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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________
FORM 10-Q
(Mark One)
| X | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
--- EXCHANGE ACT OF 1934
For quarter period ended December 31, 1993
OR
|__| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________________
Commission file number 0-15012
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CHIPS AND TECHNOLOGIES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 77-0047943
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(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification No.)
2950 Zanker Road, San Jose, California 95134
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (408)434-0600
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Former name, former address and former fiscal year. If changed since last
report.
Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
At January 31, 1994, the registrant had 16,603,542 shares of common
stock outstanding.
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TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Unaudited Condensed Consolidated Financial 3
Statements
Notes to Unaudited Condensed Consolidated 6
Financial Statements
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings Not
applicable
Item 2. Changes in Securities Not
applicable
Item 3. Defaults upon Senior Securities Not
applicable
Item 4. Submission of Matters to a Vote of 10
Security Holders
Item 5. Other Information Not
applicable
Item 6. Exhibits and Reports on Form 8-K 13
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PART I. - FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
CHIPS AND TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
DEC. 31, JUNE 30,
1993 1993
-------- --------
ASSETS (UNAUDITED)
Current Assets:
Cash and cash equivalents $ 17,136 $ 20,742
Short-term investments 2,000 8,436
Accounts receivable, net of allowances 11,975 10,287
for doubtful accounts of $1,505 and
$1,463
Finished goods inventory 7,044 5,244
Prepaid and other assets 4,775 5,401
--------- ----------
Total current assets 42,930 50,110
Property, plant and equipment, net 11,160 13,059
Other assets 1,890 1,637
--------- ---------
$ 55,980 $ 64,806
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 6,976 $ 6,889
Other accrued liabilities 8,174 8,337
Current portion of capitalized lease 1,984 3,410
obligations
Accrued commissions to manufacturers 1,474 2,218
representatives
Deferred gross profit 1,451 1,581
Accrued restructuring costs 4,001 13,775
--------- ---------
Total current liabilities 24,060 36,210
Subordinated debt 7,910 7,910
Long-term capitalized lease obligations, 367 1,009
less current portion
Noncurrent notes payable 939 -
--------- ---------
Total liabilities 33,276 45,129
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Stockholders' Equity:
Convertible preferred stock, $.01 par 1 1
value; 5,000,000 shares authorized;
123,000 shares issued and outstanding
Common stock $.01 par value, 100,000,000 165 160
shares authorized; 16,480,000 and
16,074,000 shares issued
Capital in excess of par value 57,276 55,329
Notes receivable from officers 0 (34)
Retained earnings (34,738) (35,779)
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Total stockholders' equity 22,704 19,677
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$ 55,980 $ 64,806
========= =========
See notes to Unaudited Condensed Consolidated Financial Statements
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CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share amounts)
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
1993 1992 1993 1992
---- ---- ---- ----
NET SALES $ 22,438 $ 28,415 $43,609 $54,733
Costs and expenses:
Cost of sales and other
manufacturing expenses 14,060 25,365 27,173 43,913
Research and development 3,349 5,876 6,607 13,881
Marketing and selling 2,914 5,774 6,031 11,822
General and administrative 1,324 3,245 2,995 7,081
Restructuring charge 0 17,038 0 17,038
-------- -------- ------- -------
Income (loss) from operations 791 (28,883) 803 (39,002)
Interest and other income, net 11 3,032 355 3,425
-------- -------- ------- -------
Income (loss) before taxes 802 (25,851) 1,158 (35,577)
Provision for income taxes (82) (32) (116) (32)
-------- -------- ------- -------
NET INCOME (LOSS) $ 720 $(25,883) $1,042 $(35,609)
======== ======== ======= =======
NET INCOME (LOSS) PER SHARE $ 0.04 $ (1.67) $ 0.06 $ (2.29)
Weighted average common shares
and dilutive share equivalents
outstanding 17,252 15,547 16,699 15,546
======== ======== ======= =======
See notes to Unaudited Condensed Consolidated Financial Statements
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CHIPS AND TECHNOLOGIES, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS ENDED
DECEMBER 31,
----------------
1993 1992
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 1,042 $ (35,609)
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Adjustments to reconcile net income
(loss) to cash provided by operating
activities:
Depreciation and amortization 1,901 5,573
Provision for losses on accounts 451 1,060
receivable
Provision for losses on inventory 409 7,091
Compensation related to non-qualified - 97
stock options
Accrued interest for officer's loans (1) (12)
CHANGES IN OPERATING ASSETS AND
LIABILITIES NET OF EFFECTS FROM
PURCHASE OF SMS:
Accounts receivable (2,139) 1,639
Finished goods inventory (2,209) (1,023)
Other assets & liabilities (641) 15,836
Accrued restructuring costs (9,774) 14,983
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Total adjustments (12,003) 45,244
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NET CASH PROVIDED BY (USED FOR) (10,961) 9,635
OPERATING ACTIVITIES ------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,003) (750)
Disposition of fixed assets 1,064 -
Sale of short-term investment 6,436 -
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NET CASH PROVIDED BY (USED FOR) BY 6,497 (750)
INVESTING ACTIVITIES ------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments for capital lease (2,068) (3,061)
obligations
Proceeds from issuance of stock 1,952 568
Note payable 939 -
Proceeds from issuance of subordinated - 10,280
debt
Repayment from officer's loans 35 7
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NET CASH FROM (USED BY) FINANCING 858 7,794
ACTIVITIES ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH (3,606) 16,679
EQUIVALENTS
Cash and cash equivalents at beginning 20,742 14,175
of period ------- ---------
CASH AND CASH EQUIVALENTS AT PERIOD-END $ 17,136 $ 30,854
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 220 $ 838
Income taxes 27 118
Additions to capital lease obligations - 338
See notes to Unaudited Condensed Consolidated Financial Statements
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The condensed consolidated balance sheet as of December 31, 1993 and
related condensed consolidated statements of operations and condensed
consolidated statements of cash flows for the three and six month periods
ended December 31, 1993 and 1992 are unaudited. In the opinion of
management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted only of
normal recurring items. Interim results are not necessarily indicative of
results for a full fiscal year.
The financial statements and notes are presented as permitted by the
Securities and Exchange Commission, and do not contain all information
included in the Company's annual financial statements and notes, which should
be read in conjunction with this Form 10-Q.
NOTE 2. PRINCIPLES OF CONSOLIDATION
The condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. All material intercompany accounts and
transactions have been eliminated.
NOTE 3. NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average
number of common shares and dilutive common share equivalents outstanding.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the quarter ended December 31, 1993 ("Second Quarter
1994") declined 21% to $22.4 million, compared to net sales of $28.4 million
for the quarter ended December 31, 1992 ("Second Quarter 1993"). The decline
in sales was a result of lower unit volumes in the systems logic product line
and discontinued products.
Revenue from media/graphics products was 59% of Second Quarter 1994
gross sales compared to 44% of Second Quarter 1993. Vampire LCD controllers
continued to enjoy acceptance worldwide. Revenues from systems logic product
shipments totaled 24% of sales in Second Quarter 1994 compared to 28% in
Second Quarter 1993. We expect product revenues to decline by approximately
15-20% in Third Quarter 1994 from Second Quarter 1994 as we transition our
customers to next generation products, but expect revenues to rebound in
Fourth Quarter 1994.
The Company reduced its Second Quarter 1994 operating expenses by $7.3
million versus Second Quarter 1993, exclusive of Second Quarter 1993
restructuring charges, as a result of cost controls.
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Gross margin was $8.4 million for Second Quarter 1994 compared to $3.1
million for Second Quarter 1993. The gross margin percentage increased to
37% from 11% in Second Quarter 1993. The improvement reflects lower
inventory provisions, a shift to higher margin media products and reduced
fixed operating costs. The Company has experienced and expects to continue
to experience price pressure with regard to both its new and mature product
lines. The Company's ability to retain higher margins and market share will
depend on its ability to introduce new products with unique features and
performance characteristics ahead of the competition and its success in
securing favorable product cost reductions from its subcontract
manufacturers.
Research and development ("R&D") expenses include circuit and system
software design costs, computer-aided-engineering system support, and non-
recurring engineering ("NRE") expenses paid to manufacturing subcontractors.
R&D expenses were reduced significantly to $3.3 million in Second Quarter
1994, compared to $5.9 million in Second Quarter 1993. The decrease was a
result of a cost reduction and restructuring program, with the major savings
being related to labor and depreciation.
The integrated circuits which comprise the Company's products are
currently manufactured in the United States by NEC Corporation, NCR
Corporation and National Semiconductor Corporation. International foundries
are Samsung Semiconductor, Inc., Taiwan Semiconductor Manufacturing Company
Ltd., Toshiba International Corp., Yamaha International Corporation, and NEC
Corporation. These sources of supply are subject to such risks as capacity
constraints, transportation delays and interruptions, and imposition of
tariffs. The overseas foundries are also subject to import and export
controls, currency exchange fluctuations and changes in governmental
policies. Moreover, no contractual commitments bind these subcontractors to
continue to manufacture the Company's products beyond the period of
outstanding purchase orders. There can be no assurance that the Company will
be able to obtain product in a timely manner. However, the Company believes
it has developed strong relationships with its suppliers due in part to the
high volume of business the Company's products represent and the leading edge
design methodologies employed. If any of these relationships were to
abruptly end or deteriorate, the Company's business could be adversely
affected. Additionally, the Company's policy is to obtain second sources of
supply for all high volume products within one year of the release of the
product to volume production.
Marketing and selling expenses include commissions paid to all of the
Company's internal and external sales representatives and costs associated
with product marketing and advertising. Marketing and selling expenses were
$2.9 million in Second Quarter 1994 compared to $5.8 million in Second
Quarter 1993. This decrease was primarily due to headcount reductions
resulting from cost control programs and lower sales commissions.
General and administrative ("G&A") expenses were reduced to $1.3 million
in Second Quarter 1994 compared to $3.2 million in Second Quarter 1993. G&A
expenses declined mainly as a result of lower costs related to outside
services, reduced provision for bad debt and headcount reduction.
For Second Quarter 1994, the Company had income from operations of $.8
million, compared to a loss from operations of $28.9 million for Second
Quarter 1993. Exclusive of inventory reserves of $5.0 million and
restructuring charges of $17.0 million, Second Quarter 1993 loss from
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operations would have been $6.9 million. Net of these unusual charges, the
margin improvement was primarily attributable to lower operating costs
resulting from the Company's restructuring and cost control efforts.
The Company's future profitability depends on maintaining adequate sales
levels through the timely introduction of new products to the market in
volume production, achievement of targeted product cost and performance
levels, demonstrated compatibility with industry standards, and development
of manufacturing, marketing and support capabilities. If the Company is not
successful in bringing new products to market in a timely manner and if such
products do not receive widespread market acceptance, the Company's financial
results would be adversely affected.
The Company recorded a 10% tax provision in the first half of fiscal
1994 for certain alternative minimum tax and state tax obligations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its growth to date through cash generated from
public and private placements of equity and debt, operations, and, to a
lesser extent, lease financing of capital equipment. The Company's
subcontract manufacturing strategy enables the Company to use the majority of
its capital resources for continuing operations and product development.
Cash and short-term investments decreased by $10.0 million from June 30,
1993 principally due to payments necessary to settle certain lease
obligations in connection with the consolidation of facilities and other
actions taken under the previously announced restructuring plan.
Accounts receivable at December 31, 1993 were $12.0 million, an increase
of $1.7 million from balances at June 30, 1993 due to timing of payments and
the addition of the current portion of the note receivable from the sale of
certain discontinued products.
Inventories at December 31, 1993 were $7.0 million, compared to $5.2
million at June 30, 1993 due to the increased level of inventory needed to
satisfy customer demand in a timely manner.
Accrued restructuring costs at December 31, 1993 aggregate $4.0 million,
compared to $13.8 million at June 30, 1993. The $9.8 million decrease is
principally attributable to the settlement of certain building leases,
severance payments, and other payments made for the consolidation of
facilities. The Company believes the reserves are adequate to cover
remaining costs associated with the restructuring plan.
Total long-term debt at December 31, 1993 includes the long term portion
of the Company's $1 million note payable issued in partial settlement of long-
term lease obligations. The note calls for monthly payments of $9,000 with
the remaining unpaid principal balance due September 1996.
The Company has two secured line of credit agreements which allow it to
borrow up to $8 million at the banks' reference rates. These agreements will
expire in October 1994. No amounts were outstanding at December 31, 1993
under these lines of credit. The Company's lines of credit contain financial
covenants. The availability of such lines of credit in future quarters will
depend upon the Company's compliance with the covenants established by the
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banks and the Company's ability to renew the lines of credits when they
expire. The Company also has $7,910,000 in debentures outstanding. The
debentures contain certain financial covenants. If the Company does not
comply with the covenants of the debentures, they could become due and
payable.
Based on the current level of working capital and available borrowing
capacity, the Company believes that its present capital resources are
sufficient to meet its needs for the current fiscal year.
In May 1993 the Financial Accounting Standards Board issued Financial
Accounting Standard No. 115 (FAS 115) Accounting for Certain Investments in
Debt and Equity Securities to be effective for fiscal years beginning after
December 15, 1993. Implementation of FAS 115 is not expected to have a
significant impact on the Company's financials.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings Not
applicable
Item 2. Changes in Securities Not
applicable
Item 3. Defaults upon Senior Securities Not
applicable
Item 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
The Annual Meeting of the Stockholders of
Chips and Technologies, Inc. was held on
November 10, 1993 in Milpitas, California.
Of the total of 16,235,052 shares
outstanding as of the record date,
14,412,110 shares were present or
represented by proxies at the meeting.
ELECTION OF CLASS III DIRECTOR
James F. Stafford was elected as Class III
Director. Mr. Stafford received
13,774,093 affirmative votes and 638,017
were withheld.
1988 STOCK OPTION PLAN FOR OUTSIDE
DIRECTORS
The stockholders voted to modify the
automatic grant feature of the 1988 Stock
Option Plan for Outside Directors.
Pursuant to the Amendment, each new
Outside Director would continue to receive
an initial grant of 20,000 shares, and
each current Outside Director will receive
an option to purchase 10,000 shares of
Common Stock on each anniversary of his or
her tenure, instead of the current
biannual grant of 10,000 shares. To
compensate directors for prior years in
which he or she did not receive an option
grant, the Amendment provides that each
current Outside Director would also
receive an option to purchase 10,000
shares for each of his odd year
Anniversary Dates subsequent to the later
of the effective date of the Outside
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Directors Plan or such Outside Director's
appointment to the Board an prior to the
effective date of the Amendment. The
proposal received 12,357,982 affirmative
votes, 1,825,485 negative votes and
228,643 abstentions.
Item 4. The stockholders voted to increase the
number of shares for issuance under the
1988 Stock Option Plan for Outside
Directors by 150,000 shares. The proposal
received 12,947,747 affirmative votes,
1,272,785 negative votes and 191,578
abstentions.
The stockholders voted to amend the
Outside Director Plan to increase the term
of options pursuant to the Plan to ten
(10) years. The proposal received
12,282,227 affirmative votes, 1,941,001
negative votes and 188,882 abstentions.
APPOINTMENT OF CORPORATION'S INDEPENDENT
ACCOUNTANTS
The stockholders voted to ratify the
appointment of Price Waterhouse as the
Corporation's independent accountants for
the fiscal year ending June 30, 1994. The
proposal received 14,245,618 affirmative
votes, 57,911 negative votes and 108,581
abstentions.
Item 5. Other Information Not
applicable
Item 6. Exhibits and Reports on Form 8-K 13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CHIPS AND TECHNOLOGIES, INC.
(Registrant)
/s/ James F. Stafford
------------------------------------
James F. Stafford
President & Chief Executive Officer
/s/ Timothy R. Christoffersen
------------------------------------
Timothy R. Christoffersen
Vice President of Finance
Chief Financial Officer and
Principal Accounting Officer
Date: February 11, 1994
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INDEX TO EXHIBITS
Exhibit
No. Description Page
- ------- ----------- ----
4.1 Stockholders' Rights Agreement dated August 23, 1989.
(Incorporated by reference to Exhibit 4.1 to the
Company's Annual Report on Form 10-K which was filed
September 20, 1989)
10.1 Amended and Restated 1985 Stock Option Plan, as
amended November 5, 1991 (Incorporated by reference
to Exhibit 10.1 to the Company's Annual Report on
Form 10-K which was filed September 24, 1992)
10.2 Form of Stock Option Agreement used in conjunction
with the 1985 Stock Option Plan (Incorporated by
reference to Exhibit 10.2 to the Company's Annual
Report on Form 10-K which was filed September 24,
1992)
10.3 Registration Rights Agreement dated October 10, 1985
and amendment thereto dated January 24, 1986.
(Incorporated by reference to Exhibit 10.6 to
Registration Statement No. 33-8005 effective October
8, 1986.)
10.4 Amended and Restated Employee Stock Purchase Plan, as
amended July 27,1992. (Incorporated by reference to
Exhibit 10.4 to the Company's Annual Report on Form
10-K which was filed September 27, 1993.)
10.5 Lease Termination Agreement and related exhibit
between the Company and The Equitable Life Assurance
Society dated September 10, 1993. (Incorporated by
reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K which was filed September 27,
1993.)
10.6 Master Equipment Lease and related Schedules between
Oliver Allen Corporation and the Company dated
February 9, 1989. (Incorporated by reference to
Exhibit 10.8 to the Company's Annual Report on Form
10-K which was filed September 20, 1990).
10.7 Line of Credit Agreement between the Company and
Silicon Valley Bank dated December 19, 1991.
(Incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K which was filed
September 21, 1992.)
10.8 Line of Credit Agreement between the Company and Bank
of America dated December 19, 1991. (Incorporated by
reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K which was filed September 21,
1992.)
10.9 Amended and Restated Qualified Investment Plan dated
January 1, 1989. (Incorporated by reference to
Exhibit 10.16 to the Company's Annual Report on Form
10-K which was filed September 20, 1990).
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Exhibit
No. Description Page
- ------- ----------- ----
10.10 First Amended of Chips and Technologies, Inc. 1988 15
Nonqualified Stock Option Plan for Outside Directors
dated October 1, 1993
10.11 Promissory Note to the Company from Enzo Torresi
dated August 1, 1992. (Incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form
10-K which was filed September 27, 1993.)
10.12 Promissory Note to the Company from Marc Jones dated
February 3, 1993. (Incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form
10-K which was filed September 27, 1993.)
10.13 Form of Indemnity Agreement between the Company and
each of its directors and executive officers.
(Incorporated by reference to Exhibit 10.27 to the
Company's Annual Report on Form 10-K which was filed
September 20, 1990).
10.14 Form of Incentive Deferred Compensation Agreement
(Incorporated by reference to Exhibit 10.20 to the
Company's Annual Report on Form 10-K which was filed
September 20, 1989.)
10.15 Equipment term lease agreement and supplemental
schedules between the Company and IBM Credit
Corporation dated November 7, 1990 and December 19,
1990 (Incorporated by reference to Exhibit 10.30 to
the Company's Annual Report on Form 10-K which was
filed September 25, 1991.)
10.16 Confidential Termination Agreement and General
Release of Claims between the Company and Ravi
Bhatnagar dated December 18, 1992. (Incorporated by
reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K which was filed September 27,
1993)
10.17 Confidential Termination Agreement and General
Release of Claims between the Company and Nancy S.
Dusseau , dated September 1, 1993. (Incorporated by
reference to Exhibit 10.20 to the Company's Annual
Report on Form 10-K which was filed September
27, 1993)
10.18 Confidential Termination Agreement and General
Release of Claims between the Company and Jeffrey H.
Grammer, dated September 2, 1993. (Incorporated by
reference to Exhibit 10.21 to the Company's Annual
Report on Form 10-K which was filed September
27, 1993)
10.19 Confidential Termination Agreement and General
Release of Claims between the Company and Gary P.
Martin, dated April 19, 1993. (Incorporated by
reference to Exhibit 10.22 to the Company's Annual
Report on Form 10-K which was filed September 27,
1993)
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Exhibit
No. Description Page
- ------- ----------- ----
10.20 Relocation Agreement between the Company and Lee J.
Barker, dated September 2, 1992. (Incorporated by
reference to Exhibit 10.23 to the Company's Annual
Report on Form 10-K which was filed September 27,
1993)
10.21 Convertible Promissory Notes and Preferred Stock
Purchase Agreement, dated as of July 16, 1992.
(Incorporated by reference to Exhibit 10.24 to the
Company's Annual Report on Form 10-K which was filed
September 27, 1993)
10.22 Amendment to convertible Promissory Notes and
Preferred Stock Purchase Agreement (Incorporated by
reference to Exhibit 10.25 to the Company's Annual
Report on Form 10-K which was filed September 27,
1993)
10.23 Form of Convertible Subordinated Debenture, due June
30, 2002. (Incorporated by reference to Exhibit
10.26 to the Company's Annual Report on Form 10-K
which was filed September 27, 1993)
10.24 Amendment to 8 1/2 % convertible Subordinated
Debentures, due June 30, 2002. (Incorporated by
reference to Exhibit 10.27 to the Company's Annual
Report on Form 10-K which was filed September 27,
1993)
10.25 Confidential Resignation and Consulting Agreement and
General Release of Claims between the Company and
Gordon A. Campbell dated September 30, 1993.
(Incorporated by reference to Exhibit 10.25 to the
Company's Quarterly Report on Form 10-Q which was
filed November 15, 1993).
10.26 Agreement for Sale and Purchase of Assets between
Techfarm, Inc. and Chips and Technologies, Inc.,
dated September 24, 1993. (Incorporated by reference
to Exhibit 10.26 to the Company's Quarterly Report on
Form 10Q which was filed November 15, 1993.)
10.27 Form of Nonqualified Stock Option Agreement for 20
Outside Directors used in conjunction with the 1988
Stock Option Plan for Outside Directors dated
November 10, 1993.
10.28 Promissory Note to the Company from Lee Barker dated 27
November 14, 1993.
10.29 Amendment to Loan Agreement between the Company and 28
Silicon Valley Bank dated September 13, 1993
10.30 Amendment to Line of Credit Agreement between the
Company and Bank of America dated September 1993.
(Incorporated by reference to Exhibit 10.8 to the
Company's Annual Report on Form 10K which was filed
September 27, 1993.)
FIRST AMENDED
CHIPS AND TECHNOLOGIES, INC.
1988 NONQUALIFIED STOCK OPTION PLAN
FOR OUTSIDE DIRECTORS
1. Purpose. The Chips and Technologies, Inc. 1988 Nonqualified Stock
Option Plan for Outside Directors (the "Prior Plan") was established
effective as of March 1, 1988 (the "Effective Date"), to create additional
incentive for the outside directors of Chips and Technologies, Inc. and any
successor corporation thereto (collectively referred to as the "Company"), to
promote the financial success and progress of the Company. The Prior Plan is
amended and restated as the First Amended Chips and Technologies, Inc. 1988
Nonqualified Stock Option Plan for Outside Directors (the "Plan") effective
upon approval of the Company's stockholders (the "Amendment Effective Date").
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board') and/or by a duly appointed committee
of the Board having such powers as shall be specified by the Board. Any
subsequent references to the Board shall also mean the committee if such
committee has been appointed. All questions of interpretation of the Plan or
of any options granted under the Plan (an "Option") shall be determined by
the Board, and such determinations shall be final and binding upon all
persons having an interest in the Plan and/or any Option. All Options shall
be nonqualified stock options. Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated
to the Company herein, provided the officer has apparent authority with
respect to such matter, right, obligation, or election.
3. Eligibility and Type of Option. The Options may be granted only to
directors of the Company who are not employees of the Company or any present
parent and/or subsidiary corporations of the Company. Options granted to
eligible directors of the Company ("Outside Directors") shall be nonqualified
stock options, that is, options which do not meet the requirements of section
422(b) of the Internal Revenue Code of 1986, as amended (the "Code"). For
purposes of the Plan, a parent corporation and a subsidiary corporation shall
be as defined in sections 424(e) and 424(f) of the Code.
4. Shares Subject to Option. Options shall be options for the
purchase of the authorized but unissued common stock of the Company (the
"Stock") subject to adjustment as provided in Paragraph 8 below. The maximum
number of shares of Stock which may be issued under the Plan shall be 350,000
shares. In the event that any outstanding Option for any reason expires or
is terminated and/or shares subject to repurchase are repurchased by the
Company, the shares of Stock allocable to the unexercised portion of such
Option may again be subjected to an Option.
5. Time for Granting Options. All Options shall be granted, if at
all, within ten (10) years from the Effective Date.
6. Terms, Conditions and Form of Options. Options granted pursuant to
the Plan shall be evidenced by written agreements ("Stock Option Agreements")
specifying the number of shares of Stock covered thereby, in substantially
the form attached hereto as Exhibit A and incorporated herein by reference
(the "Option Agreement"), except as set forth herein, and shall comply with
and be subject to the following terms and conditions:
(a) Automatic Grant of Options.
(i) Each Outside Director shall be granted an Option for
Twenty Thousand (20,000) shares of Stock upon the later of the Effective Date
or the date said Outside Director is first elected to serve on the Board.
(ii) The Anniversary Date of an Outside Director who was
elected to the Board prior to the Effective Date shall be the date which is
twelve (12) months after the Effective Date, and successive anniversaries
thereof. The Anniversary Date of any Outside Director who is elected to the
Board on or after the Effective Date shall be the date which is twelve (12)
months after such election and successive anniversaries thereof. The
Anniversary Date of a director who is employed by the Company or a present
parent and/or subsidiary corporation of the Company and who subsequently
terminates such employment while remaining on the Board shall be the date
following such termination of employment.
(iii) Each Outside Director shall be granted on the
Amendment Effective Date an additional Option for the Ten Thousand (10,000)
shares of Stock for each odd Anniversary Date of such Outside Director which
occurred subsequent to the later of the Effective Date or such Outside
Director's election to the Board and prior to the Amendment Effective Date.
For example, an Outside Director elected to the Board prior to the Effective
Date would be granted an Option for Thirty Thousand (30,000) shares of Stock
computed as follows:
10,000 multiplied by 3 odd year Anniversary Dates (3-1-89, 3-1-91 and 3-
1-93).
Vesting on each Ten Thousand (10,000) share Option granted pursuant to this
Paragraph 6(a)(iii) shall run from the odd Anniversary Date to which such
grant relates.
(iv) Each Outside Director shall be granted an additional
Option for Ten Thousand (10,000) shares of Stock upon every Anniversary Date
occurring on or after the Amendment Effective Date of said Outside Director's
tenure as a Director.
(v) Each Outside Director shall be granted an additional
Option on the Amendment Effective Date and on every Anniversary Date
thereafter on which such Outside Director is a member of one or more Board
Committees ("Committee Membership") for a number of shares of Stock
determined as follows. For each Committee Membership, the Outside Director
shall be granted Two Thousand Five Hundred (2,500) shares of Stock.
(vi) An Outside Director who is serving as Chairman of the
Board shall be granted an additional Option on the Amendment Effective Date
and upon every Anniversary Date thereafter on which the Outside Director is
so serving as Chairman of the Board for Five Thousand (5,000) shares of
Stock.
(vii) Notwithstanding any other provision of the Plan, no
Option shall be granted to any individual who is no longer serving as an
Outside Director of the Company, Committee Member, or Chairman of the Board,
as the case may be, on an Anniversary Date which would otherwise be a date of
grant.
(viii) For purposes of determining the number of Option
shares under Paragraphs 6(a)(v) and (vi), only service while an Outside
Director shall be counted.
(b) Option Price. The option price per share for an Option shall
be the fair market value, as determined by the closing price of the Company's
common stock on the National Association of Securities Dealers Automated
Quotation System (the "NASDAQ System") as reported in the Wall Street Journal
on the date prior to the date of the granting of the Option. If the such
date prior to the date of the granting of the Option does not fall on a day
on which the Company's Stock is trading on the NASDAQ System or a national
securities exchange, the date on which the Option price per share shall be
established shall be the last day on which the Company's Stock was so traded
prior to the date of the granting of the Option. Notwithstanding the
foregoing, an Option may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to
an assumption or substitution for another option in a manner qualifying with
the provisions of section 424(a) of the Code.
(c) Exercise Period of Options. Any Option granted hereunder
shall be exercisable for a term of ten (10) years.
(d) Payment of Option Price. Payment of the option price for the
number of shares of Stock being purchased pursuant to any Option shall be
made:
(i) in cash;
(ii) by check, or
(iii) by the assignment of the proceeds of a sale of some
or all of the shares being acquired upon the exercise of the Option
(including, without limitation, through an exercise complying with the
provisions of Regulation T as promulgated from time to time by the Board of
Governors of the Federal Reserve System).
7. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of the Option Agreement either in connection
with the grant of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of such revised or amended stock option agreements shall
be in accordance with the terms of the Plan.
8. Effect of Change in Stock Subject to the Plan. Appropriate
adjustments shall be made in the number and class of shares of Stock subject
to the Plan and to any outstanding Options and in the option price of any
outstanding Options in the event of a stock dividend, stock split, reverse
stock split, combination, reclassification, or like change in the capital
structure of the Company.
9. Ownership Change and Transfer of Control. For the purposes hereof,
the "Control Company" shall mean Chips and Technologies, Inc. An "Ownership
Change" shall be deemed to have occurred in the event of any of the following
occurrences with respect to the Control Company:
(a) the direct or indirect sale or exchange by the stockholders of
the Control Company of all or substantially all of the stock of the Control
Company;
(b) a merger in which the Control Company is a party; or
(c) the sale, exchange, or transfer of all or substantially all of
the Control Company's assets.
A "Transfer of Control" shall mean an Ownership Change in which the
stockholders of the Control Company before such Ownership Change do not
retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Control Company.
In the event of a Transfer of Control, the Board, in its sole
discretion, shall either (i) provide that any unvested portion of the Option
shall be immediately exercisable and vested as of a date prior to the
Transfer of Control, as the Board so determines, or (ii) arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may
be, that such corporation either assume the Company's rights and obligations
under outstanding stock option agreements or substitute options for such
corporation's stock for such outstanding options. Any Options which are
neither exercised as of the date of the Transfer of Control nor assumed by
the surviving, continuing, successor, or purchasing corporation, as the case
may be, shall terminate effective as of the date of the Transfer of Control.
10. Options Non-Transferable. During the lifetime of the Optionee, an
Option shall be exercisable only by said Optionee. No Option shall be
assignable or transferable by the Optionee, except by will or by the laws of
descent and distribution.
11. Termination or Amendment of Plan. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any
time; provided, however, that without the approval of the Company's
stockholders, there shall be (i) no increase in the total number of shares
covered by the Plan (except by operation of the provisions of Paragraph 8,
above), and (ii) no expansion in the class of persons eligible to receive
nonqualified stock options. Notwithstanding the foregoing, the Plan may not
be amended more frequently than once every six (6) months, other than to
comport with changes in the Internal Revenue Code, the Employee Retirement
Income Security Act, or the rules thereunder. In any event, no amendment may
adversely affect any then outstanding Option or any unexercised portion
thereof, without the consent of the Optionee.
<PAGE>
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing First Amended Chips and Technologies, Inc. 1988
Nonqualified Stock Option Plan for Outside Directors was duly adopted by the
Board of Directors of the Company on the ______ day of ______________, 1993,
and approved by a majority of the stockholders of the Company on November 10,
1993.
-----------------------------
CHIPS AND TECHNOLOGIES, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
FOR OUTSIDE DIRECTORS
GRANT NUMBER
Chips and Technologies, Inc., a Delaware corporation (the "Company"),
has granted to___________________________________________________________
___________ (the "Optionee"), and option to purchase a total of
shares of common stock of the Company, under to Company's 1988 Outside
Directors Stock Option Plan (the "Plan"), at the Exercise Price of $_________
per share and in the manner, and subject to the provisions of this Option
Agreement (the "Option"). This Option is intended to be a nonqualified stock
option and, as provided in Section 422A(b) of the Internal Revenue Code of
1986, as amended (the "Code"), this Option shall not be treated as an
incentive stock option.
All questions of interpretation concerning this Option Agreement shall
be determined by the Board of Directors of the Company (the "Board") and/or
by a duly appointed committee of the Board having such powers as shall be
specified by the Board. Any subsequent reference herein to the board shall
also mean the committee if such committee has been appointed. All
determinations by the Board shall be final and binding upon all persons
having an interest in the Option. Any officer of the Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated
to the Company herein, provided the officer has apparent authority with
respect to such matter, right, obligation, or election.
1. Exercise of the Option.
(a) Right to Exercise. The Option shall be immediately exercisable in
its entirety on or after the Date of Option Grant (as set forth below)
subject to the Optionee's agreement that any shares purchased upon
exercise are subject to the Company's repurchase rights set forth in
Paragraph 6 below.
(b) Method of Exercise. The Option shall be exercisable by written
notice to the Company which shall state the election to exercise the
Option, the number of shares for which the Option is being exercised,
and such other representations and agreements as to the Optionee's
investment intent with respect to such shares as may be required by the
Company pursuant to the provisions of this Option Agreement. Such
written notice shall be signed by the Optionee and shall be delivered in
person or by certified mail to the Chief Financial Officer of the
Company, or other authorized representative of the Company, prior to the
expiration of the term of the Option as set forth in Paragraph 3 below,
accompanied by an executed copy of the then current form of escrow
instructions as required below and full payment, in cash or by check, of
the option price for the number of shares being purchased.
(c) Withholding. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the
Optionee shall make adequate provision for federal and state tax
withholding obligations of the Company, if any, which arise in
connection with the Option, including, without limitation, obligations
arising upon (i) the exercise of the Option in whole or in part, (ii)
any transfer, in whole or in part, of any shares acquired on exercise of
the Option, (iii) the operation of any federal or state law providing
for the imputation of interest, or (iv) the lapse of any restriction
with respect to any shares acquired on exercise of the Option.
(d) Certificate Registration. The certificate or certificates for the
shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(e) Restriction on Grant of Option and Issuance of Shares. The grant
of the Option and the issuance of shares pursuant to the Option shall be
subject to compliance with all applicable requirements of federal or
state law with respect to such securities, including, without
limitation, any required approval by the Commissioner of Corporations of
the State of California. The Option may not be exercised if the
issuance of shares upon such exercise would constitute a violation of
any applicable federal or state securities laws or other law or
regulations. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law
ro regulation and to make any representation or warranty with respect
thereto as may be requested by the Company. The Company may at any time
place legends referencing any applicable federal and/or state securities
restrictions on all certificates representing shares of stock subject to
the provisions of this Option Agreement.
(f) Fractional Shares. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
2. Non-Transferability of the Option. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be
assigned or transferred in any manner, expect by will or by laws of
descent and distribution.
3. Option Term.
(a) Termination of Option. The Option shall terminate and may no
longer be exercised on the first to occur of (i) five (5) years from the
Date of Option Grant as set forth below (the "Option Term Date"), (ii)
upon a Transfer of Control as described below, or (iii) the last date
for exercising the Option following the Optionee's termination of
service as a director as described below. The Option may be exercised
during such period only in accordance with the terms of the Option as
set forth in this Option Agreement.
(b) Ownership Change and Transfer of Control. For the purposes
hereof, the "Control Company" shall mean Chips and Technologies, Inc.
An "Ownership Change" shall be deemed to have occurred in the event any
of the following occurs with respect to the Control Company:
(i) the direct or indirect sale or exchange by the shareholders of
the Control Company of all or substantially all of the stock of the
Control Company;
(ii) a merger in which the Control Company is a party; or
(iii) the sale, exchange, or transfer of all or substantially all
of the Control Company's assets (other than a sale, exchange, or
transfer to one or more corporations where the shareholders of the
Control Company before such sale, exchange, or transfer retain, directly
or indirectly, at least a majority of the beneficial interest in the
voting stock of the corporation(s) to which the assets were
transferred).
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Control Company before such Ownership Change do not
retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Control Company.
In the event of a Transfer of Control, the Board, in its sole
discretion, shall either (A) provide that all shares acquired on
exercise of the Option become Vested Shares for purposes of Paragraph 6
below effective upon the Transfer of Control, or (B) arrange with the
surviving, continuing, successor, or purchasing corporation, as the case
may be, that such corporation either assume the Company's rights and
obligations under this Option Agreement or substitute options for such
corporation's stock for the Option. The Option shall terminate
effective as of the date of the Transfer of Control to the extent that
the Option is neither exercised as of the date of the Transfer of
Control nor assumed by the surviving, successor , or purchasing
corporation, as the case may be.
(c) Termination of Service as a Director.
(i) If the Optionee ceases to be a director of the Company for any
reason except death or disability within the meaning of section 422A(c)
of the Code, the Option, the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be a director, may
be exercised by the Optionee within one (1) month after the date of
which the Optionee's service as a director of the Company terminates,
but in any event no later than the Option Term Date. If the Optionee's
service as a director of the Company is terminated because of the death
of Optionee or disability of the Optionee within the meaning of section
422A(c) of the Code, the Option may be exercised by the Optionee (or the
Optionee's legal representative) at any time prior to the expiration of
six (6) months from the date the Optionee's service as a director of the
Company terminated, but in any event no later that the Option Term Date.
Notwithstanding this paragraph 3(c)(i), the Option may not be exercised
after the Optionee's termination of service as a director if the shares
acquired on exercise of the Option would be Unvested Shares as that term
is defined in Paragraph 6 below.
(ii) Except as provided in this Paragraph 3, the Option shall
terminate and may not be exercised after the Optionee's service as a
director of the Company terminates unless the exercise of the Option in
accordance with this Paragraph 3 is prevented by the provision of
Paragraph 1(e). If the exercise of the Option is so prevented, the
Option shall remain exercisable until one (1) month after the date the
Optionee is notified by the Company that the Option is exercisable.
(iii) Notwithstanding the foregoing, if the exercise of the Option
within the applicable time periods set forth above would subject the
Optionee to suit under Section 16(b) of the Securities Exchange Act of
1934, as amended, the Option shall remain exercisable until the earliest
to occur of (A) the tenth (10th) day following the date on which the
Optionee would no longer be subject to such suit, (B) the one hundred
and ninetieth (190th) day after the Optionee's termination of service as
a director of the Company, and (C) the Option Term Date.
4. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of
shares of stock subject to the Option in the event of a stock dividend,
stock split, reverse stock split, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority
of the shares which are of the same class as the shares that are subject
to the Option are exchanged for, converted into, or otherwise become
(whether or not pursuant to a Transfer of Control) shares of another
corporation (the "New Shares"), the Company may unilaterally amend this
Option to provide that the Option is exercisable for New Shares. In the
event of any such amendment, the number of shares and the exercise price
shall be adjusted in a fair and equitable manner.
5. Rights as a Shareholder. The Optionee shall have no rights as a
shareholder with respect to any shares covered by the Option until the
date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for
dividends or distributions or other rights for which the record date is
prior to the date such certificate or certificates are issued, expect as
provided in Paragraph 4.
6. Unvested Share Repurchase Option. In the event the Optionee ceases to
be a director of the Company for any reason, with or without cause, or
if the Optionee or the Optionee's legal representative attempts to sell,
exchange, transfer, pledge, or otherwise dispose of (other than pursuant
to an Ownership Change) an shares acquired upon exercise of the Option
which have not vested in the Optionee pursuant to Paragraph 6(a) below
(the "Unvested Shares"), the Company shall have the right to reacquire
the Unvested Shares under the terms and subject to the conditions set
forth in this Paragraph 6 (the "Unvested Shares Repurchase Option").
(a) Vesting of Shares. Unless otherwise specified by the Board at
the time the Option is granted and set forth below, the term Initial
Vesting Date shall mean the date six (6) months form the date the Option
is granted. Prior to the Initial Vesting Date, no shares subject to the
Option shall vest in the Optionee so that prior to the Initial Vesting
Date all shares acquired by the Optionee shall be subject to the
Unvested Share Repurchase Option. Shares subject to the Option shall
vest in the Optionee (the "Vested Shares") on and after the Initial
vesting Date in accordance with the following formula:
Nemployment + 6 x Ngrant = Nvested
Nperiod
Where: Nemployment = the number of full months of the
Optionee's continuous service as a
director of the Company for the Initial
Vesting Date with fractional months
being eliminated.
Nperiod = forty-eight (48) full months
Ngrant = the number of shares subject to the
Option.
Nvested = the number of Vested Shares.
(b) Escrow. To insure that the Unvested Shares will be available
for repurchase, the Optionee shall deposit the certificates evidencing
the shares which the Optionee purchases upon exercise of an Option with
an escrow agent designated by the Board under the terms and conditions
of an escrow agreement approved by the Board. The Company shall bear
the expenses of the escrow.
(c) Exercise of Unvested Share Repurchase Option. The Company
may exercise the Unvested Share Repurchase Option by written notice to
the Optionee within sixty (60) days after (i) such termination of
service as a director (or exercise of the Option, if later) or (ii) the
Company has received notice of an attempted disposition. If the Company
fails to give notice within such sixty (60) day period, the Unvested
Share Repurchase Option shall terminate unless the Company and the
Optionee have extended the time for the exercise of the Unvested Share
Repurchase Option. The Unvested Share Repurchase Option must be
exercised, if at all, for all of the Unvested Shares, except as the
Company and the Optionee otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the
Company to the escrow agent on behalf of the Optionee or the Optionee's
legal representative shall be made in cash within sixty (60) days after
the date of the mailing of the written notice of exercise of the
Unvested Share Repurchase Option. For purposes of the foregoing,
cancellation of any promissory note of the Optionee to the Company shall
be treated as payment to the Optionee in cash to the extent of the
unpaid principal and any accrued interest cancelled. The purchase price
per share being purchased by the Company shall be an amount equal to the
Optionee's original cost per share, as adjusted pursuant to paragraph 4
above. Within thirty (30) days after payment by the Company, the escrow
agent shall give the shares which the Company has purchased to the
Company and shall give the payment received from the Company to the
Optionee.
(e) Ownership Change. In the event of an Ownership Change, the
Unvested Share Repurchase Option shall continue in full force and
effect; provided, however, that service as a director of the Company for
the purpose of this Paragraph 6 shall include all service with the
Company or any corporation which was either a parent or subsidiary
corporation of the Company as defined at section 425 of the Code at the
time the services were rendered, whether or not the corporation was
included within such term both before and after the event constituting
the Ownership Change.
(f) Transfers Not Subject to the Unvested Share Repurchase Option.
The Unvested Share Repurchase Option shall not apply to a transfer to
the Optionee's ancestors or descendants or spouse or to a trustee for
their benefit; provided, however, that such transferee shall agree in
writing (in a form satisfactory to the Board) to take the stock subject
to all the terms and conditions of this Paragraph 6 providing for an
Unvested Share Repurchase Option.
(g) Legends. The Company may at any time place a legend or
legends referencing the Unvested Shares Repurchase Option on any shares
subject to the Unvested Share Repurchase Option.
(h) Assignment of Unvested Share Repurchase Option. In the event
the Company is unable to exercise the Unvested Share Repurchase Option
pursuant to the provisions of Section 160 of the Delaware General
Corporation Law, or the corresponding provisions of other applicable
law, the Company shall have the right to assign the Unvested Share
Repurchase Option to one or more persons as may be selected by the
Board.
7. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split or other change in the
character or amount of any of the stock outstanding stock of the
Company, then in such event any and all new substituted or additional
securities to which the Optionee is entilted by reason of the Optionee's
ownership of the shares acquired upon exercise of the Option shall be
immediately subject to the Unvested Share Repurchase Option with the
same force and effect as the shares subject to the Unvested Share
Repurchase Option immediately before such event.
8. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
9. Amendment to Termination. The Board may at any time amend or terminate
the Plan and/or the Option; provided, however, that no such amendment or
termination may adversely affect the Option or any unexercised portion
hereof without the consent of the Optionee.
10. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect
to the subject matter contained herein, and there are no agreements,
understanding, restrictions, representations, or warranties among the
Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this
Option Agreement shall survive any exercise of this Option and shall
remain in full force and effect.
"Date of Option Grant":_________________________________________________
CHIPS AND TECHNOLOGIES, INC.
By:____________________________________________
Title: PRESIDENT & CEO
-----------------------------------------
The Optionee represents that he has either a pre-existing personal or
business relationship with the Company or any of the Company's officers,
directors, or controlling persons, or by reason of his business or financial
experience or the business or financial experience of the Optionee's advisors
who are unaffiliated with and who are not compensated by the Company or any
affiliate or selling agent of the Company, directly or indirectly, has the
capacity to protest his own interests in connection with the transaction.
The Optionee represents that he is purchasing for his own account and
not with a view to or for sale in connection with any distribution of the
security.
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 6, and hereby accepts the Option subject to all
of the terms and provisions thereof. The Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under this Option Agreement.
Date:_______________________ ___________________________________________
The undersigned, being the spouse of the above-named optionee, does
hereby acknowledge that the undersigned has read and is familiar with the
provisions of the above Agreement, and the undersigned hereby agrees thereto
and joins therein to the extent, if any, that the agreement and joinder of
the undersigned may be necessary.
Date:_______________________ ___________________________________________
PROMISSORY NOTE
$32,630.16 San Jose,
California
DUE DATE: 9/1/94
FOR THE VALUE RECEIVED, Lee Barker promises to pay Chips & Technologies, Inc.
("the Company"), or order, at San Jose, California or at such place or places
as the holder of this Note may from time to time designate in writing, the
principal sum of Thirty two thousand six hundred thirty dollars and sixteen
cents ($32,630.16) with interest from the date hereof. The interest rate
shall be equal to 8% or the minimum rate necessary to avoid the imputation of
interest pursuant to all applicable sections of the Internal Revenue Code of
1986, as amended if lower.
Accrued interest shall be payable annually.
Principal; and any accrued but unpaid interest shall be due and payable as
follows:
2. Upon termination of employment with the Company for any reason or for no
reason, the whole sum of principal and accrued interest shall become
immediately due and payable.
3. In no event later than September 1, 1994
This note may be prepaid at any time, in whole or in part, without premium or
penalty.
If any amount due under the terms of this Note is not paid in full, the
undersigned agrees to pay all reasonable costs and expenses of collection,
including attorney's fees. The undersigned also waives presentment, demand,
protest, notice of protest, notice of dishonor, notice of nonpayment, any and
all other notices and demands in connection with the delivery, acceptance,
performance, default or enforcement of the Note. No delay by holder hereof
in exercising any power or right hereunder shall operate as a waiver of any
power or right.
This Note shall be governed by and construed in accordance with the laws of
the State of California.
/s/ Lee Barker
- --------------------------
Lee Barker
Vice President, Operations
Chips & Technologies
/s/ James F. Stafford
- --------------------------
James F. Stafford
President and CEO
Chips & Technologies
AMENDMENT TO LOAN AGREEMENT
This Amendment to Loan Agreement is made as of September 13, 1993 by and
between Chips and Technologies, Inc. (the "Borrower") and Silicon Valley Bank
("Silicon" or "Bank"). The parties agree to amend the Loan and Security
Agreement between them, dated December 19, 1991 (the "Loan Agreement")
further modified by that certain Amendment to Loan Agreement dated September
30, 1992, as follows, effective on the date hereof. (Capitalized terms used
but not defined in this Amendment, shall have the meanings set forth in the
Loan Agreement).
1. MODIFICATION OF CREDIT LIMIT. The first sentence of the section of
the Schedule to Loan Agreement entitled "Credit Limit (Section 1.1)" is
hereby deleted and replaced with the following:
Credit Limit
(Section 1.1) $5,000,000.00; the Credit Limit shall be the lesser of (i)
$5,000,000.00 at any one time outstanding; or (ii) 75% of
the Net Amount of Borrower's accounts, which Bank in its
discretion deems eligible for borrowing.
2. MODIFICATION OF LOAN ORIGINATION FEE. The section of the Schedule
to Loan Agreement entitled "Loan Origination Fee (Section 1.3)" is hereby
deleted and replaced with the following:
Loan Fee
(Section 1.3) $25,000.00 per annum
3. MODIFICATION OF MATURITY DATE. The section of the Schedule to Loan
Agreement entitled "Maturity Date (Section 5.1)" is hereby deleted and
replaced with the following:
Maturity Date
(Section 5.1) October 5, 1994
4. MODIFICATION TO INTEREST RATE. The section of the Schedule to Loan
Agreement entitled "Interest Rate (Section 1.2)" is hereby deleted and
replaced with the following:
Interest Rate
(Section 1.2) A rate equal to 1.000 percentage point over the "Prime Rate"
in effect from time to time. Interest shall be calculated
in the basis of a 360-day year for the actual number of days
elapsed. "Prime Rate" means the rate announced from time to
time by Bank as its "prime rate"; it is a base rate upon
which other rate charged by Bank are
based, and it is not necessarily the best rate available at
Bank. The interest rate applicable to the Obligations shall
change on each date there is a change in the Prime Rate.
5. MODIFICATION OF FINANCIAL COVENANTS. The section of the Schedule
to Loan Agreement entitled "Financial Covenants (Section 4.1)" is hereby
deleted and replaced with the following:
Financial
Covenants
(Section 4.1) Borrower shall comply with all of the following covenants.
Compliance shall be determined as of the end of each month,
except as otherwise specifically provided below:
QUICK ASSET RATIO: Borrower shall maintain a ratio of
"Quick Assets" to current liabilities of not less than .9 to
1.00.
CURRENT ASSET RATIO: Borrower shall maintain a ratio of
"Current Assets" to current liabilities of not less than
1.25 to 1.0.
TANGIBLE NET WORTH: Borrower shall maintain a tangible net
worth of not less than $20,000,000.00.
DEBT TO TANGIBLE NET WORTH RATIO: Borrower shall maintain a
ratio of total liabilities to tangible net worth of not more
than 1.25 to 1.00.
PROFITABILITY: Borrower shall not incur a loss (after
taxes) for the fiscal quarter ending September 30, 1993 in
excess of $4,500,000.00 nor shall Borrower incur a loss
(after taxes) for the fiscal quarter ending December 31,
1993 in excess of $250,000.00, ending March 31, 1994 of
$700,000.00. Borrower shall maintain a minimum profit for
the fiscal quarter ending June 30, 1994 of $800,000.00.
MINIMUM CASH. Borrower shall maintain minimum cash, for the
fiscal quarter ending September 30, 1993 of $12,000,000.00,
for the quarter ending December 31, 1993 of $9,000,000.00,
for the quarter ending March 31, 1993 of $8,000,000.00, and
for the quarter ending June 30, 1994 of $8,000,000.00.
DEFINITIONS: "Current Assets" means cash, accounts
receivable, inventory and other assets likely to be
converted into cash within one calendar year.
6. MODIFICATIONS TO EVENTS OF DEFAULT. The section of the Loan and
Security Agreement entitled "Events of Default (Section 6.1)" is hereby
amended as follows:
Events of
Defaults
(Section 6.1) (b) the Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligations;
(e) the Borrower shall fail to pay or perform any other non-
monetary Obligation;
(f) any levy, assessment, seizure, lien or encumbrance is
made on all or any part of the Collateral;
All other terms and conditions shall remain the same.
7. OTHER COVENANTS. Paragraph 4 of the section entitled "Other
Covenants (Section 4.1) of the Amendment to Loan Agreement dated September
30, 1992, is hereby deleted and replaced with the following and a new
paragraph 5 as set forth below is hereby added hereto after the current
paragraph 4:
4. REQUIRED BALANCES. Borrower agrees to maintain the following
balances with the Bank: (a) average money
market balance of not less than $1,500,000.00
at all times, and (b) an average net free
collected demand deposit balance of not less
than $500,000.00 at all times.
5. REQUEST TO DEBIT Borrower will regularly deposit all funds
ACCOUNT received from its business activities in
accounts maintain by Borrower at Silicon
Valley Bank. Borrower hereby requests and
authorizes Bank to debit any of Borrower
accounts with Bank, specifically, without
limitation, Account Number __________________,
for payments of interest and principal due on
the loan and any other obligations owing by
Borrower to Bank. Bank will notify Borrower
of all debits which Bank makes against
Borrower's accounts. Any such debits against
Borrower's accounts in no way shall be deemed
a setoff.
8. LINE OF CREDIT FOR ISSUANCE OF LETTERS OF CREDIT. Bank has issued
to Borrower a new line of credit in the amount of $3,000,000.00 (the "LC
Credit Limit") to be utilized for standby and commercial letters of credit
(the "New Letters of Credit") issued by Silicon or other banks by Silicon
(the "Issuer") for the account of the Borrower. In no event may the total
New Letters of Credit outstanding at anytime exceed $3,000,000.00. The LC
Credit Limit available at any time shall be reduced by the total amount of
all outstanding New Letters of Credit; provided, that the total amount of all
outstanding New Letters of Credit shall not affect the Credit Limit.
The Borrower shall execute all standard form letter of credit
applications and agreements of the Issuer in connection with the New Letters
of Credit, and without limiting any of the terms of such applications and
agreements, the Borrower shall pay all standard fees and amounts drawn on any
New Letters of Credit prior to the day the Issuer is required to make payment
under the New Letter of Credit. The New Letters of Credit shall have
expiration dates no later than the Maturity Date (October 5,1994).
9. GENERAL PROVISIONS. This Amendment, the Loan Agreement, any prior
written amendments to the Loan Agreement signed by Bank and the Borrower, and
the other written documents and agreements between Bank and the Borrower set
forth in full of the representations and agreements of the parties with
respect to the subject matter hereof and supersede all prior discussions,
representations, agreements and understandings between the parties with
respect to the subject hereof. Except as herein expressly amended, all of
the terms and provisions of the Loan Agreement, and all other documents and
agreements between Bank and the Borrower shall continue in full force and
effect and the same are hereby ratified and confirmed. Capitalized terms
used herein shall have the definitions given them in the Loan Agreement
unless otherwise defined herein.
CHIPS AND TECHNOLOGIES, INC. SILICON VALLEY BANK
By:____________________ By:____________________
Name:_________________ Name:__________________
Title:__________________ Title:___________________
PROMISSORY NOTE
=============================================================================
BORROWER: CHIPS AND TECHNOLOGIES, INC. LENDER: Silicon Valley Bank
3050 Zanker Road 3000 Lakeside Drive
San Jose, CA 95134 P.O. Box 3762
Santa Clara, CA 95054
=============================================================================
PRINCIPAL AMOUNT: $3,000,000.00 INITIAL RATE: 6.000% DATE OF
NOTE: SEPTEMBER 13, 1993
PROMISE TO PAY. CHIPS AND TECHNOLOGIES, INC. ("Borrower") promises to pay
Silicon Valley Bank ("Lender"), or order, in lawful money of the United
States of America, the principal amount of Three Million & 00/100 Dollars
($3,000,000.00) or so much as may be outstanding, together with interest on
the unpaid outstanding principal balance of each advance. Interest shall be
calculated from the date off each advance until repayment of each advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on October 5, 1994. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest
beginning October 5, 1993, and all subsequent interest payments are due on
the same day of each month after that. Interest on this note is computed on
a 365/360 simple interest basis; that is, by applying the ratio of the annual
interest rate over a year of 360 days, times the outstanding principal
balance, times the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Unless otherwise agreed
or required by applicable law, payments will be applied first to accrued
unpaid interest, then to principal, and any remaining amount to any unpaid
collection costs and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change
from time to time based on changes in an index which is Lender's Prime Rate
(the "Index"). This is the rate Lender charges, or would charge, on 90-day
unsecured loans to the most creditworthy corporate customers. This rate may
or may not be the lowest rate available from Lender at any given time.
Lender will tell Borrower the current Index rate upon Borrower's request.
Borrower understands that Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each time the prime
rate is adjusted by Silicon Valley Bank. The Index currently is 6.000% per
annum. the interest rate to be applied to the unpaid principal balance of
this Note will be at a rate equal to the Index, resulting in an initial rate
of 6.000% per annum. NOTICE: Under no circumstances will the interest rate
on this Note be more than the maximum rate allowed by applicable law.
PREPAYMENT. Borrower may pay without penalty all or a portion of the amount
owed earlier than it is due. Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower's obligation to continue to
make payments under the payment schedule. Rather, they will reduce the
principal balance due and may result in the Borrower's making fewer payments.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any
promise Borrower has made to Lender, or Borrower fails to perform promptly at
the time and strictly in the manner provided in this Note or any agreement
related to this Note, or in any other agreement or loan Borrower has with
Lender. (c) Any representation or statement made or furnished to Lender by
Borrower or on Borrower's behalf is false or misleading in any material
respect. (d) Borrower becomes insolvent, a receiver is appointed for any
part of Borrower's property, Borrower makes an assignment for the benefit of
creditors, or any proceeding is commenced either by Borrower or against
Borrower under any bankruptcy or insolvency laws. (e) Any creditor tries to
take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with
Lender. (f) Any of the events described in this default section occurs with
respect to any guarantor of this Note.
LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid
principal balance on this Note and all accrued unpaid interest immediately
due, without notice, and then Borrower will pay the amount. Upon Borrower's
failure to pay all amounts declared due pursuant to this section, including
failure to pay upon maturity, Lender at its option, may also, if permitted
under applicable law, do one or both of the following: (a) Increase the
variable interest rate on this Note to 5.000 percentage points over the
Index, and (b) add any unpaid accrued interest to principal and such sum will
bear interest therefrom until paid at the rate provided in this Note
(including any increased rate). Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. Borrower also will pay Lender
that amount. This includes, subject to any limits under applicable law,
Lenders' attorneys' fees and Lender's legal expenses whether or not there is
a lawsuit, including attorneys' fees and legal expenses for bankruptcy
proceedings (including efforts to modify or vacate any automatic stay or
injunction), appeals, and any anticipated post-judgment collection services.
Borrower also will pay any court costs, in addition to all other sums
provided by law. This Note has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Santa
Clara County, the State of California. This Note shall be governed by and
construed in accordance with the laws of the State of California.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances
under this Note, as well as directions for payment from Borrower's accounts,
may be requested orally or in writing by Borrower or by an authorized person.
Lender may, but need not, require that all oral requests be confirmed in
writing. Borrower agrees to be liable for al sums either: (a) advanced in
accordance with the instructions of an authorized person or (b) credited to
any Borrower's accounts with Lender. The unpaid principal balance owing on
this Note at any time may be evidenced by endorsements on this note or by
Lenders internal records, including daily computer print-outs. Lender will
have no obligation to advance funds under this Note if: (a) Borrower or any
guarantor is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in
connection with the signing of this Note; (b) Borrower or any guarantor
ceases doing business or is insolvent; (c) any guarantor seeks, claims or
otherwise attempts to limit, modify or revoke such guarantor's guarantee of
this Note or any other loan with Lender; or (d) Borrower has applied funds
provided pursuant to this Note for purposes other than those authorized by
Lender.
REQUEST TO DEBIT ACCOUNTS. Borrower will regularly deposit all funds
received from its business activities in accounts maintained by Borrower at
SILICON VALLEY BANK. Borrower hereby requests and authorizes Lender to debit
any of Borrower's accounts with Lender, specifically, without limitation,
Account Number ________________, for payments of interest and principal due
on the loan and any other obligations owing by Borrower to Lender. Lender
will notify Borrower of all debits which Lender makes against Borrower's
accounts. Any such debits against Borrower's accounts in no way shall be
deemed a setoff.
BUSINESS LOAN AGREEMENT. This note is subject to and shall be governed by
all the terms and conditions of the Loan and Security Agreement dated
December 19, 1991, as amended from time to time, between Lender and Borrower,
which Loan and Security Agreement is incorporated herein by referenced.
ADDITIONAL PROVISIONS. This Promissory Note evidences a Letter of Credit
facility. Accordingly, advances under this Note shall be used for issuance
of Letters of Credit.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person
who signs, guarantees or endorses this Note, to the extent allowed by law,
waive any applicable statute of limitations, presentment, demand for payment,
protest and notice of dishonor. Upon any change in the terms of this Note,
and unless otherwise expressly stated in writing, no party who signs this
Note, whether as maker, guarantor, accommodation maker or endorser, shall be
released from liability. All such parties agree that Lender may renew or
extend (repeatedly and for any length of time) this loan, or release any
party or guarantor or collateral; or impair, fail to realize upon or perfect
Lender's security interest in the collateral; and take any action deemed
necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS
OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY
OF THE NOTE.
BORROWER:
CHIPS AND TECHNOLOGIES, INC.
By:______________________
Name: ___________________
Title: _____________________
REQUEST FOR HOLD ON ACCOUNT
BORROWER: CHIPS AND TECHNOLOGIES, INC.
GRANTOR: SAME
LOAN OFFICER: DAVID JACKSON
COLLATERAL
TYPE ACCOUNT NUMBER AMOUNT MATURITY
- -----------------------------------------------------------------------------
AUTHORIZED BY: _____________________
DATE: ______________________
_____________________________________________________________________________
RELEASE OF HOLD
You are hereby authorized to release the proceeds in the amount of
$____________ under the above referenced account to pay Loan No.
_____________________.
_____________________________________________________________________________
For Lender's Use Only
APPROVED BY:_____________________
DATE: ______________________________
COMMENTS:
ASSIGNMENT OF DEPOSIT ACCOUNT
=============================================================================
BORROWER: CHIPS AND TECHNOLOGIES, INC. LENDER: Silicon Valley Bank
3050 Zanker Road 3000 Lakeside Drive
San Jose, CA 95134 P.O. Box 3762
Santa Clara, CA 95054
=============================================================================
THIS ASSIGNMENT OF DEPOSIT ACCOUNT is entered into between CHIPS AND
TECHNOLOGIES, INC. (referred to below as "Grantor"); and Silicon Valley Bank
(referred to below as "Lender").
ASSIGNMENT. For valuable consideration, Grantor assigns and grants to Lender
a security interest in the Collateral, including without limitation the
deposit accounts described below, to secure the indebtedness and agrees that
Lender shall have the rights stated in this Agreement with respect to the
Collateral, in addition to all other rights which Lender may have by law.
DEFINITIONS. The following words shall have the following meanings when used
in this Agreement. Terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
ACCOUNT. The word "Account" means the deposit account described below
in the definition for "Collateral."
AGREEMENT. The word "Agreement" means this Assignment of Deposit
Account, as this Assignment of Deposit Account may be amended or
modified from time to time, together with all exhibits and schedules
attached to this Assignment of Deposit Account from time to time.
COLLATERAL. The word "Collateral" means the following described deposit
account:
SILICON VALLEY BANK CERTIFICATE OF DEPOSIT, CERTIFICATE NO.
_______, ACCOUNT NO. _________________ ISSUED BY LENDER IN AN
AMOUNT NOT LESS THAN $3,000,000.00
together with (a) all interest, whether now accrued or hereafter
accruing; (b) all additional deposits hereafter made to the Account; and
(c) all renewals, replacements and substitutions for any of the
foregoing.
(A) ALL PROPERTY TO WHICH LENDER ACQUIRES TITLE OR DOCUMENTS OF
TITLE.
(B) ALL PROPERTY ASSIGNED TO LENDER.
(C) ALL PROMISSORY NOTES, BILLS OF EXCHANGE, STOCK CERTIFICATES,
BONDS, SAVINGS PASSBOOKS, TIME CERTIFICATES OF DEPOSIT, INSURANCE
POLICIES, AND ALL OTHER INSTRUMENTS AND EVIDENCES OF AN OBLIGATION.
(D) ALL RECORDS RELATING TO ANY OF THE PROPERTY DESCRIBED IN THIS
COLLATERAL SECTION, WHETHER IN THE FORM OF WRITING, MICROFILM,
MICROFICHE, OR ELECTRONIC MEDIA.
EVENT OF DEFAULT. The words "Event of Default" mean and include any of
the Events of Default set forth below in the section entitled "Events of
Default."
GRANTOR. The word "Grantor" means CHIPS AND TECHNOLOGIES, INC., its
successors and assigns
GUARANTOR. The word "Guarantor" means and includes without limitation,
each and all of the guarantors, sureties, and accommodation parties in
connection with the indebtedness.
INDEBTEDNESS. The word "Indebtedness" means indebtedness evidenced by
any and all notes or credit agreements or letters of credit, including
all principal and interest, together with all other indebtedness and
costs and expenses for which Grantor is responsible under this Agreement
or under any of the Related Documents.
LENDER. The word "Lender" means Silicon Valley Bank, it successors and
assigns
NOTE. The word "Note" means the notes or credit agreements or letter of
credit, in any principal amount from Borrower to Lender, together with
all renewals of, extensions of, modifications of, refinancings of,
consolidations of and substitutions for the notes or credit agreements.
RELATED DOCUMENTS. The words "Related Documents" mean and include
without limitation all promissory notes, credit agreements, loan
agreements, guaranties, security agreements, mortgages, deeds of trust,
and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the indebtedness.
GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.
With respect to the Collateral, Grantor represents and warrants to Lender
that:
OWNERSHIP. Grantor is the lawful owner of the Collateral free and clear
of all loans, liens, encumbrances, and claims except as disclosed to and
accepted by Lender in writing.
RIGHT TO GRANT SECURITY INTEREST. Grantor has the full right, power,
and authority to enter into this Agreement and to assign the Collateral
to Lender.
NO FURTHER TRANSFER. Grantor will not sell, assign, encumber, or
otherwise dispose of any of Grantor's rights in the Collateral except as
provided in this Agreement.
NO DEFAULTS. There are no defaults relating to the Collateral, and
there are no offsets or counterclaims to the same. Grantor will
strictly and promptly do everything required of Grantor under the terms,
conditions, promises, and agreements contained in or relating to the
Collateral.
PROCEEDS. Any and all replacement or renewal certificates, instruments,
or other benefits or proceeds related to the Collateral that are
received by Grantor shall be held by Grantor under the terms,
conditions, promises, and agreements contained in or relating to the
Collateral
LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO THE COLLATERAL. While this
Agreement is in effect, Lender may retain the rights to possession of the
Collateral, together with any and all evidence of the Collateral, such as
certificates or passbooks. This Agreement will remain in effect until (a)
there no longer is any indebtedness owing to Lender; (b) all other
obligations secured by this Agreement have been fulfilled; (c) Grantor, in
writing, has requested from Lender a release of this Agreement.
EXPENDITURES BY LENDER. If not discharged or paid when due, Lender may (but
shall not be obligated to) discharge or pay any amounts required to be
discharged or paid by Grantor under this Agreement, including without
limitation all taxes, liens, security interests, encumbrances, and other
claims, at any time levied or placed on the Collateral. Lender also may (but
shall not be obligated to) pay all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender
for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by the Lender to the date of repayment by
Grantor. All such expenses shall become a part of the indebtedness and, at
Lender's option, will (a) be payable on demand, (b) be added to the balance
of the Note and be apportioned among and be payable with any installment
payments to become due during either (i) the term of any applicable insurance
policy or (ii) the remaining term of the Note, or (c) be treated as a balloon
payment which will be due and payable at the Note's maturity. This Agreement
also will secure payment of these amounts. Such right shall be in addition
to all other rights and remedies to which Lender may be entitled upon the
occurrence of an Event of Default.
LIMITATIONS ON OBLIGATIONS OF LENDER. Lender shall use ordinary reasonable
care in the physical preservation and custody of any certificate or passbook
for the Collateral but shall have no other obligation to protect the
Collateral or its value. In particular, but without limitation, Lender shall
have no responsibility (a) for the collection or protection of any income on
the Collateral, (b) for the preservation of rights against issuers of the
Collateral or against third persons; (c) for ascertaining any maturities,
conversions, exchanges, offers, tenders, or similar matters relating to the
collateral; nor (d) for informing the Grantor about any of the above,
whether or not Lender has or is deemed to have knowledge of such matters.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of
Default under this Agreement:
DEFAULT ON INDEBTEDNESS. Failure of Grantor to make any payment when
due on the Indebtedness.
OTHER DEFAULTS. Failure of Grantor to comply with or to perform any
other term, obligation, covenant or condition contained in this
Agreement or in any of the other Related Documents or in any other
agreement between Lender and Grantor.
INSOLVENCY. The dissolution or termination of Grantor's existence as a
going business, the insolvency of Grantor, the appointment of a receiver
for any part of Grantor's property, any assignment for the benefit of
creditors, or the commencement of any proceeding under and bankruptcy or
insolvency laws by or against Grantor.
CREDITOR OR FORFEITURE PROCEEDINGS. Commencement of foreclosure or
forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Grantor or by any
governmental agency against the Collateral or any other collateral
securing the Indebtedness. This includes a garnishment of any Grantor's
deposit accounts with Lender.
EVENTS AFFECTING GUARANTOR. Any of the preceding events occurs with
respect to any Guarantor of any of the Indebtedness or such Guarantor
dies or becomes incompetent.
RIGHTS AND REMEDIES ON DEFAULT. Upon the occurrence of any Event of Default,
or at any time thereafter, Lender may exercise any one or more of the
following rights and remedies, in addition to any rights or remedies that may
be available at law, in equity, or otherwise:
ACCELERATE INDEBTEDNESS. Lender may declare all Indebtedness of Grantor
to Lender immediately due and payable, without notice of any kind to
Guarantor.
APPLICATION OF ACCOUNT PROCEEDS. Lender may obtain all funds in the
Account from the Issuer of the Account and apply them to the
Indebtedness in the same manner as if the Account had been issued by
Lender. If the Account is subject to an early withdrawl penalty, that
penalty shall be deducted from the Account before its application to the
Indebtedness, whether the Account is with Lender or some other
institution. Any excess funds remaining after application of the
Account proceeds to the Indebtedness will be paid to Grantor as the
interests of Grantor may appear. Grantor agrees, to the extent
permitted by law, to pay any deficiency after application of the
proceeds of the Account to the Indebtedness. Lender also shall have all
the rights of a secured party under the California Uniform Commercial
Code, even if the Account is not otherwise subject to such code
concerning security interests, and the parties to this Agreement agree
that the provisions of the code giving rights to a secured party shall
nonetheless be a part of this Agreement.
COLLECT THE COLLATERAL. Lender may collect any of the Collateral and,
at Lender's option and to the extent permitted by applicable law, may
retain possession of the Collateral while suing on the Indebtedness.
SELL THE COLLATERAL. Lender may sell the Collateral, at Lender's
discretion, as a unit or in parcels, at one or more public or private
sales. Unless the Collateral is perishable or threatens to decline
speedily in value, Lender shall give or mail to Grantor, or any of them,
notice at least ten (10) days in advance of the time and place of public
sale, or of the date after which private sale may be made. Grantor
agrees that any requirement of days in advance of the time and place of
public sale, or of the date after which private sale may be made.
Grantor agrees that any requirements of reasonable notice is satisfied
if Lender mails notice by ordinary mail addressed to Grantor, or any of
them, at the last address Grantor has given Lender in writing. If
public sale is held, there shall be sufficient compliance with all
requirements of notice to the public by a single publication in any
newspaper of general circulation in the county where the Collateral is
located, setting forth the time and place of sale and a brief
description of the property to be sold. Lender may be a purchaser at
any public sale.
REGISTER SECURITIES. Lender may sell any securities included in the
Collateral in a manner consistent with applicable federal and state
securities laws, notwithstanding any other provision of this or any
other agreement. If, because of restrictions under such laws, Lender is
or believes it is unable to sell the securities in an open market
transaction, Grantor agrees that (a) Lender shall have no obligation to
delay sale until the securities can be registered, (b) Lender may make a
private sale to a single person or restricted group of persons, even
though such sale may result in a price that is less favorable than might
be obtained in an open market transaction, and (c) such a sale shall be
considered commercially reasonable. If any securities held as
Collateral are "restricted securities" as defined in the Rules of the
Securities and Exchange Commission (such as Regulation D or Rule 144) or
state securities departments under state "Blue Sky" laws, or if Grantor,
or any of them (if more than one), is an affiliate of the issuer of the
securities, Grantor agrees that Grantor will neither sell nor dispose of
any securities of such issuer without obtaining Lender's prior written
consent.
TRANSFER TITLE. Lender may effect transfer of title upon sale of all or
part of the Collateral. For this purpose, Grantor irrevocably appoints
Lender as its attorney-in-fact to execute endorsements, assignments and
instruments in the name of the Grantor and each of them (if more than
one) as shall be necessary or reasonable.
APPLICATION OF PROCEEDS. Lender may apply any cash which is part of the
Collateral, or which is received from the collection or sale of the
Collateral, to (a) reimbursement of any expenses, including any costs of
any securities registration, commissions incurred in connection with a
sale, attorney fees as provided below and court costs, whether or not
there is a lawsuit and including any fees on appeal, incurred by Lender
in connection with the collection and sale of such Collateral, and (b)
to the payment of the Indebtedness of Grantor to Lender, with any excess
funds to be paid to Grantor as the interests of Grantor may appear.
OTHER RIGHTS AND REMEDIES. Lender shall have and may exercise any or
all of the rights and remedies of a secured creditor under the
provisions of the California Uniform Commercial Code, at law, in equity,
or otherwise.
DEFICIENCY JUDGMENT. If permitted by applicable law, Lender may obtain
a judgment for any deficiency remaining in the Indebtedness due to
Lender after application of all amounts received from the exercise of
the rights provided in this section.
CUMULATIVE REMEDIES. All of Lender's rights and remedies, whether
evidenced by this Agreement or by any other writing, shall be cumulative
and may be exercised singularly or concurrently. Election by Lender to
pursue any remedy shall not exclude pursuit of any other remedy, and an
election to make expenditures or to take action to perform an obligation
of Grantor under this Agreement, after Grantor's failure to perform,
shall not affect Lender's right to declare a default and to exercise its
remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part
of this Agreement:
AMENDMENTS. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to
the matters set forth in this Agreement. No alteration of or amendment
to this Agreement shall be effective unless given in writing and signed
by the party or parties sought to be charged or bound by the alteration
or amendment.
APPLICABLE LAW. This Agreement has been delivered to Lender and
accepted by Lender in the State of California. If there is a lawsuit,
Grantor agrees upon Lender's request to submit to the jurisdiction of
the courts of Santa Clara County, State of California. This Agreement
shall be governed by and construed in accordance with the laws of the
State of California.
ATTORNEY'S FEES; EXPENSES. Grantor agrees to pay upon demand all of
Lender's costs and expenses, including attorneys' fees and Lender's
legal expenses, incurred in connection with the enforcement of this
Agreement. Lender may pay someone else to help enforce this Agreement
and Grantor shall pay the costs and expenses of such enforcement. Costs
and expenses shall include Lender's attorneys' fees and legal expenses
whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (and including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Grantor also shall pay all court
costs and such additional fees as may be directed by the court.
MULTIPLE PARTIES; CORPORATE AUTHORITY. All obligations of Grantor under
this Agreement shall be joint and several, and all references to Grantor
shall mean each and every Grantor. This means that each of the persons
signing below is responsible for all obligations in this Agreement.
NOTICES. All notices required to be given under this Agreement shall be
given in writing and shall be effective when actually delivered or when
deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address
shown above. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties,
specifying that the purpose of the notice is to change the party's
address. To the extent permitted by applicable law, if there is more
than one Grantor, notice to any Grantor will constitute notice to all
Grantors. For notice purposes, Grantor ;agrees to keep Lender informed
at all times of Grantor's current address(es).
POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and
lawful attorney-in-fact, irrevocably, with full power of substitution to
do the following: (a) demand, collect, receive, receipt for, sue and
recover all sums of money or the property which may now or hereafter
become due, owing or payable from the Collateral; (b) execute, sign and
endorse any and all claims, instruments, receipts, checks, drafts or
warrants issued in payment for the Collateral; (c) to settle or
compromise any and all claims arising under the Collateral, and in the
place and stead of Grantor, to execute and deliver its release and
settlement for the claim; and (d) to file any claim or claims or to take
any action or institute or take part in any proceedings, either in its
own name or in the name of Grantor, or otherwise, which in the
discretion of Lender may seem to be necessary or advisable. This power
is given as security for the Indebtedness, and the authority hereby
conferred is and shall be irrevocable and shall remain in full force and
effect until renounced by Lender.
SERVERABILITY. If a court of competent jurisdiction finds any provision
of this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invlaid or
unenforceable as to any other persons or circumstances. If feasible,
any such offending provision shall be deemded to be modified to be
within the limits of enforceability or validity; however, if the
offending provision cannot be so modified, it shall be stricken and all
other provisions of this Agreement in all other respects shall remain
valid and enfoceable.
SUCCESSOR INTERESTS. Subject to the limitations set forth above on
transfer of the Collateral, this Agreement shall be binding upon and
inure to the benefit of the partiies, their successors and assigns.
WAIVER. Lender shall not be deemed to have wiaved any rights under this
Agreement unless such waiver is given in writing and signed by Lender.
No delay or omission on the part of Lender in exercising any right shall
operate as a waiver of such right or any other right. A waiver by
Lender of a provision of this Agreement shall not prejudice or consitute
a waiver of Lender's right otherwise to demand strict compliance with
that provision or any other provision of this Agreement. No prior
waiver by Lender, nor any course of dealing between Lender and Grantor,
shall constitute a waiver of any of Lender's rights or of any of
Grantor's obligations as to any future transactions. Whenever the
consent of Lender is required under this Agreement, the granting of such
consent by Lender in any isntance shall not constitute continuing
consent to subsequent instances where such consent is required and in
all cases such consent may be granted or withheld in the sole discretion
of Lender.
ADDITIONAL PROVISIONS. If any law is passed that requires additional action
on the part of the Lender, Borrower shall fully cooperate with Lender in
complying with the law and accordingly, shall reimburse Lender for all costs
and expenses which Lender incurs to comply with the law.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS ASSIGNMENT OF
DEPOSIT ACCOUNT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED SEPTMEBER
13, 1993.
GRANTOR:
CHIPS AND TECHNOLOGIES, INC.
By:______________________
Name: ___________________
Title: _____________________
COLLATERAL RECEIPT
=============================================================================
BORROWER: CHIPS AND TECHNOLOGIES, INC. LENDER: Silicon Valley Bank
3050 Zanker Road 3000 Lakeside Drive
San Jose, CA 95134 P.O. Box 3762
Santa Clara, CA 95054
=============================================================================
DESCRIPTION OF COLLATERAL CUSTODY CONTROL DATE RELEASED
SIGNATURES
Silicon Valley Bank Certificate of Deposit,
Certificate No._____________, Account No.
___________________ in approximate amount
of $3,000,000.00
INITIAL DELIVERY RETURN RECEIPT INSTRUCTIONS FOR
ACKNOWLEDGMENTS: ACKNOWLEDGMENT: RETURNING COLLATERAL
AND DISPOSITION OF
Grantor acknowledges the COUPONS: _________
Grantor:___________________ receipt of all
_ collateral, including __________________
all unmatured coupons,
(Grantor's Signature) if any. __________________
Silicon Valley Bank X_______________________ __________________
____
By:________________________
(Grantor's Signature)
(Authorized Officer)
DISBURSEMENT REQUEST AND AUTHORIZATION
=============================================================================
BORROWER: CHIPS AND TECHNOLOGIES, INC. LENDER: Silicon Valley Bank
3050 Zanker Road 3000 Lakeside Drive
San Jose, CA 95134 P.O. Box 3762
Santa Clara, CA 95054
=============================================================================
LOAN TYPE. This is a Variable Rate (at SILICON VALLEY BANK PRIME RATE),
making an initial rate of 6.000%). Revolving Line of Credit Loan to a
Corporation for $3,000,000.00 due on October 5, 1994.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for (please
initial):
---
| | ______ Personal, Family or Household Purposes or Personal Investment
---
|X| ______ Business (Including Real Estate Investment).
---
SPECIFIC PURPOSE. The specific purpose of this loan is: Guarantee payments
to suppliers.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will
be disbursed until all of Lender's conditions for making the loan have been
satisfied. Please disburse the loan proceeds of $3,000,000.00 as follows:
Undisbursed Funds: $3,000,000.00
-------------
Note Principal: $3,000,000.00
AUTOMATIC PAYMENTS. Borrower hereby authorizes Lender automatically to
deduct from Borrower's account numbered __________ the amount of any loan
payment. If the funds in the account are insufficient to cover any payment,
Lender shall not be obligated to advance funds to cover the payment. At any
time and for any reason, Borrower or Lender may voluntarily terminate
Automatic Payments.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO LENDER THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT
AND THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION
AS DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO LENDER. THIS
AUTHORIZATION IS DATED SEPTEMBER 13,1993.
BORROWER:
CHIPS AND TECHNOLOGIES, INC.
By:______________________
Name: ___________________
Title: _____________________
=============================================================================
BOARDING DATA
=============================================================================
The information contained on this Boarding Data Sheet is for Lender's use
only.
=============================================================================
BORROWER: CHIPS AND TECHNOLOGIES, INC. LENDER: Silicon Valley Bank
3050 Zanker Road 3000 Lakeside Drive
San Jose, CA 95134 P.O. Box 3762
Santa Clara, CA 95054
COUNTY: Santa Clara
TIN: 77-0047943
OFFICERS: ADDRESS:
___________________ , __________________
___________________ , __________________
___________________ , __________________
___________________ , __________________
OTHER SIGNER(S): Name:_________________________, Title:_________________
ACCOUNT/CUSTOMER NUMBER: BUS. PHONE: (408) 434-0600
LOAN DESCRIPTION: This is a Variable Rate (at SILICON VALLEY BANK PRIME RATE,
making an initial rate of 6.000%). Nondisclosable Revolving Line of Credit
Loan to a Corporation for $3,000,000.00 due on October 5, 1994.
=============================================================================
FEES AND CHARGES:
Undisbursed Funds: $3,000,000.00
Note Principal: $3,000,000.00
Prepaid Finance Charges: $0.00
Amount Financed: $3,000,000.00
=============================================================================
Payment Information:
NO. OF PAYMENTS AMOUNT DUE
1 $3,000,000.00 Monthly interest payments beginning
10-05-1993
10-05-1994 plus all accrued unpaid
interest.
APR: 6.083
INT. RATE: 6.000 @ 365/360 at SILICON VALLEY BANK PRIME RATE adjusted each
time the prime rate is adjusted by Silicon Valley Bank
CURRENT INDEX: 6.000
NOT ROUNDED
RATE IN DEFAULT: Note Rate + 5.000%
TOTAL PAYMENTS: $3,096,750.00 (estimate)
LOAN TYPE: Line of Credit / Multiple Advance
AUTOMATIC PAYMENTS: Account Number ______________________
TYPE(S) OF INSURANCE PURCHASED: No Insurance Purchased.
=============================================================================
CLASSIFICATION DATA: Non Disclosable Corporation
LOAN LOAN DATE: 09-13-93 Department/ SC
NUMBER: Branch:
CALL CODE: DISBURSEMENT 09-13-93 Officer DJ
DATE:
PURPOSE MATURITY 10-05-94 Last Edit: MDG
CODE: DATE:
COLLATERAL Portfolio: TECH
CODE:
LOAN NAME: CHIPSTEC (renewable)
STD. LOAN: CORPORATE LINE OF
CREDIT
PURPOSE: Guarantee payments to
suppliers
=============================================================================
COLLATERAL INFORMATION:
OWNER INSURANCE COVERAGE
DESCRIPTION CODE AMOUNT BASIS DEDUCTIBLE
Silicon Valley Bank Certificate 2
of Deposit, Certificate
No. ________________, Account
No. _____________
(Amount $3,000,000.000)
=============================================================================
