<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 16, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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MICROCHIP TECHNOLOGY INCORPORATED
(Exact name of Registrant as specified in its charter)
DELAWARE 86-0629024
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
2355 WEST CHANDLER BOULEVARD
CHANDLER, AZ 85224-6199
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
----------------
STEVE SANGHI
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
MICROCHIP TECHNOLOGY INCORPORATED
2355 WEST CHANDLER BOULEVARD
CHANDLER, AZ 85224-6199
602-786-7200
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
----------------
Copies to:
BARRY E. TAYLOR CRAIG D. NORRIS GREGORY M. GALLO SCOTT M. STANTON
MATTHEW B. SWARTZ WILSON SONSINI GILBERT GALLARDO GRAY CARY WARE &
GOODRICH & ROSATI PROFESSIONAL FREIDENRICH A PROFESSIONAL
CORPORATION 650 PAGE MILL ROAD PALO CORPORATION 400 HAMILTON AVENUE PALO
ALTO, CA 94304 (415) 493-9300 ALTO, CA 94301 (415) 328-6561
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration
Statement.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE OF EACH CLASS OF AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE AMOUNT OF
REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
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<S> <C> <C> <C> <C>
Common Stock, $0.001
par value............. 1,150,000 shares $37.0625 $42,621,875 $12,916
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</TABLE>
(1) Includes 150,000 shares of Common Stock which the Underwriters have the
option to purchase to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee based on the average of the high and low prices for the
Common Stock as reported by the Nasdaq National Market on January 10, 1997
in accordance with Rule 457 of the Securities Act of 1933.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
JANUARY 16, 1997
1,000,000 Shares
[MICROCHIP LOGO]
Common Stock
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All of the shares of Common Stock offered hereby are being sold by Microchip
Technology Incorporated ("Microchip" or the "Company"). The Company's Common
Stock is traded on the Nasdaq National Market under the symbol "MCHP." On
January 15, 1997, the last sale price for the Common Stock as reported on the
Nasdaq National Market was $33.50 per share. See "Price Range of Common Stock."
All share and per share numbers reflect a 3-for-2 stock split effective January
6, 1997.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 6.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share........................ $ $ $
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Total(3)......................... $ $ $
</TABLE>
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(1) See "Underwriting" for information relating to indemnification of the
Underwriters.
(2) Before deducting expenses of the offering estimated at $300,000, payable by
the Company.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
150,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, total Underwriting
Discounts and Commissions and total Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
--------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject
to the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the
offices of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1997.
Alex. Brown & Sons
INCORPORATED
Deutsche Morgan Grenfell
Prudential Securities
Robertson, Stephens & Company
THE DATE OF THIS PROSPECTUS IS , 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the
Commission: New York Regional Office, Seven World Trade Center, New York, New
York 10048, and Chicago Regional Office, 500 West Madison Street, Chicago,
Illinois 60661. Copies of such materials can be obtained from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 upon payment of the prescribed fees. The Common Stock of the Company is
quoted on the Nasdaq National Market. Reports, proxy statements and other
information concerning the Company may be inspected at the National
Association of Securities Dealers, Inc. at 1735 K Street, N.W., Washington,
D.C. 20006. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements and other information regarding
registrants that file electronically with the Commission. The address of the
Commission's Web site is http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus: (i) the Company's Annual Report
on Form 10-K for the year ended March 31, 1996; (ii) the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996; (iii) the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1996; (iv)
the description of the Company's Common Stock contained in its Registration
Statement on Form 8-A as filed with the Commission on February 5, 1993; and
(v) the description of the Company's Preferred Share Purchase Rights contained
in its Registration Statement on Form 8-A as filed with the Commission on
February 14, 1995.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of
this Prospectus and prior to the termination of this offering shall be deemed
to be incorporated by reference herein and to be a part hereof from the date
of filing of such reports and documents. Any statement incorporated herein
shall be deemed to be modified or superseded for purposes of this Prospectus
to the extent a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company hereby undertakes to provide, without charge, to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Requests for such documents should be
submitted in writing to Corporate Secretary at the Company's principal
executive offices at 2355 West Chandler Boulevard, Chandler, Arizona 85224 or
by telephone at (602) 786-7200.
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IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVERALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMPANY'S
COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND OTHER SELLING
GROUP MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE
COMPANY'S COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE
10B-6A UNDER THE EXCHANGE ACT. SEE "UNDERWRITING."
The Microchip logo and name and PIC, Smart Serials, KEELOQ and QuickASIC are
trademarks of the Company. This Prospectus also includes trademarks of
companies other than the Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements and notes thereto appearing
elsewhere in this Prospectus or incorporated herein by reference. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including those set forth under "Risk Factors" and elsewhere in this
Prospectus, including the documents incorporated by reference herein.
THE COMPANY
Microchip develops, manufactures and markets field programmable 8-bit
microcontrollers, application specific standard products ("ASSPs") and related
specialty memory products for high-volume embedded control applications in the
consumer, automotive, office automation, communications and industrial markets.
The Company provides cost-effective field programmability for high-volume
applications and believes that its PIC product family is a price/performance
leader in the worldwide 8-bit microcontroller market. Microchip's embedded
control products also offer the advantages of a small footprint and low voltage
operation along with ease of development, enabling timely and cost-effective
product integration by its customers. The Company's ASSP products include a
variety of specialized integrated circuits, including the KEELOQ security
products and QuickASIC gate array devices. The Company's specialty memory
products are primarily comprised of serial EEPROMS, which are used primarily to
provide additional memory in embedded control systems.
Embedded control systems typically incorporate a microcontroller, a computer-
on-a-chip that consists of a central processing unit, memory, application-
specific software and various input/output capabilities, and may include other
components such as additional non-volatile EEPROM memory. Embedded control
systems enable manufacturers to differentiate their products, replace less
efficient electromechanical control devices, add product functionality and
significantly reduce product cost. Embedded control solutions have been
incorporated into thousands of products and subassemblies in a wide variety of
markets worldwide, including compact disc players, automotive air bag and anti-
lock braking systems, household appliances, cordless and cellular telephones,
remote controls and keyless entry systems.
Microchip's strategy is to provide embedded control solutions that combine
time-to-market advantages with high performance and increased functionality.
With Microchip's field programmable microcontrollers and easy-to-use
development systems, customers can design and produce new products or new
product features in a few days. In addition, Microchip's RISC architecture
provides faster performance than competing 8-bit microcontrollers. Using
advanced design and manufacturing technology, the Company is also able to
provide products that have some of the industry's smallest die and package
sizes and that operate at voltage and power requirements that are among the
industry's lowest.
The Company sells its products to a geographically diverse base of customers
across a broad and growing range of market applications, reducing its
dependence on any single industry, market or customer. The Company sells to
more than 650 OEM customers directly and to more than 9,000 other customers
worldwide through its distributors. Microchip has also sold more than 83,000
development systems, providing a broad foundation for future microcontroller
sales.
The Company designs and fabricates wafers at its facilities in Chandler and
Tempe, Arizona. The Company is continuing the process of transitioning products
to smaller geometries and to larger wafer sizes. An 8-inch wafer pilot line was
established at the Tempe wafer fab during fiscal 1997, and the Company
3
<PAGE>
plans to convert the Tempe wafer fab from a 6-inch facility to an 8-inch
facility over time. In addition, the Company has begun the implementation of a
0.7 micron process to which it expects to transition over time. Microchip's
ownership of its manufacturing resources is an important component of its
business strategy, enabling it to maintain a high level of manufacturing
control and to be one of the lowest cost producers in the embedded control
industry. Direct control over wafer fabrication also enables Microchip to
shorten the Company's design and production cycles. The Company performs final
test at its facilities in Kaohsiung, Taiwan and Chachoengsao, Thailand, near
Bangkok, and also uses third-party assembly and test contractors in Thailand
and several other Asian countries.
In fiscal 1996, the Company initiated planning and design of a third wafer
fabrication facility in Chandler, Arizona. The Company has determined that
additional capital investment in its existing wafer fab facilities will yield
sufficient manufacturing capacity for several additional years and, thus, has
deferred the construction of the third wafer fab facility for the present time.
Except as noted herein, references to the Company include the Company and its
subsidiaries. The Company's executive offices are located at 2355 West Chandler
Boulevard, Chandler, Arizona 85224-6199 and its telephone number is (602) 786-
7200.
4
<PAGE>
THE OFFERING
<TABLE>
<C> <S>
Common Stock offered hereby..................... 1,000,000 shares
Common Stock to be outstanding
after the offering............................. 52,923,283 shares(1)
Use of proceeds................................. To reduce outstanding
indebtedness and for general
corporate purposes, working
capital. See "Use of
Proceeds".
Nasdaq National Market Symbol................... MCHP
</TABLE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(in thousands, except per share data)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
-------------------------- -----------------
1994 1995 1996 1995 1996
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<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales........................ $138,742 $207,961 $285,888 $213,833 $240,747
Operating income................. 24,204 49,201 60,312 42,219 48,853
Income before income taxes....... 24,133 49,128 59,934 41,894 47,351
Net income....................... 19,159 36,299 43,752 30,033 34,567
Net income per common and common
equivalent share................ $ 0.42 $ 0.70 $ 0.80 $ 0.55 $ 0.64
Shares used in per share
calculations.................... 46,155 51,641 54,533 54,807 54,201
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDED
----------------------------------------------------------------
DEC.
JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30, SEPT. 30, 31,
1995 1995 1995 1996 1996 1996 1996
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<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.............. $64,499 $71,265 $78,069 $72,055 $74,161 $79,510 $87,076
Operating income....... 16,161 17,994 8,064 18,093 9,545 18,517 20,791
Income before income
taxes................. 16,087 17,778 8,029 18,093 9,161 17,980 20,210
Net income............. 11,503 12,765 5,765 13,719 6,686 13,126 14,755
Net income per common
and common equivalent
share................. $ 0.21 $ 0.23 $ 0.10 $ 0.25 $ 0.12 $ 0.24 $ 0.27
Shares used in per
share calculations.... 54,312 54,981 55,119 54,519 54,423 53,843 54,594
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------
ACTUAL AS ADJUSTED (2)
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<S> <C> <C>
BALANCE SHEET DATA:
Working capital....................................... $ 54,063 $ 58,804
Total assets.......................................... 385,896 390,638
Current portion of long-term obligations.............. 6,411 6,411
Long-term obligations, less current portion........... 33,831 7,131
Stockholders' equity.................................. 243,202 274,643
</TABLE>
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(1) Based on the number of shares outstanding at December 31, 1996. Excludes
outstanding options to purchase 4,451,387 shares of Common Stock under the
Company's stock option plan. See "Capitalization."
(2) Adjusted to reflect the issuance and sale of 1,000,000 shares of Common
Stock offered hereby at an assumed offering price of $33.50 per share,
after deducting the estimated underwriter discounts and commissions and
expenses payable by the Company in connection with the offering, and the
anticipated use of proceeds therefrom, including the repayment of
approximately $26.7 million in debt. See "Use of Proceeds" and
"Capitalization."
----------------
Except as otherwise specified, all information in this Prospectus assumes no
exercise of the Underwriters' over-allotment option. See "Underwriting."
5
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
shares of Common Stock offered by this Prospectus. This Prospectus contains
forward-looking statements that involve risks and uncertainties and the
Company's actual results could differ materially from those anticipated in
these forward-looking statements as a result of certain factors, including
those set forth in the following Risk Factors and elsewhere in this
Prospectus, including the documents incorporated by reference herein.
Factors Affecting Operating Results. The Company's operating results are
affected by a wide variety of factors which could adversely impact its net
sales and profitability, many of which are beyond the control of the Company.
These factors include the level of orders which are received and can be
shipped in a quarter, the Company's ability to design and introduce new
products on a timely basis, market acceptance of products of both the Company
and its customers, customer demand for the Company's products, customer order
patterns and seasonality, changes in product mix, whether the Company's
customers buy from a distributor or directly from the Company, expansion of
direct sales efforts which adversely affect relationships with distributors,
product performance and reliability, product obsolescence, the amount of any
product returns, availability and utilization of manufacturing capacity,
fluctuations in manufacturing yield, the availability and cost of raw
materials, equipment and other supplies, the cyclical nature of both the
semiconductor industry and the markets addressed by the Company's products,
technological changes, competition and competitive pressures on prices, and
economic conditions in the United States and worldwide markets served by the
Company. The Company believes its ability to continue to increase its
manufacturing capacity to meet customer demand and maintain satisfactory
delivery schedules will be an important competitive factor. As a result of the
increase in fixed costs and operating expenses related to expanding its
manufacturing capacity, the Company's operating results may be adversely
affected if net sales do not increase sufficiently to offset the increased
costs. Historically, average selling prices in the semiconductor industry
decrease over the life of any particular product. The Company's overall
average selling prices for its embedded control products have remained
relatively constant while average selling prices of its non-volatile memory
products have declined gradually over time. In the quarters ended June 30,
1996 and September 30, 1996, the Company experienced increased pricing
pressure on its non-volatile memory products due to industry inventory
correction activities. There can be no assurance that average selling prices
for the Company's embedded control or other products will not experience
increased pricing pressure in the future. An increase in pricing pressure
could adversely affect the Company's operating results. The Company's products
are incorporated into a wide variety of consumer, automotive, office
automation, communications and industrial products. A slowdown in demand for
products which utilize the Company's products as a result of economic or other
conditions in the United States or worldwide markets served by the Company
could adversely affect the Company's operating results.
Because of the foregoing factors, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and that
such comparisons should not be relied upon as indications of future
performance. Further, it is possible that in future periods the Company's
operating results may be below the expectations of public market analysts and
investors. In such an event, the price of the Company's Common Stock would
likely be materially adversely affected.
Dependence on Orders Received and Shipped in a Quarter. The Company's net
sales in any given quarter are dependent upon a combination of orders received
in that quarter for shipment in that quarter ("turns orders") and shipments
from backlog. The Company has emphasized its ability to respond quickly to
customer orders as part of its competitive strategy. This strategy, combined
with current industry conditions, is resulting in customers placing orders
with relatively short delivery schedules. This has the effect of increasing
turns orders as a portion of the Company's business in any quarter and
reducing the Company's visibility on net sales. The percentage of turns orders
has increased in each quarter of fiscal
6
<PAGE>
1997 and is expected to increase further in the fourth quarter of fiscal 1997.
Because turns orders are more difficult to predict, there can be no assurance
that the combination of turns orders and backlog in any quarter will be
sufficient to achieve growth in net sales. If the Company does not achieve a
sufficient level of turns orders in a particular quarter, the Company's
revenues and operating results would be materially adversely affected.
Dependence on New Products and Technologies. The Company's future operating
results will depend to a significant extent on its ability to continue to
develop and introduce new products on a timely basis which compete effectively
on the basis of price and performance and which address customer requirements.
The success of new product introductions depends on various factors, including
proper new product selection, timely completion and introduction of new
product designs, development of support tools and collateral literature that
make complex new products easy for engineers to understand and use and market
acceptance of customers' end products. Because of the complexity of its
products, the Company has experienced delays from time to time in completing
development of new products. In addition, there can be no assurance that any
new products will receive or maintain substantial market acceptance. If the
Company were unable to design, develop and introduce competitive products on a
timely basis, its future operating results would be adversely affected.
The Company's future success will also depend upon its ability to develop
and implement new design and process technologies. Semiconductor design and
process technologies are subject to rapid technological change, requiring
large expenditures for research and development. The Company is continuing the
process of transitioning products to smaller geometries and to larger wafer
sizes. An 8-inch pilot line was established at the Tempe wafer fab during
fiscal 1997 and the Company plans to convert the Tempe fab from a 6-inch
facility to an 8-inch facility over time. In addition, the Company has begun
the implementation of a 0.7 micron process to which it expects to transition
over time. Other companies in the industry have experienced difficulty in
effecting transitions to smaller geometry processes and to larger wafers and,
consequently, have suffered reduced manufacturing yields or delays in product
deliveries. The Company believes that its transition to smaller geometries and
to larger wafers will be important for the Company to remain competitive and
operating results could be adversely affected if the transition is
substantially delayed or inefficiently implemented.
Manufacturing Yields and Capacity. The manufacture and assembly of
integrated circuits, particularly nonvolatile, erasable CMOS memory and logic
devices such as those produced by the Company, are complex processes that are
sensitive to a wide variety of factors, including the level of contaminants in
the manufacturing environment, impurities in the materials used and the
performance of the fabrication personnel and equipment. As is typical in the
semiconductor industry, the Company has from time to time experienced lower
than anticipated manufacturing yields. The Company's operating results would
be adversely affected if Microchip were unable to maintain yields at
approximately current levels.
The Company believes that expansion of its manufacturing capacity will be
important to enable it to respond to increased sales opportunities and
maintain satisfactory delivery schedules. Operating results could be adversely
affected if the expansion of manufacturing capacity is delayed or
inefficiently implemented. Other companies in the industry have experienced
difficulty in expanding manufacturing capacity, resulting in reduced yields or
delays in product deliveries. No assurance can be given that the Company will
not experience manufacturing yield or delivery problems in the future. Such
problems could materially affect the Company's operating results.
Reliance on Third-Party Contractors. Nearly all of Microchip's assembly
operations are performed by third-party contractors in order to meet increased
product shipment requirements. Reliance on third parties involves some
reduction in the Company's level of control over the assembly portion of its
business. While the Company reviews the quality, delivery and cost performance
of these third-party contractors, there can be no assurance that increased
reliance on third-party contractors will not adversely impact results in
future reporting periods if any third-party contractor is unable to maintain
assembly and test yields and costs at approximately their current levels.
7
<PAGE>
Foreign Manufacturing Operations. The Company owns test facilities in
Kaohsiung, Taiwan, Republic of China and Chachoengsao, Thailand, near Bangkok.
The Company also uses various third-party contractors in Thailand, the
Philippines and other locations in Asia for assembly and test. The Company's
reliance on facilities in these countries, and maintenance of substantially all
of its finished goods inventory overseas, entails certain political and
economic risks, including political instability and expropriation, supply
disruption, currency controls and exchange fluctuations, as well as changes in
tax laws, tariff and freight rates. The Company has not experienced any
significant interruptions in its foreign business operations to date.
Nonetheless, the Company's business and operating results could be adversely
affected if foreign operations or international air transportation were
disrupted.
Competition. The semiconductor industry is intensely competitive and has been
characterized by price erosion, rapid technological change and foreign
competition with respect to many products. The Company competes with major
domestic and international semiconductor companies, many of which have greater
market recognition and substantially greater financial, technical, marketing,
distribution and other resources than the Company with which to pursue
engineering, manufacturing, marketing and distribution of their products.
Emerging companies are also increasing their participation in the market for
embedded control applications. While the Company's product strategy is to
target markets which the Company believes are less susceptible to competitive
pricing pressure than commodity markets, the Company experiences significant
price competition in connection with the sale of its products and may
experience increased competition, which could adversely affect its operating
margins. In addition, the ability of the Company to compete successfully
depends on a number of factors both within and outside its control, including
the quality; performance; reliability; features; ease of use; pricing and
diversity of its products; the quality of its customer services and its ability
to address the needs of its customers; its success in designing and
manufacturing new products including those implementing new technologies,
efficiency of production, adequate sources of raw materials and other supplies
at acceptable prices; protection of the Company's products and processes by
effective utilization of intellectual property laws; the rate at which
customers incorporate the Company's products into their own products; product
introductions by the Company's competitors; the number; nature and success of
its competitors in a given market and general market and economic conditions.
Furthermore, capacity in the semiconductor industry is increasing and such
increased capacity or improved product availability could adversely affect the
Company's competitive position. The Company currently competes principally on
the basis of the technical innovation and performance of its embedded control
products, including their speed, functionality, density, power consumption,
reliability and packaging alternatives, as well as on price and product
availability. The Company believes that important competitive factors in the
embedded control market that it serves are product performance, cost, size and
packaging options, user programmability, low voltage, enhanced power
management, ease of use, functionality of application development systems and
technical service and support. There is no assurance that the Company will
continue to be able to compete successfully in the future.
Patents, Licenses and Intellectual Property Claims. The Company's success
depends in part on its ability to obtain patents, licenses and other
intellectual property rights covering its products and manufacturing processes.
To that end, the Company has acquired certain patents and patent licenses and
intends to continue to seek patents on its inventions and manufacturing
processes. The process of seeking patent protection can be long and expensive,
and there can be no assurance that patents will be issued from currently
pending or future applications or that the Company's existing patents or any
new patents that are issued will be of sufficient scope or strength to provide
meaningful protection or any commercial advantage to the Company. The Company
may be subject to or may initiate interference proceedings in the U.S. Patent
and Trademark Office, which can require significant financial and management
resources. As is typical in the semiconductor industry, the Company has from
time to time received, and may in the future receive, communications alleging
possible infringement of patents or other intellectual property rights of
others. The Company investigates all such notices and responds as appropriate.
The Company is currently in discussions with several other companies regarding
intellectual property licenses of such
8
<PAGE>
other companies' semiconductor patents. Based on industry practice, the
Company believes that in most cases it could obtain any necessary licenses or
other rights on commercially reasonable terms, but no assurance can be given
that licenses would be on acceptable terms, that litigation would not ensue or
that damages for any past infringement would not be assessed. Litigation,
which could result in substantial cost to the Company and diversion of
management effort, may be necessary to enforce patents or other intellectual
property rights of the Company or to defend the Company against claimed
infringement of the rights of others. The failure to obtain necessary licenses
or other rights or litigation arising out of infringement claims could have a
material adverse effect on the Company's business and results of operations.
See "--Legal Matters."
Foreign Trade and Currency Exchange. Approximately 65% of the Company's net
sales in the past three fiscal years and nine months ended December 31, 1996,
were to foreign customers. In addition, the Company purchases a substantial
portion of its raw materials and equipment from foreign suppliers and incurs
labor costs in foreign locations. The foreign manufacture and sale of products
and the purchase of raw materials and equipment from foreign suppliers may be
adversely affected by foreign political and economic conditions. Protectionist
trade legislation in either the United States or foreign countries, such as a
change in the current tariff structures, export compliance laws or other trade
policies, could adversely affect the Company's ability to manufacture or sell
products in foreign markets and purchase materials or equipment from foreign
suppliers. In countries in which the Company conducts business in local
currency, currency exchange fluctuations could adversely affect the Company's
costs. In addition, the laws of certain foreign countries do not protect the
Company's intellectual property rights to the same extent as the laws of the
United States.
A portion of the Company's foreign transactions are denominated in
currencies other than the U.S. dollar, principally the New Taiwan dollar.
Although the Company has not incurred any material exchange gains or losses,
there can be no assurance that fluctuations in the currency exchange rates in
the future will not have an adverse impact on the Company's operations. The
Company has entered and will from time to time enter into hedging transactions
in order to minimize exposure to currency rate fluctuations.
The Semiconductor Industry; Capital Requirements. The semiconductor industry
in general has been characterized by cyclicality. The industry has experienced
significant economic downturns at various times, characterized by diminished
product demand, accelerated erosion of average selling prices and production
over-capacity. The Company has sought to reduce its exposure to industry
cyclicality by selling products to a geographically diverse base of customers
across a broad range of market applications. However, the Company may
experience substantial period-to-period fluctuations in future operating
results due to general industry conditions or events occurring in the general
economy. The Company experienced a period of increased demand and production
capacity constraints until the fourth quarter of fiscal 1996, at which time
the Company and other semiconductor companies experienced a period of lower
revenues due to an industry-wide inventory correction. The Company's revenues
have increased each quarter in fiscal 1997. However, there is no assurance
that the Company will continue to experience increasing revenues.
The semiconductor industry is also capital intensive. In order to remain
competitive, the Company must continue to make significant investments in
capital equipment, for both production and research and development. As a
result of the increase in fixed costs and operating expenses related to these
capital expenditures, the Company's operating results may be adversely
affected if net sales do not increase sufficiently to offset the increased
costs. The Company may from time-to-time seek additional equity or debt
financing for the capital expenditures required to maintain or expand the
Company's fabrication and assembly and test facilities and capital equipment.
The timing and amount of any such capital requirements will depend on a number
of factors, including demand for the Company's products, product mix, changes
in industry conditions and competitive factors. There can be no assurance that
such financing will be available on acceptable terms, and any additional
equity financing could result in additional dilution to existing investors.
9
<PAGE>
Environmental Regulation. The Company is subject to a variety of federal,
state and local governmental regulations related to the use, storage, discharge
and disposal of toxic, volatile or otherwise hazardous chemicals used in its
manufacturing process. Although the Company believes that its activities
conform to presently applicable environmental regulations, the failure to
comply with present or future regulations could result in fines being imposed
on the Company, suspension of production or a cessation of operation. Such
regulation could require the Company to acquire costly equipment or to incur
other significant expenses to comply with environmental regulations. Any
failure by the Company to control the use of or adequately restrict the
discharge of hazardous substances could subject it to future liabilities. There
can be no assurance that environmental problems will not occur in the future
which could subject the Company to future costs or liabilities.
Management of Growth. The Company's ability to manage its growth effectively
will require it to continue to enhance its operational, financial and
management systems and to successfully hire, train, motivate and manage
additional employees. If the Company is unable to manage growth effectively,
the Company's results of operations could be adversely affected.
Dependence on Key Personnel. The Company's future success will depend to a
significant extent upon the efforts and abilities of its senior management and
technical personnel. The competition for qualified technical and management
personnel is intense. There can be no assurance that the Company will be
successful in retaining its existing key personnel or in attracting and
retaining additional key personnel which it requires. The loss of the services
of one or more of its key personnel or the inability to add key personnel could
have a material adverse effect on the Company. The Company does not have an
employment agreement with any member of its senior management.
Possible Volatility of Stock Price. The market price of the Company's Common
Stock has increased significantly since the Company's initial public offering
in March 1993. See "Price Range of Common Stock." The period was marked by
generally rising stock prices and substantially improving operating results by
the Company. The trading price of the Company's Common Stock in the future
could be subject to wide fluctuations in response to quarterly variations in
operating results of the Company and other semiconductor companies, actual or
anticipated announcements of technical innovations or new products by the
Company or its competitors, changes in analysts' estimates of the Company's
financial performance, general conditions in the semiconductor industry,
worldwide economic and financial conditions and other events or factors. In
addition, the stock market has experienced significant price and volume
fluctuations which have particularly affected the market prices for many high
technology companies and which often have been unrelated to the operating
performance of such companies. These broad market fluctuations and other
factors may adversely affect the market price of the Company's Common Stock.
Legal Matters. The Company is currently in discussions with Lucent
Technologies Inc. ("Lucent") regarding alleged infringement of certain of
Lucent's semiconductor patents. The Company has investigated Lucent's claims
and believes it does not infringe any of the asserted patents. Notwithstanding
the Company's position, the Company and Lucent have exchanged various proposals
for a patent license, but, to date, have been unable to reach an agreement.
Although the outcome of the discussions with Lucent is not presently
determinable, the Company believes that, should a license be necessary, the
Company will be able to obtain a license with Lucent on commercially reasonable
terms. However, no assurances can be given that a mutually satisfactory
conclusion will be achieved. In such event, the Company may be subject to
litigation, which could result in substantial cost to the Company and diversion
of management effort. If unsuccessful, the Company could be forced to pay
royalties on past and future sales. Any such litigation and/or royalty payments
could have a material adverse impact on the Company's business and operating
results. See "--Patents, Licenses and Intellectual Property Claims."
The Securities and Exchange Commission is presently conducting a private,
non-public investigation into matters relating to the Company's disclosure on
February 26, 1996 that revenues and earnings for the
10
<PAGE>
quarter ended March 31, 1996 would be lower than previously estimated. While
the outcome of the investigation, and its effect on the Company, if any,
cannot be predicted at the present time, the Company does not believe that the
investigation will result in a material adverse effect on the Company.
Effect of Issuance of Preferred Stock. Certain provisions of the Company's
Restated Certificate of Incorporation, as amended, allow the Company to issue
Preferred Stock with voting, liquidation and dividend rights senior to those
of the Common Stock without the approval of the Company's stockholders. The
issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions or other corporate purposes, could have
the effect of making it more difficult for a third party to acquire a majority
of the outstanding stock of the Company. The Company has no present plans to
issue shares of Preferred Stock.
11
<PAGE>
DIVIDEND POLICY
The Company has not paid any cash dividends on its capital stock. The
Company currently anticipates that it will retain all available funds for use
in the operation of its business and therefore does not anticipate paying any
cash dividends in the foreseeable future.
PRICE RANGE OF COMMON STOCK
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol "MCHP." The following table sets forth the quarterly high and low
closing prices of the Common Stock as reported by the Nasdaq National Market
for the last three fiscal years (through January 15, 1997), adjusted to
reflect a 3-for-2 stock split effected in March 1994, a 3-for-2 stock split
effected in November 1994 and a 3-for-2 stock split effective in January 1997:
<TABLE>
<CAPTION>
HIGH LOW
FISCAL 1995 ------- -------
<S> <C> <C>
First Quarter................................................ $ 15.67 $ 8.81
Second Quarter............................................... 17.67 13.67
Third Quarter................................................ 20.83 16.00
Fourth Quarter............................................... 19.33 14.83
FISCAL 1996
First Quarter................................................ $ 25.50 $ 17.08
Second Quarter............................................... 27.50 23.25
Third Quarter................................................ 29.25 22.00
Fourth Quarter............................................... 25.67 16.00
FISCAL 1997
First Quarter................................................ $ 19.50 $ 14.67
Second Quarter............................................... 25.67 14.00
Third Quarter................................................ 34.84 23.34
Fourth Quarter (through January 15, 1997).................... 39.50 33.50
</TABLE>
On January 15, 1997, the closing sale price for the Company's Common Stock
was $33.50 per share. As of January 15, 1997, there were approximately 542
holders of record of the Company's Common Stock. This figure does not reflect
beneficial ownership of shares held in nominee names.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,000,000 shares being
offered hereby are estimated to be approximately $31,441,000 ($36,202,000 if
the Underwriters' over-allotment option is exercised in full), after deducting
the estimated underwriting discounts and commissions and expenses payable by
the Company in connection with the offering. The Company intends to use the
net proceeds to repay the outstanding borrowings under the Company's bank
lines of credit ($37,713,000 at December 31, 1996). The line of credit bears
interest at the prime rate or the 30-day London Interbank Offered Rate (LIBOR)
plus 75 basis points (8.25% and 6.313%, respectively) at December 31, 1996)
and expires in October 1998. The borrowings were incurred to fund wafer
fabrication and final test capacity. The balance of the net proceeds, if any,
will be used for working capital and general corporate purposes. Pending such
uses, the Company intends to invest the net proceeds in investment grade,
interest bearing securities.
The semiconductor industry is capital intensive. In order to remain
competitive, the Company must continue to make significant investments in
capital equipment, for both production and research and development. As a
result of the increase in fixed costs and operating expenses related to these
capital expenditures, the Company's operating results may be adversely
affected if net sales do not increase sufficiently to offset the increased
costs. The Company may from time-to-time seek additional equity or debt
financing for the capital expenditures required to maintain or expand the
Company's fabrication and assembly and test facilities and capital equipment.
The timing and amount of any such capital requirements will depend on a number
of factors, including demand for the Company's products, product mix, changes
in industry conditions and competitive factors. There can be no assurance that
such financing will be available on acceptable terms, and any additional
equity financing could result in additional dilution to existing investors.
The Company believes its existing sources of liquidity combined with cash
generated from operations and additional borrowings under its bank line of
credit will be sufficient to meet the Company's currently anticipated cash
requirements for at least the next twelve months.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1996, and as adjusted as of that date to reflect the issuance and
sale of the 1,000,000 shares of Common Stock offered hereby at an assumed
offering price of $33.50 per share, after deducting the estimated underwriting
discounts and commissions and expenses payable by the Company in connection
with the offering.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
ACTUAL AS ADJUSTED(1)
-------- -------------
(IN THOUSANDS)
<S> <C> <C>
Long-term obligations, less current portion........... 33,831 7,131
-------- -------
Stockholders' equity:
Preferred Stock, $.001 par value, 5,000,000 shares
authorized, no shares issued or outstanding......... -- --
Common Stock, $.001 par value, 65,000,000 shares
authorized, 51,923,283 shares issued and
outstanding; 52,923,283 shares issued and
outstanding as adjusted(2).......................... 52 53
Additional paid-in capital........................... 117,304 148,744
Retained earnings.................................... 133,261 133,261
Less shares of common stock held in treasury......... (7,582) (7,582)
Cumulative translation adjustment.................... 167 167
-------- -------
Net stockholders' equity............................. 243,202 274,643
-------- -------
Total capitalization............................... $270,033 281,774
======== =======
</TABLE>
- --------
(1) Adjusted to give effect to the net proceeds to the Company of this
offering at an assumed public offering price of $33.50 per share, after
deducting the estimated underwriting discounts and commissions and
expenses payable by the Company in connection with the offering, and the
anticipated use of proceeds therefrom, including the repayment of
approximately $26.7 million in debt. See "Use of Proceeds."
(2) Excludes outstanding options to purchase 4,451,387 shares of Common Stock
under the Company's stock option plan as of December 31, 1996.
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with the Company's Consolidated Financial Statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in the documents incorporated herein by
reference. The Company's consolidated statement of operations data for each of
the years in the five-year period ended March 31, 1996, and the balance sheet
data as of March 31, 1996, 1995, 1994, 1993 and 1992 are derived from and are
qualified by reference to the audited consolidated financial statements of the
Company. The selected consolidated statement of operations data for the nine
months ended December 31, 1996 and 1995 and the balance sheet data as of
December 31, 1996 has been derived from unaudited consolidated financial
statements which include, in the opinion of management, all adjustments,
consisting only of normal recurring adjustments necessary for a fair
presentation of the financial data for such periods. The results of operations
for the nine months ended December 31, 1996, are not necessarily indicative of
the results to be expected for any future interim or annual period.
<TABLE>
<CAPTION>
NINE
MONTHS ENDED
YEAR ENDED MARCH 31, DECEMBER 31,
---------------------------------------------- ------------------
1992 1993 1994 1995 1996 1995 1996
------- ------- -------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net sales.............. $73,058 $88,652 $138,742 $207,961 $285,888 $213,833 $240,747
Cost of sales.......... 49,607 56,552 73,765 101,039 137,708 102,997 120,809
------- ------- -------- -------- -------- -------- --------
Gross profit........... 23,451 32,100 64,977 106,922 148,180 110,836 119,938
Research and
development........... 8,155 9,114 13,840 20,746 27,517 20,523 23,003
Selling, general and
administrative........ 15,442 19,056 28,569 37,045 48,903 36,646 40,538
Restructuring cost..... -- -- -- -- -- -- 5,969
Write-off of in-process
technology............ -- -- -- -- 11,448 11,448 1,575
Amortization of
negative goodwill..... (1,636) (1,636) (1,636) (70) -- -- --
------- ------- -------- -------- -------- -------- --------
Operating income....... 1,490 5,566 24,204 49,201 60,312 42,219 48,853
Interest income
(expense), net........ (1,303) (1,825) (593) (881) (947) (277) (1,783)
Other, net............. 348 814 522 808 569 ( 48) 281
------- ------- -------- -------- -------- -------- --------
Income before income
taxes................. 535 4,555 24,133 49,128 59,934 41,894 47,351
Provision for income
taxes................. 175 337 4,974 12,829 16,182 11,861 12,784
------- ------- -------- -------- -------- -------- --------
Net income............. 360 4,218 19,159 36,299 43,752 30,033 34,567
======= ======= ======== ======== ======== ======== ========
Net income per share... $ 0.01 $ 0.13 $ 0.42 $ 0.70 $ 0.80 $ 0.55 $ 0.64
======= ======= ======== ======== ======== ======== ========
Shares used in per
share calculations.... 30,767 33,420 46,155 51,641 54,533 54,807 54,201
======= ======= ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31,
-------------------------------------------- DEC. 31
1992 1993 1994 1995 1996 1996
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.......... $ 10,103 $ 32,445 $ 53,584 $ 71,307 $ 55,855 54,063
Total assets............. 57,879 76,919 151,425 249,480 358,187 385,896
Long-term obligations,
less current portion.... 5,763 3,749 14,424 15,340 33,250 33,831
Stockholders' equity..... 18,030 43,834 87,864 161,825 219,632 243,202
</TABLE>
14
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company and their ages as of
January 15, 1997 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Steve Sanghi............ 41 Chairman of the Board, President and Chief Executive Officer
Timothy B. Billington... 53 Vice President, Manufacturing Operations
C. Philip Chapman....... 43 Vice President, Chief Financial Officer and Secretary
Robert A. Lanford....... 55 Vice President, Worldwide Sales
George P. Rigg.......... 56 Vice President, Advanced Microcontroller and Technology Division
Mitchell R. Little...... 44 Vice President, Standard Microcontroller and ASSP Division
Jon H. Beedle (1)....... 64 Director
Albert J. Hugo-Martinez
(1)(2)................. 51 Director
L.B. Day (2)............ 52 Director
</TABLE>
- --------
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
Mr. Sanghi is currently, and has been since August 1990, President of the
Company, since October 1991, Chief Executive Officer and since October 1993,
Chairman of the Board of Directors. He has served as a director of the Company
since August 1990. He served as the Company's Chief Operating Officer from
August 1990 through October 1991 and as Senior Vice President of Operations
from February 1990 through August 1990. Mr. Sanghi holds an M.S. degree in
Electrical and Computer Engineering from the University of Massachusetts and a
B.S. degree in Electronics and Communication from Punjab University, India. Mr.
Sanghi is also a director of ADFlex Solutions, Inc., a U.S. supplier of
flexible circuit-based interconnect solutions.
Mr. Billington has served as Vice President, Manufacturing Operations since
October 1994 and was Vice President, Process Development and Manufacturing
Operations from April 1991 until October 1994. Prior to his appointment as Vice
President, Mr. Billington served as Director of Wafer Fabrication from November
1990 to April 1991 and Wafer Fabrication Manager from June 1989 to November
1990. Mr. Billington holds a B.S. degree in marketing from Abilene Christian
University.
Mr. Chapman has served as the Company's Vice President and Chief Financial
Officer since joining the Company in September 1992 and as Secretary of the
Company since December 1992. Prior to joining the Company, Mr. Chapman was
employed by Syntellect Inc., a telecommunication systems company, where he
served as Executive Vice President, Finance and Operations, and Chief Financial
Officer from 1988 to 1992. Mr. Chapman holds an M.B.A. from the Harvard
Graduate School of Business Administration and B.A. degrees in Accounting and
Managerial Finance from the University of California.
Mr. Lanford has served as Vice President, Worldwide Sales for the Company
since April 1991. From May 1990 to April 1991, Mr. Lanford was Vice President,
Marketing for Specialty Development Corporation, a distributor of semiconductor
devices and other computer peripherals. From 1987 to 1990, Mr. Lanford served
as Vice President of Sales and Marketing and a director for AIM Technology, a
computer software company. Mr. Lanford holds a B.S. degree in Electrical
Engineering from Arizona State University.
Mr. Rigg has served as Vice President, Advanced Microcontroller and
Technology Division since November 1995. From June 1989 to November 1995, he
served as Vice President, Logic Products Division. From 1981 to 1989, Mr. Rigg
held a number of senior management positions with Advanced Micro
15
<PAGE>
Devices, Inc., a semiconductor company, including Vice President, Embedded
Processor Division, Managing Director of Programmable Microprocessors and
Product Line Manager for Interface and LAN. Mr. Rigg holds a B.S. degree in
Physics from Manchester University, England.
Mr. Little has served as Vice President, Standard Microcontroller and ASSP
Division since November 1995. From September 1993 to November 1995, he served
as Vice President, Memory Products and ASSP Division. Prior to his appointment
as Vice President, Mr. Little served as Division Director for the Company's
Memory Products Division from July 1991 to September 1993, and as Director of
Memory Marketing from November 1989 to July 1991. Immediately prior to joining
the Company, Mr. Little was employed by SGS-Thomson Microelectronics from 1982
to 1989 where he held various positions of increasing management responsibility
for the marketing of microprocessors, microcontrollers and memory products. Mr.
Little holds a BSET from United Electronics Institute.
Mr. Beedle has served as a director of the Company since October 1993. In
1995, Mr. Beedle retired as President of IN-STAT, Inc., a leading high
technology market research firm, a position in which he had served since 1981.
Currently, Mr. Beedle serves as a consultant to IN-STAT. Mr. Beedle is also a
director of Bell Microproducts, a regional electronics distributor.
Mr. Hugo-Martinez has served as a director of the Company since October 1990.
Since March 1996, he has served as President and Chief Executive Officer of GTI
Corporation, a manufacturer of ISDN and local area network subcomponents. From
1987 to 1995, he served as President and Chief Executive Officer of Applied
Micro Circuits Corporation, a manufacturer of high-performance bipolar and bi-
CMOS gate arrays. Prior to Applied Micro Circuits Corporation, Mr. Hugo-
Martinez was actively involved for over 20 years in the semiconductor industry,
holding senior management positions at the LSI Products Division of TRW
Incorporated, Burr-Brown Research Corporation and Motorola, Inc.
Mr. Day has served as a director since December 1994. Since 1976, he has
served as President of L.B. Day & Company, Inc. (formerly Day-Floren
Associates, Inc.), a management consulting firm specializing in organizational
structure, development and strategic planning.
16
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated, Deutsche Morgan Grenfell Inc., Prudential
Securities Incorporated and Robertson, Stephens & Company LLC, have severally
agreed to purchase from the Company the following respective number of shares
of Common Stock at the public offering price less the underwriting discounts
and commissions set forth on the cover page of this Prospectus, and the Company
has agreed to sell to the Underwriters named below 1,000,000 shares:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
----------- ---------
<S> <C>
Alex. Brown & Sons Incorporated.......................................
Deutsche Morgan Grenfell Inc..........................................
Prudential Securities Incorporated....................................
Robertson, Stephens & Company LLC.....................................
---------
Total................................................................. 1,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent, and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any such shares are
to be purchased.
The Company has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession of not more than $ per
share. The Underwriters may allow, and such dealers may reallow, a concession
not in excess of $ per share to certain other dealers. After the
offering, the public offering price and other selling terms may be changed by
the Representatives of the Underwriters.
The Company has granted the Underwriters an option, exercisable not later
than thirty days after the date of this Prospectus, to purchase up to 150,000
shares of Common Stock at the public offering price less the underwriting
discounts and commissions set forth on the cover page of this Prospectus. To
the extent that the Underwriters exercise such option, each of the Underwriters
will have a firm commitment to purchase approximately the same percentage
thereof that the number of shares of Common Stock to be purchased by it shown
in the above table bears to 1,000,000, and the Company will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Stock offered hereby. If purchased, such
additional shares will be sold by the Underwriters on the same terms as those
on which the 150,000 shares are being offered.
The Underwriting Agreement contains covenants of indemnity among the
Underwriters and the Company against certain civil liabilities, including
liabilities under the Securities Act.
In connection with this offering, certain Underwriters and selling group
members (if any) who are qualifying registered market makers on the Nasdaq
Stock Market may engage in passive market making transactions in the Common
Stock on the Nasdaq National Market in accordance with Rule 10b-6A under the
Exchange Act during the two business day period before commencement of sales in
this offering. The passive market making transactions must comply with
applicable price and volume limits and be identified as such. In general, a
passive market maker may display its bid at a price not in excess of the
highest independent bid for the security; if all independent bids are lowered
below the passive market maker's bid, however, such bid must then be lowered
when certain purchase limits are exceeded. Net purchases by a passive market
maker on each day are generally limited to a specified percentage of the
passive market maker's average daily trading volume in the Common Stock during
a prior period and must be
17
<PAGE>
discontinued when such limit is reached. Passive market making may stabilize
the market price of the Common Stock at a level above that which might
otherwise prevail and if commenced, may be discontinued at any time.
The Company has agreed that until 90 days after the date of this Prospectus,
it will not, without the prior written consent of the Representatives of the
Underwriters, directly or indirectly sell, offer to sell, issue, distribute or
otherwise dispose of any shares of Common Stock or any options, rights or
warrants with respect to any Common Stock or register for sale under the
Securities Act, any Common Stock, subject to certain limited exceptions.
Further, the directors and executive officers of the Company have agreed not
to directly or indirectly sell, contract to sell, grant any option to purchase
or otherwise transfer or dispose of an aggregate of approximately 1,590,490
shares of the Company's Common Stock (including shares issuable upon exercise
of options) for the 90-day period from the date of this Prospectus without the
prior written consent of the Underwriters.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Wilson Sonsini Goodrich & Rosati, Professional
Corporation, Palo Alto, California. Certain legal matters in connection with
this offering will be passed upon for the Underwriters by Gray Cary Ware &
Freidenrich, A Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated financial statements of Microchip Technology Incorporated
and Subsidiaries as of March 31, 1996 and 1995, and for each of the years in
the three-year period ended March 31, 1996, have been incorporated herein by
reference and in the registration statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated
herein by reference and upon the authority of such firm as experts in
accounting and auditing.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus
does not contain all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information with respect to the
Company and the shares of Common Stock offered hereby, reference is hereby
made to the Registration Statement. Statements contained herein concerning the
provisions of any document are not necessarily complete, and each such
statement is qualified in its entirety by reference to the copy of such
document filed with the Commission.
18
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON IN ANY JURISDICTION
IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIV-
ERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUM-
STANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN
IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
-----------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
Prospectus Summary......................................................... 3
The Offering............................................................... 5
Risk Factors............................................................... 6
Dividend Policy............................................................ 11
Price Range of Common Stock................................................ 11
Use of Proceeds............................................................ 12
Capitalization............................................................. 12
Selected Consolidated Financial Data....................................... 13
Management................................................................. 14
Underwriting............................................................... 16
Legal Matters.............................................................. 17
Experts.................................................................... 17
Additional Information..................................................... 17
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1,000,000 Shares
[LOGO]
Common Stock
-----------
PROSPECTUS
-----------
Alex. Brown & Sons
INCORPORATED
Deutsche Morgan Grenfell
Prudential Securities Incorporated
Robertson, Stephens & Company
, 1997
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriters discounts and commissions, payable by the Company in connection
with the sale of Common Stock being registered. All of the amounts shown are
estimates except for the registration, NASD filing and listing fees.
<TABLE>
<CAPTION>
AMOUNT TO
BE PAID
---------
<S> <C>
Registration Fee................................................... $12,916
NASD Filing Fee.................................................... 4,763
Nasdaq National Market additional listing fee...................... 17,500
Accounting fees and expenses....................................... 50,000
Printing and engraving............................................. 100,000
Transfer agent and registrar fees and expenses..................... 2,500
Blue Sky fees and expenses......................................... 3,500
Legal fees and expenses of the Company............................. 100,000
Miscellaneous...................................................... 8,821
--------
Total............................................................ $300,000
========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("Delaware Law")
authorizes a court to award or a corporation's Board of Directors to grant
indemnification to directors and officers in terms sufficiently broad to
permit such indemnification under certain circumstances for liabilities
(including reimbursement for expenses incurred) arising under the Securities
Act of 1933, as amended (the "Act"). Article VI of the Registrant's Bylaws
provides for mandatory indemnification of its directors and executive
officers, to the maximum extent permitted by Delaware Law. The Registrant has
entered into indemnification agreements with its directors and certain of its
officers, a form of which was filed as Exhibit 10.1 to Registration Statement
No. 33-57960. The indemnification agreements provide the Registrant's
directors and selected officers with further indemnification to the maximum
extent permitted by Delaware Law. Reference is also made to Section 8 of the
Underwriting Agreement contained in Exhibit 1.1 hereto, indemnifying officers
and directors of the Registrant against certain liabilities.
Reference is made to the form of Underwriting Agreement filed as Exhibit 1.1
to this Registration Statement for certain provisions regarding
indemnification of officers and directors of the Company by the several
Underwriters.
II-1
<PAGE>
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
1.1 Form of Underwriting Agreement.
Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional
5.1 Corporation.
23.1 Consent of Counsel (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (See Page II-3).
</TABLE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement to include any
material information with respect to the plan of distribution not previously
disclosed in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
(4) That, for purposes of determining any liability under the Securities
Act, each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Exchange Act that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Chandler, State of Arizona, on January 16, 1997.
MICROCHIP TECHNOLOGY INCORPORATED
By: /s/ C. Philip Chapman
___________________________________
C. Philip Chapman
Vice President, Chief Financial
Officer and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints C. Philip Chapman and Mary K. Simmons, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Registration
Statement on Form S-3, and to sign any registration statement for the same
offering covered by this Registration Statement that is to be effective upon
filing pursuant to Rule 462(b) promulgated on the Securities Act of 1933, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON JANUARY 16,
1997 IN THE CAPACITIES INDICATED.
SIGNATURES TITLE
/s/ Steve Sanghi Chairman, President, Chief
- ------------------------------------- Executive Officer (Principal
STEVE SANGHI Executive Officer) and Director
/s/ C. Philip Chapman Vice President, Chief Financial
- ------------------------------------- Officer and Secretary
C. PHILIP CHAPMAN (Principal Financial and
Accounting Officer)
Director
- -------------------------------------
JON H. BEEDLE
/s/ Albert J. Martinez Director
- -------------------------------------
ALBERT J. MARTINEZ
/s/ L.B. Day Director
- -------------------------------------
L.B. DAY
II-3
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER EXHIBIT TABLE NO.
- ------- ------------- ----
<S> <C> <C>
1.1 Form of Underwriting Agreement.
5.1 Opinion of Wilson, Sonsini, Goodrich & Rosati, Professional Corporation.
23.1 Consent of Counsel (included in Exhibit 5.1).
23.2 Consent of KPMG Peat Marwick LLP.
24.1 Power of Attorney (See Page II-3).
</TABLE>
<PAGE>
EXHIBIT 1.1
1,000,000 Shares
Microchip Technology Incorporated
Common Stock
($0.001 Par Value)
UNDERWRITING AGREEMENT
----------------------
, 1997
-------------
Alex. Brown & Sons Incorporated
Deutsche Morgan Grenfell Inc.
Prudential Securities Incorporated
Robertson, Stephens & Company LLC
c/o Alex. Brown & Sons Incorporated
135 East Baltimore Street
Baltimore, Maryland 21202
Ladies and Gentlemen:
Microchip Technology Incorporated, a Delaware corporation (the "Company"),
proposes to sell to the several underwriters (the "Underwriters") named in
Schedule I hereto an aggregate of 1,000,000 shares of the Company's Common
Stock, $0.001 par value (the "Firm Shares"). The respective amounts of the Firm
Shares to be so purchased by the Underwriters are set forth opposite their names
in Schedule I hereto. The Company also proposes to sell, at the Underwriters'
option, an aggregate of up to 150,000 additional shares of the Company's Common
Stock (the "Option Shares") as set forth in Section 2(c) below.
As the Underwriters, you have advised the Company (a) that you are
authorized to enter into this Agreement, and (b) that each of you is willing,
acting severally and not jointly, to purchase the numbers of Firm Shares set
forth opposite your respective name in Schedule I, plus your pro rata portion of
the Option Shares if you elect to exercise the over-allotment option in whole or
in part for the accounts of the Underwriters. The Firm Shares and the Option
Shares (to the extent the aforementioned options are exercised) are herein
collectively called the "Shares."
In consideration of the mutual agreements contained herein and of the
interests of the parties in the transactions contemplated hereby, the parties
hereto agree as follows:
1
<PAGE>
1. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
---------------------------------------------
and warrants as follows:
(a) A registration statement on Form S-3 (File No. 33-__________) with
respect to the Shares has been prepared by the Company in conformity with the
requirements of the Securities Act of 1933, as amended, (the "Act") and the
Rules and Regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") thereunder and has been filed with the
Commission under the Act. Copies of such registration statement, including any
amendments thereto, the preliminary prospectuses (meeting the requirements of
Rule 430A of the Rules and Regulations) contained therein and the exhibits,
financial statements and schedules, as finally amended and revised, have
heretofore been delivered by the Company to you. Such registration statement,
herein referred to as the "Registration Statement," which shall be deemed to
include all information omitted therefrom in reliance upon Rule 430A,
incorporated therein by reference and contained in the Prospectus referred to
below, has been declared effective by the Commission under the Act and no post
effective amendment to the Registration Statement has been filed as of the date
of this Agreement. The form of prospectus first filed by the Company with the
Commission pursuant to its Rule 424(b) and Rule 430A is herein referred to as
the "Prospectus." Each preliminary prospectus included in the Registration
Statement prior to the time it becomes effective is herein referred to as a
"Preliminary Prospectus."
(b) The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware with
corporate power and authority to own its properties and conduct its business as
described in the Registration Statement; each of the subsidiaries of the
Company, as listed in Exhibit 22.1 to Item 16(a) of the Registration Statement
on Form S-1 (File No. 33-57960) filed with the Commission on February 5, 1993
(collectively, the "Subsidiaries") has been duly organized and is validly
existing as a corporation in good standing under the laws of the jurisdiction of
its incorporation, with corporate power and authority to own or lease its
properties and conduct its business as described in the Registration Statement;
the Company and each of the Subsidiaries are duly qualified to transact business
in all jurisdictions in which the conduct of their business requires such
qualification; the outstanding shares of capital stock of each of the
Subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable and are owned by the Company free and clear of all liens,
encumbrances and security interests (except as set forth in the Registration
Statement); and no options, warrants or other rights to purchase, agreements or
other obligations to issue or other rights to convert any obligations into
shares of capital stock or ownership interests in the Subsidiaries are
outstanding.
(c) The outstanding shares of Common Stock of the Company have been
duly authorized and validly issued and are fully paid and non-assessable; the
Shares to be issued and sold by the Company have been duly authorized and when
issued and paid for as contemplated herein will be validly issued, fully paid
and non-assessable; and no
2
<PAGE>
preemptive rights of stockholders exist with respect to any of the Shares or
the issue and sale thereof.
(d) The Shares conform with the statements concerning them in the
Registration Statement.
(e) The Commission has not issued an order preventing or suspending
the use of any Preliminary Prospectus relating to the proposed offering of the
Shares nor instituted proceedings for that purpose. The Registration Statement
contains, and the Prospectus and any amendments or supplements thereto will
contain, all statements which are required to be stated therein by, and in all
respects conform or will conform, as the case may be, to the requirements of the
Act and the Rules and Regulations. Neither the Registration Statement nor any
amendment thereto, and neither the Prospectus nor any supplement thereto
contains or will contain, as the case may be, any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided, however,
that the Company makes no representations or warranties as to information
contained in or omitted from the Registration Statement or the Prospectus, or
any such amendment or supplement, in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of any Underwriter,
specifically for use in the preparation thereof.
(f) The consolidated financial statements of the Company and the
Subsidiaries, together with related notes and schedules as incorporated by
reference in the Registration Statement, present fairly the financial position
and the results of operations of the Company and Subsidiaries consolidated, at
the indicated dates and for the indicated periods. Such financial statements
have been prepared in accordance with generally accepted principles of
accounting, consistently applied (except as stated therein) throughout the
periods involved, and all adjustments necessary for a fair presentation of
results for such periods have been made. The summary financial and statistical
data included in the Registration Statement presents fairly the information
shown therein and has been compiled on a basis consistent with the financial
statements presented therein.
(g) There is no action or proceeding pending or, to the knowledge of
the Company, threatened against the Company or any of the Subsidiaries before
any court or administrative agency which might result in any material adverse
change in the business or condition of the Company and of the Subsidiaries taken
as a whole, except as set forth in the Registration Statement.
(h) The Company and the Subsidiaries have good and marketable title to
all of the properties and assets reflected in the financial statements (or as
described in the Registration Statement) hereinabove described, subject to no
lien, mortgage, pledge, charge or encumbrance of any kind except those
reflected in such financial statements (or as described in the Registration
Statement) or which are not material in amount. The
3
<PAGE>
Company and the Subsidiaries occupy their leased properties under valid and
binding leases conforming to the description thereof set forth in the
Registration Statement.
(i) The Company and the Subsidiaries have filed all Federal, State and
foreign income tax returns which have been required to be filed and have paid
all taxes indicated by said returns and all assessments received by them or any
of them to the extent that such taxes have become due.
(j) Since the respective dates as of which information is given in the
Registration Statement, there has not been any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business affairs, management, or business prospects of
the Company and its Subsidiaries taken as a whole, whether or not occurring in
the ordinary course of business, and there has not been any material transaction
entered into by the Company or the Subsidiaries, other than transactions in the
ordinary course of business and changes and transactions contemplated by the
Registration Statement, as it may be amended or supplemented. The Company and
the Subsidiaries have no material contingent obligations which are not disclosed
in the Registration Statement.
(k) Neither the Company nor any of the Subsidiaries is in default
under any agreement, lease, contract, indenture or other instrument or
obligation to which it is a party or by which it or any of its properties is
bound and which default is of material significance in respect of the business
or financial condition of the Company and the Subsidiaries taken as a whole.
The consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under, the Certificate of
Incorporation or Bylaws of the Company or any order, rule or regulation
applicable to the Company or any Subsidiary of any court or of any regulatory
body or administrative agency or other governmental body having jurisdiction.
The consummation of the transactions herein contemplated and the fulfillment of
the terms hereof will not conflict with or result in a breach of any of the
terms or provisions of, or constitute a default under any indenture, mortgage,
deed of trust or other agreement or instrument to which the Company or any
Subsidiary is a party, except where such breach, violation or default would not
have a material adverse effect on the business or financial condition of the
Company and the Subsidiaries, taken as a whole.
(l) Each approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body necessary in connection with the execution and delivery by the
Company of this Agreement and the consummation of the transactions herein
contemplated (except such additional steps as may be required by the National
Association of Securities Dealers, Inc. (the "NASD") or may be necessary to
qualify the Shares for public offering by the Underwriters under State
securities or Blue Sky laws) has been obtained or made and is in full force
and effect.
4
<PAGE>
(m) The Company and each of the Subsidiaries holds all material
licenses, certificates and permits from governmental authorities which are
necessary to the conduct of their businesses; and neither the Company nor any of
the Subsidiaries has infringed any patent, patent right, trade name, trademark,
copyrights or trade secret, which infringement is material to the business of
the Company and the Subsidiaries taken as a whole.
(n) KPMG Peat Marwick, who have certified certain of the financial
statements filed with the Commission as part of the Registration Statement, are
independent public accountants as required by the Act and the Rules and
Regulations.
(o) Each executive officer and director of the Company has executed a
market stand-off agreement restricting such stockholder from directly or
indirectly selling, offering to sell, contracting to sell (including, without
limitation, selling short), granting any option to purchase or otherwise
transferring or disposing of (other than to donees who agree to be similarly
bound) more than (a) 30,000 shares of Common Stock in the case of Steve Sarghi
or (b) 10,000 shares of any securities of the Company, for at least 90 days
following the date of the Prospectus.
(p) The Company has not been advised, and has no reason to believe,
that either it or any of its Subsidiaries has not conducted or is not conducting
business in compliance with all applicable laws, rules and regulations of the
jurisdictions in which it has conducted or is conducting business, including,
without limitation, all applicable local, state and federal employment and
environmental laws and regulations, except where failure to have been or to be
in compliance did not and would not have a material adverse effect on the
business or financial condition of the Company and the Subsidiaries, taken as a
whole.
2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
-----------------------------------------
(a) On the basis of the representations, warranties and covenants
herein contained, and subject to the conditions herein set forth, the Company
agrees to sell to the Underwriters and each Underwriter agrees, severally and
not jointly, to purchase, at a price of $______________ per share, the number of
Firm Shares set forth opposite the name of each Underwriter in Schedule I
hereof, subject to adjustments in accordance with Section 9 hereof.
(b) Payment for the Firm Shares to be sold hereunder is to be made in
same day funds available in New York against delivery of certificates therefor
for the accounts of the Underwriters. Such payment and delivery are to be made
at the offices of Alex. Brown & Sons Incorporated, 135 East Baltimore Street,
Baltimore, Maryland, at 10:00 a.m., Baltimore time, on the third business day
after the date of this Agreement or at such other time and date not later than
third business days thereafter as you and the Company shall agree upon, such
time and date being herein referred to as the "Closing Date." (As used herein,
"business day" means a day on which the New York Stock Exchange is open for
trading and on which banks in New York are open for business and not permitted
by law or
5
<PAGE>
executive order to be closed.) The certificates for the Firm Shares will be
delivered in such denominations and in such registrations as the Underwriters
request in writing not later than the third full business day prior to the
Closing Date, and will be made available for inspection by the Underwriters at
least one business day prior to the Closing Date.
(c) On the basis of the representations and warranties herein
contained and subject to the terms and conditions herein set forth, the Company
hereby grants an option to the Underwriters to purchase the Option Shares at the
price per share as set forth in the first paragraph of this Section 2. The
option granted pursuant to this Section 2(c) may be exercised in whole or in
part but only once and at any time upon written notice given before 11:59 p.m.
on the later of January _____, 1997 and 30 days after the date of this
Agreement, by you, the Underwriters, to the Company setting forth the number of
Option Shares as to which the Underwriters are exercising the option, the names
and denominations in which the Option Shares are to be registered and the time
and date at which such certificates are to be delivered. The time and date at
which certificates for Option Shares are to be delivered shall be determined by
the Underwriters but shall not be earlier than three nor later than 10 full
business days after the exercise of this option, nor in any event prior to the
Closing Date (such time and date being herein referred to as the "Option Closing
Date"). If the date of exercise of this option is three or more days before the
Closing Date, the notice of exercise shall set the Closing Date as the Option
Closing Date. The number of Option Shares to be purchased by each Underwriter
shall be in the same proportion to the total number of Option Shares being
purchased as the number of Firm Shares being purchased by such Underwriter bears
to 1,000,000, adjusted by you in such manner as to avoid fractional shares. The
option with respect to the Option Shares granted hereunder may be exercised only
to cover over-allotments in the sale of the Firm Shares by the Underwriters.
The Underwriters may cancel this option at any time prior to its expiration by
giving written notice of such cancellation to the Company. To the extent, if
any, that this option is exercised, payment for the Option Shares shall be made
on the Option Closing Date in same day funds available in New York against
delivery of certificates therefor at the offices of Alex. Brown & Sons
Incorporated, 135 East Baltimore Street, Baltimore, Maryland.
3. OFFERING BY THE UNDERWRITERS. It is understood that the Underwriters
----------------------------
are to make a public offering of the Firm Shares as soon as they deem it
advisable to do so. The Firm Shares are to be initially offered to the public
at the initial public offering price set forth in the Prospectus. The
Underwriters may from time to time thereafter sell stock of the Company on terms
other than as set forth herein. To the extent, if at all, that any Option
Shares are purchased pursuant to Section 2 hereof, the Underwriters will offer
them to the public on the foregoing terms.
It is further understood that you will act as the Representatives for the
Underwriters in the offering and sale of the Shares in accordance with a Master
Agreement Among Underwriters entered into by you and the several other
Underwriters.
6
<PAGE>
4. COVENANTS OF THE COMPANY. The Company covenants and agrees with the
------------------------
Underwriters that:
(a) The Company will (A) prepare and timely file with the Commission
under Rule 424(b) of the Rules and Regulations a Prospectus containing
information previously omitted at the time of effectiveness of the Registration
Statement in reliance on Rule 430A of the Rules and Regulations, (B) not file
any amendment to the Registration Statement or supplement to the Prospectus of
which the Underwriters shall not previously have been advised and furnished with
a copy or to which the Underwriters shall have reasonably objected in writing or
which is not in compliance with the Rules and Regulations and (C) file on a
timely basis all reports and any definitive proxy or information statements
required to be filed by the Company with the Commission subsequent to the date
of the Prospectus and prior to the termination of the offering of the Shares by
the Underwriters.
(b) The Company will advise the Underwriters promptly of any request
of the Commission for amendment of the Registration Statement or for supplement
to the Prospectus or for any additional information, or of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any proceedings
for that purpose, and the Company will use its best efforts to prevent the
issuance of any such stop order preventing or suspending the use of the
Prospectus and to obtain as soon as possible the lifting thereof, if issued.
(c) The Company will cooperate with the Underwriters in endeavoring to
qualify the Shares for sale under the securities laws of such jurisdictions as
the Underwriters may reasonably have designated in writing and will make such
applications, file such documents, and furnish such information as may be
reasonably required for that purpose, provided the Company shall not be required
to qualify as a foreign corporation or to file a general consent to service of
process in any jurisdiction where it is not now so qualified or required to file
such a consent. The Company will, from time to time, prepare and file such
statements, reports, and other documents, as are or may be required to continue
such qualifications in effect for so long a period as the Underwriters may
reasonably request for distribution of the Shares.
(d) The Company will deliver to, or upon the order of, the
Underwriters, from time to time, as many copies of any Preliminary Prospectus as
the Underwriters may reasonably request. The Company will deliver to, or upon
the order of, the Underwriters during the period when delivery of a Prospectus
is required under the Act, as many copies of the Prospectus in final form, or
as thereafter amended or supplemented, as the Underwriters may reasonably
request. The Company will deliver to the Underwriters at or before the Closing
Date, two signed copies of the Registration Statement and all amendments
thereto, including all exhibits filed therewith, and will deliver to the
Underwriters such number of copies of the Registration Statement, but without
exhibits, and of all amendments thereto, as the Underwriters may reasonably
request.
7
<PAGE>
(e) If during the period in which a prospectus is required by law to
be delivered by an Underwriter or dealer any event shall occur as a result of
which, in the judgment of the Company or in the opinion of counsel for the
Underwriters, it becomes necessary to amend or supplement the Prospectus in
order to make the statements therein, in the light of the circumstances existing
at the time the Prospectus is delivered to a purchaser, not misleading, or, if
it is necessary at any time to amend or supplement the Prospectus to comply with
any law, the Company promptly will prepare and file with the Commission an
appropriate amendment to the Registration Statement or supplement to the
Prospectus so that the Prospectus as so amended or supplemented will not, in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with the law.
(f) The Company will make generally available to its security holders,
as soon as it is practicable to do so, but in any event not later than 15 months
after the effective date of the Registration Statement, an earnings statement
(which need not be audited) in reasonable detail, covering a period of at least
12 consecutive months beginning after the effective date of the Registration
Statement, which earning statement shall satisfy the requirements of Section
11(a) of the Act and Rule 158 of the Rules and Regulations and will advise you
in writing when such statement has been so made available.
(g) The Company will, for a period of four years from the Closing
Date, deliver to the Underwriters copies of annual reports and copies of all
other documents, reports and information furnished by the Company to its
stockholders or filed with any securities exchange pursuant to the requirements
of such exchange or with the Commission pursuant to the Act or the Securities
Exchange Act of 1934, as amended. The Company will deliver to the Underwriters
similar reports with respect to significant subsidiaries, as that term is
defined in the Rules and Regulations, which are not consolidated in the
Company's financial statements.
(h) Other than pursuant to (A) the Company's Employee Stock Purchase
Plan, (B) the Company's International Employee Stock Purchase Plan, (C) the
Company's 1993 Stock Option/Stock Issuance Plan, (D) an acquisition by the
Company of another corporation or (E) a registration statement on Form S-8,
until 90 days after the date of the Prospectus, the Company will not, without
the prior written consent of the Underwriters, directly or indirectly, sell
(including, without limitation, any short sale), offer to sell, grant any option
for the sale of, issue, distribute or otherwise dispose of any shares of
Common Stock or any options, rights or warrants with respect to any Common
Stock or any security convertible into Common Stock or register for sale under
the Act any Common Stock.
(i) The Company will use its best efforts to designate the Shares on
the National Association of Securities Dealers Automated Quotation (herein
called "Nasdaq") National Market System.
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5. COSTS AND EXPENSES. The Company will pay all costs, expenses and fees
------------------
incident to the performance of its obligations under this Agreement, including,
without limiting the generality of the foregoing, the following: accounting fees
of the Company; the fees and the disbursements of counsel for the Company; the
cost of printing and delivering to, or as requested by, the Underwriters copies
of the Registration Statement, Preliminary Prospectuses, the Prospectus, this
Agreement, the Agreement Among Underwriters, the Underwriters' Selling
Memorandum, the Underwriters' Questionnaire, the Invitation Letter, the Power of
Attorney, the Application for Inclusion, the Blue Sky Survey and any supplements
or amendments thereto; any transfer taxes imposed on the sale of the Shares to
the Underwriters; the filing fees of the Commission; the filing fees and
expenses incident to securing any required review by the National Association of
Securities Dealers, Inc. (the "NASD") of the terms of the sale of the Shares;
the Entry Fees and Annual Fees of the NASD; and the expenses, including the fees
and disbursements of counsel for the Underwriters, incurred in connection with
the qualification of the Shares under State securities or Blue Sky laws. Any
transfer taxes imposed on the sale of the Shares to the Underwriters will be
paid by the Company. The Company shall not, however, be required to pay for any
of the Underwriters' expenses (other than those related to qualification under
State securities or Blue Sky laws) except that, if this Agreement shall not be
consummated because the conditions in Section 7 hereof are not satisfied, or
because this Agreement is terminated by the Underwriters pursuant to Section 6
hereof, or by reason of any failure, refusal or inability on the part of the
Company to perform any undertaking or satisfy any condition of this Agreement or
to comply with any of the terms hereof on its part to be performed, unless such
failure to satisfy said condition or to comply with said terms is due to the
default or omission of any Underwriter, then the Company shall reimburse the
Underwriters for reasonable out-of-pocket expenses, including fees and
disbursements of counsel, reasonably incurred in connection with investigating,
marketing and proposing to market the Shares or in contemplation of performing
their obligations hereunder, but the Company shall not in any event be liable to
any of the Underwriters for damages on account of loss of anticipated profits
from the sale by them of the Shares.
6. CONDITIONS OF OBLIGATIONS OF THE UNDERWRITERS. The several
---------------------------------------------
obligations of the Underwriters to purchase the Firm Shares on the Closing Date
and the Option Shares, if any, on the Option Closing Date, are subject to the
accuracy, as of the Closing Date or the Option Closing Date, as the case may
be, of the representations and warranties of the Company contained herein, and
to the performance by the Company of its covenants and obligations hereunder
and to the following additional conditions:
(a) No stop order suspending the effectiveness of the Registration
Statement, as amended from time to time, shall have been issued and no
proceedings for that purpose shall have been taken or, to the knowledge of the
Company, shall be contemplated by the Commission.
(b) The Underwriters shall have received on the Closing Date or the
Option Closing Date, as the case may be, the opinion of Wilson, Sonsini Goodrich
& Rosati, P.C.,
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counsel for the Company, dated the Closing Date, or the Option Closing Date,
as the case may be, addressed to the Underwriters to the effect that:
(i) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with corporate power and authority to own its properties and conduct its
business as described in the Prospectus; to such counsel's knowledge, the
Company is duly qualified to transact business in all jurisdictions in which
the conduct of its business requires such qualification, or in which the
failure to qualify would have a materially adverse effect upon the business of
the Company and the Subsidiaries taken as a whole.
(ii) The Company has authorized and outstanding capital stock as set
forth under the caption "Capitalization" in the Prospectus; the authorized
shares of its Common Stock have been duly authorized; the outstanding shares of
its Common Stock have been duly authorized and validly issued and are fully paid
and non-assessable; all of the Shares conform in all material respects to the
description thereof contained in the Prospectus; the certificates for the Shares
are in due and proper form; the shares of Common Stock, including the Option
Shares, if any, to be sold by the Company pursuant to this Agreement have been
duly authorized and will be validly issued, fully paid and non-assessable when
issued and paid for as contemplated by this Agreement; and no preemptive rights
of stockholders exist with respect to any of the Shares or the issue and sale
thereof.
(iii) The Registration Statement has become effective under
the Act and, to the knowledge of such counsel, no stop order proceedings with
respect thereto have been instituted or are pending or threatened under the Act.
(iv) The Registration Statement, the Prospectus and each amendment or
supplement thereto comply as to form in all material respects with the
requirements of the Act and the applicable rules and regulations thereunder
(except that such counsel need express no opinion as to the financial
statements, schedules and other financial or statistical information included
therein or as to information supplied by the Underwriters for use therein).
(v) The description of the Company's Common Stock contained in its
Registration Statement on Form 8-A as filed with the Commission on February 5,
1993, insofar as such statements constitute a summary of documents referred to
therein or matters of law, are in all material respects accurate summaries and
fairly and correctly present the information called for with respect to such
documents and matters of law.
(vi) Such counsel does not know of any contracts or documents
required to be filed as exhibits to the Registration Statement or described in
the Registration Statement or the Prospectus which are not so filed or
described as required, and such contracts and documents as summarized in the
Registration Statement or the Prospectus are fairly summarized in all material
respects.
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(vii) Such counsel knows of no material legal proceedings pending or
threatened against the Company or any of the Subsidiaries except as set forth
in the Prospectus.
(viii) The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated do not and will not
conflict with or result in a breach of any of the terms or provisions of, or
constitute a default under, the certificate of incorporation or by-laws of the
Company. To such counsel's knowledge, the execution and delivery of this
Agreement and the consummation of the transactions herein contemplated do not
and will not conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any agreement or instrument
known to such counsel to which the Company or any of the Subsidiaries is a
party or by which the Company or any of the Subsidiaries may be bound and that
has been certified by the Company to such counsel as an instrument under which
the Company or any of its Subsidiaries enjoys substantial rights or benefits
(and such counsel shall state that they know of no material agreement or
instrument of the Company or any of the Subsidiaries to be in existence which
has not been so certified), except where such breach, violation or default
would not have a material adverse effect on the business or financial
condition of the Company and the Subsidiaries taken as a whole.
(ix) This Agreement has been duly authorized, executed and
delivered by the Company.
(x) No approval, consent, order, authorization, designation,
declaration or filing by or with any regulatory, administrative or other
governmental body is necessary in connection with the execution and delivery of
this Agreement and the consummation of the transactions herein contemplated
(other than as may be required by the National Association of Securities
Dealers, Inc. or as required by State securities and Blue Sky laws as to which
such counsel need express no opinion) except such as have been obtained or made,
specifying the same.
In rendering such opinion, Wilson, Sonsini, Goodrich & Rosati, P.C., may
rely as to matters governed by the laws of states other than Delaware or Federal
laws on local counsel in such jurisdictions provided that in each case such
counsel shall state that they believe that they and the Underwriters are
justified in relying on such local counsel. In addition to the matters set
forth above, such opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads them to believe
that the Registration Statement, as of the time it became effective under the
Act, the Prospectus or any amendment or supplement thereto, on the date it was
filed pursuant to Rule 424(b) and the Registration Statement and the Prospectus,
or any amendment or supplement thereto, as of the Closing Date, or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial information included therein). With respect to such statement, such
counsel may state that
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<PAGE>
their belief is based upon the procedures set forth therein, but is without
independent check and verification.
(c) The Underwriters shall have received from counsel for the Company,
an opinion dated the Closing Date, or any Option Closing Date, as the case may
be, relating to certain patent matters in form and substance satisfactory to the
Underwriters and Gray Cary Ware & Freidenrich, A Professional Corporation,
counsel for the Underwriters.
(d) The Underwriters shall have received legal opinions in form and
substance satisfactory to the Underwriters and Gray Cary Ware & Freidenrich, A
Professional Corporation, counsel to the Underwriters, as to the due
organization, valid existence, corporate power and authority and qualification
to do business of the Subsidiaries, the ownership of and the absence of liens on
the outstanding capital of the Subsidiaries and the absence of any additional
options, warrants or rights to purchase capital stock or ownership interests in
the Subsidiaries.
(e) The Underwriters shall have received from Gray Cary Ware &
Freidenrich, A Professional Corporation, counsel for the Underwriters, an
opinion dated the Closing Date, or any Option Closing Date, as the case may be,
substantially to the effect specified in subparagraphs (iii) and (iv) of
Paragraph (b) of this Section 6, and that the Company is a validly organized and
existing corporation under the laws of the State of Delaware and that the shares
of Common Stock, including the Option Shares, if any, to be sold by the Company
pursuant to this Agreement have been duly authorized and will be validly issued,
fully paid and non-assessable when issued and paid for as contemplated by this
Agreement. In rendering such opinion, such counsel may rely as to all matters
governed other than by the laws of the State of California or Delaware or
Federal laws on the opinions of counsel referred to in Paragraphs (b), (c) and
(d) of this Section 6. In addition to the matters set forth above, such opinion
shall also include a statement to the effect that nothing has come to the
attention of such counsel which leads them to believe that the Registration
Statement, as of the time it became effective under the Act, and the
Prospectus or any amendment or supplement thereto, on the date it was filed
pursuant to Rule 424(b), and the Registration Statement and the Prospectus, or
any amendment or supplement thereto, as of the Closing Date, or the Option
Closing Date, as the case may be, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading (except that such
counsel need express no view as to financial statements, schedules and other
financial information included therein). With respect to such statement, such
counsel may state that their belief is based upon the procedures set forth
therein, but is without independent check and verification.
(f) The Underwriters shall have received at or prior to the Closing
Date from Gray Cary Ware & Freidenrich, A Professional Corporation, a memorandum
or summary, in form and substance satisfactory to the Underwriters, with respect
to the qualification for offering and sale by the Underwriters of the Shares
under the State
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<PAGE>
securities or Blue Sky laws of such jurisdictions as the Underwriters may
reasonably have designated to the Company.
(g) The Underwriters shall have received on the Closing Date, or the
Option Closing Date, as the case may be, a signed letter from KPMG Peat Marwick
dated the Closing Date or the Option Closing Date, as the case may be, which
shall confirm, on the basis of a review in accordance with the procedures set
forth in the letter signed by such firm and dated and delivered to the
Underwriters on the date hereof, that nothing has come to their attention during
the period from the date five days prior to the date hereof, to a date not more
than five days prior to the Closing Date, or the Option Closing Date, as the
case may be, which would require any change in their letter dated the date
hereof if it were required to be dated and delivered on the Closing Date, or the
Option Closing Date, as the case may be. All such letters shall be in form and
substance satisfactory to the Underwriters.
(h) The Underwriters shall have received on the Closing Date, or the
Option Closing Date, as the case may be, a certificate or certificates of the
Chief Executive Officer and the Chief Financial Officer of the Company to the
effect that, as of the Closing Date, or the Option Closing Date, as the case may
be, each of them severally represents as follows:
(i) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration
Statement has been issued, and no proceedings for such purpose have been taken
or are, to his knowledge, contemplated by the Commission.
(ii) He does not know of any litigation instituted or threatened
against the Company of a character required to be disclosed in the Registration
Statement which is not so disclosed; he does not know of any material contract
required to be filed as an exhibit to the Registration Statement which is not
so filed; and the representations and warranties of the Company contained in
Section 1 hereof are true and correct as of the Closing Date, or the Option
Closing Date, as the case may be.
(iii) He has carefully examined the Registration Statement
and the Prospectus and, in his opinion, as of the effective date of the
Registration Statement, the statements contained in the Registration Statement
were true and correct, and such Registration Statement and Prospectus did not
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and, in his opinion, since
the effective date of the Registration Statement, no event has occurred which
should have been set forth in a supplement to or an amendment of the Prospectus
which has not been so set forth in such supplement or amendment.
(i) The Company shall have furnished to the Underwriters such further
certificates and documents confirming the representations and warranties
contained herein and related matters as the Underwriters may reasonably have
requested.
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(j) The Firm Shares and Option Shares, if any, have been approved for
designation upon notice of issuance on the Nasdaq National Market System.
The opinions and certificates mentioned in this Agreement shall be deemed
to be in compliance with the provisions hereof only if they are in all material
respects satisfactory to the Underwriters and to Gray Cary Ware & Freidenrich, A
Professional Corporation, counsel for the Underwriters.
If any of the conditions hereinabove provided for in this Section 6 shall
not have been fulfilled when and as required by this Agreement to be fulfilled,
the obligations of the Underwriters hereunder may be terminated by the
Underwriters by notifying the Company of such termination in writing or by
telegram at or prior to the Closing Date, or the Option Closing Date, as the
case may be.
In such event, the Company and the Underwriters shall not be under any
obligation to each other (except to the extent provided in Sections 5 and 8
hereof).
7. CONDITIONS OF THE OBLIGATIONS OF THE COMPANY. The obligations of the
--------------------------------------------
Company to sell and deliver the portion of the Shares required to be delivered
as and when specified in this Agreement are subject to the conditions that at
the Closing Date, or the Option Closing Date, as the case may be, no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and in effect or proceedings therefor initiated or threatened.
8. INDEMNIFICATION.
---------------
(a) The Company agrees to indemnify and hold harmless each Underwriter
and each person, if any, who controls any Underwriter within the meaning
of the Act, against any losses, claims, damages or liabilities to which such
Underwriter or such controlling person may become subject under the Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of or are based upon (i) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, any Preliminary Prospectus, the Prospectus or any
amendment or supplement thereto, or (ii) the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each Underwriter and
each such controlling person for any legal or other expenses reasonably incurred
by such Underwriter or such controlling person in connection with investigating
or defending any such loss, claim, damage, liability, action or proceeding;
provided, however, that the Company will not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon an untrue statement or alleged untrue statement, or omission or alleged
omission made in the Registration Statement, any Preliminary Prospectus, the
Prospectus, or such amendment or supplement, in reliance upon and in conformity
with written information furnished to the Company by or through the Underwriters
specifically for use in the
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preparation thereof. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.
(b) Each Underwriter will indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the Registration
Statement and each person, if any, who controls, within the meaning of the Act,
the Company against any losses, claims, damages or liabilities to which the
Company or any such director, officer, or controlling person may become subject
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained in the Registration Statement, any Preliminary Prospectus, the
Prospectus or any amendment or supplement thereto, or arise out of or are based
upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances under which they were made; and
will reimburse any legal or other expenses reasonably incurred by the Company or
any such director, officer, or controlling person in connection with
investigating or defending any such loss, claim, damage, liability, action or
proceeding; provided, however, that each Underwriter will be liable in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission has been made in the
Registration Statement, any Preliminary Prospectus, the Prospectus or such
amendment or supplement, in reliance upon and in conformity with written
information furnished to the Company by or through the Underwriters specifically
for use in the preparation thereof. This indemnity agreement will be in
addition to any liability which such Underwriter may otherwise have.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to this Section 8, such person (the "indemnified party") shall
promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing. No indemnification provided for in Section
8(a) or (b) shall be available to any party who shall fail to give notice as
provided in this Section 8(c) if the party to whom notice was not given was
unaware of the proceeding to which such notice would have related and was
prejudiced by the failure to give such notice, but the failure to give such
notice shall not relieve the indemnifying party or parties from any liability
which it or they may have to the indemnified party for contribution or
otherwise than on account of the provisions of Section 8(a) or (b). In case
any such proceeding shall be brought against any indemnified party and it
shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the extent
that it shall wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel satisfactory to such
indemnified party and shall pay as incurred the fees and disbursements of such
counsel related to such proceeding. In any such proceeding, any indemnified
party shall have the right to retain its own counsel at its own expense.
Notwithstanding the foregoing, the indemnifying party shall pay as incurred
the fees and expenses of the counsel retained by the indemnified party in the
event (i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention
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of such counsel or (ii) the named parties to any such proceeding (including
any impleaded parties) include both the indemnifying party and the indemnified
party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing interests between them. It
is understood that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be liable for the
reasonable fees and expenses of more than one separate firm for all such
indemnified parties. Such firm shall be designated in writing by you in the
case of parties indemnified pursuant to Section 8(a) and by the Company in the
case of parties indemnified pursuant to Section 8(b). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party under
Section 8(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) in such proportion as
is appropriate to reflect the relative benefits received by the Company on the
one hand and the Underwriters on the other from the offering of the Shares. If,
however, the allocation provided by the immediately preceding sentence is not
permitted by applicable law or if the indemnified party failed to give the
notice required under Section 8(c) above, then each indemnifying party shall
contribute to such amount paid or payable by such indemnified party in such
proportion as is appropriate to reflect not only such relative benefits but
also the relative fault of the Company on the one hand and the Underwriters on
the other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions or proceedings in
respect thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the Underwriters
on the other shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) received by the Company
bear to the total underwriting discounts and commissions received by the
Underwriters, in each case as set forth in the table on the cover page of the
Prospectus. The relative fault shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company on the one hand or the Underwriters on the
other and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and the Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 8(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 8(d). The amount
paid or payable by an indemnified party as a result of the
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<PAGE>
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 8(d) shall be deemed to include any
legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (d), (i) no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter and (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations in this Section 8(d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) In any proceeding relating to the Registration Statement, any
Preliminary Prospectus, the Prospectus or any supplement or amendment thereto,
each party against whom contribution may be sought under this Section 8 hereby
consents to the jurisdiction of any court having jurisdiction over any other
contributing party, agrees that process issuing from such court may be served
upon him or it by any other contributing party and consents to the service of
such process and agrees that any other contributing party may join him or it as
an additional defendant in any such proceeding in which such other contributing
party is a party.
9. DEFAULT BY UNDERWRITERS. If on the Closing Date or the Option Closing
-----------------------
Date, as the case may be, any Underwriter shall fail to purchase and pay for the
portion of the Shares which such Underwriter has agreed to purchase and pay for
on such date (otherwise than by reason of any default on the part of the
Company) the non-defaulting Underwriter shall use its best efforts to procure
within 24 hours thereafter one or more other Underwriters, or any others, to
purchase from the Company such amounts as may be agreed upon and upon the
terms set forth herein, the Firm Shares, or the Option Shares, as the case may
be, which the defaulting Underwriter or Underwriters failed to purchase. If
during such 24 hours the non-defaulting Underwriter shall not have procured
such other Underwriter, or any others, to purchase the Firm Shares or Option
Shares, as the case may be, agreed to be purchased by the defaulting
Underwriter or Underwriters, then (a) if the aggregate number of shares with
respect to which such default shall occur does not exceed 10% of the Firm
Shares or Option Shares, as the case may be, covered hereby, the other
Underwriter shall be obligated to purchase the Firm Shares or Option Shares,
as the case may be, which such defaulting Underwriter or Underwriters failed
to purchase, or (b) if the aggregate number of shares of Firm Shares or Option
Shares, as the case may be, with respect to which such default shall occur
exceeds 10% of the Firm Shares or Option Shares, as the case may be, covered
hereby, the Company or the non-defaulting Underwriter will have the right, by
written notice given within the next 24-hour period to the parties to this
Agreement, to terminate this Agreement without liability on the part of the
non-defaulting Underwriter, or the Company except to the extent provided in
Section 8 hereof. In the event of a default by any Underwriter or
Underwriters, as set forth in this Section 9, the Closing Date or Option
Closing Date, as the case may be, may be postponed for such period, not
exceeding seven days, as you as Underwriters, may determine in order
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that the required changes in the Registration Statement or in the Prospectus
or in any other documents or arrangements may be effected. The term
"Underwriter" includes any person substituted for a defaulting Underwriter.
Any action taken under this Section 9 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
10. NOTICES. All communications hereunder shall be in writing and, except
-------
as otherwise provided herein, will be mailed, delivered or telegraphed and
confirmed as follows: if to the Underwriters, to Alex. Brown & Sons
Incorporated, 101 California Street, 46th Floor, San Francisco, California
94111, Attention: Andrew T. Sheehan; if to the Company, to Microchip Technology
Incorporated, 2355 West Chandler Boulevard, Chandler, Arizona 85224, Attention:
C. Philip Chapman.
11. TERMINATION. This Agreement may be terminated by you by notice to the
-----------
Company as follows:
(a) at any time prior to the earlier of (i) the time the Shares are
released by you for sale by notice to the Underwriters, or (ii) 11:30 a.m. on
the first business day following the date of this Agreement;
(b) at any time prior to the Closing Date if any of the following has
occurred: (i) since the respective dates as of which information is given in the
Registration Statement and the Prospectus, any material adverse change or any
development involving a prospective material adverse change in or affecting the
condition, financial or otherwise, of the Company and its Subsidiaries taken as
a whole or the earnings, business affairs, management or business prospects of
the Company and its Subsidiaries taken as a whole, whether or not arising in the
ordinary course of business, (ii) any outbreak of hostilities or other national
or international calamity or crisis or change in economic or political
conditions if the effect of such outbreak, calamity, crisis or change on the
financial markets of the United States would, in your reasonable judgment, make
the offering or delivery of the Shares impracticable, (iii) suspension of
trading in securities on the New York Stock Exchange or the American Stock
Exchange or limitation on prices (other than limitations on hours or numbers of
days of trading) for securities on either such Exchange, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your reasonable opinion materially and adversely affects or will materially or
adversely affect the business or operations of the Company, (v) declaration of a
banking moratorium by either federal or New York State authorities, or (vi) the
taking of any action by any federal, state or local government or agency in
respect of its monetary of fiscal affairs which in your reasonable opinion has a
material adverse effect on the securities markets in the United States; or
(c) as provided in Sections 6 or 9 of this Agreement.
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This Agreement also may be terminated by you, by notice to the Company as to any
obligation of the Underwriters to purchase the Option Shares, upon the
occurrence at any time prior to the Option Closing Date, of any of the events
described in subparagraph (b) above or as provided in Sections 6 or 9 of this
Agreement.
12. SUCCESSORS. This Agreement has been and is made solely for the
----------
benefit of the Underwriters and the Company and their respective successors,
executors, administrators, heirs and assigns, and the officers, directors and
controlling persons referred to herein, and no other person will have any right
or obligation hereunder. The term "successors" shall not include any purchaser
of the Shares merely because of such purchase.
13. MISCELLANEOUS. The reimbursement, indemnification and contribution
-------------
agreements contained in this Agreement and the representations, warranties and
covenants in this Agreement shall remain in full force and effect regardless of
(a) any termination of this Agreement, (b) any investigation made by or on
behalf of any Underwriter or controlling person thereof, or by or on behalf of
the Company or its directors or officers and (c) delivery of and payment for the
Shares under this Agreement.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Maryland.
19
<PAGE>
If the foregoing letter is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicates hereof,
whereupon it will become a binding agreement among the Company and the
Underwriters in accordance with its terms.
Very truly yours,
MICROCHIP TECHNOLOGY INCORPORATED
By: _____________________________
President
The foregoing Underwriting Agreement
is hereby confirmed and accepted as of
the date first above written.
ALEX. BROWN & SONS INCORPORATED
DEUTSCHE MORGAN GRENFELL INC.
PRUDENTIAL SECURITIES INCORPORATED
ROBERTSON, STEPHENS & COMPANY LLC
By ALEX. BROWN & SONS INCORPORATED
By: _______________________________
Authorized Officer
20
<PAGE>
SCHEDULE I
SCHEDULE OF UNDERWRITERS
<TABLE>
<CAPTION>
NUMBER OF FIRM SHARES
UNDERWRITER TO BE PURCHASED
- ----------- ---------------------
<S> <C>
Alex. Brown & Sons Incorporated
Deutsche Morgan Grenfell Inc.
Prudential Securities Incorporated
Robertson, Stephens & Company LLC
---------
TOTAL 1,000,000
</TABLE>
21
<PAGE>
EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050 JOHN ARNOT ARNOT
TELEPHONE 415-493-9300 FACSIMILE 415-493-6811 RETIRED
WWW.WSG.COM
January 16, 1997
Microchip Technology Incorporated
2355 West Chandler Boulevard
Chandler, AZ 85224-6199
RE: REGISTRATION STATEMENT ON FORM S-3
----------------------------------
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 to be filed by you
with the Securities and Exchange Commission on or about January 16, 1997 (as
such may thereafter be amended or supplemented, the "Registration Statement") in
connection with the registration under the Securities Act of 1933, as amended,
of 1,150,000 shares of your Common Stock, $.001 par value (the "Stock"). The
Stock includes an over-allotment option granted to the Underwriters to
purchase 150,000 shares. As your legal counsel, we have examined the
proceedings being taken by you relating to the issuance and sale of the Stock.
It is our opinion that the Stock, when issued and sold in the manner
referred to in the Registration Statement and in accordance with the resolutions
adopted by the Board of Directors of the Company, will be legally and validly
issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
/s/ Wilson Sonsini Goodrich & Rosati
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<PAGE>
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Microchip Technology Incorporated
We consent to the use of our report incorporated herein by reference and to
the reference to our firm under the heading "Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Phoenix, Arizona
January 16, 1997
