000
Blue Sky fees and expenses....................................... *
Registrar and Transfer Agent fees................................ *
Miscellaneous fees and expenses.................................. 30,752
----------
Total.......................................................... $1,000,000
==========
</TABLE>
- --------
*To be included in an amendment.

Item 14. Indemnification of Directors and Officers

Our articles of incorporation limit the liability of directors to the
maximum extent permitted by California law. This limitation of liability is
subject to exceptions including intentional misconduct, obtaining an improper
personal benefit and abdication or reckless disregard of director duties. Our
articles of incorporation and bylaws provide that we may indemnify our
directors, officers, employees and other agents to the fullest extent permitted
by law. Our bylaws also permit us to secure insurance on behalf of any officer,
director, employee or other agent for any liability arising out of his or her
actions in such capacity, regardless of whether the bylaws would permit
indemnification. We have entered into agreements to indemnify our directors and
executive officers, in addition to indemnification provided for in our bylaws.
These agreements, among other things, provide for indemnification of our
directors and executive officers for certain expenses (including attorney's
fees), judgments, fines and settlement amounts incurred by any such person in
any action or proceeding, including any action by or in the right of Tvia,
arising out of such person's services as a director or executive officer of
Tvia, any of our subsidiaries or any other company or enterprise to which the
person provides services at the request of Tvia. We believe that these
provisions and agreements are necessary to attract and retain qualified persons
as directors and executive officers.

Item 15. Recent Sales of Unregistered Securities

Since March 28, 1997, we have issued and sold the following unregistered
securities:

1. Since March 28, 1997, we issued and sold 769,740 shares of Common
Stock to employees, directors and consultants at prices ranging from
$.04 to $.12 per share.

2. Since March 28, 1997 we issued options to purchase 15,316,697 shares
of our common stock to directors, employees and consultants pursuant
to the Registrant's 1999 Stock Incentive Plan.

3. From September 25, 1998, we sold 4,750,000 shares of Series G
preferred stock to six investors for an aggregate purchase price of
$4,250,000.

4. On March 22, 2000, we sold 3,614,869 shares of Series H preferred
stock to 28 investors for an aggregate purchase price of
$4,518,586.25.

II-1
<PAGE>

5. On March 29, 2000, we sold 1,494,000 shares of Series I preferred
stock to 21 investors for an aggregate purchase price of $3,735,000.

6. From December 31, 1997 to January 31, 2000, we issued warrants to
purchase an aggregate of 425,000 shares of Series G preferred stock at
a purchase price of $1.00 per share and 440,000 shares of Series H
preferred stock at an exercise price of $1.25 per share.

The sales of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of the
Securities Act, or Regulation D promulgated thereunder (with respect to items
3, 4, 5 and 6), or Rule 701 (with respect to items 1 and 2) promulgated under
Section 3(b) of the Securities Act, as transactions by an issuer not involving
a public offering or transactions pursuant to compensatory benefit plans and
contracts relating to compensation as provided under Rule 701. The recipients
of securities in each of these transactions represented their intention to
acquire the securities for investment only and not with view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationship with the Registrant,
to information about the Registrant.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits

See exhibits listed on the Exhibit Index following the signature page of
the Form S-1, which is incorporated herein by reference.

(b) Financial Statement Schedules

Schedules other than those referred to above have been omitted because they
are not applicable or not required or because the information is included
elsewhere in the Financial Statements or the notes thereto.

Item 17. Undertakings

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act
of 1933, as amended, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part
of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities
Act of 1933, as amended, each post-effective amendment that contains a
form of prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.

(3) The Registrant will provide to the underwriters at the closing(s)
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.

II-2
<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Santa Clara, State of
California, on the 4th day of April, 2000.

TVIA, INC.

/s/ Kenny Liu
By __________________________________
Kenny Liu
Chief Executive Officer and
Chairman

POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints Kenny Liu and Michael Hoberg
and each of them, his or her true and lawful attorneys-in-fact and agents, each
with full power of substitution and resubstitution, for him or her and in his
or her name, place and stead, in any and all capacities, to sign any and all
amendments, including post-effective amendments, to this Registration
Statement, and any registration statement relating to the offering covered by
this Registration Statement and filed pursuant to Rule 462(b) under the
Securities Act of 1933 and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that each of said attorneys-
in-fact and agents or their substitute or substitutes may lawfully do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----

<C> <S> <C>
/s/ Kenny Liu Chief Executive Officer April 4, 2000
______________________________________ and Chairman of the
Kenny Liu Board (Principal
Executive Officer)

/s/ Michael Hoberg Vice President of April 4, 2000
______________________________________ Finance and Chief
Michael Hoberg Financial Officer
(Principal Financial
Officer and Accounting
Officer)

/s/ R. David Dicioccio Director April 4, 2000
______________________________________
R. David Dicioccio

Director April 4, 2000
______________________________________
Steven Cheng

/s/ James Bunker Director April 4, 2000
______________________________________
James Bunker

/s/ M. K. Tsai Director April 4, 2000
______________________________________
M. K. Tsai
</TABLE>

II-3
<PAGE>

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE

To the Board of Directors and Stockholders
of Tvia, Inc.

We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Tvia, Inc. included in this
Registration Statement and have issued our report thereon dated March 17, 2000.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule is the
responsibility of the Company's management and is presented for the purpose of
complying with the Securities and Exchange Commission's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
as a whole.

/s/ Arthur Andersen LLP

San Jose, California
March 17, 2000

S-1
<PAGE>

TVIA, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)

<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
- ------------------------------------- ---------- ---------- ---------- --------
Balance
Balance at Charged to at End
Beginning Costs and of
Description of Period Expenses Deductions Period
- ------------------------------------- ---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Year Ended March 31, 1997
Allowance for doubtful accounts...... $ -- $ 5 $ -- $ 5
Year Ended March 31, 1998
Allowance for doubtful accounts...... $ 5 $ -- $ -- $ 5
Nine-Months Ended December 31, 1998
Allowance for doubtful accounts...... $ 5 $ -- $ -- $ 5
Year Ended March 31, 1999
Allowance for doubtful accounts...... $ 5 $ -- $ -- $ 5
Nine-Months Ended December 31, 1999
Allowance for doubtful accounts...... $ 5 $ 28 $ -- $33
</TABLE>
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation.
3.2 Amended and Restated Bylaws.
3.3* Amended and Restated Certificate of Incorporation, to be effective
upon consummation of this offering.
3.4* Amended and Restated Bylaws, to be effective upon consummation of this
offering.
4.1* Form of Common Stock certificate.
4.2 Form of Amended and Restated Registration Rights Agreement dated as of
April 3, 2000.
4.3 Warrant to Purchase Stock issued December 31, 1997 to C.Y. Lee.
4.4 Warrant to Purchase Stock issued April 30, 1999 to James Mah.
4.5 Warrant to Purchase Stock issued June 21, 1999 to Far East National
Bank.
4.6 Warrant to Purchase Stock issued July 8, 1999 to C.Y. Lee.
4.7 Warrant to Purchase Stock issued December 30, 1999 to Far East
National Bank.
4.8* Warrant to Purchase Stock issued January , 2000 to C.Y. Lee.
4.9* Warrant to Purchase Stock issued January , 2000 to James Mah.
5.1* Opinion of Pillsbury Madison & Sutro LLP.
10.1* 1999 Stock Incentive Plan of IGS Technologies, Inc.
10.2 2000 Stock Incentive Plan of Tvia, Inc.
10.3 2000 Employee Stock Purchase Plan of Tvia, Inc.
10.4* Form of Directors and Officers' Indemnification Agreement.
10.5* TSMC Terms and Conditions dated November 15, 1999.
10.6* UMC Wafer Foundry Standard Terms and Conditions.
10.7*+ Caesar International, Inc. Quotation dated August 20, 1998.
10.8*+ Joint Development Agreement dated October 29, 1999 between IGS
Technologies, Inc. and Coreum Technology, Inc.
10.9*+ LSI Development Agreement dated May 10, 1998 between Mitsubishi
Electric Corporation and IGS Technologies Inc.
10.10*+ Cross License Agreement dated March 21, 2000 between Innovative
Semiconductors, Inc. and IGS Technologies with Innovative
Semiconductors.
10.11*+ Audio Technology Licensing Agreement dated June 26, 1997 between T-
Squared Design, Inc. and InteGraphics Systems, Inc.
10.12*+ Technology License Agreement dated July 1, 1997 between Reality
Simulation Systems Acquisition Corporation and InteGraphics Systems,
Inc.
10.13 Multi-Tenant Single-Building Modified-Net Lease dated October 27, 1995
between Koll/Intereal Bay Area and Intergraphics System, Inc.
10.14 First Amendment to Lease Agreement dated January 15, 1999 between
Koll/Intereal Bay Area and IGS Technologies, Inc.
10.15 Second Amendment to Lease Agreement dated May 6, 1999 between
Koll/Intereal Bay Area and IGS Technologies, Inc.
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3* Consent of Pillsbury Madison & Sutro LLP (contained in their opinion
filed as Exhibit 5.1).
24.1 Power of Attorney. Reference is made to Page II-4.
27.1 Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.

+ Confidential Treatment Requested.

<PAGE>

EXHIBIT 3.1

AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
TVIA, INC.

Jack Guedj and Michael Hoberg certify that:

1. They are the President and Secretary, respectively of Tvia, Inc., a
California corporation.

2. The Articles of Incorporation of this corporation are amended and
restated to read as follows:

The name of this corporation is Tvia, Inc.

II.

The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.

III.

A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Preferred Stock" and "Common Stock." The total number
of shares which the Corporation is authorized to issue is one hundred eighty-
three million eight hundred twenty-three thousand seven hundred thirty-five
(183,823,735) shares. One hundred fifty million (150,000,000) shares shall be
Common Stock, without par value (the "Common Stock"), and thirty-three million
eight hundred twenty-three thousand seven hundred thirty-five (33,823,735)
shares shall be Preferred Stock, without par value (the "Preferred Stock").

B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in these Articles of Incorporation, to fix or alter the
dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, and the liquidation preferences of any wholly unissued Series of
Preferred Stock, and the number of shares constituting any such Series and the
designation thereof, or any of them, and to increase or decrease the number of
shares of any series subsequent to the issue of shares of that series, but not
below the number of shares of such series then outstanding. In case the number
of shares of any series shall be so decreased, the shares constituting such
decrease shall resume the status which they had prior to the adoption of the
resolution originally fixing the number of shares of such series.

-1-
<PAGE>

IV.

The rights, preferences, privileges, restrictions and other matters
relating to certain shares of Preferred Stock are as follows:

A. Designation. Six hundred thousand (600,000) shares of Preferred Stock
-----------
shall be designated and known as "Series A Preferred Stock." Four million eight
hundred thousand (4,800,000) shares shall be designated and known as "Series B
Preferred Stock." One million two hundred sixty-six thousand six hundred sixty-
seven (1,266,667) shares shall be designated and known as "Series C Preferred
Stock." Four million six hundred and two thousand five hundred (4,602,500)
shares shall be designated and known as "Series D Preferred Stock." Four million
six hundred forty-seven thousand two hundred and thirty-six (4,647,236) shares
shall be designated and known as "Series E Preferred Stock." Six million nine
hundred fifty-seven thousand three hundred thirty-two (6,957,332) shares shall
be designated and known as "Series F Preferred Stock." Four million seven
hundred fifty thousand (4,750,000) shares shall be designated and known as
"Series G Preferred Stock." Four million two hundred thousand (4,200,000) shares
shall be designated and known as "Series H Preferred Stock." Two million
(2,000,000) shares shall be designated and known as "Series I Preferred Stock."
As described further and except as provided herein, all of the rights,
privileges, preferences and restrictions of any Series of Preferred Stock shall
be and hereby are deemed pari pasu with (including, without limitation,
---------
inclusion in provisions with respect to liquidation and acquisition preferences,
redemption and/or approval of matters of vote or written consent) the other
series.

B. Dividends and Distributions.
---------------------------

1. Preferred Stock. Holders of Series G Preferred Stock, Series H
---------------
Preferred Stock and Series I Preferred Stock in preference to the holders of any
other stock of the Company ("Junior Stock"), shall be entitled to receive, when
and as declared by the Board of Directors, but only out of funds that are
legally available therefor, cash dividends at the rate of eight percent (8%) of
the "Original Issue Price" per annum on each outstanding share of Series G
Preferred Stock, Series H Preferred Stock and Series I Preferred Stock (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares). The Original Issue Price of the Series G
Preferred Stock shall be US$1.00. The Original Issue Price of the Series H
Preferred Stock shall be US$1.25. The Original Issue Price of the Series I
Preferred Stock shall be US$2.50. Such dividends shall be payable only when, as
and if declared by the Board of Directors and shall be non-cumulative. No
dividends, whether in cash or property, shall be paid or declared, nor shall any
other distribution be made, on any Junior Stock, nor shall any shares of any
Junior Stock be purchased, redeemed, or otherwise acquired for value by the
Company until all dividends on the Series G Preferred Stock, Series H Preferred
Stock and Series I Preferred Stock shall have been paid or set apart.

2. The holders of the outstanding Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series I Preferred Stock shall also be entitled to receive
in any fiscal year, when and as declared by the Board of Directors, out of any
assets at the time legally available therefore, dividends in cash at the same
rate and at the time as any dividends or other distributions (as defined below)
is declared or paid on shares of

-2-
<PAGE>

Common Stock. The right to such dividends on shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock and Series I Preferred Stock shall not be cumulative
and no right shall accrue to holders of shares of Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock and Series I Preferred Stock by reason of the fact that
dividends on said shares are not declared in any prior year, nor shall any
undeclared or unpaid dividend bear or accrue interest.

3. Distributions Defined. For purposes of this Section B, unless the
---------------------
context requires otherwise, "distribution" shall mean the transfer of cash or
property without consideration, whether by way of dividend or otherwise, payable
other than in Common Stock or other securities of the corporation, or the
purchase or redemption of shares of the corporation (other than repurchases of
Common Stock held by employees of, or consultants to, the corporation upon
termination of their employment or services pursuant to agreements providing for
such repurchase and other than redemptions in liquidation or dissolution of the
corporation) for cash or property, including any such transfer, purchase, or
redemption by a subsidiary of the corporation.

C. Liquidation Rights.
------------------

1. In the event of any liquidation, dissolution or winding up of the
corporation, whether voluntary or involuntary, the holders of each shares of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock
then outstanding shall be entitled to be paid, out of the assets of the
corporation legally available for distribution to its shareholders, whether from
capital, surplus or earnings, before any payment or setting apart for payment of
any amount shall be made in respect of the Common Stock, an amount equal to
twenty cents (US$0.20) per share of Series A Preferred Stock, twenty-five cents
(US$0.25) per share of Series B Preferred Stock, thirty cents (US$0.30) per
share of Series C Preferred Stock, forty cents (US$0.40) per share of Series D
Preferred Stock, forty-five cents (US$0.45) per share of Series E Preferred
Stock, seventy-five cents (US$0.75) per share of Series F Preferred Stock, one
dollar (US$1.00) per share of Series G Preferred Stock, one dollar and twenty-
five cents (US$1.25) per share of Series H Preferred Stock and two dollars and
fifty cents (US$2.50) per share of Series I Preferred Stock then held by each of
them. If the assets of the corporation are insufficient to pay the full
liquidation preference to the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred
Stock and Series I Preferred Stock the entire remaining assets shall be paid to
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F Preferred
Stock, Series G Preferred Stock, Series H Preferred Stock and Series I Preferred
Stock in proportion to the full preferential amount each holder is otherwise
entitled to receive.

2. After payment has been made to the holders of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock and Series I

-3-
<PAGE>

Preferred Stock of their full Preference Amount as set forth in Section C.l
above, any remaining assets or surplus funds of the corporation shall be shared
by and distributed ratably among the holders of Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock, Series I Preferred Stock and Common Stock in proportion to the
number of shares of Common Stock then held by each of them, calculated as if all
Preferred Stock has been converted into Common Stock.

3. For purposes of this Section C, (i) a merger or consolidation of the
corporation into, or with another corporation (other than with a wholly owned
subsidiary of the corporation), or any other corporate reorganization in which
the corporation shall not be the continuing or surviving entity of such merger,
consolidation or reorganization, (ii) a sale, transfer or other disposition of
all or substantially all of the assets of the corporation or (iii) the
effectuation by the corporation of a transaction or Series of related
transactions in which more than 50% of the voting power of the corporation is
transferred within a three-month period, shall be deemed to be a liquidation,
dissolution or winding up of the corporation.

4. In the event the corporation shall propose to take any action
regarding the liquidation, dissolution or winding up of the corporation which
will involve the distribution of assets other than cash, the value of the assets
to be distributed to the holders of shares of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock,
Series E Preferred Stock, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock and Series I Preferred Stock shall be determined by the
consent or vote of the Board of Directors and such determination shall be
binding upon the holders of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred
Stock and Series I Preferred Stock, except that any securities distributed shall
be valued as follows:

(a) Securities not subject to investment letter or other similar
restrictions on free marketability:

(i) if traded on a securities exchange or the Nasdaq Stock Market
System, the value shall be deemed to be the average of the security's
closing prices on such exchange over the thirty (30) day period ending
three (3) days prior to the closing; and

(ii) if actively traded over-the-counter, the value shall be deemed
to be the average of the closing bid prices over the thirty (30) day period
ending three (3) days prior to the closing; and

(iii) if there is no active public market, the value shall be the fair
market value thereof, as determined by the consent or vote of the board of
Directors and such determination shall be binding upon the holders of the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and
Series I Preferred Stock.

-4-
<PAGE>

(b) The method of valuation of securities subject to investment letter or
other restrictions on free marketability shall be to make an appropriate
discount from the market value determined as above in (a)(i), (ii) or (iii) to
reflect the approximate fair market value thereof, as determined by the consent
or vote of the Board of Directors and such determination shall be binding upon
the holders of the Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I
Preferred Stock.

D. Voting Rights.
-------------

1. General. Except as otherwise expressly provided herein or as required
-------
by law, the holder of each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred
Stock and Series I Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such share of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock and Series I Preferred Stock could be
converted on the record date for the vote or the consent of shareholders and
shall have voting rights and powers equal to the voting rights and powers of the
Common Stock (except as otherwise expressly provided herein or as required by
law, voting together with the Common Stock as a single class) and shall be
entitled to notice of any shareholders, meeting in accordance with the Bylaws of
the corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and
Series I Preferred Stock and held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half being rounded upward).

2. The holders of the Series G Preferred Stock, voting together as a
single series, shall be entitled to elect one (1) member of the Board of the
Company. The holders of Series H Preferred Stock, voting together as a single
series, shall be entitled to elect one (1) member of the Board of Directors of
the Company. The holders of the Common Stock and Preferred Stock (including the
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred Stock, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock
on an as-converted basis) shall be entitled to elect the remaining members of
the Board of Directors. Any director who shall have been elected by the holders
of the Series G Preferred Stock may be removed during his term of office only by
the affirmative vote of the holders of a majority of the Series G Preferred
Stock. Any director who shall have been elected by the holders of the Series H
Preferred Stock may be removed during his term of office only by the affirmative
vote of the holders of a majority of the Series H Preferred Stock.

3. So long as shares of Series G Preferred Stock are outstanding, the
Company shall not without first obtaining the approval (by vote or written
consent as provided by law) of the holders of at least majority of the then
outstanding shares of Series G Preferred Stock voting as a separate class:

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<PAGE>

(i) materially and adversely alter or change the rights,
preferences or privileges or powers of, or the restrictions provided for
the benefit of, the Series G Preferred Stock;

(ii) authorize or issue any new class or Series of stock having any
preference or priority as to dividends or assets superior to or on a parity
with any such preference or priority of the Series G Preferred Stock;

(iii) reclassify any shares of Common Stock or any other shares of
the Company into shares having any preference or priority as to dividends
or assets superior to or on a parity with any such preference or priority
of the Series G Preferred Stock;

(iv) sell all or substantially all of its property or business or
merge into or consolidate with any other corporation (other than a wholly
owned subsidiary corporation) or effect any other transaction or Series of
related transactions in which more than fifty percent (50%) of the voting
power of the corporation is disposed of;

(v) liquidate or dissolve the corporation;

(vi) redeem, purchase or otherwise acquire (or pay into or set funds
aside for a sinking fund for such purpose) any share or shares of Common
Stock; provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Company pursuant
to agreements under which the Company has the option to repurchase such
shares at cost or at cost upon the occurrence of certain events, such as
the termination of employment;

(vii) increase or decrease the authorized number of shares of Common
Stock or Preferred Stock;

(viii) change the size of the Board of Directors;

(ix) amend or repeal any provision of, or add any provision to, this
Corporation's Articles of Incorporation or Bylaws so as to materially and
adversely effect the rights of the Series G Preferred Stock; or

(x) declare or pay dividends on or make any distribution on account
of the Common Stock or Preferred Stock.

4. So long as shares of Series H Preferred Stock are outstanding, the
Company shall not without first obtaining the approval (by vote or written
consent as provided by law) of the holders of at least majority of the then
outstanding shares of Series H Preferred Stock voting as a separate class:

-6-
<PAGE>

(i) materially and adversely alter or change the rights,
preferences or privileges or powers of, or the restrictions provided for
the benefit of, the Series H Preferred Stock;

(iv) sell all or substantially all of its property or business or
merge into or consolidate with any other corporation (other than a wholly
owned subsidiary corporation);

(v) effect any other transaction or Series of related transactions
in which more than fifty percent (50%) of the voting power of the
corporation is disposed of;

(vi) liquidate or dissolve the corporation;

(vii) redeem, purchase or otherwise acquire (or pay into or set funds
aside for a sinking fund for such purpose) any share or shares of Common
Stock; provided, however, that this restriction shall not apply to the
repurchase of shares of Common Stock from employees, officers, directors,
consultants or other persons performing services for the Company pursuant
to agreements under which the Company has the option to repurchase such
shares at cost or at cost upon the occurrence of certain events, such as
the termination of employment;

(viii) increase or decrease the authorized number of shares of Common
Stock or Preferred Stock;

(ix) change the size of the Board of Directors;

(x) amend or repeal any provision of, or add any provision to, this
Corporation's Articles of Incorporation or Bylaws so as to materially and
adversely effect the rights of the Series H Preferred Stock; or

(xi) declare or pay dividends on or make any distribution on account
of the Common Stock or Preferred Stock.

E. Conversion. The holders of the Series A Preferred Stock, Series B
----------
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series I Preferred Stock shall have conversion rights as
follows (the "Conversion Rights"):

-7-
<PAGE>

1. Voluntary Conversion. Each share of Preferred Stock shall be
--------------------
convertible into fully paid and nonassessable shares of Common Stock without the
payment of any additional consideration by the holder thereof and, at the option
of the holder thereof, at any time after the date of issuance of such share, at
the office of the corporation or any transfer agent for the Preferred Stock.
The number of shares of Common Stock to which a holder of Preferred Stock shall
be entitled upon conversion shall be the product obtained by multiplying the
applicable "Conversion Rate" then in effect (determined as provided in Section
E.2) by the number of shares of Preferred Stock being converted.

2. Conversion Rate. The conversion rate in effect at any time for
---------------
conversion of the Preferred Stock (the "Conversion Rate") shall be the quotient
obtained by dividing the applicable Original Issue Price of the Preferred Stock
by the applicable "Conversion Price," calculated as provided in Section E.6.

3. Conversion Price. The conversion price for the Preferred Stock shall
----------------
initially be the applicable price per share at which the Preferred Stock was
originally issued (a "Conversion Price"). Such initial Conversion Price shall be
adjusted from time to time in accordance with this Section E. All references to
the Conversion Price herein shall mean the applicable Conversion Price as so
adjusted. The initial applicable Conversion Price for the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock, Series F Preferred Stock, Series G Preferred
Stock, Series H Preferred Stock and Series I Preferred Stock shall be US$0.20,
US$0.25, US$0.30, US$0.40, US$0.45, US$0.75, US$1.00, US$1.25 and US$2.50,
respectively.

4. Automatic Conversion. Each share of Series A Preferred Stock, Series B
--------------------
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series I Preferred Stock shall automatically be converted
into Common Stock, based upon the then effective Conversion Price, upon (a) the
date specified by vote or written consent or agreement of holders of at least a
majority of the shares of such series then outstanding, or (b) immediately upon
the closing of a firmly underwritten public offering pursuant to an effective
registration statement under the Securities Act of 1933, as amended, covering
the offer and sale of Common Stock for the account of the Company in which (i)
the per share price is at least US$2.75 (as adjusted for any stock dividend,
combinations, splits, recapitalizations and the like), and (ii) the gross cash
proceeds to the Company (before underwriting discounts, commissions and fees)
are at least $10,000,000. Upon such automatic conversion, any declared and
unpaid dividends shall be paid in accordance with the provisions of Section B.l.

5. Mechanics of Conversion. Before the corporation shall be obligated to
-----------------------
issue certificates for shares of Common Stock upon the automatic conversion of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred, Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock
as set forth in paragraph E(2) hereof, such holder shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
corporation or of any transfer agent for the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series I Preferred Stock. The corporation shall, as soon as

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<PAGE>

practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,
Series D Preferred Stock, Series E Preferred, Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock and Series I Preferred Stock or to its
nominee or nominees a certificate or certificates for the number of shares of
Common stock to which such holder or nominee shall be entitled as aforesaid
together with (a) cash in lieu of any fraction of a share, and (b) cash or, to
the extent sufficient funds are not then legally available therefor, Common
Stock (at the Common Stock's fair market value so determined by the Board of
Directors as of the date of such conversion), on any declared and unpaid
dividends on the shares being converted. Such conversion shall be deemed to
have been made immediately prior to the public offering and the person or
persons entitled to receive the shares of Common Stock issuable upon conversion
shall be treated for all purposes as the record holder or holders of such shares
of Common Stock on such date.

6. Adjustment of Conversion Price.
------------------------------

(a) Special Definitions. For purposes of this Section E.4, the following
-------------------
definitions shall apply:

(i) "Excluded Stock" shall mean:
--------------

(1) all shares of Common Stock issued or issuable upon (i)
conversion of Preferred Stock and (ii) outstanding warrants to
purchase the Company's capital stock outstanding on the date of these
Articles of Incorporation;

(2) up to thirteen million eight hundred thousand (13,800,000)
shares of Common Stock or other securities exercisable therefor issued
or issuable to officers, directors, consultants, employees strategic
partners, of the corporation pursuant to plans and arrangements
approved by the board of directors; and

(3) all shares of Common Stock or other securities issued or
issuable to lessors, lenders, or licensors to the corporation upon
approval by the board of directors.

(b) Adjustment of Conversion Price for Issuance of Common Stock. In the
-----------------------------------------------------------
event this corporation shall issue any Common Stock or securities exercisable
for or convertible into Common Stock, other than Excluded Stock, for a
consideration per share less than the applicable Conversion Price for the
Preferred Stock in effect immediately prior to the issuance of such Common Stock
(excluding stock dividends, subdivisions, split-ups, combinations, dividends or
recapitalizations which are covered by Sections 4(c), (d) and (e)), the
Conversion Price for the Preferred Stock in effect immediately after each such
issuance shall forthwith (except as provided in this Section 4) be adjusted to a
price equal to the quotient obtained by dividing:

(i) an amount equal to the sum of

(x) the total number of shares of Common Stock issuable
upon conversion of the outstanding Preferred Stock

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<PAGE>

immediately prior to such issuance multiplied by the Conversion
Price for such Series in effect immediately prior to such
issuance, plus

(y) the consideration received by the corporation upon such
issuance, by

(ii) the total number of shares of Common Stock issuable upon
conversion of the outstanding Preferred Stock immediately prior to such
issuance plus the number of shares of Common Stock so issued (or the number
of shares of Common Stock issuable upon exercise or conversion of the other
securities so issued).

For the purposes of this clause (b), the following
provisions shall be applicable:

(1) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor
after deducting any discounts or commissions paid or incurred by the
corporation in connection with the issuance and sale thereof.

(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as
determined by the board of directors of the corporation, in accordance
with generally accepted accounting treatment; provided, however, that
-------- -------
if, at the time of such determination, the corporation's Common Stock
is traded in the over-the-counter market or on a national or regional
securities exchange, such fair market value as determined by the board
of directors of the corporation shall not exceed the aggregate
"Current Market Price" (as defined below) of the shares of Common
Stock being issued.

(3) In the case of the issuance of (i) options to purchase or
rights to subscribe for Common Stock (other than Excluded Stock), (ii)
securities by their terms convertible into or exchangeable for Common
Stock (other than Excluded Stock), or (iii) options to purchase or
rights to subscribe for such convertible or exchangeable securities
(other than Excluded Stock):

(A) the aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights
to subscribe for Common Stock shall be deemed to have been issued at
the time such options or rights were issued and for a consideration
equal to the consideration (determined in the manner provided in
subdivisions E(1) and E(2) above), if any, received by the corporation
upon the issuance of such options or rights plus the minimum purchase
price provided in such options or rights for the Common Stock covered
thereby;

-10-
<PAGE>

(B) the aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise of
options to purchase or rights to subscribe for such convertible or
exchangeable securities and subsequent conversion or exchange thereof,
shall be deemed to have been issued at the time such securities were
issued or such options or rights were issued and for a consideration
equal to the consideration received by the corporation for any such
securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the corporation
upon the conversion or exchange of such securities or the exercise of
any related options or rights (the consideration in each case to be
determined in the manner provided in subdivisions (1) and (2) above);

(C) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable
securities, or on any change in the minimum purchase price of such
options, rights or securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the
adjustment made upon (x) the issuance of such options, rights or
securities not exercised, converted or exchanged prior to such change,
as the case may be, been made upon the basis of such change or (y) the
options or rights related to such securities not converted or
exchanged prior to such change, as the case may be, been made upon the
basis of such change; and

(D) on the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the
adjustment made upon the issuance of such options, rights, convertible
or exchangeable securities or options or rights related to such
convertible or exchangeable securities, as the case may be, been made
upon the basis of the issuance of only the number of shares of Common
Stock actually issued upon the exercise of such options or rights,
upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to
such convertible or exchangeable securities, as the case may be.

(c) If the number of shares of Common Stock outstanding at any time after
the date hereof is increased by a stock dividend payable in shares of Common
Stock or by a subdivision or split-up of shares of Common Stock, then, on the
date such payment is made or such change is effective, the Conversion Price of
the Preferred Stock shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of any shares of Preferred Stock
shall be increased in proportion to such increase of outstanding shares.

-11-
<PAGE>

(d) If the number of shares of Common Stock outstanding at any time after
the date hereof is decreased by a combination of the outstanding shares of
Common Stock, then, on the effective date of such combination, the Conversion
Price of the Preferred Stock shall be appropriately increased so that the number
of shares of Common Stock issuable on conversion of any shares of Preferred
Stock shall be decreased in proportion to such decrease in outstanding shares.

(e) In case of any capital reorganization (other than a reorganization
covered by Section C.3 above), or any reclassification of the stock of the
corporation (other than as a result of a stock dividend or subdivision, split-up
or combination of shares), the shares of a Series of Preferred Stock shall,
after such capital reorganization or reclassification, be convertible into the
kind and number of shares of stock or other securities or property of the
corporation or otherwise to which such holder would have been entitled if
immediately prior to such capital reorganization or reclassification he had
converted his shares of such Series of Preferred Stock into Common Stock. The
provisions of this clause (e) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales or other
dispositions.

(f) For the purpose of any computation pursuant to this Section 4, the
"Current Market Price" at any date of one share of Common Stock, shall be deemed
to be the average of the highest reported bid and the lowest reported offer
prices on the preceding business day as furnished by the National Quotation
Bureau, Incorporated (or equivalent recognized source of quotations) or the
closing sale price, if reported; provided, however, that if the Common Stock is
-------- -------
not traded in such manner that the quotations referred to in this clause (f) are
available for the period required hereunder, Current Market Price shall be
determined in good faith by the board of directors of the corporation.

7. No Impairment. Without the consent of the holders of a majority of
-------------
the then outstanding Series F Preferred Stock, the consent of the holders of a
majority of the then outstanding Series G Preferred Stock and the consent of the
holders of a majority of the outstanding Series H Preferred Stock, the
corporation will not, by amendment of these Articles of Incorporation or
otherwise, through any reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the corporation, but will at
all times in good faith assist in the carrying out of all the provisions of
Section E.6 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of
Preferred Stock against impairment.

8. Certificate as to Adjustments. Upon the occurrence of each adjustment
-----------------------------
or readjustment of the Conversion Rate pursuant to Section E.6, the corporation
at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and prepare and furnish to each holder of
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The corporation shall, upon written request at any time of any holder of
Preferred Stock, furnish or cause to be furnished to such holder a like
certificate setting forth (i) such adjustments and readjustments, (ii) the
Conversion Rate of such Series at the time in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of such holder's shares of Preferred
Stock.

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<PAGE>

9. Notices of Record Date. In the event of any taking by the corporation
----------------------
of a record of the holders of any class of securities for the purpose of
determining the holders thereof who are entitled to receive any dividend (other
than a cash dividend) or other distribution, any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or any other
securities or property or to receive any right, the corporation shall mail to
each holder of Preferred Stock at least ten (10) days prior to such record date,
a notice specifying the date on which any such record is to be taken for the
purpose of such dividend or distribution or right, and the amount and character
of such dividend, distribution or right.

10. Notices. Any notice required by the provisions of Section E.6 to be
-------
given to the holder of shares of Preferred Stock shall be deemed given (i) upon
personal delivery to the party notified, (ii) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (iii) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, or (iv) five (5)
days after being deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.

11. Reissuance of Converted Shares. No shares of Preferred Stock which
------------------------------
have been converted into Common Stock after the original issuance thereof shall
ever again be reissued and all such shares so converted shall upon such
conversion cease to be a part of the authorized shares of the corporation.

12. No Fractional Shares. No fractional shares of Common Stock shall be
--------------------
issued upon conversion of the shares of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
corporation shall pay cash for any fractional shares of Common Stock to which
the shareholders may be entitled, at the fair value of such shares at the time
of conversion. Such fair value shall be determined by the board of directors.

13. Adjustments. If the number of outstanding shares of Common Stock has
-----------
been increased or decreased since the initial issuance of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock and Series I Preferred Stock having conversion rights
(by reason of split, stock dividends, merger, consolidation or other capital
change or reorganization affecting the number of outstanding shares of Common
Stock), the number of shares of Common Stock to be issued on conversion to the
holders of Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and Series I
Preferred Stock shall equitably be adjusted by appropriate amendment of these
articles. The purpose of such adjustment is to preserve fairly and equitably
(as far as reasonably possible) the original conversion rights of the shares
being converted.

14. Common Stock Reserved. The corporation shall at all times reserve and
---------------------
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred, Series F Preferred Stock, Series G Preferred Stock,
Series H Preferred Stock and Series I Preferred Stock, such number of shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all

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<PAGE>

outstanding shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock, Series G Preferred Stock, Series H Preferred Stock and
Series I Preferred Stock and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred, Series F Preferred Stock, Series G Preferred Stock, Series H
Preferred Stock and Series I Preferred Stock, the corporation shall take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose.

F. Redemption Rights.
-----------------

1. Redemption at the Holders' Option. To the extent permitted by law,
---------------------------------
the Series F Preferred Stock, Series G Preferred Stock and Series H Preferred
Stock shall be redeemable in whole or in part at the option of the holders of a
majority of the outstanding shares of Series F Preferred Stock or a majority of
the outstanding shares of Series G Preferred Stock and a majority of the Series
H Preferred Stock, respectively, at any time and from time to time after July
31, 2003 if the Company has not completed a public offering of more than
$5,000,000 of Company stock for not less than US$5.00 per share (subject to
proportionate adjustment for future stock dividends, combinations or splits).
Such redemption right may be exercised by giving at least 90 days' notice prior
to the date of commencement of the redemption (the "Redemption Date") by
certified or registered mail, postage prepaid, to the corporation at its
principal office. After receipt of such notice of a redemption pursuant to this
Section F, the corporation shall, to the extent it may lawfully do so, redeem
all of the outstanding shares of Series F Preferred Stock, Series G Preferred
Stock or Series H Preferred Stock to be redeemed in twelve equal installments on
the last day of each calendar quarter (commencing with the first calendar
quarter ending after the 120 day notice period). The Redemption Price of the
Series F Preferred Stock shall be US$0.75 per share, the Redemption Price of the
Series G Preferred Stock shall be US$1.00 per share and the Redemption Price of
the Series H Preferred Stock shall be US$1.25 per share. Any redemption of only
a part of the outstanding Series F Preferred Stock, Series G Preferred Stock or
Series H Preferred Stock by the corporation pursuant to this Section F shall be
made among all holders of Series F Preferred Stock, Series G Preferred Stock or
Series H Preferred Stock seeking redemption pursuant to this Section F in
proportion to the number of shares of Series F Preferred Stock, Series G
Preferred Stock or Series H Preferred Stock held by such holders.

2. Notice Regarding Redemption. At least thirty (30) but no more than
---------------------------
sixty (60) days prior to any Redemption Date, written notice shall be mailed,
postage prepaid, to each holder of record (determined at the close of business
on the business day next preceding the day on which notice is given) of Series F
Preferred Stock, Series G Preferred Stock or Series H Preferred Stock to be
redeemed, at his post office address last shown on the records of the
corporation, notifying such holder of the redemption of such shares, specifying
the Redemption Date, the Redemption Price and the date on which such holder's
Conversion Rights (as hereinafter defined) as to such shares terminate (such
Conversion Rights to expire on the day prior to the Redemption Date) and calling
upon such holder to surrender to the corporation, in the manner and at the place
designated in the continental United States, his certificate or certificates

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<PAGE>

representing the shares to be redeemed (such notice is hereinafter referred to
as the "Redemption Notice"). The Company may delay the redemption for up to one
(1) year if it responds in writing to the Redemption Notice that it intends to
complete a public offering within the year. Unless such holder elects to
convert his shares in accordance with Section F prior to the Redemption Date, on
or after the Redemption Date, each holder of Series F Preferred Stock, Series G
Preferred Stock or Series H Preferred Stock to be redeemed shall surrender his
certificate or certificates representing such shares to the corporation, in the
manner and at the place designated in the Redemption Notice, and thereupon the
Redemption Price of such shares shall be payable to the order of the person
whose name appears on such certificate or certificates as the owner thereof and
each surrendered certificate shall be canceled. In the event less than all the
shares represented by any such certificate are redeemed, a new certificate shall
be issued representing the unredeemed shares. If, on or prior to the Redemption
Date, the funds necessary for such redemption shall have been set aside by the
corporation and deposited with a bank or trust company, for the benefit of the
holders of Series F Preferred Stock, Series G Preferred Stock or Series H
Preferred Stock whose shares are being redeemed, then from and after the close
of business on the Redemption Date, all rights of the holders of such shares as
holders of Series F Preferred Stock, Series G Preferred Stock or Series H
Preferred Stock of the corporation (except the right to receive the Redemption
Price without interest upon surrender of their certificate or certificates)
shall cease with respect to such shares, and such shares shall not thereafter be
transferred on the books of the corporation or be deemed to be outstanding for
any purpose whatsoever.

3. Trust Fund. On or prior to the Redemption Date, the corporation may
----------
deposit the Redemption Price of all shares of Series F Preferred Stock, Series G
Preferred Stock or Series H Preferred Stock designated for redemption in the
Redemption Notice and not yet redeemed or converted with a bank or trust company
as a trust fund for the benefit of the respective holders of the shares
designated for redemption and not yet redeemed or converted. Any monies
deposited by the corporation pursuant to this Section F.3 for the redemption of
shares thereafter converted into shares of Common Stock pursuant to Section F
hereof no later than the close of business on the Redemption Date shall be
returned to the corporation forthwith upon such conversion. The balance of any
monies deposited by the corporation pursuant to this Section F.3 remaining
unclaimed at the expiration of one (1) year following the Redemption Date shall
thereafter be returned to the corporation upon its request expressed in a
resolution of the board of directors of the corporation, provided that the
shareholder to which such monies would be payable hereunder shall be entitled,
upon surrender of his certificates representing such shares of Series F
Preferred Stock, Series G Preferred Stock or Series H Preferred Stock to the
corporation, to receive such monies but without interest from the Redemption
Date.

4. Insufficient Funds. If the funds of the corporation legally available
------------------
for redemption of Series F Preferred Stock, Series G Preferred Stock or Series H
Preferred Stock on any Redemption Date are insufficient to redeem the total
number of shares of Series F Preferred Stock, Series G Preferred Stock or Series
H Preferred Stock to be redeemed on such date, those funds which are legally
available will be used to redeem the shares of Series F Preferred Stock, Series
G Preferred Stock or Series H Preferred Stock ratably among the holders in
accordance with the last sentence of Section 3(a). At any time thereafter when
additional funds of the corporation are legally available for the redemption of
Series F Preferred Stock, Series G Preferred Stock or Series H Preferred Stock,
such funds will be immediately used to redeem the

-15-
<PAGE>

balance of the shares of Series F Preferred Stock, Series G Preferred Stock or
Series H Preferred Stock which the corporation became obligated to redeem on
such Redemption Date but which it has not redeemed.

A. Limitation of Directors' Liability. The liability of the directors of
----------------------------------
this corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.

B. Indemnification of Corporate Agents. This corporation is authorized
-----------------------------------
to provide indemnification of its agents (as defined in Section 317 of the
California Corporations Code (the "Code")) for breach of their duty to this
corporation and its shareholders through bylaw provisions or through agreements
with the agents, or both, in excess of the indemnification otherwise permitted
by such Section 317, subject to the limits on such excess indemnification set
forth in Section 204 of the Code.

C. Repeal or Modification. Any repeal or modification of the foregoing
----------------------
provisions of this Article V shall be prospective only and shall not adversely
affect any right of indemnification or limitation of liability of an agent of
this corporation relating to acts or omissions occurring prior to such repeal or
modification.

3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.

4. The forgoing amendment and restatement of the Articles of
Incorporation has been duly approved by the require vote of shareholders in
accordance with Section 903 of the California Corporation Code. The total
number of outstanding shares of Common Stock, Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock, Series F Preferred Stock and Series G Preferred Stock of the
corporation is 13,236,469, 600,000, 4,800,000, 1,266,667, 4,602,500, 4,647,238,
6,957,332, 4,750,000 and 3,614,869, respectively. The percentage vote required
was (i) more than 50% of Common Stock, (ii) more than 50% of Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock, Series E Preferred Stock and Series F Preferred Stock, voting together as
a class, (iii) more than 50% of Series G Preferred Stock, voting separately as a
class, and (iv) more than 50% of the Series H Preferred Stock, voting separately
as a class. The number of shares voting in favor of the amendment equaled or
exceeded the vote required.

-16-
<PAGE>

We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.

Dated: March 23, 2000

/s/ Jack Guedj
------------------------------
Jack Guedj, President

/s/ Michael Hoberg
------------------------------
Michael Hoberg, Secretary

-17-

<PAGE>

EXHIBIT 3.2

AMENDED AND RESTATED BYLAWS

INTEGRAPHICS SYSTEMS, INC.

As Adopted by the Shareholders
on February 4, 1994
<PAGE>

Table of Content
----------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 - Offices.............................................................................. 1
- -------------------
Section 1.1 Principal Offices............................................................ 1
Section 1.2 Other Offices................................................................ 1

ARTICLE 2 - Meeting of Shareholders.............................................................. 1
- -----------------------------------
Section 2.1 Place of Meeting............................................................. 1
Section 2.1 Annual Meeting............................................................... 1
Section 2.3 Special Meetings............................................................. 1
Section 2.4 Notice of Shareholders Meeting............................................... 2
Section 2.5 Quorum....................................................................... 2
Section 2.6 Voting....................................................................... 2
Section 2.7 Waiver of Notice or Consent by Absent Shareholders........................... 3
Section 2.8 Shareholder Action by Written Consent Without a Meeting...................... 4

ARTICLE 3 - Directors............................................................................ 4
- ---------------------
Section 3.1 Powers....................................................................... 4
Section 3.2 Number and Qualification of Director(s)...................................... 4
Section 3.3 Election and Term of Office of Directors..................................... 4
Section 3.4 Vacancies.................................................................... 5
Section 3.5 Place of Meeting by Telephone................................................ 5
Section 3.6 Regular Meeting.............................................................. 5
Section 3.7 Special Meeting.............................................................. 5
Section 3.8 Quorum....................................................................... 5
Section 3.9 Waiver of Notice............................................................. 6
Section 3.10 Action without Meeting....................................................... 6
Section 3.11 Fees and Compensation of Directors........................................... 6

ARTICLE 4 - Officers............................................................................. 6
- --------------------
Section 4.1 Officers..................................................................... 6
Section 4.2 Election of Officers......................................................... 6
Section 4.3 Vacancies in Offices......................................................... 6
Section 4.4 Chairman of the Board........................................................ 7
Section 4.5 President.................................................................... 7
Section 4.6 Vice President............................................................... 7
Section 4.7 Secretary.................................................................... 7
Section 4.8 Chief Financial Officer...................................................... 8

ARTICLE 5 - Indemnification of Directors, Officers,
- --------------------------------------------------
Employees and Other Agents........................................................... 8
--------------------------
Section 5.1 Indemnification.............................................................. 8

ARTICLE 6 - Issuance and Transference of Shares.................................................. 8
- -----------------------------------------------
Section 6.1 Certificates for paid Unpaid Shares.......................................... 8
Section 6.2 Share Certificates........................................................... 9
Section 6.3 Replacement of Certificates.................................................. 9
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6.4 Transfer of Shares......................................... 9

ARTICLE 7 - Records and Reports........................................... 9
- -------------------------------
Section 7.1 Inspection of Books and Records....................... 9
Section 7.2 Annual Report to Shareholders......................... 9

ARTICLE 8 - Amendment of Bylaws........................................... 10
- -------------------------------
Section 8.1 Amendment of Bylaws by Shareholders................... 10
Section 8.2 Amendment of Bylaws by Directors...................... 10

ARTICLE 9 - Right of First Refusal........................................ 10
- ----------------------------------
Section 9.1 Right of First Refusal................................ 10
</TABLE>
<PAGE>

BYLAWS OF

INTEGRAPHICS SYSTEMS, INC.

ARTICLE I
---------

Offices

Section 1.1: Principal Offices. The corporation shall maintain its
----------- -----------------
principal executive office at the following address:

2150 Trade Zone Boulevard
Suite 101
San Jose, California 95131

Section 1. 2: Other Offices. The board of directors may change the location
------------ -------------
of the principal office of the corporation, or establish and maintain additional
offices at such other places as it may from time to time designate.

ARTICLE 2
---------

Meetings of Shareholders

Section 2.1: Place of Meetings. Meetings of shareholders shall be held at
----------- -----------------
any place within or outside the State of California designated by the board of
directors. In the absence of any such designation, shareholders meetings shall
be held a the principal executive office of the corporation.

Section 2.2: Annual Meeting. The annual meetings of the shareholders,
----------- --------------
after the year of incorporation, shall be held at 1:00 P.M. Pacific Standard
Time on the second Wednesday of the last month of the fiscal year. If this day
falls on a legal holiday, the annual meeting shall be held at the same time on
the following business day thereafter.

Section 2.3: Special Meetings. A special meeting of the shareholders may
----------- ----------------
be called at any time by the board of directors, or by the chairman of the
board, or by the president or by one or more shareholders holding shares in the
aggregate entitled to cast not less than ten percent (10%) of the votes at that
meeting.

1
<PAGE>

If a special meeting is called by any person or persons other than the
board of directors, the request shall be in writing specifying the time of such
meeting and the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the chairman of the board, the president and any
vice president or the secretary of the corporation. The officer receiving the
request shall cause notice to be promptly given to the shareholders entitled to
vote, in accordance with the provisions of Section 601 of the Corporations Code
of the State of California, that a meeting will be held at the time requested by
the person or persons calling the meeting, not less than thirty five (35) nor
more than sixty (60) days after the receipt of the request. If the notice is not
given within twenty (20) days after receipt of the request, the person or
persons requesting the meeting may give the notice. Nothing contained in this
paragraph of this Section 2.3 shall be construed as limiting, fixing or
---
affecting the time when a meeting of shareholders called by action of the board
of directors may be held.

Section 2.4: Notice of Shareholders Meeting. When notice of any meeting of
----------- ------------------------------
shareholders is given it shall be in accordance with Section 601 of the
Corporations Code of the State of California.

Notice of any meeting of shareholders may be waived in accordance with
Section 2.7 of this Article 2, except as required by Section 601 of the
--- -
Corporations Code of the State of California or any successor thereto.

Section 2.5: Quorum. The presence in person or by proxy of the holders of
----------- ------
a majority of the shares entitled to vote at any meeting of shareholders shall
constitute a quorum for the transaction of business. The shareholders present at
a duly called or held meeting at which a quorum is present may continue to do
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum, if any action taken (other than
adjournment) is approved by at least a majority of the shares required to
constitute a quorum.

Section 2.6: Voting. The shareholders entitled to vote at any meeting of
----------- ------
shareholders shall be determined in accordance with the provisions of Section
701 of the Corporations Code of the State of California, subject to the
provisions of Section 702, Section 703 and Section 704 of the Corporations Code
of the State of California (relating to voting shares held by a fiduciary, in
the name of a corporation, or in joint ownership). The shareholders vote may be
by voice vote or by ballot; provided, however, that any election for directors
must be by ballot if demanded by any shareholder before the voting has begun. On
any matter other than election of directors, any shareholder may vote part of
the shares in favor of the proposal and refrain from voting the remaining
shares, or vote them against the proposal; but, if the shareholder

2
<PAGE>

fails to specify the number of shares which the shareholder is voting
affirmatively, it will be conclusively presumed that the shareholder's approving
vote is with respect to all shares that the shareholder is entitled to vote. If
a quorum is present, the affirmative vote of the majority of the shares
represented at the meeting and entitled to vote on any matter (other than the
election of directors) shall be the act of the shareholders, unless the vote of
a greater number or voting by classes is required by California General
Corporation Law or by the articles of incorporation.

At a shareholders meeting at which directors are to be elected, no
shareholder shall be entitled to cumulate votes (i.e., cast for any one or more
candidates a number of votes greater than the number of the shareholder's
shares) unless the candidates names have been placed in nomination prior to
commencement of the voting and a shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes. If
any shareholder has given such a notice, then every shareholder entitled to vote
may cumulate votes for candidates in nomination and give one candidate a number
of votes equal to the number of directors to be elected, multiplied by the
number of votes to which that shareholder's shares are entitled, or distribute
the shareholder's votes on the same principle among any or all of the candidates
as the shareholder thinks fit. The candidates receiving the highest number of
votes, up to the number of directors to be elected, shall be elected.

Section 2.7: Waiver of Notice or Consent by Absent Shareholders. The
----------- --------------------------------------------------
transactions of any meeting of shareholders, either annual or special, however
called and noticed and wherever held, shall be as valid as though had at a
meeting duly held after regular call and notice, if a quorum be present either
in person or by proxy, and if, either before or after the meeting, each person
entitled to vote who was not present in person or by proxy signs a written
waiver of notice or a consent to a holding of the meeting, or an approval of the
minutes. The waiver of notice or consent need not specify either the business to
be transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in Section 601(f) of the Corporations Code of the State
of California and if such action is taken by other than unanimous approval of
those entitled to vote, the waiver of notice or consent shall state the general
nature of the proposal. All such waivers, consents or approvals shall be filed
with the corporate records or made a part of the minutes of the meeting.

Attendance by a person at a meeting shall also constitute a waiver of
notice of that meeting, except when the person objects at the beginning of the
meeting to the transaction of any business because the meeting is not lawfully
called or convened, and except that attendance at a meeting is not a waiver of
any right to object

3
<PAGE>

to the consideration of matters not included in the notice of the meeting if
that objection is expressly made at the meeting.

Section 2.8: Shareholder Action by Written Consent Without A Meeting. Any
----------- -------------------------------------------------------
action which may be taken at any annual or special meeting of shareholders may
be taken without a meeting and without prior notice if a consent in writing
setting forth the action so taken is signed by the holders of outstanding shares
having not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all shares entitled to vote
on that action were present and voted. In the case of election of directors,
such a consent shall be effective only if signed by the holders of all
outstanding shares entitled to vote for the election of directors; provided,
however, that a director may be elected at any time to fill a vacancy on the
board of directors that has not been filled by the directors by the written
consent of the holders of a majority of the outstanding shares entitled to vote
for the election of directors. All such consents shall be filed with the
secretary of the corporation and shall be maintained in the corporate records.
Any shareholder giving a written consent, or the shareholder's proxy holders, or
a transferee of the shares or a personal representative of the shareholder or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.

ARTICLE 3
---------

Directors

Section 3.1: Powers. Subject to the provisions of the California General
----------- ------
Corporation Law and any limitations in the articles of incorporation and these
bylaws relating to action required to be approved by the shareholders or by the
outstanding shares, the business and affairs of the corporation shall be managed
and all corporate powers shall be exercised by or under the direction of the
board of directors.

Section 3.2: Number and Qualification of Director(s). The authorized
----------- ---------------------------------------
number of director(s) shall be eight (8) until changed by a duly adopted
amendment to the articles of incorporation, or by an amendment to this bylaw
adopted by the vote or written consent of holders of a majority of the
outstanding shares entitled to vote.

Section 3.3: Election and Term of Office of Directors. Directors shall be
----------- ----------------------------------------
elected at each annual meeting of the shareholders to hold office until the next
annual meeting. Each director, including a director elected to fill a vacancy,
shall hold office until the expiration of the term for which elected and until a
successor has been elected and qualified.

4
<PAGE>

Section 3.4: Vacancies. Vacancies in the board of directors may be filled
----------- ---------
by a majority of the remaining directors, though less than a quorum, or by a
sole remaining director, except that a vacancy created by the removal of a
director by the vote or written consent of the shareholders, or by court order,
may be filed only by the vote of a majority of the shares entitled to vote
represented at a duly held meeting at which a quorum is present, or by the
written consent of holders of a majority of the outstanding shares entitled to
vote.

Section 3.5: Place of Meetings by Telephone. Regular meetings of the board
----------- ------------------------------
of directors may be held at any place within or outside the State of California
that has been designated from time to time by resolution of the board of
directors. In the absence of such a designation, regular meetings shall be held
at the principal executive office of the corporation. Special meetings of the
board shall be held at any place within or outside the State of California that
has been designated in the notice of the meeting, or if not stated in the notice
or if there is no notice, at the principal executive office of the corporation.
Any meeting, regular or special, may be held by conference telephone or similar
communication equipment, so long as all directors participating in the meeting
can hear one another, and all such directors shall be deemed to be present in
person at the meeting.

Section 3.6: Regular Meetings. Regular meetings of the board of directors
----------- ----------------
shall be held without call at such time as shall from time to time be fixed by
the board of directors. Such regular meetings may be held without notice.

Section 3.7: Special Meetings. Special meetings of the board of directors
----------- ----------------
for any purpose or purposes may be called at any time by the chairman of the
board or the president, or any vice president, or the secretary or any two
directors. Notice shall be given in the manner prescribed by Section 307 of the
Corporations Code of the State of California.

Section 3.8: Quorum. A majority of the authorized number of directors
----------- ------
shall constitute a quorum for the transaction of business, except to adjourn.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present shall be regarded as the act of
the board of directors subject to the provisions of Section 310 of the
Corporations Code of California (as to approval of contracts or transactions in
which a director has a direct or indirect material financial interest), Section
311 of that Code (as to appointment of committees) and Section 317(e) of that
Code (as to indemnification of directors). A meeting at which a quorum is
initially present may continue to transact business notwithstanding the
withdrawal of directors if any action taken is approved by at least a majority
of the required quorum for that meeting.

5
<PAGE>

Section 3.9: Waiver of Notice. The transactions of any meeting of the
----------- ----------------
board of directors, however called and noticed or wherever held, shall be as
valid as though had at a meeting duly held after regular call and notice if a
quorum is present, and if either before or after the meeting, each of the
directors not present signs a written waiver of notice, a consent to holding the
meeting or an approval of the minutes. The waiver of notice or consent need not
specify the purpose of the meeting. All such waivers, consents and approvals
shall be filed with the corporate records or made a part of the minutes of the
meeting. Notice of a meeting shall also be deemed given to any director who
attends the meeting without protesting before or at its commencement the lack of
notice to that director.

Section 3.10: Action Without Meeting. Any action required or permitted to
------------ ----------------------
be taken by the board of directors may be taken without a meeting if all members
of the board shall individually or collectively consent in writing to that
action. Such action by written consent shall have the same force and effect as a
unanimous vote of the board of directors. Such written consent or consents shall
be filed with the minutes of the proceedings of the board of directors.

Section 3. 11: Fees and Compensation of Directors. Directors and members
------------- ----------------------------------
of committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
board of directors. This Section 3.11 shall not be construed to preclude any
----
director from serving the corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.

ARTICLE 4
---------

Officers

Section 4.1: Officers. The officers of the corporation shall be a
----------- --------
president, a secretary and a chief financial officer. The corporation may also
have, at the discretion of the board of directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers and such other officers as may be appointed in accordance
with the provisions of Section 4.2 of this Article 4. Any number of offices may
--- -
be held by the same person.

Section 4.2: Election of Officers. The officers of the corporation,
----------- --------------------
except such officers as may be appointed in accordance with the provisions of
Section 4.3 of this Article 4, shall be chosen by the board of directors, and
--- -
each shall serve at the pleasure of the board, subject to the rights, if any, of
an officer under any contract of employment.

6
<PAGE>

Section 4.3: Vacancies in Offices. A vacancy in any office because of
----------- --------------------
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these bylaws for regular appointments to that
office.

Section 4.4: Chairman of the Board. The chairman of the board, if such an
----------- ---------------------
officer be elected, shall if present, preside at meetings of the board of
directors and exercise and perform such other powers and duties as may be from
time to time assigned to him by the board of directors or prescribed by the
bylaws. If there is no president, the chairman of the board shall, in addition,
be the chief executive officer of the corporation, and shall have the powers and
duties prescribed in Section 4.5 of this Article 4.
--- -

Section 4.5: President. Subject to such supervisory powers, if any, as may
----------- ---------
be given by the board of directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
corporation and shall, subject to the control of the board of directors, have
general supervision, direction, and control of the business and the officers of
the corporation. He or she shall preside at all meetings of the shareholders,
and in the absence of the chairman of the board, or if there be none, at all
meetings of the board of directors. He or she shall have the general powers and
duties of management usually vested in the office of president of a corporation,
and shall have such other powers and duties as may be prescribed by the board of
directors or the bylaws.

Section 4.6: Vice Presidents. In the absence or disability of the
----------- ---------------
president, the vice presidents, if any, in order of their rank as fixed by the
board of directors, or if not ranked, a vice president designated by the board
of directors, shall perform all the duties of the president, and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
board of directors or the bylaws, and the president or the chairman of the
board.

Section 4.7: Secretary. The secretary shall keep or cause to be kept at
----------- ---------
the principal executive office, or such other place as the board of directors
may direct, a book of minutes of all meetings and actions of directors,
committees of directors and shareholders, with the time and place of holding,
whether regular or special, and if special, how authorized, the notice given,
the names of those present at directors meetings or committee meetings, the
number of shares present or represented at shareholders meetings and the
proceedings.

The secretary shall keep or cause to be kept at the principal executive
office, or at the office of the corporation's transfer agent or registrar as
determined by resolution of the board of

7
<PAGE>

directors, a share register or a duplicate share register showing the names of
all shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same and the number and
date of cancellation of every certificate surrendered for cancellation.

The secretary shall give or cause to be given notice of all meetings of the
shareholders and of the board of directors required by the bylaws, or by law to
be given, and he shall keep the seal of the corporation, if one be adopted, in
safe custody, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or bylaws.

Section 4.8: Chief Financial Officer. The chief financial officer shall
----------- -----------------------
receive and have custody of all funds and securities of the corporation, shall
keep adequate and correct accounts of the corporation's properties and business
transactions and shall perform such other duties as may be required of him by
the board of directors or by the president.

ARTICLE 5
---------

Indemnification of Directors, Officers,
Employees and Other Agents

Section 5.1: Indemnification. The corporation may, as permitted by the
----------- ---------------
California General Corporation Law, indemnify each of its agents against
expenses, judgments, fines, settlement and other amounts actually and reasonably
incurred in connection with any proceeding arising by reason of the fact any
such person is or was an agent of the corporation. For purposes of this section,
an "agent" of the corporation includes any person who is or was a director,
officer, employee or other agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a director, officer, employee or agent
of a corporation which was a predecessor corporation of corporation or of
another enterprise at the request of such predecessor corporation.

ARTICLE 6
---------

Issuance and Transference of Shares

Section 6.1: Certificates for paid Unpaid Shares. Certificates for shares
----------- -----------------------------------
of the corporation shall be issued when fully paid, and may be issued prior to
full payment under such restrictions as the board of directors may deem to be in
compliance with the regulations of the Commissioner of Corporations of the State
of California.

8
<PAGE>

Section 6.2: Share Certificates. The certificates shall be in such from
----------- ------------------
and device as shall be provided by the board of directors and shall fully comply
with the provisions of the Corporations Code of the State of California. The
certificates shall be signed by the president or the vice president and by the
secretary or assistant secretary and the seal of the corporation shall be
affixed thereto.

Section 6.3: Replacement of Certificates. No new certificates shall be
----------- ---------------------------
issued until the form certificate for the shares represented thereby shall have
been surrendered and canceled, except in the case of lost or destroyed
certificates for which the board of directors may order new certificates to be
issued upon such terms, conditions and guarantees as the board may see fit to
impose including the filling of sufficient indemnity.

Section 6.4: Transfer of Shares. Subject to the terms and provisions of
----------- ------------------
any agreement which may now or hereafter restrict the transfer of the
corporation's shares, shares of the corporation may be transferred in any manner
permitted by law, but, such transfer shall not be valid, except as to the
parties thereto, until the same is entered upon the books of the corporation and
until the old certificates are surrendered and canceled. The transferee in any
transfer of shares shall be deemed to have full notice of, and to consent to,
the bylaws of this corporation to the same extent as if he had signed a written
assent thereto.

ARTICLE 7
---------

Records and Reports

Section 7.1: Inspection of Books and Records. All books and records
----------- -------------------------------
provided for by statue shall be open to inspection of the directors and
shareholders from time to time and to the extent expressly provided by statute
and not otherwise.

Section 7.2: Annual Report to Shareholders. The annual report to
----------- -----------------------------
shareholders referred to in Section 1501 of the California General Corporation
Law is expressly dispensed with, but, nothing herein shall be interpreted as
prohibiting the board of directors from issuing annual or other periodic reports
to the shareholders of the corporation as they consider appropriate.

9
<PAGE>

ARTICLE 8

AMENDMENT OF BYLAWS

Section 8.1: Amendment of Bylaws by Shareholders. Subject to section 212
----------- -----------------------------------
of the California Corporations Code the bylaws and every part thereof may from
time to time, and at any time, be amended, altered or repealed and new or
additional bylaws may be adopted by the vote of the shareholders entitled to
exercise a majority of the voting power of the corporation or by the written
assent of such shareholders, except where a greater number is required by law.

Section 8.2: Amendment of Bylaws by Directors. Subject to the right of the
----------- --------------------------------
shareholders to adopt, amend or repeal bylaws and subject to section 212 of the
California Corporations Code, bylaws may be adopted, amended or repealed by a
majority vote of the directors present at any meeting of the board of directors
at which a quorum is present; provided, however, that the board of directors may
not adopt a bylaw or amendments thereof changing the authorized number of
directors.

ARTICLE 9
---------

Right of First Refusal

Section 9.1: Right of First Refusal. No shareholder shall sell, assign,
----------- ----------------------
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:

(a) If the shareholder desires to sell or otherwise transfer any of
his shares of stock, then the shareholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.

(b) For a period of thirty (30) days following receipt of such
notice, the corporation shall have the option to purchase all (but not less than
all) of the shares specified in the notice at the price and upon the terms set
forth in such notice; provided, however, that, with the consent of the
shareholder, the corporation shall have the option to purchase a lesser portion
of the shares specified in said notice a the price and upon the terms set forth
therein. In the event of a gift, property settlement or other transfer in which
the proposed transferee is not paying the full price for the shares, and that is
not otherwise exempted from the provisions of this Section 64, the price shall
be deemed to be the fair market value of the stock at such time as determined in
good

10
<PAGE>

faith by the Board of Directors. In the event the corporation elects to purchase
all of the shares or, with consent of the shareholder, a lesser portion of the
shares, it shall give written notice to the transferring shareholder of its
election and settlement for said shares shall be made as provided below in
paragraph (d).

(d) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring shareholder as specified in said
transferring shareholder's notice, the Secretary of the corporation shall so
notify the transferring shareholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring shareholder's notice; provided that if the terms of payment set
forth in said transferring shareholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring shareholder's
notice.

(e) In the event the corporation and/or its assignee(s) do not elect
to acquire all of the shares specified in the transferring shareholder's notice,
said transferring shareholder may, with the sixty-day period following the
expiration of the option rights granted to the corporation and/or its
assignee(s) as specified in said transferring shareholder's notice. All shares
so sold by said transferring shareholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.

(f) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring shareholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the shareholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.

(g) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.

(h) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:

11
<PAGE>

(1) Upon the date securities of the corporation are first offered to
the public pursuant to a registration statement filed with, and declared
effective by, the United States Securities and Exchange Commission under the
Securities Act of 1933, as amended.

(i) The certificates representing shares of stock of the corporation shall
bear on their face the following legend so long as the foregoing right of first
refusal remains in effect:

"The shares represented by this certificate are subject to a right of
first refusal option in favor of the corporation and/or its assignee(s), as
provided in the bylaws of the corporation."

<PAGE>

EXHIBIT 4.2
TVIA, INC.

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
<PAGE>

TVIA, INC.

AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT

THIS AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the "Agreement")
is entered into as of April 3, 2000, by and between TVIA, INC., a California
----------
corporation (the "Company"), the undersigned holders of Series F Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock of the Company (the
"Investors"), and the undersigned purchasers of Series I Preferred Stock of the
Company (the "Purchasers"). The Investors, other holders of registration and
other rights under the Prior Agreement (as defined below), and the Purchasers
are sometimes collectively referred to as the "Shareholders." The names of the
Investors and the Purchasers are set forth on the Schedule of Investors and
Purchasers attached hereto as Schedule A,
----------

W I T N E S S E T H:

WHEREAS, the Company and the Purchasers have entered into that certain
Series I Preferred Stock Purchase Agreement dated of even date herewith (the
"Purchase Agreement") to which the Company shall sell to the Investors up to two
million (2,000,000) shares of its Series I Preferred Stock; and

WHEREAS, Investors holding a majority of the shares of Series F Preferred
Stock, Series G Preferred Stock and Series H Preferred Stock of the Company
enjoying certain registration rights and rights regarding receipt of information
pursuant to an Investors' Rights Agreement dated as of March 22, 2000 (the
"Prior Agreement"). The Investors wish to terminate all rights under the Prior
Agreement and have such rights superseded in their entirety by the rights
provided under this Agreement and wish to have this Agreement supersede and
replace the Prior Agreement in its entirety; and

WHEREAS, in order to induce the Purchasers to invest funds in the Company
pursuant to the Purchase Agreement, the Investors, the Purchasers and the
Company hereby agree to enter into this Agreement:

NOW, THEREFORE, in consideration of the premises, covenants and conditions
set forth herein, the parties agree as follows:

1. Registration Rights. The parties covenant and agree as follows:
-------------------

1.1 Definitions. For purposes of this Section 1:
-----------

(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the declaration or ordering of effectiveness of such registration
statement or document.

(b) The term "Registrable Securities" means (i) the Company's Common
Stock issuable or issued upon conversion of the Series F Preferred Stock, the
Series G Preferred Stock,

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<PAGE>

Series H Preferred Stock or Series I Preferred Stock of the Company (the
"Conversion Stock") and (ii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such Series F Preferred Stock, Series G
Preferred Stock, Series H Preferred Stock, Series I Preferred Stock or Common
Stock, excluding in all cases, however, (A) any Registrable Securities sold by a
person in a transaction in which such person's rights under this Section 1 are
not assigned or (B) shares of Conversion Stock or other securities that have
been sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction.

(c) The number of shares of "Registrable Securities then outstanding"
shall be equal to the sum of (i) the number of shares of Common Stock
outstanding that are Registrable Securities and (ii) the number of shares of
Common Stock issuable pursuant to then exercisable or convertible securities
that are exercisable or convertible into Registrable Securities.

(d) The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any transferee or assignee thereof in
accordance with Section 1.14 hereof.

(e) The term "Form S-3" means such form under the Act as in effect on the
date hereof or any registration form under the Act subsequently adopted by the
Securities and Exchange Commission ("SEC") that permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.

(f) The term "Initial Public Offering" means the first sale of Common
Stock of the Company to the public effected pursuant to a registration statement
(other than a registration statement relating either to the sale of securities
to employees of the Company pursuant to a stock plan, stock purchase or similar
plan or a SEC Rule 145 transaction) filed with, and declared effective by, the
SEC under the Act on Form S-1 (or any subsequently adopted similar form).

(g) The term "Preferred Stock" shall mean the Series F Preferred Stock,
Series G Preferred Stock, Series H Preferred Stock and Series I Preferred Stock
of the Company.

1.2 Request for Registration.
------------------------

(a) If the Company shall receive at any time after the earlier of (i) July
31, 2001, or (ii) six (6) months after consummation of the Company's Initial
Public Offering, a written request from the Holders of twenty percent (20%) of
the Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of Registrable Securities with
an aggregate gross offering price of at least $10,000,000, then the Company
shall, within ten (10) days of the receipt thereof, give written notice of such
request to all Holders and shall, subject to the limitations of subsection
1.2(b), effect as soon as practicable, and in any event shall use its best
efforts to effect within one hundred twenty (120) days of the receipt of such
request, the registration under the Act of all Registrable Securities that the
Holders request to be registered within twenty (20) days of the mailing of such
notice by the Company.

-2-
<PAGE>

(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter or underwriters will be selected by the Company and
shall be reasonably acceptable to a majority in interest of the Initiating
Holders. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting. Notwithstanding any
other provision of this Section 1.2, if the managing underwriter advises the
Initiating Holders in writing that marketing factors require a limitation of the
number of shares to be underwritten, then the Company shall so advise all
Holders of Registrable Securities requesting to be included in the underwriting,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders requesting to be included in
the underwriting, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder at the time of filing
the registration statement; provided, however, that the number of shares of
Registrable Securities to be included in such underwriting shall not be reduced
unless all other securities, including, without limitation, any shares offered
by the Company, are first entirely excluded from the underwriting. No
Registrable Securities excluded from the underwriting by reason of the managing
underwriters' marketing limitation shall be included in such registration. To
facilitate the allocation of Shares in accordance with the above provisions, the
Company or the underwriters may round the number of shares allocated to any
Holder to the nearest 100 Shares.

(c) The Company is obligated to effect only two (2) registrations pursuant
to this Section 1.2 (counting for this purpose only registrations that have been
declared or ordered effective and pursuant to which Registrable Securities have
been sold).

(d) Notwithstanding the foregoing, if the Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a certificate
signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to
the Company and its stockholders for such registration statement to be filed and
that it is therefore essential to defer the filing of such registration
statement, the Company shall have the right to defer such filing for a period of
not more than one hundred twenty (120) days after receipt of the request of the
Initiating Holders; provided, however, that the Company may defer its
obligations for this reason only once in any twelve (12) month period.

(e) Notwithstanding anything to the contrary in this Section 1.2, the
Company shall not be obligated to take an action to effect such registration
pursuant to this Section 1.2 for a period of six (6) months following the
effective date of a registration statement previously filed by the Company
(other than a registration of securities in a SEC Rule 145 transaction or with
respect to an employee benefit plan).

-3-
<PAGE>

1.3 Company Registration. If (but without any obligation to do so) (a) the
--------------------
Company proposes to register any of its Common Stock or other securities under
the Act in connection with a public offering of such securities solely for cash
(including a registration effected by the Company for stockholders other than
the Holders, but not including a registration relating solely to the Company's
employee benefit plans, or a registration on any form that does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), and (b)
the Company has consummated its Initial Public Offering, the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company, the Company shall, subject to the provisions of
Section 1.8, cause to be registered under the Act all of the Registrable
Securities that each such Holder has requested to be registered.

1.4 Obligations of the Company. Whenever required pursuant to this
--------------------------
Section 1 to effect the registration of any Registrable Securities, the Company
shall perform the following obligations as expeditiously as reasonably possible:

(a) The Company shall prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best efforts
to cause such registration statement to become effective and, upon the request
of the Holders of a majority of the Registrable Securities registered
thereunder, to keep such registration statement effective for up to one hundred
twenty (120) days.

(b) The Company shall prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.

(c) The Company shall furnish to the Holders such numbers of copies of the
prospectus, including a prospectus subject to completion, in conformity with the
requirements of the Act, and such other documents as they may reasonably request
in order to facilitate the disposition of Registrable Securities owned by them.

(d) The Company shall use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders, provided that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.

(e) In the event of any underwritten public offering, the Company shall
enter into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.

(f) The Company shall notify each Holder of Registrable Securities covered
by such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such

-4-
<PAGE>

registration statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances then existing.

(g) Notwithstanding the foregoing, the Company shall have no obligation
with respect to any registration requested pursuant to Section 1.2 or 1.13 if
the number of shares or the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the number of shares or the anticipated aggregate offering price required
to trigger the Company's obligation to initiate such registration as specified
in subsection 1.2(a) or subsection 1.13(b)(ii), as applicable.

1.5 Obligations of the Investors.
----------------------------

(a) It shall be a condition precedent to the obligations of the Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company
such information regarding itself, the Registrable Securities held by it, and
the intended method of disposition of such securities as shall be required to
effect the registration of such Holder's Registrable Securities.

(b) In the event of any underwritten public offering, each Holder
participating in such underwriting shall enter into and perform its obligations
under an underwriting agreement in customary form with the managing underwriter
of such offering.

1.6 Expenses of Demand Registration. All expenses other than underwriting
-------------------------------
discounts and commissions incurred in connection with registrations, filings or
qualifications pursuant to Section 1.2, including (without limitation) all
registration, filing and qualification fees, printers' and accounting fees, fees
and disbursements of counsel for the Company and the reasonable fees and
disbursements of one counsel for the selling Holders shall be borne by the
Company. Notwithstanding the foregoing, the Company shall not be required to pay
for expenses of any registration proceeding begun under Section 1.2, the request
for which has been subsequently withdrawn by the Holders of a majority of the
Registrable Securities or is not completed due to failure to meet the gross
offering price requirement set forth in such section unless Holders representing
a majority of Registrable Securities agree to forfeit their right to a
registration under Section 1.2, provided however, that if at the time of such
withdrawal by the Holders of a majority of the Registrable Securities, the
Holders have learned of a material adverse change in the operating results,
financial condition or business of the Company from that known to the Holders at
the time of the request and have withdrawn the request with promptness following
disclosure by the Company of such material adverse change then the Holders shall
not be required to pay any such expenses and shall retain their right pursuant
to Section 1.2.

1.7 Expenses of Company Registration. The Company shall bear and pay all
--------------------------------
expenses incurred in connection with any registration, filing or qualification
of Registrable Securities with respect to the registrations pursuant to Section
1.3 for each Holder (which right may be assigned as provided in Section 1.14),
including (without limitation) all registration, filing, and qualification fees,
fees and disbursements of Company counsel, printers' and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements of

-5-
<PAGE>

one counsel for the selling Holders, but excluding underwriting discounts and
commissions relating to Registrable Securities.

1.8 Underwriting Requirements.
-------------------------

(a) In connection with any offering involving an underwriting of shares of
the Company's capital stock, the Company shall not be required under Section 1.3
to include any of the Holders' securities in such underwriting unless they
accept the terms of the underwriting as agreed upon between the Company and the
underwriters selected by it (or by other persons entitled to select the
underwriters), and then only in such quantity as the managing underwriter
determines in its sole discretion will not, due to marketing factors, jeopardize
the success of the offering by the Company.

(b) If the total amount of securities, including Registrable Securities,
requested by stockholders to be included in such offering exceeds the amount of
securities sold other than by the Company that the underwriters determine in
their sole discretion is compatible with the success of the offering, then the
Company shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters determine
in their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the Holders requesting
inclusion in such registration according to the total amount of securities
entitled to be included therein owned by each such Holder on a pro rata basis);
provided, however, that any such limitation or "cut-back" shall be first applied
to all shares proposed to be sold in such offering, other than for the account
of the Company, which are not Registrable Securities. In no event shall the
amount of securities of the selling Holders included in the offering be reduced
below twenty-five percent (25%) of the total amount of securities included in
such offering, unless such offering is the initial public offering of the
Company's securities, in which case the selling shareholders may be excluded if
the underwriters make the determination described above and no other
shareholder's securities are included.

1.9 Withdrawal Rights and Reallocation. If any Holder disapproves of the
----------------------------------
terms of any such underwriting, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriters. If such Holder's shares are
withdrawn from registration, or if the number of shares of Registrable
Securities was previously reduced due to marketing factors, the Company shall
offer to all Holders retaining the right to include securities in the
registration the right to include additional Registrable Securities in the
registration, with such shares being allocated on a pro rata basis among the
Holders of Registrable Securities.

1.10 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.

1.11 Indemnification. In the event any Registrable Securities are included
---------------
in a registration statement under this Section 1:

(a) To the extent permitted by law, the Company will indemnify and hold
harmless each Holder, the officers, directors and general partners of each
Holder, any underwriter (as defined in the Act) for such Holder and each person,
if any, who controls such Holder or

-6-
<PAGE>

underwriter within the meaning of the Act or the 1934 Act, against any losses,
claims, damages or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act or other federal or state law, including any
of the foregoing incurred in settlement of any litigation, commenced or
threatened, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (each of which is referred to herein as a
"Violation"):

(i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any prospectus
subject to completion or final prospectus contained therein or any
amendments or supplements thereto;

(ii) the omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or

(iii) any violation or alleged violation by the Company of the Act,
the 1934 Act, any state securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities laws. In
addition, the Company will promptly reimburse each such Holder, officer,
director or general partner, underwriter or controlling person for any
legal or other expenses reasonably incurred by them on an as-incurred
basis, in connection with investigating or defending any such loss, claim,
damage, liability or action.

Notwithstanding the foregoing, the indemnity provisions contained in this
Section 1.11(a) shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability or action if such settlement is effected without the
written consent of the Company (which consent shall not be unreasonably
withheld), nor shall the Company be liable in any such case for any such loss,
claim, damage, liability or action to the extent that it arises out of or is
based upon a Violation that results from reliance upon written information
furnished expressly for use in connection with such registration by any such
Holder, officer, director, general partner, underwriter or controlling person.

(b) To the extent permitted by law, each selling Holder shall indemnify
and hold harmless the Company, each of its directors, each of its officers who
have signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter and any Holder selling
securities in such registration statement or any of its directors, officers or
general partners or each person, if any, who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
(or any director, officer or controlling person), or underwriter (or controlling
person), or Holder (or director, officer, general partner or controlling person
thereof) may become subject, under the Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or action in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation results from reliance
upon written information furnished by such Holder expressly for use in
connection with such registration.

-7-
<PAGE>

Each such Holder will promptly reimburse any legal or other expenses
reasonably incurred, on an as-incurred basis, by the Company (or any director,
officer or controlling person), underwriter (or controlling person), Holder (or
any director, officer, general partner or controlling person thereof) in
connection with investigating or defending, any such loss, claim, damage,
liability or action; provided, however, that the indemnity agreement contained
in this Section 1.11(b) shall not apply to amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the written consent of the Holder, which consent shall not be
unreasonably withheld.

Notwithstanding the foregoing, the liability of each Holder under this
Section 1.11(b) shall be limited to an amount equal to the aggregate proceeds of
the shares sold by such Holder in the offering pursuant to which the Violation
is claimed to have occurred, unless such liability arises out of or is based on
willful misconduct of such Holder.

(c) Within a reasonable time after receipt by an indemnified party of
notice of the commencement of any action (including any governmental action)
under this Section 1.11, such indemnified party shall, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.11,
deliver to the indemnifying party a written notice of the commencement thereof.
Such indemnifying party shall have the right to participate in and subject to
the consent of the indemnified party, which consent shall not be unreasonably
withheld, the indemnifying party shall have the right to enter into settlement
of such action, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense of
such action with counsel approved by the indemnified party (whose approval shall
not be unreasonably withheld); provided, however, that the indemnified party
shall cooperate with the indemnifying party, and that if representation of an
indemnified party by the counsel retained by the indemnifying party would be
inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding, such indemnified party shall have the right to retain its own
counsel, with the reasonable fees and reasonable expenses to be paid by the
indemnifying party.

The failure of an indemnified party to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action, if such failure is prejudicial to the indemnifying party, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 1.11 to the extent such party is prejudiced. However, the omission of
the indemnified party to deliver such written notice to the indemnifying party
will not relieve such indemnifying party of any liability that it may have to
any indemnified party otherwise than under this Section 1.11.

(d) If the indemnification provided for in this Section 1.11 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
deter-

-8-
<PAGE>

mined by reference to, among other things, whether the violation of law or the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to acts of or information supplied by the indemnifying
party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.

(e) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with the underwritten public offering are in conflict with
the foregoing provisions, the provisions in the underwriting agreement shall
control.

(f) The obligations of the Company and of the Holders under this Section
1.11 shall survive the conversion, if any, of the Series F Preferred Stock,
Series G Preferred Stock and Series I Preferred Stock and the completion of any
offering of Registrable Securities in a registration statement under this
Section 1 or otherwise.

1.12 Reports Under the 1934 Act. With a view to making available to the
--------------------------
Holders the benefits of Rule 144 promulgated under the Act and any other rule or
regulation of the SEC that may at any time permit a Holder to sell securities of
the Company to the public without registration, the Company agrees:

(a) to make and keep public information available, as those terms are
defined under SEC Rule 144, at all times after ninety (90) days after the
effective date of the first registration statement filed by the Company for the
offering of its securities to the general public;

(b) use its best efforts to file with the SEC all reports and other
documents required of the Company under the Act and the 1934 Act (at any time
after it has become subject to such reporting requirements) in a timely manner;
and

(c) to furnish to any Holder, so long as such Holder owns Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), (ii) a copy of the Company's
most recent annual or quarterly report and (iii) such other information as may
be reasonably requested by such Holder in order to avail itself of any rule or
regulation of the SEC that permits the selling of any such securities without
registration.

1.13 Form S-3 Registration. At any time following the first anniversary of
---------------------
the Company's Initial Public Offering, in case the Company shall receive from
any Holder or Holders a written request that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
shall comply with the following obligations:

(a) The Company shall promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders.
In the event the registration is proposed to be part of a firm commitment
underwritten public offering, the substantive provisions of subparagraph (b) of
Section 1.2 hereof shall be applicable to each such registration initiated under
this Section 1.13.

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<PAGE>

(b) As soon as practicable, the Company shall effect such registration and
all such qualifications and compliances as may be so requested and as would
permit or facilitate the sale and distribution of all or such portion of such
Holder's or Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any other
Holder or Holders joining in such request as are specified in a written request
given within fifteen (15) days after receipt of such written notice from the
Company. Notwithstanding the foregoing, the Company shall not be obligated to
effect any such registration, qualification or compliance, pursuant to this
Section 1.13 if: (i) the Company has previously effected three (3) registrations
pursuant to this Section 1.13; (ii) Form S-3 is not available for such offering
by the Holders; (iii) the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than $1,000,000; (iv) the Company furnishes to the
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Holder or Holders under this Section 1.13; (v) the Company has,
within the twelve (12) month period preceding the date of such request, already
effected a registration on Form S-3 for the Holders pursuant to this Section
1.13; (vi) the Company would be required to qualify to do business or to execute
a general consent to service of process in effecting such registration,
qualification or compliance in a particular jurisdiction, or (vii) a
registration statement respecting securities of the Company has been declared
effective within one hundred eighty (180) days of such request.

(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities so requested to be registered as
soon as practicable after receipt of the request or requests of the Holders. All
expenses incurred in connection with the registrations requested pursuant to
this Section 1.13, including (without limitation) all registration, filing,
qualification, printers' and accounting fees, fees and disbursements of counsel
for the selling Holder or Holders shall be borne by the Company and any
underwriters' discounts or commissions associated with Registrable Securities,
shall be borne by the selling Holder or Holders. Registrations effected pursuant
to this Section 1.1 shall not be counted as demands for registration effected
pursuant to Section 1.2.

1.14 Assignment of Registration Rights. The rights to cause the Company to
---------------------------------
register Registrable Securities granted under this Section 1 may be assigned by
a Holder to a transferee or assignee who acquires 250,000 shares (as adjusted
for stock splits, combinations, dividends and the like) of the Registrable
Securities held by such Holder, provided the Company is, within a reasonable
time prior to such transfer, furnished with written notice of the name and
address of such proposed transferee or assignee and the securities with respect
to which such registration rights are being assigned; provided further that such
assignment shall be effective only if the transferee enters into a written
agreement providing that such transferee shall be bound by the provisions of
Section 1 of this Agreement. Notwithstanding the foregoing or any other
provision contained herein to the contrary, the right to cause the Company to
register Registrable Securities may be assigned by a Holder to any constituent
partner of a partnership Holder and any affiliate,

-10-
<PAGE>

subsidiary or parent of a corporate Holder provided that such transferee agrees
in writing to be bound by the terms and conditions of this Agreement.

1.15 "Market Stand-Off' Agreement. Each Shareholder hereby agrees that it
----------------------------
shall not, to the extent specified by the Company and an underwriter of Common
Stock (or other securities) of the Company, sell, offer to sell, contract to
sell (including without limitation any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any securities of the Company (other than securities already
registered) during a reasonable and customary period of time not to exceed one
hundred eighty (180) days, as agreed to by the Company and the underwriters,
following the effective date of the Company's Initial Public Offering; provided,
however, that all officers and directors of the Company enter into similar
agreements.

In order to enforce the foregoing covenant, the Company may impose stop
transfer instructions with respect to the securities of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such one hundred eighty (180) day period.

1.16 Termination of the Company's Obligation. The rights to cause the
---------------------------------------
Company to register securities granted to Holders pursuant to Sections 1.2 and
1.3 shall terminate as to any Holder at such time as the Holder has the ability
to sell all of the Registrable Securities owned by such stockholder under SEC
Rule 144 within a three (3) month period.

1.17 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of Registrable Securities then outstanding, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would grant rights to have securities other than Registrable
Securities registered under the Act that are senior to or pari passu with the
registration rights granted herein.

2. Miscellaneous.
-------------

2.1 Governing Law. This Agreement shall be governed by and construed under
-------------
the laws of the State of California as applied to agreements among California
residents, made and to be performed entirely within the State of California.

2.2 Successors and Assigns. Except as otherwise expressly provided herein,
----------------------
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors, and administrators of the parties hereto
(including transferees of any shares of Preferred Stock sold under their
respective stock purchase agreements or any Common Stock issued upon conversion
thereof).

2.3 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement among the parties with regard to the subject matter
hereof, and no party shall be liable or bound to any other party in any manner
by any representations, warranties, covenants or agreements except as
specifically set forth herein. Nothing in this Agreement, express or implied,
is intended to confer upon any party, other than the parties hereto and their
respective

-11-
<PAGE>

successors and assigns, any rights, remedies, obligations or liabilities under
or by reason of this Agreement, except as expressly provided herein.

2.4 Severability. Any invalidity, illegality or limitation of the
------------
enforceability with respect to any Shareholder of any one or more of the
provisions of this Agreement, or any part thereof, whether arising by reason of
the law of any such Shareholder's domicile or otherwise, shall in no way affect
or impair the validity, legality or enforceability of this Agreement with
respect to any other Shareholder. In case any provision of this Agreement shall
be invalid, illegal or unenforceable, it shall, to the extent practicable, be
modified so as to make it valid, legal and enforceable and to retain as nearly
as practicable the intent of the parties, and the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.

2.5 Amendment and Waiver. Any term of this Agreement may be amended and
--------------------
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively) only with
the written consent of the Company and the Holders of a majority of the
Registrable Securities then outstanding, provided that the effect of such
amendment or waiver is to treat all Holders equally. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Holder of
Registrable Securities at the time outstanding (including securities exercisable
for or convertible into Registrable Securities), each future holder of all such
securities and the Company.

2.6 Delays or Omissions. No delay or omission to exercise any right, power
-------------------
or remedy accruing to any Shareholder or any permitted transferee upon any
breach, default or noncompliance of the Company under this Agreement shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or of
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
the Shareholders' part of any breach, default or noncompliance of this Agreement
or any waiver on the Shareholders' part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing, and that all remedies, either under this
Agreement, by law or otherwise afforded to each Shareholder, shall be cumulative
and not alternative.

2.7 Notices, etc. Unless otherwise provided, any notice required or
------------
permitted under this Agreement shall be given to the party to be so notified in
writing and shall be deemed effective upon personal delivery, upon delivery by
confirmed facsimile or electronic transmission (with duplicate original sent by
United States mail), or three (3) business days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid and
addressed to the party to be notified at the address indicated for such party on
Schedule A hereto (or, if to the Company, at the address of its principal
- ----------
executive offices), or at such other address as such party may designate by ten
(10) days' advance written notice to the other parties.

2.8 Titles and Subtitles. The titles of the paragraphs and subparagraphs
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.

-12-
<PAGE>

2.9 Expenses. If any action at law or in equity is necessary to enforce or
--------
interpret the terms of this Agreement, the prevailing party shall be entitled to
reasonable attorneys' fees, expenses and necessary disbursements in addition to
any other relief to which such party may be entitled.

2.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one instrument.

2.11 Aggregation of Stock. All shares of Preferred Stock held or acquired
--------------------
by affiliated entities or persons shall be aggregated together for the purposes
of determining the availability of any right under this Agreement.

2.12 Termination of Prior Agreement. The Investors, who hold a majority of
------------------------------
the outstanding shares of Series F Preferred Stock, Series G Preferred Stock and
Series H Preferred Stock, hereby agree that all rights under the Prior Agreement
are hereby terminated and superseded by the rights provided under this
Agreement, which Agreement supersedes and replaces the Prior Agreement in its
entirety.

[Remainder of page intentionally left blank]

-13-
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first above written.

COMPANY
-------

TVIA, INC., a California corporation

By /s/ Jack Guedj
----------------------------------

Its President
---------------------------------

Address: 4001 Burton Drive
----------------------------
Santa Clara, CA 95054
----------------------------

INVESTORS:
---------

_____________________________________
Name of Investor

By___________________________________

Its__________________________________

Signature Page of Series I Preferred Stock
Amended and Restated Registration Rights Agreement

-14-

<PAGE>

EXHIBIT 4.3

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL, THAT SUCH
REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE STOCK

Corporation: IGS Technologies, Inc.
Number of Shares: See Below
Class of Stock: See Below
Initial Exercise Price: See Below
Issue Date: December 31, 1997
Expiration Date: December 31, 2002

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.25 and for other
good and valuable consideration, C. Y. Lee ("Holder") is entitled to purchase
the number of fully paid and nonassessable shares of Series H Preferred Stock
(the "Shares") of the corporation (the "Company") at the price per Share (the
"Warrant Price") all as set forth herein and as adjusted pursuant to Article 2
of this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall be equal to the price at which
the Company next sells its equity securities in an offering (the "Next Round")
in which the Company receives net proceeds of not less than One Million Dollars
($1,000,000), and the Shares shall be of the type sold in the Next Round. The
number of Shares that Holder may purchase under this Warrant is equal to
$220,000 divided by the Warrant Price. Notwithstanding the foregoing, if the
Next Round does not occur by December 31, 1999 then, at the option of Holder,
this Warrant shall be for Series G Preferred Stock and the Warrant Price shall
be equal to the price at which the Company last sold its Series G Preferred
Stock or $1.00 per share.

ARTICLE 1. EXERCISE.
--------

1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.

1.2 Conversion Right. In lieu of exercising this Warrant as specified in
----------------
Section 1.1, Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined at the time of such conversion pursuant Section 1.4.

1.3 No Rights of Shareholder. This Warrant does not entitle Holder to
------------------------
any voting rights as a shareholder of the Company prior to the exercise hereof.

1
<PAGE>

Notice of Exercise to the Company. If the Shares are not traded in a public
market, the Board of Directors of the Company shall determine fair market value
in its reasonable good faith judgment. The foregoing notwithstanding, if Holder
advises the Board of Directors in writing that Holder disagrees with such
determination, then the Company and Holder shall promptly agree upon a reputable
investment banking or public accounting firm to undertake such valuation. If the
valuation of such investment banking firm is greater than that determined by the
Board of Directors, then all fees and expenses of such investment banking firm
shall be paid by the Company. In all other circumstances, such fees and expenses
shall be paid by Holder.

1.5 Delivery of Certificate and New Warrant. Promptly after Holder
---------------------------------------
exercises or converts this Warrant, the Company shall deliver to Holder
certificates for the Shares acquired and, if this Warrant has not been fully
exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.

1.6 Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and amount to the Company
or, in the case of mutilation, or surrender and cancellation of this Warrant,
the Company at its expense shall execute and deliver, in lieu of this Warrant, a
new warrant of like tenor.

1.7 Assumption on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------

1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
-------------
means any sale, transfer, or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.

1.7.2 Assumption of Warrant. Upon the closing of any Acquisition
---------------------
the successor entity shall assume the obligations of this Warrant, and this
Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
-----------------------------
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without additional cost to Holder, the total number and kind of
securities to which Holder would have been entitled had Holder owned the Shares
of record as of the date the dividend or subdivision occurred.

2.2 Reclassification, Exchange or Substitution. Upon any
------------------------------------------
reclassification, exchange, substitution, or other event that results in a
change of the number and/or class of the securities issuable upon exercise or
conversion of this Warrant including without limitation, the conversion of the
Company's outstanding shares of preferred stock to common stock, Holder shall be
entitled to receive, upon exercise or conversion of this Warrant, the number and
kind of securities and property that Holder would have received for the Shares
if this Warrant had been exercised immediately before such

2
<PAGE>

reclassification, exchange, substitution, or other event. The Company or its
successor shall promptly issue to Holder a new Warrant for such new securities
or other property. The new Warrant shall provide for adjustments which shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Article 2 including, without limitation, adjustments to the Warrant Price
and to the number of securities or property issuable upon exercise of the new
Warrant. The provisions of this Section 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

2.3 Adjustments for Combinations, Etc. If the outstanding Shares are
---------------------------------
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.

2.4 Price Adjustment. If the Company issues additional common shares
----------------
(including shares of common stock ultimately issuable upon conversion of a
security convertible into common stock) after the date of the Warrant and the
consideration per additional common share is less than the price at which the
Shares are converted to common stock if the Shares are Preferred Stock, then
such conversion price shall be adjusted in accordance with the treatment of such
Preferred Stock under the Company's Articles of Incorporation in effect on the
Issue Date.

2.5 No Impairment. The Company shall not, by amendment of its Articles
-------------
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.

2.6 Fractional Shares. No fractional Shares shall be issuable upon
-----------------
exercise or conversion of the Warrant and the number of Shares to be issued
shall be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying Holder amount computed by
multiplying the fractional interest by the fair market value of a full Share.

2.7 Certificate as to Adjustments. Upon each adjustment of the Warrant
-----------------------------
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.

ARTICLE 3. REPRESENTATION AND COVENANTS OF THE COMPANY

3.1 Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder that all Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws. The

3
<PAGE>

Company shall at all times reserve a sufficient number of shares of stock for
issuance upon Holder's exercise of its rights hereunder.

3.2 Notice of Certain Events. If the Company proposes at any time (a)
------------------------
to declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.

3.3 Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual financial statements of the Company.

ARTICLE 4. MISCELLANEOUS>

4.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date set forth
above.

4.2 Legends. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

4
<PAGE>

letters and legal opinions reasonably satisfactory to the Company,
as reasonably requested by the Company). The Company shall not
require Holder to provide an opinion of counsel if the transfer is
to an affiliate of Holder or if there is no material question as to
the availability of current information as referenced in Rule
144(c), Holder represents that it has complied with Rule 144(d) and
(e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy
of Holder's notice of proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the
Company notice of the portion of the Warrant being transferred
setting forth the name, address and taxpayer identification number
of the transferee and surrendering this Warrant to the Company for
reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to
the Securities Exchange Act of 1934, the Company shall have the
right to refuse to transfer any portion of this Warrant to any
person who directly competes with the Company.

4.5 Notices. All notices and other communications from the Company to
-------
the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or
certified mail, postage prepaid, at such address as may have been
furnished to the Company or the Holder, as the case may be, in
writing by the Company or such holder from time to time.

4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by
the party against which enforcement of such change, waiver,
discharge or termination is sought.

4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the
other party all costs incurred in such dispute, including reasonable
attorneys' fees.

4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving
effect to its principles regarding conflicts of law.

IGS TECHNOLOGIES, INC.

By: /s/ Kenny Liu
-----------------------------------

Title: CEO
--------------------------------

5
<PAGE>

APPENDIX 1

NOTICE OF EXERCISE
------------------

1. The undersigned hereby elects to purchase __ shares of the Stock of
________________ pursuant to the terms of the attached Warrant, and tenders
herewith payment of the purchase price of such shares in full.

1. The undersigned hereby elects to convert the attached Warrant into
Shares/cash [strike one] in the manner specified in the Warrant. This conversion
is exercised with respect to ___________of the Shares covered by the Warrant.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

____________________________________
(Name)

____________________________________
____________________________________
(Address)

3. The undersigned represents it is acquiring the shares solely for its
own account and not as a nominee for any other party and not with a view toward
the resale or distribution thereof except in compliance with applicable
securities laws.

_______________________________________
(Signature)

__________________________
(Date)

<PAGE>

EXHIBIT 4.4

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTTHIS WARRANT
AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144
OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE STOCK

Corporation: IGS Technologies, Inc.
Number of Shares: See Below
Class of Stock: See Below
Initial Exercise Price: See Below
Issue Date: April 30, 1999
Expiration Date: April 30, 2004

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.25 and for other
good and valuable consideration, James Ma ("Holder") is entitled to purchase the
number of fully paid and nonassessable shares of Series H Preferred Stock (the
"Shares") of the corporation (the "Company") at the price per Share (the
"Warrant Price") all as set forth herein and as adjusted pursuant to Article 2
of this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall be equal to the price at which
the Company next sells its equity securities in an offering (the "Next Round")
in which the Company receives net proceeds of not less than One Million Dollars
($1,000,000), and the Shares shall be of the type sold in the Next Round. The
number of Shares that Holder may purchase under this Warrant is equal to
$100,000 divided by the Warrant Price. Notwithstanding the foregoing, if the
Next Round does not occur by December 31, 1999 then, at the option of Holder,
this Warrant shall be for Series G Preferred Stock and the Warrant Price shall
be equal to the price at which the Company last sold its Series G Preferred
Stock or $1.00 per share.

ARTICLE 1. EXERCISE.
--------

1.1 Method of Exercise. Holder may exercise this Warrant by
------------------
delivering a duly executed Notice of Exercise in substantially the form attached
as Appendix 1 to the principal office of the Company. Unless Holder is
exercising the conversion right set forth in Section 1.2, Holder shall also
deliver to the Company a check for the aggregate Warrant Price for the Shares
being purchased.

1.2 Conversion Right. In lieu of exercising this Warrant as specified
----------------
in Section 1.1, Holder may from time to time convert this Warrant, in whole or
in part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined at the time of such conversion pursuant Section 1.4.

1.3 No Rights of Shareholder. This Warrant does not entitle Holder to
------------------------
any voting rights as a shareholder of the Company prior to the exercise hereof.

1.4 Fair Market Value. If the Shares are traded in a public market,
-----------------
the fair market value of the Shares shall be the closing price of the Shares (or
the closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its
<PAGE>

1.7 Assumption on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------

1.7.1 "Acquisition". For the purpose of this Warrant,
-------------
"Acquisition" means any sale, transfer, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------

2
<PAGE>

2.5 No Impairment. The Company shall not, by amendment of its
-------------
Articles of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions of
this Article 2 and in taking all such action as may be necessary or appropriate
to protect Holder's rights under this Article against impairment. If the Company
takes any action affecting the Shares or its common stock other than as
described above that adversely affects Holder's rights under this Warrant, the
Warrant Price shall be adjusted downward and the number of Shares issuable upon
exercise of this Warrant shall be adjusted upward in such a manner that the
aggregate Warrant Price of this Warrant is unchanged.

2.7 Certificate as to Adjustments. Upon each adjustment of the
-----------------------------
Warrant Price, the Company at its expense shall promptly compute such
adjustment, and furnish Holder with a certificate of its Chief Financial Officer
setting forth such adjustment and the facts upon which such adjustment is based.
The Company shall, upon written request, furnish Holder a certificate setting
forth the Warrant Price in effect upon the date thereof and the series of
adjustments leading to such Warrant Price.

ARTICLE 3. REPRESENTATION AND COVENANTS OF THE COMPANY

3
<PAGE>

Company shall at all times reserve a sufficient number of shares of stock for
issuance upon Holder's exercise of its rights hereunder.

3.3 Information Rights. So long as the Holder holds this Warrant
------------------
and/or any of the Shares, the Company shall deliver to the Holder (a) promptly
after mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual financial statements of the Company.

3.4 Registration Under Securities Act of 1933, as amended. The
-----------------------------------------------------
Company hereby grants to Holder the same piggyback registration rights granted
to the Holders of the Series H Preferred Stock.

ARTICLE 4. MISCELLANEOUS>

4.1 Term. This Warrant is exercisable, in whole or in part, at any
time and from time to time on or before the Expiration Date set
forth above.

4.2 Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares,
if any) shall be imprinted with a legend in substantially the
following form:

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH REGISTRATION
IS NOT REQUIRED.

4
<PAGE>

letters and legal opinions reasonably satisfactory to the
Company, as reasonably requested by the Company). The Company
shall not require Holder to provide an opinion of counsel if the
transfer is to an affiliate of Holder or if there is no material
question as to the availability of current information as
referenced in Rule 144(c), Holder represents that it has complied
with Rule 144(d) and (e) in reasonable detail, the selling broker
represents that it has complied with Rule 144(f), and the Company
is provided with a copy of Holder's notice of proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3,
------------------
Holder may transfer all or part of this Warrant or the Shares
issuable upon exercise of this Warrant (or the securities
issuable, directly or indirectly, upon conversion of the Shares,
if any) by giving the Company notice of the portion of the
Warrant being transferred setting forth the name, address and
taxpayer identification number of the transferee and surrendering
this Warrant to the Company for reissuance to the transferee(s)
(and Holder if applicable). Unless the Company is filing
financial information with the SEC pursuant to the Securities
Exchange Act of 1934, the Company shall have the right to refuse
to transfer any portion of this Warrant to any person who
directly competes with the Company.

4.5 Notices. All notices and other communications from the Company to
-------
the Holder, or vice versa, shall be deemed delivered and
effective when given personally or mailed by first-class
registered or certified mail, postage prepaid, at such address as
may have been furnished to the Company or the Holder, as the case
may be, in writing by the Company or such holder from time to
time.

4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed
by the party against which enforcement of such change, waiver,
discharge or termination is sought.

4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without
giving effect to its principles regarding conflicts of law.

IGS TECHNOLOGIES, INC.

By: /s/ Kenny Liu
----------------------------------------

Title: CEO
-------------------------------------

5
<PAGE>

APPENDIX 1

NOTICE OF EXERCISE
------------------

1. The undersigned hereby elects to purchase ____________ shares of the
Stock of __________________________ pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

_____________________________
(Name)

_____________________________
_____________________________
(Address)

_____________________________________
(Signature)

_________________________
(Date)

<PAGE>

EXHIBIT 4.5

THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

WARRANT TO PURCHASE STOCK

Corporation: IGS Technologies, Inc.
Number of Shares: See Below
Class of Stock: Series G
Initial Exercise Price: See Below
Issue Date: June 21, 1999
Expiration Date: June 21, 2004

THIS WARRANT CERTIFIES THAT, for the agreed upon value of One Dollar ($1.00) and
for other good and valuable consideration, FAR EAST NATIONAL BANK ("Holder") is
entitled to purchase the number of fully paid and nonassessable shares of Series
G Preferred Stock (the "Shares") of the corporation (the "Company") at the price
per Share (the "Warrant Price") all as set forth herein and as adjusted pursuant
to Article 2 of this Warrant, subject to the provisions and upon the terms and
conditions set forth of this Warrant. The Warrant Price shall be equal to the
price at which the Company next sells its equity securities in an offering (the
"Next Round") in which the Company receives net proceeds of not less than One
Million Dollars ($1,000,000), and the Shares shall be of the type sold in the
Next Round. The number of Shares that Holder may purchase under this Warrant is
equal to Fifty Thousand Dollars ($50,000) divided by the Warrant Price from and
after the date of the first Advance made under the Loan and Security Agreement
between Holder and Company, and an additional number of Shares equal to Fifty
Thousand Dollars ($50,000) divided by the Warrant Price from and after the date
of the second Advance thereunder.

ARTICLE 1. EXERCISE.
--------

1.1 Method of Exercise. Holder may exercise this Warrant by delivering a
------------------
duly executed Notice of Exercise in substantially the form attached as Appendix
I to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2, Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.

1.3 No Rights of Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.

which the Shares are convertible) reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company. If the Shares are
not traded in a public market, the Board of Directors of the Company shall
determine fair market value in its reasonable good faith judgment. The foregoing
notwithstanding, if Holder advises the Board of Directors in writing that Holder
disagrees with such determination, then the Company and Holder shall promptly
agree upon a reputable investment banking or public accounting firm to undertake
such valuation. If the valuation of such investment banking firm is greater than
that determined by the Board of Directors, then all fees and expenses of such
investment banking firm shall be paid by the Company. In all other
circumstances, such fees and expenses shall be paid by Holder.

1.7 Assumption on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------

1.7.1 "Acquisition". For the purpose of this Warrant, "Acquisition"
-----------
means any sale, transfer, or other disposition of all or substantially all of
the assets of the Company, or any reorganization, consolidation, or merger of
the Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.

1.7.2 Assumption of Warrant. Upon the closing of any Acquisition the
---------------------
successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.

1.7.3 Purchase Right. At the election of Holder, the Company shall
--------------
purchase the unexercised portion of this Warrant for cash upon the closing of
any Acquisition for an amount equal to (a) the fair market value of any
consideration that would have been received by Holder in consideration of the
Shares had Holder exercised the unexercised portion of this Warrant immediately
before the record date for determining the shareholders entitled to participate
in the proceeds of the Acquisition, less (b) the aggregate Warrant Price of the
Shares, but in no event less than zero.

ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------

2.1 Stock Dividends, Splits, Etc. If the Company declares or pays a
----------------------------
dividend on its common stock payable in common stock, or other securities,
subdivides the outstanding common stock into a greater amount of common stock,
then upon exercise of this Warrant, for each Share acquired, Holder shall
receive, without additional cost to Holder, the total number and kind of
securities to which Holder

2
<PAGE>

would have been entitled had Holder owned the Shares of record as of the date
the dividend or subdivision occurred.

2.2 Reclassification, Exchange or Substitution. Upon any reclassification,
------------------------------------------
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant including, without limitation, the conversion of the Company's
outstanding shares of Preferred Stock to Common Stock, Holder shall be entitled
to receive, upon exercise or conversion of this Warrant, the number and kind of
securities and property that Holder would have received for the Shares if this
Warrant had been exercised immediately before such reclassification, exchange,
substitution, or other event. The Company or its successor shall promptly issue
to Holder a new Warrant for such new securities or other property. The new
Warrant shall provide for adjustments which shall be as nearly equivalent as may
be practicable to the adjustments provided for in this Article 2 including,
without limitation, adjustments to the Warrant Price and to the number of
securities or property issuable upon exercise of the new Warrant. The provisions
of this Section 2.2 shall similarly apply to successive reclassifications,
exchanges, substitutions, or other events.

2.4 Price Adjustment. If the Company issues additional common shares
----------------
(including shares of common stock ultimately issuable upon conversion of a
security convertible into common stock) after the date of the Warrant and the
consideration per additional common share is less than, the price at which the
Shares are converted to common stock if the Shares are Preferred Stock, then
such conversion price shall be adjusted in accordance with the treatment of such
Preferred Stock under the Company's Articles of Incorporation in effect on the
Issue Date.

2.5 No Impairment. The Company shall not, by amendment of its Articles of
-------------
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.

3
<PAGE>

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.

3.2 Notice of Certain Events. If the Company proposes at any time (a) to
------------------------
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or sell, lease,
license, or convey all or substantially all of its assets, or to liquidate,
dissolve or wind up; or (e) offer holders of registration rights the opportunity
to participate in an underwritten public offering of the company's securities
for cash, then, in connection with each such event, the Company shall give
Holder (1) at least 20 days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of common stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; (2) in the case of the matters referred to in
(c) and (d) above at least 20 days prior written notice of the date when the
same will take place (and specifying the date on which the holders of common
stock will be entitled to exchange their common stock for securities or other
property deliverable upon the occurrence of such event); and (3) in the case of
the matter referred to in (e) above, the same notice as is given to the holders
of such registration rights.

3.4 Registration Under Securities Act of 1933, as amended. The Company
-----------------------------------------------------
hereby grants to Holder the same piggyback registration rights granted to the
Holders, as such term is defined in the Amended and Restated Registration Rights
Agreement, dated as of August __, 1998 (the "Securityholders Agreement"). The
Shares shall be Registrable Securities, as such term is defined in the
Securityholders Agreement, and will be given such rights and priority as set
forth in the Securityholders Agreement.

ARTICLE 4.

4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above.

4.2 Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:

4
<PAGE>

4.3 Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require Holder to provide an
opinion of counsel if the transfer is to an affiliate of Holder or if there is
no material question as to the availability of current information as referenced
in Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e)
in reasonable detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder's notice of
proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.

4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.

4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.

4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

IGS TECHNOLOGIES, INC.

By: /s/ John J. O'Shea
--------------------------------

5
<PAGE>

Title: V.P. CFO
-----------------------------

6
<PAGE>

APPENDIX 1

NOTICE OF EXERCISE
------------------

1. The undersigned hereby elects to purchase __________ shares of the
Stock of ____________________ pursuant to the terms of the attached Warrant, and
tenders herewith payment of the purchase price of such shares in full.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

______________________________
(Name)

______________________________
______________________________
(Address)

________________________________________
(Signature)

____________________
(Date)

<PAGE>

EXHIBIT 4.6

WARRANT TO PURCHASE STOCK

Corporation: IGS Technologies, Inc.
Number of Shares: See Below
Class of Stock: See Below
Initial Exercise Price: See Below
Issue Date: July 8, 1999
Expiration Date: July 8, 2004

THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.25 and for other
good and valuable consideration, C. Y. Lee ("Holder") is entitled to purchase
the number of fully paid and nonassessable shares of Series H Preferred Stock
(the "Shares") of the corporation (the "Company") at the price per Share (the
"Warrant Price") all as set forth herein and as adjusted pursuant to Article 2
of this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant. The Warrant Price shall be equal to the price at which
the Company next sells its equity securities in an offering (the "Next Round")
in which the Company receives net proceeds of not less than One Million Dollars
($1,000,000), and the Shares shall be of the type sold in the Next Round. The
number of Shares that Holder may purchase under this Warrant is equal to $80,000
divided by the Warrant Price. Notwithstanding the foregoing, if the Next Round
does not occur by December 31, 1999 then, at the option of Holder, this Warrant
shall be for Series G Preferred Stock and the Warrant Price shall be equal to
the price at which the Company last sold its Series G Preferred Stock or $1.00
per share.

ARTICLE 1. EXERCISE.
--------

1.3 No Rights of Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.

1.7 Assumption on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------

ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------

2
<PAGE>

ARTICLE 3. REPRESENTATION AND COVENANTS OF THE COMPANY

3
<PAGE>

Company shall at all times reserve a sufficient number of shares of stock for
issuance upon Holder's exercise of its rights hereunder.

ARTICLE 4. MISCELLANEOUS>

4.1 Term. This Warrant is exercisable, in whole or in part, at any time
and from time to time on or before the Expiration Date set forth
above.

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH
ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.

4
<PAGE>

letters and legal opinions reasonably satisfactory to the Company, as
reasonably requested by the Company). The Company shall not require
Holder to provide an opinion of counsel if the transfer is to an
affiliate of Holder or if there is no material question as to the
availability of current information as referenced in Rule 144(c),
Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied
with Rule 144(f), and the Company is provided with a copy of Holder's
notice of proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon
exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) by giving the
Company notice of the portion of the Warrant being transferred setting
forth the name, address and taxpayer identification number of the
transferee and surrendering this Warrant to the Company for reissuance
to the transferee(s) (and Holder if applicable). Unless the Company is
filing financial information with the SEC pursuant to the Securities
Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly
competes with the Company.

4.5 Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when
given personally or mailed by first-class registered or certified
mail, postage prepaid, at such address as may have been furnished to
the Company or the Holder, as the case may be, in writing by the
Company or such holder from time to time.

4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party
prevailing in such dispute shall be entitled to collect from the other
party all costs incurred in such dispute, including reasonable
attorneys' fees.

IGS TECHNOLOGIES, INC.

By: /s/ Kenny Liu
---------------------------

Title: CEO
------------------------

5
<PAGE>

APPENDIX 1

NOTICE OF EXERCISE
------------------

1. The undersigned hereby elects to purchase __________ shares of the
Stock of ______________________________ pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full.

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

______________________________
(Name)

______________________________
______________________________
(Address)

______________________________
(Signature)

______________________________
(Date)

<PAGE>

EXHIBIT 4.7

WARRANT TO PURCHASE STOCK

Corporation: IGS Technologies, Inc.
Number of Shares: 25,000
Class of Stock: Series G Preferred Stock
Initial Exercise Price: $1.00
Issue Date: December 30, 1999
Expiration Date: December 30, 2004

THIS WARRANT CERTIFIES THAT, for the agreed upon value of One Dollar ($1.00) and
for other good and valuable consideration, FAR EAST CAPITAL CORPORATION
("Holder") is entitled to purchase the number of fully paid and nonassessable
shares of Series G Preferred Stock (the "Shares") of the corporation (the
"Company") at the price per Share (the "Warrant Price") all as set forth herein
and as adjusted pursuant to Article 2 of this Warrant, subject to the provisions
and upon the terms and conditions set forth of this Warrant.

ARTICLE 1. EXERCISE.
--------

1.3 No Rights of Shareholder. This Warrant does not entitle Holder to any
------------------------
voting rights as a shareholder of the Company prior to the exercise hereof.

1.4 Fair Market Value. If the Shares are traded in a public market, the
-----------------
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment. The foregoing notwithstanding, if Holder advises
the Board of Directors in writing that Holder disagrees with such determination,
then the Company and Holder shall promptly agree upon a reputable investment
banking or public accounting firm to undertake such valuation. If the valuation
of such

1
<PAGE>

investment banking firm is greater than that determined by the Board of
Directors, then all fees and expenses of such investment banking firm shall be
paid by the Company. In all other circumstances, such fees and expenses shall be
paid by Holder.

1.7 Assumption on Sale, Merger, or Consolidation of the Company.
------------------------------------------------------------

ARTICLE 2. ADJUSTMENTS TO THE SHARES.
-------------------------

2
<PAGE>

2.4 Price Adjustment. If the Company issues additional common shares
----------------
(including shares of common stock ultimately issuable upon conversion of a
security convertible into common stock) after the date of the Warrant and the
consideration per additional common share is less than, the price at which the
Shares are converted to common stock if the Shares are Preferred Stock, then
such conversion price shall be adjusted in accordance with the treatment of such
Preferred Stock under the Company's Articles of Incorporation in effect on the
Issue Date.

ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
--------------------------------------------

3
<PAGE>

ARTICLE 4.

4.1 Term. This Warrant is exercisable, in whole or in part, at any time
----
and from time to time on or before the Expiration Date set forth above.

4
<PAGE>

as reasonably requested by the Company). The Company shall not require Holder to
provide an opinion of counsel if the transfer is to an affiliate of Holder or if
there is no material question as to the availability of current information as
referenced in Rule 144(c), Holder represents that it has complied with Rule
144(d) and (e) in reasonable detail, the selling broker represents that it has
complied with Rule 144(f), and the Company is provided with a copy of Holder's
notice of proposed sale.

4.4 Transfer Procedure. Subject to the provisions of Section 4.3, Holder
------------------
may transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.

4.6 Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

4.7 Attorneys Fees. In the event of any dispute between the parties
--------------
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.

4.8 Governing Law. This Warrant shall be governed by and construed in
-------------
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

IGS TECHNOLOGIES, INC.

By: /s/ Gary Sawka
-------------------------------------

Title: Vice President & CFO
----------------------------------

5
<PAGE>

APPENDIX 1

NOTICE OF EXERCISE
------------------

[Strike paragraph that does not apply.]

2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name as is specified below:

______________________________
(Name)

______________________________
______________________________
(Address)

________________________________________
(Signature)

__________________
(Date)

<PAGE>

EXHIBIT 10.2

TVIA, INC.

2000 STOCK INCENTIVE PLAN

(Effective ________ __, 2000)
<PAGE>

TVIA, INC.

2000 STOCK INCENTIVE PLAN

(Effective ________ __, 2000)

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
Page
<S> <C>
SECTION 1. PURPOSE..................................................... 1

SECTION 2. DEFINITIONS................................................. 1

(a) "Award"....................................................... 1
(b) "Board"....................................................... 1
(c) "Change in Control"........................................... 1
(d) "Code"........................................................ 1
(e) "Committee"................................................... 1
(f) "Common-Law Employee"......................................... 2
(g) "Common Stock"................................................ 2
(h) "Company"..................................................... 2
(i) "Consultant".................................................. 2
(j) "Exchange Act"................................................ 2
(k) "Exercise Price".............................................. 2
(l) "Fair Market Value"........................................... 2
(m) "Incentive Stock Option"...................................... 3
(n) "Key Contributor"............................................. 3
(o) "Non-Employee Director"....................................... 3
(p) "Nonstatutory Option"......................................... 3
(q) "Offeree"..................................................... 3
(r) "Option"...................................................... 3
(s) "Optionee".................................................... 3
(t) "Parent"...................................................... 3
(u) "Participant"................................................. 3
(v) "Plan"........................................................ 3
(w) "Purchase Price".............................................. 3
(x) "Restricted Share"............................................ 3
(y) "Service"..................................................... 3
(z) "Stock Award Agreement"....................................... 3
(aa) "Stock Option Agreement"...................................... 3
(bb) "Stock Purchase Agreement".................................... 3
(cc) "Subsidiary".................................................. 4
(dd) "10% Stockholder"............................................. 4
(ee) "Total and Permanent Disability".............................. 4
(ff) "W-2 Payroll"................................................. 4

SECTION 3. ADMINISTRATION.............................................. 4

(a) Committees of the Board....................................... 4
(b) Committee Procedures.......................................... 4
(c) Authority of the Committee.................................... 5
(d) Committee Liability........................................... 5

SECTION 4. ELIGIBILITY................................................. 5

SECTION 5. STOCK SUBJECT TO PLAN....................................... 5
</TABLE>

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TVIA, INC.

2000 STOCK INCENTIVE PLAN

<TABLE>
<S> <C>
(a) Basic Limitation............................................. 5
(b) Additional Shares............................................ 5

SECTION 6. TERMS AND CONDITIONS OF GRANTS OR SALES.................... 6

(a) Stock Purchase Agreement..................................... 6
(b) Duration of Offers........................................... 6
(c) Purchase Price............................................... 6
(d) Restrictions on Transfer of Common Stock..................... 6

SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES....... 6

(a) Form and Amount of Award..................................... 6
(b) Exercisability............................................... 6
(c) Effect of Change in Control.................................. 7
(d) Voting Rights................................................ 7

SECTION 8. TERMS AND CONDITIONS OF OPTIONS............................ 7

(a) Stock Option Agreement....................................... 7
(b) Number of Shares............................................. 7
(c) Exercise Price............................................... 7
(d) Exercisability............................................... 7
(e) Effect of Change in Control.................................. 7
(f) Term......................................................... 8
(g) Exercise of Options on Termination of Service................ 8
(h) No Rights as a Stockholder................................... 8
(i) Modification, Extension and Assumption of Options............ 8
(j) Restrictions on Transfer..................................... 8

SECTION 9. FORMS OF PAYMENT........................................... 9

(a) General Rule................................................. 9
(b) Surrender of Stock........................................... 9
(c) Promissory Notes............................................. 9
(d) Cashless Exercise............................................ 9
(e) Other Forms of Payment....................................... 9

SECTION 10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.................. 9

(a) General...................................................... 9
(b) Mergers and Consolidations................................... 10
(c) Reservation of Rights........................................ 10

SECTION 11. WITHHOLDING TAXES......................................... 10

(a) General...................................................... 10
(b) Common Stock Withholding..................................... 10
(c) Cashless Exercise/Pledge..................................... 11
(d) Other Forms of Payment....................................... 11

SECTION 12. LEGAL REQUIREMENTS........................................ 11

(a) Restrictions on Issuance..................................... 11
(b) Financial Reports............................................ 11

SECTION 13. ASSIGNMENT OR TRANSFER OF AWARDS.......................... 11

(a) General...................................................... 11
(b) Trusts....................................................... 11
</TABLE>

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<PAGE>

TVIA, INC.

2000 STOCK INCENTIVE PLAN

<TABLE>
<S> <C>
SECTION 14. NO EMPLOYMENT RIGHTS....................................... 12

SECTION 15. DURATION AND AMENDMENTS.................................... 12

(a) Term of the Plan.............................................. 12
(b) Right to Amend or Terminate the Plan.......................... 12
(c) Effect of Amendment or Termination............................ 12

SECTION 16. EXECUTION.................................................. 13
</TABLE>

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<PAGE>

TVIA, INC.

2000 STOCK INCENTIVE PLAN

SECTION 1. PURPOSE.

The purpose of the Plan is to offer selected employees, directors and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, to encourage such persons to remain
in the employ of the Company and to attract new employees with outstanding
qualifications. The Plan seeks to achieve this purpose by providing for the
direct grant or sale of Common Stock and for the grant of Options to purchase
Common Stock. Options granted under the Plan may include Nonstatutory Options as
well as Incentive Stock Options intended to qualify under section 422 of the
Internal Revenue Code. While this Plan is intended to satisfy federal Rule 701
and Section 25102(o) of the California Corporations Code, Awards may be granted
under this Plan in reliance upon other federal and state securities law
exemptions and to the extent another exemption is relied upon, the terms of this
Plan which are required only because of Rule 701 or Section 25102(o) need not
apply to the extent provided by the Board in the award agreement.

SECTION 2. DEFINITIONS.

(a) "Award" shall mean any award of an Option, Restricted Share or other
right under the Plan.

(b) "Board" shall mean the Board of the Company, as constituted from time
to time.

(i) The consummation of a merger or consolidation of the Company with
or into another entity or any other corporate reorganization, if more than
50% of the combined voting power of the continuing or surviving entity's
securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other
reorganization; or

(ii) The sale, transfer or other disposition of all or substantially
all of the Company's assets.

A transaction shall not constitute a Change in Control if: (a) its sole purpose
is to change the state of the Company's incorporation, (b) its sole purpose is
to create a holding company that will be owned in substantially the same
proportions by the persons who held the Company's securities immediately before
such transaction or (c) such transaction constitutes the Company's initial
public offering.

(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(e) "Committee" shall mean a committee consisting of one or more members
of the Board that is appointed by the Board to administer the Plan under Section
3.
<PAGE>

(f) "Common-Law Employee" shall mean an individual paid from W-2 Payroll
of the Company or a Subsidiary. If, during any period, the Company (or
Subsidiary, as applicable) has not treated an individual as a Common-Law
Employee and, for that reason, has not paid such individual in a manner which
results in the issuance of a Form W-2 and withheld taxes with respect to him or
her, then that individual shall not be an eligible Common-Law Employee for that
period, even if any person, court or government agency determines,
retroactively, that that individual is or was a Common-Law Employee during all
or any portion of that period.

(g) "Common Stock" shall mean the Company's common stock.

(h) "Company" shall mean Tvia, Inc., a Delaware corporation.

(i) "Consultant" shall mean an individual who performs bona fide services
to the Company, a Parent or a Subsidiary other than as a Common-Law Employee, or
a member of the Board, or a member of the board of directors of a Subsidiary.

(j) "Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.

(k) "Exercise Price" shall mean the amount for which one share of Common
Stock may be purchased upon exercise of an Option, as specified by the Board in
the applicable Stock Option Agreement.

(l) "Fair Market Value" shall mean the market price of Common Stock,
determined by the Board as follows:

(i) If the Shares were traded over-the-counter on the date in
question but were not traded on the Nasdaq Stock Market or the Nasdaq
National Market System, then the Fair Market Value shall be equal to the
mean between the last reported representative bid and asked prices quoted
for such date by the principal automated inter-dealer quotation system on
which the Shares are quoted or, if the Shares are not quoted on any such
system, by the "Pink Sheets" published by the National Quotation Bureau,
Inc.;

(ii) If the Shares were traded over-the-counter on the date in
question and were traded on the Nasdaq Stock Market or the Nasdaq National
Market System, then the Fair Market Value shall be equal to the last-
transaction price quoted for such date by the Nasdaq Stock Market or the
Nasdaq National Market;

(iii) If the Shares were traded on a stock exchange on the date in
question, then the Fair Market Value shall be equal to the closing price
reported by the applicable composite transactions report for such date; and

(iv) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Board in good faith on such basis
as it deems appropriate.

In all cases, the determination of Fair Market Value by the Board shall be
conclusive and binding on all persons.

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<PAGE>

(m) "Incentive Stock Option" or "ISO" shall mean an incentive stock option
described in Code section 422(b).

(n) "Key Contributor" shall mean (i) any individual who is a Common-Law
Employee of the Company, a Parent or a Subsidiary, (ii) a member of the Board,
including (without limitation) a Non-Employee Director, or an affiliate of a
member of the Board; (iii) a member of the board of directors of a Subsidiary,
or (iv) a Consultant. Service as a member of the Board, a member of the board of
directors of a Subsidiary or a Consultant shall be considered employment for all
purposes of the Plan except the second sentence of Section 4(a).

(o) "Non-Employee Director" shall mean a member of the Board who is not a
Common-Law Employee of the Company or a Subsidiary.

(p) "Nonstatutory Option" or "NSO" shall mean a stock option that is not
an ISO.

(q) "Offeree" shall mean an individual to whom the Board has offered the
right to acquire Common Stock under the Plan (other than upon exercise of an
Option).

(r) "Option" shall mean an ISO or NSO granted under the Plan entitling the
holder to purchase Common Stock.

(s) "Optionee" shall mean an individual who holds an Option.

(t) "Parent" shall have the meaning set forth in Section 424(e) of the
Code.

(u) "Participant" shall mean an individual or estate who holds an Award.

(v) "Plan" shall mean this 2000 Stock Incentive Plan of Tvia, Inc.

(w) "Purchase Price" shall mean the consideration for which one share of
Common Stock may be acquired under the Plan (other than upon exercise of an
Option) pursuant to a grant or sale under Section 6, as specified by the Board.

(x) "Restricted Share" shall mean a share of Common Stock sold or granted
to an eligible Key Contributor which is nontransferable and subject to
substantial risk of forfeiture until restrictions lapse.

(y) "Service" shall mean service as a Key Contributor.

(z) "Stock Award Agreement" shall mean the agreement between the Company
and the recipient of a Restricted Share which contains the terms, conditions and
restrictions pertaining to such Restricted Share.

(aa) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to an Option.

(bb) "Stock Purchase Agreement" shall mean the agreement between the
Company and an Offeree who acquires Common Stock under the Plan (other than
pursuant to an Option)

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<PAGE>

that contains the terms, conditions and restrictions pertaining to the
acquisition of such Common Stock.

(cc) "Subsidiary" shall have the meaning set forth in Section 424(f) of the
Code.

(dd) "10% Stockholder" shall mean an individual who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company, its Parent or any of its Subsidiaries. For purposes of this Subsection
(dd), in determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied. For purposes of this Subsection (dd), "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include Common Stock authorized for
issuance under outstanding Options held by the Key Contributor or by any other
person.

(ee) "Total and Permanent Disability" shall mean that the Optionee is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment.

(ff) "W-2 Payroll" shall mean whatever mechanism or procedure that the
Company or a Subsidiary utilizes to pay any individual which results in the
issuance of Form W-2 to the individual. "W-2 Payroll" does not include any
mechanism or procedure which results in the issuance of any form other than a
Form W-2 to an individual, including, but not limited to, any Form 1099 which
may be issued to an independent contractor, an agency employee or a consultant.
Whether a mechanism or procedure qualifies as a "W-2 Payroll" shall be
determined in the absolute discretion of the Company (or Subsidiary, as
applicable), and the Company or Subsidiary determination shall be conclusive and
binding on all persons.

SECTION 3. ADMINISTRATION.

(a) Committees of the Board. The Plan shall be administered by the Board.
However, any or all administrative functions otherwise exercisable by the Board
may be delegated to a Committee. Members of the Committee shall serve for such
period of time as the Board may determine and shall be subject to removal by the
Board at any time. The Board may also at any time terminate the functions of the
Committee and reassume all powers and authority previously delegated to the
Committee. Any reference to the Board in the Plan shall be construed as a
reference to the Committee (if any) to whom the Board has assigned a particular
function.

In the event that the Company's Common Stock becomes publicly traded, the
Board may appoint a Committee which, if appointed, shall be comprised solely of
two or more Non-Employee Directors (although Committee functions may be
delegated to officers to the extent the Awards relate to persons who are not
subject to the reporting requirements of Section 16 of the Exchange Act).

(b) Committee Procedures. The Board shall designate one of the members of
the Committee as chairperson. The Committee may hold meetings at such times and
places as it shall determine. The acts of a majority of the Committee members
present at meetings at which

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<PAGE>

a quorum exists, or acts reduced to or approved in writing by all Committee
members, shall be valid acts of the Committee.

(c) Authority of the Committee. Subject to the provisions of the Plan,
the Committee shall have full authority and discretion to take any actions it
deems necessary or advisable for the administration of the Plan. The Committee
has authority in its discretion to determine eligible Key Contributors to whom,
and the time or times at which, Awards may be granted and the number of Shares
subject to each Award. Subject to the express provisions of the respective Award
agreements (which need not be identical) and to make all other determinations
necessary or advisable for Plan administration, the Committee has authority to
prescribe, amend and rescind rules and regulations relating to the Plan. All
decisions, interpretations and other actions of the Committee shall be final,
conclusive and binding on all parties who have an interest in the Plan or any
option or shares issued thereunder.

(d) Committee Liability. No member of the Board or the Committee will be
liable for any action or determination made in good faith by the Committee with
respect to the Plan or any Award made under the Plan.

SECTION 4. ELIGIBILITY.

Only Key Contributors shall be eligible for designation as Participants by
the Board. In addition, only individuals who are employed as Common-Law
Employees by the Company or a Subsidiary shall be eligible for the grant of
ISOs.

SECTION 5. STOCK SUBJECT TO PLAN.

(a) Basic Limitation. The stock issuable under the Plan shall be shares
of authorized but unissued or reacquired Common Stock. The maximum number of
shares of Common Stock which may be issued under the Plan shall not exceed
2,000,000 shares, subject to adjustment pursuant to Section 9.

In any event, (i) the number of Shares which are subject to Awards or other
rights outstanding at any time under the Plan shall not exceed the number of
Shares which then remain available for issuance under the Plan; and (ii) to the
extent an award is made in reliance upon the exemption available under Section
25102(o) of the California Corporations Code, the number of Shares which are
subject to Awards or other rights outstanding at any time under the Plan or
otherwise shall not exceed the limitation imposed by Section 260.140.45 of Title
10 of the California Code of Regulations. The Company, during the term of the
Plan, shall at all times reserve and keep available sufficient Shares to satisfy
the requirements of the Plan.

(b) Additional Shares. If any outstanding Option or other right to acquire
Common Stock for any reason expires or is canceled, forfeited or otherwise
terminated, the Common Stock allocable to the unexercised portion of such Option
or other right shall again be available for the purposes of the Plan. If shares
of Common Stock issued under the Plan are reacquired by the Company pursuant to
any right of repurchase or right of first refusal, such shares of Common Stock
shall again be available for the purposes of the Plan, except that the aggregate
number of shares of Common Stock that may be issued upon the exercise of ISOs
shall in no event exceed

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<PAGE>

the number of shares of Common Stock reserved for issuance pursuant to paragraph
(a) above plus the number of previously optioned shares returned to the Plan
pursuant to the first sentence of this paragraph, as adjusted pursuant to
Section 9.

SECTION 6. TERMS AND CONDITIONS OF GRANTS OR SALES.

(a) Stock Purchase Agreement. Each grant or sale of Common Stock under
the Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Offeree and the Company. Such grant or sale shall
be subject to all applicable terms and conditions of the Plan and may be subject
to any other terms and conditions that are not inconsistent with the Plan and
that the Board deems appropriate for inclusion in a Stock Purchase Agreement.
The provisions of the various Stock Purchase Agreements entered into under the
Plan need not be identical.

(b) Duration of Offers. Any right to acquire Common Stock under the Plan
other than an Option shall automatically expire if not exercised by the Offeree
within thirty (30) days after the grant of such right was communicated by the
Board to the Offeree.

(c) Purchase Price. The Purchase Price of Common Stock offered under the
Plan shall be established by the Board and set forth in the Stock Purchase
Agreement and, to the extent required by applicable law, including the
California Corporations Code or the regulations thereunder, shall not be less
than 85% of Fair Market Value (100% for 10% Stockholders). The Purchase Price
shall be payable in a form described in Section 9 or, in the discretion of the
Board, in consideration for past services rendered to the Company or for its
benefit.

(d) Restrictions on Transfer of Common Stock. No Common Stock granted or
sold under the Plan may be sold or otherwise transferred or disposed of by the
Offeree during the one hundred eighty (180) day period following the effective
date of a registration statement covering securities of the Company filed under
the Securities Act of 1933 (unless such restriction is consented to or waived by
the managing underwriter). Subject to the preceding sentence, any Common Stock
granted or sold under the Plan shall be subject to such special conditions,
rights of repurchase, rights of first refusal and other transfer restrictions as
the Board may determine. Such restrictions shall apply in addition to any
general restrictions that may apply to all holders of Common Stock.

SECTION 7. ADDITIONAL TERMS AND CONDITIONS OF RESTRICTED SHARES.

(a) Form and Amount of Award. Each Stock Award Agreement shall specify
the number of shares of Common Stock that are subject to the Award. Restricted
Shares may be awarded in combination with NSOs and such an Award may provide
that the Restricted Shares will be forfeited in the event that the related NSOs
are exercised.

(b) Exercisability. Each Stock Award Agreement shall specify the
conditions upon which Restricted Shares shall become vested, in full or in
installments. To the extent required by applicable law, each Stock Award shall
become exercisable no less rapidly than the rate of 20% per year for each of the
first five years from the date of grant. Subject to the preceding sentence, the
exercisability of any Stock Award shall be determined by the Board in its sole
discretion.

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<PAGE>

c) Effect of Change in Control. The Board may determine at the time of
making an Award or thereafter, that such Award shall become fully vested, in
whole or in part, in the event that a Change in Control occurs with respect to
the Company.

(d) Voting Rights. Holders of Restricted Shares awarded under the Plan
shall have the same voting, dividend and other rights as the Company's other
stockholders. A Stock Award Agreement, however, may require that the holders
invested any cash dividends received in additional Restricted Shares. Such
additional Restricted Shares shall be subject to the same conditions and
restrictions as the Award with respect to which the dividends were paid. Such
additional Restricted Shares shall not reduce the number of Shares available
under Section 5.

SECTION 8. TERMS AND CONDITIONS OF OPTIONS.

(a) Stock Option Agreement. Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions that are not inconsistent
with the Plan and that the Board deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.

(b) Number of Shares. Each Stock Option Agreement shall specify the
number of shares of Common Stock that are subject to the Option and shall
provide for the adjustment of such number in accordance with Section 10. The
Stock Option Agreement shall also specify whether the Option is an ISO or an
NSO.

(c) Exercise Price. An Option's Exercise Price shall be established by
the Board and set forth in a Stock Option Agreement. The Exercise Price of an
ISO shall not be less than 100% of the Fair Market Value (110% for 10%
Stockholders) on the date of grant. The Exercise Price of a Nonstatutory Option
shall not be less than 85% of the Fair Market Value (110% for 10% Stockholders)
on the date of grant. The Exercise Price shall be payable in a form described in
Section 9. Notwithstanding the foregoing, an Option may be granted with an
exercise price lower than that set prescribed in this paragraph if the Option
grant is attributable to the issuance or assumption of an option in a
transaction to which Code section 424(a) applies.

(d) Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to vest or become exercisable. To
the extent required by applicable law, including the California Corporations
Code or the regulations thereunder, an Option granted to Key Contributors who
are not officers shall vest and become exercisable no less rapidly than the rate
of 20% per year for each of the first five (5) years from the date of grant.
Subject to the preceding sentence, the vesting of any Option shall be determined
by the Board in its sole discretion. A Stock Option Agreement may permit an
Optionee to exercise an Option before it is vested, subject to the Company's
right of repurchase over any shares acquired under the unvested portion of the
Option (an "early exercise"), which right of repurchase shall lapse at the same
rate the Option would have vested had there been no early exercise.

(e) Effect of Change in Control. The Board may determine, at the time of
granting an Option or thereafter, that such Option shall become fully
exercisable as to all shares of

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<PAGE>

Common Stock subject to such Option in the event that a Change in Control occurs
with respect to the Company.

(f) Term. The Stock Option Agreement shall specify the term of the
Option. The term shall not exceed ten (10) years from the date of grant (5 years
in the case of an ISO granted to a Ten Percent Stockholder). Subject to the
preceding sentence, the Board at its sole discretion shall determine when an
Option is to expire.

(g) Exercise of Options on Termination of Service. Each Option shall set
forth the extent to which the Optionee shall have the right to exercise the
Option following termination of the Optionee's Service with the Company and its
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Board, need not be uniform among all Options issued pursuant to the Plan, and
may reflect distinctions based on the reasons for termination of Service.
Notwithstanding the foregoing in this Section 8(h), to the extent required by
applicable law, including the California Corporations Code or the regulations
thereunder, each Stock Option Agreement shall provide that the Optionee shall
have the right to exercise the Option following termination of the Optionee's
Service, during the Option's term, for at least thirty (30) days following
termination of Service for any reason except cause, death or disability, and for
at least six (6) months following termination of Service due to death or
disability.

(h) No Rights as a Stockholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Common Stock
covered by an Option until such person becomes entitled to receive such Common
Stock by filing a notice of exercise and paying the Exercise Price pursuant to
the terms of such Option.

(i) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Board may modify, extend or assume outstanding
Options or may accept the cancellation of outstanding Options (whether granted
by the Company or another issuer) in return for the grant of new Options for the
same or a different number of shares of Common Stock and at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair the Optionee's rights
or increase the Optionee's obligations under such Option.

(j) Restrictions on Transfer. No shares of Common Stock issued upon
exercise of an Option may be sold or otherwise transferred or disposed of by the
Optionee during the one hundred eighty (180) day period following the effective
date of a registration statement covering securities of the Company filed under
the Securities Act of 1933 (unless such restriction is consented to or waived by
the managing underwriter). Subject to the preceding sentence, any Common Stock
issued upon exercise of an Option shall be subject to such rights of repurchase,
rights of first refusal and other transfer restrictions as the Board may
determine. Such restrictions shall apply in addition to any restrictions that
may apply to holders of Common Stock generally. Any right to repurchase an
Optionee's Common Stock at the original Exercise Price upon termination of the
Optionee's Service shall lapse at least as rapidly as the schedule set forth in
Subsection (d) above. Any such repurchase right may be exercised only within
ninety (90) days after the termination of the Optionee's Service for cash or for
cancellation of indebtedness incurred in purchasing the Common Stock.

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<PAGE>

SECTION 9. FORMS OF PAYMENT.

(a) General Rule. The entire Purchase Price or Exercise Price shall be
payable in cash or cash equivalents acceptable to the Company at the time of
exercise or purchase, except as otherwise provided in this Section 9.

(b) Surrender of Stock. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, payment may be made all or in part with
Common Stock that has already been owned by the Optionee or the Optionee's
representative for any time period specified by the Board and that are
surrendered to the Company in good form for transfer. Such Common Stock shall be
valued at Fair Market Value on the date when the new Common Stock is purchased
under the Plan.

(c) Promissory Notes. To the extent that a Stock Option Agreement or
Stock Purchase agreement so provides, payment may be made all or in part with a
full recourse promissory note executed by the Optionee of Offeree. The interest
rate and other terms and conditions of such note shall be determined by the
Board. The Board may require that the Optionee pledge his or her Common Stock to
the Company for the purpose of securing the payment of such note. In no event
shall the stock certificate(s) representing such Common Stock be released to the
Optionee or Offeree until such note is paid in full, unless otherwise provided
in the Stock Option Agreement or Stock Purchase Agreement.

(d) Cashless Exercise. To the extent that a Stock Option Agreement so
provides and a public market for the Common Stock exists, payment may be made
all or in part by delivery (on a form acceptable to the Board) of an irrevocable
direction to a securities broker to sell Common Stock and to deliver all or part
of the sale proceeds to the Company in payment of the aggregate Exercise Price.

(e) Other Forms of Payment. To the extent provided in the Stock Option
Agreement, payment may be made in any other form that is consistent with
applicable laws, regulations and rules.

SECTION 10. ADJUSTMENTS UPON CHANGES IN COMMON STOCK.

(a) General. In the event of a subdivision of the outstanding Common
Stock, a declaration of a dividend payable in Common Stock, a declaration of an
extraordinary dividend payable in a form other than Common Stock in an amount
that has a material effect on the value of Common Stock, a combination or
consolidation of the outstanding Common Stock into a lesser number of shares, a
recapitalization, a reclassification or a similar occurrence, the Board shall
make appropriate adjustments, subject to the limitations set forth in Section
10(c), in one or more of (i) the number of shares of Common Stock available for
future grants of Options or other rights to acquire Common Stock under Section
5, (ii) the number of shares of Common Stock covered by each outstanding Option
or other right to acquire Common Stock or (iii) the Exercise Price of each
outstanding Option or the Purchase Price of each other right to acquire Common
Stock.

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<PAGE>

(b) Mergers and Consolidations. In the event that the Company is a party
to a merger or consolidation, outstanding Options or other rights to acquire
Common Stock shall be subject to the agreement of merger or reorganization. Such
agreement, without an Optionee's consent, may provide for:

(i) The continuation of such outstanding Options by the Company (if
the Company is the surviving corporation);

(ii) The assumption of the Plan and such outstanding Options by the
surviving corporation or its parent;

(iii) The substitution by the surviving corporation or its parent of
options with substantially the same terms for such outstanding Options; or

(iv) The cancellation of such outstanding Options without payment of
any consideration, provided that in such event vesting of Options will
accelerate in full.

(c) Reservation of Rights. Except as provided in this Section 10, an
Optionee or Offeree shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend,
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of shares
of Common Stock subject to an Option, or the number of shares subject to any
other right to acquire Common Stock and/or the Exercise Price or Purchase Price.
The grant of an Option or other right to acquire Common Stock pursuant to the
Plan shall not affect in any way the right or power of the Company to make
adjustments, reclassifications, reorganizations or changes of its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.

SECTION 11. WITHHOLDING TAXES.

(a) General. To the extent required by applicable federal, state, local
or foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Committee for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Shares or make any cash payment under the Plan until such
obligations are satisfied.

(b) Common Stock Withholding. The Committee may permit a Participant to
satisfy all or part of his or her withholding or income tax obligations by
having the Company withhold all or a portion of any shares of Common Stock that
otherwise would be issued to him or her or by surrendering all or a portion of
any shares of Common Stock that he or she previously acquired. Notwithstanding
the previous sentence in this Section 11(b), the maximum amount that may be
subject to common stock withholding under this Section 11(b) shall be determined
by the Committee based upon the minimum rates of federal, state and employment
withholding applicable under the circumstances. Shares of Common Stock that are
withheld or surrendered pursuant to this Section 11 shall be valued at their
Fair Market Value on the date

-10-
<PAGE>

when taxes otherwise would be withheld in cash. Any payment of taxes by
assigning shares of Common Stock to the Company may be subject to restrictions,
including any restrictions required by rules of any federal or state regulatory
body or other authority.

(c) Cashless Exercise/Pledge. The Committee may provide that if Company
shares of Common Stock are publicly traded at the time of exercise, arrangements
may be made to meet the Optionee's withholding obligation by cashless exercise
or pledge.

(d) Other Forms of Payment. The Committee may permit such other means of
tax withholding as it deems appropriate.

SECTION 12. LEGAL REQUIREMENTS.

(a) Restrictions on Issuance. Common Stock shall not be issued under the
Plan unless the issuance and delivery of such Common Stock complies with (or is
exempt from) all applicable requirements of law, including (without limitation)
the Securities Act of 1933, as amended, the rules and regulations promulgated
thereunder, state securities laws and regulations, and the regulations of any
stock exchange on which the Company's securities may then be listed, and the
Company has obtained the approval or favorable ruling from any governmental
agency that the Company determines is necessary or advisable.

(b) Financial Reports. To the extent required to comply with the
California Corporations Code or the regulations thereunder, not less often than
annually the Company shall furnish to Optionees and Offerees Company summary
financial information including a balance sheet regarding the Company's
financial condition and results of operations, unless such Optionees or Offerees
have duties with the Company that assure them access to equivalent information.
Such financial statements need not be audited.

SECTION 13. ASSIGNMENT OR TRANSFER OF AWARDS.

(a) General. An Award granted under the Plan shall not be anticipated,
assigned, attached, garnished, optioned, transferred or made subject to any
creditor's process, whether voluntarily, involuntarily or by operation of law,
except as approved by the Committee. Notwithstanding the foregoing, ISOs may not
be transferable. Also notwithstanding the foregoing, while the shares of Common
Stock are subject to California Corporations Code (S) 25102(o), (i) Offerees and
Optionees may not transfer their rights hereunder except by will, beneficiary
designation or the laws of descent and distribution, and (ii) any rights of
repurchase in favor of the Company shall take into account the provisions of
Sections 260.140.41 or 260.140.42 of Title 10 of the California Code of
Regulations, as applicable.

(b) Trusts. Neither this Section 13 nor any other provision of the Plan
shall preclude a Participant from transferring or assigning Restricted Shares to
(a) the trustee of a trust that is revocable by such Participant alone, both at
the time of the transfer or assignment and at all times thereafter prior to such
Participant's death, or (b) the trustee of any other trust to the extent
approved by the Committee in writing. A transfer or assignment of Restricted
Shares from such trustee to any other person than such Participant shall be
permitted only to the extent approved in advance by the Committee in writing,
and Restricted Shares held by such trustee shall be subject

-11-
<PAGE>

to all the conditions and restrictions set forth in the Plan and in the
applicable Stock Award Agreement, as if such trustee were a party to such
Agreement.

SECTION 14. NO EMPLOYMENT RIGHTS.

No provision of the Plan, nor any Option granted or other right to acquire
Common Stock granted under the Plan, shall be construed to give any person any
right to become, to be treated as, or to remain a Key Contributor. The Company
and its Subsidiaries reserve the right to terminate any person's Service at any
time and for any reason.

SECTION 15. DURATION AND AMENDMENTS.

(a) Term of the Plan. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board, subject to the approval of
the Company's stockholders. In the event that the stockholders fail to approve
the Plan within twelve (12) months after its adoption by the Board, any Option
grants or other right to acquire Common Stock already made shall be null and
void, and no additional Option grants or other right to acquire Common Stock
shall be made after such date. The Plan shall terminate automatically ten (10)
years after its adoption by the Board and may be terminated on any earlier date
pursuant to Subsection (b) below.

(b) Right to Amend or Terminate the Plan. The Board may amend or
terminate the Plan at any time. Rights under any Option granted or other right
to acquire Common Stock granted before amendment of the Plan shall not be
materially impaired by any amendment or termination, except with consent of the
Optionee or Offeree. An amendment of the Plan shall be subject to the approval
of the Company's stockholders only to the extent required by applicable laws,
regulations or rules.

(c) Effect of Amendment or Termination. No Common Stock shall be issued
or sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Common Stock previously issued or Option
previously granted under the Plan.

-12-
<PAGE>

SECTION 16. EXECUTION.

To record the adoption of the Plan, the Company has caused its authorized
officer to execute the same.

TVIA, INC.

By ________________________________________
Title _______________________________________

-13-
<PAGE>

TVIA, INC.

2000 Stock Incentive Plan

STOCK OPTION AGREEMENT

(without exercise before vesting)

Tvia, Inc., a Delaware corporation (the "Company"), hereby grants an Option
to purchase its Common Stock to the Optionee named below. The terms and
conditions of the Option are set forth in this Stock Option Agreement and in the
Company's 2000 Stock Incentive Plan (the "Plan").

I. GRANT INFORMATION

Date of Grant: __________, 20___

Name of Optionee: _________________________________

Optionee's Social Security Number: ________-______-________

Type of Option: __ Incentive ("ISO")

__ Nonstatutory ("NSO")

Number of Shares of Common Stock Covered by the Option: ____________

Exercise Price per Share: $__________

Vesting Start Date: __________, 20__

Vesting Schedule: Subject to attached Terms and
Conditions, the Option shall vest as to
12/48ths of the shares of Common Stock
on the first anniversary of the Vesting
Start Date and 1/48th of the shares of
Common Stock each full month thereafter.

By signing below, you agree to all of the terms and conditions
described in this Stock Option Agreement, including the
attached Terms and Conditions, Notice of Exercise and Common
Stock Purchase Agreement and the Plan.

Optionee:_______________________________________________________________________
(Signature)

Company:________________________________________________________________________
(Signature)

Title:__________________________________________________________________________
<PAGE>

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE, AND MAY BE
OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED PURSUANT TO THE RELEVANT
PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF THE COMPANY IS PROVIDED AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION AND
QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS IS NOT REQUIRED.

Stock Option Agreement - Terms and Conditions

2000 Stock Incentive Plan

Tvia, Inc.

(does not include early exercise provision)

II. TERMS AND CONDITIONS

1. Vesting. Your Option vests during your Service on the dates specified
in the first page of this Stock Option Agreement. Vesting will cease if your
Service terminates for any reason.

2. Service; Leaves of Absence. Your Service shall cease when you cease to
be actively employed by, or a consultant or adviser to, the Company (or any
subsidiary) as determined in the sole discretion of the Board. For purposes of
your Option, your Service does not terminate when you go on a bona fide leave of
absence, that was approved by the Company in writing, if the terms of the leave
provide for continued service crediting, or when continued service crediting is
required by applicable law. However, for purposes of determining whether your
Option is entitled to ISO status, your Service will be treated as terminating
ninety (90) days after you went on leave, unless your right to return to active
work is guaranteed by law or by a contract. Your Service terminates in any event
when the approved leave ends, unless you immediately return to active work. The
Company determines which leaves count toward Service, and when your Service
terminates for all purposes under the Plan.

3. Term of Option. Your Option expires on the day before the 10th
anniversary of the Date of Grant (fifth anniversary for a 10% owner), and will
expire earlier if your Service terminates as follows:

(a) Regular Termination. If your Service terminates for any reason
except death or Disability, then your Option will expire at the close of
business at Company headquarters on the date three (3) months after your
termination date. During that three-month period, you may exercise that
portion of your Option that was vested on the date that your Service
terminated.

(b) Cause. If your Service terminates for Cause, your Option will
expire immediately.

-2-
<PAGE>

For purposes of this Section, "Cause" means (i) continued failure to
perform substantially his or her duties, which standard of duties shall be
referenced to the standards set by the Company at the date of this Agreement
(other than as a result of sickness, accident or similar cause beyond your
reasonable control) after receipt of a written warning and given thirty (30)
days to improve, (ii) willful and material misconduct, which is demonstrably and
materially injurious to the Company or any of its subsidiaries, including
willful and material failure to perform your duties as an officer or employee of
the Company or any of its subsidiaries or a material breach of this Agreement,
(iii) conviction of or plea of nolo contendere to a felony; (iv) conviction of
an act of fraud against, or the misappropriation of property belonging to the
Company or any of its subsidiaries, or any employee, customer, or supplier of
the Company or any of its subsidiaries.

(c) Death. If you die while in Service, then your Option will expire
at the close of business at Company headquarters on the date six (6) months
after the date of death. During that six-month period, your estate or
heirs may exercise that portion of your Option that was vested on the date
of death.

(d) Disability. If your Service terminates because of your
Disability, then your Option will expire at the close of business at
Company headquarters on the date six (6) months after your termination
date. (However, if your Disability is not expected to result in death or
to last for a continuous period of at least twelve (12) months, your Option
will be eligible for ISO tax treatment only if it is exercised within three
(3) months following the termination of your Service.) During that six-
month period, you may exercise that portion of your Option that was vested
on the date of your Disability.

"Disability" means that you are unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment.

4. Exercise of Option.

(a) Legal Restrictions. By signing this Agreement, you agree not to
exercise this Option or sell any Common Stock acquired upon exercise of
this Option at a time when applicable laws, regulations or Company or
underwriter trading policies prohibit exercise or sale. In particular, the
Company shall have the right to designate one or more periods of time, each
of which shall not exceed 180 days in length, during which this Option
shall not be exercisable if the Company determines (in its sole discretion)
that such limitation on exercise could in any way facilitate a lessening of
any restriction on transfer pursuant to the Securities Act or any state
securities laws with respect to any issuance of securities by the Company,
facilitate the registration or qualification of any securities by the
Company under the Securities Act or any state securities laws, or
facilitate the perfection of any exemption from the registration or
qualification requirements of the Securities Act or any applicable state
securities laws for the issuance or transfer of any securities. Such
limitation on exercise shall not alter the vesting schedule set forth in
this Agreement other than to limit the periods during which this Option
shall be exercisable.

-3-
<PAGE>

If the sale of Common Stock under the Plan is not registered under the
Securities Act of 1933, as amended (the "Securities Act"), but an exemption
is available which requires an investment or other representation, you
shall represent and agree at the time of exercise that the Common Stock
being acquired upon exercise of this Option are being acquired for
investment, and not with a view to the sale or distribution thereof, and
shall make such other representations as are deemed necessary or
appropriate by the Company and its counsel.

(b) Method of Exercise. To exercise your Option, you must execute the
Notice of Exercise and Common Stock Purchase Agreement, attached hereto as
Exhibit A. You must submit this form, together with full payment, at the
---------
address given on the form. Your exercise will be effective when it is
received by the Company. If someone else wants to exercise your Option
after your death, that person must prove to the Company's satisfaction that
he or she is entitled to do so.

(c) Form of Payment. When you submit Exhibit A, you must include
---------
payment of the aggregate Exercise Price for the Common Stock you are
purchasing. Payment may be made in one (or a combination) of the following
forms.

. Your personal check, a cashier's check or a money order.

. Shares of Common Stock which you have owned for six months and
which are surrendered to the Company. The value of such Common
Stock, determined as of the effective date of the Option
exercise, will be applied to the Exercise Price.

. To the extent that a public market for Common Stock exists as
determined by the Company, by delivery (on a form approved by the
Company) of an irrevocable direction to a securities broker to
sell Common Stock and to deliver all or part of the sale proceeds
to the Company in payment of the aggregate Exercise Price.

. Any other form of legal consideration approved by the Board.

(d) Withholding Taxes. You will not be allowed to exercise your
Option unless you make acceptable arrangements to pay any withholding or
other taxes that may be due as a result of the Option exercise or the sale
of Common Stock acquired upon exercise of your Option.

5. Exercise of Option Before Vesting ("Early Exercise"). You may not
exercise your Option before it is fully vested.

-4-
<PAGE>

value or agree to engage in any of the foregoing transactions with respect to
any Common Stock without the prior written consent of the Company or its
underwriters, for such period of time after the effective date of such
registration statement as may be requested by the Company or such underwriters.
Such period of time shall not exceed one hundred eighty (180) days and may be
required by the underwriter as a market condition of the offering. By signing
this Agreement you agree to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. To enforce
the provisions of this paragraph, the Company may impose stop-transfer
instructions with respect to the Common Stock until the end of the applicable
stand-off period.

7. Right of First Refusal. If you propose to sell, pledge or otherwise
transfer to a third party any Common Stock acquired under this Stock Option
Agreement, or any interest in such Common Stock, the Company shall have the
"Right of First Refusal" with respect to all (and not less than all) of such
Common Stock. If you desire to transfer Common Stock acquired under this Stock
Option Agreement, you must give a written "Transfer Notice" to the Company
describing fully the proposed transfer, including the number of shares proposed
to be transferred, the proposed transfer price and the name and address of the
proposed transferee. The Transfer Notice shall be signed both by you and by the
proposed new transferee and must constitute a binding commitment of both parties
to the transfer of the Common Stock. The Company shall have the right to
purchase all, and not less than all, of the Common Stock on the terms of the
proposal described in the Transfer Notice (subject, however, to any change in
such terms permitted in the next paragraph) by delivery of a notice of exercise
of the Right of First Refusal within thirty (30) days after the date when the
Transfer Notice was received by the Company.

If the Company fails to exercise its Right of First Refusal before or
within thirty (30) days after the date when it received the Transfer Notice, you
may, not later than ninety (90) days following receipt of the Transfer Notice by
the Company, conclude a transfer of the Common Stock subject to the Transfer
Notice on the terms and conditions described in the Transfer Notice. Any
proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by you, shall again
be subject to the Right of First Refusal and shall require compliance with the
procedure described in the paragraph above. If the Company exercises its Right
of First Refusal, the parties shall consummate the sale of the Common Stock on
the terms set forth in the Transfer Notice within sixty (60) days after the date
when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that if the
Transfer Notice provided that payment for the Common Stock was to be made in a
form other than lawful money paid at the time of transfer, the Company shall
have the Option of paying for the Common Stock with lawful money equal to the
present value of the consideration described in the Transfer Notice.

The Company's Right of First Refusal shall inure to the benefit of its
successors and assigns, shall be freely assignable in whole or in part and shall
be binding upon any transferee of the Common Stock.

The Company's Right of First Refusal shall terminate if the Company's
common stock is listed on an established stock exchange or is quoted regularly
on the Nasdaq Stock Market.

-5-
<PAGE>

8. Transfer of Option. Prior to your death, only you may exercise your
Option. You cannot transfer or assign your Option. For instance, you may not
sell your Option or use it as security for a loan. If you attempt to do any of
these things, your Option will immediately become invalid. You may, however,
dispose of your Option in your will. Regardless of any marital property
settlement agreement, the Company is not obligated to honor a notice of exercise
from your spouse or former spouse, nor is the Company obligated to recognize
such individual's interest in your Option in any other way.

9. No Retention Rights. Your Option does not give you the right to be
retained by the Company (or any subsidiaries) in any capacity. The Company
reserves the right to terminate your Service at any time and for any reason.

10. Stockholder Rights. You, or your estate or heirs, have no rights as a
stockholder of the Company until a certificate for your Common Stock has been
issued. No adjustments are made for dividends or other rights if the applicable
record date occurs before your stock certificate is issued, except as described
in the Plan.

11. Adjustments to Common Stock. In the event of a stock split, a stock
dividend or a similar change in the Company's Common Stock, the number of shares
covered by your Option and the exercise price per share may be adjusted pursuant
to the Plan. Your Option shall be subject to the terms of the agreement of
merger, liquidation or reorganization in the event the Company is subject to
such corporate activity.

12. Legends. All certificates representing the Common Stock issued upon
exercise of your Option shall, where applicable, have endorsed thereon the
following legends:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH
THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE INITIAL HOLDER
HEREOF. SUCH AGREEMENT PROVIDES FOR CERTAIN TRANSFER RESTRICTIONS, INCLUDING
RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SECURITIES AND RIGHTS
OF REPURCHASE. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A
COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED OR
QUALIFIED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE, AND MAY BE OFFERED AND SOLD ONLY IF REGISTERED AND QUALIFIED
PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS OR IF
THE COMPANY IS PROVIDED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
REGISTRATION AND QUALIFICATION UNDER FEDERAL AND STATE SECURITIES LAWS ARE NOT
REQUIRED."

13. Applicable Law. This Agreement will be interpreted and enforced under
the laws of the State of California.

-6-
<PAGE>

14. Incorporation of Plan by Reference. The text of the Plan is
incorporated in this Agreement by reference. Certain capitalized terms used in
this Agreement are defined in the Plan.

This Agreement and the Plan constitute the entire understanding between you
and the Company regarding your Option. Any prior agreements, commitments or
negotiations concerning your Option are superseded.

By signing the cover sheet of this Agreement, you agree to all
of the terms and conditions described above and in the Plan.
You also acknowledge that you have read Section 11, "Purchaser's
Investment Representations" of Exhibit A and that you can and
---------
hereby do make the same representations with respect to the grant
of this Option.

-7-
<PAGE>

Tvia., INC.

2000 Stock Incentive Plan

STOCK OPTION AGREEMENT

(includes exercise before vesting)

Tvia., Inc., a Delaware corporation (the "Company"), hereby grants an
Option to purchase its Common Stock to the Optionee named below. The terms and
conditions of the Option are set forth in this Stock Option Agreement and in the
Company's 2000 Stock Incentive Plan (the "Plan").

1. GRANT INFORMATION

Date of Grant: __________, 20___

Name of Optionee: ____________________________________

Optionee's Social Security Number: ________-______-________

Type of Option: __ Incentive ("ISO")

__ Nonstatutory ("NSO")

Number of Shares of Common Stock Covered by the Option: ____________

Exercise Price per Share: $__________

Vesting Start Date: __________, 20__

By signing below, you agree to all of the terms and conditions
described in this Stock Option Agreement, including the attached
Terms and Conditions, Notice of Exercise and Common Stock Purchase
Agreement and the Plan.

Optionee:_______________________________________________________________________
(Signature)

Company:________________________________________________________________________
(Signature)

Title:__________________________________________________________________________

1
<PAGE>

Stock Option Agreement - Terms and Conditions

2000 Stock Incentive Plan

Tvia., Inc.

(includes early exercise provision)

II. TERMS AND CONDITIONS

1. Vesting. Your Option vests during your Service on the dates specified
in the first page of this Stock Option Agreement. Vesting will cease if your
Service terminates for any reason.

3. Term of Option. Your Option expires on the day before the 10th
anniversary of the Date of Grant (fifth anniversary for a 10% owner), and will
expire earlier if your Service terminates as follows:

(b) Cause. If your Service terminates for Cause, your Option will
expire immediately.

2
<PAGE>

"Disability" means that you are unable to engage in any substantial
gainful activity by reason of any medically determinable physical or mental
impairment.

4. Exercise of Option.

3
<PAGE>

(c) Form of Payment. When you submit Exhibit A, you must include
payment of the aggregate Exercise Price for the Common Stock you are
purchasing. Payment may be made in one (or a combination) of the following
forms.

. Your personal check, a cashier's check or a money order.

. Any other form of legal consideration approved by the Board.

5. Exercise of Option Before Vesting ("Early Exercise"). You may
exercise your Option before it is fully vested, and the vesting provisions set
forth herein will apply to the Common Stock you acquire by exercising your
Option. If you exercise this Option before vesting, you should consider making
an election under Section 83(b) of the Internal Revenue Code of 1986, as amended
(the "83(b) Election"), a form of which is attached as Exhibit E. Please see
the Tax Summary attached as Exhibit F. The 83(b) Election must be filed within
thirty (30) days after the date you exercise all or any portion of your Option
in which you are not vested.

4
<PAGE>

6. Resale Restrictions/Market Stand-Off. In connection with any
underwritten public offering by the Company of its equity securities pursuant to
an effective registration statement filed under the Securities Act, including
the Company's initial public offering, you shall not, directly or indirectly,
engage in any transaction prohibited by the underwriter, nor shall you sell,
make any short sale of, contract to sell, transfer the economic risk of
ownership in, loan, hypothecate, pledge, grant any Option for the purchase of,
or otherwise dispose or transfer for value or agree to engage in any of the
foregoing transactions with respect to any Common Stock without the prior
written consent of the Company or its underwriters, for such period of time
after the effective date of such registration statement as may be requested by
the Company or such underwriters. Such period of time shall not exceed one
hundred eighty (180) days and may be required by the underwriter as a market
condition of the offering. By signing this Agreement you agree to execute and
deliver such other agreements as may be reasonably requested by the Company or
the underwriter which are consistent with the foregoing or which are necessary
to give further effect thereto. To enforce the provisions of this paragraph,
the Company may impose stop-transfer instructions with respect to the Common
Stock until the end of the applicable stand-off period.

5
<PAGE>

The Company's Right of First Refusal shall terminate if the Company's
common stock is listed on an established stock exchange or is quoted regularly
on the Nasdaq Stock Market.

12. Legends. All certificates representing the Common Stock issued upon
exercise of your Option shall, where applicable, have endorsed thereon the
following legends:

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE
COMPANY AND THE INITIAL HOLDER HEREOF. SUCH AGREEMENT PROVIDES FOR
CERTAIN TRANSFER RESTRICTIONS, INCLUDING RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SECURITIES AND RIGHTS OF
REPURCHASE. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."

6
<PAGE>

PURSUANT TO THE RELEVANT PROVISIONS OF FEDERAL AND STATE SECURITIES
LAWS OR IF THE COMPANY IS PROVIDED AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT REGISTRATION AND QUALIFICATION
UNDER FEDERAL AND STATE SECURITIES LAWS ARE NOT REQUIRED."

13. Applicable Law. This Agreement will be interpreted and enforced under
the laws of the State of California.

14. Incorporation of Plan by Reference. The text of the Plan is
incorporated in this Agreement by reference. Certain capitalized terms used in
this Agreement are defined in the Plan.

By signing the cover sheet of this Agreement, you agree to all of
the terms and conditions described above and in the Plan. You also
acknowledge that you have read Section 11, "Purchaser's Investment
Representations" of Exhibit A and that you can and hereby do make the
---------
same representations with respect to the grant of this Option.

7
<PAGE>

EXHIBIT A
(to be attached to an
option agreement,
either ISO or NSO;
allows exercise prior to vesting)

Tvia, Inc.
----------

Notice of Exercise and Common Stock Purchase Agreement
------------------------------------------------------

THIS AGREEMENT is dated as of ___________, ____, between Tvia, Inc. (the
"Company"), and _________________ ("Purchaser").

W I T N E S S E T H:

WHEREAS, the Company and Purchaser are parties to that certain _______
Incentive __________ Nonstatutory Stock Option Agreement dated as of
___________, ____ (the "Option Agreement") pursuant to which the Purchaser has
the right to purchase up to ______ shares of the Company's common stock (the
"Option Shares"); and

WHEREAS, the Option is exercisable with respect to certain of the Option
Shares as of the date hereof; and

WHEREAS, pursuant to the Option Agreement, Purchaser desires to purchase
shares of the Company as herein described, on the terms and conditions set forth
in this Agreement, the Option Agreement and the Tvia, Inc. 2000 Stock Incentive
Plan (the "Plan"). Certain capitalized terms used in this Agreement are defined
in the Plan.

NOW, THEREFORE, it is agreed between the parties as follows:

SECTION 1: PURCHASE OF SHARES.
- ------------------------------

(i) Pursuant to the terms of the Option Agreement, Purchaser hereby
agrees to purchase from the Company and the Company agrees to sell and issue to
Purchaser _________ shares of the Company's common stock (the "Common Stock")
for the Exercise Price per share specified in the Option Agreement payable by
personal check, cashier's check or money order, if permitted by the Option
Agreement, as follows: _______________________________. Payment shall be
delivered at the Closing, as such term is hereinafter defined.

(ii) The closing hereunder (the "Closing") shall occur at the offices of
the Company on __________, ____, or such other time and place as may be
designated by the Company (the "Closing Date").

A-1
<PAGE>

SECTION 2: REPURCHASE OPTION
- --------------------------------

All unvested shares of the Common Stock purchased by the Purchaser pursuant
to this Agreement (sometimes referred to as the "Repurchase Option Stock") shall
be subject to the following option (the "Repurchase Option"):

(i) In the event the Purchaser terminates service with the Company
("Service") for any reason, with or without cause, the Company may exercise the
Repurchase Option.

(ii) Purchaser understands that the Common Stock is being sold in order
to induce Purchaser to become and/or remain associated with the Company and to
work diligently for the success of the Company and that the Repurchase Option
Stock will continue to vest in accordance with the schedule set forth in the
Option Agreement. Accordingly, the Company shall have the right at any time
within 90 days after the termination of Service to purchase from the Purchaser
all shares of Common Stock purchased hereunder which have not vested in
accordance with the terms of such vesting schedule in the Option Agreement. The
purchase price for such unvested shares of Repurchase Option Stock shall be the
Exercise Price per share paid by Purchaser for such shares pursuant to the
Option (the "Option Price"). The purchase price shall be paid by certified or
cashier's check or by cancellation of any indebtedness of Purchaser to the
Company.

(iii) Nothing in this Agreement shall be construed as a right by Purchaser
to be retained by the Company, or a parent or subsidiary of Company in any
capacity. The Company reserves the right to terminate Purchaser's Service at
any time and for any reason.

SECTION 3: EXERCISE OF REPURCHASE OPTION
- --------------------------------------------

The Repurchase Option shall be exercised by written notice signed by an
officer of the Company and delivered or mailed as provided in Section 16 of this
Agreement and to the Escrow Agent as provided in Section 16 of the Joint Escrow
Instructions attached as Exhibit B to the Option Agreement.
---------

SECTION 4: WAIVER, ASSIGNMENT, EXPIRATION OF REPURCHASE OPTION
- ------------------------------------------------------------------

If the Company waives or fails to exercise the Repurchase Option as to all
of the shares subject thereto, the Company may, in the discretion of its Board
of Directors, assign the Repurchase Option to any other holder or holders of
preferred or common stock of the Company in such proportions as such Board of
Directors may determine. In the event of such an assignment, the assignee shall
pay to the Company in cash an amount equal to the fair market value of the
Repurchase Option. The Company shall promptly, upon expiration of the 90-day
period referred to in Section 2 above, notify Purchaser of the number of shares
subject to the Repurchase Option assigned to such stockholders and shall notify
both the Purchaser and the assignees of the time, place and date for settlement
of such purchase, which must be made within 90 days from the date of cessation
of continuous Service. In the event that the Company and/or such assignees do
not elect to exercise the Repurchase Option as to all or part of the shares
subject to it, the Repurchase Option shall expire as to all shares which the
Company and/or such assignees have not elected to purchase.

A-2
<PAGE>

SECTION 5: ESCROW OF SHARES
- -------------------------------

(i) As security for Purchaser's faithful performance of the terms of
this Agreement and to ensure the availability for delivery of Purchaser's shares
upon exercise of the Repurchase Option herein provided for, Purchaser agrees at
the Closing hereunder, to deliver to and deposit with the Escrow Agent named in
the Joint Escrow Instructions attached to the Option Agreement as Exhibit B, the
---------
certificate or certificates evidencing the Option Stock subject to the
Repurchase Option and two Assignments Separate from Certificate duly executed
(with date and number of shares in blank) in the form attached to the Option
Agreement as Exhibit D. Such documents are to be held by the Escrow Agent and
---------
delivered by the Escrow Agent pursuant to the Joint Escrow Instructions, which
instructions shall also be delivered to the Escrow Agent at the Closing
hereunder.

(ii) Within 30 days after the last day of each successive completed
calendar quarter after the Closing Date, if Purchaser so requests, the Escrow
Agent will deliver to Purchaser certificates representing so many shares of
Common Stock as are no longer subject to the Repurchase Option (less such shares
as have been previously delivered). Ninety days after cessation of Purchaser's
Service with the Company the Company will direct the Escrow Agent to deliver to
Purchaser a certificate or certificates representing the number of shares not
repurchased by the Company or its assignees pursuant to exercise of the
Repurchase Option (less such shares as have been previously delivered).

SECTION 6: ADJUSTMENT OF SHARES
- -----------------------------------

Subject to the provisions of the Certificate of Incorporation of the
Company, if, from time to time during the term of the Repurchase Option:

(i) there is any stock dividend or liquidating dividend of cash and/or
property, stock split or other change in the character or amount of any of the
outstanding securities of the Company, or

(ii) there is any consolidation, merger or sale of all or substantially
all, of the assets of the Company,

then, in such event, any and all new, substituted or additional securities or
other property to which Purchaser is entitled by reason of Purchaser's ownership
of the shares shall be immediately subject to such Repurchase Option with the
same force and effect as the shares of Option Stock from time to time subject to
the Repurchase Option. While the total Option Price shall remain the same after
each such event, the Option Price per share of Option Stock upon exercise of the
Repurchase Option shall be appropriately and equitably adjusted as determined by
the Board of Directors of the Company.

SECTION 7: THE COMPANY'S RIGHT OF FIRST REFUSAL.
- ----------------------------------------------------

Before any shares of Common Stock registered in the name of Purchaser and
not subject to the Repurchase Option may be sold or transferred, such shares
shall first be offered to the Company as set forth in the Option Agreement.

A-3
<PAGE>

SECTION 8: PURCHASER'S RIGHTS AFTER EXERCISE OF REPURCHASE
- --------------------------------------------------------------
OPTION OR RIGHT OF FIRST REFUSAL.
- ---------------------------------

If the Company makes available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Common Stock to be
repurchased in accordance with the provisions of Sections 2 and 7 of this
Agreement, then from and after such time the person from whom such shares are to
be repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed to have been repurchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefor have been delivered as required by this Agreement.

SECTION 9: TRANSFER BY PURCHASER TO CERTAIN TRUSTS.
- -------------------------------------------------------

Purchaser shall have the right to transfer all or any portion of
Purchaser's interest in the shares issued under this Agreement which have been
delivered to Purchaser under the provisions of Section 5 of this Agreement, to a
trust established by Purchaser for the benefit of Purchaser, Purchaser's spouse
or Purchaser's children, without being subject to the provisions of Section 7
hereof, provided that the trustee on behalf of the trust shall agree in writing
to be bound by the terms and conditions of this Agreement. The transferee shall
execute a copy of Exhibit C attached to the Option Agreement and file the same
---------
with the Secretary of the Company.

SECTION 10: LEGEND OF SHARES.
- --------------------------------

All certificates representing the Common Stock purchased under this
Agreement shall, where applicable, have endorsed thereon the legends set forth
in the Option Agreement and any other legends required by applicable securities
laws.

SECTION 11: PURCHASER'S INVESTMENT REPRESENTATIONS.
- ------------------------------------------------------

(i) This Agreement is made with Purchaser in reliance upon Purchaser's
representation to the Company, which by Purchaser's acceptance hereof Purchaser
confirms, that the Common Stock which Purchaser will receive will be acquired
with Purchaser's own funds for investment for an indefinite period for
Purchaser's own account, not as a nominee or agent, and not with a view to the
sale or distribution of any part thereof, and that Purchaser has no present
intention of selling, granting participation in, or otherwise distributing the
same, but subject, nevertheless, to any requirement of law that the disposition
of Purchaser's property shall at all times be within Purchaser's control. By
executing this Agreement, Purchaser further represents that Purchaser does not
have any contract, understanding or agreement with any person to sell, transfer,
or grant participation, to such person or to any third person, with respect to
any of the Common Stock.

(ii) Purchaser understands that the Common Stock will not be registered
or qualified under federal or state securities laws on the ground that the sale
provided for in this Agreement is exempt from registration or qualification
under federal or state securities laws and that the Company's reliance on such
exemption is predicated on Purchaser's representations set forth herein.

A-4
<PAGE>

(iii) Purchaser agrees that in no event will Purchaser make a disposition
of any of the Common Stock (including a disposition under Section 9 of this
Agreement), unless and until (i) Purchaser shall have notified the Company of
the proposed disposition and shall have furnished the Company with a statement
of the circumstances surrounding the proposed disposition and (ii) Purchaser
shall have furnished the Company with an opinion of counsel satisfactory to the
Company to the effect that (A) such disposition will not require registration or
qualification of such Common Stock under federal or state securities laws or (B)
appropriate action necessary for compliance with the federal or state securities
laws has been taken or (iii) the Company shall have waived, expressly and in
writing, its rights under clauses (i) and (ii) of this section.

(iv) With respect to a transaction occurring prior to such date as the
Plan and Common Stock thereunder are covered by a valid Form S-8 or similar
federal registration statement, this subsection shall apply unless the
transaction is covered by the exemption in California Corporations Code
(S)25102(o) or a similar broad based exemption. In connection with the
investment representations made herein, Purchaser represents that Purchaser is
able to fend for himself or herself in the transactions contemplated by this
Agreement, has such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of Purchaser's investment,
has the ability to bear the economic risks of Purchaser's investment and has
been furnished with and has had access to such information as would be made
available in the form of a registration statement together with such additional
information as is necessary to verify the accuracy of the information supplied
and to have all questions answered by the Company.

(v) Purchaser understands that if the Company does not register with the
Securities and Exchange Commission pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or if a registration
statement covering the Common Stock (or a filing pursuant to the exemption from
registration under Regulation A of the Securities Act of 1933) under the
Securities Act of 1933 is not in effect when Purchaser desires to sell the
Common Stock, Purchaser may be required to hold the Common Stock for an
indeterminate period. Purchaser also acknowledges that Purchaser understands
that any sale of the Common Stock which might be made by Purchaser in reliance
upon Rule 144 under the Securities Act of 1933 may be made only in limited
amounts in accordance with the terms and conditions of that Rule.

SECTION 12: ASSISTANCE TO PURCHASER UNDER RULE 144.
- ------------------------------------------------------

The Company covenants and agrees that (a) at all times after it first
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, it will use its best efforts to comply with the current public
information requirements of Rule 144(c)(1) under the Securities Act of 1933, and
that if prior to becoming subject to such reporting requirements an over-the-
counter market develops for the Common Stock, it will make publicly available
the information required by Rule 144(c)(2); (b) it will furnish Purchaser, upon
request, with all information required for the preparation and filing of Form
144; and (c) it will on a timely basis use its best efforts to file all reports
required to be filed and make all disclosures, including disclosures of
materially adverse information, required to permit Purchaser to make the
required representations in Form 144.

A-5
<PAGE>

SECTION 13: NO DUTY TO TRANSFER IN VIOLATION HEREUNDER.
- ----------------------------------------------------------

The Company shall not be required (a) to transfer on its books any shares
of Common Stock of the Company which shall have been sold or transferred in
violation of any of the provisions set forth in this Agreement or (b) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.

SECTION 14: RIGHTS OF PURCHASER.
- -----------------------------------

Except as otherwise provided herein, Purchaser shall, during the term of
this Agreement, exercise all rights and privileges of a stockholder of the
Company with respect to the Common Stock.

SECTION 15: OTHER NECESSARY ACTIONS.
- ---------------------------------------

The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.

SECTION 16: NOTICE.
- ----------------------

Any notice required or permitted hereunder shall be given in writing and
shall be deemed effectively given upon the earliest of personal delivery,
receipt or the third full day following deposit in the United States Post Office
with postage and fees prepaid, addressed to the other party hereto at the
address last known or at such other address as such party may designate by 10
days' advance written notice to the other party hereto.

SECTION 17: SUCCESSORS AND ASSIGNS.
- -------------------------------------

This Agreement shall inure to the benefit of the successors and assigns of
the Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns. The failure of the Company in any instance to exercise
the Repurchase Option or rights of first offer described herein shall not
constitute a waiver of any other Repurchase Option or right of first offer that
may subsequently arise under the provisions of this Agreement. No waiver of any
breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of a like or different nature.

SECTION 18: APPLICABLE LAW.
- ------------------------------

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California, as such laws are applied to contracts entered
into and performed in such state.

SECTION 19: NO STATE QUALIFICATION.
- --------------------------------------

THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT
BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND THE ISSUANCE OF SUCH

A-6
<PAGE>

SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO
EXEMPT.

SECTION 20: NO ORAL MODIFICATION.
- ------------------------------------

No modification of this Agreement shall be valid unless made in writing and
signed by the parties hereto.

SECTION 21: ENTIRE AGREEMENT.
- --------------------------------

This Agreement and the Option Agreement constitute the entire complete and
final agreement between the parties hereto with regard to the subject matter
hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

TVIA, INC. PURCHASER

By _________________________ _____________________________

A-7
<PAGE>

EXHIBIT B
---------

Joint Escrow Instructions
-------------------------

_________, _____

Secretary
Tvia, Inc.

Dear Sir or Madam:

As Escrow Agent for both Tvia, Inc. (the "Company"), and
___________________ ("Purchaser"), you are hereby authorized and directed to
hold the documents delivered to you pursuant to the terms of that certain Common
Stock Purchase Agreement (the "Agreement") of even date herewith, to which a
copy of these Joint Escrow Instructions is attached as Exhibit B to a certain
---------
Stock Option dated ________ ("Option Agreement"), in accordance with the
following instructions:

1. In the event the Company shall elect to exercise the Repurchase Option
set forth in the Agreement, the Company shall give to Purchaser and you a
written notice as provided in the Agreement. Purchaser and the Company hereby
irrevocably authorize and direct you to close the transaction contemplated by
such notice, including prompt delivery of stock certificates.

2. At the closing, you are directed (a) to date the stock assignment form
or forms necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
or certificates evidencing the shares to be transferred, to the Company against
the simultaneous delivery to you of the purchase price (by certified or bank
cashier's check) for the number of shares being purchased pursuant to the
exercise of the Repurchase Option.

3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares to be held by you hereunder and any additions and
substitutions to said shares as defined in the Agreement. Purchaser does hereby
irrevocably constitute and appoint you as Purchaser's attorney-in-fact and agent
for the term of this escrow to execute with respect to such securities all
documents necessary or appropriate to make such securities negotiable and to
complete any transaction herein contemplated. Subject to the provisions of this
Section 3, Purchaser shall exercise all rights and privileges, including but not
limited to, the right to vote and to receive dividends (if any), of a
stockholder of the Company while the shares are held by you.

4. In accordance with the terms of Section 5 of the Agreement, you may
from time to time deliver to Purchaser a certificate or certificates
representing so many shares as are no longer subject to the Repurchase Option.

5. This escrow shall terminate upon the release of all shares held under
the terms and provisions hereof.

B-1
<PAGE>

6. If at the time of termination of this escrow you should have in your
possession any documents, securities or other property belonging to Purchaser,
you shall deliver all of same to Purchaser and shall be discharged from all
further obligations hereunder.

7. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.

8. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact of Purchaser while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.

9. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court.
In case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.

10. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.

11. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.

12. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel.

13. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice of each party. In the event of any such termination, the Company shall
appoint any officer of the Company as successor Escrow Agent.

14. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.

15. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of

B-2
<PAGE>

the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.

16. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled.

17. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.

18. This instrument shall be governed by and construed in accordance with
the laws of the State of California.

19. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.

Very truly yours,

Tvia, Inc.

By ___________________________

ESCROW AGENT: PURCHASER:

________________________ ______________________________

B-3
<PAGE>

EXHIBIT C
---------

ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------

FOR VALUE RECEIVED _________________________________ hereby sells, assigns
and transfers unto _________________________ ________________________ (________)
shares of the Common Stock of Tvia, Inc. (the "Company"), standing in __________
name on the books of the Company represented by Certificate No. ___________
herewith and hereby irrevocably constitutes and appoints ________________
Attorney to transfer said stock on the books of the Company with full power of
substitution in the premises.

Dated: ____________________, ____.

__________________________________
Print Name

__________________________________
(Signature)

Spousal Consent (if applicable)
-------------------------------

___________________ (Purchaser's spouse) indicates by the execution of this
Assignment his or her consent to be bound by the terms herein as to his or her
interests, whether as community property or otherwise, if any, in the Shares.

__________________________________
Signature

INSTRUCTIONS: PLEASE DO NOT FILL IN ANY BLANKS OTHER THAN THE SIGNATURE LINE.
- ------------
THE PURPOSE OF THIS ASSIGNMENT IS TO ENABLE THE COMPANY TO EXERCISE ITS
"REPURCHASE OPTION" SET FORTH IN THE STOCK PURCHASE AGREEMENT WITHOUT REQUIRING
ADDITIONAL SIGNATURES ON THE PART OF PURCHASER

C-1
<PAGE>

EXHIBIT D
---------

Acknowledgment of and Agreement to be Bound
-------------------------------------------

By the Notice of Exercise and Common Stock Purchase Agreement of
----------------------------------------------------------------

Tvia, Inc.
----------

The undersigned, as transferee of shares of Tvia, Inc., hereby acknowledges
that he or she has read and reviewed the terms of the Notice of Exercise and
Common Stock Purchase Agreement of Tvia, Inc. and hereby agrees to be bound by
the terms and conditions thereof, as if the undersigned had executed said
Agreement as an original party thereto.

Dated: ____________________, ____.

By ___________________________

D-1
<PAGE>

EXHIBIT E
---------

ELECTION UNDER SECTION 83(b) OF
-------------------------------
THE INTERNAL REVENUE CODE
-------------------------

This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.

(i) The taxpayer who performed the services is:

Name: _____________________________________

Address: _____________________________________

_____________________________________

Social Security No.: _________________________

(ii) The property with respect to which the election is being made is
_____________ shares of common stock of Tvia, Inc., a Delaware
corporation (the "Company").

(iii) The property was issued on _______________, 20____.

(iv) The taxable year in which the election is being made is the
calendar year 20____.

(v) The property is subject to a repurchase right pursuant to which
the issuer has the right to acquire the property at the original
purchase price if for any reason taxpayer's service with the
issuer is terminated. The issuer's repurchase right lapses in a
series of annual and monthly installments over a ____ (__) year
period ending on ___________.

(vi) The Fair Market Value of the property at the time of transfer
(determined without regard to any restriction other than a
restriction which by its terms will never lapse) is _________ per
share.

(vii) The amount paid for such property is $_____________.

(viii) A copy of this statement was furnished to the Company for whom
taxpayer rendered the service underlying the transfer of property.

(ix) This statement is executed as of ___________________, 20_____.

___________________________________ ________________________________________
Spouse (if any) Taxpayer

This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax return. The filing must be made
within thirty (30) days after the date of transfer of the property referenced
above.

Note: The Special Protective Election form attached below should only be
included with the 83(b) Election if you are exercising an incentive stock
Option.

E-1
<PAGE>

SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b)
-----------------------------------------------------
OF THE INTERNAL REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED
--------------------------------------------------------------
UPON EXERCISE OF AN INCENTIVE STOCK OPTION
------------------------------------------

The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
Option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:

1. The purpose of this election is to have the alternative minimum taxable
income attributable to the purchased shares measured by the amount by which the
fair market value of such shares at the time of their transfer to the Taxpayer
exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.

2. Section 421(a)(1) of the Code expressly excludes from income any excess of
the fair market value of the purchased shares over the amount paid for such
shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.

E-2
<PAGE>

EXHIBIT F
---------

TAX SUMMARY
-----------

EXERCISE BEFORE VESTING
-----------------------

If your Options are intended to be incentive stock Options, they qualify for
incentive stock Option ("ISO") treatment under the Internal Revenue Code
("Code"). Without such special tax treatment, they would be treated as regular,
or nonqualified stock Options ("NSOs").

Typically, under an NSO you are taxed at ordinary income tax rates at the time
you exercise an Option. The amount taxed is equal to the difference between the
fair market value at exercise and the exercise price. Subsequent appreciation,
if any, is taxed as a capital gain when you actually sell the shares. To be
eligible for long-term capital gain treatment with a maximum rate of 20%,
---------
generally you must hold the shares at least one year after exercise. You should
consult with a tax adviser on the effect of the tax laws.

With an ISO, however, you are not taxed on exercise. Rather, if you meet the
required holding periods specially applicable to ISOs, you will not be taxed
until you actually sell the shares. Another advantage to ISO treatment is that
at the time of sale of the stock the spread at exercise is taxed as a long term
capital gain rather than ordinary income. However, the spread is considered as
a "preference" item in the year of exercise in computing your alternative
minimum tax.

The ISO holding period requirement is that you must not dispose of the shares
within two years of the grant date nor within one year of exercise. If you do
not meet the ISO holding period requirement, the spread between fair market
value at exercise and the exercise price will be taxed as ordinary income in the
year of the disposition.

One way to avoid the inclusion of the spread in the alternative minimum tax
calculation is to exercise the Option at grant, pay the exercise price and make
an "83(b)" election within 30 days.

Immediate exercise also begins the various holding requirement for long-term
capital gain treatment and the one-year requirement that applies after the
---
exercise of an ISO. As noted above, the general rule is if you dispose of the
shares before the ISO holding period is met, you recognize the spread at
exercise as ordinary income at the time of the disposition. However, if by
early exercise you have held the shares at least one year, your gain on
disposition will be taxed at long-term capital gains rates.

Assume you are granted an Option to exercise four shares at $.10 per share. The
underlying shares vest annually over a four-year period. At the end of year
one, the fair market value of a share is $.20.

Assume that after four years all shares become vested and are worth $10 per
share and you have not yet exercised the Option. Then, in year 5, when the fair
market value of the stock is $10.10, you exercise all four shares. Because the
Option is an incentive stock Option, you are not taxed at exercise.

F-1
<PAGE>

The $10 spread will show up as an alternative minimum tax preference item with
potentially substantial adverse tax consequences to you in year 5. By
purchasing at grant and making an 83(b) election, you avoid having to include
the spread as a minimum tax preference item.

But what if you do not qualify for ISO treatment? That is, assume also that you
then sell the shares in year 5 when the value is $10.10. Because you have not
met the part of the holding period requirement which prohibits disposition
within one year of exercise, you will recognize $10 per share in ordinary income
------------------
(but you will not have to include the spread as a preference item). However, if
you had previously exercised when the Option was granted and when the value was
$.10 and then made an 83(b) election within 30 days, you recognize no ordinary
income either at exercise or in year 5. Rather, when you sell for $10.10 in
year 5 your $10 gain would be taxed entirely at favorable long-term capital
gains (assuming a favorable differential in ordinary income and capital gains
rates is still in effect at disposition).

To exercise the Options you do of course have to pay the exercise price. If
your service with the Company terminates before the shares are vested, the
Company may repurchase the shares at your original exercise price.

If your Options are not ISOs but are nonqualified stock Options (NSOs), exercise
prior to vesting will accomplish two things: (1) it will start the capital gains
holding period sooner and (2) it will prevent you from being taxed (at ordinary
income tax rates) on a later date if you decide to exercise and if the fair
market value of the stock has increased from the date of grant. Of course, when
you sell the shares, the gain will be taxed according to how long you have held
the shares.

This Tax Summary is general in nature and should not be relied upon by any
person in deciding whether or when to exercise an Option or to make an 83(b)
election. Each person should consult his or her own tax advisor regarding these
matters.

F-2
<PAGE>

SECTION 83(b) ELECTIONS
-----------------------

This memorandum briefly describes certain aspects of Internal Revenue Code
section 83 and section 83(b) elections as they exist under current law. A form
of election is attached. The effect of making the election is that it permits
the employee or consultant to include in his or her gross income, in his or her
taxable year in which unvested shares are transferred, the excess, if any, of
(i) the fair market value of such shares at the time of transfer (determined
without regard to restrictions other than those which will never lapse) over
(ii) the amount (if any) paid for such shares.

By making the section 83(b) election, subsequent appreciation in the value of
the shares generally will be taxed as a capital gain, rather than as
compensation. Also, appreciation that occurs after the transfer but prior to
vesting will not be taxed until the shares are sold. Finally, such subsequent
appreciation may be deferred if transfer occurs in a tax-free reorganization or
may go untaxed altogether if a stepped-up basis results from transfer by reason
of death. However, if the shares are forfeited the employees or consultants who
made the election can only deduct a loss to the extent the amount received (if
any) on forfeiture is less than the amount paid (if any) for such shares. Thus,
such employees or consultants are precluded from recovering the tax paid with
respect to any reported compensation income. Moreover, any loss recognized will
generally be a capital loss which can only offset capital gains plus $3,000 of
ordinary income ($1,500 in the case of married individuals filing a separate
return).

In the absence of an election, the employee or consultant who receives unvested
shares does not recognize any income until such shares vest. In the taxable
year in which any shares vest such employee or consultant will recognize
compensation income equal to the excess, if any, of (i) the fair market value of
the vested shares on the vesting date over (ii) the amount (if any) paid for
such shares. If the shares are forfeited the employee or consultant will
recognize ordinary loss to the extent the amount received on forfeiture is less
than the amount paid for such shares.

The election must be made not later than 30 days after the date of transfer of
the shares to the employee or consultant. The election is to be filed with the
Internal Revenue Service Center with which the employee or consultant files his
or her return. Whether a filing is required with any state tax board depends on
applicable state law. Therefore, consultants or employees should seek local tax
advice. In general, the election is irrevocable.

Each filing should be made by certified mail with the sender's receipt
postmarked at the time of mailing to establish proof of filing. Also, one copy
of the election should be filed with the Company. Finally, one copy of the
election must be submitted with the employee's federal income tax returns for
the taxable year in which the shares are transferred. Certain states may also
require a copy of the election to be submitted with state tax returns.
Consultants and employees should seek local tax advice. Although the election
must be made within 30 days of the date of transfer of the shares, the tax, if
any, arising out of the election need not be paid until the employee or
consultant files his or her tax return for the tax year of transfer (subject to
the withholding rules discussed below).

The Company should be entitled to a tax deduction for federal income tax
purposes equal to the amount, if any, included in the gross income of the
employees or consultants receiving the

F-3
<PAGE>

shares. The Company may also be entitled to a tax deduction for state income
tax purposes depending on the applicable state law. Deductibility is conditioned
on (i) satisfaction of the reasonable compensation requirements, and (ii)
compliance with withholding requirements with respect to employees. Also, the
compensatory amounts should be treated in the same manner as other bonus-wage
payments for purposes of the normal withholding requirements for FICA, FUTA and
applicable state employment taxes. Any deduction is allowed for the taxable year
of the Company in which or with which ends the taxable year in which the amount
was included in the gross income of the employee or consultant.

If the shares are not publicly traded, the per share fair market value at the
time of the election will likely be the value which the board of directors of
the Company attributes to the shares in its resolutions. This will be based
upon the Company's current appraisal of the shares, as revised from time to
time.

While it may be desirable from a tax standpoint for employees and consultants to
make an 83(b) election at the time unvested shares are acquired, the matter
should be reviewed by each employee or consultant with his or her tax adviser.
The Company will not give tax advice to the employee or consultant.

F-4
<PAGE>

EXHIBIT A
---------
(to be attached to an
option agreement,
either ISO or NSO;
does not allow exercise
prior to vesting)

Tvia, Inc.
----------

Notice of Exercise and Common Stock Purchase Agreement
------------------------------------------------------

THIS AGREEMENT is dated as of ___________, ____, between Tvia, Inc. (the
"Company"), and _________________ ("Purchaser").

W I T N E S S E T H:

WHEREAS, the Option is exercisable with respect to certain of the Option
Shares as of the date hereof; and

NOW, THEREFORE, it is agreed between the parties as follows:

SECTION 1: PURCHASE OF SHARES.
- ---------------------------------

(a) Pursuant to the terms of the Option Agreement, Purchaser hereby agrees
to purchase from the Company and the Company agrees to sell and issue to
Purchaser _________ shares of the Company's common stock (the "Common Stock")
for the Exercise Price per share specified in the Option Agreement payable by
personal check, cashier's check or money order, if permitted by the Option
Agreement, as follows: _______________________________. Payment shall be
delivered at the Closing, as such term is hereinafter defined.

(b) The closing hereunder (the "Closing") shall occur at the offices of
the Company on __________, ____, or such other time and place as may be
designated by the Company (the "Closing Date").

A-1
<PAGE>

SECTION 2: THE COMPANY'S RIGHT OF FIRST REFUSAL.
- ----------------------------------------------------

Before any shares of Common Stock registered in the name of Purchaser may
be sold or transferred, such shares shall first be offered to the Company as set
forth in the Option Agreement.

SECTION 3: PURCHASER'S RIGHTS AFTER EXERCISE OF RIGHT OF FIRST REFUSAL.
- ---------------------------------------------------------------------------

If the Company makes available, at the time and place and in the amount and
form provided in this Agreement, the consideration for the Common Stock to be
repurchased in accordance with the provisions of Section 2 of this Agreement,
then from and after such time the person from whom such shares are to be
repurchased shall no longer have any rights as a holder of such shares (other
than the right to receive payment of such consideration in accordance with this
Agreement). Such shares shall be deemed to have been repurchased in accordance
with the applicable provision hereof, whether or not the certificate(s) therefor
have been delivered as required by this Agreement.

SECTION 4: LEGEND OF SHARES.
- --------------------------------

SECTION 5: PURCHASER'S INVESTMENT REPRESENTATIONS.
- ------------------------------------------------------

(a) This Agreement is made with Purchaser in reliance upon Purchaser's
representation to the Company, which by Purchaser's acceptance hereof Purchaser
confirms, that the Common Stock which Purchaser will receive will be acquired
with Purchaser's own funds for investment for an indefinite period for
Purchaser's own account, not as a nominee or agent, and not with a view to the
sale or distribution of any part thereof, and that Purchaser has no present
intention of selling, granting participation in, or otherwise distributing the
same, but subject, nevertheless, to any requirement of law that the disposition
of Purchaser's property shall at all times be within Purchaser's control. By
executing this Agreement, Purchaser further represents that Purchaser does not
have any contract, understanding or agreement with any person to sell, transfer,
or grant participation, to such person or to any third person, with respect to
any of the Common Stock.

(b) Purchaser understands that the Common Stock will not be registered or
qualified under federal or state securities laws on the ground that the sale
provided for in this Agreement is exempt from registration or qualification
under federal or state securities laws and that the Company's reliance on such
exemption is predicated on Purchaser's representations set forth herein.

(c) Purchaser agrees that in no event will Purchaser make a disposition of
any of the Common Stock (including a disposition under Section 9 of this
Agreement), unless and until (i) Purchaser shall have notified the Company of
the proposed disposition and shall have

A-2
<PAGE>

furnished the Company with a statement of the circumstances surrounding the
proposed disposition and (ii) Purchaser shall have furnished the Company with an
opinion of counsel satisfactory to the Company to the effect that (A) such
disposition will not require registration or qualification of such Common Stock
under federal or state securities laws or (B) appropriate action necessary for
compliance with the federal or state securities laws has been taken or (iii) the
Company shall have waived, expressly and in writing, its rights under clauses
(i) and (ii) of this section.

(d) With respect to a transaction occurring prior to such date as the Plan
and Common Stock thereunder are covered by a valid Form S-8 or similar federal
registration statement, this subsection shall apply unless the transaction is
covered by the exemption in California Corporations Code (S)25102(o) or a
similar broad based exemption. In connection with the investment representations
made herein, Purchaser represents that Purchaser is able to fend for himself or
herself in the transactions contemplated by this Agreement, has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of Purchaser's investment, has the ability to bear the
economic risks of Purchaser's investment and has been furnished with and has had
access to such information as would be made available in the form of a
registration statement together with such additional information as is necessary
to verify the accuracy of the information supplied and to have all questions
answered by the Company.

(e) Purchaser understands that if the Company does not register with the
Securities and Exchange Commission pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or if a registration
statement covering the Common Stock (or a filing pursuant to the exemption from
registration under Regulation A of the Securities Act of 1933) under the
Securities Act of 1933 is not in effect when Purchaser desires to sell the
Common Stock, Purchaser may be required to hold the Common Stock for an
indeterminate period. Purchaser also acknowledges that Purchaser understands
that any sale of the Common Stock which might be made by Purchaser in reliance
upon Rule 144 under the Securities Act of 1933 may be made only in limited
amounts in accordance with the terms and conditions of that Rule.

SECTION 6: ASSISTANCE TO PURCHASER UNDER RULE 144.
- ------------------------------------------------------

A-3
<PAGE>

SECTION 7: NO DUTY TO TRANSFER IN VIOLATION HEREUNDER.
- ----------------------------------------------------------

SECTION 8: RIGHTS OF PURCHASER.
- -----------------------------------

Except as otherwise provided herein, Purchaser shall, during the term of
this Agreement, exercise all rights and privileges of a stockholder of the
Company with respect to the Common Stock.

SECTION 9: OTHER NECESSARY ACTIONS.
- ---------------------------------------

The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.

SECTION 10: NOTICE.
- ----------------------

SECTION 11: SUCCESSORS AND ASSIGNS.
- --------------------------------------

This Agreement shall inure to the benefit of the successors and assigns of
the Company and, subject to the restrictions on transfer herein set forth, be
binding upon Purchaser and Purchaser's heirs, executors, administrators,
successors and assigns. The failure of the Company in any instance to exercise
rights of first offer described herein shall not constitute a waiver of any
other right of first offer that may subsequently arise under the provisions of
this Agreement. No waiver of any breach or condition of this Agreement shall be
deemed to be a waiver of any other or subsequent breach or condition, whether of
a like or different nature.

SECTION 12: APPLICABLE LAW.
- ------------------------------

This Agreement shall be governed by, and construed in accordance with, the
laws of the State of California, as such laws are applied to contracts entered
into and performed in such state.

SECTION 13: NO STATE QUALIFICATION.
- --------------------------------------

THE SALE OF THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT
BEEN QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE

A-4
<PAGE>

CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY SECTION 25100, 25102 OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.

SECTION 14: NO ORAL MODIFICATION.
- ------------------------------------

No modification of this Agreement shall be valid unless made in writing and
signed by the parties hereto.

SECTION 15: ENTIRE AGREEMENT.
- --------------------------------

This Agreement and the Option Agreement constitute the entire complete and
final agreement between the parties hereto with regard to the subject matter
hereof.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

TVIA, INC. PURCHASER

By _________________________ _____________________________

A-5
<PAGE>

EXHIBIT B
---------

Acknowledgment of and Agreement to be Bound
-------------------------------------------

By the Notice of Exercise and Common Stock Purchase Agreement of
----------------------------------------------------------------

Tvia, Inc.
----------

Dated: ____________________, ____.

By ___________________________

B-1

<PAGE>

EXHIBIT 10.3

TVIA, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

(Adopted by the Board on _______ __, 2000)
<PAGE>

Table of Contents
-----------------

<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1. Purpose Of The Plan........................................... 1

SECTION 2. Definitions................................................... 1
(A) "Accumulation Period............................................ 1
(B) "Board"......................................................... 1
(C) "Code".......................................................... 1
(D) "Committee"..................................................... 1
(E) "Company"....................................................... 1
(F) "Compensation".................................................. 1
(G) "Corporate reorganization"...................................... 1
(H) "Eligible Employee"............................................. 1
(I) "Exchange Act".................................................. 2
(J) "Fair Market VAlue"............................................. 2
(K) "IPO"........................................................... 2
(L) "Offering Period"............................................... 2
(M) "Participant"................................................... 2
(N) "Participating Company"......................................... 2
(O) "Plan".......................................................... 2
(P) "Plan Account".................................................. 2
(Q) "Purchase Price"................................................ 2
(R) "Stock"......................................................... 2
(S) "Subsidiary".................................................... 3

SECTION 3. Administration of the Plan.................................... 3
(A) Committee Composition........................................... 3
(B) Committee Responsibilities...................................... 3

Section 4. Enrollment And Participation.................................. 3
(A) Offering Periods................................................ 3
(B) Accumulation Periods............................................ 3
(C) Enrollment...................................................... 3
(D) Duration of Participation....................................... 3
(E) Applicable Offering Period...................................... 3

SECTION 5. Employee Contributions........................................ 4
(A) Frequency of Payroll Deductions................................. 4
(B) Amount of Payroll Deductions.................................... 4
(C) Changing Withholding Rate....................................... 4
(D) Discontinuing Payroll Deductions................................ 4
(E) Limit on Number of Elections.................................... 4

Section 6. Withdrawal From The Plan...................................... 5
(A) Withdrawal...................................................... 5
(B) Re-enrollment After Withdrawal.................................. 5

SECTION 7. Change In Employment Status................................... 5
(A) Termination of Employment....................................... 5
(B) Leave of Absence................................................ 5
(C) Death........................................................... 5
</TABLE>

i
<PAGE>

<TABLE>
<S> <C>
SECTION 8. Plan Accounts And Purchase Of Shares.......................... 5
(A) Plan Accounts................................................... 5
(B) Purchase Price.................................................. 5
(C) Number of Shares Purchased...................................... 6
(D) Available Shares Insufficient................................... 6
(E) Issuance of Stock............................................... 6
(F) Unused Cash Balances............................................ 6
(G) Stockholder Approval............................................ 6

SECTION 9. Limitations On Stock Ownership................................ 7
(A) Five Percent Limit.............................................. 7
(B) Dollar Limit.................................................... 7

SECTION 10. Rights Not Transferable...................................... 7

SECTION 11. No Rights As An Employee..................................... 7

SECTION 12. No Rights As A Stockholder................................... 8

SECTION 13. Securities Law Requirements.................................. 8

SECTION 14. Stock Offered Under The Plan................................. 8
(A) Authorized Shares............................................... 8
(B) Antidilution Adjustments........................................ 8
(C) Reorganizations................................................. 8

SECTION 15. Amendment Or Discontinuance.................................. 8

SECTION 16. Execution.................................................... 9
</TABLE>

ii
<PAGE>

TVIA, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

SECTION 1. Purpose Of The Plan.
- --------- -------------------

The Plan was adopted by the Board on _______ __, 2000, effective as of the
date of the IPO. The purpose of the Plan is to provide Eligible Employees with
an opportunity to increase their proprietary interest in the success of the
Company by purchasing Stock from the Company on favorable terms and to pay for
such purchases through payroll deductions. The Plan is intended to qualify
under section 423 of the Code.

SECTION 2. Definitions.
- --------- -----------

(a) "Accumulation Period " means a six-month period during which
-------------------
contributions may be made toward the purchase of Stock under the Plan, as
determined pursuant to Section 4(b).

(b) "Board" means the Board of Directors of the Company, as constituted
-----
from time to time.

(d) "Committee" means a committee of the Board, as described in Section 3.
---------

(e) "Company" means Tvia, Inc., a _____________ Corporation.
-------

(f) "Compensation" means (i) the total compensation paid in cash to a
------------
Participant by a Participating Company, including salaries, wages, bonuses,
incentive compensation, commissions, overtime pay and shift premiums, plus (ii)
any pre-tax contributions made by the Participant under section 401(k) or 125 of
the Code. "Compensation" shall exclude all non-cash items, moving or relocation
allowances, cost-of-living equalization payments, car allowances, tuition
reimbursements, imputed income attributable to cars or life insurance, severance
pay, fringe benefits, contributions or benefits received under employee benefit
plans, income attributable to the exercise of stock options, and similar items.
The Committee shall determine whether a particular item is included in
Compensation.

(g) "Corporate Reorganization" means:
------------------------

(i) The consummation of a merger or consolidation of the Company with
or into another entity, or any other corporate reorganization; or

(ii) The sale, transfer or other disposition of all or substantially
all of the Company's assets or the complete liquidation or dissolution of the
Company.

(h) "Eligible Employee" means any employee of a Participating Company
-----------------
customary employment is for more than five months per calendar year and for more
than 20 hours per week.
<PAGE>

The foregoing notwithstanding, an individual shall not be considered an
Eligible Employee if his or her participation in the Plan is prohibited by the
law of any country which has jurisdiction over him or her or if he or she is
subject to a collective bargaining agreement that does not provide for
participation in the Plan.

(i) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------

(j) "Fair Market Value" means the market price of Stock, determined by the
-----------------
Committee as follows:

(i) If Stock was traded on The Nasdaq National Market on the date in
question, then the Fair Market Value shall be equal to the last-transaction
price quoted for such date by The Nasdaq National Market;

(ii) If Stock was traded on a stock exchange on the date in question,
then the Fair Market Value shall be equal to the closing price reported by the
applicable composite transactions report for such date; or

(iii) If none of the foregoing provisions is applicable, then the Fair
Market Value shall be determined by the Committee in good faith on such basis as
it deems appropriate.

Whenever possible, the determination of Fair Market Value by the Committee
shall be based on the prices reported in the Wall Street Journal or as reported
-------------------
directly to the Company by Nasdaq or a stock exchange. Such determination shall
be conclusive and binding on all persons.

(k) "IPO" means the initial offering of Stock to the public pursuant to a
---
registration statement filed by the Company with the Securities and Exchange
Commission.

(l) "Offering Period" means a 24-month period with respect to which the
---------------
right to purchase Stock may be granted under the Plan, as determined pursuant to
Section 4(a).

(m) "Participant" means an Eligible Employee who elects to participate in
-----------
the Plan, as provided in Section 4(c).

(n) "Participating Company" means (i) the Company and (ii) each present or
---------------------
future Subsidiary designated by the Committee as a Participating Company.

(o) "Plan" means this Tvia, Inc. 2000 Employee Stock Purchase Plan, as it
----
may be amended from time to time.

(p) "Plan Account" means the account established for each Participant
------------
pursuant to Section 8(a).

(q) "Purchase Price" means the price at which Participants may purchase
--------------
Stock under the Plan, as determined pursuant to Section 8(b).

(r) "Stock" means the Common Stock of the Company.

2
<PAGE>

(s) "Subsidiary" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

SECTION 3. Administration of the Plan.
- --------------------------------------

(a) Committee Composition. The Plan shall be administered by the
Committee. The Committee shall consist exclusively of one or more directors of
the Company, who shall be appointed by the Board.

(b) Committee Responsibilities. The Committee shall interpret the Plan and
make all other policy decisions relating to the operation of the Plan. The
Committee may adopt such rules, guidelines and forms as it deems appropriate to
implement the Plan. The Committee's determinations under the Plan shall be final
and binding on all persons.

SECTION 4. Enrollment And Participation.
- ----------------------------------------

(a) Offering Periods. While the Plan is in effect, two Offering Periods
----------------
shall commence in each calendar year. The Offering Periods shall consist of the
24-month periods commencing on each January 1 and July 1, except that the first
Offering Period shall commence on the date of the IPO and end on December 31,
2001.

(b) Accumulation Periods. While the Plan is in effect, two Accumulation
--------------------
Periods shall commence in each calendar year. The Accumulation Periods shall
consist of the six-month periods commencing on January 1 and July 1, except that
the first Accumulation Period shall commence on the date of the IPO and end on
June 30, 2000.

(c) Enrollment. Any individual who, on the day preceding the first day of
----------
an Offering Period, qualifies as an Eligible Employee may elect to become a
Participant in the Plan for such Offering Period by executing the enrollment
form prescribed for this purpose by the Committee. The enrollment form shall be
filed with the Company at the prescribed location not later than 15 days prior
to the commencement of such Offering Period.

(d) Duration of Participation. Once enrolled in the Plan, a Participant
-------------------------
shall continue to participate in the Plan until he or she ceases to be an
Eligible Employee, withdraws from the Plan under Section 5(a) or reaches the end
of the Offering Period in which his or her employee contributions were
discontinued under Section 5(d) or 9(b). A Participant who discontinued employee
contributions under Section 5(d) or 9(b) or withdrew from the Plan under Section
6(a) may again become a Participant, if he or she then is an Eligible Employee,
by following the procedure described in Subsection (c) above. A Participant
whose employee contributions were discontinued automatically under Section 9(b)
shall automatically resume participation at the beginning of the earliest
Offering Period ending in the next calendar year, if he or she then is an
Eligible Employee.

(e) Applicable Offering Period. For purposes of calculating the purchase
--------------------------
price under Section 8(b), the applicable Offering Period shall be determined as
follows:

3
<PAGE>

(i) Once a Participant is enrolled in the Plan for an Offering
Period, such Offering Period shall continue to apply to him or her until the
earliest of: (A) the end of such Offering Period; (B) the end of his or her
participation under Subsection (d) above; or (C) re-enrollment in a subsequent
Offering Period under Paragraph (ii) below.

(ii) In the event that the Fair Market Value of Stock on the last
trading day before the commencement of the Offering Period in which the
Participant is enrolled is higher than on the last trading day before the
commencement of any subsequent Offering Period, the Participant shall
automatically be re-enrolled for such subsequent Offering Period.

(iii) When a Participant reaches the end of an Offering Period but his
or her participation is to continue, then such Participant shall automatically
be re-enrolled for the Offering Period that commences immediately after the end
of the prior Offering Period.

SECTION 5. Employee Contributions.
- ----------------------------------

(a) Frequency of Payroll Deductions. A Participant may purchase shares of
-------------------------------
Stock under the Plan solely by means of payroll deductions. Payroll deductions,
as designated by the Participant pursuant to Subsection (b) below, shall occur
on each payday during participation in the Plan.

(b) Amount of Payroll Deductions. An Eligible Employee shall designate on
----------------------------
the enrollment form the portion of his or her Compensation that he or she elects
to have withheld for the purchase of Stock. Such portion shall be a whole
percentage of the Eligible Employee's Compensation, but not less than 1% nor
more than 15%.

(c) Changing Withholding Rate. If a Participant wishes to change the rate
-------------------------
of payroll withholding, he or she may do so by filing a new enrollment form with
the Company at the prescribed location at any time. The new withholding rate
shall be effective as soon as reasonably practicable after such form has been
received by the Company. The new withholding rate shall be a whole percentage of
the Eligible Employee's Compensation, but not less than 1% nor more than 15%.

(d) Discontinuing Payroll Deductions. If a Participant wishes to
--------------------------------
discontinue employee contributions entirely, he or she may do so by filing a new
enrollment form with the Company at the prescribed location at any time. Payroll
withholding shall cease as soon as reasonably practicable after such form has
been received by the Company. (In addition, employee contributions may be
discontinued automatically pursuant to Section 9(b)). A Participant who has
discontinued employee contributions may resume such contributions by filing a
new enrollment form with the Company at the prescribed location. Payroll
withholding shall resume as soon as reasonably practicable after such form has
been received by the Company.

(e) Limit on Number of Elections. No Participant shall make more than two
----------------------------
elections under Subsection (c) or (d) above during any Offering Period.

4
<PAGE>

SECTION 6. Withdrawal From The Plan.
- ------------------------------------

(a) Withdrawal. A Participant may elect to withdraw from the Plan by
----------
filing the prescribed form with the Company at the prescribed location at any
time before the last day of an Accumulation Period. As soon as reasonably
practicable thereafter, payroll deductions shall cease and the entire amount
credited to the Participant's Plan Account shall be refunded to him or her in
cash, without interest. No partial withdrawals shall be permitted.

(b) Re-enrollment After Withdrawal. A former Participant who has withdrawn
------------------------------
from the Plan shall not be a Participant until he or she re-enrolls in the Plan
under Section 4(c). Re-enrollment may be effective only at the commencement of
an Offering Period.

SECTION 7. Change In Employment Status.
- ---------------------------------------

(a) Termination of Employment. Termination of employment as an Eligible
-------------------------
Employee for any reason, including death, shall be treated as an automatic
withdrawal from the Plan under Section 6(a). (A transfer from one Participating
Company to another shall not be treated as a termination of employment.)

(b) Leave of Absence. For purposes of the Plan, employment shall not be
----------------
deemed to terminate when the Participant goes on a military leave, a sick leave
or another bona fide leave of absence, if the leave was approved by the Company
in writing. Employment, however, shall be deemed to terminate ninety (90) days
after the Participant goes on a leave, unless a contract or statute guarantees
his or her right to return to work. Employment shall be deemed to terminate in
any event when the approved leave ends, unless the Participant immediately
returns to work.

(c) Death. In the event of the Participant's death, the amount credited to
-----
his or her Plan Account shall be paid to a beneficiary designated by him or her
for this purpose on the prescribed form or, if none, to the Participant's
estate. Such form shall be valid only if it was filed with the Company at the
prescribed location before the Participant's death.

SECTION 8. Plan Accounts And Purchase Of Shares.
- ------------------------------------------------

(a) Plan Accounts. The Company shall maintain a Plan Account on its books
-------------
in the name of each Participant. Whenever an amount is deducted from the
Participant's Compensation under the Plan, such amount shall be credited to the
Participant's Plan Account. Amounts credited to Plan Accounts shall not be trust
funds and may be commingled with the Company's general assets and applied to
general corporate purposes. No interest shall be credited to Plan Accounts.

(b) Purchase Price. The Purchase Price for each share of Stock purchased
--------------
on the last trading day of the month in which the Accumulation Period expired
shall be the lower of:

(i) 85% of the Fair Market Value of such share on the last trading
day of the month in which the Accumulation Period expired; or

(ii) 85% of the Fair Market Value of such share on the last trading
day before the commencement of the applicable Offering Period (as determined
under Section 4(e)) or, in

5
<PAGE>

the case of the first Offering Period under the Plan, 85% of the price at which
one share of Stock is offered to the public in the IPO.

(c) Number of Shares Purchased. As of the last trading day of each month
--------------------------
in which the Accumulation Period expired, each Participant shall be deemed to
have elected to purchase the number of shares of Stock calculated in accordance
with this Subsection (c), unless the Participant has previously elected to
withdraw from the Plan in accordance with Section 6(a). The amount then in the
Participant's Plan Account shall be divided by the Purchase Price, and the
number of shares that results shall be purchased from the Company with the funds
in the Participant's Plan Account. The foregoing notwithstanding, no Participant
shall purchase more than 1,000 shares of Stock with respect to any Accumulation
Period nor more than the amounts of Stock set forth in Sections 9(b) and 14(a).
The Committee may determine with respect to all Participants that any fractional
share, as calculated under this Subsection (c), shall be (i) rounded down to the
next lower whole share or (ii) credited as a fractional share.

(d) Available Shares Insufficient. In the event that the aggregate number
-----------------------------
of shares that all Participants elect to purchase during an Accumulation Period
exceeds the maximum number of shares remaining available for issuance under
Section 14(a), then the number of shares to which each Participant is entitled
shall be determined by multiplying the number of shares available for issuance
by a fraction, the numerator of which is the number of shares that such
Participant has elected to purchase and the denominator of which is the number
of shares that all Participants have elected to purchase.

(e) Issuance of Stock. Certificates representing the shares of Stock
-----------------
purchased by a Participant under the Plan shall be issued to him or her as soon
as reasonably practicable after the close of the applicable Accumulation Period,
except that the Committee may determine that such shares shall be held for each
Participant's benefit by a broker designated by the Committee (unless the
Participant has elected that certificates be issued to him or her). Shares may
be registered in the name of the Participant or jointly in the name of the
Participant and his or her spouse as joint tenants with right of survivorship or
as community property.

(f) Unused Cash Balances. An amount remaining in the Participant's Plan
--------------------
Account that represents the Purchase Price for any fractional share shall be
carried over in the Participant's Plan Account to the next Accumulation Period.
Any amount remaining in the Participant's Plan Account that represents the
Purchase Price for whole shares that could not be purchased by reason of
Subsection (c) above, Section 9(b) or Section 14(a) shall be refunded to the
Participant in cash, without interest.

(g) Stockholder Approval. Any other provision of the Plan notwithstanding,
--------------------
no shares of Stock shall be purchased under the Plan unless and until the
Company's stockholders have approved the adoption of the Plan.

6
<PAGE>

SECTION 9. Limitations On Stock Ownership.
- ------------------------------------------

(a) Five Percent Limit. Any other provision of the Plan notwithstanding,
------------------
no Participant shall be granted a right to purchase Stock under the Plan if such
Participant, immediately after his or her election to purchase such Stock, would
own stock possessing more than 5% of the total combined voting power or value of
all classes of stock of the Company or any parent or Subsidiary of the Company.
For purposes of this Subsection (a), the following rules shall apply:

(i) Ownership of stock shall be determined after applying the
attribution rules of section 424(d) of the Code;

(ii) Each Participant shall be deemed to own any stock that he or she
has a right or option to purchase under this or any other plan; and

(iii) Each Participant shall be deemed to have the right to purchase
1,000 shares of Stock under this Plan with respect to each Accumulation Period.

(b) Dollar Limit. Any other provision of the Plan notwithstanding, no
------------
Participant shall purchase Stock with a Fair Market Value in excess of the
following limit:

Any other provision of the Plan notwithstanding, no Participant shall
purchase Stock with a Fair Market Value in excess of $25,000 per calendar year
(under this Plan and all other employee stock purchase plans of the Company or
any parent or Subsidiary of the Company).

For purposes of this Subsection (b), the Fair Market Value of Stock shall
be determined in each case as of the beginning of the Offering Period in which
such Stock is purchased. Employee stock purchase plans not described in section
423 of the Code shall be disregarded. If a Participant is precluded by this
Subsection (b) from purchasing additional Stock under the Plan, then his or her
employee contributions shall automatically be discontinued and shall resume at
the beginning of the earliest Accumulation Period ending in the next calendar
year (if he or she then is an Eligible Employee).

SECTION 10. Rights Not Transferable.
- ------------------------------------

The rights of any Participant under the Plan, or any Participant's interest
in any Stock or moneys to which he or she may be entitled under the Plan, shall
not be transferable by voluntary or involuntary assignment or by operation of
law, or in any other manner other than by beneficiary designation or the laws of
descent and distribution. If a Participant in any manner attempts to transfer,
assign or otherwise encumber his or her rights or interest under the Plan, other
than by beneficiary designation or the laws of descent and distribution, then
such act shall be treated as an election by the Participant to withdraw from the
Plan under Section 6(a).

SECTION 11. No Rights As An Employee.
- -------------------------------------

Nothing in the Plan or in any right granted under the Plan shall confer
upon the Participant any right to continue in the employ of a Participating
Company for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Participating

7
<PAGE>

Companies or of the Participant, which rights are hereby expressly reserved by
each, to terminate his or her employment at any time and for any reason, with or
without cause.

SECTION 12. No Rights As A Stockholder.
- ---------------------------------------

A Participant shall have no rights as a stockholder with respect to any
shares of Stock that he or she may have a right to purchase under the Plan until
such shares have been purchased on the last day of the applicable Offering
Period.

SECTION 13. Securities Law Requirements.
- ----------------------------------------

Shares of Stock shall not be issued under the Plan unless the issuance and
delivery of such shares comply with (or are exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations, and the regulations of any stock exchange or other
securities market on which the Company's securities may then be traded.

SECTION 14. Stock Offered Under The Plan.
- -----------------------------------------

(a) Authorized Shares. The maximum aggregate number of shares of Stock
-----------------
available for purchase under the Plan is one million (1,000,000), plus an annual
increase to be added on the first day of the Company's fiscal year beginning in
2001 equal to the lesser of (i) ___________ (__________) shares, (ii) ___% of
the outstanding shares on such date or (iii) a lesser amount determined by the
Board. The aggregate number of Shares available for purchase under the Plan
shall at all times be subject to adjustment pursuant to Section 14.

(b) Antidilution Adjustments. The aggregate number of shares of Stock
------------------------
offered under the Plan, the 1,000 share limitation described in Section 8(c) and
the price of shares that any Participant has elected to purchase shall be
adjusted proportionately by the Committee for any increase or decrease in the
number of outstanding shares of Stock resulting from a subdivision or
consolidation of shares or the payment of a stock dividend, any other increase
or decrease in such shares effected without receipt or payment of consideration
by the Company, the distribution of the shares of a Subsidiary to the Company's
stockholders or a similar event.

(c) Reorganizations. Any other provision of the Plan notwithstanding,
---------------
immediately prior to the effective time of a Corporate Reorganization, the
Offering Period then in progress shall terminate and shares shall be purchased
pursuant to Section 8, unless the Plan is assumed by the surviving corporation
or its parent corporation pursuant to the plan of merger or consolidation. The
Plan shall in no event be construed to restrict in any way the Company's right
to undertake a dissolution, liquidation, merger, consolidation or other
reorganization.

SECTION 15. Amendment Or Discontinuance.
- ----------------------------------------

The Board shall have the right to amend, suspend or terminate the Plan at
any time and without notice. Except as provided in Section 14, any increase in
the aggregate number of shares of Stock to be issued under the Plan shall be
subject to approval by a vote of the stockholders of the Company. In addition,
any other amendment of the Plan shall be subject to approval by a

8
<PAGE>

vote of the stockholders of the Company to the extent required by an applicable
law or regulation.

SECTION 16. Execution.
- ----------------------

To record the adoption of the Plan by the Board on ________ __, 2000, the
Company has caused its authorized officer to execute the same.

Tvia, Inc.

By:_____________________________

Title:__________________________

9
<PAGE>

TVIA, INC.

Common Stock

______________________________

2000 Employee Stock Purchase Plan

SUMMARY AND PROSPECTUS

______________________________

Tvia, Inc., a Delaware corporation (the "Company"), has established a stock
purchase program. This program allows eligible employees to acquire shares of
the Company's Common Stock (the "Stock") at periodic intervals. The shares may
be purchased at a discount, and the purchase price may be paid through payroll
deductions. The program is officially called the Tvia, Inc. 2000 Employee Stock
Purchase Plan (the "Plan").

The phrases "accumulation period" and offering period" are used throughout
this document and are important to your understanding of the Plan. An
"accumulation period" is a six-month period during which payroll deductions are
made, and following which shares are purchased. An "offering period" is a 24-
month period comprised of four accumulation periods.

THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.

______________________________

The date of this Summary and Prospectus is ______, 2000.
<PAGE>

QUESTIONS AND ANSWERS ABOUT
THE PLAN

This Summary and Prospectus sets forth in question and answer format the
principal features of the Plan and the principal rights and benefits available
to the participating employees. This document is only intended to be a summary
of the Plan. Some rules are described in abbreviated form and others are not
mentioned at all. If there is any ambiguity in the Plan Summary and Prospectus
or if there is a conflict between this Plan Summary and Prospectus and the
official Plan text, then the Plan text will govern. You may request a copy of
the Plan from the Company. The Company has its principal executive offices at
4001 Burton Drive, Santa Clara, CA 95054. The Company's telephone number is
(408) 982-8588.

GENERAL PLAN PROVISIONS
________________________________________________________________

1. What is the purpose of the Plan?

The purpose of the Plan is to provide eligible employees with the
opportunity to increase their stake in the success of the Company by buying
Stock from the Company on favorable terms and paying for the purchases through
periodic payroll deductions. These payroll deductions will be applied at semi-
annual intervals to purchase shares of Stock at a discount from the then current
market price.

2. When was the Plan adopted?

The Plan was adopted by the Company's Board of Directors (the "Board") on
________, 2000 and subsequently approved by the Company's stockholders on
_________, 2000.

3. Who administers the Plan?

The Plan is administered by a committee of the Board consisting of one or
more directors of the Company appointed by the Board (the "Committee"). The
members of the Committee will serve for as long as the Board deems appropriate
and may be removed by the Board at any time. The Committee in its capacity as
administrator of the Plan will be referred to in this document as the "Plan
Administrator."

The Committee has full authority to interpret the Plan and make all
decisions relating to the operation and administration of the Plan. The
Committee may also adopt such rules and regulations for carrying out the Plan's
purposes. Decisions of the Committee are final and binding.

-2-
<PAGE>

4. How many shares of Stock may be issued under the Plan?

A total of one million (1,000,000) shares of Stock are reserved for
issuance under the Plan, plus an annual increase in accordance with the terms of
the Plan. The number of shares of Stock that are reserved for issuance under the
Plan is subject to adjustments described in Question 24. Under the Plan, shares
are purchased directly from the Company. These shares will be made available
either from the Company's authorized but unissued shares of Stock or from
treasury shares, including shares repurchased on the open market.

5. Who is eligible to participate in the Plan?

You will be eligible to participate in the Plan if you are employed by the
Company or any participating subsidiary on a basis that requires you to work
more than twenty (20) hours per week for more than five (5) months per calendar
year.

However, you will not be granted a right to purchase Stock under the Plan
if you own stock possessing more than 5% of the total combined voting power or
value of all classes of stock of the Company or any parent or subsidiary of the
Company. You will be considered to own any stock that you have a right or option
to purchase under this or any other plan, and you will be considered to own any
stock owned by your spouse, sister, brother, ancestors and lineal descendants.

6. When may I become a participant?

If you are an eligible employee at the time of the initial public offering
of the Stock (the "IPO"), you may join the Plan at that time or at the start of
any subsequent offering period (the January 1 and July 1 of each year). If you
are not an eligible employee on the start date of an offering period, you may
enter on the start date of the next offering period on which you are an eligible
employee or at the start of any subsequent offering period, provided you remain
an eligible employee.

7. How do I become a participant?

In order to participate in a particular offering period, you must complete
and file the appropriate forms with the Plan Administrator at least fifteen (15)
days prior to the commencement of the offering period. The forms include an
Enrollment/Change Form and a Beneficiary Designation. These forms may be
obtained from ___________.

-3-
<PAGE>

8. How much can I invest through the Plan?

You may authorize payroll deductions in 1% multiples of your cash
compensation, up to a maximum of 15%. Your cash compensation includes salaries,
wages, bonuses, incentive compensation, commissions and overtime pay plus any
pretax contributions you may make to any 401(k) plan or cafeteria benefit plan
now or hereafter maintained by the Company. Cash compensation excludes moving or
relocation allowances, car allowances, imputed income attributable to a company
car or life insurance, fringe benefits, contributions to employee benefit plans
(other than your own pretax contributions to 401(k) or cafeteria plans), and
similar items.

Your contributions to the Plan are made on an after-tax basis. In other
words, your payroll deductions that are contributed to the Plan do not reduce
your taxable income (unlike contributions to a 401(k) plan).

9. How will the Stock be made available for purchase?

Shares of Stock will be offered for purchase through a series of
overlapping 24-month offering periods. New offering periods start on each
January 1 and July 1, except that the initial offering period is expected to
begin at the time the IPO takes place and will end on December 31, 2001.

Each offering period will be comprised of four successive six-month
accumulation periods. The start date for the first accumulation period will be
the same as the start date of the initial offering period. Subsequent
accumulation periods will begin on each January 1 and July 1.

For example, an offering period which starts on July 1, 2000 will end on
June 30, 2002. Within such offering period, there are four accumulation periods:

------------------------------------------------------------
First Accumulation Period: July 1, 2000 through
December 31, 2000
------------------------------------------------------------
Second Accumulation Period: January 1, 2001 through
June 30, 2001
------------------------------------------------------------
Third Accumulation Period: July 1, 2001 through
December 31, 2001
------------------------------------------------------------
Fourth Accumulation Period: January 1, 2002 through
June 30, 2002
------------------------------------------------------------

-4-
<PAGE>

However, if the price of the Stock is lower at the start of a new offering
period than it was at the start of the open offering period, you will
automatically be enrolled in the new offering period. See Question 13 for
details.

For each offering period in which you participate, you will be granted a
right to purchase stock.

10. When will my purchase right be exercised?

Your purchase right will be exercised on the last trading day of the month
in which each accumulation period expires. Therefore, these purchase dates will
occur every six months on the last trading day in June and December.

11. What is the purchase price of the Stock?

The purchase price per share of Stock will be 85% of the lower of (a) the
fair market value per share of Stock on the last trading day of the month in
which each accumulation period expires or (b) the fair market value per share on
the last trading day before the commencement of the applicable offering period
(or, in the case of the first offering period, the price at which one share of
Stock is offered to the public in the IPO). In any event, your purchases of
Stock will always be at a discount of at least 15% of fair market value on the
purchase date.

For example, assume that June 30, 2000, was the last trading day before the
applicable offering period started and that the closing price on that day was
$10 per share. Assume also that December 31, 2000, is the last trading day in
the month in which the accumulation period expired and that the Company's Stock
closes on that day at $12. The contributions made during this accumulation
period are used on December 31, 2000, to buy shares for $8.50 (85% of $10, which
is the lower of $12 and $10). In this example, the discount is approximately 29%
from the market value at the time of the purchase.

On the other hand, assume that the Stock closes at $10 per share on June
30, 2000, and at $8 on December 31, 2000. In this case, the shares would be
purchased on December 31, 2000, for $6.80 each (85% of $8, which is the lower of
$10 and $8). This represents a discount of 15% from the market value at the time
of the purchase.

These examples illustrate that the discount from market value will never be
less than 15% on the date the shares are purchased. If the value of the shares
rises during the offering period, then the discount will be greater than 15% on
the date of the purchase. (The value of the shares may, of course, decline after
they are purchased.)

12. How is the fair market value of the Stock determined?

In general, the fair market value per share on any relevant date under the
Plan will be equal to the closing price quoted for such date by Nasdaq. Whenever
possible, the determination

-5-
<PAGE>

of fair market value will be based on the prices reported in the Wall Street
-----------
Journal or reported directly to the Company by Nasdaq.
- -------

13. How do I determine which offering period I am participating in?

Once you are enrolled in the Plan for a two-year offering period, you will
continue in that offering period until the earliest of (a) the end of that
offering period, (b) the end of your participation in the Plan or (c) automatic
re-enrollment in a subsequent offering period as described in the next
paragraph.

In the event that the closing price on the last trading day before the
start of the offering period in which you are enrolled (the "First Offering
Period") is higher than on the last trading day before the start of any
subsequent offering period (the "Subsequent Offering Period"), you will
automatically be re-enrolled in the Subsequent Offering Period. Your
participation in the First Offering Period will automatically end with the
purchase that occurs immediately before the Subsequent Offering Period starts.
In other words, a new two-year offering period starts for you and becomes your
"applicable offering period," and you will receive the benefit of the lower
price for purchases during that new period.

When you have reached the end of a two-year offering period but your
participation is to continue, then you will automatically be re-enrolled in the
offering period that starts immediately after the end of the prior offering
period.

For example, assume that you enroll in the Plan on July 1, 2000. Your
initial offering period is the two-year period ending June 30, 2002. If the
market price on December 31, 2000, June 30, 2001 and December 31, 2001 is higher
than it was on June 30, 2000, then you will remain in the same offering period
until it ends (or until you stop participating). The purchase price for your
purchases on December 31, 2000, June 30, 2001, December 31, 2001 and June 30,
2002, will be based on the June 30, 2000 market value. But if, for instance, the
market price on December 31, 2000 is lower than it was on June 30, 2000, then
you will automatically be re-enrolled in a two-year offering period starting on
January 1, 2001. This means that the purchase price for your purchases on June
31, 2001, December 31, 2001, June 30, 2002, and December 31, 2002, will be based
on the December 31, 2000 market value--unless another automatic re-enrollment
occurs. Of course, your purchase on December 31, 2000 will also be based on the
December 31, 2000 market value.

14. Can I change the rate of my payroll deductions?

You may change your rate of payroll deduction at any time, but you may not
make more than two changes during the same accumulation period. The new
withholding rate will become effective as soon as reasonably practicable
following the filing of your Enrollment/Change Form with the Plan Administrator.
Your new rate may not be in excess of 15% of your cash compensation.

-6-
<PAGE>

15. What happens to my payroll deductions?

Your payroll deductions will be credited to an account established in your
name on the Company's books. No interest will be paid on the balance credited to
your account. Since the Company pays all administrative expenses of the Plan,
the full amount of your payroll deductions will be applied to the purchase of
Stock. No commissions are charged on purchases. Your payroll deductions may be
commingled with the general assets of the Company and used for general corporate
purposes.

16. How will my purchase right be exercised?

Your purchase right will be exercised by applying the amount credited to
your account to the purchase of whole shares of Stock on each purchase date. If
a balance remains in your account because it is less than the price of one whole
share, it will be carried over to the next accumulation period. However, any
payroll deductions that are not applied to the purchase of Stock by reason of
the limitations on the number of shares purchasable per participant will be
refunded promptly after the purchase date, without interest. (See Question 18.)

17. Will I receive a report indicating the amount and status of my account?

After each purchase date, you will receive a report indicating the number
of shares purchased on your behalf and the purchase price paid per share.

18. Are there any limitations on the number of shares I may purchase?

Yes. The following limitations will apply:

(a) The total number of shares of Stock available for purchase by all
participants is limited to one million (1,000,000) shares, plus an annual
increase to be added determined in accordance with the Plan (subject to the
adjustments described in Question 24). The share reserve can be increased with
Board and stockholder approval.

(b) The maximum number of shares of Stock that you may purchase in any
accumulation period is one thousand (1,000) shares (subject to the adjustments
described in Question 24).

(c) You may not purchase shares with a value in excess of $25,000.00
(determined on the basis of the fair market value of the Stock on the start date
of the offering period) in any calendar year. In certain situations, unused
amounts may be carried over from one year to the next.

Any payroll deductions collected from you that cannot be applied to the
purchase of Stock as a result of one or more of these limitations will be
refunded.

-7-
<PAGE>

19. What if there are not enough shares available to cover all of the exercised
purchase rights on a particular purchase date?

If the total number of shares for which purchase rights are to be exercised
on any purchase date exceeds the number of shares at the time available for
issuance under the Plan, then the Plan Administrator will prorate the available
shares. Any payroll deductions not applied to the purchase of the available
shares will be refunded to you.

20. Can I withdraw from the Plan or discontinue payroll deductions?

You may withdraw from the Plan by filing an Enrollment/Change Form with the
Plan Administrator at any time before the last day of any accumulation period.
As soon as reasonably practicable thereafter, payroll deductions will cease. Any
payroll deductions already collected for that period will be refunded to you
without interest. No shares will be purchased on the last trading day of the
month in which the accumulation period expired. Once you have withdrawn from the
Plan, you may not rejoin the Plan until the next offering period.

You may also discontinue your contributions under the Plan by filing an
Enrollment/Change Form with the Company at any time. Payroll deductions will
cease as soon as reasonably practicable after the form is received by the
Company. However, the contributions that you already made will not be refunded
and will be applied to purchase Stock at the end of the accumulation period. In
addition, your contributions will be discontinued automatically if you would
otherwise exceed the limit described in Question 18(c).

21. How do I rejoin the Plan if I have withdrawn from the Plan or discontinued
payroll deductions?

Individuals who withdraw from the Plan may resume participation in the Plan
by filing a new Enrollment/Change Form prior to the next scheduled offering
period. Individuals who discontinue payroll deductions may resume participation
in the Plan by filing a new Enrollment/Change Form at any time. Payroll
withholding will resume as soon as reasonably practicable after the form has
been received by the Company.

22. What happens if my employment terminates or my eligibility status changes?
/i/

Should your employment terminate for any reason (including death or
disability) or should you otherwise lose your status as an eligible employee,
then all of your payroll deductions for the accumulation period in which your
employment terminates or you lose your eligibility will automatically be
refunded to you (or to your designated beneficiary in the event of your death,
as described in the next paragraph).

You may designate a beneficiary on the Beneficiary Designation Form and may
change that designation at any time by filing a new Beneficiary Designation
Form. The form will be

-8-
<PAGE>

valid only if it was filed with the Company before your death. Should you die,
unused cash contributed to the Plan will be distributed to the beneficiary whom
you have designated for this purpose or, if there is no surviving beneficiary,
to your estate. (This beneficiary designation applies only to the cash in your
account; the disposition of shares already purchased is governed by your will or
applicable law.)

23. What happens if there is a merger?

In the event of a merger or acquisition of the Company, the accumulation
period and offering period will terminate early and all payroll deductions for
the accumulation period in which the transaction occurs will automatically be
applied to the purchase of Stock immediately prior to the effective time of the
transaction, subject to the share limitations summarized in Question 18. The
purchase price for your shares will be 85% of the lower of (a) the fair market
value per share on the last trading day before the commencement of the
applicable offering period or (b) the fair market value per share on the last
trading day before the effective time of the transaction. However, if the Plan
is assumed and continued by the surviving corporation (or its parent), then the
accumulation and offering periods will continue and your right to purchase Stock
will be converted into an equivalent right to purchase shares of the surviving
corporation (or its parent) at the end of the accumulation period.

24. What happens if there is a change in the Company's capital structure?

In the event of a stock split, a reverse stock split or the payment of a
stock dividend or any other increase or decrease in the shares of Stock without
the Company's receipt or payment of consideration, appropriate adjustments will
be made to (a) the maximum number and class of securities issuable under the
Plan, (b) the maximum number of securities purchasable per participant on each
purchase date and (c) the number and class of securities and the price per share
in effect under each outstanding purchase right. Such adjustments will prevent
any dilution or enlargement of the rights and benefits of Plan participants.

25. Can I assign or transfer my purchase rights under the Plan?

Your purchase rights cannot be assigned or transferred.

26. When will I receive the stock certificate for my purchased shares?

As soon as reasonably practicable after each purchase date, you will be
issued a stock certificate for the shares purchased on your behalf or the shares
will be credited to a brokerage account in your name.

27. After becoming a stockholder, can I vote my shares?

-9-
<PAGE>

Yes, even if you do not have physical possession of a stock certificate.

28. When can I sell my purchased shares?

Individuals who purchase Stock under the Plan may resell such shares
without restriction, subject to the Company's insider trading policy. However,
the Federal and state income tax treatment of the sale proceeds may be more
favorable if you hold your shares for a certain period of time prior to sale.
See "Questions and Answers on Federal Tax Consequences" below.

At the time you sell your purchased shares, you must inform the Company of
the date of purchase, the date of sale, the number of shares sold and the
selling price per share. You will be required to satisfy any applicable income
and employment tax withholding requirements at the time of the sale.

29. Can the Company terminate the Plan?

The Plan Administrator has the discretion to terminate the Plan at any time
without notice. If the Plan Administrator exercises this discretion, the Plan
will terminate in its entirety. No further purchase rights will thereafter be
granted or exercised, and no further payroll deductions will be collected under
the terminated plan. Unless the Plan is terminated, it continues indefinitely.

30. Can the Plan be amended?

The Board may amend or suspend the Plan at any time and without notice.
However, certain amendments may require the approval of the Company's
stockholders.

31. Does the Plan have any impact on the terms of my employment?

Neither the Plan nor any outstanding purchase right is intended to give you
the right to remain in the Company's employ for any specific period, and both
you and the Company will each have the right to terminate your employment at any
time and for any reason, with or without cause.

32. Is the Plan subject to ERISA?

The Plan is not subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) or Section 401(a) of the Internal Revenue Code.

33. What restrictions apply because I am a Section 16 Insider?

-10-
<PAGE>

Section 16(b) of the Securities Exchange Act of 1934 (the "1934 Act")
requires the Company to recover any profit realized by a Section 16 Insider from
any purchase and sale, or sale and purchase, of shares of Stock made within a
period of less than six (6) months. A "Section 16 Insider" is generally an
executive officer or director of the Company or a stockholder who beneficially
owns more than 10% of the Company's outstanding securities.

The Securities and Exchange Commission (the "SEC") has issued rules under
Section 16(b) of the 1934 Act that govern the short-swing liability treatment of
certain transactions effected by a Section 16 Insider under employee stock
purchase plans such as the Plan. The receipt of a purchase right under the Plan
is not considered the purchase of a security, and the purchase of shares under
the Plan is exempt from Section 16(b). However, the sale of shares acquired
under the Plan will be treated as a "sale" transaction for short-swing liability
purposes and will be matched with any non-exempt purchases of shares made by the
Section 16 Insider within six (6) months before or after the date of the sale.
The sale of shares acquired under the Plan must be reported to the SEC on a Form
4, which must be filed within ten (10) days after the close of the calendar
month in which the sale is made.

34. What restrictions apply if I am an affiliate?

In general, executive officers and other persons with power to manage and
direct the policies of the Company, relatives of these persons and trusts,
estates, corporations or other entities controlled by any of these persons or
their relatives may be deemed to be affiliates of the Company. Affiliates of the
Company are obligated to resell their shares of Stock in compliance with SEC
Rule 144. This rule requires such sales to be effected in "broker's
transactions," as defined in the rule, and a written notice of each sale must be
filed with the SEC at the time of the sale. The rule also limits the number of
shares that may be sold in any three-month period to the greater of (a) 1% of
the outstanding shares of Stock or (b) the average weekly reported volume of
trading in Stock during the four (4) calendar weeks preceding the filing of the
required notice of proposed sale. However, the holding period requirement of
Rule 144 will not be applicable to any shares of Stock acquired under the Plan.

35. Are there any restrictions on resale that apply even if I am not an
affiliate or Section 16 Insider?

Your purchases and sales of shares of Stock are subject to Rule 10b-5 under
the 1934 Act, which makes it unlawful to trade when you are in possession of
material information about the Company that is not yet known to the general
public. In addition, your transactions in shares of Stock must comply with the
Company's insider trading policy.

If you are an officer or director of the Company or a stockholder who owns
more than 10% of the Company's outstanding securities, you should consult with
counsel before offering for sale any shares of Stock acquired under the Plan in
order to ensure your compliance with Rule 144, Section 16 and all other
applicable provisions of Federal and state securities laws.

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QUESTIONS AND ANSWERS ON FEDERAL
TAX CONSEQUENCES

The following is a description of the federal income tax consequences of
participation in the Plan. State and local tax treatment, which is not
discussed below, may vary from the federal income tax treatment. You should
consult your own tax advisor as to the tax consequences of your particular
transactions under the Plan.

T1. Will the receipt of a purchase right or the purchase of shares on my behalf
under the Plan result in taxable income?

The Plan is intended to be an "employee stock purchase plan" within the
meaning of Section 423 of the Internal Revenue Code. Under such a plan, no
taxable income is recognized by the participant either when the purchase right
is granted at the beginning of the offering period or when the shares are
purchased at the end of each accumulation period.

T2. When will I be subject to federal income tax on the purchased shares?

Generally, you will recognize income in the year in which you make a
disposition of the purchased shares. The term "disposition" generally includes
any transfer of legal title, whether by sale, exchange or gift. It does not
include a transfer to your spouse, a transfer into joint ownership if you remain
one of the joint owners or a transfer into your brokerage account.

T3. How is my federal income tax liability determined when I sell my shares?

Your federal income tax liability will depend on whether you make a
qualifying or disqualifying disposition of the purchased shares. A qualifying
disposition will occur if the sale or other disposition of those shares is made
after you have held the shares for (a) more than two (2) years after the start
date of the applicable offering period and (b) more than one (1) year after the
actual purchase date. A disqualifying disposition is any sale or other
disposition which is made before either of these two holding periods is
satisfied.

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T4. What if I make a qualifying disposition?

You will recognize ordinary income in the year of the qualifying
disposition equal to the lesser of (a) the amount by which the fair market value
of the shares on the date of the qualifying disposition exceeds the purchase
price paid for those shares or (b) 15% of the fair market value of the shares on
the start date of the offering period during which those shares were purchased.
The Company is not entitled to an income tax deduction with respect to such
disposition. Any additional gain recognized upon the qualifying disposition will
be a capital gain. The capital gain will be long-term if you held the shares
more than 12 months. In general, the maximum federal income tax rate on long-
term capital gains is 20%.

If the fair market value of the shares on the date of the qualifying
disposition is less than the purchase price you paid for the shares, there will
be no ordinary income, and any loss recognized will generally be a long-term
capital loss.

Example: On the July 1, 2000 start date of the offering period, the fair
market value of the Stock is $10.00 per share. On the December 31, 2000
purchase date, Stock is purchased on your behalf at a price of $8.50 per share
when the fair market value is $15.00 per share. On January 1, 2003, you sell
the shares for $20.00 per share in a qualifying disposition. The income tax
treatment of your $11.50 profit per share will be as follows:

Ordinary The lower of (a) 15% of the
Income Per $10.00 fair market value on the
Share start date of the offering
period or (b) the excess of the
$20.00 per share selling price
over the $8.50 purchase price.
The lower of the two is 15% of
$10 = $1.50 per share.

Long-Term $20.00 per share selling price
Capital Gain less $10.00 ($8.50 purchase
Per Share price plus $1.50 ordinary
income) = $10.00 per share
(at a capital gain tax rate of
up to 20%).

T5. What if I make a disqualifying disposition?

You will recognize ordinary income in the year of the disqualifying
disposition equal to the excess of (a) the fair market value of the shares on
the purchase date over (b) the purchase

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price paid for the shares. The Company is entitled to an income tax deduction
equal in amount to such excess for the taxable year in which such disposition
occurs. Any additional gain recognized upon the disqualifying disposition will
be capital gain. The capital gain will be long-term if you held the shares more
than 12 months and short-term if you held the shares not more than 12 months.
The maximum federal income tax rate on long-term capital gains generally is 20%.
Short-term capital gains generally are taxed at the same rate as ordinary
income.

The amount of ordinary income you recognize upon such a disqualifying
disposition will be reported by the Company on your W-2 wage statement for the
year of such disposition, and any applicable withholding taxes which arise in
connection with such disqualifying disposition will be collected from your wages
or through your separate payment.

Example: On December 31, 2000 you purchase Stock at a price of $10.00 per
share when the fair market value is assumed to be $15.00 per share. On November
30, 2001, you sell the shares for $18.00 per share in a disqualifying
disposition. The income tax treatment of your $8.00 per share profit will be as
follows:

Ordinary $15.00 fair market value on
Income Per the purchase date less
Share $10.00 per share purchase
price = $5.00 per share.

Short-Term $18.00 per share selling
Capital price less $15.00 fair
Gain Per market value on the
Share purchase date = $3.00 per
share.

T6. What if I die before disposing of the shares?

The personal representative of your estate must report as ordinary income
in the year of your death the lesser of (a) the amount by which the fair market
value of the shares on the date of your death exceeds the purchase price paid
for such shares or (b) 15% of the fair market value of the shares on the start
date of the offering period during which those shares were purchased.