<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended December 26, 1999
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 0-15858
IMP, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-2722142
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2830 North First Street, San Jose, CA 95134
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (408) 432-9100
------------------------------------------------------
(Former name, former address and former fiscal year if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $0.01 par value outstanding at December 26, 1999: 4,040,544
<PAGE> 2
IMP, Inc.
FORM 10-Q
THIRD QUARTER
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
Part I: Financial Information (unaudited)
Condensed Balance Sheet at December 26, 1999 and March 28, 1999 3
Condensed Statement of Operations for the three months ended
December 26, 1999 and December 27, 1998 4
Condensed Statement of Operations for the nine months ended
December 26, 1999 and December 27, 1998 5
Condensed Statement of Cash Flows for the nine months ended
December 26, 1999 and December 27, 1998 6
Notes to condensed financial statements 7
Management's discussion and analysis of financial condition
and results of operations 10
Part II: Other Information
Item 1. Legal Proceedings 18
Item 3. Defaults by the Company on its Senior Securities 18
Item 6. Reports on Form 8K 18
Signatures 19
</TABLE>
2
<PAGE> 3
IMP, Inc.
CONDENSED BALANCE SHEET
(In thousands)
(unaudited)
ASSETS
<TABLE>
<CAPTION>
DEC 26, 1999 MARCH 28, 1999
------------ --------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 631 $ 1,606
Accounts receivable - net of allowances for
doubtful accounts and returns of $217
and $2,529 6,798 9,191
Inventories 6,027 6,076
Deposits and other current assets 384 693
-------- --------
Total current assets 13,840 17,566
Leasehold improvements and equipment 91,577 91,371
Accumulated depreciation (86,160) (83,470)
-------- --------
Net leasehold improvements and equipment 5,417 7,901
Other long term assets 436 494
-------- --------
$ 19,693 $ 25,961
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt $ 6,096 $ 5,212
Trade accounts payable 2,264 6,756
Accrued payroll and related expenses 950 1,322
Other accrued liabilities 2,246 1,528
Current portion of capital lease obligations 3,047 3,216
-------- --------
Total current liabilities 14,603 18,034
Long-term portion of debt
and capital lease obligations 1,060 2,942
Stockholders' equity:
Common stock 42 35
Additional paid-in capital 74,728 72,671
Accumulated deficit (66,843) (63,824)
Treasury stock at cost (3,897) (3,897)
-------- --------
Total stockholders' equity 4,030 4,985
-------- --------
$ 19,693 $ 25,961
======== ========
</TABLE>
See notes to unaudited condensed financial statements
3
<PAGE> 4
IMP, Inc.
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------
DEC 26, 1999 DEC 27, 1998
------------ ------------
<S> <C> <C>
Net revenues $ 8,917 $ 9,755
Cost of revenues 6,595 5,901
------- -------
Gross profit 2,322 3,854
Operating expenses:
Research and development 1,137 2,748
Selling, general and administrative 860 1,048
------- -------
Operating income 325 58
Interest:
Expense (261) (266)
Income -- 20
------- -------
Net interest (261) (246)
------- -------
Net income (loss) $ 64 $ (188)
======= =======
Basic and diluted net income (loss) per share $ .02 $ (.07)
======= =======
Shares used in computing basic and
diluted net income (loss) per share 3,641 2,833
======= =======
</TABLE>
See notes to unaudited condensed financial statements.
4
<PAGE> 5
IMP, Inc.
CONDENSED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------------
DEC 26, 1999 DEC 27, 1998
------------ ------------
<S> <C> <C>
Net revenues $ 27,233 $ 23,080
Cost of revenues 21,990 18,079
-------- --------
Gross profit 5,243 5,001
Operating expenses:
Research and development 3,912 7,255
Selling, general and administrative 3,479 3,817
-------- --------
Operating loss (2,148) (6,071)
Interest:
Expense (871) (892)
Income -- 158
-------- --------
Net interest (871) (734)
-------- --------
Net loss $ (3,019) $ (6,805)
======== ========
Basic and diluted net loss per share $ (.87) $ (2.40)
======== ========
Shares used in computing basic and
diluted net loss per share 3,457 2,830
======== ========
</TABLE>
See notes to unaudited condensed financial statements.
5
<PAGE> 6
IMP, Inc.
CONDENSED STATEMENT OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
---------------------------
DEC 26, 1999 DEC 27, 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (3,019) $ (6,805)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization 2,690 3,805
Increase (decrease) from changes in:
Accounts receivable 2,393 (2,187)
Inventories 49 (2,455)
Deposits and other assets 367 (183)
Trade accounts payable (4,492) 1,019
Accrued payroll and related expenses (372) (898)
Other accrued liabilities 718 340
-------- --------
Net cash used for operating activities (1,666) (7,364)
-------- --------
Cash flows from investing activities:
Net cash used for investing activities for purchase
of capital equipment (188) (955)
-------- --------
Cash flows from financing activities:
Proceeds from credit facility 2,601 2,025
Payments of principal on credit facility (3,276) (883)
Proceeds from equipment note payable 1,731 --
Payments of principal under capital lease
obligations, net (1,475) (2,713)
Payments on notes payable (766) (626)
Proceeds from issuance of common stock 2,064 53
-------- --------
Net cash provided by (used for) financing activities 879 (2,144)
Net decrease in cash and cash equivalents (975) (10,463)
Cash and cash equivalents at beginning of the period 1,606 11,819
-------- --------
Cash and cash equivalents at end of the period $ 631 $ 1,356
======== ========
Supplemental cash flow disclosures:
Interest paid $ 871 $ 734
Supplemental non cash disclosures:
Equipment acquired under capital lease $ 18 $ 1,183
</TABLE>
See notes to unaudited condensed financial statements.
6
<PAGE> 7
IMP, Inc.
NOTES TO CONDENSED FINANCIAL
STATEMENTS
(unaudited)
1. Basis of presentation
The accompanying unaudited interim condensed financial statements have been
prepared in conformity with generally accepted accounting principles,
consistent with those applied in, and should be read in conjunction with, the
audited financial statements for the year ended March 28, 1999 included in
the Company's Annual Report on Form 10-K/A filed with the Securities and
Exchange Commission. The interim financial information is unaudited, but
reflects all adjustments consisting only of normal recurring adjustments
which are, in the opinion of management, necessary to a fair statement of
results for the interim periods presented. For financial reporting purposes,
the Company reports on a 13 or 14 week quarter and a 52 or 53 week year
ending on the Sunday closest to March 31.
2. Cash
At December 26, 1999, the Company had cash and cash equivalents of
approximately $631,000. The Company's cash balance has decreased over each of
the last several quarters. The Company entered into a new financing facility
during the quarter ended June 1999 (see Note 4, Notes Payable & Financing
Arrangements for more details).
The Company failed to make its scheduled payments due during the months of
August, September and October 1999 under certain of its credit facilities and
its equipment leases. These instances of non-payment put the Company in
default of these agreements and in default of the revolving credit facility
(see Note 4) due to a cross default charge in the revolving credit facility
agreement. The Company has renegotiated the payment terms under the equipment
notes payable amounting to $1,292,000 and capital lease obligations with an
aggregate balance of $3,047,000 as of December 26, 1999. However, the Company
has been unable to renegotiate the payment terms under one capital lease
obligation amounting to $927,000 as of December 26, 1999. The lessor has not
required acceleration of such obligation and management continues to pursue
renegotiated payment terms. As such, as of December 26, 1999, the Company
remains in default of the revolving credit facility amounting to $4,804,000
and capital lease obligations with an aggregate balance of $1,105,000 due to
cross default clauses in these agreements. As a result, the Company may not
be able to continue to draw on unused amounts under the revolving credit
facility.
The indebtedness related to agreements in which the Company remains in
default (as described above) is classified as current on the Company's
balance sheet because such creditors and lessors continue to have the right
to effectively declare the principal amount of the Company's indebtedness to
be immediately due and payable (or to exercise an equivalent remedy with
respect to a capitalized lease). The amount reclassified from long-term to
current, as of December 26, 1999 was $1,684,000.
3. Inventories
Inventories consist of:
<TABLE>
<CAPTION>
DEC 26, 1999 MARCH 28, 1999
------------ --------------
<S> <C> <C>
Raw materials $ 832 $1,103
Work-in-process 4,317 4,120
Finished goods 878 853
------ ------
$6,027 $6,076
====== ======
</TABLE>
4. Notes Payable & Financing Arrangements
Credit facility - On April 30, 1999, the Company entered into a revolving
credit facility, which includes term loans, with The CIT Group. The maximum
and minimum amount of the borrowing is $9.5 million and $2.5 million,
respectively. $7.5 million of the facility allows the Company to borrow up to
80% of eligible accounts receivable and 25% of the Company's inventory of raw
materials. Up to $1.0 million of the $7.5 million may be based on the raw
materials inventory. $2.0 million of the facility is for term loans relating
to equipment. The facility is for a minimum period to April 30, 2002. The
interest rate for the revolving credit facility is prime rate plus 1.5%, and
for the term loans is prime rate plus 2%. At March 31, 2000, if the Company's
net income for
7
<PAGE> 8
the fiscal year then ending is greater than $1.0 million, the interest rates
will be decreased by 0.5% from March 31, 2000 onward. If an event of default
occurs, an additional 1.0% interest is payable. Although the Company is in
default of this facility due to cross default clauses on other leases, the
additional interest has not been charged to the Company. If the Company has a
net loss, for that period, the interest rate will be increased by 0.5% from
March 31, 2000 onward. The facility is secured by inventory, equipment and
fixtures, and other assets, excluding all assets under lease from other
creditors. As of December 26, 1999, $3,278,000 was drawn down on the $7.5
million revolving facility, and the balance outstanding on the term loan was
approximately $1,526,000. As at December 26, 1999 all amounts due under this
facility are classified as current due to the instance of default discussed
in Note 2. This facility does not contain any restrictive financial
covenants. As a result of the defaults as discussed in Note 2, the Company
may not be able to continue to draw on unused amounts under the revolving
credit facility.
Equipment notes payable - The Company has a $5.0 million facility with an
asset based lender. Due to the decrease in the value of the assets, this
facility has been fully utilized. This note does not contain any restrictive
financial covenants. The balance outstanding under this line at December 26,
1999 was approximately $1,343,000.
The indebtedness represented by certain credit facilities and capital lease
obligations is classified as current on the Company's balance sheet due to
certain credit defaults discussed in Note 2.
5. Earnings per share
Statement of Financial Accounting Standards No. 128, Earnings per Share,
requires presentation of both basic and diluted EPS. Basic EPS is computed by
dividing net income (loss) available to common stockholders by the weighted
average number or common shares outstanding during the period. Diluted EPS is
computed using the weighted average number of common shares outstanding, plus
the effects of options and warrants outstanding during the period, except
when the inclusion of those items would be antidilutive. In computing diluted
EPS, the average stock price for the period is used in determining the number
of shares assumed to be repurchased with the proceeds from the exercise of
stock options. A reconciliation of the numerators and the denominators of the
basic and diluted per share computation is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------- ---------------------
DEC 26, DEC 27 DEC 26, DEC 27
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income (loss) $ 64 $ (188) $(3,019) $(6,805)
Shares used in per share computation:
Weighted Average Shares Outstanding 3,641 2,833 3,457 2,830
Basic and diluted income (loss) per share $ 0.02 $ (0.07) $ (0.87) $ (2.40)
======= ======= ======= =======
</TABLE>
Options to purchase 139,031 shares of common stock were outstanding at
December 26, 1999, but were not included in the computation of diluted EPS
for the three months ended December 26, 1999 because the options' exercise
price was greater than the average market price of the common shares during
the three months ended December 26, 1999. Options to purchase 261,480 shares
of common stock were outstanding at December 27, 1998 but were not included
in the computation of diluted EPS for the three months ended December 27,
1998, as the Company was in a loss position, and therefore, to do so would
have been antidilutive.
6. Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 establishes a new
model for accounting for derivatives and hedging activities. In July 1999,
the Financial Accounting Standards Board issued SFAS No. 137, "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133" ("SFAS 137"). SFAS 137 deferred the effective
date of SFAS 133 until the first fiscal year beginning after June 15, 2000.
The impact of the implementation of SFAS 133 on the consolidated financial
statements of the Company is not expected to be significant, as the Company
does not currently buy or sell derivative instruments
8
<PAGE> 9
7. Teamasia Agreements
In October 1999, the Company entered into a stock purchase agreement (the
"Agreement") under which Teamasia Semiconductors (India) Ltd., ("Teamasia"),
a corporation headquartered in India involved in the manufacturing and sale
of discrete semiconductor devices purchased an aggregate of 16.7% of the
Company's common stock outstanding for consideration of $2,050,000. The
transaction closed during the quarter ending December 26, 1999. The sale of
all of the shares and therefore the receipt of all of the $2,050,000 was
subject to the Company's compliance with certain terms and conditions. The
Company met such terms and conditions and received all of the $2,050,000
during the third quarter of fiscal 2000. The agreement places certain
restrictions on the use of the funds received by the Company for the sale of
stock under the agreement. Under the agreement, Teamasia is also obligated to
place orders with the Company for wafer fabrication through the second
quarter of fiscal 2001.
On December 15, 1999, the Company and Teamasia entered into a second stock
purchase agreement (the "Phase Two Stock Purchase Agreement") under which
Teamasia will make an additional equity investment in the Company. After the
closing of the Phase Two Stock Purchase Agreement, Teamasia will have
purchased an aggregate total of approximately 5.5 million shares, bringing
their total equity ownership in the Company to approximately 61.9%. The Phase
Two Stock Purchase Agreement will be subject to approval by the shareholders
of the Company at a meeting which will also be the Company's annual meeting
and is planned for the first or second quarter of calendar 2000. If approved
by the Company's shareholders, the transaction contemplated by the Phase Two
Stock Purchase Agreement is expected to close shortly thereafter. During the
period between December 15, 1999 and the date of approval of the Phase Two
Stock Purchase Agreement, Teamasia is required to use reasonable efforts to
provide the Company with additional financing up to the amount of the
purchase price upon commercially reasonable terms, if the Company so
requests. Such loan, if made, shall be repaid at the closing of the Phase Two
Stock Purchase Agreement. During the period between the approval date and the
date of the closing of the Phase Two Stock Purchase Agreement, if the Company
so requests, Teamasia is required to provide the Company with additional
financing up to the amount of the purchase price upon commercially reasonable
terms. Such amount shall be repaid at the closing of the Phase Two Stock
Purchase Agreement. In order for the Phase Two Stock Purchase Agreement to be
approved, the Company must receive approval of the Phase Two Stock Purchase
Agreement from its shareholders and all other required governmental approvals
and must make certain amendments to its Articles of Incorporation.
9
<PAGE> 10
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operation
Except for the historical information contained herein, the matters discussed in
this document are forward-looking statements that involve certain risks and
uncertainties, including the risks and uncertainties set forth below under
"Factors Affecting Future Results."
Results of Operations - Third Quarter of Fiscal 2000 Compared to Third Quarter
of Fiscal 1999
Net revenues for the third quarter of fiscal 2000 were $8.9 million compared to
$9.8 million for the same period of the prior year. The decrease in net revenues
was due to a decrease in foundry sales. Revenues in the immediate prior quarter
were $7.7 million.
Cost of revenues in the third quarter of fiscal 2000 was $6.6 million,
representing 74% of net revenues for that period compared to $5.9 million,
representing 60% of net revenues for the same quarter in the prior fiscal year.
Cost of revenues as a percentage of revenues in the third quarter of fiscal 2000
are higher as a result of under-utilization of fab capacity.
Research and development expenses were $1.1 million (13% of revenue) in the
third quarter of fiscal 2000 compared to $2.7 million (28% of revenue) in the
corresponding quarter of the prior fiscal year. The research and development
expenses are lower due to the engineering resources being focused on third party
consulting projects instead of internal research and development. Continuing the
Company's focus on the development of a portfolio of standard analog products is
important, however the Company believes that research and development expenses
in absolute dollars will need to be aligned to be consistent with our current
business conditions and new product development strategies.
Selling, general and administrative expenses were $860,000 (10% of net revenues)
in the third quarter of fiscal 2000 down from $1.0 million (11% of net revenues)
in the same quarter of the prior year. Included in the $860,000 is an accrual
for a potential legal settlement. The decrease was primarily due to a reduction
in expenses in marketing and sales administration and an ongoing decrease in
sales commissions associated with renegotiated commission contracts. In
addition, the Company recorded a one-time adjustment related to commission
liabilities outstanding at the start of the third quarter of fiscal 2000.
Net interest expense was $261,000 for the third quarter of fiscal 2000, compared
to $246,000 for fiscal 1999. The increase is due to a decrease in interest
income (which offsets interest expense) resulting from lower cash balances.
Net income for the third quarter of fiscal 2000 was $64,000 compared to a net
loss of $188,000 for the same period of the prior year. This resulted in net
income of $.02 per share for the third quarter of fiscal 2000 compared to $0.07
loss per share in the same period of the prior year.
Results of Operations - First Nine Months of Fiscal 2000 Compared to First Nine
Months of Fiscal 1999.
Net revenues for the nine-month period ended December 26, 1999 were $27.2
million, up 18% compared to net revenues of $23.1 million for the same period of
the prior year. The increase in net revenues was due to increased demand for the
company's standard products as well as an increase in design revenue in the
first quarter of fiscal 2000.
Cost of revenues in the nine-month period ended December 26, 1999 was $22.0
million, representing 81% of net revenues, compared to $18.1 or 78% of net
revenues in the corresponding period of the prior fiscal year. Cost of revenues
as a percentage of revenues in fiscal 2000 are higher as a result of
under-utilization of fab capacity.
Research and development expenses were $3.9 million (14% of net revenues) for
the nine-month period ended December 26, 1999 compared to $7.3 million (31% of
net revenue) in the comparable period of fiscal 1999. The decline is due to the
engineering resources being focused on third party consulting projects instead
of internal research and development. Continuing the Company's focus on the
development of a portfolio of standard analog products is important, however the
Company believes that research and development expenses in absolute dollars will
need to be aligned to be consistent with our current business conditions and new
product development strategies.
Selling, general and administrative expenses were $3.5 million (13% of net
revenues) for the nine-month period ended December 26, 1999 compared to $3.8
million (16% of net revenues) in the corresponding period of the prior year. The
$3.5 million includes an accrual for a potential legal settlement. The decrease
in absolute dollars was primarily due to a reduction in expenses in marketing
and sales administration as well as lower commission expenses associated with
renegotiated commission contracts.
10
<PAGE> 11
Net interest expense was $871,000 for the nine-month period ended December 26,
1999 compared to $734,000 for the corresponding period of the prior fiscal year.
The increase is due to a decrease in interest income as a result of lower cash
balances.
Net loss for the nine-month period ended December 26, 1999 was $3.0 million
compared to a net loss of $6.8 million for the same period of the prior fiscal
year. This resulted in net loss of $.87 per share for the nine-month period
ended December 26, 1999 compared to $2.40 loss per share in the same period of
the prior fiscal year.
Liquidity and Capital Resources
At December 26, 1999, the Company had cash and cash equivalents of approximately
$631,000. The Company's cash balance has decreased over each of the last several
quarters. On April 30, 1999, the Company entered into a $9.5 million financing
facility with The CIT Group. Included in the $9.5 million is a facility for up
to $2.0 million in secured term loans and a facility which allows the Company to
borrow up to $7.5 million based on accounts receivable and inventory balances.
During the nine-month period ended December 26, 1999, the Company's net cash
used by operations was $1.7 million compared to net cash used by operations of
$7.4 million in the nine-month period ended December 27, 1998. The net cash used
by operating activities for the nine-month period ended December 26, 1999
consisted of a net decrease in operating assets and liabilities of $1.3 million
combined with the net loss, before depreciation and amortization, of $3.0
million for the nine-month period ended December 26, 1999.. The net cash used
for operating activities for the nine-month period ended December 27, 1998
consisted primarily of the net loss, before depreciation and amortization, of
$3.0 million and an increase in net operating assets and liabilities of $4.4
million. For the nine-month period ended December 26, 1999, non-cash adjustments
consisted of depreciation and amortization expense of $2.7 million compared to
$3.8 million for the nine-month period ended December 27, 1998.
Our investing activities used cash of $188,000 for the nine-month period ended
December 26, 1999 compared to the use of $955,000 for the nine-month period
ended December 27, 1998. The decrease is due to tight capital expenditure
controls in place in order to conserve cash.
Our financing activities provided cash of approximately $879,000 during the
nine-month period ended December 26, 1999. Proceeds from a new credit facility
and equipment note payable totaled $4.3 million offset by payments of $5.5
million relating to a replaced credit facility, repayment of the amounts
initially drawn down on the new credit facility as a result of a reduced
borrowing base, payments on notes payable and payments of principal under
capital lease obligations. In addition, proceeds from the issuance of common
stock totaled $2.1 million, primarily from the Company's stock purchase
agreement with Teamasia Semiconductors (India) Ltd. For the nine-months ended
December 27, 1998 financing activities used cash of approximately $2.1 million.
Payments of principal under capital lease obligations and payments on notes
payable declined from $3.3 million for the nine-month period ended December 27,
1998 to $2.2 million for the nine-month period ended December 26, 1999 as a
result of not making scheduled payments in the second and third quarter of
fiscal 2000.
During the second and third quarters of fiscal year 2000, the Company was unable
to meets its obligations under its equipment notes payable and certain of its
capital leases. These instances of non-payment put the Company in default of
these agreements and in default of the revolving credit facility entered into in
April 1999 due to a cross default clause in the revolving credit facility
agreement. The Company has renegotiated the payment terms under the equipment
notes payable amounting to $1,292,000 and capital lease obligations with an
aggregate balance of $3,047,000 as at December 26, 1999. However, the Company
has been unable to renegotiate the payment terms under one capital lease
obligation amounting to $927,000 as at December 26, 1999. As of December 26,
1999, the lessor has not required acceleration of such obligation and management
intends to continue to pursue renegotiated payment terms. As of December 26,
1999, the Company remains in default of the revolving credit facility amounting
to $4,804,000 as at December 26, 1999 and capital lease obligations with an
aggregate total balance of $1,105,000 as at December 26, 1999 due to cross
default clauses in these agreements. As a result, the Company may not be able to
continue to draw on unused amounts under the revolving credit facility.
The Company has minimal financial resources and operating needs are funded
principally from the collection of accounts receivable. Should the cash flow
from accounts receivable be lessened or interrupted by slow collections or by a
decrease in revenue generation, the Company could very quickly again find itself
unable to meet its obligations. In addition, the Company's cash balance has
decreased over each of the last several quarters. If the Company continues to
report operating losses and negative cash flow it will
11
<PAGE> 12
need to obtain additional funding to remain in operation. There can be no
assurance that such funding will be available at reasonable rates, or terms if
at all.
In October 1999, the Company entered into a stock purchase agreement (the
"Agreement") under which Teamasia Semiconductors (India) Ltd., ("Teamasia"), a
corporation headquartered in India involved in the manufacturing and sale of
discrete semiconductor devices purchased an aggregate of 16.7% of the Company's
common stock outstanding for consideration of $2,050,000. The transaction closed
during the quarter ending December 26, 1999. The sale of all of the shares and
therefore the receipt of all of the $2,050,000 was subject to the Company's
compliance with certain terms and conditions. The Company met such terms and
conditions and received all of the $2,050,000 in the third quarter of fiscal
2000. The agreement places certain restrictions on the use of the funds received
by the Company for the sale of stock under the agreement. Under the agreement,
Teamasia is also obligated to place orders with the Company for wafer
fabrication through the second quarter of fiscal 2001.
On December 15, 1999, the Company and Teamasia entered into a second stock
purchase agreement (the "Phase Two Stock Purchase Agreement") under which
Teamasia will make an additional equity investment in the Company. After the
closing of the Phase Two Stock Purchase Agreement, Teamasia will have purchased
an aggregate total of approximately 5.5 million shares, bringing their total
equity ownership in the Company to approximately 61.9%. The Phase Two Stock
Purchase Agreement will be subject to approval by the shareholders of the
Company at a meeting which will also be the Company's annual meeting and is
planned for the first or second quarter of calendar 2000. If approved by the
Company's shareholders, the transaction contemplated by the Phase Two Stock
Purchase Agreement is expected to close shortly thereafter. During the period
between December 15, 1999 and the date of approval of the Phase Two Stock
Purchase Agreement, Teamasia is required to use reasonable efforts to provide
the Company with additional financing up to the amount of the purchase price
upon commercially reasonable terms, if the Company so requests. Such loan, if
made, shall be repaid at the closing of the Phase Two Stock Purchase Agreement.
During the period between the approval date and the date of the closing of the
Phase Two Stock Purchase Agreement, if the Company so requests, Teamasia is
required to provide the Company with additional financing up to the amount of
the purchase price upon commercially reasonable terms. Such amount shall be
repaid at the closing of the Phase Two Stock Purchase Agreement. In order for
the Phase Two Stock Purchase Agreement to be approved, the Company must receive
approval of the Phase Two Stock Purchase Agreement from its shareholders and all
other required governmental approvals and must make certain amendments to its
Articles of Incorporation.
If the shareholders of the Company do not approve this transaction with Teamasia
or the transaction does not close for some other reason, the Company's liquidity
could be adversely affected.
Factors Affecting Future Results
The Company's business, financial condition and future results of operations
have been, and may in the future, be affected by a variety of factors, including
those described below:
Cash. As discussed above in "Liquidity and Capital Resources" on December 26,
1999 the Company had very low cash balances. The Company has minimal financial
resources and operating needs are funded principally from the collection of
accounts receivable. In September 1999, the Company took steps to materially
reduce its ongoing payroll expenses and continues to keep tight control on
expenses. In October 1999, the Company entered into an equity investment
agreement with Teamasia for $2,050,000, which has been completed. In December
1999, a second stock purchase agreement was entered into with Teamasia, under
which Teamasia has agreed to make an additional investment in the Company,
subject to the satisfaction of certain conditions precedent, including approval
by the Company's shareholders. Teamasia is also placing orders with the Company
for wafer fabrication.
Stock Traded on Nasdaq SmallCap Market. On December 11, 1998, a hearing was held
before a Panel authorized by the National Association of Securities Dealers,
Inc. Board of Governors to determine whether the Company would be allowed to
maintain the listing of its common stock on the Nasdaq National Market. The
hearing addressed, among other things, the Company's compliance with the minimum
$1 per share price requirement and the $4 million net tangible assets
requirement for stock traded on Nasdaq. The Panel concluded that the Company
could retain its listing on the Nasdaq National Market if it complied with the
following conditions: (i) effect a one-for-ten reverse split of our common stock
so that the Company's closing bid price meets or exceeds the $1.00 per share for
a minimum of ten consecutive trading days; (ii) file with the Securities and
Exchange Commission (SEC) on or before February 16, 1999, a December 31, 1998
balance sheet, which, with pro forma adjustments for significant events and
transactions after such date, shows net tangible assets of at least $4.0
million; and (iii) file with the SEC on or before March 31, 1999, a balance
sheet as of a date 45 days prior thereto, which, with appropriate pro forma
adjustments, shows net tangible assets of at least $6.5 million. Effective
12
<PAGE> 13
January 13, 1999, the Company effected a one-for-ten reverse stock split, thus
addressing the minimum trading price per share requirement. On February 16, 1999
the Company filed a proforma balance sheet dated as of December 31, 1998
incorporating the effect of a February 1999 Private Placement showing net
tangible assets of $6.1 million. The Company did not satisfy the final criterion
of net tangible assets of $6.5 million by March 31, 1999. As a result, on April
7, 1999 the Company's common stock was moved from the Nasdaq National Market to
the Nasdaq SmallCap Market where it continues to trade under the symbol "IMPX."
On November 19, 1999, the Nasdaq SmallCap Market informed the Company that,
based on the net tangible assets of the Company as of the end of the third
quarter of 1999, the Company no longer met the $2,000,000 net tangible assets
requirements for continued listing on the Nasdaq SmallCap Market. The Company
provided Nasdaq with financial statements indicating that as of the end of
November, 1999 the Company had net tangible assets in excess of the level
required by Nasdaq. Management believes that the Company is now in compliance
with Nasdaq's criteria for continued listing on the Nasdaq SmallCap Market.
Because of the low volume of trading on the Nasdaq SmallCap Market, an investor
could find it more difficult to dispose of, or to obtain accurate quotations as
to the market value of, our securities. In addition, if the Company's common
stock trading price remains below $5.00 per share, trading in the Company's
common stock could also be subject to the requirements of certain rules
promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), which require additional disclosure by broker-dealers in connection with
any trades involving a stock defined as a penny stock (generally, any non-Nasdaq
equity security that has a market price of less than $5.00 per share, subject to
certain exceptions). The additional burdens imposed upon broker-dealers by such
requirements could discourage broker-dealers from trading in the Company's
common stock, which could severely limit the market liquidity of the common
stock and the ability of investors to trade our common stock.
In addition, the Company's market capitalization might decrease and stockholder
value might decrease as a result of the reverse stock split. The reverse split
increased the number of odd-lot holders of the Company's common stock.
Transaction costs involving odd-lot amounts of common stock are generally higher
on a per-share basis than transaction costs involving even-lot amounts of common
stock. Thus, the reverse split might have the effect of increasing the
transaction costs of certain of the Company's stockholders.
Dependence on Foundry Business. In the near term the Company's success depends
on its ability to attract additional business from new and existing customers
for its analog and high-voltage wafer fabrication services. During periods of
low demand, high fixed wafer fabrication costs have historically had a material
adverse effect on the Company's results of operations. For example, during the
last three-quarters of fiscal 1997, all of fiscal 1998, the first half of fiscal
1999 and the second quarter of fiscal 2000 the Company's operating results were
adversely affected by the low utilization of the Company's manufacturing
facility.
In addition, potential revenues from new and existing customers for wafer
fabrication services may be subject to delays stemming from the time involved to
(i) have the customer complete its process of reviewing and qualifying the
Company as a supplier, (ii) ramp-up suppliers of raw materials, (iii) ramp-up
the Company's production capabilities and (iv) customer's request to change
agreed fabrication schedule. Such delays may cause revenues which had been
anticipated to be recognized in one quarter to be delayed to a subsequent
quarter.
Dependence on New Analog Products. In the long term the Company's success
depends on its ability to develop new analog integrated circuit products for
existing and new applications, to introduce such products in a timely manner,
and to gain customer acceptance for its products. The development of new analog
integrated circuits is highly complex and from time to time the Company has
experienced delays in developing and introducing new products. Successful
product development and introduction depends on a number of factors including
proper new product definition, completion of design and testing of new products
on time, achievement of acceptable manufacturing yields and market acceptance of
the Company's and its customers' products. Moreover, successful product design
and development is dependent on the Company's ability to attract, retain and
motivate qualified analog design engineers, of which there are a limited number.
There can be no assurance that the Company will be able to meet these challenges
or adjust to changing market conditions as quickly and cost-effectively as
necessary to compete successfully. Due to the complexity and variety of analog
circuits, the limited number of analog circuit designers and the limited
effectiveness of computer-aided design systems in the design of analog circuits,
there can be no assurance that the Company will be able to continue to
successfully develop and introduce new products on a timely basis. The Company
seeks to design alternate source products that have already achieved market
acceptance from other vendors, as well as new proprietary IMP products. However,
there can be no assurance that any products introduced by the Company will be
accepted by customers or that any product initially accepted by the Company's
customers will result in production orders. The Company's failure to continue to
develop, introduce and sell new products successfully could materially and
adversely affect its long-term business and operating results.
13
<PAGE> 14
Dependence upon Ability to Fabricate Higher-Margin Products. The ability of the
Company to transition from the fabrication of lower-margin products to
higher-margin products, including both those developed by the Company and those
for which it serves as a third-party foundry, is very important for the
Company's future results of operations. Rapidly changing customer demands may
result in the obsolescence of existing Company inventories. There can be no
assurances that the Company will be successful in its efforts to keep pace with
changing customer demands. In this regard, the ability of the Company to develop
higher-margin products will be materially and adversely affected if it is unable
to retain its engineering personnel due to the Company's current business
climate.
Competition. Currently, the Company's principal competitors in the silicon
foundry market include American Microsystems Inc., a division of Japan Energy
Corporation, Austrian Micro Systems, GMT Microelectronics Corporation, Orbit
Semiconductor, a division of the DII Group, Tower Semiconductor, as well as
internal manufacturing facilities within its customers and excess fabrication
capacity within standard product vendors. To a lesser degree the Company also
competes with large Asian foundries, such as Chartered Semiconductor of
Singapore and TSMC of Taiwan. The Company's principal competitors for existing
and new Analog Products include Dallas Semiconductor, Linear Technology
Corporation, Linfinity Microelectronics, Maxim Integrated Products, Inc.,
Micrel, Semtech, Sipex, Supertex, Texas Instruments, Unitrode Corporation and
certain European and Asian manufacturers. Many of the Company's competitors have
substantially greater technical, manufacturing, financial and marketing
resources than the Company. The Company's international sales are primarily
denominated in U.S. currency. Consequently, changes in exchange rates that
strengthen the U.S. dollar could increase the price in local currencies of the
Company's products in foreign markets and make the Company's products relatively
more expensive than competitor's products that are denominated in local
currency.
Due to the current excess of supply over demand for semiconductors of all types,
including both foundry services and analog integrated circuits, the Company
expects continued strong competition from existing suppliers as well as the
entry of new competitors. Such competitive pressures could reduce the market
acceptance of the Company's products and result in market price reductions and
increases in expenses that could adversely affect the Company's business,
financial condition or results of operations.
Patents and Licenses. Although the Company is not currently a party to any
material litigation relating to patents and other intellectual property rights,
because of technological developments in the semiconductor industry, it is
possible that certain of the Company's designs or processes may involve
infringement of existing patents. There can be no assurance that any patent
owned by the Company will not be invalidated, circumvented or challenged, that
the rights granted thereunder will provide competitive advantages to the Company
or that any of the Company's pending or future patent applications will be
issued. The Company has from time to time received, and may in the future
receive, communications from third parties asserting patents, maskwork rights,
or copyrights on certain of our products and technologies. The Company has been
contacted by the Lemelson Medical Foundation. This foundation has filed patent
violation legal actions against 88 semiconductor companies. The Company is
currently not one of the defendants in this action but might be added at a later
date if final negotiations with the Lemelson Medical Foundations are not
successful. Although we are not currently a party to any material litigation, if
a third party were to make a valid intellectual property claim and a license
were not available on commercially reasonable terms, our operating results could
be materially and adversely affected. Litigation, which could result in
substantial cost to us and diversion of our resources, may also be necessary to
enforce our patents or other intellectual property rights or to defend us
against claimed infringement of the rights of others.
Manufacturing. The fabrication of integrated circuits is a highly complex and
precise process. Minute impurities, contaminants in the manufacturing
environment, difficulties in the fabrication process, defects in the masks used
to print circuits on a wafer, manufacturing equipment failure, wafer breakage or
other factors can cause a substantial percentage of wafers to be rejected or
numerous die on each wafer to be nonfunctional. The majority of the Company's
costs of manufacturing are relatively fixed, and, consequently, the number of
shippable die per wafer for a given product is critical to the Company's results
of operations. To the extent the Company does not achieve acceptable
manufacturing yields or experiences product shipment delays, its financial
condition or results of operations would be materially and adversely affected.
The Company has from time to time in the past experienced lower than expected
production yields, which have delayed product shipments and adversely affected
gross margins. Moreover, there can be no assurance that the Company in general
will be able to maintain acceptable manufacturing yields in the future.
The Company manufactures all of its wafers at the one fabrication facility in
San Jose. Given the unique nature of the Company's processes, it would be
difficult to arrange for independent manufacturing facilities to supply such
wafers in a short period of time. Any prolonged inability to utilize the
Company's manufacturing facility as a result of fire, natural disaster or
otherwise, would have a material adverse effect on the Company's financial
condition or results of operations. Although it believes that it has adequate
capacity to support its near term plans, the Company has in the past
subcontracted the fabrication of a portion of its wafer production to outside
foundries, and may need to do so again. At the present time, there are several
wafer foundries that are capable of supplying certain of
14
<PAGE> 15
the Company's needs. However, there can be no assurance that the Company will
always be able to find the necessary foundry capacity.
Due to the relatively long manufacturing cycle for integrated circuits, the
Company builds some of its inventory in advance of receiving orders from its
customers. As a consequence of inaccuracies inherent in forecasting demand for
such products, inventory imbalances periodically occur that result in surplus
amounts of some Company products and shortages of others. Such shortages can
adversely affect customer relationships; surpluses can result in larger than
desired inventory levels, or inventory adjustments.
The Company's backlog consists of distributor and OEM customer orders required
to be shipped within six months following the order date. Customers may
generally cancel or reschedule orders to purchase products without significant
penalty to the customer. As a result, to reflect changes in their needs,
customers frequently revise the quantities of the Company's products to be
delivered and their delivery schedules. Since backlog can be canceled or
rescheduled without significant penalty, the Company does not believe its
backlog is a meaningful indicator of future revenue. In addition, the Company's
backlog includes its orders from domestic distributors as to which revenues are
not recognized until the products are sold by the distributors. Such products
when sold may result in revenue lower than the stated backlog amounts as a
result of discounts that are authorized by the Company at the time of sale by
the distributors.
Furthermore, the Company is dependent on a number of subcontractors for
performance by the Company of certain of its manufacturing processes, such as
epitaxial deposition services. The failure of any of these subcontractors to
perform these processes on a timely basis could result in manufacturing delays,
which could materially adversely affect the Company's results of operations.
Currently, the Company purchases certain materials, including silicon wafers, on
a purchase order basis from a limited number of vendors. Any delay, disruption
or termination of supply from any of these suppliers could have a material
adverse effect on the Company's financial condition and results of operations.
The packaging of the Company's products is performed by a limited group of third
party subcontractors located predominantly in Asian and Pacific Rim countries,
including Indonesia. Certain of the raw materials included in such products are
obtained from sole source suppliers. Although the Company seeks to reduce its
dependence on its sole and limited source suppliers, disruption or termination
of any of these sources could occur and such disruptions could have a material
adverse effect on the Company's financial condition or results of operations. In
the event that any of the Company's subcontractors were to experience financial,
operational, production or quality assurance difficulties resulting in a delay,
reduction or interruption in supply to the Company, the Company's operating
results would be adversely affected until alternate subcontractors, if any,
became available.
Environmental and Safety Regulation. Federal, state, and local regulations
impose a variety of safety and environmental controls on the storage, handling,
discharge and disposal of certain chemicals and gases used in semiconductor
manufacturing. The Company's facilities have been designed to comply with these
regulations, and it believes that its activities are conducted in material
compliance with such regulations. There can be no assurance, however, that
interpretation and enforcement of current or future environmental regulations
will not impose costly requirements upon the Company. Any failure of the Company
to control adequately the storage, use and disposal of regulated substances
could result in future liabilities.
While the Company to date has not experienced any materially adverse effects on
its business from safety and environmental regulations, there can be no
assurance that changes or new interpretations of such regulations will not
impose costly equipment, facility or other requirements.
Year 2000 Issues
General. The Company is currently conducting a company-wide Year 2000 readiness
program (the Y2K program). The Y2K program is addressing the issue of computer
programs and embedded computer chips being able to distinguish between the year
1900 and the year 2000. Any of such systems and equipment, including integrated
circuits, computers and manufacturing equipment, sold or used by the Company,
its customers and its suppliers, that recognize a date code field of "00" as the
year 1900 rather than the year 2000 could cause such systems or equipment to
malfunction prior to or in the year 2000 and lead to significant business
delays, additional expenses and disruptions in service or operations. As a
result, the systems and equipment of all business organizations containing
integrated circuits, software or computer hardware may need to be upgraded or
replaced in order to resolve the potential impact of this misinterpretation and
the resulting errors or system failures and to make such systems, equipment and
software Year 2000 compliant.
15
<PAGE> 16
The Company's Y2K program is divided into four sections - (1) IMP Manufactured
Products, (2) Internal Information Technology (IT) Systems, (3) Manufacturing
Systems and Equipment, and (4) Third Party Suppliers and Customers. The Y2K
program is divided into three phases (i) inventorying potential Year 2000 items,
(ii) assessing the Year 2000 compliance of items determined to be material to
the Company; and (iii) repairing or replacing such material items. The Company
has substantially completed the first two phases of work required to achieve
Year 2000 compliance requirement and in Phase Three it has repaired or replaced
the majority of items on its inventory.
Through December 26, 1999, the Company has incurred less than $200,000.00 in
expenses associated with making its systems and equipment Year 2000 compliant.
Based on the preliminary results of the assessment and the modifications
completed to date, the Company believes that the total cost for year 2000
compliance will not exceed $200,000. However, there can be no assurance that any
such assessments and updates will be completed on a timely basis, if at all, or
within estimated budgets, or that any required updates or corrections will work
as anticipated in the year 2000.
Impact on Sales of IMP Manufactured Products. The Company designs its products
both internally and through third party design providers. Both sources of
product design rely on licenses of third party technology for certain aspects of
these designs. The Company has done an internal assessment of the Year 2000
compliance of certain of its stand-alone products, and the Company believes that
these products are designed so that they are not dependent on embedded software
or hardware that relies on a date code field and, therefore, such products are
Year 2000 compliant. The Company also manufactures wafers containing designs
implemented by its customers. It has no knowledge of the Year 2000 compliance of
such products. To the extent that date information is necessary for the proper
functioning of the Company's and its customer's products, the products rely on
date information from other manufacturer's devices resident in the networks or
systems in which they operate. Thus, any Year 2000 problems within these third
party products or systems could cause the such products not to work accurately
and/or without disruption, if at all, with other companies' devices and systems.
Any failure of these products to be Year 2000 compliant would result in the
malfunctioning of such products or of the systems in which such products
operate. Any failure of the Company's products, its customers designs or any
third party products on which the Company's products rely or any third party
products which incorporate certain of the Company's licensed designs or
technologies to be Year 2000 compliant could result in a substantial decline in
the Company's revenues or could result in the Company's incurring substantial
unexpected expenses associated with product returns, warranty claims and claims
for consequential damages and would materially adversely affect the Company's
business, results of operations and financial condition.
Internal Information Technology (IT) System. With respect to its internal IT
computer systems, the Company is now in Phase Three of the Y2K program. It has
evaluated and has replaced or has tested operating systems for the critical
computers used for its management information systems. Many applications
programs have been modified and the majority of such programs are expected to be
modified as required. The Company is also in Phase Three for its non-IT systems,
such as personal computers.
Manufacturing Systems and Equipment. The Company relies on a number of embedded
programs, computer systems and applications to operate and monitor the design,
control and manufacturing aspects of its business. These include its automated
design software and its fabrication, test and physical plant equipment with
embedded hardware and/or software. With respect to such items, the Company is
now in Phase Three of the Y2K program. It has evaluated and has replaced or has
tested modifications for the majority of such systems.
Third Party Suppliers and Customers. The Company has contacted the majority of
its key suppliers and contract manufacturers to assess the possible effects of
their Year 2000 readiness on the Company's business. Although many of these
suppliers and contract manufacturers have notified the Company that they have
been addressing the problem, they have not provided specific assurance regarding
the Year 2000 compliance of their systems and software. The Company's reliance
on suppliers and contract manufacturers and, therefore, on the proper
functioning of their information systems and software, means that failure of
such key suppliers and contract manufacturers to address Year 2000 issues could
have a material impact on the Company's operations and financial results.
In addition to its suppliers and contract manufacturers, the Company relies on a
large variety of business enterprises such as customers, creditors, financial
organizations, and domestic and international governmental entities for the
accurate exchange of data. Any disruption in the computer systems of any of
these third parties could materially and adversely affect the Company.
Summary. The Company has not established detailed contingency plans for the Year
2000 issues. The Company will evaluate the need for such plans.
16
<PAGE> 17
Many of the Company's products, systems, suppliers and customers address markets
that are vulnerable to technological issues involving the Year 2000, therefore
substantially all of the Company's revenues may be at risk. Despite the
Company's efforts to address the Year 2000 impact on its products, internal
systems and business operations, the Year 2000 issue may result in a material
disruption of its business or have a material adverse effect on the Company's
business, financial condition or results of operations.
17
<PAGE> 18
IMP, Inc.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
The previously disclosed securities class action and derivative lawsuits
filed against the Company and certain of its present and former officers and
directors have been settled and all claims dismissed with prejudice.
Item 3. Defaults by the Company on its Senior Securities
The Company has failed to make its scheduled payments due during the
months of August, September, and October 1999 under its credit facilities and
certain of its equipment leases, for a total aggregate amount of $1,035,654 (See
Note 2 to Condensed Financial Statements).
Item 6. Reports on Form 8-K.
NO REPORTS ON FORM 8-K WERE FILED DURING THE THREE MONTHS ENDED DECEMBER
26, 1999.
<TABLE>
<S> <C>
Exhibit 10.1 Stock Purchase Agreement dated as of October 8, 1999 between the
Company and Teamasia Semiconductors (India) Ltd.
Exhibit 10.2 Phase Two Stock Purchase Agreement, dated as of December 15, 1999
between the Company and Teamasia Semiconductors PTE Ltd.
Exhibit 27.1 Financial Data Schedule.
</TABLE>
18
<PAGE> 19
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.
IMP, Inc.
Registrant
/s/ BRAD WHITNEY
-----------------------------------
February 9, 2000 Brad Whitney, President and Chief
Executive Officer
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
Exhibit
No. Description
- - - - ------- -----------
<S> <C>
10.1 Stock Purchase Agreement dated as of October 8, 1999 between the
Company and Teamasia Semiconductors (India) Ltd.
10.2 Phase Two Stock Purchase Agreement, dated as of December 15, 1999
between the Company and Teamasia Semiconductors PTE Ltd.
27.1 Financial Data Schedule
</TABLE>
<PAGE> 1
EXHIBIT 10.1
IMP, Inc.
--------------------------------------------------------
STOCK PURCHASE AGREEMENT
Dated as of October 8, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1 PURCHASE AND SALE OF STOCK..............................................1
SECTION 1.1. Delivery.......................................................1
Article 2 REPRESENTATIONS AND WARRANTIES OF COMPANY...............................1
SECTION 2.1. Organization, Standing and Qualification.......................1
SECTION 2.2. Capitalization.................................................1
SECTION 2.3. Validity of Stock..............................................2
SECTION 2.4. Subsidiaries...................................................2
SECTION 2.5. Financial Statements...........................................2
SECTION 2.6. Authorization; Approvals.......................................2
SECTION 2.7. No Conflict with Other Instruments.............................3
SECTION 2.8. Absence of Undisclosed Liabilities; Changes....................3
SECTION 2.9. Patents. Trademarks and Other Intangible Assets...............3
SECTION 2.10. Taxes..........................................................3
SECTION 2.11. Litigation.....................................................4
SECTION 2.13. Private Offering...............................................4
SECTION 2.14. Fees and Commissions...........................................4
SECTION 2.15. Compliance with Environmental Laws.............................4
Article 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER..............5
SECTION 3.1. Authorization..................................................5
SECTION 3.2. Investment Representations.....................................5
SECTION 3.3. Investment Experience; Access to Information...................5
SECTION 3.4. Absence of Registration........................................5
SECTION 3.5. Restrictions on Transfer.......................................5
SECTION 3.6. Transfer Instructions..........................................6
SECTION 3.7. Economic Risk..................................................6
SECTION 3.8. Fees and Commissions...........................................6
SECTION 3.9. Purchaser's Board of Directors Designee........................6
SECTION 3.10. Payment of Certain Expenses....................................7
SECTION 3.11. Wafer Purchase Commitment......................................7
Article 4 CONDITIONS TO OBLIGATIONS OF THE PURCHASER..............................7
SECTION 4.1. Conditions to Obligations of the Purchaser....................7
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 5 CONDITIONS TO OBLIGATIONS OF COMPANY....................................8
SECTION 5.1. Conditions to Obligations of the Company......................8
Article 6 AFFIRMATIVE COVENANTS...................................................8
SECTION 6.1. Use of Proceeds................................................8
SECTION 6.2. Piggy-Back Registrations.......................................8
SECTION 6.3. Officers of the Company........................................9
SECTION 6.4. Right of First Offer...........................................9
Article 7 MISCELLANEOUS..........................................................10
SECTION 7.1. Survival of Agreements........................................10
SECTION 7.2. Notices.......................................................11
SECTION 7.3. Modifications; Waiver.........................................11
SECTION 7.4. Exculpation...................................................12
SECTION 7.5. Entire Agreement..............................................12
SECTION 7.6. Successors and Assigns........................................12
SECTION 7.7. Enforcement...................................................12
SECTION 7.8. Execution and Counterparts....................................12
SECTION 7.9. Governing Law and Severability................................12
SECTION 7.10. Headings......................................................13
SECTION 7.11. Confidentiality...............................................13
SECTION 7.12. No Solicitation...............................................13
SECTION 7.13. Termination...................................................14
SECTION 7.14. Indemnification...............................................14
SECTION 7.15. Teamasia's Future Investments in the Company..................15
ANNEX I - ADDITIONAL PURCHASER REPRESENTATIONS.......................................I-1
DISCLOSURE SCHEDULE .................................................................S-1
SCHEDULE 1.1 - CLOSING DATES......................................................S1.1-1
SCHEDULE 2.2(b) - WARRANTS.....................................................S2.2(b)-1
SCHEDULE 2.9 - PATENTS............................................................S2.9-1
SCHEDULE 2.10 - TAXES............................................................S2.10-1
SCHEDULE 2.12 - DEFAULT OF OBLIGATIONS ..........................................S2.12-1
SCHEDULE 3.11 - FOUNDRY SERVICES.................................................S3.11-1
EXHIBIT A - FORM OF LEGAL OPINION....................................................A-1
</TABLE>
-ii-
<PAGE> 4
STOCK PURCHASE AGREEMENT
Agreement, dated as of October 8, 1999 between IMP, Inc., a Delaware
corporation (the "Company") and Teamasia Semiconductors (India) Ltd., a limited
Indian corporation (the "Purchaser").
ARTICLE 1
PURCHASE AND SALE OF STOCK
SECTION 1.1. Delivery. Subject to the provisions of this Agreement, the
Purchaser agrees to purchase at the Closings (as defined below), and the Company
agrees to sell and issue to the Purchaser at the Closings, 671,173 shares (the
"Shares") of Common Stock of the Company, for the aggregate purchase price of
$2,050,000 ($3.05 per share). The purchase and sale of Shares (in the amounts
specified on Schedule 1.1) shall take place at the offices of the Company at
10:00 a.m. West Coast time on the dates set forth on Schedule 1.1, or at such
other time and place as the Company and Purchaser mutually agree upon in writing
(which time and place are designated as the "Closings" and which date is
designated as the "Closing Dates"). At each Closing, commencing with the October
15 Closing (at which Closing the Company shall deliver certificates representing
the Shares purchased on both the October 8, 1999 and October 15, 1999 Closing
Date), the Company shall deliver to the Purchaser a certificate representing the
Common Stock which the Purchaser is purchasing against delivery to the Company
by the Purchaser by wire transfer, certified check for immediately available
funds, or other manner approved by the Company, in the amount of the purchase
price therefor payable to the Company's order.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants that, except as set forth in the
Disclosure Schedules:
SECTION 2.1. Organization, Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and corporate authority to
own, lease and operate its property and assets and to conduct its business as
presently conducted and as proposed to be conducted by it. The Company has full
corporate power and corporate authority to enter into and perform its
obligations under this Agreement, to carry out the transactions contemplated by
this Agreement. The nature of the Company's business and its ownership or
leasing of property do not require that the Company become qualified as a
foreign corporation in any state or jurisdiction where it is not qualified,
other than where the failure to so qualify will not have a material adverse
effect on the Company. Complete and correct copies of the articles and by-laws
of the Company, as amended to date, have been delivered to counsel for the
Purchaser.
SECTION 2.2. Capitalization.
(a) The capital stock of the Company consists of 50,000,000 shares of
authorized common stock, par value $0.01 per share ("Common Stock"), of which
3,372,731 shares are
<PAGE> 5
issued and outstanding as of the date of this Agreement and 617,279 shares are
reserved for issuance pursuant to employee stock purchase and/or option
ownership plans that have been adopted by the Company for officers, directors,
employees and consultants.
(b) Except as set forth on Schedule 2.2, there are (i) no outstanding
warrants, options, convertible securities or rights to subscribe for or purchase
any capital stock or other securities from the Company, (ii) to the Company's
knowledge, no voting trusts or voting agreements among, or irrevocable proxies
executed by, shareholders of the Company, and (iii) no obligations (contingent
or otherwise) of the Company to purchase, redeem or otherwise acquire any shares
of its capital stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
SECTION 2.3. Validity of Stock. The Common Stock to be sold pursuant to
this Agreement, when issued, sold, and delivered in accordance with the terms of
this Agreement, will be duly and validly issued, fully paid and non-assessable.
SECTION 2.4. Subsidiaries. The Company does not own any capital stock,
partnership interests or other equity interests of, or control, directly or
indirectly, any other corporation, partnership, association or business entity.
SECTION 2.5. Financial Statements. (a) The Company has furnished the
Purchaser with its audited financial statements as of and for the year ended
March 28, 1999, and an audited balance sheet as of March 28, 1999 (the "Balance
Sheet") (together, the "1999 Financial Statements"). The 1999 Financial
Statements and the Balance Sheet are true and correct in all material respects,
are in accordance with the books and records of the Company, and have been
prepared in accordance with generally accepted accounting principles ("GAAP")
consistently applied, and fairly present the financial position of the Company
as of such date and the results of its operations for the periods then ended.
(b) The unaudited balance sheet of the Company as of June 30, 1999 (the
"Current Balance Sheet") and the related unaudited statements of profit and loss
and cash flow, including the footnotes thereto (collectively, the "Current
Financial Statements"), for the three months then ended, a copy of which has
been made available to the Purchaser, fairly present, in conformity with
generally accepted accounting principles, applied on a basis consistent with the
financial statements referred to in subsection (a) of this Section, the
financial position of the Company as of such date and its results of operations
(subject to normal year-end adjustments). The 1999 Financial Statements and
Current Financial Statements are hereinafter referred to as the "Financial
Statements".
SECTION 2.6. Authorization; Approvals. All action on the part of the
Company and its shareholders necessary for the authorization, execution,
delivery, and performance of all its obligations under this Agreement and for
the authorization, issuance, and delivery of the Common Stock being sold under
this Agreement, has been taken. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms. The Company has obtained or will obtain prior to the Closings
all necessary consents, authorizations, approvals and orders, and has made all
registrations, qualifications, designations, declarations or filings with all
federal, state, or other relevant
2
<PAGE> 6
governmental authorities required on the part of the Company in connection with
the consummation of the transactions contemplated by this Agreement.
SECTION 2.7. No Conflict with Other Instruments. The execution, delivery
and performance of this Agreement does not and will not result in any violation
of, conflict with, or constitute a default under any terms or provision of (i)
the Company's articles of incorporation or bylaws; (ii) any judgment, decree or
order to which the Company is a party or by which its property is bound; (iii)
any agreement, contract, understanding, indenture or other instrument to which
the Company is a party, the effect of which would give rise to a material
adverse effect on the Company; or (iv) any statute, rule or governmental
regulation applicable to the Company or any of its property.
SECTION 2.8. Absence of Undisclosed Liabilities; Changes. (a) To its
knowledge, the Company has no liability or obligation, which would have a
material adverse effect on the Company, absolute or contingent, including,
without limiting the generality of the foregoing, any tax liabilities due or to
become due, not reflected in the Current Balance Sheet, except (i) obligations
and liabilities incurred after the date of the Current Balance Sheet in the
ordinary course of business that are not individually or in the aggregate
material, (ii) obligations under contracts made in the ordinary course of
business that would not be required to be reflected in financial statements
prepared in accordance with GAAP and (iii) obligations under this Agreement.
Without limiting the generality of the foregoing, the Company does not know of,
and has no reasonable ground to believe that there is any basis for the
assertion against the Company of, any material liabilities of the Company.
SECTION 2.9. Patents. Trademarks and Other Intangible Assets.
(a) The Company has taken otherwise reasonable security measures to
protect the secrecy, confidentiality and value of all material intellectual
property of the Company.
(b) To the knowledge of the Company, the Company has title and ownership
(or licenses to use in various cases) of all patents, trademarks, service marks,
trade names, copyrights, trade secrets, and other intellectual property rights
necessary for its business as now conducted or as currently proposed to be
conducted without any known conflict with or infringement of the rights of
others. Except as disclosed in Schedule 2.9 hereto, the Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or other intellectual property rights of any
other person or entity where any such allegation, if true, would be reasonably
likely to have a material adverse effect on the Company.
SECTION 2.10. Taxes. The Company has accurately prepared and timely
filed all federal, state and local reports, returns, estimates, declarations,
information returns and statements with respect to taxes (together, "Tax
Returns") that are required to be filed by it and has paid or made provision for
the payment of all taxes due with respect to the periods covered by such Tax
Returns, in all material respects. Except as disclosed in Schedule 2.10, no
deficiency assessment or proposed adjustment of federal income taxes or state or
municipal taxes of the Company is pending and the Company has no knowledge of
any proposed liability for any
3
<PAGE> 7
tax to be imposed where any such assessment or proposed adjustment, if adversely
decided, would be reasonably likely to have a material adverse effect on the
Company. For the purpose of this Section 2.10, "tax" or "taxes" shall mean all
federal, state, local or foreign taxes, including but not limited to income,
gross receipts, windfall profits, alternative minimum, value added, severance,
property, production, sales, use, license, excise, franchise, employment,
withholding or similar taxes, together with any interest, additions or penalties
with respect thereto and any interest in respect of such additions or penalties.
SECTION 2.11. Litigation. Except as otherwise set forth herein, no
action, proceeding or governmental inquiry or investigation is pending or to the
knowledge of the Company threatened against (i) the Company or any of its
officers, directors or employees (in their capacity as such), (ii) any of the
Company's properties or (iii) to the knowledge of the Company, any material
consultant to the Company, in any case before any court, arbitration board or
tribunal or administrative or other governmental agency, nor is the Company
aware that there is any basis for the foregoing, where any such action,
proceeding, inquiry or investigation, if adversely decided, would be reasonably
likely to have a material adverse effect on the Company.
SECTION 2.12. Relationship with Creditors. The Company is presently in
default of its monetary obligations to the parties listed in Schedule 2.12, as
described therein.
SECTION 2.13. Private Offering. The Company agrees that neither the
Company nor anyone acting on its behalf has offered or will offer securities of
the Company or any part thereof or any similar securities for issuance or sale
to, or solicit any offer to acquire any of the same from, anyone so as to make
the issuance and sale of the Common Stock not exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"). None of the shares of the Company's capital stock issued and
outstanding has been offered or sold in such a manner as to make the issuance
and sale of such shares not exempt from such registration requirements, and all
such shares of capital stock have been offered and sold in compliance with all
applicable federal and state securities laws.
SECTION 2.14. Fees and Commissions. The Company has not retained, or
otherwise authorized to act, any finder, broker, agent, financial advisor or
other intermediary (collectively, "Intermediary") in connection with the
transactions contemplated by this Agreement and the Company shall indemnify and
hold harmless the Purchaser from liability for any compensation, to any
Intermediary retained or otherwise authorized to act by, or on behalf of, the
Company and the fees and expenses of defending against such liability or alleged
liability.
SECTION 2.15. Compliance with Environmental Laws. To the knowledge of
the Company, it is not in violation of any agreement, instrument, judgment,
decree, or order, or federal, state, local or foreign statute, ordinance, rule
or regulation applicable to or binding upon it (including but not limited to any
environmental laws, rules and regulations), the violation of which would be
reasonably likely to have a material adverse effect on the Company. To the
knowledge of the Company, there is no contamination of any real property leased
or operated by the Company that could subject the Company to liability in excess
of $50,000 under any environmental laws or regulations.
4
<PAGE> 8
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser represents and warrants that:
SECTION 3.1. Authorization. The Purchaser has full power and authority
to enter into and to perform this Agreement in accordance with its terms. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a valid and legally binding obligation of the Purchaser.
SECTION 3.2. Investment Representations. The Purchaser is acquiring the
Common Stock for the Purchaser's own account, for investment purposes and not
with a view to, or for sale in connection with, any distribution of such
securities or any part thereof in violation of federal or state securities laws.
SECTION 3.3. Investment Experience; Access to Information. (a) The
Purchaser or a person acting in its capacity as "purchaser representative" (as
defined in Regulation D of the Securities Act) for the Purchaser, is an
"accredited investor" as that term is defined in Rule 501(a) promulgated under
the Securities Act, is a sophisticated investor; is able to fend for itself in
the transactions contemplated by this Agreement, has such knowledge and
experience in financial, business and investment matters as to be capable of
evaluating the merits and risks of this investment, has the ability to bear the
economic risks of this investment, has been furnished with or has had access to
such information as is specified in subparagraph (b)(2) of Rule 502 promulgated
under the Securities Act, was not organized or reorganized for the specific
purpose of acquiring the Common Stock purchased by it and has been afforded the
opportunity to ask questions of, and to receive answers from, the Company and to
obtain any additional information, to the extent the Company has or could have
acquired such information without unreasonable effort or expense, all as
necessary for the Purchaser or "purchaser representative" to make an informed
investment decision with respect to the purchase of the Common Stock. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Article 2 of this Agreement or the right of the Purchaser to
rely thereon.
(b) In addition to the foregoing, the Purchaser acknowledges, represents
and warrants, as applicable, as set forth in Annex I hereto.
SECTION 3.4. Absence of Registration. The Purchaser understands that the
Common Stock to be sold and issued hereunder may not be sold by the Purchaser
unless it is subsequently registered under the Securities Act, or an exemption
from such registration is available.
SECTION 3.5. Restrictions on Transfer. The Purchaser agrees that (a) it
will not offer, sell, pledge, hypothecate, or otherwise dispose of the Common
Stock other than to its "affiliates" unless such offer, sale, pledge,
hypothecation or other disposition is (i) registered under the Securities Act,
or (ii) in compliance with an opinion of counsel to the Purchaser, delivered to
the Company and reasonably acceptable to it, to the effect that such offer,
sale, pledge, hypothecation or other disposition thereof does not violate the
Securities Act, and (b) the certificate(s) representing the Common Stock shall
bear a legend stating in substance:
5
<PAGE> 9
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED OTHER THAN TO AFFILIATES (AS DEFINED) OF THE REGISTERED
HOLDER HEREOF UNLESS AND UNTIL REGISTERED UNDER SAID ACT OR, IN THE
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
DOES NOT VIOLATE THE PROVISIONS THEREOF.
For purposes of this Section 3.5, "affiliate" of any Purchaser means (i)
any entity more than 10% of the voting stock or other voting interest of which
is owned, directly or indirectly through one or more intermediaries, by the
Purchaser, (ii) any entity which owns, directly or indirectly through one or
more intermediaries, more than 10% of the voting stock of the Purchaser, (iii)
any entity of which 10% or more of the voting stock is owned by an affiliate of
the Purchaser, and (iv) with respect to a Purchaser that is a trust, a grantor
or beneficiary of such trust or other entity under the control of such grantor
or beneficiary. Upon request of a holder of Common Stock the Company shall
remove the legend set forth above from the certificates evidencing such Common
Stock or issue to such holder new certificates therefor free of such legend, if
with such request the Company shall have received an opinion of counsel selected
by the holder and reasonably satisfactory to the Company, in form and substance
reasonably satisfactory to the Company, to the effect that such Preferred or
Common Stock is not required by the Securities Act to continue to bear the
legend.
SECTION 3.6. Transfer Instructions. The Purchaser agrees that the
Company may provide for appropriate transfer instructions to implement the
provisions of Section 3.5 hereof.
SECTION 3.7. Economic Risk. The Purchaser understands that it must bear
the economic risk of the investment represented by the purchase of Common Stock
for an indefinite period.
SECTION 3.8. Fees and Commissions. The Purchaser represents and warrants
that it has retained, or otherwise authorized to act, no Intermediary in
connection with the transactions contemplated by this Agreement and agrees to
indemnify and hold harmless the Company from liability for any compensation to
any Intermediary retained or otherwise authorized to act by, or on behalf of,
the Purchaser and the fees and expenses of defending against such liability or
alleged liability.
SECTION 3.9. Purchaser's Board of Directors Designee. Promptly after the
initial Closing Date on October 8, 1999, the Company's Board of Directors shall
take the necessary steps to add a person designated by the Purchaser as a member
of the Company's Board of Directors. In connection therewith, the Purchaser's
designee shall resign from the Board of Directors immediately upon any failure
by the Purchaser to complete the acquisition of any Shares in accordance with
the provisions hereof including, but not limited to, Schedule 1.1.
6
<PAGE> 10
SECTION 3.10. Payment of Certain Expenses. The Purchaser agrees to pay
all of the fees and expenses of Gerbsman Partners incurred in connection with
the restructuring of the Company's debt up to $250,000.
SECTION 3.11. Wafer Purchase Commitment. The Purchaser hereby agrees to
purchase wafers from the Company for the Company's third fiscal quarter 2000,
and in an amount not less than 25% of the Company's installed capacity for the
fourth fiscal quarter 2000 and the first and second fiscal quarters 2001. Such
wafer purchase commitment shall be for the price and upon the other terms and
conditions, set forth on Schedule 3.11 and in accordance with a wafer purchase
agreement to be negotiated in form and substance satisfactory to both parties.
ARTICLE 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
SECTION 4.1. Conditions to Obligations of the Purchaser. The obligation
of the Purchaser on each of the Closing Dates to purchase the Common Stock under
this Agreement and in accordance with Schedule 1.1 shall be subject to each of
the following conditions precedent, any one or more of which may be waived by
the Purchaser:
(a) Representations and Warranties. The representations and warranties
made by the Company herein shall be true and accurate in all material respects
on and as of each of the Closing Dates as if made on each of the Closing Dates
(unless otherwise provided below).
(b) Performance. The Company shall have performed and complied with all
agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to or at each of the Closings in all
material respects.
(c) Consents, etc. The Company shall have secured all permits, consents
and authorizations that shall be necessary or required lawfully to consummate
this Agreement, to issue the Common Stock to be purchased by the Purchaser.
(d) Compliance Certificates. The Company shall have delivered to the
Purchaser or its representative at each of the Closings an Officer's Certificate
to the effect that, to such Officer's knowledge, all conditions specified in
Sections 4.1(a) through (c), inclusive, have been fulfilled.
(e) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchaser and its counsel, and the
Purchaser and its counsel shall have received all such counterpart originals or
certified or other copies of such documents as the Purchaser or its counsel may
reasonably request.
(f) Opinion of Company's Counsel. On the initial Closing Date, October
8, 1999, the Purchaser shall have received from Orrick, Herrington & Sutcliffe
LLP, counsel for the
7
<PAGE> 11
Company, an opinion, dated the initial Closing Date and reasonably satisfactory
in form and substance to the Purchaser and its counsel, and in the form attached
hereto as Exhibit A.
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF COMPANY
SECTION 5.1. Conditions to Obligations of the Company. The obligation of
the Company at each of the Closings to issue and sell the Common Stock to be
purchased under this Agreement shall be subject to the following conditions
precedent, which may be waived by the Company:
(a) Representations and Warranties. The representations and warranties
made by the Purchaser herein shall be true and accurate in all material respects
on and as of each of the Closing Dates as if made on each of the Closing Dates
(unless otherwise provided below).
(b) Performance. The Purchaser shall have performed and complied with
all agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to or at each of the Closings in all
material respects.
(c) Compliance Certificates. The Purchaser shall have delivered to the
Company or its representative at each of the Closings an Officer's Certificate
to the effect that, to such Officer's knowledge, all conditions specified in
Sections 5.1(a) and (b) have been fulfilled.
ARTICLE 6
AFFIRMATIVE COVENANTS
SECTION 6.1. Use of Proceeds. The Company shall use the proceeds from
the sale of the Common Stock only as follows: (a) to make compensation payments
to its employees; (b) to pay lease obligations for leases in effect on the date
hereof; or (c) to pay other operating expenses approved by Purchaser.
SECTION 6.2. Piggy-Back Registrations. If at any time the Company shall
determine to register for its own account or the account of others under the
Securities Act any of its equity securities, other than on Form S-8 or Form S-4
or their then equivalents (a "Piggy-Back Registration"), it shall send to the
Purchaser, written notice of such determination and, if within fifteen (15) days
after receipt of such notice, the Purchaser shall so request in writing, the
Company shall use its diligent efforts to include in such registration statement
all or any part of the Registrable Shares (as defined below) the Purchaser
requests to be registered, except that if, in connection with any offering
involving an underwriting of Common Stock to be issued by the Company, the
managing underwriter shall impose a limitation on the number of shares of Common
Stock which may be included in the registration statement because, in its
judgment, such limitation is necessary to effect an orderly public distribution,
then the Company shall be obligated to include in such registration statement
only such limited portion (or none, if so required by the managing underwriter)
of the Registrable Shares with respect to which such Holder has requested
inclusion hereunder. For the purposes of this Section, "Registrable Shares"
shall mean and include (i) shares of Common Stock held by the Purchaser; and
(ii) any shares of
8
<PAGE> 12
Common Stock issued to (or issuable upon exercise of warrants issued to) any
bank or other lender, or equipment lessor in connection with the Company
obtaining a loan or equipment financing, if the Company expressly accords to
such shares the registration rights contained in this Agreement; provided,
however, that shares of Common Stock which are Registrable Shares shall cease to
be Registrable Shares upon the consummation of any sale of such shares pursuant
to a registration statement or Rule 144 under the Securities Act.
SECTION 6.3. Officers of the Company. The Company shall use reasonable
efforts to hire executives for the officer positions in the Company that are
currently vacant and which positions are critical to the future success of the
Company and shall inform Purchaser of potential candidates identified by the
Company and shall give reasonable consideration to Purchaser's recommendation
and evaluation of potential candidates.
SECTION 6.4. Right of First Offer.
(a) Subject to this Section 6.4 and other than as disclosed in Section
2.1(b), if the Company shall decide to issue or sell, any (i) shares of Common
Stock, (ii) any other equity security of the Company, including without
limitation, shares of Preferred Stock, (iii) any debt security of the Company
which by its terms is convertible into or exchangeable for any equity security
of the Company, (iv) any security of the Company that is a combination of debt
and equity, or (v) any option, warrant or other right to subscribe for, purchase
or otherwise acquire any such equity security or any such debt security of the
Company, the Company shall, in each case, first offer to sell such securities
(the "Offered Securities") to the Purchaser (the "Preemptive Shareholder"), if
it holds at least 15% of the then outstanding capital stock of the Company as
follows: the Company shall offer to sell to the Preemptive Shareholder that
portion of the Offered Securities as the number of Common Shares which the
Preemptive Shareholder then holds or has the right to acquire bears to the sum
of the total number of issued and outstanding Common Shares and upon exercise of
warrants, options and rights outstanding, at a price and on such other terms as
shall have been specified by the Company in writing delivered to the Preemptive
Shareholder (the "Offer"), which Offer by its terms shall remain open for a
period of 14 days from the giving of the Offer.
(b) Notice of the Preemptive Shareholder's intention to accept, in whole
or in part, any Offer made pursuant to clause (a) shall be evidenced by a
writing signed by the Preemptive Shareholder and delivered to the Company prior
to the end of the 14-day period of such Offer, setting forth the number of
shares or securities the Preemptive Shareholder elects to purchase (the "Notice
of Acceptance"). Failure of the Preemptive Shareholder to deliver a Notice of
Acceptance within said 14 days will be deemed to be a rejection of the Offer.
(c) The Company shall have one hundred twenty (120) days from the end of
said 14-day period to sell any such Offered Securities as to which a Notice of
Acceptance has not been given (the "Refused Securities") to any Person or
Persons, substantially on the same terms and conditions as set forth in the
Offer.
(d) The rights of the Preemptive Shareholder under this Section 6.4
shall terminate for all future issuances of Offered Securities if the Preemptive
Shareholder does not purchase all of the Offered Securities which it was
entitled to purchase in this Section 6.4.
9
<PAGE> 13
(e) The rights of the Preemptive Shareholder under this Section 6.4
shall not apply to:
(i) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(ii) Preferred Stock issued as a dividend to holders of Preferred
Stock or upon any subdivision or combination of shares of Preferred Stock;
(iii) Common Stock issued upon exercise of options, warrants and
rights outstanding as of the date of this Agreement;
(iv) Common Stock and options of the Company issued after the
date hereof to directors, officers, employees or consultants of the Company and
any Subsidiary pursuant to any qualified or non-qualified stock option plan,
employee stock ownership plan, employee benefit plan, stock plan, or such other
options, arrangements, agreements or plans intended principally as a means of
providing compensation or incentive compensation for employment or services,
approved by the Board of Directors of the Company;
(v) Options, warrants or shares issued to banks or other lenders
or equipment lessors in connection with the Company obtaining loans or equipment
financing or to customers, prospective customers, vendors or strategic partners;
or
(vi) Securities issued in a merger or consolidation or as
consideration for the acquisition by the Company of any other corporation or
other business entity or of the assets and business thereof.
(f) For convenience in administration, the Company may offer and sell
Securities covered by the right in clause (a) without first offering such
Securities to the Preemptive Shareholder, so long as the Preemptive Shareholder
is given the opportunity to purchase its pro rata amount within 45 days after
the close of the sale of Securities.
(g) The rights of the Preemptive Shareholder set forth herein are
nonassignable except (i) to any or all of the beneficial owners of the
Preemptive Shareholder; (ii) an affiliate of the Preemptive Shareholder; and
(iii) to a purchaser who is not a competitor of the Company and who purchases
all of the Preemptive Shareholder's Securities of the Company. Any assignee
permitted under the preceding sentence shall assume the assignor's obligations
under this Agreement and become a party to this Agreement in a manner reasonably
satisfactory to the Company.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement and any disposition of Common Stock issued upon
conversion thereof.
10
<PAGE> 14
SECTION 7.2. Notices. All notices, requests, consents and other
communications herein (except as stated in the last sentence of this Section
7.2) shall be in writing and shall be mailed by first-class certified mail,
postage prepaid and return receipt requested, personally delivered, faxed, or
sent by recognized overnight courier service, as follows:
(a) If to the Company:
IMP, Inc.
2830 North First Street
San Jose, California U.S.A. 95143-2071
Attention: Chief Executive Officer
Fax: (408) 434-0335
With a copy to
Richard Grey, Esq.
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111-3143
Fax: (415) 773-5759
(b) If to the Purchaser:
Teamasia Semiconductors (India) Ltd.
IDA, Patancheru
Medak District
Pin, 502 319, A.P. INDIA
Attention: Managing Director
Fax: (011) 91-8455-42070
With a copy to:
Robert T. Borawski, Inc.
4125 Blackford Ave., Suite 140
San Jose, California 95117
Fax: (408) 241-8895
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties.
SECTION 7.3. Modifications; Waiver. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally or in
writing, except that any provision of this Agreement may be amended and the
observance of any such provision may be waived (either generally or in a
particular instance and either retroactively or prospectively) with (but only
with) the written consent of the party to be charged.
11
<PAGE> 15
SECTION 7.4. Exculpation. The Purchaser acknowledges that it is not
relying upon any statements or instruments made or issued by any person, firm or
corporation, other than those contained in this Agreement in making its decision
to invest in the Company.
SECTION 7.5. Entire Agreement. This Agreement, together with the
schedules and exhibits attached hereto and made a part hereof, contains the
entire agreement between the parties with respect to the transactions
contemplated hereby, and supersedes all negotiations, agreements,
representations, warranties and commitments, whether in writing or oral, prior
to or contemporaneous with the date hereof.
SECTION 7.6. Successors and Assigns. Except as otherwise expressly
provided in this Agreement, all of the terms of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto.
SECTION 7.7. Enforcement.
(a) Remedies at Law or in Equity. If the Company shall default in any of
its obligations under this Agreement or if any representation or warranty made
by or on behalf of the Company in this Agreement or in any certificate, report
or other instrument delivered under or pursuant to any term hereof shall be
untrue or misleading in any material respect as of the date of this Agreement or
as of the Closings or as of the date it was made, furnished or delivered, the
Purchaser may proceed to protect and enforce its rights, including by way of
suit in equity or action at law. In the event the Purchaser brings such an
action against the Company, the prevailing party in such dispute shall be
entitled to recover from the losing party all fees, costs and expenses of
enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to a party at law or in
equity. No express or implied waiver by Purchaser of any default shall be a
waiver of any future or subsequent default. The failure or delay of any party in
exercising any rights granted it hereunder shall not constitute a waiver of any
such right and any single or partial exercise of any particular right by a party
shall not exhaust the same or constitute a waiver of any other right provided
herein.
SECTION 7.8. Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and all such counterparts together shall constitute
one instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
SECTION 7.9. Governing Law and Severability. (a) This agreement shall be
governed by the internal laws of the state of California, without regard to
principles of conflicts of law. Each of the parties hereto hereby submits to the
exclusive jurisdiction of the United States District Court in San Francisco,
California, for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each of the parties
12
<PAGE> 16
hereto waives any objection which it may now or hereafter have to the laying of
the venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
(b) In the event any provision of this agreement or the application of
any such provision to any party shall be held by a court of competent
jurisdiction to be contrary to law, the remaining provisions of this agreement
shall remain in full force and effect.
SECTION 7.10. Headings. The descriptive headings of the Articles and
Sections hereof and the Schedules and Exhibits hereto are inserted for
convenience only and do not constitute a part of this Agreement.
SECTION 7.11. Confidentiality. The Purchaser agrees that it will keep
confidential and will not disclose, or divulge any confidential, proprietary,
secret or non-public information which the Purchaser may obtain from the Company
and not use such information other than for the benefit of the Company or in
furtherance of the Purchaser's rights as a shareholder of the Company; provided,
that, no such information shall be deemed to be non-public if it (i) is or
becomes generally available to the public other than as a result of a disclosure
by the Purchaser or its respective agents, representatives or employees; (ii) is
or becomes available to the Purchaser on a non-confidential basis from a source
(other than the Company or one of its officers, directors, agents,
representatives or employees) that is not prohibited from disclosing such
information by a legal, contractual or fiduciary obligation; or (iii) was known
to the Purchaser on a non-confidential basis prior to its disclosure to it by
the Company and provided further that, any other term of this Agreement to the
contrary notwithstanding, the Company shall not be obligated to disclose any
information, the disclosure of which it believes in good faith would be
detrimental to the Company or its shareholders.
SECTION 7.12. No Solicitation.
(a) Each of the Purchaser and the Company agrees that for a period of
two years from the last Closing Date, it shall not induce or encourage, directly
or indirectly, any current employee of the other party to leave such party's
employ, whether to accept a position with it or an entity related to it or
otherwise. The restrictions in the previous sentence shall not be deemed to be
violated by either party in the case of a general solicitation to hire,
including, without limitation, through the use of advertising or recruiting
(provided that a recruiter is not specifically instructed to solicit the other
party's employees). Each of the Purchaser and the Company hereby further agrees
that for a period of two years from the last Closing Date, it shall not take any
action which would interfere with the business of the other party, unless such
action is taken pursuant to the mutual agreement of both parties. The provisions
of this Section 7.12 shall survive the last Closing Date for a period of two
years.
(b) Without limiting the right of either party to pursue all other legal
and equitable rights available to them for violation of this Section 7.12, it is
agreed that other remedies cannot fully compensate either party for such a
violation and that each party shall be entitled to injunctive relief to prevent
the violation or the continuing violation thereof. It is the intent and
understanding of each party hereto that if, in any action before any
Governmental Authority legally empowered to enforce this Section 7.12, any term,
restriction, covenant or promise in this
13
<PAGE> 17
Section 7.12 is found to be unreasonable and for that reason unenforceable, then
such term, restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such Governmental Authority.
(c) For the purposes of the Section, "Governmental Authority" shall mean
any federal, state, local or other governmental or administrative body,
instrumentality, department, agency or any court, tribunal, administrative
hearing, arbitration panel, commission or other similar dispute resolving panel
or body.
SECTION 7.13. Termination. In the event that the Purchaser shall fail to
make any payment in full that it is obligated to make hereunder within three (3)
Business Days of the applicable Closing Date set forth on Schedule 1.1, this
Agreement shall terminate and the Company shall have no further obligation to
sell and issue Shares to the Purchaser in accordance with this Agreement.
Notwithstanding the foregoing, all provisions hereunder which the parties have
agreed to survive termination of this Agreement shall remain binding upon the
parties hereto. For the purpose of this Section, "Business Day" shall mean any
day other than Saturday, Sunday or a holiday in San Jose, California.
SECTION 7.14. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser from
and against any and all liabilities, obligations, losses, out-of-pocket costs or
damages ("Loss") and reasonable attorneys' and accountants' fees and expenses,
court costs and all other reasonable out-of-pocket expenses ("Expense") incurred
by the Purchaser in connection with or arising from or attributable to any
breach by the Company, of any of its representations, warranties, obligations,
covenants or agreements contained in this Agreement; provided, however, that the
Purchaser shall not be entitled to indemnification for Losses or Expenses
pursuant to this Section unless and until the amount of Losses and Expenses
exceeds $100,000. Thereafter, the Company shall be liable for indemnification
for Losses and Expenses only to the extent the aggregate amount thereof exceeds
$100,000. Notwithstanding the foregoing, the terms "Loss" and "Expense" shall
not include incidental, consequential or punitive damages except in a third
party claim, action or suit.
(b) If the Purchaser believes that it has suffered or incurred any Loss
or Expense pursuant to this Section, it shall so notify the Company promptly in
writing describing such Loss or Expense, the amount thereof, if known, and the
method of computation of such Loss or Expense. Promptly after receipt by the
Purchaser of notice of the commencement of any action by any third party, such
indemnified party shall, if a claim in respect thereof is to be made against the
Company under this Section notify the Company in writing of the commencement
thereof (but the failure so to notify the Company shall not relieve the Company
from any liability which it may have under this Section except to the extent
that it has been prejudiced in any material respect by such failure or from any
liability which it might otherwise have). Unless the Company is contesting a
third party claim, the Company shall promptly pay such claim or reimburse the
Purchaser if the Purchaser has made payment.
(c) The Company shall have the right to conduct and control, through
counsel of its choosing, any third party claim, action or suit. The Company
shall permit the Purchaser to
14
<PAGE> 18
participate in the defense of any such action or suit through counsel chosen by
it, provided that the fees and expenses of such counsel shall be borne by the
Purchaser. The Company may agree to any compromise or settlement with respect to
a claim for money damages without the consent of the Purchaser; provided, that
the Company shall not effect any compromise or settlement which will have a
continuing effect on the business of the Purchaser without the prior consent of
the Purchaser, which consent shall not be unreasonably withheld or delayed.
SECTION 7.15. Purchaser's Future Investments in the Company. It is the
parties' intent that the Purchaser acquire not less than 51% of the fully
diluted Common Shares of the Company at a price equal to a total of $5,980,000
($5,980,000 - $2,050,000 (paid hereunder upon completion of purchase of 16.6%) =
$3,930,000 (paid upon completion of Purchaser's purchase of the remaining Common
Shares resulting in the Purchaser holding at least 51% of the fully diluted
Common Shares)) no later than February 28, 2000. To that end, the parties agree
that promptly upon the parties' execution of this Agreement, they will proceed
to negotiate, in good faith, the terms and conditions of a share purchase
agreement for the remaining Common Shares of the Company, which agreement will
result in the Purchaser owning and maintaining not less than 51% of the fully
diluted Common Shares. Further, the Company agrees to use its reasonable efforts
to obtain the necessary approvals from its shareholders and to obtain all
applicable Governmental Approvals in order to complete the Purchaser's purchase
of such Common Shares, as expeditiously as possible. The Purchaser agrees to
provide all reasonable assistance to the Company to obtain such approvals. Upon
the Purchaser acquiring not less than 51% of the fully diluted Common Shares,
the provisions of Section 7.12 shall no longer be obligations of either party.
[The rest of this page left intentionally blank.]
15
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
IMP, INC.
By: /s/ ZVI GRINFAS
---------------------------------
Name: ZVI GRINFAS
---------------------------
Title: PRESIDENT & CEO
---------------------------
TEAMASIA SEMICONDUCTORS (INDIA) LTD.
By: /s/ SUBBA RAO PINAMANENI
---------------------------------
Name: PINAMANENI SUBBA RAO
---------------------------
Title: MANAGING DIRECTOR
---------------------------
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
<PAGE> 1
EXHIBIT 10.2
EXECUTION COPY
IMP, Inc.
--------------------------------------------------------
PHASE 2 STOCK PURCHASE AGREEMENT
Dated as of December 15, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE 1 PURCHASE AND SALE OF STOCK...........................................1
SECTION 1.1. Delivery.......................................................1
ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF COMPANY............................1
SECTION 2.1. Organization, Standing and Qualification.......................1
SECTION 2.2. Capitalization.................................................1
SECTION 2.3. Validity of Stock..............................................2
SECTION 2.4. Subsidiaries...................................................2
SECTION 2.5. Financial Statements...........................................2
SECTION 2.6. Authorization; Approvals.......................................3
SECTION 2.7. No Conflict with Other Instruments.............................3
SECTION 2.8. Absence of Undisclosed Liabilities; Changes....................3
SECTION 2.9. Patents, Trademarks and Other Intangible Assets................3
SECTION 2.10. Taxes..........................................................4
SECTION 2.11. Litigation.....................................................4
SECTION 2.13. Private Offering...............................................4
SECTION 2.14. Fees and Commissions...........................................4
SECTION 2.15. Compliance with Environmental Laws.............................5
ARTICLE 3 REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER...........5
SECTION 3.1. Authorization..................................................5
SECTION 3.2. Investment Representations.....................................5
SECTION 3.3. Investment Experience; Access to Information...................5
SECTION 3.4. Absence of Registration........................................6
SECTION 3.5. Restrictions on Transfer.......................................6
SECTION 3.6. Transfer Instructions..........................................6
SECTION 3.7. Economic Risk..................................................6
SECTION 3.8. Fees and Commissions...........................................7
SECTION 3.9. [Reserved].....................................................7
SECTION 3.10. Restructuring of Debt..........................................7
SECTION 3.11. Wafer Purchase Commitment......................................7
ARTICLE 4 CONDITIONS TO OBLIGATIONS OF THE PURCHASER...........................7
</TABLE>
-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SECTION 4.1. Conditions to Obligations of the Purchaser....................7
ARTICLE 5 CONDITIONS TO OBLIGATIONS OF COMPANY.................................8
SECTION 5.1. Conditions to Obligations of the Company......................8
ARTICLE 6 AFFIRMATIVE COVENANTS................................................9
SECTION 6.1. Preparation of Proxy Statement: Stockholders' Meeting..........9
SECTION 6.2. Piggy-Back Registrations.......................................9
SECTION 6.3. Registrations on Form S-1 or Form S-3.........................10
SECTION 6.4. Effectiveness.................................................11
SECTION 6.5. Right of First Offer..........................................11
SECTION 6.6. Additional Purchases By Purchaser.............................12
SECTION 6.7. Employee Retention Plan.......................................13
SECTION 6.8. Purchaser's Board of Directors Designee.......................13
ARTICLE 7 MISCELLANEOUS.......................................................13
SECTION 7.1. Survival of Agreements........................................13
SECTION 7.2. Notices.......................................................13
SECTION 7.3. Modifications; Waiver.........................................14
SECTION 7.4. Exculpation...................................................14
SECTION 7.5. Entire Agreement..............................................14
SECTION 7.6. Successors and Assigns........................................14
SECTION 7.7. Enforcement...................................................15
SECTION 7.8. Execution and Counterparts....................................15
SECTION 7.9. Governing Law and Severability................................15
SECTION 7.10. Headings......................................................15
SECTION 7.11. Confidentiality...............................................16
SECTION 7.12. [Reserved.]...................................................16
SECTION 7.13. [Reserved.]...................................................16
SECTION 7.14. Indemnification...............................................16
SECTION 7.15. [Reserved]....................................................17
SECTION 7.16. Expenses......................................................17
ANNEX I - ADDITIONAL PURCHASER REPRESENTATIONS.......................................I-1
DISCLOSURE SCHEDULE..................................................................S-1
</TABLE>
-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
SCHEDULE 2.2(B) - WARRANTS..........................................................S2.2(B)-1
SCHEDULE 2.9 - PATENTS.................................................................S2.9-1
SCHEDULE 2.10 - TAXES ................................................................S2.10-1
SCHEDULE 2.12 - DEFAULT OF OBLIGATIONS ...............................................S2.12-1
SCHEDULE 3.11 - FOUNDRY SERVICES......................................................S3.11-1
EXHIBIT A - FORM OF LEGAL OPINION.........................................................A-1
</TABLE>
-iii-
<PAGE> 5
PHASE 2 STOCK PURCHASE AGREEMENT
Agreement, dated as of December 15, 1999 between IMP, Inc., a Delaware
corporation (the "Company") and Teamasia Semiconductors PTE Ltd., a Singapore
corporation (the "Purchaser").
ARTICLE 1
PURCHASE AND SALE OF STOCK
SECTION 1.1. Delivery. Subject to the provisions of this Agreement, the
Purchaser agrees to purchase at the Closing (as defined below), and the Company
agrees to sell and issue to the Purchaser at the Closing, 4,793,235 shares of
common stock of the Company, (the "Purchased Shares") for the aggregate purchase
price of $3,930,000 ($0.82 per share) (the "Purchase Price"). The purchase and
sale of Purchased Shares shall take place at the offices of the Company at 10:00
a.m. West Coast time not later than 14 Business Days after the last condition of
Section 4.1 herein is satisfied, or at such other time and place as the Company
and Purchaser mutually agree upon in writing (which time and place are
designated as the "Closing" and which date is designated as the "Closing Date").
At the Closing, the Company shall deliver to the Purchaser a certificate
representing the Purchased Shares that the Purchaser is purchasing against
delivery to the Company by the Purchaser by wire transfer, certified check for
immediately available funds, or other manner approved by the Company, in the
amount of the purchase price therefor payable to the Company's order.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF COMPANY
As of the date of this Agreement and as of the Closing Date, the Company
represents and warrants that, except as set forth in the Disclosure Schedules:
SECTION 2.1. Organization, Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has full corporate power and corporate authority to
own, lease and operate its property and assets and to conduct its business as
presently conducted and as proposed to be conducted by it. The Company has full
corporate power and corporate authority to enter into and perform its
obligations under this Agreement, to carry out the transactions contemplated by
this Agreement. The nature of the Company's business and its ownership or
leasing of property do not require that the Company become qualified as a
foreign corporation in any state or jurisdiction where it is not qualified,
other than where the failure to so qualify will not have a material adverse
effect on the Company. Complete and correct copies of the articles and by-laws
of the Company, as amended to date, have been delivered to counsel for the
Purchaser.
SECTION 2.2. Capitalization.
(a) The capital stock of the Company consists of 50,000,000 shares of
authorized common stock, par value $0.01 per share ("Common Stock"), of which
4,040,544 shares are issued and outstanding as of the date of this Agreement and
619,533 shares are reserved for
<PAGE> 6
issuance pursuant to employee stock purchase and/or option ownership plans that
have been adopted by the Company for officers, directors, employees and
consultants.
(b) Except as set forth on Schedule 2.2, there are (i) no outstanding
warrants, options, convertible securities or rights to subscribe for or purchase
any capital stock or other securities from the Company, (ii) to the Company's
knowledge, no voting trusts or voting agreements among, or irrevocable proxies
executed by, stockholders of the Company, and (iii) no obligations (contingent
or otherwise) of the Company to purchase, redeem or otherwise acquire any shares
of its capital stock or any interest therein or to pay any dividend or make any
other distribution in respect thereof.
(c) The Company was notified on November 19, 1999 that the NASDAQ Stock
Market is conducting a review of the Company to determine its eligibility for
continued listing on the NASDAQ Small Cap Market. The Company is in the process
of providing financial information to NASDAQ Stock Market evidencing the
Company's current and on-going compliance and fully anticipates maintaining its
listing with the NASDAQ Small Cap Market.
SECTION 2.3. Validity of Stock. The Purchased Shares to be sold pursuant
to this Agreement, when issued, sold, and delivered in accordance with the terms
of this Agreement, will be duly and validly issued, fully paid and
non-assessable.
SECTION 2.4. Subsidiaries. The Company does not own any capital stock,
partnership interests or other equity interests of, or control, directly or
indirectly, any other corporation, partnership, association or business entity.
SECTION 2.5. Financial Statements.
(a) The Company has furnished the Purchaser with its audited financial
statements as of and for the year ended March 28, 1999, and an audited balance
sheet as of March 28, 1999 (the "Balance Sheet") (together, the "1999 Financial
Statements"). As amended on July 26, 1999, the 1999 Financial Statements and the
Balance Sheet are true and correct in all material respects, are in accordance
with the books and records of the Company, and have been prepared in accordance
with generally accepted accounting principles ("GAAP") consistently applied, and
fairly present the financial position of the Company as of such date and the
results of its operations for the periods then ended.
(b) The unaudited balance sheet of the Company as of September 26, 1999
(the "Current Balance Sheet") and the related unaudited statements of profit and
loss and cash flow, including the footnotes thereto (collectively, the "Current
Financial Statements"), for the three months then ended, a copy of which has
been made available to the Purchaser, fairly present, in conformity with
generally accepted accounting principles, applied on a basis consistent with the
financial statements referred to in subsection (a) of this Section, the
financial position of the Company as of such date and its results of operations
(subject to normal year-end adjustments). The 1999 Financial Statements and
Current Financial Statements are hereinafter referred to as the "Financial
Statements".
2
<PAGE> 7
SECTION 2.6. Authorization; Approvals. All action on the part of the
Company and its stockholders necessary for the authorization, execution,
delivery, and performance of all its obligations under this Agreement and for
the authorization, issuance, and delivery of the Purchased Shares being sold
under this Agreement, has been taken or will be taken prior to the Closing Date.
The Board of Directors of the Company has approved this Agreement and the
transactions contemplated hereby in accordance with Section 203 of the Delaware
General Corporation Law. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable against the Company in accordance
with its terms. The Company has obtained or will obtain prior to the Closing
Date all necessary consents, authorizations, approvals and orders, and has made
all registrations, qualifications, designations, declarations or filings with
all federal, state, or other relevant governmental authorities required on the
part of the Company in connection with the consummation of the transactions
contemplated by this Agreement.
SECTION 2.7. No Conflict with Other Instruments. The execution, delivery
and performance of this Agreement does not and will not result in any violation
of, conflict with, or constitute a default under any terms or provision of (a)
the Company's articles of incorporation or bylaws; (b) any judgment, decree or
order to which the Company is a party or by which its property is bound; (c) any
agreement, contract, understanding, indenture or other instrument to which the
Company is a party, the effect of which would give rise to a material adverse
effect on the Company; or (d) any statute, rule or governmental regulation
applicable to the Company or any of its property.
SECTION 2.8. Absence of Undisclosed Liabilities; Changes. To its
knowledge, the Company has no liability or obligation, which would have a
material adverse effect on the Company, absolute or contingent, including,
without limiting the generality of the foregoing, any tax liabilities due or to
become due, not reflected in the Current Balance Sheet, except: (a) obligations
and liabilities incurred after the date of the Current Balance Sheet in the
ordinary course of business that are not individually or in the aggregate
material, (b) obligations under contracts made in the ordinary course of
business that would not be required to be reflected in financial statements
prepared in accordance with GAAP and (c) obligations under this Agreement.
Without limiting the generality of the foregoing, the Company does not know of,
and has no reasonable ground to believe that there is any basis for the
assertion against the Company of, any material liabilities of the Company.
SECTION 2.9. Patents, Trademarks and Other Intangible Assets.
(a) The Company has taken otherwise reasonable security measures to
protect the secrecy, confidentiality and value of all material intellectual
property of the Company.
(b) To the knowledge of the Company, the Company has title and ownership
(or licenses to use in various cases) of all patents, trademarks, service marks,
trade names, copyrights, trade secrets, and other intellectual property rights
necessary for its business as now conducted or as currently proposed to be
conducted without any known conflict with or infringement of the rights of
others. Except as disclosed in Schedule 2.9 hereto, the Company has not received
any communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade
3
<PAGE> 8
names, copyrights or other intellectual property rights of any other person or
entity where any such allegation, if true, would be reasonably likely to have a
material adverse effect on the Company.
SECTION 2.10. Taxes. The Company has accurately prepared and timely
filed all federal, state and local reports, returns, estimates, declarations,
information returns and statements with respect to taxes (together, "Tax
Returns") that are required to be filed by it and has paid or made provision for
the payment of all taxes due with respect to the periods covered by such Tax
Returns, in all material respects. Except as disclosed in Schedule 2.10, no
deficiency assessment or proposed adjustment of federal income taxes or state or
municipal taxes of the Company is pending and the Company has no knowledge of
any proposed liability for any tax to be imposed where any such assessment or
proposed adjustment, if adversely decided, would be reasonably likely to have a
material adverse effect on the Company. For the purpose of this Section 2.10,
"tax" or "taxes" shall mean all federal, state, local or foreign taxes,
including but not limited to income, gross receipts, windfall profits,
alternative minimum, value added, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes, together
with any interest, additions or penalties with respect thereto and any interest
in respect of such additions or penalties.
SECTION 2.11. Litigation. Except as otherwise set forth herein, no
action, proceeding or governmental inquiry or investigation is pending or to the
knowledge of the Company threatened against (a) the Company or any of its
officers, directors or employees (in their capacity as such), (b) any of the
Company's properties or (c) to the knowledge of the Company, any material
consultant to the Company, in any case before any court, arbitration board or
tribunal or administrative or other governmental agency, nor is the Company
aware that there is any basis for the foregoing, where any such action,
proceeding, inquiry or investigation, if adversely decided, would be reasonably
likely to have a material adverse effect on the Company.
SECTION 2.12. Relationship with Creditors. The Company is presently in
default of its obligations to, or has negotiated revised payment schedules with,
the parties listed in Schedule 2.12, as described therein.
SECTION 2.13. Private Offering. The Company agrees that neither the
Company nor anyone acting on its behalf has offered or will offer securities of
the Company or any part thereof or any similar securities for issuance or sale
to, or solicit any offer to acquire any of the same from, anyone so as to make
the issuance and sale of the Purchased Shares not exempt from the registration
requirements of Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"). None of the shares of the Company's capital stock issued and
outstanding has been offered or sold in such a manner as to make the issuance
and sale of such shares not exempt from such registration requirements, and all
such shares of capital stock have been offered and sold in compliance with all
applicable federal and state securities laws.
SECTION 2.14. Fees and Commissions. The Company has not retained, or
otherwise authorized to act, any finder, broker, agent, financial advisor or
other intermediary (collectively, "Intermediary") in connection with the
transactions contemplated by this Agreement and the Company shall indemnify and
hold harmless the Purchaser from liability
4
<PAGE> 9
for any compensation, to any Intermediary retained or otherwise authorized to
act by, or on behalf of, the Company and the fees and expenses of defending
against such liability or alleged liability.
SECTION 2.15. Compliance with Environmental Laws. To the knowledge of
the Company, it is not in violation of any agreement, instrument, judgment,
decree, or order, or federal, state, local or foreign statute, ordinance, rule
or regulation applicable to or binding upon it (including but not limited to any
environmental laws, rules and regulations), the violation of which would be
reasonably likely to have a material adverse effect on the Company. To the
knowledge of the Company, there is no contamination of any real property leased
or operated by the Company that could subject the Company to liability in excess
of $50,000 under any environmental laws or regulations.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
The Purchaser covenants, and as of the date of this Agreement and as of
the Closing Date, the Purchaser represents and warrants that:
SECTION 3.1. Authorization. The Purchaser has full power and authority
to enter into and to perform this Agreement in accordance with its terms. This
Agreement has been duly executed and delivered by the Purchaser and constitutes
a valid and legally binding obligation of the Purchaser.
SECTION 3.2. Investment Representations. The Purchaser is acquiring the
Purchased Shares for the Purchaser's own account, for investment purposes and
not with a view to, or for sale in connection with, any distribution of such
securities or any part thereof in violation of federal or state securities laws.
SECTION 3.3. Investment Experience; Access to Information. (a) The
Purchaser or a person acting in its capacity as "purchaser representative" (as
defined in Regulation D of the Securities Act) for the Purchaser, is an
"accredited investor" as that term is defined in Rule 501(a) promulgated under
the Securities Act, is a sophisticated investor; is able to fend for itself in
the transactions contemplated by this Agreement, has such knowledge and
experience in financial, business and investment matters as to be capable of
evaluating the merits and risks of this investment, has the ability to bear the
economic risks of this investment, has been furnished with or has had access to
such information as is specified in subparagraph (b)(2) of Rule 502 promulgated
under the Securities Act, was not organized or reorganized for the specific
purpose of acquiring the Purchased Shares purchased by it and has been afforded
the opportunity to ask questions of, and to receive answers from, the Company
and to obtain any additional information, to the extent the Company has or could
have acquired such information without unreasonable effort or expense, all as
necessary for the Purchaser or "purchaser representative" to make an informed
investment decision with respect to the purchase of the Purchased Shares. The
foregoing, however, does not limit or modify the representations and warranties
of the Company in Article 2 of this Agreement or the right of the Purchaser to
rely thereon.
5
<PAGE> 10
(a) In addition to the foregoing, the Purchaser acknowledges, represents
and warrants, as applicable, as set forth in Annex I hereto.
SECTION 3.4. Absence of Registration. The Purchaser understands that the
Purchased Shares to be sold and issued hereunder may not be sold by the
Purchaser unless it is subsequently registered under the Securities Act, or an
exemption from such registration is available.
SECTION 3.5. Restrictions on Transfer. The Purchaser agrees that (a) it
will not offer, sell, pledge, hypothecate, or otherwise dispose of the Purchased
Shares other than to its "affiliates" unless such offer, sale, pledge,
hypothecation or other disposition is (i) registered under the Securities Act,
or (ii) in compliance with an opinion of counsel to the Purchaser, delivered to
the Company and reasonably acceptable to it, to the effect that such offer,
sale, pledge, hypothecation or other disposition thereof does not violate the
Securities Act, and (b) the certificate(s) representing the Purchased Shares
shall bear a legend stating in substance:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED
OR HYPOTHECATED OTHER THAN TO AFFILIATES (AS DEFINED) OF THE REGISTERED
HOLDER HEREOF UNLESS AND UNTIL REGISTERED UNDER SAID ACT OR, IN THE
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF
THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
DOES NOT VIOLATE THE PROVISIONS THEREOF.
For purposes of this Section 3.5, "affiliate" of any Purchaser means (i)
any entity more than 10% of the voting stock or other voting interest of which
is owned, directly or indirectly through one or more intermediaries, by the
Purchaser, (ii) any entity which owns, directly or indirectly through one or
more intermediaries, more than 10% of the voting stock of the Purchaser, (iii)
any entity of which 10% or more of the voting stock is owned by an affiliate of
the Purchaser, and (iv) with respect to a Purchaser that is a trust, a grantor
or beneficiary of such trust or other entity under the control of such grantor
or beneficiary. Upon request of a holder of Purchased Shares the Company shall
remove the legend set forth above from the certificates evidencing such
Purchased Shares or issue to such holder new certificates therefor free of such
legend, if with such request the Company shall have received an opinion of
counsel selected by the holder and reasonably satisfactory to the Company, in
form and substance reasonably satisfactory to the Company, to the effect that
such Purchased Shares are not required by the Securities Act to continue to bear
the legend.
SECTION 3.6. Transfer Instructions. The Purchaser agrees that the
Company may provide for appropriate transfer instructions to implement the
provisions of Section 3.5 hereof.
SECTION 3.7. Economic Risk. The Purchaser understands that it must bear
the economic risk of the investment represented by the purchase of Purchased
Shares for an indefinite period.
6
<PAGE> 11
SECTION 3.8. Fees and Commissions. The Purchaser represents and warrants
that it has retained, or otherwise authorized to act, no Intermediary in
connection with the transactions contemplated by this Agreement and agrees to
indemnify and hold harmless the Company from liability for any compensation to
any Intermediary retained or otherwise authorized to act by, or on behalf of,
the Purchaser and the fees and expenses of defending against such liability or
alleged liability.
SECTION 3.9. [Reserved].
SECTION 3.10. Restructuring of Debt. At the election of the Board of
Directors of the Company, the Purchaser shall (a) prior to the Closing Date, use
its reasonable efforts to; and (b) after the Closing Date, provide alternative
financing facilities to the Company's financing facilities that are in effect at
the time of such election by the Board of Directors.
SECTION 3.11. Wafer Purchase Commitment. The Purchaser hereby
acknowledges that it is obligated to purchase wafers from the Company in
accordance with Section 3.11 of the stock purchase agreement between the Company
and the Purchaser dated October 8, 1999.
ARTICLE 4
CONDITIONS TO OBLIGATIONS OF THE PURCHASER
SECTION 4.1. Conditions to Obligations of the Purchaser. The obligation
of the Purchaser on the Closing Date to purchase the Purchased Shares under this
Agreement shall be subject to each of the following conditions precedent, any
one or more of which may be waived by the Purchaser:
(a) Representations and Warranties. The representations and warranties
made by the Company herein shall be true and accurate in all material respects
on and as of the Closing Date.
(b) Performance. The Company shall have performed and complied with all
agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to the Closing in all material respects.
(c) Consents, etc. The Company shall have secured all permits, consents
and authorizations that shall be necessary or required lawfully to consummate
this Agreement, to issue the Purchased Shares to be purchased by the Purchaser.
(d) Compliance Certificates. The Company shall have delivered to the
Purchaser or its representative at the Closing an Officer's Certificate to the
effect that, to such Officer's knowledge, all conditions specified in Sections
4.1(a) through (c), inclusive, have been fulfilled.
(e) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the
7
<PAGE> 12
Purchaser and its counsel, and the Purchaser and its counsel shall have received
all such counterpart originals or certified or other copies of such documents as
the Purchaser or its counsel may reasonably request.
(f) Opinion of Company's Counsel. On the Closing Date, the Purchaser
shall have received from Orrick, Herrington & Sutcliffe LLP, counsel for the
Company, an opinion, dated the Closing Date, reasonably satisfactory in form and
substance to the Purchaser and its counsel, and in the form attached hereto as
Exhibit A.
(g) Shareholder and Governmental Approval. The Company agrees to use its
reasonable efforts to prepare a proxy statement, obtain the necessary approvals
from its stockholders, to obtain all applicable Governmental Approvals and to
amend and restate the Certificate of Incorporation to incorporate Section 6.6 of
this Agreement.
(h) Incumbency Certificate. The Company shall provide a certificate
dated the Closing Date of the Secretary or Assistant Secretary of the Company
certifying and attaching as exhibits thereto: (i) the Amended and Restated
Certificate of Incorporation; (ii) the By-laws; and (iii) the minutes of the
Board of Directors approving the execution, delivery and performance of this
Agreement.
ARTICLE 5
CONDITIONS TO OBLIGATIONS OF COMPANY
SECTION 5.1. Conditions to Obligations of the Company. The obligation of
the Company at the Closing to issue and sell the Purchased Shares to be
purchased under this Agreement shall be subject to the following conditions
precedent, which may be waived by the Company:
(a) Representations and Warranties. The representations and warranties
made by the Purchaser herein shall be true and accurate in all material respects
on and as of the Closing Date.
(b) Performance. The Purchaser shall have performed and complied with
all agreements and conditions contained herein or in other ancillary documents
incident to the transactions contemplated by this Agreement required to be
performed or complied with by it prior to or at the Closing in all material
respects.
(c) Compliance Certificates. The Purchaser shall have delivered to the
Company or its representative at the Closing an Officer's Certificate to the
effect that, to such Officer's knowledge, all conditions specified in Sections
5.1(a) and (b) have been fulfilled.
(d) Consents of Creditors. The Company shall have received consents from
Copelco Capital, Inc., Lyon Credit Corporation, and CIT Group/Credit Finance,
Inc. with respect to the Company executing, delivering and performing this
Agreement.
(e) Bridge Financing. Within 14 days of a request by the Company (which
request shall be made between the date hereof and the Closing Date), the
Purchaser, and/or its
8
<PAGE> 13
Affiliates (as defined below), shall lend the Company up to the amount of the
Purchase Price upon commercially reasonable terms, which amount shall be repaid
from the Purchase Price at Closing; provided, however, that (i) between the date
hereof and the date upon which the conditions of Section 4.1(g) are satisfied,
the Purchaser and/or its Affiliates shall be required to use their reasonable
efforts to fulfill their obligations under this Section 5.1(e) and (ii) after
the date on which the conditions of Section 4.1(g) are satisfied, the Purchaser
and/or its Affiliates shall be obligated to satisfy the conditions of this
Section 5.1(e).
For the purposes of this Agreement, "Affiliate" shall mean, with respect
to any natural person or entity ("Person"): (i) each Person that, directly or
indirectly, owns or controls, whether beneficially, or as a trustee, guardian or
other fiduciary, five percent (5%) or more of the capital stock having ordinary
voting power in the election of directors of such Person; (ii) each Person that
controls, is controlled by or is under common control with such Person or any
Affiliate of such Person; or (iii) each of such Person's officers, directors,
joint ventures and partners. For the purpose of this definition, "control" of a
Person shall mean the possession, directly or indirectly, of the power to direct
or cause the direction of its management or policies, whether through the
ownership of voting securities, by contract or otherwise.
ARTICLE 6
AFFIRMATIVE COVENANTS
SECTION 6.1. Preparation of Proxy Statement: Stockholders' Meeting.
Promptly following the date of this Agreement, the Company shall prepare and
file with the SEC a proxy statement relating to the meeting of the Company's
stockholders to be held in connection with this Agreement (the "Proxy
Statement"). Purchaser shall be entitled to review drafts of, and comment upon
the Proxy Statement, and the Company shall in good faith consider such comments.
The Company shall use its reasonable efforts to cause the Proxy Statement to be
mailed to the Company's stockholders as promptly as possible.
The Company, acting through its Board of Directors, shall, in accordance
with its Certificate of Incorporation and Bylaws promptly and duly call, give
notice of, convene and hold as soon as practicable, a meeting (the "Stockholders
Meeting") of the Company's stockholders for the purpose of voting to approve and
adopt this Agreement and the transactions contemplated hereby, and, subject to
the exercise of the Board of Director's fiduciary duties, (i) recommend approval
and adoption of this Agreement by the stockholders of the Company and include in
the Proxy Statement such recommendation; and (ii) take all reasonable and lawful
action to solicit and obtain such approval.
SECTION 6.2. Piggy-Back Registrations. If at any time the Company shall
determine to register for its own account or the account of others under the
Securities Act any of its equity securities, other than on Form S-8 or Form S-4
or their then equivalents (a "Piggy-Back Registration"), it shall send to the
Purchaser, written notice of such determination and, if within fifteen (15) days
after receipt of such notice, the Purchaser shall so request in writing, the
Company shall use its diligent efforts to include in such registration statement
all or any part of the Registrable Shares (as defined below) the Purchaser
requests to be registered, except that if, in connection with any offering
involving an underwriting of Common Stock to be issued by the Company, the
managing underwriter shall impose a
9
<PAGE> 14
limitation on the number of shares of Common Stock which may be included in the
registration statement because, in its judgment, such limitation is necessary to
effect an orderly public distribution, then the Company shall be obligated to
include in such registration statement only such limited portion (or none, if so
required by the managing underwriter) of the Registrable Shares with respect to
which such Holder has requested inclusion hereunder. For the purposes of this
Section, "Registrable Shares" shall mean and include (i) Purchased Shares held
by the Purchaser; (ii) the shares of Common Stock of the Company purchased by
Purchaser under the terms of the Stock Purchase Agreement dated as of October 8,
1999 between the Purchaser and the Company, and (iii) any shares of Common Stock
issued to (or issuable upon exercise of warrants issued to) any bank or other
lender, or equipment lessor in connection with the Company obtaining a loan or
equipment financing, if the Company expressly accords to such shares the
registration rights contained in this Agreement; provided, however, that shares
of Common Stock which are Registrable Shares shall cease to be Registrable
Shares upon the consummation of any sale of such shares pursuant to a
registration statement or Rule 144 under the Securities Act.
SECTION 6.3. Registrations on Form S-1 or Form S-3. In addition to the
rights provided the Purchaser in Section 6.1 above, if the registration of
Registrable Shares under the Securities Act can be effected on Form S-1 or Form
S-3 (or any equivalent successor form promulgated by the Commission), then the
Company shall provide the Purchaser with the following rights:
(a) For the Purchaser. Upon the written request of the Purchaser, the
Company shall so notify Purchaser, and then shall, as expeditiously as possible,
use its diligent efforts to effect qualification and registration under the
Securities Act on Form S-1 or Form S-3 of all or such portion of the Registrable
Shares as the Purchaser shall specify; provided, however, the Company shall not
be required to effect a registration pursuant to this Section 6.3(a) unless the
market value of the Registrable Shares to be sold by the Purchaser in any such
registration shall be at least $2,000,000 at the time of filing such
registration statement, and further provided that the Company shall not be
required to effect (i) any registration during the first six (6) months
immediately following the Closing Date; (ii) a registration during the three (3)
months thereafter pursuant to this Section 6.3(a) unless the Registrable Shares
are less than twenty percent (20%) of the Purchased Shares; (iii) a registration
during each three(3) month period thereafter pursuant to Section 6.3(a) unless
the Registrable Shares are less than twenty percent (20%) of the then-remaining
Purchased Shares; and (iv) more than five registrations in the aggregate
pursuant to this Section 6.3(a).
(b) Conflicts. In the event that, in a registration under this Section
6.3 which is effected through an underwriter, the underwriter imposes a
limitation on the number of Registrable Shares which may be included in the
registration statement in order to effect an orderly public distribution, then
the Company shall exclude from such registration statement, first, all shares
which are not Registrable Shares, and second, Registrable Shares which are
requested to be included pursuant to Section 6.2.
SECTION 6.4. Effectiveness. The Company will use its diligent efforts to
maintain the effectiveness for up to one hundred twenty (120) days (or such
shorter period of time as the
10
<PAGE> 15
underwriters need to complete the distribution of the registered offering, or
ninety (90) days in the case of a "shelf" registration statement on Form S-1 or
Form S-3) of any registration statement pursuant to which any of the Registrable
Shares are being offered, and from time to time will amend or supplement such
registration statement and the prospectus contained therein to the extent
necessary to comply with the Securities Act and any applicable state securities
statute or regulation. The Company will also provide the Purchaser with as many
copies of the prospectus contained in any such registration statement as it may
reasonably request.
SECTION 6.5. Right of First Offer.
(a) Subject to this Section 6.5 and other than as disclosed in Section
2.2(b), if the Company shall decide to issue or sell, any (i) shares of Common
Stock, (ii) any other equity security of the Company, including without
limitation, shares of Preferred Stock, (iii) any debt security of the Company
which by its terms is convertible into or exchangeable for any equity security
of the Company, (iv) any security of the Company that is a combination of debt
and equity, or (v) any option, warrant or other right to subscribe for, purchase
or otherwise acquire any such equity security or any such debt security of the
Company, the Company shall, in each case, first offer to sell such securities
(the "Offered Securities") to the Purchaser and its Affiliates (the "Preemptive
Stockholders"), if they (collectively) hold at least 40% (forty percent) of the
then outstanding capital stock of the Company, as follows: the Company shall
offer to sell to the Preemptive Stockholders that portion of the Offered
Securities as the number of shares of Common Stock which the Preemptive
Stockholders then hold or have the right to acquire bears to the sum of the
total number of issued and outstanding shares of Common Stock and upon exercise
of warrants, options and rights outstanding, at a price and on such other terms
as shall have been specified by the Company in writing delivered to the
Preemptive Stockholders (the "Offer"), which Offer by its terms shall remain
open for a period of 14 days from the giving of the Offer.
(b) Notice of the Preemptive Stockholders' intention to accept, in whole
or in part, any Offer made pursuant to clause (a) shall be evidenced by a
writing signed by the Preemptive Stockholders and delivered to the Company prior
to the end of the 14-day period of such Offer, setting forth the number of
shares or securities the Preemptive Stockholders elect to purchase (the "Notice
of Acceptance"). Failure of the Preemptive Stockholders to deliver a Notice of
Acceptance within said 14 days will be deemed to be a rejection of the Offer.
(c) The Company shall have one hundred twenty (120) days from the end of
said 14-day period to sell any such Offered Securities as to which a Notice of
Acceptance has not been given (the "Refused Securities") to any Person or
Persons, substantially on the same terms and conditions as set forth in the
Offer.
(d) The rights of the Preemptive Stockholders under this Section 6.5
shall terminate for all future issuances of Offered Securities upon the earlier
of (i) two (2) years after the Closing Date; and (ii) any date on which
Purchaser and/or its Affiliates hold less than forty percent (40%) of the
then-outstanding capital stock of the Company.
(e) The rights of the Preemptive Stockholders under this Section 6.5
shall not apply to:
11
<PAGE> 16
(i) Common Stock issued as a stock dividend to holders of Common
Stock or upon any subdivision or combination of shares of Common Stock;
(ii) Preferred Stock issued as a dividend to holders of Preferred
Stock or upon any subdivision or combination of shares of Preferred Stock;
(iii) Common Stock issued upon exercise of options, warrants and
rights outstanding as of the date of this Agreement;
(iv) Common Stock and options of the Company issued after the
date hereof to directors, officers, employees or consultants of the Company and
any Subsidiary pursuant to any qualified or non-qualified stock option plan,
employee stock ownership plan, employee benefit plan, stock plan, or such other
options, arrangements, agreements or plans intended principally as a means of
providing compensation or incentive compensation for employment or services,
approved by the Board of Directors of the Company;
(v) Options, warrants or shares issued to banks or other lenders
or equipment lessors in connection with the Company obtaining loans or equipment
financing or to customers, prospective customers, vendors or strategic partners;
or
(vi) Securities issued in a merger or consolidation or as
consideration for the acquisition by the Company of any other corporation or
other business entity or of the assets and business thereof.
(f) For convenience in administration, the Company may offer and sell
Securities covered by the right in clause (a) without first offering such
Securities to the Preemptive Stockholders, so long as the Preemptive
Stockholders are given the opportunity to purchase their pro rata amount within
45 days after the close of the sale of Securities.
(g) The rights of the Preemptive Stockholders set forth herein are
nonassignable except (i) to any or all of the beneficial owners of the
Preemptive Stockholders; (ii) an Affiliate of the Preemptive Stockholders; and
(iii) to a purchaser who is not a competitor of the Company and who purchases
all of the Preemptive Stockholders' Securities of the Company. Any assignee
permitted under the preceding sentence shall assume the assignor's obligations
under this Agreement and become a party to this Agreement in a manner reasonably
satisfactory to the Company.
SECTION 6.6. Additional Purchases By Purchaser. Unless approved by the
Board of Directors unanimously, if, on any day other than the Closing Date, the
Purchaser and/or its Affiliates elect to purchase shares of Common Stock that
would result in the Purchaser or its affiliates holding more than 51% of the
fully diluted Common Stock pursuant to a purchase of stock, a purchase of
assets, a merger or a combination, or any other form of acquisition, such
additional purchase shall be subject to the vote of the stockholders of the
Company and shall be approved if at least fifty-one percent (51%) of the
stockholders vote in favor of the transaction and no more than twenty percent
(20%) of the stockholders vote against such transaction. Notwithstanding the
foregoing, the provisions of this Section 6.6 shall terminate at such time
12
<PAGE> 17
as the Purchaser and/or its Affiliates have acquired equal to or greater than
75% of the outstanding Common Stock of the Company.
SECTION 6.7. Employee Retention Plan. The Company and the Purchaser
agree that after the Closing hereunder, the Company shall, subject to Board of
Directors approval, set aside an additional 1,000,000 shares of Common Stock of
the Company in order to grant options in the form of qualified or non-qualified
Common Stock option grants to certain Company employees pursuant to a key
employee retention plan.
SECTION 6.8. Purchaser's Board of Directors Designee. Promptly after the
Closing Date, the Company's Board of Directors shall take the necessary steps to
add one person designated by the Purchaser as a member of the Company's Board of
Directors. The parties agree to promptly designate any person whom the Company
names as CEO in the future as a member of the Board. The parties further agree
that in the event that Bernard Vonderschmidt ceases to serve as a member of the
Board, Zvi Grinfas may, in his sole discretion and as long as he is still
serving as a member of the Board, designate a person to replace Mr.
Vonderschmidt as a member of the Board.
ARTICLE 7
MISCELLANEOUS
SECTION 7.1. Survival of Agreements. All agreements, representations and
warranties contained herein or made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement.
SECTION 7.2. Notices. All notices, requests, consents and other
communications herein (except as stated in the last sentence of this Section
7.2) shall be in writing and shall be mailed by first-class certified mail,
postage prepaid and return receipt requested, personally delivered, faxed, or
sent by recognized overnight courier service, as follows:
(a) If to the Company:
IMP, Inc.
2830 North First Street
San Jose, California U.S.A. 95143-2071
Attention: Chief Executive Officer
Fax: (408) 434-0335
With a copy to
Richard Grey, Esq.
Orrick, Herrington & Sutcliffe LLP
Old Federal Reserve Bank Building
400 Sansome Street
San Francisco, California 94111-3143
Fax: (415) 773-5759
13
<PAGE> 18
(b) If to the Purchaser:
Teamasia Semiconductors PTE Ltd.
PSA Building, PO Box 512
Singapore 91148
With a copy to:
Robert T. Borawski, Inc.
4125 Blackford Ave., Suite 140
San Jose, California 95117
Fax: (408) 241-8895
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties.
SECTION 7.3. Modifications; Waiver. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally or in
writing, except that any provision of this Agreement may be amended and the
observance of any such provision may be waived (either generally or in a
particular instance and either retroactively or prospectively) with (but only
with) the written consent of the party to be charged.
SECTION 7.4. Exculpation. The Purchaser acknowledges that it is not
relying upon any statements or instruments made or issued by any person, firm or
corporation, other than those contained in this Agreement in making its decision
to invest in the Company.
SECTION 7.5. Entire Agreement. This Agreement, together with the
schedules and exhibits attached hereto and the officer's certificate and
financial statements delivered pursuant hereto and made a part hereof, contains
the entire agreement between the parties with respect to the transactions
contemplated hereby, and supersedes all negotiations, agreements,
representations, warranties and commitments, whether in writing or oral, prior
to or contemporaneous with the Closing Date.
SECTION 7.6. Successors and Assigns. Except as otherwise expressly
provided in this Agreement, all of the terms of this Agreement shall be binding
upon and inure to the benefit of and be enforceable by the respective successors
and assigns of the parties hereto.
SECTION 7.7. Enforcement.
(a) Remedies at Law or in Equity. If the Company shall default in any of
its obligations under this Agreement or if any representation or warranty made
by or on behalf of the Company in this Agreement or in any certificate, report
or other instrument delivered under or pursuant to any term hereof shall be
untrue or misleading in any material respect as of the date of this Agreement or
as of the Closing or as of the date it was made, furnished or delivered, the
Purchaser may proceed to protect and enforce its rights, including by way of
suit in equity or action at law. In the event the Purchaser brings such an
action against the Company, the prevailing party in such dispute shall be
entitled to recover from the losing party
14
<PAGE> 19
all fees, costs and expenses of enforcing any right of such prevailing party
under or with respect to this Agreement, including without limitation such
reasonable fees and expenses of attorneys and accountants, which shall include,
without limitation, all fees, costs and expenses of appeals.
(b) Remedies Cumulative; Waiver. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to a party at law or in
equity. No express or implied waiver by Purchaser of any default shall be a
waiver of any future or subsequent default. The failure or delay of any party in
exercising any rights granted it hereunder shall not constitute a waiver of any
such right and any single or partial exercise of any particular right by a party
shall not exhaust the same or constitute a waiver of any other right provided
herein.
SECTION 7.8. Execution and Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and all such counterparts together shall constitute
one instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
SECTION 7.9. Governing Law and Severability. (a) This agreement shall be
governed by the internal laws of the state of California, without regard to
principles of conflicts of law. Each of the parties hereto hereby submits to the
exclusive jurisdiction of the United States District Court in San Francisco,
California, for purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each of the parties
hereto waives any objection which it may now or hereafter have to the laying of
the venue of any such proceeding brought in such a court and any claim that any
such proceeding brought in such a court has been brought in an inconvenient
forum.
(b) In the event any provision of this agreement or the application of
any such provision to any party shall be held by a court of competent
jurisdiction to be contrary to law, the remaining provisions of this agreement
shall remain in full force and effect.
SECTION 7.10. Headings. The descriptive headings of the Articles and
Sections hereof and the Schedules and Exhibits hereto are inserted for
convenience only and do not constitute a part of this Agreement.
SECTION 7.11. Confidentiality. The Purchaser agrees that it will keep
confidential and will not disclose, or divulge any confidential, proprietary,
secret or non-public information which the Purchaser may obtain from the Company
and not use such information other than for the benefit of the Company or in
furtherance of the Purchaser's rights as a shareholder of the Company; provided,
that, no such information shall be deemed to be non-public if it (i) is or
becomes generally available to the public other than as a result of a disclosure
by the Purchaser or its respective agents, representatives or employees; (ii) is
or becomes available to the Purchaser on a non-confidential basis from a source
(other than the Company or one of its officers, directors, agents,
representatives or employees) that is not prohibited from disclosing such
information by a legal, contractual or fiduciary obligation; or (iii) was known
to the Purchaser on a non-confidential basis prior to its disclosure to it by
the Company and provided
15
<PAGE> 20
further that, any other term of this Agreement to the contrary notwithstanding,
the Company shall not be obligated to disclose any information, the disclosure
of which it believes in good faith would be detrimental to the Company or its
stockholders.
SECTION 7.12. [Reserved.]
SECTION 7.13. [Reserved.]
SECTION 7.14. Indemnification.
(a) The Company agrees to indemnify and hold harmless the Purchaser from
and against any and all liabilities, obligations, losses, out-of-pocket costs or
damages ("Loss") and reasonable attorneys' and accountants' fees and expenses,
court costs and all other reasonable out-of-pocket expenses ("Expense") incurred
by the Purchaser in connection with or arising from or attributable to any
breach by the Company, of any of its representations, warranties, obligations,
covenants or agreements contained in this Agreement; provided, however, that the
Purchaser shall not be entitled to indemnification for Losses or Expenses
pursuant to this Section unless and until the amount of Losses and Expenses
exceeds $100,000. Thereafter, the Company shall be liable for indemnification
for Losses and Expenses only to the extent the aggregate amount thereof exceeds
$100,000. Notwithstanding the foregoing, the terms "Loss" and "Expense" shall
not include incidental, consequential or punitive damages except in a third
party claim, action or suit.
(b) If the Purchaser believes that it has suffered or incurred any Loss
or Expense pursuant to this Section, it shall so notify the Company promptly in
writing describing such Loss or Expense, the amount thereof, if known, and the
method of computation of such Loss or Expense. Promptly after receipt by the
Purchaser of notice of the commencement of any action by any third party, such
indemnified party shall, if a claim in respect thereof is to be made against the
Company under this Section notify the Company in writing of the commencement
thereof (but the failure so to notify the Company shall not relieve the Company
from any liability which it may have under this Section except to the extent
that it has been prejudiced in any material respect by such failure or from any
liability which it might otherwise have). Unless the Company is contesting a
third party claim, the Company shall promptly pay such claim or reimburse the
Purchaser if the Purchaser has made payment.
(c) The Company shall have the right to conduct and control, through
counsel of its choosing, any third party claim, action or suit. The Company
shall permit the Purchaser to participate in the defense of any such action or
suit through counsel chosen by it, provided that the fees and expenses of such
counsel shall be borne by the Purchaser. The Company may agree to any compromise
or settlement with respect to a claim for money damages without the consent of
the Purchaser; provided, that the Company shall not effect any compromise or
settlement which will have a continuing effect on the business of the Purchaser
without the prior consent of the Purchaser, which consent shall not be
unreasonably withheld or delayed.
SECTION 7.15. [Reserved].
16
<PAGE> 21
SECTION 7.16. Expenses. The parties shall each pay their own legal,
accounting and financial advisory fees and other out-of-pocket expenses related
to the negotiation, preparation and carrying out of this Agreement and the
transactions herein contemplated.
[The rest of this page left intentionally blank.]
17
<PAGE> 22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
IMP, INC.
By: /s/ ZVI GRINFAS
---------------------------------
Name: ZVI GRINFAS
---------------------------
Title: PRESIDENT & CEO
---------------------------
TEAMASIA SEMICONDUCTORS PTE LTD.
By: /s/ SUBBA RAO PINAMANENI
---------------------------------
Name: SUBBA RAO PINAMANENI
---------------------------
Title: MANAGING DIRECTOR
---------------------------
STOCK PURCHASE AGREEMENT SIGNATURE PAGE
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-26-2000
<PERIOD-START> SEP-27-1999
<PERIOD-END> DEC-26-1999
<CASH> 631
<SECURITIES> 0
<RECEIVABLES> 6,798
<ALLOWANCES> 217
<INVENTORY> 6,027
<CURRENT-ASSETS> 13,840
<PP&E> 91,577
<DEPRECIATION> (86,160)
<TOTAL-ASSETS> 19,693
<CURRENT-LIABILITIES> 14,603
<BONDS> 0
0
0
<COMMON> 42
<OTHER-SE> 74,728
<TOTAL-LIABILITY-AND-EQUITY> 19,693
<SALES> 8,917
<TOTAL-REVENUES> 8,917
<CGS> 6,595
<TOTAL-COSTS> 6,595
<OTHER-EXPENSES> 1,997
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (261)
<INCOME-PRETAX> 64
<INCOME-TAX> 0
<INCOME-CONTINUING> 64
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 64
<EPS-BASIC> $.02
<EPS-DILUTED> $.02
</TABLE>
