<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 5, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
VLSI TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1109 MCKAY DRIVE 94-2597282
(State or other jurisdiction of SAN JOSE, CALIFORNIA (I.R.S. Employer
incorporation or organization) 95131 Identification No.)
Telephone: (408)
434-3100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
ALFRED J. STEIN
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
VLSI TECHNOLOGY, INC.
1109 MCKAY DRIVE
SAN JOSE, CA 95131
TELEPHONE: (408) 434-3100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------------------
COPIES TO:
LARRY W. SONSINI, Esq. CHRISTOPHER L. KAUFMAN, Esq.
JOHN A. FORE, Esq. BRUCE R. LEDESMA, Esq.
Wilson, Sonsini, Goodrich & Rosati Latham & Watkins
Professional Corporation 505 Montgomery Street, Suite 1900
650 Page Mill Road San Francisco, California 94111
Palo Alto, California 94304-1050 (415) 391-0600
(415) 493-9300
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
--------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
--------------------------
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT OFFERING AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED (1) PER UNIT (2) PRICE (2) FEE
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value............... 2,613,636 $26.875 $70,241,468 $24,221
<FN>
(1) Maximum number of shares issuable upon conversion of a maximum of
$57,500,000 outstanding aggregate principal amount of the Company's 7%
Convertible Subordinated Debentures due May 1, 2012. Includes Preferred
Share Purchase Rights associated with the Common Stock.
(2) Estimated solely for the purpose of computing the amount of the
registration fee, based on the average of the high and low prices for the
Common Stock as reported on the Nasdaq Stock Market on June 28, 1995, in
accordance with Rule 457(c) promulgated under the Securities Act of 1933.
</TABLE>
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
PROSPECTUS
2,613,636 SHARES
[LOGO]
COMMON STOCK
The 2,613,636 shares of Common Stock, $0.01 par value ("Common Stock"), of
VLSI Technology, Inc. (the "Company") offered hereby are the maximum number of
shares of Common Stock issuable upon conversion of its outstanding 7%
Convertible Subordinated Debentures due May 1, 2012 (the "Debentures").
On July 6, 1995, the Company called for redemption on August 7, 1995 (the
"Redemption Date") the $57,500,000 outstanding aggregate principal amount of its
Debentures at a redemption price of 101.4% of the principal amount plus accrued
interest of $18.86 from May 1, 1995 to the Redemption Date for each $1,000
principal amount Debenture, making a total of $1,032.86 payable for each such
$1,000 principal amount (the "Redemption Payment"). THE RIGHT TO CONVERT THE
DEBENTURES INTO SHARES OF COMMON STOCK EXPIRES AT 5:00 P.M. NEW YORK CITY TIME,
ON AUGUST 4, 1995 (THE "CONVERSION EXPIRATION DATE"). Thereafter, no further
conversion of Debentures may be made, and any Debentures not duly surrendered
for conversion prior to the close of business on the Conversion Expiration Date
or for redemption prior to the close of business on the Redemption Date shall
become due and cease to accrue interest.
The Company has made arrangements with Bear, Stearns & Co. Inc. and
Hambrecht & Quist LLC (collectively, the "Purchasers") pursuant to which the
Purchasers have agreed, subject to certain conditions, to purchase from the
Company the shares of Common Stock that otherwise would have been delivered upon
conversion of Debentures that are not duly surrendered for conversion on or
prior to the Conversion Expiration Date. Such shares of Common Stock will be
purchased by the Purchasers at $22.72 per share, for an aggregate purchase price
equal to the aggregate Redemption Payment for those Debentures. The proceeds
will be used by the Company to redeem Debentures. The Purchasers also may
purchase Debentures in the open market or otherwise prior to the Conversion
Expiration Date and have agreed to surrender for conversion Debentures so
purchased by them and any additional Debentures beneficially owned by them.
Prior to the Redemption Date, the Purchasers may offer Common Stock,
including shares acquired through the purchase and conversion of Debentures,
directly to the public at prices set from time to time by the Purchasers and to
dealers at such prices less a selling concession to be determined by the
Purchasers. Prior to the Redemption Date, it is intended that each such price
when set will not exceed the greater of the last sale or current asked price of
the Common Stock on the Nasdaq Stock Market plus a dealer's concession, and the
offering price will not be increased more than once in any calendar day. After
the Redemption Date, the Purchasers may offer Common Stock at a price or prices
to be determined, but which it is presently intended will be determined in
conformity with the preceding sentence. Sales of Common Stock by the Purchasers
may be made on the Nasdaq Stock Market in block trades or in privately
negotiated transactions. In effecting such transactions, the Purchasers may
realize profits or losses independent of their compensation described under
"Standby Arrangements." Pursuant to such standby arrangements, the Company has
agreed to pay the Purchasers a standby fee of $600,000, plus an amount ranging
from no fee to $0.85 per share purchased by the Purchasers depending upon the
number of shares issuable upon conversion of the Debentures that the Purchasers
are required to purchase. The Purchasers have agreed to pay the Company 50% of
the amount by which the net proceeds realized by the Purchasers in the sale of
shares so purchased from the Company exceed the purchase price paid for such
shares by the Purchasers; there is no such profit sharing with respect to
proceeds realized by the Purchasers in the sale of shares not so purchased,
including shares issued upon conversion of Debentures held by the Purchasers.
The Company has agreed to indemnify the Purchasers against, and to provide
contribution with respect to, certain liabilities, including liabilities under
the Securities Act of 1933, as amended. See "Standby Arrangements."
The Common Stock and the Debentures are quoted on the Nasdaq Stock Market.
On July 3, 1995, the last reported sale price of the Common Stock on the Nasdaq
Stock Market was $29.625 per share. A holder of Debentures who converted such
Debentures on July 3, 1995 would have received Common Stock having a market
value of $1,346.59 for each $1,000 principal amount of Debentures converted
(including cash, if any, received in lieu of fractional shares) based on the
last reported sales price on the Nasdaq Stock Market as of such date. If the
Debentures were surrendered for redemption on the Redemption Date, such holder
would receive $1,032.86 for each $1,000 principal amount of Debentures. WHILE NO
ASSURANCE CAN BE GIVEN AS TO FUTURE PRICES FOR THE COMMON STOCK, AS LONG AS THE
MARKET PRICE OF THE COMMON STOCK REMAINS AT OR ABOVE $22.72 PER SHARE, UPON
CONVERSION OF THEIR DEBENTURES, HOLDERS WILL RECEIVE COMMON STOCK AND CASH FOR
FRACTIONAL SHARES HAVING AN AGGREGATE MARKET PRICE (WITHOUT GIVING EFFECT TO
COMMISSIONS AND OTHER COSTS WHICH WOULD LIKELY BE INCURRED ON SALE) EQUAL TO OR
GREATER THAN THE REDEMPTION PAYMENT. It should be noted, however, that the price
of the Common Stock received upon conversion will fluctuate in the market. No
assurance is given as to the price of the Common Stock at any future time, and
the holders should expect to incur various expenses of sale if the Common Stock
received upon conversion of the Debentures is sold.
--------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------
BEAR, STEARNS & CO. INC. HAMBRECHT & QUIST
THE DATE OF THIS PROSPECTUS IS JULY 6, 1995.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements and other information may be inspected and
copied at the public reference facilities maintained by the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Commission's Regional Offices located at Seven World Trade Center, 13th Floor,
New York, New York 10048 and at Northwest Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material also can be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Company has filed a registration statement on Form S-3 (herein, together
with all amendments and exhibits, referred to as the "Registration Statement")
with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"). This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information, reference is hereby made to the Registration Statement.
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by VLSI with the Commission (File No. 0-11879)
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 30, 1994.
2. The Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1995.
3. The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A filed with the Commission on April 20,
1984, as amended, and the description of the Company's Preferred Share
Purchase Rights issued and issuable pursuant to its stockholder rights
plan, contained in the Registration Statement on Form 8-A filed with the
Commission on November 20, 1989, as amended.
In addition, all reports and other documents subsequently filed by the
Company pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this Prospectus and prior to the termination of the offering of
Common Stock shall be deemed to be incorporated by reference in this Prospectus
from the date of filing such documents. Any statement contained in a document
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any subsequently filed document that also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any such
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus. The Company will provide
without charge to each person, including any beneficial owner, to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any and all of the documents that are incorporated herein by reference (other
than exhibits to such documents, unless such exhibits are specifically
incorporated by reference into such documents). Requests for such documents
should be directed to Gregory K. Hinckley, Vice President, Finance, and Chief
Financial Officer at the principal executive offices of VLSI Technology, Inc.,
1109 McKay Drive, San Jose, California 95131 or by telephone at (408) 434-3100.
--------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
AND/OR THE DEBENTURES AT LEVELS ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE
OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
--------------------------
The VLSI name and logo, Polar-TM- and FSB are trademarks of the Company.
This Prospectus also includes trademarks of companies other than VLSI.
The following companies are mentioned in this Prospectus: Alcatel Alsthom
Compagnie Generale d'Electricite ("Alcatel"), AT&T Corp. ("AT&T"), Apple
Computer, Inc. ("Apple"), Cadence Design Systems, Inc. ("Cadence"), Chips and
Technologies, Inc. ("Chips and Technologies"), Cisco Systems, Inc. ("Cisco"),
Compaq Computer Corporation ("Compaq"), DSC Communications Corporation ("DSC"),
Digital Equipment Corporation ("DEC"), Telefonaktiebolaget LM Ericsson
("Ericsson"), Hewlett-Packard Company ("Hewlett-Packard"), Hitachi, Ltd.
("Hitachi"), Hughes Corporation ("Hughes"), Intel Corporation ("Intel"),
International Business Machines Corporation ("IBM"), LSI Logic Corporation
("LSI"), Matsushita Electric Industrial Co., Ltd. ("Matsushita"), Mentor
Graphics Corporation ("Mentor Graphics"), Motorola, Inc. ("Motorola"), National
Semiconductor Corporation ("National Semiconductor"), NEC Corporation ("NEC"),
Newbridge Networks Corporation ("Newbridge"), NexGen, Inc. ("NexGen"), Oak
Technology, Inc. ("Oak Technology"), Packard Bell Electronics, Inc. ("Packard
Bell"), Pioneer Electronic Corporation ("Pioneer"), Rockwell International
Corporation ("Rockwell"), Sagem SA ("Sagem"), Silicon Graphics, Inc. ("Silicon
Graphics"), Sony Corporation ("Sony"), Tellabs, Inc. ("Tellabs"), Texas
Instruments Incorporated ("Texas Instruments" or "TI"), Thomson Consumer
Electronic ("Thomson"), Toshiba Corporation ("Toshiba") and UB Networks, Inc.
("UB Networks").
2
<PAGE>
THE COMPANY
VLSI is a leader in the design, manufacture and sale of highly complex
application specific integrated circuits ("ASICs") -- custom designed chips for
an individual customer -- and application specific standard products ("ASSPs")
- -- semi-custom chips designed for a particular market application that may be
used by several different customers. The Company targets high-volume markets in
which it has built significant expertise and can use its library of proprietary
cells and highly integrated building blocks to assist customers in designing
products and bringing them to market rapidly. VLSI's target markets include the
computing, communications and consumer and entertainment markets. VLSI
emphasizes high performance applications where its products are critical
elements of complex electronic systems. VLSI targets key OEM customers who are
leaders in their respective industries. The Company's major customers include
Compaq, Apple, Ericsson, Hewlett-Packard, Tellabs, Alcatel and Silicon Graphics.
VLSI produces a significant portion of its wafers (approximately 73% in
1994) at its own facilities and augments internal manufacturing capacity with
the foundry services of third-party wafer subcontractors. The Company believes
that this strategy improves quality, cost-effectiveness, responsiveness to
customers, access to capacity, ability to implement leading edge process
technology and time to market, as compared to semiconductor companies that lack
fabrication facilities. The semiconductor industry is, however, currently facing
capacity constraints in wafer manufacturing and the availability of third-party
wafer foundries has diminished significantly. Due to this manufacturing capacity
shortage, as well as increased customer demand, the Company is seeking to
accelerate the expansion and upgrading of its internal and external
manufacturing capacity.
Through its subsidiary, COMPASS Design Automation, Inc. ("COMPASS"), VLSI
offers an integrated suite of electronic design automation ("EDA") software
tools, foundry-flexible libraries and support services for use by systems and
circuit designers at other semiconductor and systems companies, as well as at
the Company, in creating complex integrated circuits.
The Company's principal executive offices are located at 1109 McKay Drive,
San Jose, California 95131, and the Company's telephone number is (408)
434-3100.
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR (1) QUARTER ENDED (2)
------------------------------------------------ ----------------------------------
1990 (3) 1991 1992 (4) 1993 (5) 1994 APRIL 1, 1994 MARCH 31, 1995
-------- -------- -------- -------- -------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net revenues.......................... $324,828 $413,376 $428,498 $515,946 $587,091 $138,123 $163,035
Operating income (loss)............... (6,062) 23,173 (19,282) 27,082 46,749 8,348 15,631
Net income (loss)..................... (12,740) 9,873 (32,217) 15,883 31,697 5,361 10,250
Fully diluted net income (loss) per
share................................ $ (0.52) $ 0.37 $ (1.12) $ 0.45 $ 0.85 $ 0.15 $ 0.26
Weighted average common and common
equivalent shares outstanding........ 24,339 26,657 28,865 35,276 37,446 36,802 41,798
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
----------------------------------------------
PRO FORMA
ACTUAL PRO FORMA (6) AS ADJUSTED (7)
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<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital.................................................. $ 137,914 $ 231,653 $ 232,496
Total assets..................................................... 504,537 598,276 596,264
Short-term debt, including current portion of long-term
obligations..................................................... 13,946 13,946 13,946
Long-term debt and noncurrent capital lease obligations.......... 94,108 94,108 36,608
Stockholders' equity............................................. 267,266 361,005 418,196
<FN>
- ------------------------------
(1) From 1990 through 1993, VLSI's fiscal year end was the last Saturday of
December. In 1994, the Company changed its fiscal year end to the last
Friday of December. The actual dates of the Company's fiscal year ends in
the table above are December 29, 1990, December 28, 1991, December 26,
1992, December 25, 1993 and December 30, 1994. The fiscal year ended
December 30, 1994 was a 53-week year. The current fiscal year is a 52-week
year ending on December 29, 1995.
(2) The quarter ended April 1, 1994 was a 14-week quarter. The quarter ended
March 31, 1995 was a 13-week quarter.
(3) Includes a special charge of $12.8 million reflecting the estimated cost of
corporate reorganization related to exiting the memory business.
(4) Includes a special charge of $22.5 million related to the de-emphasis of
older technologies, costs of streamlining sales distribution channels,
costs of relocating certain offices, writedowns of nonperforming assets and
costs associated with intellectual property matters.
(5) Includes a special charge of $1.0 million representing a write-off of
purchased in-process research and development expenses related to the
acquisition of certain assets.
(6) Adjusted to reflect the sale of the 3,450,000 shares of Common Stock sold
in connection with a public offering of the Company's Common Stock in June
1995 at a public offering price of $28.625 per share (the "Public
Offering). The estimated net proceeds of the Public Offering have been
added to working capital pending their use.
(7) Adjusted to reflect estimated net proceeds of the Public Offering, the
conversion of all Debentures outstanding as of March 31, 1995, the
estimated fees paid to the Purchasers under the standby arrangements, the
unamortized debt issuance costs related to the Debentures, the interest
accrued on the Debentures and other expenses related to the transaction.
</TABLE>
4
<PAGE>
RISK FACTORS
FLUCTUATIONS IN OPERATING RESULTS. The Company believes that its future
operating results will be subject to quarterly variations based upon a wide
variety of factors, including the cyclical nature of both the semiconductor
industry and the markets addressed by the Company's products, price erosion,
competitive factors, fluctuations in manufacturing yields, the timing of new
product introductions, changes in product mix, the availability and extent of
utilization of manufacturing capacity, product obsolescence, scheduling,
rescheduling and cancellation of large orders, the ability to develop and
implement new technologies, changes in effective tax rates and litigation
expenses. The Company's COMPASS subsidiary, like other companies in the EDA
business, is particularly subject to significant fluctuations in revenues due to
limited backlog and its reliance on large orders placed late in the quarter. The
Company increases its level of operating expenses and investment in
manufacturing capacity in anticipation of future growth in revenues. To the
extent this revenue growth does not materialize, the Company's operating results
would be adversely affected. In circumstances where the Company is operating at
less than full capacity or has targeted a market segment as a long-term
strategic focus, the Company may choose, in the face of severe pricing pressure,
to manufacture products at low or no profitability. The Company's second quarter
financial results will be adversely affected by a $19.4 million charge to
earnings relating to a May 1995 verdict against VLSI in a patent infringement
lawsuit. See "-- TI Litigation; Intellectual Property Matters" and "Recent
Developments -- TI Litigation."
MANUFACTURING CAPACITY LIMITATIONS. The Company's manufacturing facilities
are operating at capacity. As a result, VLSI's growth is constrained and the
Company has experienced difficulty in meeting some delivery dates requested by
customers. Prolonged inability of VLSI to deliver products in a timely manner
could result in the loss of customers and materially adversely affect results of
operations. In addition, the Company is experiencing manufacturing
inefficiencies associated with the operation of its facilities at capacity while
simultaneously working to expand or upgrade that capacity. Significant lead time
is required to acquire and install additional wafer fabrication equipment. To
the extent that the Company is unable to procure and install such equipment in a
timely manner, the increase in wafer production capacity at its facilities would
be delayed.
In addition, available third-party wafer fabrication, assembly, testing and
packaging capacity has become very limited in recent months. The Company relied
on two outside suppliers for approximately 27% of its 1994 wafer production.
Although the Company has ongoing relationships with these suppliers, the Company
has only one contract for guaranteed capacity. The other supplier has notified
the Company that it will sequentially reduce its allocation of wafers to VLSI
from the third quarter of 1995 through the second quarter of 1996 and has
indicated that it does not intend to supply wafers to the Company thereafter.
There can be no assurance that such supplier will not further reduce its
allocation to VLSI. The Company will be required to find alternative sources of
wafer supply to replace the capacity previously provided by such supplier. If
the Company is unable to replace such wafer supplier, its sales of products
would be diminished, which could have a material adverse impact on the Company's
operations. In addition, the Company relies on three suppliers for almost all
assembly operations and a significant portion of test operations and any
reduction in allocation from these suppliers would adversely affect the
Company's operations.
MANUFACTURING RISKS. The fabrication of integrated circuits is an extremely
complex and precise process consisting of hundreds of separate steps and
requiring production in a highly controlled, clean environment. Minute
impurities, errors in any step of the fabrication process, defects in the masks
used to print circuits on a wafer or other factors can cause a substantial
percentage of wafers to be rejected or numerous die on each wafer to be
nonfunctional. The Company may experience problems in achieving acceptable
yields in the manufacture of wafers, particularly in connection with any
expansion of its capacity or change in its processing steps. For example, in
late 1992, the Company switched processes at one step in the manufacturing line,
which caused certain VLSI chips to fail. The Company's replacement of these
chips at no charge to the customers adversely affected results of operations in
the first quarter of 1993.
In addition to manufacturing in its own facilities, VLSI has wafer
manufacturing arrangements with two integrated circuit manufacturing companies.
These wafer subcontractors are themselves subject to all of the manufacturing
risks that are applicable to VLSI's own wafer manufacturing operations. The
Company also
5
<PAGE>
subcontracts virtually all of its integrated circuit packaging and a significant
portion of its final testing to third parties, principally ANAM Industrial
Company in Korea, ASE Corporation in Taiwan, Advanced Semiconductor Assembly
Technology in Hong Kong and Mitsui Incorporated in Japan. In addition, the
Company's foreign subcontract manufacturing arrangements are subject to risks
such as changes in government policies, transportation delays, increased
tariffs, fluctuations in foreign exchange rates, and export and tax controls.
Any problems experienced in obtaining acceptable wafers from third party wafer
subcontractors on a timely basis to augment the Company's internal manufacturing
capacity or in the integrated circuit packaging, assembly and test operations
performed by subcontractors could delay shipments of the Company's products and
materially adversely affect the Company's results of operations.
The Company's success is also dependent upon its ability to develop and
implement new manufacturing process technologies. Semiconductor design and
process methodologies are subject to rapid technological change, requiring large
expenditures for research and development. Most of the Company's products are
currently manufactured using sub-micron CMOS processes. The Company believes
that the transition to smaller geometry process technologies will be important
to remaining competitive. The Company is in the process of expanding and
upgrading its manufacturing facility in San Jose, California to convert
production to a 6-inch CMOS wafer process. The Company's San Antonio facility,
which is currently using both 0.6-micron and 0.8-micron processes, is being
converted to 100% 0.5-micron CMOS process capability. These conversion
activities could result in a disruption to the facilities' manufacturing cycles,
thereby lowering the output of the facilities as well as wafer yields. Any lack
of success of the Company's facilities conversion efforts would have a material
adverse effect on future operating results and, in particular, delay of planned
increased production of 6-inch CMOS wafers at the San Jose facility, currently
scheduled for the third quarter of 1995, could adversely affect near-term
results.
The Company is party to a joint development agreement with Hitachi, which
expires in 1997. Under such agreement, the Company and Hitachi work together to
develop advanced sub-micron processes for the manufacture of integrated
circuits. In addition, the Company is dependent on Hitachi for assistance in
developing other state-of-the-art manufacturing processes. Any failure or
disruption of the Company's joint development activities could have a material
adverse effect upon the Company's ability to implement state-of-the-art
manufacturing processes.
The Company's San Jose facility, which accounted for approximately 42% of
its total internal production in the first quarter of 1995, is located near
major earthquake faults and in an area that has in the recent past experienced
an extended drought. Even though the Company utilizes both of its fabrication
plants and two subcontractors to manufacture its wafers and has the ability to
shift manufacturing from one plant to another for many of its products,
disruption of operations at either of the Company's production facilities or at
those of its subcontractors for any reason, such as fire or earthquake, would
cause delays in shipments until the Company could shift the products from the
affected facility or subcontractor to another facility.
FUTURE CAPITAL NEEDS. Semiconductor companies such as VLSI have substantial
ongoing capital requirements to obtain internal or external manufacturing
capacity. In order to remain competitive, the Company must continue to make
significant investments in capital equipment and expansion of facilities, as
well as in research and development. Development and implementation of
sub-micron manufacturing processes is particularly capital intensive, requiring
significant investments in new state-of-the-art equipment. The Company currently
anticipates that its capital expenditures for 1995 will be approximately $200
million. The Company believes that the net proceeds from the sale of the Common
Stock in the Public Offering, together with existing cash balances, cash flow
from operations, available equipment financing and proceeds from the expected
exercise by Intel of its warrant for an aggregate exercise price of
approximately $31.3 million, will be sufficient to meet the Company's liquidity
and capital requirements through 1996. However, the Company is currently
exploring methods of increasing both its internal and external manufacturing
capacity. As a result, the Company may be required or choose to seek additional
equity or debt financing to fund further expansion of its internal or external
wafer fabrication capacity or for other purposes. The timing and amount of such
capital requirements cannot be precisely determined and will depend on a number
of factors, including demand for the Company's products, product mix, changes in
semiconductor industry conditions and competitive factors. There can be no
assurance that such additional
6
<PAGE>
financing will be available when needed or, if available, will be on
satisfactory terms. The failure to obtain financing would hinder the Company's
ability to make continued investments in capital equipment and facilities, which
could materially adversely affect the Company's results of operations.
DEPENDENCE ON PERSONAL COMPUTER INDUSTRY. The Company estimates that total
sales to the personal computer market during 1994 represented approximately 47%
of the Company's net revenues. With five of the Company's top ten customers in
1994 operating in the personal computer industry, a deterioration of business
conditions in the personal computer industry would have a material adverse
effect on VLSI's operations. The personal computer market is volatile and is
subject to significant shifts in demand and severe pricing pressures. In
addition, the market for the Company's personal computer devices is
characterized by rapid technological change and product obsolescence. The
Company's results in the PC market will also be dependent in part on the
Company's ability to respond quickly to new microprocessor architectures adopted
by major OEMs. The Company's need to anticipate customer product transitions
also leads to potential inventory exposure, which could adversely affect the
Company's financial results.
CYCLICAL NATURE OF THE SEMICONDUCTOR INDUSTRY. The semiconductor industry
has historically been characterized by wide fluctuations in product supply and
demand. From time to time, the industry has also experienced significant
downturns, often in connection with, or in anticipation of, declines in general
economic conditions. These downturns, which in some cases have lasted for more
than a year, have been characterized by diminished product demand, production
over-capacity and subsequent accelerated erosion of average sales prices. The
Company, like other semiconductor manufacturers with fabrication facilities, has
high fixed costs for its manufacturing facilities and believes that its
operating results were adversely affected by an industry-wide downturn in the
demand for semiconductors in 1990. This downturn coincided with the recession in
the U.S. economy and slower growth in various electronics industries using
semiconductors, including market segments in which the Company was engaged at
the time.
NEW PRODUCT RISKS. The Company's future success depends on its ability to
continue to develop and introduce new products that compete effectively on the
basis of price and performance and that satisfy customer requirements. New
product development often requires long-term forecasting of market trends,
development and implementation of new processes and technologies and substantial
capital commitments. If the Company is unable to design, develop, manufacture
and market new products successfully and in a timely manner, its operating
results will be materially adversely affected. No assurance can be given that
the Company's product and process development efforts will be successful or that
new products will achieve market acceptance. For example, the Company expended
considerable financial and technical resources during 1993 and part of 1994
toward the development of its Polar product, a device intended for the handheld
computer market integrating Intel's 386SL microprocessor. Because the handheld
market developed more slowly than initial expectations, the Company and Intel,
its partner in the Polar development effort, canceled the Polar project and
terminated the amended July 8, 1992 Technology Agreement between the companies.
COMPETITION. The semiconductor industry in general and the markets in which
the Company competes in particular are intensely competitive, exhibiting both
rapid technological change and ongoing price erosion as technologies mature. The
Company competes with large domestic and foreign companies that have
substantially greater financial, technical, marketing and management resources
than the Company, such as AT&T, IBM, Intel, LSI, Motorola, TI and Toshiba.
Competition is particularly intense in X86 core logic chip sets where Intel, a
dominant supplier of microprocessors to the PC industry, has become the major
supplier of Pentium PC chip sets, as well as motherboards, which is likely to
cause increased pricing and margin pressure on such chip sets. Competition faced
by COMPASS in the EDA market comes primarily from a few large established
vendors, such as Cadence and Mentor Graphics. There is no assurance that the
Company will be able to compete successfully in the future.
CONCENTRATION OF CUSTOMER BASE. Approximately two-thirds of the Company's
net revenues for 1994 were derived from sales to its top 20 customers, a large
percentage of which are in the personal computer business. As a result of the
concentration of the Company's customer base, loss or cancellation of business
from any of these major customers, significant changes in scheduled deliveries
to any of these customers or decreases in the prices of products sold to any of
these customers could materially adversely affect the
7
<PAGE>
Company's results of operations. These risks of customer concentration are
exacerbated by the fact that the Company's agreements with its customers for the
purchase of products are generally terminable by such customers at any time and
permit customers to cancel orders previously placed for the Company's products
without penalty. For example, in the fourth quarter of 1993, Apple, which
accounted for 19% of 1993 net revenues, postponed and, in certain cases,
canceled, approximately $20 million of shipments originally planned for delivery
in 1994, adversely affecting VLSI's 1994 results of operations. Shipments to
another customer, Compaq, accounted for 22% of net revenues in 1994 and 11% of
net revenues in the first quarter of 1995.
TI LITIGATION; INTELLECTUAL PROPERTY MATTERS. The Company is one of three
defendants in a major patent infringement suit brought by Texas Instruments with
respect to patents that have now expired, which suit resulted in a May 1995 jury
verdict against VLSI for damages of $19.4 million. The Company intends to
contest the verdict. However, the Company will record a charge to earnings of
$19.4 million in the second quarter of 1995. Based on the jury's finding that
the alleged infringement was intentional, TI has requested that the judge award
enhanced damages, pre-judgment interest and attorneys' fees. In the event that
enhanced damages (which by statute may be as high as treble damages),
pre-judgment interest and/or attorneys' fees are awarded, the judgment could
result in a material reduction in liquidity, as well as an increased impact on
the Company's reported results of operations. See "Recent Developments -- TI
Litigation."
The semiconductor industry is generally characterized by vigorous protection
and pursuit of intellectual property rights and positions, which have on
occasion resulted in protracted litigation that utilizes cash and management
resources, which can have a significant adverse effect on operating results.
There can be no assurance that additional intellectual property claims will not
be made against the Company in the future or that the Company will not be
prohibited from using the technologies subject to such claims or be required to
obtain licenses and make corresponding royalty payments for past or future use.
There can be no assurance that any such licenses could be obtained on
commercially reasonable terms.
AVAILABILITY OF RAW MATERIALS. Raw materials essential to the Company's
business are generally available from multiple sources. However, due to
increased levels of demand, there may be an industrywide shortage of raw silicon
wafers. A prolonged inability to obtain silicon wafers or any other raw
materials could have a material adverse impact on the Company's business.
ENVIRONMENTAL REGULATIONS. The Company is subject to a variety of federal,
state and local governmental regulations related to the storage, use, discharge
and disposal of toxic, volatile or otherwise hazardous chemicals used in its
manufacturing process. Increasing public attention has been focused on the
environmental impact of semiconductor manufacturing operations. The Company's
San Jose, California facilities are located near residential areas, which could
increase the incidence of environmental complaints or investigations. There can
be no assurance that changes in environmental regulations will not impose the
need for additional capital equipment or other requirements. Any failure by the
Company to control the use of, or adequately to restrict the discharge of,
hazardous substances under present or future regulations could subject VLSI to
substantial liability or could cause its manufacturing operations to be
suspended. Such liability or suspension of manufacturing operations could have a
material adverse effect on the Company's operating results.
VOLATILITY OF STOCK PRICE. The Company's Common Stock has experienced and
can be expected to experience substantial price volatility. In addition, the
stock market in general has experienced extreme price and volume fluctuations,
which have particularly affected the market price of many technology companies
and which have often been unrelated to the operating performance of those
companies. See "Price Range of Common Stock and Dividend Policy."
EFFECT OF POTENTIAL STOCK SALES. Intel has the right to demand registration
of 2,677,604 shares of Common Stock issuable upon exercise of a fully
exercisable warrant. Such rights may be exercised by Intel at any time, subject
to the Company's ability to delay registration for 90 days if Intel makes the
demand during an offering by the Company or if the Company initiates an offering
within 30 days of Intel's demand. There can be no assurance that Intel will not
elect to exercise its demand right during or shortly after this offering, which
election could adversely affect the market price of the Company's Common Stock.
In addition, as of
8
<PAGE>
March 31, 1995, approximately 3,742,984 vested and unvested shares of the
Company's Common Stock (the "Option Shares") were subject to employee and
director stock options having exercise prices below the market price of the
Common Stock shown on the cover page of this Prospectus. Many optionees may
choose to exercise their options and sell the Common Stock acquired upon
exercise in the coming months due to the significant spread between the exercise
prices and current market prices. Shares of the Company's Common Stock are
currently trading in excess of the conversion price of the Debentures, which
have been called for redemption. See "Redemption of Debentures and Expiration of
Conversion Privilege." Such redemption call is expected to lead to the
conversion of most, if not all, of the Debentures. Sales of large numbers of
shares by Intel, optionees, Debenture holders who convert into Common Stock or
others may have a depressing effect on the market price for the Company's Common
Stock. See "Capitalization."
USE OF PROCEEDS
There will be no proceeds to the Company from the issuance of the Common
Stock upon conversion of Debentures by the holders thereof. The net proceeds
from the sale of any Common Stock to the Purchasers pursuant to the standby
arrangements described herein will be used to effect redemption of any
Debentures not tendered for conversion. Any additional proceeds from the sale of
Common Stock pursuant to the standby arrangements described herein will be added
to working capital and used for general business purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock has been traded on the over-the-counter market
under the Nasdaq Stock Market symbol VLSI since the Company's initial public
offering in 1983. The following table sets forth, for the periods indicated, the
high and low closing prices for the Common Stock on the Nasdaq Stock Market. The
last reported sale price for the Common Stock of the Company on July 3, 1995 as
reported by the Nasdaq Stock Market is set forth on the cover page of this
Prospectus. At March 31, 1995, the Company had approximately 1,695 holders of
record of its Common Stock and 36,871,246 shares outstanding. See also "Risk
Factors -- Volatility of Stock Price" and "-- Effect of Potential Stock Sales."
<TABLE>
<CAPTION>
HIGH LOW
----- -----
<S> <C> <C>
1992:
First Quarter.................................................................. $10 $ 7 1/2
Second Quarter................................................................. 9 1/8 6 7/8
Third Quarter.................................................................. 8 1/2 6 1/8
Fourth Quarter................................................................. 8 7
1993:
First Quarter.................................................................. $ 8 7/8 $ 6 3/4
Second Quarter................................................................. 8 7/8 6 1/2
Third Quarter.................................................................. 18 5/8 9 1/2
Fourth Quarter................................................................. 18 5/8 9 3/4
1994:
First Quarter.................................................................. $16 $ 9 5/8
Second Quarter................................................................. 15 3/8 12 1/8
Third Quarter.................................................................. 15 15/16 11
Fourth Quarter................................................................. 13 1/8 10 1/2
1995:
First Quarter.................................................................. $18 3/16 $11 11/16
Second Quarter................................................................. 30 1/8 16 3/4
Third Quarter (through July 3, 1995)........................................... 29 5/8 29 5/8
</TABLE>
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain all cash for use in the operation and expansion of
the Company's business and does not anticipate paying any cash dividends in the
near future. Certain of VLSI's debt agreements prohibit the payment of dividends
without the lender's consent.
9
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization and short-term debt of the
Company at March 31, 1995, pro forma to give effect to the Public Offering and
pro forma as adjusted to give effect to the Public Offering and the conversion
of all of the Debentures into Common Stock. To the extent that any Debentures
are redeemed for cash, the Company would recognize a loss on the extinguishment
of the Debentures equal to the premium paid plus a pro rata portion of the
unamortized debt issuance costs. In addition, paid-in capital will be adjusted
for the fees paid to the Purchasers under the standby arrangements and other
expenses related to the transaction net of the Company's share of any profits
realized on sales of shares of Common Stock purchased from the Company pursuant
to the terms of the standby arrangements.
<TABLE>
<CAPTION>
MARCH 31, 1995
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA (1) AS ADJUSTED(2)
---------- ------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Current portion of long-term debt................................... $ 7,703 $ 7,703 $ 7,703
Current capital lease obligations................................... 6,243 6,243 6,243
---------- ------------- --------------
Total short-term debt............................................. $ 13,946 $ 13,946 $ 13,946
---------- ------------- --------------
---------- ------------- --------------
Long-term debt:
7% Convertible Subordinated Debentures due May 1, 2012.............. $ 57,500 $ 57,500 $ 0
Other long-term debt................................................ 32,374 32,374 32,374
Noncurrent capital lease obligations................................ 4,234 4,234 4,234
---------- ------------- --------------
Total long-term debt.............................................. 94,108 94,108 36,608
---------- ------------- --------------
Stockholders' equity:
Preferred Shares, $.01 par value, Authorized: 2,000,000 shares; no
shares issued and outstanding...................................... -- -- --
Common Stock, $.01 par value, Authorized: 99,000,000 shares; Issued
and outstanding: 36,871,246 shares; 40,321,246 shares, pro forma
and 42,934,882 shares pro forma as adjusted (3).................... 369 403 429
Junior Common Stock, $.01 par value, Authorized: 1,000,000 shares;
no shares issued and outstanding................................... -- -- --
Additional paid-in capital.......................................... 233,486 327,191 384,356
Retained earnings................................................... 33,411 33,411 33,411
---------- ------------- --------------
Total stockholders' equity........................................ 267,266 361,005 418,196
---------- ------------- --------------
Total capitalization............................................ $ 361,374 $ 455,113 $ 454,804
---------- ------------- --------------
---------- ------------- --------------
<FN>
- ------------------------
(1) Adjusted to reflect estimated net proceeds of the Public Offering.
(2) Adjusted to reflect estimated net proceeds of the Public Offering, the
conversion of all Debentures outstanding as of March 31, 1995, the
estimated fees paid to the Purchasers under the standby arrangements, the
unamortized debt issuance costs related to the Debentures, the interest
accrued on the Debentures and other expenses related to the transaction.
(3) Excludes (i) 1,740,691 shares of Common Stock subject to outstanding
options under the Company's 1982 Incentive Stock Option Plan, which plan
has expired as to future grants, (ii) 4,393,371 shares of Common Stock
reserved for issuance upon exercise of stock options under the Company's
1992 Stock Plan, of which 1,877,293 shares are subject to outstanding
options and 2,516,078 shares are available for future grant as of March 31,
1995, (iii) 523,838 shares of Common Stock reserved for issuance under the
Company's employee stock purchase plan, (iv) 285,000 shares of Common Stock
reserved for issuance upon exercise of stock options under the Company's
1986 Directors' Stock Option Plan, of which 125,000 shares are subject to
outstanding options and 160,000 shares are available for future grant and
(v) 2,677,604 shares of Common Stock reserved for issuance under a warrant
granted to Intel.
</TABLE>
10
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data set forth below for the years
ended December 26, 1992, December 25, 1993 and December 30, 1994 and the
consolidated balance sheet data at December 25, 1993 and December 30, 1994 are
derived from the financial statements of the Company, audited by Ernst & Young
LLP, independent auditors, that are incorporated herein by reference, and are
qualified by reference to such financial statements. The consolidated statement
of operations data for the years ended December 29, 1990, and December 28, 1991,
and the consolidated balance sheet data at December 29, 1990, December 28, 1991
and December 26, 1992 are derived from financial statements of the Company that
also have been audited by Ernst & Young LLP but are not incorporated herein by
reference. The financial data at March 31, 1995 and for the three-month periods
ended April 1, 1994 and March 31, 1995 are derived from unaudited financial
statements, which include all adjustments, consisting only of normal recurring
accruals, that the Company considers necessary for a fair presentation of the
consolidated financial position and the consolidated results of operations for
these periods. Operating results for the three months ended March 31, 1995 are
not necessarily indicative of the results that may be expected for future
periods or for the year ending December 29, 1995. The data should be read in
conjunction with the consolidated financial statements, related notes and other
financial information included herein or incorporated herein by reference.
<TABLE>
<CAPTION>
FISCAL YEAR (1)(2) QUARTER ENDED (3)
-------------------------------------------------------- -----------------------------------
1990 1991 1992 1993 1994 APRIL 1, 1994 MARCH 31, 1995
-------- -------- -------- -------- -------- ---------------- --------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF
OPERATIONS DATA:
Net revenues.............. $324,828 $413,376 $428,498 $515,946 $587,091 $138,123 $163,035
Cost of sales............. 215,757 275,414 293,392 327,774 356,858 86,940 98,961
-------- -------- -------- -------- -------- -------- --------------
Gross profit............ 109,071 137,962 135,106 188,172 230,233 51,183 64,074
Operating expenses:
Research and
development............ 35,521 39,167 50,442 65,431 78,889 18,705 20,668
Marketing, general and
administrative......... 66,862 75,622 81,446 94,651 104,595 24,130 27,775
Special charge.......... 12,750(4) -- 22,500(5) 1,008(6) -- -- --
-------- -------- -------- -------- -------- -------- --------------
Operating income (loss)... (6,062) 23,173 (19,282) 27,082 46,749 8,348 15,631
Interest income and other
expenses (net)........... 2,395 (1,161) (3,282) 1,512 3,301 802 881
Interest expense.......... (9,073) (9,234) (9,053) (8,063) (8,343) (2,004) (1,862)
-------- -------- -------- -------- -------- -------- --------------
Income (loss) before
provision for taxes on
income................... (12,740) 12,778 (31,617) 20,531 41,707 7,146 14,650
Provision for taxes on
income................... -- 2,905 600 4,648 10,010 1,785 4,400
-------- -------- -------- -------- -------- -------- --------------
Net income (loss)......... $(12,740) $ 9,873 $(32,217) $ 15,883 $ 31,697 $ 5,361 $ 10,250
-------- -------- -------- -------- -------- -------- --------------
-------- -------- -------- -------- -------- -------- --------------
Fully diluted net income
(loss) per share......... $ (0.52) $ 0.37 $ (1.12) $ 0.45 $ 0.85 $ 0.15 $ 0.26
-------- -------- -------- -------- -------- -------- --------------
-------- -------- -------- -------- -------- -------- --------------
Weighted average common
and common equivalent
shares outstanding....... 24,339 26,657 28,865 35,276 37,446 36,802 41,798
<CAPTION>
FISCAL YEAR (1)(2) QUARTER ENDED (3)
-------------------------------------------------------- -----------------------------------
1990 1991 1992 1993 1994 APRIL 1, 1994 MARCH 31, 1995
-------- -------- -------- -------- -------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales............. 66.4 66.6 68.5 63.5 60.8 62.9 60.7
-------- -------- -------- -------- -------- -------- --------------
Gross profit............ 33.6 33.4 31.5 36.5 39.2 37.1 39.3
Operating expenses:
Research and
development............ 10.9 9.5 11.8 12.7 13.4 13.6 12.7
Marketing, general and
administrative......... 20.7 18.3 19.0 18.3 17.8 17.5 17.0
Special charge.......... 3.9(4) -- 5.2(5) 0.2(6) -- -- --
-------- -------- -------- -------- -------- -------- --------------
Operating income (loss)... (1.9) 5.6 (4.5) 5.3 8.0 6.0 9.6
Interest expense and
other, net............... 2.0 2.5 2.9 1.3 0.9 0.8 0.6
Provision for taxes on
income................... -- 0.7 0.1 0.9 1.7 1.3 2.7
-------- -------- -------- -------- -------- -------- --------------
Net income (loss)......... (3.9)% 2.4% (7.5)% 3.1% 5.4% 3.9% 6.3%
-------- -------- -------- -------- -------- -------- --------------
-------- -------- -------- -------- -------- -------- --------------
</TABLE>
<TABLE>
<CAPTION>
AT FISCAL YEAR END (1)
------------------------------------------------ AT
1990 1991 1992 1993 1994 MARCH 31, 1995
-------- -------- -------- -------- -------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital........................................... $ 65,960 $ 76,127 $102,149 $114,423 $138,704 $137,914
Total assets.............................................. 327,340 364,018 368,208 412,223 490,216 504,537
Short-term debt, including current portion of long-term
obligations.............................................. 34,945 39,661 15,707 14,606 15,516 13,946
Long-term debt and non-current capital lease
obligations.............................................. 89,277 92,633 83,178 85,855 96,804 94,108
Stockholders' equity...................................... 147,110 161,628 185,008 212,508 255,430 267,266
<FN>
- ----------------------------------
(1) From 1990 through 1993, VLSI's fiscal year end was the last Saturday of
December. In 1994, the Company changed its fiscal year end to the last
Friday of December. The actual dates of the Company's fiscal year ends in
the table above are December 29, 1990, December 28, 1991, December 26,
1992, December 25, 1993 and December 30, 1994. The fiscal year ended
December 30, 1994 was a 53-week year. The current fiscal year is a 52-week
year ending on December 29, 1995.
(2) During 1994, the Company reclassified costs associated with its Technology
Centers from research and development to cost of sales and marketing,
general and administrative in order to make the presentation of the
Company's financial statements more comparable with the financial
statements of its closest competitors and to better reflect the nature of
these costs. Amounts reclassified in 1990, 1991, 1992, 1993 and 1994 total
$18.1 million, $18.8 million, $19.1 million, $18.4 million and $22.7
million, respectively. Cost of sales were increased $14.1 million, $14.7
million, $14.9 million, $14.2 million and $17.9 million for 1990, 1991,
1992, 1993 and 1994, respectively. Marketing, general and administrative
expenses were increased $4.0 million, $4.1 million, $4.2 million, $4.2
million and $4.8 million for 1990, 1991, 1992, 1993 and 1994, respectively.
(3) The quarter ended April 1, 1994 was a 14-week quarter. The quarter ended
March 31, 1995 was a 13-week quarter.
(4) Represents a special charge of $12.8 million reflecting the estimated cost
of corporate reorganization related to exiting the memory business.
(5) Represents a special charge of $22.5 million related to the de-emphasis of
older technologies, costs of streamlining sales distribution channels,
costs of relocating certain offices, writedowns of nonperforming assets and
costs associated with intellectual property matters.
(6) Represents a special charge of $1.0 million reflecting a write-off of
purchased in-process research and development expenses related to the
acquisition of certain assets.
</TABLE>
11
<PAGE>
BUSINESS
VLSI is a leader in the design, manufacture and sale of highly complex
application specific integrated circuits ("ASICs") -- custom designed chips for
an individual customer -- and application specific standard products ("ASSPs")
- -- semi-custom chips designed for a particular market application that may be
used by several different customers. The Company targets high-volume markets in
which it has built significant expertise and can use its library of proprietary
cells and highly integrated building blocks to assist customers in designing
products and bringing them to market rapidly. VLSI's target markets include the
computing, communications and consumer and entertainment markets. VLSI
emphasizes high performance applications where its products are critical
elements of complex electronic systems. VLSI targets key OEM customers who are
leaders in their respective industries. The Company's major customers include
Compaq, Apple, Ericsson, Hewlett-Packard, Tellabs, Alcatel and Silicon Graphics.
VLSI produces a significant portion of its wafers (approximately 73% in
1994) at its own facilities and augments internal manufacturing capacity with
the foundry services of third-party wafer subcontractors. The Company believes
that this strategy improves quality, cost-effectiveness, responsiveness to
customers, access to capacity, ability to implement leading edge process
technology and time to market, as compared to semiconductor companies that lack
fabrication facilities. The semiconductor industry is, however, currently facing
capacity constraints in wafer manufacturing and the availability of third-party
wafer foundries has diminished significantly. Due to this manufacturing capacity
shortage, as well as increased customer demand, the Company is seeking to
accelerate the expansion and upgrading of its internal and external
manufacturing capacity.
Through its subsidiary, COMPASS Design Automation, Inc. ("COMPASS"), VLSI
offers an integrated suite of electronic design automation ("EDA") software
tools, foundry-flexible libraries and support services for use by systems and
circuit designers at other semiconductor and systems companies, as well as at
the Company, in creating complex integrated circuits.
BUSINESS STRATEGY
VLSI's objective is to design and manufacture highly-integrated, complex
semiconductor devices that allow its customers to develop and bring to market
higher value-added systems and products. Key elements in its strategy to achieve
this objective include:
- TARGET HIGH-VOLUME MARKETS. VLSI targets high-volume markets in which it
has built significant expertise and can utilize its library of proprietary
cells and high-level building blocks to assist customers in designing and
bringing the customers' products to market rapidly. VLSI believes that
this allows the Company to offer more value to the customer at higher
gross margins for the Company.
- FOCUS ON LARGE, INDUSTRY-LEADING OEM CUSTOMERS. VLSI focuses its
manufacturing and research and development resources on products for OEM
customers that are leaders in their respective industries. During 1994,
approximately two-thirds of the Company's net revenues were derived from
sales to its top 20 customers, including Compaq, Apple, Ericsson,
Hewlett-Packard, Tellabs, Alcatel and Silicon Graphics.
- EMPHASIZE STANDARD CELL ASICS AND ASSPS. VLSI emphasizes standard cell
ASICs and ASSPs as compared to gate arrays and other design methodologies.
The Company believes that the standard cell approach is a superior
methodology for satisfying the size, performance and power consumption
requirements of the highly complex products that form VLSI's target
markets.
- LEVERAGE LIBRARY OF STANDARD CELLS TO REDUCE CUSTOMERS' TIME TO MARKET.
VLSI's Functional System Block ("FSB") library, an expanding collection of
pre-designed cells and high-level building blocks, provides frequently
used integrated circuit functions. The FSB library allows VLSI and its
customers to more rapidly design and integrate products, thereby reducing
VLSI's customers' time to market. VLSI's library of FSBs includes Graphics
Controllers (LCD and CRT), a DES Encryption
12
<PAGE>
FSB, a PCI FSB, SCSI Controllers, an ARM RISC-based microprocessor (low
power, high performance embedded control applications), power management,
communications (including standards such as DECT, CT2, GSM and PHS),
signal converters, forward error correction, digital demodulation, MPEG2
and digital signal processing.
- PROVIDE ENGINEERING DESIGN SUPPORT. The Company seeks to differentiate
itself from its competitors not only through the quality of its products,
but also through the level of its technological support and service. VLSI
operates a network of geographically dispersed Technology Centers where
experienced engineers with a specific technical focus work with customers
to develop designs for new products and to provide continuing after-sale
customer support. In 1993, VLSI established a Customer Excellence program,
which is designed to foster relationships with customers through the use
of teams focused on elements such as customer satisfaction, manufacturing
competence and technical excellence.
- EMPLOY BOTH INTERNAL AND EXTERNAL MANUFACTURING CAPACITY. VLSI produces a
significant portion of its wafers (approximately 73% in 1994) at its own
facilities and augments internal manufacturing capacity with the foundry
services of third-party wafer subcontractors. The Company believes that
this strategy improves quality, cost-effectiveness, responsiveness to
customers, access to capacity, ability to implement leading edge process
technology and time to market, as compared to semiconductor companies that
lack fabrication facilities. The semiconductor industry is, however,
currently facing capacity constraints in wafer manufacturing and the
availability of third-party wafer foundries has diminished significantly.
Due to this manufacturing capacity shortage, as well as increased customer
demand, the Company is seeking to accelerate the expansion and upgrading
of its internal and external manufacturing capacity.
13
<PAGE>
PRODUCTS AND MARKETS
VLSI shipped over 2,000 different products in 1994. The following table
illustrates certain current VLSI products, their applications and customers, all
as selected by the Company in its discretion.
SELECTED VLSI PRODUCTS AND CUSTOMERS
<TABLE>
<CAPTION>
SELECTED
TARGET MARKET SELECTED PRODUCTS AND DESCRIPTION CUSTOMER(S)
<S> <C> <C>
COMPUTING
ASICs and ASSPs for personal Core logic chip sets for Pentium personal computers AT&T, Compaq, DEC,
computers, workstations and Hewlett- Packard,
mass storage application Packard Bell
Core logic and multimedia ASICs for various Macintosh Power Apple and Apple
PC systems licensees
Core logic chip set for NexGen microprocessor NexGen
ASICs for Onyx high-end 3D Graphics and high volume Silicon Graphics
entry-level workstations
COMMUNICATIONS
ASICs and ASSPs for wireless ASICs for Titan digital access cross connect system Tellabs
communication and network
and voice application
ASICs and ASSPs for ATM and hub/router based solutions Cisco, Newbridge,
UB Networks
ARM-based microcontroller for Marco-TM- wireless communicator Motorola
Ericsson
Signal processing and call control chips for GSM phones
ASICs for digital subscriber loop and central office Alcatel, DSC
application
CONSUMER & ENTERTAINMENT
ASICs and ASSPs for digital Forward error correction chip and QPSK demodulator for Hughes, Matsushita,
satellite and cable set top satellite set top box NEC, Pioneer,
box, arcade and video game Sagem, Sony,
application Thomson
High performance encryption engine chip AT&T
EDA
Electronic design automation Top-down design tools, which include ASIC Synthesizer-TM- and National
of complex ASICs, ICs and Datapath Compiler-TM- Semiconductor,
ASSPs Oak Technology,
Silicon Graphics
Physical design tools, which include a floorplanning tool and Rockwell
a place and route tool Tellabs, Thomson
Sub-micron physical library products Chips and
Technologies,
Hitachi, NEC, TI
</TABLE>
14
<PAGE>
RECENT DEVELOPMENTS
PUBLIC OFFERING OF COMMON STOCK
In June 1995, the Company completed the public offering of an aggregate of
3,450,000 shares of its Common Stock (including 450,000 shares sold pursuant to
the Underwriters' overallotment option) at a price to public of $28.625 per
share and for aggregate proceeds to the Company of $94,064,250. Such proceeds
will be used primarily for adding internal or external wafer fabrication
capacity.
SALE OF STOCK BY INTEL
In January and February 1995, Intel sold an aggregate of 5,355,207 shares of
Common Stock of the Company that it had acquired pursuant to the Intel/VLSI
Stock and Warrant Purchase Agreement dated July 8, 1992. As a result, Intel is
no longer a stockholder of the Company, although it currently holds a fully
exercisable warrant to purchase an aggregate of 2,677,604 shares of Common Stock
at an exercise price of $11.69 per share and expiring in August 1995. See "Risk
Factors -- Effect of Potential Stock Sales."
DEVELOPMENT OF 0.35-MICRON PROCESS TECHNOLOGY WITH HITACHI
In April 1995, the Company and Hitachi announced the joint development of a
new 0.35-micron process technology for ASICs. The Company believes that the new
process technology will be used for ASICs in the computing, communications and
consumer and entertainment markets. The Company's development and initial
fabrication of ASICs using the 0.35-micron process is taking place at the
Company's San Antonio, Texas facility. The Company and Hitachi are parties to a
joint development agreement for the development of 0.35-micron and smaller
geometry process technologies, which expires in 1997. See "Risk Factors --
Manufacturing Risks."
TI LITIGATION
In July 1990, Texas Instruments filed two actions against the Company and
four other defendants, Analog Devices, Inc., Integrated Device Technology, Inc.
("IDT"), LSI Logic Corporation and Cypress Semiconductor Corporation (the
Company and such other defendants are collectively referred to as the "TI
Defendants"). IDT settled its cases with TI in late December 1992.
In the action filed before the United States International Trade Commission
("ITC"), TI sought to exclude from importation into the U.S. all TI Defendants'
products manufactured outside the U.S. that allegedly utilize a plastic
encapsulation process described in U.S. Patent No. 4,043,027 (the "027 patent").
On October 15, 1991, the Administrative Law Judge ("ALJ") found the 027 patent
to be valid and infringed by the Company's old plastic encapsulation gating
process. However, a new plastic encapsulation gating process developed and used
by the TI Defendants was found not to infringe the 027 patent. In December 1991,
the full ITC determined that it would not consider TI's appeal to overturn the
ALJ's decision on noninfringement of the new process. The United States Court of
Appeals for the Federal Circuit affirmed the ITC decision in March 1993. The 027
patent has since expired.
TI also filed a patent infringement action against the TI Defendants in the
United States District Court for the Northern District of Texas seeking an
injunction against the sale and/or manufacture by the TI Defendants of products
that allegedly infringe the 027 patent. The action also sought damages for
alleged past infringement of the 027 patent and now expired U.S. Patent No.
43,716,764. A trial for this matter was held in April 1995, which resulted in a
May 1995 verdict against VLSI for $19.4 million. The Company intends to contest
the verdict. However, the Company will record a charge to earnings of $19.4
million in the second quarter of 1995. Based on the jury's finding that the
alleged infringement was intentional, TI has requested that the judge award
enhanced damages, pre-judgment interest and attorneys' fees. In the event that
enhanced damages (which by statute may be as high as treble damages),
pre-judgment interest and/or attorneys' fees are awarded, the judgment could
result in a material reduction in liquidity, as well as an increased impact on
the Company's reported results of operations.
15
<PAGE>
REDEMPTION OF DEBENTURES AND EXPIRATION OF
CONVERSION PRIVILEGE
The Company has called all its outstanding 7% Convertible Subordinated
Debentures due May 1, 2012 (the "Debentures") for redemption on August 7, 1995
(the "Redemption Date") pursuant to the terms of the Indenture dated as of May
1, 1987 (the "Indenture"), between the Company and Citibank, N.A., as Trustee
(the "Trustee"). As a result of the call for redemption, holders of the
Debentures are entitled to receive from the Company upon redemption the sum of
$1,014, plus accrued interest from May 1, 1995 to the Redemption Date in the
amount of $18.86, for each $1,000 principal amount of Debentures. The total
amount payable upon redemption for each $1,000 principal amount of Debentures is
thus $1,032.86 (the "Redemption Payment"). After the Redemption Date, the
Debentures will no longer be deemed to be outstanding, and all rights of the
holders of the Debentures will cease, except the right to receive the Redemption
Payment upon surrender of the Debentures to the Trustee.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES.
Holders of the Debentures have the following alternatives, each of which
should be carefully considered:
1. CONVERSION OF DEBENTURES INTO COMMON STOCK. Until 5:00 p.m., New York
City time, on August 4, 1995, one business day prior to the Redemption Date (the
"Conversion Expiration Date"), the Debentures are convertible at the option of
the holder, in part or in whole, at the conversion price of $22.00 per share,
into approximately 45.45 fully paid and nonassessable shares of the Company's
common stock, $0.01 par value (the "Common Stock"), for each $1,000 principal
amount of Debentures. In the event such conversion would result in a fractional
share of Common Stock, an amount equivalent to the value of the fraction will be
paid in cash by the Company. Such amount will be determined on the basis of the
last reported sales price as reported by the Nasdaq Stock Market on the day the
Debentures are converted. On the basis of the closing price of the Common Stock
as reported on the Nasdaq Stock Market on July 3, 1995 of $29.625, the
approximately 45.45 shares have a value (including cash in lieu of the
fractional share) equivalent to $1,346.59. No payment or adjustment will be made
on conversion for interest accrued on the Debentures surrendered for conversion.
Accordingly, any holder surrendering Debentures for conversion will not receive
any interest with respect to such Debentures accrued since May 1, 1995.
SO LONG AS THE MARKET PRICE OF THE COMMON STOCK IS AT LEAST $22.72 PER
SHARE, A HOLDER OF THE DEBENTURES WHO CONVERTS WILL RECEIVE COMMON STOCK WITH A
MARKET VALUE, PLUS CASH IN LIEU OF ANY FRACTIONAL SHARE, EQUAL TO OR GREATER
THAN THE AMOUNT OF CASH THE HOLDER WOULD OTHERWISE BE ENTITLED TO RECEIVE UPON
REDEMPTION. SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS." HOLDERS OF
DEBENTURES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
THE CONVERSION RIGHT EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 4,
1995. FROM AND AFTER THAT DATE AND TIME, HOLDERS OF DEBENTURES WILL BE ENTITLED
ONLY TO THE REDEMPTION PAYMENT. IT SHOULD BE NOTED, HOWEVER, THAT THE PRICE OF
THE COMMON STOCK RECEIVED UPON CONVERSION WILL FLUCTUATE IN THE MARKET. NO
ASSURANCE IS GIVEN AS TO THE PRICE OF THE COMMON STOCK AT ANY FUTURE TIME, AND
THE HOLDERS SHOULD EXPECT TO INCUR VARIOUS EXPENSES OF SALE IF THE COMMON STOCK
RECEIVED UPON CONVERSION OF THE DEBENTURES IS SOLD.
2. REDEMPTION OF DEBENTURES ON AUGUST 7, 1995. Any Debentures that have
not been converted into Common Stock on or prior to August 4, 1995, will be
redeemed on the Redemption Date. Upon redemption a holder will receive $1,032.86
per $1,000 principal amount of Debentures (consisting of $1,014 per $1,000
principal amount plus accrued and unpaid interest thereon from May 1, 1995 to
the Redemption Date of $18.86 per $1,000 principal amount). On and after the
Redemption Date, interest will cease to accrue and holders of Debentures will
not have any rights as such holders other than the right to receive payment of
the Redemption Payment upon surrender of their Debentures.
3. SALE OF DEBENTURES THROUGH ORDINARY BROKERAGE TRANSACTIONS. Sales of
Debentures may be made through open market brokerage transactions. After 5:00
p.m., New York City time, on August 4, 1995, no
16
<PAGE>
holder of Debentures will be entitled to convert Debentures into Common Stock.
Holders of Debentures who wish to make sales should consult with their own
brokers concerning if and when their Debentures should be sold.
MANNER OF CONVERSION
To convert Debentures into Common Stock, the holder thereof must surrender
such Debentures, duly endorsed or assigned to the Company, prior to 5:00 p.m.,
New York City time, on August 4, 1995, the last business day prior to the
Redemption Date, to the Trustee as follows: if by hand or by mail, Citibank,
N.A., 111 Wall Street, 5th Floor, New York, NY 10043, Attention: Corporate Trust
Services; and give written notice (on the reverse of the Debenture certificate)
to the Trustee that the holder elects to convert such Debentures. Such notice
must also certify the name or names in which the certificate or certificates for
shares of Common Stock which shall be issuable on such conversion shall be
issued, together with the address or addresses of the person or persons so
named. Each Debenture surrendered for conversion must, unless the shares
issuable on conversion are to be issued in the same name as the name in which
such Debenture is registered, be accompanied by instruments of transfer, in form
satisfactory to the Company and the Trustee, duly executed by the holder or his
or her duly authorized attorney. The notice that must be given to the Trustee
may be provided by surrendering Debentures accompanied by the Letter of
Transmittal provided to all record holders of the Debentures. As promptly as
practicable after the surrender of such Debenture, as aforesaid, the Company
will issue and deliver at the office of the Trustee to such holder, or on such
holder's written order, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion of such Debenture and a
check for the amount payable in lieu of any fractional share. Holders are also
entitled to convert fewer than all Debentures they hold provided that any
conversions are for principal amounts of Debentures in integral multiples of
$1,000, in accordance with the terms of the Indenture. No payment or adjustment
will be made on conversion for interest accrued on the Debentures surrendered
for conversion or for dividends on Common Stock delivered on such conversion.
THE DEBENTURES MAY BE CONVERTED INTO COMMON STOCK ONLY BY DELIVERY OF
DEBENTURES, TOGETHER WITH A NOTICE AS DESCRIBED ABOVE, TO THE TRUSTEE PRIOR TO
5:00 P.M., NEW YORK CITY TIME, ON AUGUST 4, 1995. SINCE IT IS THE TIME OF
RECEIPT, NOT THE TIME OF MAILING, THAT DETERMINES WHETHER DEBENTURES HAVE BEEN
PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE ALLOWED FOR
DEBENTURES SENT BY MAIL TO BE RECEIVED BY THE TRUSTEE PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON AUGUST 4, 1995.
ANY DEBENTURES WHICH HAVE NOT BEEN PROPERLY PRESENTED TO THE TRUSTEE FOR
CONVERSION PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 4, 1995 WILL BE
AUTOMATICALLY REDEEMED AS SET FORTH ABOVE.
MANNER OF REDEMPTION
To receive the Redemption Payment specified above for any Debentures being
redeemed, the holder thereof must surrender such Debentures as follows: if by
hand or by mail, Citibank, N.A., 111 Wall Street, 5th Floor, New York, NY 10043,
Attention: Corporate Trust Services; and give written notice to the Trustee in
the Letter of Transmittal being mailed to holders of Debentures that the holder
elects to redeem such Debentures.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is for general information and is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), the applicable regulations promulgated thereunder, and published
administrative and judicial decisions, all as they exist at the date of this
Prospectus. Changes in the law could affect the federal income tax consequences
discussed herein below.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who are
not citizens or residents of the United States) may be subject to special rules
not discussed below. EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF THE SALE OR CONVERSION OF THE DEBENTURES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND ANY CHANGES IN APPLICABLE TAX LAWS.
17
<PAGE>
For federal income tax purposes the conversion of Debentures into Common
Stock will not result in a taxable gain or loss with respect to the Common Stock
received, except that gain must be recognized with respect to cash received in
lieu of fractional shares upon conversion. The amount of such gain will be equal
to the amount of cash received less the basis attributable to such fractional
shares and will be capital gain if the Debentures are capital assets in the
hands of the holder. A holder's basis for the Common Stock received upon
conversion of Debentures will be equal to the basis of the Debentures
surrendered and, assuming that the Debentures are capital assets in the holder's
hands, the holding period for that Common Stock will include the holding period
for those Debentures.
A sale of Debentures or surrender of Debentures for redemption will be a
taxable transaction on which gain or loss, if any, will be recognized. The gain
or loss will ordinarily be a capital gain or loss, provided the Debentures are a
capital asset in the hands of the holder. The gain or loss recognized upon sale
of Debentures or surrender thereof for redemption will be the difference between
the holder's basis in the Debentures and the sale price or redemption price, as
the case may be, received in respect thereof, exclusive of accrued interest
which will be taxable as ordinary income. If a holder purchased the Debentures
at below the stated redemption price at maturity, a portion of the gain may be
treated as ordinary interest income as a result of the market discount
provisions of the Internal Revenue Code. To the extent the Debentures converted
are subject to accrued market discount not previously included in the income of
the holder, the amount of the accrued market discount will carry over to the
Common Stock acquired on conversion and will be taxed as ordinary income upon
the subsequent disposition of the Common Stock.
The federal income tax discussion set forth above is included for general
information only. Holders should consult their tax advisors to determine
particular tax consequences to them (including the application and effect of
market discount and backup withholding rules, state and local income and other
tax laws) prior to any conversion, sale or surrender for redemption of the
Debentures. Holders who do not provide a Taxpayer Identification Number or who
provide an incorrect Taxpayer Identification Number on the substitute W-9
provided in the Letter of Transmittal provided with this Prospectus may be
subject to a 31% backup withholding tax and other penalties.
STANDBY ARRANGEMENTS
The Company has entered into an agreement (the "Standby Agreement") with
Bear, Stearns & Co. Inc. and Hambrecht & Quist LLC (the "Purchasers") pursuant
to which the Purchasers have agreed, subject to certain conditions, to purchase
from the Company the shares of Common Stock that otherwise would have been
delivered upon conversion of Debentures that are not duly surrendered for
conversion on or prior to the Conversion Expiration Date. Such shares of Common
Stock will be purchased by the Purchasers at a purchase price of $22.72 per
share, for an aggregate purchase price equal to the aggregate redemption payment
to be made for those Debentures.
The Purchasers may also purchase Debentures for their own accounts in the
open market or otherwise on or prior to the Conversion Expiration Date and have
agreed to surrender for conversion all Debentures so purchased by them and any
additional Debentures beneficially owned by them.
A maximum of 2,613,636 shares of Common Stock is subject to purchase under
the Standby Agreement, which amount represents the number of shares of Common
Stock issuable upon conversion of the $57,500,000 principal amount of
Debentures.
Prior to the Redemption Date, the Purchasers may offer Common Stock,
including shares acquired through the purchase and conversion of Debentures,
directly to the public at prices set from time to time by the Purchasers and to
dealers at such prices less a selling concession to be determined by the
Purchasers. Prior to the Redemption Date, it is intended that each such price
when set will not exceed the greater of the last sale or current asked price of
Common Stock on the Nasdaq Stock Market plus a dealer's concession, and the
offering price will not be increased more than once in any calendar day. After
the Redemption Date, the Purchasers may offer Common Stock at a price or prices
to be determined, but which it is presently intended will be determined in
conformity with the preceding sentence. Sales of Common Stock by the Purchasers
may be made on the Nasdaq Stock Market, in block trades or in privately
negotiated transactions.
18
<PAGE>
In effecting such transactions, the Purchasers may realize profits or losses
independent of their compensation described below. Any Common Stock will be
offered by the Purchasers subject to receipt and acceptance by them and subject
to their right to reject orders in whole or in part.
The Company has agreed to pay the Purchasers a standby fee of $600,000, plus
an amount ranging from no fee to $0.85 per share purchased by the Purchasers
depending upon the number of shares issuable upon conversion of the Debentures
that the Purchasers are required to purchase. In particular, if the Purchasers
purchase up to 130,682 shares, no fee shall be payable; if the Purchasers
purchase in excess of 130,682 shares to a maximum of 392,045 shares, a fee of
$.45 per share shall be payable for each share (including the 130,682 shares
referred to in the clause above) purchased; and if the Purchasers purchase in
excess of 392,045 shares, a fee of $.85 per share shall be payable for each
share (including the 392,045 shares referred to in the clauses above) purchased.
The Purchasers have agreed in the Standby Agreement to pay the Company 50% of
the amount by which the net proceeds realized by the Purchasers in the sale of
shares so purchased from the Company exceeds the purchase price paid for such
shares by the Purchasers; there is no such profit sharing with respect to
proceeds realized by the Purchasers in the sale of shares not so purchased,
including shares issued upon conversion of Debentures held by the Purchasers.
The Company has agreed to reimburse the Purchasers for certain out-of-pocket
expenses in connection with the transactions contemplated by the Standby
Agreement and to indemnify the Purchasers against, and to provide contribution
with respect to, certain liabilities under the Securities Act of 1933, as
amended.
Pursuant to the Standby Agreement, the Company has agreed that for a period
of 60 days from the date of the final Prospectus relating hereto, without the
prior written consent of the Purchasers, it will not issue, sell, offer or agree
to sell or otherwise dispose of any shares of Common Stock (or securities
convertible into or exchangeable for Common Stock), other than the (i) sale of
the shares offered hereby or otherwise arising from conversion of the
Debentures, (ii) issuance of shares upon the exercise of stock options and (iii)
issuance of shares under the warrant granted by the Company to Intel dated
August 25, 1992.
The Purchasers have from time to time in recent years performed various
investment banking and other financial advisory services for the Company,
including serving as co-managers of the Public Offering, for which they have
received customary compensation.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, Palo
Alto, California, and for the Purchasers by Latham & Watkins, San Francisco,
California.
EXPERTS
The consolidated financial statements and schedule of VLSI Technology, Inc.
included in the Company's Annual Report (Form 10-K) for the year ended December
30, 1994, have been audited by Ernst & Young LLP, independent auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements and schedule have been
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
19
<PAGE>
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NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY OR EITHER OF THE PURCHASERS. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THESE SECURITIES OFFERED IN ANY JURISDICTION TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF THE COMPANY SINCE SUCH DATE.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Available Information.......................... 2
Information Incorporated by Reference.......... 2
The Company.................................... 3
Risk Factors................................... 5
Use of Proceeds................................ 9
Price Range of Common Stock and Dividend
Policy....................................... 9
Capitalization................................. 10
Selected Consolidated Financial Data........... 11
Business....................................... 12
Recent Developments............................ 15
Redemption of Debentures and Expiration of
Conversion Privilege......................... 16
Certain Federal Income Tax Considerations...... 17
Standby Arrangements........................... 18
Legal Matters.................................. 19
Experts........................................ 19
</TABLE>
[LOGO]
2,613,636 SHARES
COMMON STOCK
----------------
PROSPECTUS
----------------
BEAR, STEARNS & CO. INC.
HAMBRECHT & QUIST
JULY 6, 1995
- -------------------------------------------
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<PAGE>
VLSI TECHNOLOGY, INC.
REGISTRATION STATEMENT ON FORM S-3
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various costs and expenses payable by the
Company, other than underwriting discounts and commissions, with respect to the
sale and distribution of the securities being registered. All of the amounts
shown are estimates except the Securities and Exchange Commission registration
fee.
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 24,221
Nasdaq Additional Listing Fee..................................... 17,500
Blue Sky Fees and Expenses........................................ 7,500
Legal Fees and Expenses........................................... 105,000
Accounting Fees and Expenses...................................... 35,000
Printing and Engraving............................................ 45,000
Transfer Agent and Registrar Fees................................. 10,000
Miscellaneous..................................................... 15,779
---------
Total......................................................... $ 260,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has the power, pursuant to Section 145 of the Delaware General
Corporation Law, to limit the liability of directors to the Company for certain
breaches of fiduciary duty and to indemnify its directors, officers and other
persons for certain acts. The Company's Restated Certificate of Incorporation,
as amended, includes the following provision:
"11. LIMITATION OF DIRECTORS' LIABILITY. To the fullest extent permitted
by the Delaware General Corporation Law as the same exists or as it may
hereafter be amended, a director of the Corporation shall not be personally
liable to the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. Neither any amendment nor repeal of
this Article 11, nor the adoption of any provision of this Certificate of
Incorporation inconsistent with this Article 11, shall eliminate or reduce
the effect of this Article 11 in respect of any matter occurring, or any
cause of action, suit or claim that, but for this Article 11, would accrue
or arise, prior to such amendment, repeal or adoption of an inconsistent
provision."
Article VI of the Bylaws of the Company provides that the Company shall
indemnify certain agents of the Company against judgments, fines, settlements
and other expenses arising from such person's agency relationship with the
Company provided that the standard of conduct set forth therein is met. The
effect of Article VI is to require that the Company provide indemnification to
such agents to the maximum extent permitted by the Delaware General Corporation
Law. Agents covered by this indemnification provision include current and former
directors and officers of the Company, as well as persons who serve at the
request of the Company as directors, officers, employees or agents of another
enterprise.
In addition, the Company has entered into indemnification agreements with
each of its directors and certain of its officers. The indemnification
agreements are based on the provisions of Section 145 of the Delaware General
Corporation Law and attempt to provide the directors and officers of the Company
with the maximum indemnification allowed under Delaware law. In certain
instances, they may result in an expansion of the substantive protection
available to such individuals under the Restated Certificate of Incorporation
and the Bylaws.
The Company currently maintains directors' and officers' liability
insurance, but the policy does not provide coverage for liabilities arising
under the Securities Act.
II-1
<PAGE>
Reference is also made to Section 9 of the Standby Agreement contained in
Exhibit 1.1 hereto, indemnifying officers and directors of the Registrant
against certain liabilities.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------- --------------------------------------------------------------------------------------------------------
<S> <C>
1.1 Form of Standby Agreement.
2.1(1) Plan of Liquidation and Dissolution of VISIC, Inc.
2.2(2) VISIC, Inc. Liquidating Trust Agreement, dated as of December 18, 1990.
4.1(3) Restated Certificate of Incorporation of the Company, filed September 16, 1987.
4.2(4) Certificate of Designation of Rights, Preferences and Privileges of Series A Participating Preferred
Stock, filed August 12, 1992.
4.3(4) Certificate of Amendment of Restated Certificate of Incorporation, filed August 20, 1992.
4.4(5) Certificate of Amendment of Restated Certificate of Incorporation, filed May 5, 1995.
4.5(6) Indenture, dated as of May 1, 1987, between the Company and Citibank N.A., Trustee, with respect to
issuance of $57,500,000 of 7% Convertible Subordinated Debentures due May 1, 2012.
4.6(6) Form of 7% Convertible Subordinated Debenture due May 1, 2012.
4.7(4) First Amended and Restated Rights Agreement, dated as of August 12, 1992, by and between the Company and
the First National Bank of Boston, as Rights Agent, and Amendment No. 1 thereto dated August 24, 1992.
4.8(4) Warrant dated August 25, 1992 issued to Intel Corporation.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, regarding legality of
securities being registered.
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-5).
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
99.1 Form of Notice of Redemption.
99.2 Form of Letter of Transmittal.
<FN>
- ------------------------
(1) Incorporated by reference from Exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 29, 1990.
(2) Incorporated by reference from Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 29, 1990.
(3) Incorporated by reference from Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 27, 1987.
(4) Incorporated by reference from Exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 26, 1992.
(5) Incorporated by reference from Exhibit to the Company's Registration
Statement on Form S-3 (File No 33-60049).
(6) Incorporated by reference from Exhibit to the Company's Registration
Statement on Form S-3 (File No. 33-13463).
</TABLE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to provisions described in Item 15 hereof or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 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 of whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 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, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act of 1933 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, 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.
The undersigned Registrant hereby undertakes:
(1) to file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the Registration Statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of a prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed with or furnished to
the Commission by the Registrant pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 that are incorporated by reference in
the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
VLSI Technology, Inc., a corporation organized and existing under the laws of
the State of Delaware, certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of San Jose, State of California, on the 5th day of
July, 1995.
VLSI Technology, Inc.
By: /s/ ALFRED J. STEIN
-----------------------------------
Alfred J. Stein,
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
KNOW ALL PERSONS BY THESE PRESENTS, that each of the undersigned does hereby
constitute and appoint Gregory K. Hinckley and Thomas C. Tokos, and each of
them, his lawful attorneys-in-fact, with full power of substitution and
resubstitution and with power and authority to do any and all acts and things
and to execute any and all instruments which said attorneys-in-fact, and either
one of them, determine may be necessary or advisable or required to enable said
corporation to comply with the Securities Act of 1933, as amended, and any rules
or regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officer and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments and supplements hereto, and to any and all instruments or documents
filed as part of or in connection with such Registration Statement, and each of
the undersigned hereby ratifies and confirms all that said attorneys-in-fact, or
either of them, shall 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>
Chairman of the Board,
Chief Executive Officer
/s/ ALFRED J. STEIN and President July 5, 1995
---------------------------------------- (Principal Executive
(Alfred J. Stein) Officer) and Director
Vice President and
Controller and Acting
Vice President, Finance
and Chief Financial July 5, 1995
/s/ BALAKRISHNAN S. IYER Officer (Principal
---------------------------------------- Financial and
(Balakrishnan S. Iyer) Accounting Officer)
/s/ PIERRE S. BONELLI
---------------------------------------- Director July 5, 1995
(Pierre S. Bonelli)
/s/ ROBERT P. DILWORTH
---------------------------------------- Director July 5, 1995
(Robert P. Dilworth)
/s/ JAMES J. KIM
---------------------------------------- Director July 5, 1995
(James J. Kim)
---------------------------------------- Director
(Horace H. Tsiang)
</TABLE>
II-4
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Consolidated Financial Data" and "Experts" in this Registration Statement (Form
S-3) and the related Prospectus of VLSI Technology, Inc. for the registration of
its common stock and to the incorporation by reference therein of our report
dated January 17, 1995, with respect to the consolidated financial statements
and schedule of VLSI Technology, Inc. included in its Annual Report (Form 10-K)
for the year ended December 30, 1994, filed with the Securities and Exchange
Commission.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
San Jose, California
July 5, 1995
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE NUMBER
- --------- ------------------------------------------------------------------------------------------ -----------
<S> <C> <C>
1.1 Form of Standby Agreement.
2.1(1) Plan of Liquidation and Dissolution of VISIC, Inc.
2.2(2) VISIC, Inc. Liquidating Trust Agreement, dated as of December 18, 1990.
4.1(3) Restated Certificate of Incorporation of the Company, filed September 16, 1987.
4.2(4) Certificate of Designation of Rights, Preferences and Privileges of Series A Participating
Preferred Stock, filed August 12, 1992.
4.3(4) Certificate of Amendment of Restated Certificate of Incorporation, filed August 20, 1992.
4.4(5) Certificate of Amendment of Restated Certificate of Incorporation, filed May 5, 1995.
4.5(6) Indenture, dated as of May 1, 1987, between the Company and Citibank N.A., Trustee, with
respect to issuance of $57,500,000 of 7% Convertible Subordinated Debentures due May 1,
2012.
4.6(6) Form of 7% Convertible Subordinated Debenture due May 1, 2012.
4.7(4) First Amended and Restated Rights Agreement, dated as of August 12, 1992, by and between
the Company and the First National Bank of Boston, as Rights Agent, and Amendment No. 1
thereto dated August 24, 1992.
4.8(4) Warrant dated August 25, 1992 issued to Intel Corporation.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, regarding
legality of securities being registered.
23.1 Consent of Ernst & Young LLP, Independent Auditors (see page II-5).
23.2 Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
99.1 Form of Notice of Redemption.
99.2 Form of Letter of Transmittal.
<FN>
- ------------------------
(1) Incorporated by reference from Exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 29, 1990.
(2) Incorporated by reference from Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 29, 1990.
(3) Incorporated by reference from Exhibit to the Company's Annual Report on
Form 10-K for the fiscal year ended December 27, 1987.
(4) Incorporated by reference from Exhibit to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 26, 1992.
(5) Incorporated by reference from Exhibit to the Company's Registration
Statement on Form S-3 (File No 33-60049).
(6) Incorporated by reference from Exhibit to the Company's Registration
Statement on Form S-3 (File No. 33-13463).
</TABLE>
<PAGE>
EXHIBIT 1.1
VLSI TECHNOLOGY, INC.
STANDBY AGREEMENT
VLSI TECHNOLOGY, INC.
1109 MCKAY DRIVE
SAN JOSE, CALIFORNIA 95131
JULY 5, 1995
BEAR, STEARNS & CO. INC. ("BSC")
HAMBRECHT & QUIST LLC ("H&Q")
C/O BEAR, STEARNS & CO. INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
DEAR SIRS:
VLSI Technology, Inc., a Delaware corporation (the "Company"), proposes to
redeem on August 7, 1995 (the "Redemption Date") all of its outstanding 7%
Convertible Subordinated Debentures due May 1, 2012 (the "Debentures") at a
redemption price (the "Redemption Price") per $1,000 principal amount of
Debentures of $1,014.00, plus accrued interest of $18.86 from May 1, 1995 to the
Redemption Date, and will cause requisite notice of such redemption to be duly
given. The Debentures are convertible into shares of the Company's common stock,
$.01 par value (the "Common Stock"), at a conversion price of $22.00 per share
of Common Stock. The right to convert the Debentures into shares of Common Stock
will terminate on the Conversion Expiration Date (as defined below).
To assure the availability of funds to effect the contemplated redemption of
the Debentures, the Company desires to make arrangements pursuant to which you
(collectively the "Purchasers" and each a "Purchaser") would purchase from the
Company the shares of Common Stock (hereafter, the "Shares") that would
otherwise have been issuable upon conversion of those Debentures that are not
duly surrendered for conversion on or prior to 5:00 p.m. New York City time on
August 4, 1995 (the "Conversion Expiration Date"). The Company hereby confirms
its agreement with the Purchasers with respect to those arrangements.
1. SALE AND PURCHASE OF SHARES.
On the basis of the representations, warranties and agreements of the
Company contained herein, but subject to the terms and conditions herein set
forth, BSC agrees to purchase 80% of the Shares and H&Q agrees to purchase 20%
of the Shares, and the Company agrees to issue, sell and deliver the Shares to
BSC and H&Q, at and for a price (the "Purchase Price") of $22.72 per Share, the
obligations of BSC and H&Q being several and not joint.
2. PAYMENT AND DELIVERY.
No later than 6:00 p.m. New York City time, on the Conversion Expiration
Date, the Company shall give to the Purchasers written or telegraphic notice of
the aggregate principal amount of Debentures not theretofore duly surrendered
for conversion as described above. No later than 9:30 a.m., New York City time,
on the Redemption Date, the Purchasers shall remit to the Company or, at the
Company's prior written direction, to Citibank N.A., as Trustee under the
Indenture, dated as of May 1, 1987, relating to the Debentures (the
"Indenture"), for the account of the Company, by wire transfer of immediately
available funds, a sum equal to the aggregate Redemption Price of the Debentures
specified in the Company's notice referred to in the preceding sentence, which
sum shall be the aggregate Purchase Price of the Shares to be purchased by the
Purchasers pursuant to this Agreement. Simultaneously with such payment, the
Company shall deliver to the Purchasers, at the Purchasers' respective addresses
set forth in Section 14 hereof, or at such other location as shall be mutually
acceptable to the Company and the Purchasers, certificates evidencing the
Shares. The date and time of such payment and delivery are herein called the
"Closing Date" and may be changed by
<PAGE>
agreement between the Purchasers and the Company. Certificates representing the
shares shall, to the extent practicable, be registered in such name or names and
shall be in such denominations as the Purchasers may request in a written notice
to the Company prior to the Closing Date.
3. RESALE OF SHARES; OPEN MARKET TRANSACTIONS; SOLICITATIONS.
(a) The Company understands that the Purchasers intend to resell the
Shares from time to time at prices prevailing in the open market, as set
forth in the Prospectus (as defined in Section 5(a) hereof), and confirms
that the Purchasers and dealers selected by the Purchasers have been
authorized by the Company to distribute the Prospectus in connection with
such resales. The Purchasers agree to remit to the Company an amount equal
to 50% of the excess of (i) the aggregate net proceeds realized by the
Purchasers in respect of sales of Shares purchased by the Purchasers from
the Company pursuant to this Agreement over (ii) the Purchase Price of such
Shares. Settlement of the profit sharing arrangement, together with a
calculation of the amount thereof, set forth in this Section 3(a) shall
occur as soon as reasonably practicable after the final disposition by the
Purchasers of all Shares purchased by the Purchasers pursuant to this
Agreement and no less than every thirty (30) day period commencing with the
Redemption Date.
(b) The Company acknowledges that it is aware that, until the close of
business on the Conversion Expiration Date, the Purchasers may (but shall
have no obligation to) purchase Debentures, in the open market or otherwise,
in such amounts and at such prices as the Purchasers may deem advisable. The
Purchasers agree to present for conversion and to convert on or prior to the
close of business on the Conversion Expiration Date any Debentures so
acquired and any additional Debentures beneficially owned by the Purchasers.
Shares of Common Stock issued to the Purchasers on conversion of Debentures
may be sold by the Purchasers at any time or from time to time. The Company
further acknowledges that it is aware that the Purchasers may purchase or
sell shares of Common Stock for long or short account on the Nasdaq Stock
Market or otherwise, at such times and prices and on such terms as the
Purchasers deem advisable, and that such purchases or sales, if commenced,
may be discontinued at any time.
(c) The Purchasers agree that the Purchasers will not solicit
conversions of Debentures by the holders thereof. The Company has not paid
or given, and will not pay or give, directly or indirectly, any commission
or other remuneration for soliciting conversions of Debentures into Common
Stock.
4. COMPENSATION.
As full compensation to the Purchasers for the Purchasers' commitments
hereunder, the Company shall pay to the Purchasers by wire transfer of next day
funds (i) on the date hereof, the aggregate sum of $600,000 (the "Standby
Commitment Fee"), $480,000 of which shall be paid to BSC and $120,000 of which
shall be paid to H&Q, and (ii) on the Closing Date, a further sum (the "Take-up
Fee"), 80% of which shall be allocated to BSC and 20% of which shall be
allocated to H&Q, as follows:
(a) If the Purchasers purchase up to 130,682 Shares, no Take-up Fee
shall be payable.
(b) If the Purchasers purchase in excess of 130,682 Shares to a maximum
of 392,045 Shares, a Take-up Fee of $.45 per Share shall be payable for each
Share (including the 130,682 Shares referred to in subsection (a) above)
purchased.
(c) If the Purchasers purchase in excess of 392,045 Shares, a Take-up
Fee of $.85 per Share shall be payable for each Share (including the 392,045
Shares referred to in subsection (b) above) purchased.
All such fees shall be payable by wire transfer of next day funds. The
Purchasers shall have the right, in lieu of receiving payment of the Take-up Fee
from the Company, to deduct an amount equal to the aggregate Take-up Fee from
the aggregate purchase price of the Shares purchased by the Purchasers on the
Closing Date.
2
<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company represents and warrants to the Purchasers that:
(a) The Company has prepared and promptly following the execution of
this Agreement will file with the Securities and Exchange Commission (the
"Commission"), pursuant to the Securities Act of 1933, as amended (the
"Act"), and the rules and regulations promulgated by the Commission
thereunder (the "Regulations"), a registration statement on Form S-3,
including a prospectus, covering the maximum number of shares of Common
Stock that could constitute the Shares. As used in this Agreement, (i) the
term "Effective Date" means the date that the registration statement
hereinabove referred to is declared effective by the Commission, (ii) the
term "Registration Statement" means such registration statement including
all financial statements, schedules and exhibits, and (iii) the term
"Prospectus" means the form of final prospectus relating to the Shares first
filed with the Commission pursuant to Rule 424(b) of the Regulations or, if
no filing pursuant to Rule 424(b) is required, the form of final prospectus
included in the Registration Statement at the Effective Date. Any reference
herein to the Registration Statement, or the Prospectus shall be deemed to
refer to and include the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 which were filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), on or before the
Effective Date or the date of the Prospectus, as the case may be.
(b) When the Registration Statement shall become effective, when the
Prospectus is first filed with the Commission pursuant to Rule 424(b) of the
Regulations, when any supplement to or amendment of the Prospectus is filed
with the Commission, and at the Closing Date, the Registration Statement and
the Prospectus and any amendments thereof and supplements thereto will
comply in all material respects with the applicable provisions of the Act
and the Regulations, and will not contain an untrue statement of a material
fact and will not omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
No representation and warranty is made in this subsection (b), however, with
respect to any information contained in or omitted from the Registration
Statement or the Prospectus or any amendment thereof or supplement thereto
in reliance upon and in conformity with information furnished in writing to
the Company by the Purchasers expressly for use therein with reference to
the Purchasers. The documents incorporated by reference in the Registration
Statement and the Prospectus, when they were first filed with the Commission
(or, if an amendment with respect to any such document was filed, when such
amendment was filed with the Commission), complied in all material respects
with the applicable provisions of the Exchange Act and the rules and
regulations of the Commission thereunder; and any further document so filed
and incorporated by reference will, when they are filed with the Commission,
comply in all material respects with the applicable provisions of the
Exchange Act and the rules and regulations of the Commission thereunder;
none of such filed documents when they were so filed (or, if an amendment
with respect thereto was filed, when such amendment was filed), contained an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements made
therein, in light of the circumstances in which they were made, not
misleading; and no such further document, when it is filed with the
Commission, will contain an untrue statement of a material fact required to
be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
(c) Ernst & Young LLP, whose reports are filed with the Commission and
incorporated by reference in and made a part of the Registration Statement,
are independent public accountants with regard to the Company, as required
by the Act and the Regulations.
(d) Subsequent to the respective dates as of which information is given
in the Registration Statement, except as set forth in the Registration
Statement, there has not been any material adverse change in the business,
prospects, properties, operations, financial condition or results of
operations of the Company and its subsidiaries taken as a whole, whether or
not arising from
3
<PAGE>
transactions in the ordinary course of business, and since the date of the
latest balance sheet included or incorporated by reference in the
Registration Statement, neither the Company nor any of its subsidiaries has
incurred or undertaken any liabilities or obligations, direct or contingent,
which are material to the Company and its subsidiaries taken as a whole,
except for liabilities or obligations which were incurred or undertaken in
the ordinary course of business or are set forth in or reflected in the
Registration Statement.
(e) This Agreement has been duly and validly authorized, executed and
delivered by the Company and is a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms,
except to the extent that (i) rights to indemnity or contribution hereunder
may be limited by Federal or state securities laws or the public policy
underlying such laws, (ii) such enforcement may be subject to bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and (iii) the
remedy of specific performance and injunctive and other forms of equitable
relief may be subject to equitable defenses and to the discretion of the
court before which any proceeding therefor may be brought.
(f) The execution, delivery, and performance of this Agreement and the
consummation of the transactions contemplated hereby, will not (i) conflict
with or result in a breach of any of the terms and provisions of, or
constitute a default (or an event which with notice or lapse of time, or
both, would constitute a default) or require consent under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or any of its subsidiaries, pursuant to the terms
of the Indenture or any other agreement, instrument, franchise, license or
permit to which the Company or any of its subsidiaries is a party or by
which any of such corporations or their respective properties or assets may
be bound (other than those as to which requisite waivers or consents have
been obtained by the Company) or (ii) violate or conflict with any provision
of the certificate of incorporation, by-laws, or equivalent instruments of
the Company or any of its subsidiaries or any judgment, decree, order,
statute, rule or regulation of any court or any public, governmental or
regulatory agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets. No consent,
approval, authorization, order, registration, filing, qualification, license
or permit of or with any court or any public, governmental or regulatory
agency or body having jurisdiction over the Company or any of its
subsidiaries or any of their respective properties or assets is required for
the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, including without
limitation the issuance, sale and delivery of the Shares to be issued, sold
and delivered by the Company hereunder, except the registration under the
Act of the Shares and such consents, approvals, authorizations, orders,
registrations, filings, qualifications, licenses and permits as may be
required under the state securities or "Blue Sky" laws or Nasdaq Stock
Market listing applications in connection with the distribution of the
Shares by the Purchasers.
(g) All of the currently outstanding shares of Common Stock are duly and
validly authorized and issued, are fully paid and nonassessable and were not
issued in violation of or subject to any preemptive rights. The Shares have
been duly and validly authorized and, when issued and delivered in
accordance with this Agreement, will have been duly and validly issued and
delivered, and will be fully paid and nonassessable, and will not have been
issued in violation of or subject to any preemptive rights. The Company had,
at March 31, 1995, an authorized and outstanding capitalization as set forth
in the Registration Statement and as shall be set forth in the Prospectus.
The Common Stock conforms to the description thereof set forth in, or
incorporated by reference into, the Registration Statement and as shall be
set forth in, or incorporated by reference into, the Prospectus.
(h) Each of the Company and its subsidiaries has been duly organized and
is validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, except in any such case as would not have a
material adverse effect on the Company and its subsidiaries taken
4
<PAGE>
as a whole. Each of the Company and its subsidiaries is duly qualified and
in good standing as a foreign corporation in each jurisdiction in which the
character or location of its properties (owned, leased or licensed) or the
nature or conduct of its business makes such qualification necessary, except
for those failures to be so qualified or in good standing which will not in
the aggregate have a material adverse effect on the Company and its
subsidiaries taken as a whole. Each of the Company and its subsidiaries has
all requisite power and authority, and all necessary consents, approvals,
authorizations, orders, registrations, qualifications, licenses and permits
(collectively, "Consents") of and from all public, regulatory or
governmental agencies and bodies, to own, lease and operate its properties
and conduct its business as now being conducted and as described in the
Registration Statement and as shall be described in the Prospectus, except
for such Consents the failure of which to have or obtain will not in the
aggregate have a material adverse effect on the Company and its subsidiaries
taken as a whole, and no such Consent contains a materially burdensome
restriction that is not adequately disclosed in the Registration Statement
and that shall not be adequately disclosed in the Prospectus.
(i) Except as described in the Prospectus, there is no litigation or
governmental proceeding to which the Company or any of its subsidiaries is a
party or to which any property of the Company or any of its subsidiaries is
subject or, to the knowledge of the Company, threatened against the Company
or any of its subsidiaries which is reasonably likely to have any material
adverse effect on the business, prospects, properties, operations, financial
condition or results of operations of the Company and its subsidiaries taken
as a whole or which is required to be disclosed in the Registration
Statement and the Prospectus.
(j) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or which constitutes
or which might reasonably be expected to constitute, the stabilization or
manipulation of the price of the shares of Common Stock to facilitate the
sale or resale of the Shares.
(k) The consolidated financial statements of the Company, including the
notes thereto, and supporting schedules included in, or incorporated by
reference into, the Registration Statement and the Prospectus present fairly
the consolidated financial positions of the Company as of the dates
indicated and the results of operations for the periods specified; except as
otherwise stated in the Registration Statement, such financial statements
have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis; and the supporting schedules
included in, or incorporated by reference into, the Registration Statement
present fairly the information required to be stated therein.
(l) Except as described in the Prospectus, no holder of securities of
the Company has any rights to the registration of securities of the Company
because of the filing of the Registration Statement or otherwise in
connection with the sale of the Shares contemplated hereby.
(m) The Company is not, and upon consummation of the transactions
contemplated hereby will not be, subject to registration as an "investment
company" under the Investment Company Act of 1940, as amended.
(o) The Company meets all conditions for use of a Form S-3 registration
statement pursuant to the Act and the Regulations.
6. COVENANTS OF THE COMPANY.
The Company covenants and agrees with the Purchasers that:
(a) The Company will use reasonable best efforts to cause the
Registration Statement to become effective promptly after the filing thereof
with the Commission. The Company will promptly advise the Purchasers, and
confirm such advice in writing, (1) when the Registration Statement or any
post-effective amendment thereto has become effective, (2) of the initiation
or threatening (known to the Company) of any proceedings for, or receipt by
the Company of any
5
<PAGE>
notice with respect to, the suspension of the qualification of the Shares
for sale in any jurisdiction or the issuance of any order suspending the
effectiveness of the Registration Statement, and (3) of receipt by the
Company or any representative or attorney of the Company of any other
communications from the Commission relating to the Company, the Registration
Statement, the Prospectus or the transactions contemplated by this
Agreement. The Company will make every reasonable effort to prevent the
issuance of an order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereto and, if any such order is
issued, to obtain its lifting as soon as possible. The Company will not file
any amendment to the Registration Statement or any amendment of or
supplement to the Prospectus before or after the Effective Date to which the
Purchasers shall reasonably object in writing after being timely furnished
in advance a copy thereof.
(b) If at any time when a prospectus relating to the Shares is required
to be delivered under the Act any event shall have occurred as a result of
which the Prospectus as then amended or supplemented contains an untrue
statement of a material fact or omits to state any material fact required to
be stated therein in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading, or if it shall
be necessary at any time to amend or supplement the Registration Statement
or Prospectus to comply with the Act or the Regulations, the Company will
(i) notify the Purchasers promptly and prepare and file with the Commission
an appropriate amendment or supplement (in form and substance satisfactory
to the Purchasers) which will correct such statement or omission and (ii)
use its reasonable efforts to have any necessary amendment to the
Registration Statement declared effective as soon as possible.
(c) The Company will promptly deliver to the Purchasers two
manually-signed copies of the Registration Statement, including exhibits and
all documents incorporated by reference therein and all amendments thereto,
and to those persons, including the Purchasers, who the Purchasers identify
to the Company, such number of copies of the Prospectus, the Registration
Statement, all amendments of and supplements to such documents, if any, and
all documents incorporated by reference in the Registration Statement and
Prospectus or any amendment or supplement thereto, without exhibits, as the
Purchasers may reasonably request.
(d) The Company will endeavor in good faith, in cooperation with the
Purchasers, at or prior to the time the Registration Statement becomes
effective, to qualify the Shares for offering and sale under the securities
laws relating to the offering or sale of the Shares of such jurisdictions as
the Purchasers may designate and to maintain such qualification in effect
for so long as required for the distribution thereof; provided, however,
that the Company shall not be obligated to file any general consent to
service of process or to qualify as a foreign corporation in any
jurisdiction in which it is not so qualified.
(e) The Company will make generally available (within the meaning of
Section 11(a) of the Act) to its security holders and to the Purchasers, as
soon as practicable, an earnings statement, covering a period of at least
twelve consecutive full calendar months commencing after the effective date
of the Registration Statement, that satisfies the provisions of Section
11(a) of the Act and Rule 158 of the Regulations.
(f) During a period of three (3) years from the effective date of the
Registration Statement, the Company will furnish to the Purchasers copies of
(i) all reports to its stockholders, and (ii) all reports, financial
statements and proxy or information statements filed by the Company with the
Commission or any national securities exchange.
(g) The Company will apply the proceeds from the sale of the Shares as
set forth under "Use of Proceeds" in the Prospectus.
(h) The Company will use its reasonable efforts to cause the Shares to
be listed on the Nasdaq Stock Market.
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(i) During a period of sixty (60) days from the date of the Prospectus,
in the event the Purchasers purchase in excess of 392,045 Shares, the
Company will not, without the Purchasers' prior written consent, issue,
sell, offer or agree to sell, or otherwise dispose of directly or
indirectly, any Common Stock (or any securities convertible into,
exercisable for or exchangeable for Common Stock), other than (i) the Shares
to be issued and sold hereunder, (ii) shares issuable upon conversion of the
Debentures, (iii) options and shares issued under the Company's stock plans
and employee stock purchase plans and shares of Common Stock issuable upon
the exercise of stock options and (iv) shares of Common Stock issuable under
that certain Warrant dated August 25, 1992 issued to Intel Corporation for
2,677,604 shares of Common Stock.
(k) The Company shall mail or cause to be mailed on the Effective Date
the required notice of the redemption of the Debentures on the Redemption
Date in the form heretofore submitted to the Purchasers and shall furnish to
the Purchasers such number of copies thereof as the Purchasers reasonably
may request.
(l) The Company will direct Citibank N.A., as Trustee for the
Debentures, to advise the Purchasers daily of the aggregate principal amount
of Debentures (x) surrendered for conversion into Common Stock and (y)
surrendered for redemption, in each case through the close of business on
the immediately preceding business day.
(m) The Company will (i) give the Purchasers at least one business day's
prior written notice, or such shorter period as is practicable, of the
contents of any press release or other public announcement it intends to
issue on or prior to the Conversion Expiration Date and (ii) consider in
good faith any comments the Purchasers may have concerning the timing and
content of such press release or other public announcement.
7. PAYMENT OF EXPENSES.
Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, the Company hereby agrees to pay
all costs and expenses incident to the performance of the obligations of the
Company hereunder, including those in connection with (i) preparing, printing,
duplicating, filing and distributing the Registration Statement, as originally
filed and all amendments thereto (including all exhibits thereto), the
Prospectus and any amendments thereof or supplements thereto, and all other
documents related to the public offering of the Shares (including those supplied
to the Purchasers in quantities as hereinabove stated), (ii) the issuance and
delivery of the Shares to the Purchasers (including any transfer or other taxes
payable thereon), (iii) the qualification of the Shares under state and foreign
securities or Blue Sky laws, including the fees and disbursements of the
Purchasers' counsel in relation thereto and (iv) listing the Shares on the
Nasdaq Stock Market. In addition, the Company shall reimburse the Purchasers (x)
up to a maximum aggregate dollar amount of $25,000, for all of the Purchasers'
out-of-pocket expenses incurred in connection with this Agreement and the
consummation of the transactions contemplated hereby, including the fees and
disbursements of the Purchasers' counsel and (y) for 50% of the Purchasers'
out-of-pocket expenses in excess of $25,000 incurred in connection with this
Agreement and the consummation of the transactions contemplated hereby,
including the fees and disbursements of the Purchasers' counsel.
8. CONDITIONS OF THE PURCHASERS' OBLIGATIONS.
The Purchasers' obligations to purchase and pay for the Shares as provided
herein shall be subject to the accuracy in all material respects of the
representations and warranties of the Company herein contained as of the date
hereof and as of the Closing Date and to the performance in all material
respects by the Company of its obligations hereunder, and to the following
additional conditions:
(a) The Registration Statement shall have become effective on the next
business day after this Agreement or at such later time and date as shall
have been consented to in writing by the
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Purchasers, no stop order suspending the effectiveness of the Registration
Statement or any post-effective amendment thereof shall have been issued and
no proceedings therefor shall have been initiated or threatened by the
Commission.
(b) On the date hereof and on the Closing Date, the Purchasers shall
have received the opinion of Wilson, Sonsini, Goodrich & Rosati, counsel for
the Company, dated the date of its delivery, addressed to the Purchasers, to
the effect that:
(i) each of the Company and COMPASS Design Automation, Inc.
("COMPASS") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which
it is chartered or organized, with full corporate power and authority to
own its properties and conduct its business as described in the
Prospectus;
(ii) the Company's authorized capital stock is as set forth in the
Prospectus; the capital stock of the Company conforms to the description
thereof contained in the Registration Statement; the Shares have been
duly and validly authorized, and, when issued and delivered to and paid
for by the Purchasers pursuant to this Agreement, will be duly and
validly issued and fully paid and nonassessable; and the certificates for
the Shares are in valid and sufficient form;
(iii) this Agreement has been duly authorized, executed and delivered
by the Company;
(iv) neither the issue and sale of the Shares, nor the consummation of
any other of the transactions herein contemplated nor the fulfillment of
the terms hereof will conflict with, result in a breach or violation of,
or constitute a default under (A) the charter or by-laws of the Company
or (B) the terms of the Intel/VLSI Stock and Warrant Purchase Agreement
dated July 8, 1992, the Warrant dated August 25, 1992, issued to Intel
Corporation or the Indenture dated as of May 1, 1987 by and between the
Company and Citibank, N.A., as trustee, with respect to the Company's 7%
Convertible Subordinated Debentures due May 1, 2012 or (C) any material
judgment, order or decree known to such counsel to be applicable to the
Company or COMPASS of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or
COMPASS;
(v) no consent, approval, authorization or order of any court or
governmental agency or body is required for the issue and sale of the
Shares or the consummation of the transactions contemplated herein,
except such as have been obtained under the Act and such as may be
required under the blue sky laws of any jurisdiction in connection with
the purchase and distribution of the Shares by the Purchasers and such
other approvals (specified in such opinion) as have been obtained;
(vi) the Company is not, and upon receipt and pending application of
the net proceeds from the sale of the Common Stock in the manner
described in the Prospectus will not be, an "investment company" within
the meaning of the Investment Company Act of 1940, as amended;
(vii) the documents incorporated by reference in the Prospectus or any
further amendment or supplement thereto made by the Company prior to the
Closing Date (other than the financial statements and related schedules
and other financial and statistical information contained therein, as to
which such counsel need express no opinion), when they became effective
or were filed with the Commission, as the case may be (unless such
documents have thereafter been amended, in which case when so amended),
complied as to form in all material respects with the requirements of the
Exchange Act and the rules thereunder; and such counsel has no reason to
believe that any such documents, when such documents became effective or
were so filed, as the case may be (or if amended, when so amended),
contained, in the case of documents that were filed under the Exchange
Act with the Commission, an untrue statement of a material fact or
omitted to state a material fact necessary in
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order to make the statements therein, in the light of the circumstances
under which they were made when such documents were so filed (or if
amended, when so amended), not misleading;
(viii) the Registration Statement has become effective under the Act;
any required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been
issued, no proceedings for that purpose have been instituted or
threatened; and the Registration Statement and the Prospectus (other than
the financial statements and related schedules and other financial and
statistical information contained therein, as to which such counsel need
express no opinion) comply as to form in all material respects with the
applicable requirements of the Act and the Exchange Act and the
respective rules thereunder; and
(ix) the call for redemption by the Company of the Debentures and the
compliance by the Company with the provisions of the Standby Agreement
and the consummation of the transactions therein contemplated, will not
conflict with or result in a breach or violation of any material term or
provision of, or constitute a default under, the Indenture.
In addition, such counsel shall state that such counsel has no reason to
believe that at the Effective Date the Registration Statement contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as of its date and as of
the Closing Date, included or includes any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
(c) On the date hereof and on the Closing Date, the Purchasers shall
have received the opinion of Thomas C. Tokos, Assistant General Counsel of
the Company, dated the date of its delivery, addressed to the Purchasers, to
the effect that:
(i) each of the Company, COMPASS and VLSI Tech. Gmbh ("VLSI Tech.")
has been duly incorporated and is validly existing as a corporation in
good standing under the laws of the jurisdiction in which it is chartered
or organized, with full corporate power and authority to own its
properties and conduct its business as described in the Prospectus, and
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction that requires such
qualification wherein it owns or leases material properties or conducts
material business, except for those failures to be so qualified that will
not in the aggregate have a material adverse effect on the Company and
its subsidiaries considered as a whole;
(ii) all the outstanding shares of capital stock of COMPASS and VLSI
Tech. have been duly and validly authorized and issued and are fully paid
and nonassessable, and, except as otherwise set forth in the Prospectus,
all outstanding shares of capital stock of COMPASS and VLSI Tech. are
owned by the Company either directly or through wholly owned subsidiaries
(except for directors' qualifying shares or shares held by nominees as
required by the laws of certain non-United States jurisdictions and
except for shares of common stock of COMPASS held by employees or former
employees of the Company or COMPASS) free and clear of any perfected
security interest and, to the knowledge of such counsel, after due
inquiry, any other security interests, claims, liens or encumbrances;
(iii) the Company's authorized capital stock is as set forth in the
Prospectus; the capital stock of the Company conforms to the description
thereof contained in the Registration Statement; the outstanding shares
of capital stock of the Company and options and warrants to purchase
capital stock of the Company have been duly and validly authorized and
issued and the outstanding shares of capital stock of the Company are
fully paid and nonassessable;
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<PAGE>
the Shares have been duly and validly authorized, and, when issued and
delivered to and paid for by the Purchasers pursuant to this Agreement,
will be duly and validly issued and fully paid and nonassessable; the
certificates for the Shares are in valid and sufficient form; and the
holders of outstanding shares of capital stock of the Company are not
entitled to preemptive or other rights to subscribe for the Shares;
(iv) to the knowledge of such counsel, there is no pending or
threatened in writing action, suit or proceeding before any court or
governmental agency, authority or body or any arbitrator involving the
Company or any of its subsidiaries of a character required to be
disclosed in the Registration Statement which is not adequately disclosed
in the Prospectus, and there is no franchise, contract or other document
of a character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit, which is not described or filed
as required; and the statements in the Prospectus under the headings
"Risk Factors -- TI Litigation; Intellectual Property Matters" and
"Recent Developments -- TI Litigation" fairly summarize the matters
therein described;
(v) this Agreement has been duly authorized, executed and delivered
by the Company;
(vi) neither the issue and sale of the Shares, nor the consummation of
any other of the transactions herein contemplated, nor the fulfillment of
the terms hereof will conflict with, result in a breach or violation of,
or constitute a default under (A) any law known to such counsel (other
than state blue sky laws, as to which such counsel need not express an
opinion) or (B) the respective charter or by-laws of the Company or
COMPASS or (C) the terms of any indenture or other material agreement or
instrument known to such counsel and to which the Company or any of its
subsidiaries is a party or bound or (D) any material judgment, order or
decree known to such counsel to be applicable to the Company or any of
its subsidiaries of any court, regulatory body, administrative agency,
governmental body or arbitrator having jurisdiction over the Company or
any of its subsidiaries;
(vii) no holders of securities of the Company other than Intel
Corporation have rights to the registration of such securities under the
Registration Statement; and
(viii) the Registration Statement has become effective under the Act;
any required filing of the Prospectus, and any supplements thereto,
pursuant to Rule 424(b) has been made in the manner and within the time
period required by Rule 424(b); and to the best knowledge of such
counsel, no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for that purpose have been
instituted or threatened.
In addition, such counsel shall state that such counsel has no reason to
believe that at the Effective Date the Registration Statement contained
any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements
therein not misleading or that the Prospectus, as of its date and as of
the Closing Date, included or includes any untrue statement of a material
fact or omitted or omits to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering the opinions required by Section 8(b) or Section 8(c), such
counsel may rely (A) as to matters involving the application of laws of
any jurisdiction other than the State of California or the United States,
to the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be
reliable and who are satisfactory to counsel for the Purchasers and (B)
as to matters of fact, to the extent they deem proper, on certificates of
responsible officers of the Company and public officials. References to
the Prospectus in Section 8(b) and Section 8(c) include any supplements
thereto at the Closing Date.
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(d) At the Closing Date the Purchasers shall have received a certificate
of the Chief Executive Officer and a Vice President of the Company, dated
the date of its delivery, to the effect that the conditions set forth in
Section 8(a) hereof have been satisfied, that as of the date hereof and as
of the date of such certificate the representations and warranties of the
Company set forth in Section 5 hereof are accurate in all material respects,
and that as of the date of such certificate the obligations of the Company
to be performed hereunder on or prior thereto have been duly performed in
all material respects.
(e) As soon as practicable following the date hereof (but no later than
July 21, 1995) the Purchaser shall have received a letter from Ernst & Young
LLP, independent public accountants for the Company ("E&Y") a letter, dated
the date of its delivery, addressed to the Purchasers, in form and substance
reasonably satisfactory to the Purchasers.
(f) At the date following the date of this Agreement and on the Closing
Date the Purchasers shall have received a letter from E&Y, dated the date of
its delivery, addressed to the Purchasers, and in form and substance
satisfactory to the Purchasers, to the effect that: (i) they are independent
certified public accountants with respect to the Company within the meaning
of the Act and the applicable Regulations and stating that the answer to
Item 10 of the Registration Statement is correct insofar as it relates to
them; (ii) in their opinion, the financial statements and schedules of the
Company included and incorporated by reference in the Registration Statement
and the Prospectus and covered by their opinion therein comply as to form in
all material respects with the applicable accounting requirements of the Act
and the Regulations and the Exchange Act and the applicable published rules
and regulations of the Commission thereunder; (iii) on the basis of
procedures (but not an examination made in accordance with generally
accepted accounting principles) consisting of a reading of the latest
available unaudited interim consolidated financial statements of the Company
and its subsidiaries, a reading of the minutes of meetings and consents of
the stockholders and boards of directors of the Company and its subsidiaries
and the committees of such boards subsequent to December 30, 1994, inquiries
of officers and other employees of the Company and its subsidiaries who have
responsibility for financial and accounting matters of the Company and its
subsidiaries with respect to transactions and events subsequent to December
30, 1994, and other specified procedures and inquiries to a date not more
than five business days prior to the date of such letter, nothing has come
to their attention that would cause them to believe that: (A) the unaudited
consolidated financial statements and schedules of the Company contained or
incorporated by reference in the Registration Statement and the Prospectus
do not comply as to form in all material respects with the applicable
accounting requirements of the Act, the Regulations and the Exchange Act and
the applicable published rules and regulations of the Commission thereunder
or that such unaudited consolidated financial statements are not fairly
presented in conformity with generally accepted accounting principles,
except to the extent the Statement of Cash Flows, Statement of Stockholders'
Equity and certain footnote disclosures have been omitted in accordance with
applicable rules of the Commission under the Exchange Act, applied on a
basis substantially consistent with that of the audited consolidated
financial statements included and incorporated by reference in the
Registration Statement and the Prospectus, (B) with respect to the period
subsequent to March 31, 1995, there were, as of the date of the most recent
available monthly consolidated financial statements of the Company and its
subsidiaries, if any, and any changes in the capital stock or increases in
long-term indebtedness of the Company or any decrease in the total current
assets or stockholders' equity of the Company, in each case as compared with
the amounts shown in the most recent balance sheet included and incorporated
by reference in the Prospectus, except for changes or decreases which the
Prospectus may disclose, have occurred or may occur or which are set forth
in such letter, or (C) that during the period from March 31, 1995 to the
date of the most recent available monthly consolidated financial statements
of the Company and its subsidiaries, if any, there was any decrease, as
compared with the corresponding period in the prior fiscal year, in total
revenues, or total or per share net income, except for decreases which the
Prospectus may disclose have occurred or may occur or which are set forth in
such letter, or (D) that as of a specified date
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not more than five business days prior to the date of such letter, there
were any changes in capital stock (other than issuances of common stock
under employee stock option plans outstanding at March 31, 1995), or
increases in long-term indebtedness of the Company, in each case as compared
with the amounts shown in the most recent balance sheet included and
incorporated by reference in the Prospectus, except for changes or increases
which the Prospectus may disclose have occurred, or may occur or which are
set forth in such letter; and (iv) stating that they have compared specific
dollar amounts, numbers of shares, percentages of revenues and earnings, and
other financial information pertaining to the Company and its subsidiaries
set forth in the Prospectus, which have been specified by the Purchasers
prior to the date of this Agreement, to the extent that such amounts,
numbers, percentages, and information may be derived from the general
accounting and financial records of the Company and its subsidiaries or from
schedules derived therefrom furnished by the Company, and excluding any
questions requiring an interpretation by legal counsel, with the results
obtained from the application of specified readings, inquiries, and other
appropriate procedures specified by the Purchasers (which procedures do not
constitute an examination in accordance with generally accepted auditing
standards) set forth in such letter, and found them to be in agreement. In
addition, such letter as of the Closing Date shall contain such additional
information in form and substance reasonably satisfactory to the Purchasers.
(g) All proceedings taken in connection with the sale of the Shares as
herein contemplated shall be satisfactory in form and substance to the
Purchasers and to your counsel, and the Purchasers shall have received from
your counsel a favorable opinion, dated as of the Closing Date with respect
to the issuance and sale of the Shares as the Purchasers may reasonably
require, and the Company shall have furnished to your counsel such documents
as they reasonably request for the purpose of enabling them to pass upon
such matters.
(h) Prior to the Closing Date, the Company shall have furnished to the
Purchasers such further information, certificates and documents as the
Purchasers may reasonably request.
(i) The certificates, opinions, written statements and letters required
to be furnished to the Purchasers pursuant to this Section 8 shall be
complete and shall be in all material respects reasonably satisfactory in
form and substance to the Purchasers and to your counsel.
9. INDEMNIFICATION.
(a) The Company agrees to indemnify and hold harmless each Purchaser,
the directors, officers, employees and agents of each Purchaser and each
person who controls any Purchaser within the meaning of either the Act or
the Exchange Act against any and all losses, claims, damages or liabilities,
joint or several, to which they or any of them may become subject under the
Act, the Exchange Act or other Federal or state statutory law or regulation,
at common law or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of a material fact
contained in the registration statement for the registration of the Shares
as originally filed or in any amendment thereof, or the Prospectus, or in
any amendment thereof or supplement thereto, or arise out of or are based
upon 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, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company will not be liable
in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or
alleged untrue statement or omission or alleged omission made therein in
reliance upon and in conformity with written information furnished to the
Company by or on behalf of any Purchaser specifically for inclusion therein;
provided, further, that the Company shall not be liable to either Purchaser
(or any director, officer, employee, agent or any person controlling either
Purchaser) under the indemnity agreement in this Section 9(a) with respect
to
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the Prospectus, to the extent that any either loss, liability, claim, damage
or expense of either Purchaser (or any director, officer, employee, agent or
any person controlling either Purchaser) results from the fact that such
Purchaser sold Shares to a person to whom there was not sent or given, at or
prior to the written confirmation of such sale, a copy of the Prospectus as
then amended or supplemented (excluding documents incorporated by reference)
in any case where such delivery is required by the Act if the Company has
previously furnished copies thereof to such Purchaser and such Purchaser's
loss, liability, claim, damage or expense (or that of such director,
officer, employee, agent or person controlling such Purchaser) results from
an untrue statement, alleged untrue statement, omission or alleged omission
of a material fact contained in the Prospectus prior to such amendment or
supplement. This indemnity agreement will be in addition to any liability
that the Company may otherwise have.
(b) Each Purchaser severally agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers, employees and agents
and each person who controls the Company within the meaning of either the
Act or the Exchange Act, to the same extent as the foregoing indemnity from
the Company to each Purchaser, but only with reference to written
information relating to such Purchaser furnished to the Company by or on
behalf of such Purchaser specifically for inclusion in the documents
referred to in the foregoing indemnity; PROVIDED, HOWEVER, that in no case
shall a Purchaser be liable or responsible for its respective amount in
excess of the aggregate of the Standby Commitment Fee and the Take-up Fee
payable to such Purchaser hereunder. This indemnity agreement will be in
addition to any liability that any Purchaser may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 9
of notice of the commencement of any action, such indemnified party will, if
a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party
(i) will not relieve it from liability under Section 9(a) or Section 9(b)
above unless and to the extent it did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of
substantial rights and defenses and (ii) will not, in any event, relieve the
indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in Section 9(a) or Section 9(b)
above. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent
the indemnified party in any action for which indemnification is sought (in
which case the indemnifying party shall not thereafter be responsible for
the fees and expenses of any separate counsel retained by the indemnified
party or parties except as set forth below); PROVIDED, HOWEVER, that such
counsel shall be satisfactory to the indemnified party. Notwithstanding the
indemnifying party's election to appoint counsel to represent the
indemnified party in an action, the indemnified party shall have the right
to employ separate counsel (including local counsel), and the indemnifying
party shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict
of interest, (ii) the actual or potential defendants in, or targets of, any
such action include both the indemnified party and the indemnifying party
and the indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party,
(iii) the indemnifying party shall not have employed counsel satisfactory to
the indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the indemnifying
party shall authorize the indemnified party to employ separate counsel at
the expense of the indemnifying party. An indemnifying party will not,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder
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(whether or not the indemnified parties are actual or potential parties to
such claim or action) unless such settlement, compromise or consent includes
an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.
10. CONTRIBUTION.
In the event that the indemnity provided in Section 9(a) or Section 9(b) is
unavailable to or insufficient to hold harmless an indemnified party for any
reason, the Company and the Purchasers agree to contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending same)
(collectively, "Losses") to which the Company and one or more of the Purchasers
may be subject in such proportion as is appropriate to reflect the relative
benefits received by the Company and by each Purchaser from the offering of the
Shares; PROVIDED, HOWEVER, that in no case shall either Purchaser be required to
contribute any amount in excess of the amount by which the aggregate of the
Standby Commitment Fee and the Take-up Fees applicable to the Shares purchased
by such Purchaser pursuant to this Agreement exceeds the amount of any damages
which such Purchaser has otherwise been required to pay by reason of any untrue
or alleged untrue statement or omission or alleged omission. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the Company and the Purchasers shall contribute in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of the Company and of the Purchasers in connection with the statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. Relative fault shall be determined by reference to whether any
alleged untrue statement or omission relates to information provided by the
Company or the Purchasers. The Company and the Purchasers agree that it would
not be just and equitable if contribution were determined by pro rata allocation
or any other method of allocation that does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this Section
10, no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
Section 10, each person who controls a Purchaser within the meaning of either
the Act or the Exchange Act and each director, officer, employee and agent of a
Purchaser shall have the same rights to contribution as such Purchaser, and each
person who controls the Company within the meaning of either the Act or the
Exchange Act, each officer of the Company who shall have signed the Registration
Statement and each director of the Company shall have the same rights to
contribution as the Company, subject in each case to the applicable terms and
conditions of this Section 10. Any party entitled to contribution will, promptly
after receipt of notice of commencement of any action, suit or proceeding
against such party in respect of which a claim for contribution may be made
against another party or parties under this Section 10, notify such party or
parties from whom contribution may be sought, but the omission to so notify such
party or parties shall not relieve the party or parties from whom contribution
may be sought from any obligation it or they may have under this Section 10 or
otherwise. No party shall be liable for contribution with respect to any action
or claim settled without its written consent; PROVIDED, HOWEVER, that such
written consent was not unreasonably withheld.
11. SUPPLIED INFORMATION.
The Company acknowledges that the statements in the fourth paragraph of the
cover page of the Prospectus (except to the extent that such statements describe
the terms of this Agreement) and in the fourth paragraph under the caption
"Standby Arrangements" in the Prospectus (except to the extent that such
statements describe the terms of this Agreement) constitute the only information
furnished in writing by the Purchasers expressly for use in the Registration
Statement.
12. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS.
All representations, warranties and agreements of the Company and the
Purchasers contained in this Agreement, including the indemnity agreements
contained in Section 9 hereof and the contribution agreements contained in
Section 10 hereof, shall remain operative and in full force and effect
14
<PAGE>
regardless of any investigation made by the Purchasers or any controlling person
of the Purchasers or by or on behalf of the Company, any of its officers and
directors or any controlling person thereof, and shall survive delivery of and
payment for the Shares to and by the Purchasers. The agreements contained in
Sections 6, 7, 9 and 10 hereof shall survive the termination of this Agreement,
including pursuant to Section 13 hereof.
13. EFFECTIVE DATE OF AGREEMENT; TERMINATION.
(a) This Agreement shall become effective when the Purchasers and the
Company shall have received notification of the effectiveness of the
Registration Statement. Until this Agreement becomes effective as aforesaid,
it may be terminated by the Company by notifying the Purchasers.
(b) The Purchasers shall have the right to terminate this Agreement at
any time prior to the Closing Date by notice to the Company from the
Purchasers, without liability (other than with respect to Sections 9 and 10)
on the Purchasers' part to the Company if, on or prior to such date, (i) the
Company shall have failed, refused or been unable to perform in any material
respect any agreement on its part to be performed hereunder, (ii) any other
condition to the Purchasers' obligations hereunder as provided in Section 8
is not fulfilled when and as required in any material respects, (iii)
trading in securities generally on the Nasdaq Stock Market shall have been
suspended or materially limited, or minimum prices shall have been
established on such exchange by the Commission, or by such exchange or other
regulatory body or governmental authority having jurisdiction, (iv) trading
in the Company's Common Stock or Debentures shall have been suspended by the
Commission or the Nasdaq Stock Market for more than a single four trading-
hour-period during the five business days prior to the Redemption Date, (v)
a general banking moratorium shall have been declared by Federal or New York
State authorities or (vi) there is an outbreak or escalation of armed
hostilities significantly involving the United States on or after the date
hereof, or if there has been a declaration by the United States of a
national emergency or war, or if there shall have occurred a calamity or
crisis, the effect of which shall be, in the Purchasers' good faith
judgment, to make it impracticable to proceed with the public offering or
delivery of the Shares on the terms and in the manner contemplated in the
Prospectus.
(c) Any notice of termination pursuant to this Section 13 shall be by
telephone, telex, telecopy, or telegraph, confirmed in writing by letter.
14. NOTICES.
All communications hereunder, except as may be otherwise specifically
provided herein, shall be in writing and, if sent to the Purchasers shall be
mailed, physically delivered, telecopied, telexed, or telegraphed and confirmed
in writing to:
Bear, Stearns & Co. Inc.
245 Park Avenue
New York, New York 10167
Attention: Corporate Finance
Department
and
Hambrecht & Quist LLC
One Bush Street
San Francisco, California 94104
Attention: Corporate Finance
Department
and if sent to the Company, shall be mailed, delivered or telexed,
telegraphed or faxed and confirmed in writing to
VLSI Technology, Inc.
1109 McKay Drive
15
<PAGE>
San Jose, California 95131
Attention: Chief Financial Officer
15. PARTIES.
This Agreement shall inure solely to the benefit of, and shall be binding
upon, the Purchasers and the Company and the controlling persons, directors,
officers, employees and agents referred to in Sections 9 and 10 hereof, and
their respective successors and assigns, and no other person shall have or be
construed to have any legal or equitable right, remedy or claim under or in
respect of or by virtue of this Agreement or any provision contained herein. The
term "successors and assigns" shall not include a purchaser, in its capacity as
such, of Shares from the Purchasers.
16. CONSTRUCTION.
This Agreement shall be construed in accordance with the laws of the State
of California.
If the foregoing correctly sets forth the understanding between the
Purchasers and the Company, please so indicate in the space provided below for
that purpose, whereupon this letter shall constitute a binding agreement between
us.
Very truly yours,
VLSI TECHNOLOGY, INC.
By ___________________________________
Name:
Title:
Accepted as of the date
first above written.
BEAR, STEARNS & CO. INC.
By ___________________________________
Name:
Title:
HAMBRECHT & QUIST LLC
By ___________________________________
Name:
Title:
16
<PAGE>
EXHIBIT 5.1
[Wilson, Sonsini, Goodrich & Rosati letterhead]
July 5, 1995
VLSI Technology, Inc.
1109 McKay Drive
San Jose, California 95131
RE: REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 of VLSI Technology,
Inc. (the "Company") to be filed with the Securities and Exchange Commission
(the "Commission") on July 5, 1995 (the "Registration Statement") in connection
with the registration under the Securities Act of 1933, as amended, of 2,613,636
shares of the Company's Common Stock, $0.01 par value (the "Shares"), issuable
to Bear, Stearns & Co. Inc. and Hambrecht & Quist LLC (collectively, the
"Purchasers") upon conversion of the outstanding 7% Convertible Subordinated
Debentures due 2012 ("Debentures") or under the Standby Agreement dated as of
July 5, 1995 between the Company and the Purchasers. Issuance of the Shares is
contemplated in connection with the underwritten call of the Debentures for
redemption. As your counsel in connection with this transaction, we have
examined the proceedings taken and proposed to be taken in connection with the
issuance of the Shares.
It is our opinion that, upon completion of the proceedings being taken or
contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
the issuance of the Shares to be carried out in accordance with the securities
laws of the various states, where required, the Shares, when issued in the
manner referred to in the Registration Statement, will be validly issued, fully
paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendment thereto.
Sincerely,
/s/ WILSON, SONSINI, GOODRICH & ROSATI
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT 99.1
NOTICE OF REDEMPTION
OF
VLSI TECHNOLOGY, INC.
7% CONVERTIBLE SUBORDINATED DEBENTURES
DUE MAY 1, 2012
CUSIP NUMBER 918270 AA 7*
THE CONVERSION PRIVILEGE EXPIRES AT 5:00 P.M.
(NEW YORK CITY TIME) ON AUGUST 4, 1995
NOTICE IS HEREBY GIVEN that, pursuant to the provisions of the Indenture
dated as of May 1, 1987 (the "Indenture"), between VLSI Technology, Inc. (the
"Company") and Citibank, N.A., as Trustee, relating to the Company's 7%
Convertible Subordinated Debentures Due May 1, 2012 (the "Debentures"), the
Company has called for redemption and will redeem on August 7, 1995 (the
"Redemption Date") all outstanding Debentures at a redemption price of $1,014.00
per $1,000 principal amount, together with accrued and unpaid interest from May
1, 1995 to the Redemption Date of $18.86 per $1,000 principal amount, for a
total redemption price of $1,032.86 per $1,000 principal amount (the "Redemption
Price"). Payment of the Redemption Price will be made on or after the Redemption
Date upon presentation and surrender of Debentures at the addresses set forth
below under "Manner of Redemption." On the Redemption Date, the Redemption Price
will become due and payable on each Debenture, interest will cease to accrue,
and the holders thereof will be entitled to no rights as such holders except the
right to receive payment of the Redemption Price.
ALTERNATIVES AVAILABLE TO HOLDERS OF DEBENTURES
Holders of the Debentures have the following alternatives which should be
carefully considered:
1. CONVERSION OF DEBENTURES INTO COMMON STOCK. Until 5:00 p.m. New York
City time, on August 4, 1995, one business day prior to the Redemption Date, the
Debentures are convertible at the option of the holder, in part or in whole, at
the conversion price of $22.00 per share, into approximately 45.45 fully paid
and nonassessable shares of the Company's common stock, $.01 par value (the
"Common Stock"), for each $1,000 principal amount of Debentures. In the event
such conversion would result in a fractional share of Common Stock, an amount
equivalent to the value of the fraction will be paid in cash by the Company.
Such amount will be determined on the basis of the last reported sales price as
reported on the Nasdaq Stock Market on the day the Debentures are converted. On
the basis of the closing price of the Common Stock as reported on the Nasdaq
Stock Market on July 3, 1995 of $29.625, the approximately 45.45 shares had a
value (including cash in lieu of the fractional share) equivalent to $1,346.59.
No payment or adjustment will be made on conversion for interest accrued on the
Debentures surrendered for conversion. Accordingly, any holder surrendering
Debentures for conversion will not receive any interest with respect to such
Debentures accrued since May 1, 1995. Enclosed for your information is a
Prospectus relating to the Common Stock of the Company issuable upon conversion
of the Debentures.
SO LONG AS THE MARKET PRICE OF THE COMMON STOCK IS AT LEAST $22.72 PER
SHARE, A HOLDER OF THE DEBENTURES WHO CONVERTS WILL RECEIVE COMMON STOCK WITH A
MARKET VALUE, PLUS CASH IN LIEU OF ANY FRACTIONAL SHARE, EQUAL TO OR GREATER
THAN THE AMOUNT OF CASH THE HOLDER WOULD OTHERWISE BE ENTITLED TO RECEIVE UPON
REDEMPTION. SEE "CERTAIN FEDERAL INCOME TAX CONSIDERATIONS," BELOW. HOLDERS OF
DEBENTURES ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE COMMON STOCK.
THE CONVERSION RIGHT EXPIRES AT 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 4,
1995.
- ------------------------
* No representation is made as to the accuracy of this CUSIP Number either as
printed on the Debentures or contained in this Notice of Redemption.
<PAGE>
2. REDEMPTION OF DEBENTURES ON AUGUST 7, 1995. Any Debentures which have
not been converted into Common Stock on or prior to August 4, 1995, will be
redeemed on the Redemption Date. Upon redemption, a holder will receive
$1,032.86 per $1,000 principal amount of Debentures (consisting of $1,014.00 per
$1,000 principal amount plus accrued and unpaid interest thereon from May 1,
1995 to the Redemption Date of $18.86 per $1,000 principal amount (the
"Redemption Price")). On and after the Redemption Date, interest will cease to
accrue and holders of Debentures will not have any rights as such holders other
than the right to receive the payment of the Redemption Price upon surrender of
their Debentures.
3. SALE OF DEBENTURES THROUGH ORDINARY BROKERAGE TRANSACTIONS. Sales of
Debentures may be made through open market brokerage transactions. After 5:00
p.m., New York City time, on August 4, 1995, no holder of Debentures will be
entitled to convert Debentures into Common Stock. Holders of Debentures who wish
to make sales should consult with their own brokers concerning if and when their
Debentures should be sold.
MANNER OF CONVERSION
To convert Debentures into Common Stock, the holder thereof must surrender
such Debentures, duly endorsed or assigned to the Company prior to 5:00 p.m.,
New York City time, on August 4, 1995, the last business day prior to the
Redemption Date, to Citibank, N.A. (the "Trustee"), as follows: IF BY HAND,
CITIBANK, N.A., 111 WALL STREET, 5TH FLOOR, NEW YORK, NEW YORK 10043, ATTENTION:
CORPORATE TRUST SERVICES; IF BY MAIL CITIBANK, N.A., 111 WALL STREET, 5TH FLOOR,
NEW YORK, NEW YORK 10043, ATTENTION: CORPORATE TRUST SERVICES, and give written
notice (on the reverse of the Debenture certificate) to the Trustee that the
holder elects to convert such Debentures. Such notice must also certify the name
or names in which the certificate or certificates for shares of Common Stock
which shall be issuable on such conversion shall be issued, together with the
address or addresses of the person or persons named. Each Debentures surrendered
for conversion must, unless the shares issuable on conversion are to be issued
in the same name as the name in which such Debentures is registered, be
accompanied by instruments of transfer, in form satisfactory to the Company or
the Trustee, duly executed by the holder or his or her duly authorized attorney.
The notice that must be given to the Trustee may be provided by surrendering
Debentures accompanied by the Letter of Transmittal provided to all record
holders of the Debentures. As promptly as practicable after the surrender of
such Debenture, as aforesaid, the Company will issue and deliver at the office
of the Trustee to such holder, or on such holder's written order, a certificate
or certificates for the number of full shares of Common Stock issuable upon the
conversion of such Debenture and a check for the amount payable in lieu of any
fractional share. Holders are also entitled to convert fewer than all Debentures
they hold provided that any conversions are for principal amounts of Debentures
in integral multiples of $1,000, in accordance with the terms of the Indenture.
No payment or adjustment will be made on conversion for interest accrued on the
Debentures surrendered for conversion or for dividends on Common Stock delivered
on such conversion.
The Debentures may be converted into Common Stock only by delivery of
Debentures, together with the notice described above, to the Trustee prior to
5:00 p.m., New York City time, on August 4, 1995. SINCE IT IS THE TIME OF
RECEIPT, NOT THE TIME OF MAILING, THAT DETERMINES WHETHER DEBENTURES HAVE BEEN
PROPERLY TENDERED FOR CONVERSION, SUFFICIENT TIME SHOULD BE ALLOWED FOR
DEBENTURES SENT BY MAIL TO BE RECEIVED BY THE TRUSTEE PRIOR TO 5:00 P.M., NEW
YORK CITY TIME, ON AUGUST 4, 1995.
ANY DEBENTURES WHICH HAVE NOT BEEN PROPERLY PRESENTED TO THE TRUSTEE FOR
CONVERSION PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON AUGUST 4, 1995 WILL BE
AUTOMATICALLY REDEEMED AS SET FORTH ABOVE.
MANNER OF REDEMPTION
To receive the Redemption Price specified above for any Debentures being
redeemed, the holder thereof must surrender such Debentures to the Trustee as
follows: IF BY HAND, CITIBANK, N.A., 111 WALL STREET, 5TH FLOOR, NEW YORK, NEW
YORK 10043, ATTENTION: CORPORATE TRUST SERVICES, IF BY MAIL CITIBANK, N.A., 111
WALL STREET, 5TH FLOOR, NEW YORK, NEW YORK 10043, ATTENTION: CORPORATE TRUST
SERVICES, and give written notice to the Trustee in the Letter of Transmittal
included with this Notice of Redemption that the holder elects to redeem such
Debentures.
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is for general information and is based on the
provisions of the Internal Revenue Code of 1986, as amended (the "Internal
Revenue Code"), the applicable regulations promulgated thereunder, and published
administrative and judicial decisions, all as they exist at the date of this
Notice of Redemption. Changes in the law could affect the federal income tax
consequences discussed herein below.
Certain holders (including insurance companies, tax-exempt organizations,
financial institutions, broker-dealers, foreign corporations and persons who are
not citizens or residents of the United States) may be subject to special rules
not discussed below. EACH HOLDER SHOULD CONSULT HIS OR HER OWN TAX ADVISOR AS TO
THE PARTICULAR TAX CONSEQUENCES OF THE SALE OR CONVERSION OF THE DEBENTURES,
INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL OR FOREIGN TAX LAWS,
AND ANY CHANGES IN APPLICABLE TAX LAWS.
For federal income tax purposes, the conversion of Debentures into Common
Stock will not result in a taxable gain or loss with respect to the Common Stock
received, except that gain must be recognized with respect to cash received in
lieu of fractional shares upon conversion. The amount of such gain will be equal
to the amount of cash received less the basis attributable to such fractional
shares and will be capital gain if the Debentures are capital assets in the
hands of the holder. A holder's basis for the Common Stock received upon
conversion of Debentures will be equal to the basis of the Debentures
surrendered and, assuming that the Debentures are capital assets in the holder's
hands, the holding period for that Common Stock will include the holding period
for those Debentures.
A sale of Debentures or surrender of Debentures for redemption will be a
taxable transaction on which gain or loss, if any, will be recognized. The gain
or loss will ordinarily be a capital gain or loss, provided the Debentures are a
capital asset in the hands of the holder. The gain or loss recognized upon sale
of Debentures or surrender thereof for redemption will be the difference between
the holder's basis in the Debenture and the sale price or redemption price, as
the case may be, received in respect thereof, exclusive of accrued interest
which will be taxable as ordinary income. If a holder purchased the Debentures
at below the stated redemption price at maturity, a portion of the gain may be
treated as ordinary interest income as a result of the market discount
provisions of the Internal Revenue Code. To the extent the Debentures converted
are subject to accrued market discount not previously included in the income of
the holder, the amount of the accrued market discount will carry over to the
Common Stock acquired on conversion and will be taxed as ordinary income upon
the subsequent disposition of the Common Stock.
The federal income tax discussion set forth above is included for general
information only. Holders should consult their tax advisors to determine
particular tax consequences to them (including the application and effect of
market discount and backup withholding rules, state and local income and other
tax laws) prior to any conversion, sale or surrender for redemption of the
Debentures. Holders who do not provide a Taxpayer Identification Number or who
provide an incorrect Taxpayer Identification Number on the substitute W-9
provided in the Letter of Transmittal provided with this Notice of Redemption
may be subject to a 31% backup withholding tax and other penalties.
GENERAL
A copy of this Notice of Redemption, form of Letter of Transmittal to
accompany Debentures surrendered for redemption or tendered for conversion,
Notice of Guaranteed Delivery and Prospectus of the Company have been sent to
all holders of record of the Debentures. Additional copies of such documents may
be obtained from the Trustee at the addresses set forth above under "Manner of
Conversion" or by telephone at 1-800-422-2066; or the Company at (408) 434-3180.
Collect calls will be accepted.
VLSI TECHNOLOGY, INC.
July 6, 1995
<PAGE>
EXHIBIT 99.2
If you wish to convert your Debentures by means of this Letter of
Transmittal, then your Debenture Certificate(s) and this Letter of Transmittal
must be RECEIVED by the Paying and Conversion Agent listed below PRIOR TO 5:00
P.M., NEW YORK TIME, ON August 4, 1995. This Letter of Transmittal is to be used
only if Debenture Certificates are to be forwarded herewith. Debenture holders
whose Debenture Certificates are not immediately available or who cannot deliver
their Debenture Certificates and all other documents required hereby to the
Paying and Conversion Agent prior to 5:00 p.m., New York time, on August 4, 1995
must elect to convert their Debenture(s) according to the instructions for
guaranteed delivery set forth in Instruction 7 hereof.
VLSI TECHNOLOGY, INC.
LETTER OF TRANSMITTAL
(TO ACCOMPANY 7% CONVERTIBLE SUBORDINATED DEBENTURES DUE MAY 1, 2012)
PAYING AND CONVERSION AGENT:
BY MAIL OR BY HAND
Citibank, N.A.
11 Wall Street
5th Floor
New York, NY 10043
Attention: Corporate Trust Services
1-800-422-2066
Ladies and Gentlemen:
Enclosed herewith are 7% Convertible Subordinated Debenture(s) Due May 1,
2012 (the "Debentures") of VLSI Technology, Inc. (the "Company") numbered and
registered as listed below:
ITEMS A, B AND E OF THIS LETTER OF TRANSMITTAL AND THE SUBSTITUTE FORM W-9
MUST BE COMPLETED IN ALL CASES.
ITEM A.
- --------------------------------------------------------------------------------
IF THE NAME(S) AND ADDRESS SHOWN ARE NOT CORRECT,
PLEASE INDICATE ANY CHANGES NECESSARY.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
-- DEBENTURE HOLDERS PLEASE FILL IN --
- -------------------------------------------------------------------------------
NAMES(S) AND ADDRESS OF REGISTERED HOLDER(S) DEBENTURE PRINCIPAL
(MUST BE EXACTLY AS NAME(S) APPEAR(S) ON NUMBER(S) AMOUNT
DEBENTURE)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
TOTAL PRINCIPAL
AMOUNT
- -------------------------------------------------------------------------------
<PAGE>
ITEM B.
The Above Debentures are surrendered for the action indicated below.
1. / / CONVERSION into shares of Common Stock of the Company ("Shares") at the
conversion price of $22.00 per Share (or approximately 45.45 Shares per $1,000
principal amount of Debentures), with cash in lieu of fractional Shares. (See
Instruction 2.) Complete Items C and E.
NOTE: AS LONG AS THE MARKET PRICE PER SHARE IS GREATER THAN OR EQUAL TO
$22.72, HOLDERS OF DEBENTURES WILL RECEIVE, UPON CONVERSION, SHARES
(PLUS CASH IN LIEU OF FRACTIONAL SHARES) HAVING A MARKET VALUE
GREATER THAN THE TOTAL AMOUNT OF CASH RECEIVABLE UPON REDEMPTION.
2. / / REDEMPTION at a price of $1,014.00 per $1,000 principal amount of
Debentures, plus accrued and unpaid interest to the Redemption Date of August 7,
1995 of $18.86, for a total redemption price of $1,032.86 per $1,000 principal
amount of Debentures. (See Instruction 3.) Complete Items D and E.
3. / / PARTIAL CONVERSION/PARTIAL REDEMPTION, If this box is checked you must
indicate (1) the principal amount of Debentures you wish to convert into Common
Stock on Item C and (2) the principal amount of Debentures you wish to have
redeemed on Item D. If this box is checked and no additional instructions are
provided, the delivery of Debentures prior to 5:00 p.m., New York time, on
August 4, 1995, will be treated by the Paying and Conversion Agent as
instructions to convert such Debentures into Shares. Complete Items C, D and E.
/ / CHECK HERE IF DEBENTURE CERTIFICATES ARE BEING DELIVERED PURSUANT TO A
NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE PAYING AND CONVERSION
AGENT.
IF NO BOX IS CHECKED AND THE ABOVE DEBENTURES ARE RECEIVED BY THE PAYING AND
CONVERSION AGENT PRIOR TO 5:00 P.M., NEW YORK TIME, ON AUGUST 4, 1995, SUCH
DEBENTURES WILL BE DEEMED SURRENDERED FOR CONVERSION INTO SHARES. IF ANY
DEBENTURES ARE RECEIVED AFTER THAT TIME, SUCH DEBENTURES WILL BE REDEEMED.
<PAGE>
ITEM C.
CONVERSION
-- DEBENTURE HOLDERS PLEASE COMPLETE --
- -------------------------------------------
1. If the stock certificate(s) evidencing
Shares of Common Stock and/or check (if any) are to be issued in the name of
a person other than as indicated in Item A above, fill in this space. See
Instructions 1, 4 and 5.
Issue to:
Name: _______________________________________________________________________
Type or Print
Address _____________________________________________________________________
Zip Code ____________________________________________________________________
Social Security Number or Taxpayer I.D. Number ______________________________
- -------------------------------------------
- -------------------------------------------
2. If stock certificate(s) evidencing Shares of
Common Stock and/or check (if any) are to be mailed to an address other than
as indicated in Item A above, fill in this space. See Instruction 1.
Mail to:
Name: _______________________________________________________________________
Type or Print
Address _____________________________________________________________________
Zip Code ____________________________________________________________________
Amount of Debentures Surrendered for Conversion: $___________________________
- -------------------------------------------
ITEM D.
REDEMPTION
-- DEBENTURE HOLDERS PLEASE COMPLETE --
- -------------------------------------------
1. If the check is to be issued to a person
other than as indicated in item A above, fill in this space. See instructions
1, 4 and 5.
Issue to:
Name: _______________________________________________________________________
Type or Print
Address _____________________________________________________________________
Zip Code ____________________________________________________________________
Social Security Number or Taxpayer I.D. Number ______________________________
- -------------------------------------------
- -------------------------------------------
2. If the check is to be mailed to an address
other than as indicated in Item A above, fill in this space. See instruction
1.
Mail to:
Name: _______________________________________________________________________
Type or Print
Address _____________________________________________________________________
Zip Code ____________________________________________________________________
Amount of Debentures Surrendered for Redemption: $___________________________
- -------------------------------------------
<PAGE>
ITEM E.
SIGNATURE
The signature(s) on this Letter of Transmittal must correspond exactly with the
name(s) of the (1) registered owners of the Debenture(s) surrendered, or (2)
persons to whom such Debenture(s) has (have) been properly assigned or
transferred. If stock certificate(s) are to be issued in a name other than that
of the registered owner of the Debenture(s) surrendered or persons to whom such
Debenture(s) has (have) been properly assigned or transferred, or if a check is
to be made payable to a different name, the signature of the holder must be
guaranteed by either a bank or trust company, a broker or dealer which is a
member of the National Association of Securities Dealers, Inc., or by a member
of a national securities exchange. See Instructions 1, 4 and 5.
Dated: _________________________________________________________________________
Signature: _____________________________________________________________________
Signature: _____________________________________________________________________
Telephone: _____________________________________________________________________
Social Security Number or Taxpayer I.D. Number:
________________________________________________________________________________
Signature Guarantee: ___________________________________________________________
Dated: _________________________________________________________________________
________________________________________________________________________________
(Name of Firm Issuing Guarantee)
________________________________________________________________________________
(Signature of Officer)
________________________________________________________________________________
(Title of Officer Signing This Guarantee)
________________________________________________________________________________
________________________________________________________________________________
(Address of Guaranteeing Firm)
<PAGE>
INSTRUCTIONS
1. GENERAL
The Debenture(s), together with the signed and completed Letter of
Transmittal and any additional material (see Instruction 2 below), should be
mailed in the enclosed addressed envelope or otherwise delivered to Citibank,
N.A., the Paying and Conversion Agent, at the address indicated on the front of
this Letter of Transmittal. If mail is used, it is recommended that registered
mail, properly insured, be used as a precaution against loss. Consideration
should be given to using some form of express delivery service as the conversion
alternative discussed below expires at 5:00 p.m., New York time, on August 4,
1995. The method of transmitting the Debenture(s) and the Letter of Transmittal
is at the sole option and sole risk of the Debenture holder.
ITEMS A, B AND E OF THIS LETTER OF TRANSMITTAL AND THE SUBSTITUTE FORM W-9
MUST BE COMPLETED IN ALL CASES.
2. IF YOU WISH TO CONVERT
If you wish to convert your Debentures into Shares of Common Stock, then
prior to 5:00 p.m., New York time, on August 4, 1995 you must deposit with the
Paying and Conversion Agent (i) the Debenture(s), (ii) this Letter of
Transmittal, duly completed and (iii) any other documents required by this
Letter of Transmittal. If your Debenture Certificate(s) are not immediately
available, please see Instruction 7.
THE METHOD OF DELIVERY OF ALL REQUIRED DOCUMENTS IS AT THE ELECTION AND SOLE
RISK OF THE TENDERING DEBENTURE HOLDER; IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS STRONGLY RECOMMENDED.
If the stock certificate(s) and check in lieu of fractional Shares, if any,
are to be issued in the same name(s) as that in which the surrendered
Debenture(s) are registered and mailed to the same address as given in Item A,
complete Items A, B and E and the Substitute Form W-9.
If the stock certificate(s) and check in lieu of fractional Shares, if any,
are to be issued in the name or names of a different person(s), see Instruction
4, 5 and 6 and complete Items A, B, C and E and the Substitute Form W-9.
If the stock certificate(s) and check in lieu of fractional Shares, if any,
are to be mailed to an address different from that given in Item A, complete
Items A, B, C and E and the Substitute Form W-9.
No fractional Shares will be issued upon any conversion. Instead, a cash
payment for fractional Shares will be made on the basis of the last reported
sales price of the Common Stock on the Nasdaq Stock Market on the day your duly
completed Letter of Transmittal and surrendered Debenture(s) are received by the
Paying and Conversion agent.
NOTE: AS LONG AS THE MARKET PRICE PER SHARE IS GREATER THAN OR EQUAL TO
$22.72, HOLDERS OF DEBENTURES WILL RECEIVE, UPON CONVERSION, SHARES (PLUS CASH
IN LIEU OF FRACTIONAL SHARES) HAVING A MARKET VALUE GREATER THAN OR EQUAL TO THE
TOTAL AMOUNT OF CASH RECEIVABLE UPON REDEMPTION.
3. IF YOU WISH YOUR DEBENTURE(S) REDEEMED
If you wish your Debenture(s) to be redeemed by the Company for cash,
deliver your Debenture Certificate(s) and this Letter of Transmittal, duly
completed, to the Paying and Conversion Agent. A check for $1,032.86 per $1,000
principal amount of Debentures will be sent to you when the Debenture
Certificate(s) have been received by the Paying and Conversion Agent, but in no
event earlier than August 7, 1995.
If the check is to be issued in the same name(s) as that in which the
surrendered Debentures are registered and mailed to the same address as given in
Item A, complete Items A, B and E and the Substitute Form W-9.
If the check is to be issued in a different name or names, see Instructions
4 and 5 and complete Items A, B, D and E and the Substitute Form W-9.
<PAGE>
If the check is to be mailed to an address different from that given in Item
A, complete Items A, B, D and E and the Substitute Form W-9.
4. CERTIFICATE OR CHECK TO BE ISSUED IN A DIFFERENT NAME
Unless instructions are given in Item C, the Shares of the Common Stock are
to be issued in the same name as that of the record holder inscribed on the
surrendered Debenture Certificate(s). If the Shares of Common Stock are to be
issued in a name other than that of the record holder of the listed Debenture
Certificate(s) exactly as it appears thereon, please be guided by the following:
(a) Endorsement and Guarantee: The Debenture Certificate(s) surrendered must
be properly endorsed (or accompanied by one or more appropriate stock
powers properly executed by the record holder of such Debenture
Certificate(s)) to the person who is to receive the Common Stock
certificates. The signature of the record holder on the endorsement or
stock powers must correspond with the name as written upon the face of
the Debenture Certificate(s) surrendered in every particular and must be
guaranteed by a commercial bank or trust company, a broker or dealer
which is a member of the National Association of Securities Dealers,
Inc. or by a member of a national securities exchange.
(b) Transferee's Signature: This Letter of Transmittal must be signed by the
person to whom the transfer or assignment is made, or by his agent, and
should not be signed by the person transferring or assigning the
Debenture Certificate(s). The signature of such transferee, assignee, or
agent must be guaranteed as in provided in Instruction 4(a).
(c) Correction of or Change in Name. For a name correction, or for a change
in name which does not involve a change of ownership, proceed as
follows. For a correction in name the listed Debenture Certificate(s)
should be endorsed for example, "James E. Brown, incorrectly inscribed
as J. E. Brown," with the signature guaranteed as described in
Instruction 4(a). For a change in name by marriage, the surrendered
Debenture Certificate(s) should be endorsed, for example, "Mary Doe, now
by marriage, Mrs. Mary Jones" with the signature guaranteed as described
in Instruction 4(a).
5. SIGNATURE BY FIDUCIARY OR OTHER THAN REGISTERED HOLDER
If the Letter of Transmittal is signed in Item E by an executor,
administrator, trustee, guardian, attorney or the like, the Letter of
Transmittal and Debenture Certificate(s) must be accompanied by evidence,
satisfactory to the Paying and Conversion Agent and the Company, of the
authority of such person to sign the Letter of Transmittal.
If the Letter of Transmittal is signed in Item E by a person other than the
registered holder, who is not a person described in the preceding paragraph, the
Debenture Certificate(s) must be properly endorsed or be accompanied by
appropriate powers, properly executed by the registered holder(s), so that such
endorsement or powers are signed exactly as the name(s) of the registered
holder(s) appears on the Debenture Certificate(s), and the signature(s) to the
endorsement or on the stock power must be guaranteed by a commercial bank or
trust company, a broker or dealer which is a member of the National Association
of Securities Dealers, Inc. or by a member of a national securities exchange.
6. JOINT HOLDERS OR CERTIFICATES REGISTERED IN DIFFERENT NAMES
If Debentures are tendered by joint holders or owners, all such persons must
sign the Letter of Transmittal in Item E. If Debentures are registered in
different names or forms of ownership, separate Letters of Transmittal must be
completed, signed and returned for each different registration.
7. NOTICE OF GUARANTEED DELIVERY
Debenture holders wishing to convert their Debentures whose Debenture
Certificates are not immediately available or who cannot deliver their Debenture
Certificates and all other documents required hereby to the Paying and
Conversion Agent on or prior to 5:00 p.m., New York time, on August 4, 1995 may
elect to convert their Debentures pursuant to the following procedures: (i) such
election to convert must be made by or through a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc. or a commercial bank or
<PAGE>
trust company having an office, branch or agency in the United States, (ii) a
properly completed and duly executed Notice of Guaranteed Delivery substantially
in the form provided by the Company must be received by the Paying and
Conversion Agent on or prior to 5:00 p.m., New York time, on August 4, 1995, and
(iii) the Debenture Certificates for all tendered Debentures in proper form for
transfer, together with a properly completed and duly executed Letter of
Transmittal or facsimile thereof and all other documents required by this Letter
of Transmittal, must be received by the Paying and Conversion Agent within five
business days after the date such Notice of Guaranteed Delivery is received by
the Paying and Conversion Agent. Notwithstanding the foregoing, Shares will be
issued in respect of Debentures surrendered for conversion only after timely
receipt by the Paying and Conversion Agent of the Debenture Certificates, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) and any other documents required by the Letter of Transmittal.
8. TRANSFER TAXES
It is not anticipated that any transfer taxes will be payable in connection
with the issuance of certificates evidencing Shares upon conversion of the
Debentures. If, however, it should develop that such taxes are payable, the
converting holder will be charged.
9. LOST OR DESTROYED DEBENTURE CERTIFICATE(S)
If your Debenture Certificate(s) have been either lost or destroyed, notify
the Paying and Conversion Agent of this fact immediately by telephone at
1-800-422-2066 or by mail at Citibank, N.A. c/o Citicorp Data Distribution,
Inc., Customer Service Unit, P.O. Box 308, Paramus, New Jersey 07653. In order
to retain your rights to convert your Debentures which have been lost or
destroyed, the procedures set forth in Item 7(i) and (ii) of these instructions
must be followed. You will then be instructed as to the steps you must take in
order to convert or have redeemed the Debentures that you own. This form and
related documents cannot be processed until the missing Debenture Certificate(s)
have been replaced. You must act immediately if you wish to safeguard your
rights.
10. QUESTIONS AND ADDITIONAL COPIES
All questions regarding appropriate procedures for converting Debentures and
requests for additional copies of the Notice of Redemption, Letter of
Transmittal and Notice of Guaranteed Delivery should be directed to the Paying
and Conversion Agent at the address and telephone number set forth on the front
of this Letter of Transmittal.
11. PAYMENT OF ACCRUED INTEREST
The last interest payment date was May 1, 1995. Holders of Debentures who
wish to have their Debentures redeemed or holders who do not surrender their
Debentures for redemption prior to August 7, 1995 shall receive after the date
of surrender (but in no event earlier than August 7, 1995), a check for interest
accrued from May 1, 1995 through August 7, 1995.
12. SUBSTITUTE FORM W-9
Each Debenture holder is required to provide the Paying and Conversion Agent
with a correct taxpayer identification number ("TIN") on Substitute Form W-9
which is provided under "Important Tax Information" below, and to indicate that
the Debenture holder is not subject to backup withholding by checking the box in
Part 2 of the form. Failure to provide the information on the form may subject
the Debenture holder to 31 percent (31%) backup withholding on the payments made
to the Debenture holder or other payee with respect to Debentures redeemed or
amounts paid for fractional Shares. The box in Part 3 of the form may be checked
if the Debenture holder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked
and the Paying and Conversion Agent is not provided with a TIN within sixty (60)
days, the Paying and Conversion Agent will withhold 31 percent (31%) on all such
payments thereafter until a TIN is provided.
IMPORTANT TAX INFORMATION
Under federal income tax law, a Debenture holder whose Debentures are
redeemed or who receives cash for fractional shares is required by law to
provide the Paying and Conversion Agent with
<PAGE>
such Debenture holder's correct TIN on Substitute Form W-9 below. If such
Debenture holder is an individual, the TIN is his or her social security number.
If the Paying and Conversion Agent is not provided with the correct TIN, the
Debenture holder or other payee may be subject to a $50 penalty imposed by the
Internal Revenue Service. In addition, payments that are made to such Debenture
holder or other payee with respect to Debentures redeemed or with respect to
amounts paid for fractional shares may be subject to backup withholding.
Certain Debenture holders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, that Debenture holder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Paying and Conversion Agent.
If backup withholding applies, the Paying and Conversion Agent is required
to withhold 31 percent (31%) of any such payments made to the Debenture holder
or other payee. Backup withholding is not an additional tax. Rather, the tax
liability of persons subject to backup withholding will be reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a Debenture holder or
other payee, the Debenture holder is required to notify the Paying and
Conversion Agent of the Debenture holder's correct TIN by completing the form
below, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such Debenture holder is awaiting a TIN) and that (1) the Debenture holder
has not been notified by the Internal Revenue Service that the Debenture holder
is subject to backup withholding as a result of failure to report all interest
or dividends or (2) the Internal Revenue Service has notified the Debenture
holder that the Debenture holder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE PAYING AND CONVERSION AGENT
The Debenture holder is required to give the Paying and Conversion Agent the
TIN (e.g., social security number or employer identification number) of the
registered holder of the Debentures.
<PAGE>
PAYER'S NAME:
SUBSTITUTE Social Security Number
FORM W-9 PART 1 - PLEASE
PROVIDE YOUR OR
TIN IN THE BOX AT
RIGHT AND
CERTIFY BY SIGNING AND Employer Identification
DATING BELOW Number
----------------------------------------------------
PART 2 -- Check in the box if you are NOT subject
to backup withholding under the provisions of
Department of the Section 3406(a)(1)(c) of the Internal Revenue
Treasury Code because (1) you have not been notified that
Internal Revenue Service you are subject to backup withholding as a result
Payer's Request for of failure to report all interest or dividends or
Taxpayer (2) the Internal Revenue Service has notified you
Identification Number that you are no longer subject to backup
(TIN) withholding. / /
- -------------------------------------------------------------------------------
CERTIFICATION - UNDER PENALTIES OF PERJURY,
ICERTIFY THAT THE INFORMATION PROVIDED ONTHIS
FORM IS TRUE, CORRECT, AND COMPLETE. PART 3 --
SIGNATURE --------- DATE--------- AWAITING TIN / /
- -------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE CALL. PLEASE REVIEW
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
