UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report December 9, 1996
QUALITY SEMICONDUCTOR, INC.
(Exact name of registrant as specified in its charter)
California 2-23128 77-0199189
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.
851 Martin Avenue
Santa Clara, CA 95050
(Address of principal executive offices) (including Zip code)
(408) 450-8000
(Registrant's telephone number, including area code)
Exhibit Index on page 4
<PAGE>
Item 5. Other Events
On November 22, 1996, Quality Semiconductor, Inc., a California
corporation (the "Company") announced the sale of $5 million of unsecured
convertiblepromissory notes (the "Notes") of Quality Semiconductor Australia,
Pty. Limited a subsidiary of the Company. The termsof the Notes are contained in
the instruments defining the rights of the holders of unsecured convertible
promissory noes of Quality Semiconductor Australia, Pty. Limited attached as
exhibits hereto and incorporated by reference herein. Further details of this
transaction are contained in the Company's press release dated November 22, 1996
atttached as an exhibit hereto and incorporated by reference herein.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits
Exhibit 4.1 Form of QSA Convertible/Redeemable Note Issuance Agreement,
dated November 21, 1996, between Quality Semiconductor Australia, Pty.Limited,
Quality Semiconductor, Inc. and Technology Associates (Note No. 1).
Exhibit 4.2 Form of QSA Convertible/Redeemable Note Issuance Agreement,
dated November 21, 1996, between Quality Semiconductor Australia, Pty.Limited,
Quality Semiconductor, Inc. and Win Win Venture Capital Corporation (Note No.
3).
Exhibit 4.3 Form of QSA Convertible/Redeemable Note Issuance Agreement,
dated November 21, 1996, between Quality Semiconductor Australia, Pty.Limited,
Quality Semiconductor, Inc. and Win Win Venture Capital Corporation (Note No.
4).
Exhibit 4.4 Form of QSA Convertible/Redeemable Note Issuance Agreement,
dated November 21, 1996, between Quality Semiconductor Australia, Pty. Limited,
Quality Semiconductor, Inc. and Win Win Venture Capital Corporation (Note No.
5).
Exhibit 4.5 Form of Unsecured Convertible Promissory Note of Quality
Semiconductor Australia, Pty. Limited.
Exhibit 99 Quality Semiconductor, Inc. Press Release dated November 22,
1996.
<PAGE>
SIGNATURES
Pursuant the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUALITY SEMICONDUCTOR, INC.
Date: December 9, 1996 By: /s/STEPHEN H. VONDERACH
--------------------------
Stephen H. Vonderach
Vice President of Finance and
Chief Financial Officer
(Duly Authorized and Principal
Financial and accounting Officer)
<PAGE>
QUALITY SEMICONDUCTOR, INC.
INDEX TO EXHIBITS
Exhibit Number Description Sequential Page Number
Exhibit 4.1 Form of QSA Convertible/Redeemable 5
Note Issuance Agreement, dated
November 21, 1996, between Quality
Semiconductor, Inc. and Technology
Associates (Note No. 1).
Exhibit 4.2 Form of QSA Convertible/Redeemable 7
Note Issuance Agreement, dated
November 21, 1996, between Quality
Semiconductor Australia, Pty. Limited,
Quality Semiconductor, Inc. and Win
Win Venture Capital Corporation
(Note No. 3).
Exhibit 4.3 Form of QSA Convertible/Redeemable 9
Note Issuance Agreement, dated
November 21, 1996, between Quality
Semiconductor Australia, Pty. Limited,
Quality Semiconductor, Inc. and Win
Win Venture Capital Corporation
Note No. 4)
Exhibit 4.4 Form of QSA Convertible/Redeemable 11
Note Issuance Agreement, dated
November 21, 1996, between Quality
Semiconductor Australia, Pty. Limited,
Quality Semiconductor, Inc. and Win
Win Venture Capital Corporation
Note No. 5).
Exhibit 4.5 Form of Unsecured Convertible 13
Promissory Note of Quality
Semiconductor Australia, Pty. Limited
Exhibit 99 Press Release dated November 22, 1996 40
<PAGE>
EXHIBIT 4.1
QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
(TECHNOLOGY ASSOCIATES, NOTE NO. 1)
Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050
Ladies & Gentlemen:
The undersigned, Technology Associates Corporation (the "Noteholder"),
hereby confirms its agreement with you as follows:
1. This QSA Convertible/Redeemable Note Issuance Agreement (the
"Agreement") is made as of November __, 1996 by and among Quality Semiconductor
Australia, Pty. Ltd., an Australian corporation ("QSA"), and subsidiary of
Quality Semiconductor, Inc., a California corporation ("QSI"), QSI and the
Noteholder.
2. QSA has authorized the issuance of up to $5,999,977.01 in convertible
debt securities of QSA (the "QSA Notes") substantially in the Form of Exhibit A.
3. QSA and the Noteholder agree that the Noteholder will take and QSA
will issue, for an issuance price of up to $999,995.03, the QSA Note No. 1,
substantially in the form attached hereto as Annex I and incorporated herein by
reference as if fully set forth herein. Unless otherwise requested by the
Noteholder, the QSA Note purchased by the Noteholder will be registered in the
Noteholder's name and address as set forth below.
4. The QSA Note shall be subject to certain rights of conversion and
redemption and exchangeable for shares of the Common Stock of QSI (the "QSI
Stock") or the Series B Redeemable Preference Shares of QSA (the "QSA Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance upon conversion or redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.
5. The QSA Stock shall be subject to certain rights of conversion and
redemption and exchangeable for shares of QSI Common Stock (the "QSI Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.
6. The Noteholder represents that, except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a member beneficially owns any securities of QSA. Exceptions:
______________________________ (If no exceptions, write "none." If left blank,
response will be deemed to be "none").
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
NOTEHOLDER
By:
Title:
Address:
Tax ID No.:
<PAGE>
AGREED AND ACCEPTED:
QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.
By:
Title:
QUALITY SEMICONDUCTOR, INC.
By:
Title:
<PAGE>
EXHIBIT 4.2
QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
(WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 3)
Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050
Ladies & Gentlemen:
The undersigned, Win Win Venture Capital Corporation (the
"Noteholder"), hereby confirms its agreement with you as follows:
1. This QSA Convertible/Redeemable Note Issuance Agreement (the
"Agreement") is made as of November __, 1996 by and among Quality Semiconductor
Australia, Pty. Ltd., an Australian corporation ("QSA"), and subsidiary of
Quality Semiconductor, Inc., a California corporation ("QSI"), QSI and the
Noteholder.
2. QSA has authorized the issuance of up to $5,999,977.01 in convertible
debt securities of QSA (the "QSA Notes") substantially in the Form of Exhibit A.
3. QSA and the Noteholder agree that the Noteholder will take and QSA
will issue, for an issuance price of up to $999,995.03, the QSA Note No. 3 (the
"QSA Note"), substantially in the form attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein. Unless otherwise
requested by the Noteholder, the QSA Note purchased by the Noteholder will be
registered in the Noteholder's name and address as set forth below.
4. The QSA Note shall be subject to certain rights of conversion and
redemption and exchangeable for shares of the Common Stock of QSI (the "QSI
Stock") or the Series B Redeemable Preference Shares of QSA (the "QSA Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance upon conversion or redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.
5. The QSA Stock shall be subject to certain rights of conversion and
redemption and exchangeable for shares of QSI Common Stock (the "QSI Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.
6. The Noteholder represents that, except as set forth below, (a) it has
had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a member beneficially owns any securities of QSA. Exceptions: ___________(If no
exceptions, write "none." If left blank, response will be deemed to be "none").
Please confirm that the foregoing correctly sets forth the agreement between us
by signing in the space provided below for that purpose.
NOTEHOLDER
By:
Title:
Address:
Tax ID No.:
<PAGE>
AGREED AND ACCEPTED:
QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.
By:
Title:
QUALITY SEMICONDUCTOR, INC.
By:
Title:
<PAGE>
EXHIBIT 4.3
QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
(WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 4)
Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050
Ladies & Gentlemen:
The undersigned, Win Win Venture Capital Corporation, (the
"Noteholder"), hereby confirms its agreement with you as follows:
1. This QSA Convertible/Redeemable Note Issuance Agreement (the
"Agreement") is made as of November __, 1996 by and among Quality Semiconductor
Australia, Pty. Ltd., an Australian corporation ("QSA"), and subsidiary of
Quality Semiconductor, Inc., a California corporation ("QSI"), QSI and the
Noteholder.
2. QSA has authorized the issuance of up to $5,999,977.01 in convertible
debt securities of QSA the "QSA Notes") substantially in the Form of Exhibit A.
3. QSA and the Noteholder agree that the Noteholder will take and QSA
will issue, for an issuance price of up to $999,995.03, the QSA Note No. 4 (the
"QSA Note"), substantially in the form attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein. Unless otherwise
requested by the Noteholder, the QSA Note purchased by the Noteholder will be
registered in the Noteholder's name and address as set forth below.
4. QSA and the Noteholder agree that the Noteholder shall make the
payment of the issuance price of $999,995.03 for the QSA Note on or before
December 15, 1996 and that Noteholder's obligation to make such payment shall be
unconditional, regardless of (i) any provision herein, (ii) any breach or
violation of any representation, warranty, covenant or agreement by the Company
or the Noteholder, (iii) any alleged fraud or other tort committed by the
Company or the Noteholder, (iv) the financial condition of the Company or the
Noteholder, or (v) general market conditions. The Noteholder acknowledges that
the Company would be damaged if the Noteholder does not pay the full amount of
the issuance price of the QSA Note on or before December 15, 1996. QSA and the
Noteholder further agree that, as a surety for the Noteholder's obligation to
make full payment under this Agreement, QSA shall hold as collateral the QSA
convertible, unsecured Note No. 3 ("QSA Note No. 3") in the principal amount of
$999,995.03 of the Noteholder issued pursuant to that certain QSA
Convertible/Redeemable Note Issuance Agreement (Note No. 3) of even date
herewith by and between QSA and the Noteholder. Upon payment in full of the
issuance price of the QSA Note by the Noteholder, the Company will issue and
deliver to the Noteholder the QSA Note and QSA Note No. 3. In the event that
Noteholder fails to meet its obligation to make the payment of the issuance
price of $999,995.03 for the QSA Note on or before December 15, 1996, QSA shall
have the right, but not the obligation, to rescind this Agreement and the right,
but not the obligation, to cancel QSA Note No. 3 and return the issuance price
of QSA Note No. 3 to the Noteholder.
5. The QSA Note shall be subject to certain rights of conversion and
redemption and exchangeable for shares of the Common Stock of QSI (the "QSI
Stock") or the Series B Redeemable Preference Shares of QSA (the "QSA Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 146,586 shares of QSI
Stock for issuance upon conversion or redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.
<PAGE>
6. The QSA Stock shall be subject to certain rights of conversion and
redemption and exchangeable for shares of QSI Common Stock (the "QSI Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.
7. The Noteholder represents that, except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a member beneficially owns any securities of QSA. Exceptions:
______________________________ (If no exceptions, write "none." If left blank,
response will be deemed to be "none").
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
NOTEHOLDER
By:
Title:
Address:
Tax ID No.:
AGREED AND ACCEPTED:
QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.
By:
Title:
QUALITY SEMICONDUCTOR, INC.
By:
Title:
<PAGE>
EXHIBIT 4.4
QSA CONVERTIBLE/REDEEMABLE NOTE ISSUANCE AGREEMENT
(WIN WIN VENTURE CAPITAL CORPORATION, NOTE NO. 5)
Quality Semiconductor Australia, Pty. Ltd.
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050
Ladies & Gentlemen:
The undersigned, Win Win Venture Capital Corporation, (the
"Noteholder"), hereby confirms its agreement with you as follows:
1. This QSA Convertible/Redeemable Note Issuance Agreement (the
"Agreement") is made as of November __, 1996 by and among Quality Semiconductor
Australia, Pty. Ltd., an Australian corporation ("QSA"), and subsidiary of
Quality Semiconductor, Inc., a California corporation ("QSI"), QSI and the
Noteholder.
2. QSA has authorized the issuance of up to $5,999,977.01 in convertible
debt securities of QSA the "QSA Notes") substantially in the Form of Exhibit A.
3. QSA and the Noteholder agree that the Noteholder, an affiliated fund
of the Noteholder, or such other investor as may be approved by QSA, will take
and QSA will issue, for an issuance price of up to $1,999,996.89, the QSA Note
No. 5 (the "QSA Note"), substantially in the form attached hereto as Annex I and
incorporated herein by reference as if fully set forth herein. Unless otherwise
requested by the Noteholder, the QSA Note purchased by the Noteholder will be
registered in the Noteholder's name and address as set forth below.
4. QSA and the Noteholder agree that the Noteholder, an affiliated fund
of the Noteholder, or such other investor as may be approved by QSA, shall make
the payment of the issuance price of $1,999,996.89 for the QSA Note on or before
February 15, 1997 and that Noteholder's obligation to make such payment shall be
unconditional, regardless of (i) any provision herein, (ii) any breach or
violation of any representation, warranty, covenant or agreement by the Company
or the Noteholder, (iii) any alleged fraud or other tort committed by the
Company or the Noteholder, (iv) the financial condition of the Company or the
Noteholder, or (v) general market conditions. The Noteholder acknowledges that
the Company would be damaged if the Noteholder does not pay the full amount of
the issuance price of the QSA Note on or before February 15, 1997. QSA and the
Noteholder further agree that, as a surety for the Noteholder's obligation to
make full payment under this Agreement, QSA shall hold as collateral: (a) the
QSA convertible, unsecured Note No. 3 ("QSA Note No. 3") in the principal amount
of $999,995.03 of the Noteholder issued pursuant to that certain QSA
Convertible/Redeemable Note Issuance Agreement (Note No. 3) of even date
herewith by and between QSA and the Noteholder; and (b) the QSA Convertible,
Unsecured Note No. 4 ("QSA Note No. 4") in the principal amount of $999,995.03
of the Noteholder issued pursuant to that certain QSA Convertible/Redeemable
Note Issuance Agreement (Note No. 4) of even date herewith by and between QSA
and the Noteholder. Upon payment in full of the issuance price of the QSA Note
by the Noteholder, an affiliated fund of the Noteholder, or such other investor
as may be approved by QSA, the Company will issue and deliver to the Noteholder
QSA Note No. 3 and QSA Note No. 4 and to the entity paying the full issuance
price of the QSA Note, the QSA Note. In the event that Noteholder fails to meet
its obligation to make the payment of the issuance price of $1,999,996.89 for
the QSA Note on or before February 15, 1997, QSA shall have the right, but not
the obligation, to rescind this Agreement and the right, but not the obligation,
to cancel QSA Note No. 3, and QSA Note No. 4 and return the issuance price of
QSA Note No. 3 and QSA Note No. 4 to the Noteholder.
<PAGE>
5. The QSA Note shall be subject to certain rights of conversion and
redemption and exchangeable for shares of the Common Stock of QSI (the "QSI
Stock") or the Series B Redeemable Preference Shares of QSA (the "QSA Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein. QSI has authorized and reserved 293,173 shares of QSI
Stock for issuance upon conversion or redemption of the QSA Notes and/or QSA
Stock pursuant to the terms of this Agreement.
6. The QSA Stock shall be subject to certain rights of conversion and
redemption and exchangeable for shares of QSI Common Stock (the "QSI Stock")
pursuant to the Terms and Conditions for Exchange of the QSA Note and QSA Stock
attached hereto as Schedule 3 to Annex I and incorporated herein by reference as
if fully set forth herein.
7. The Noteholder represents that, except as set forth below, (a) it
has had no position, office or other material relationship within the past three
years with QSA or its affiliates and (b) neither it nor any group of which it is
a member beneficially owns any securities of QSA. Exceptions:
______________________________ (If no exceptions, write "none." If left blank,
response will be deemed to be "none").
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
NOTEHOLDER
By:
Title:
Address:
Tax ID No.:
AGREED AND ACCEPTED:
QUALITY SEMICONDUCTOR AUSTRALIA, PTY. LTD.
By:
Title:
QUALITY SEMICONDUCTOR, INC.
By:
Title:
<PAGE>
EXHIBIT 4.5
QUALITY SEMICONDUCTOR AUSTRALIA PTY LIMITED
ACN 072 373 730
Registered office:
Level 15
321 Kent Street
SYDNEY NSW 2000
CONVERTIBLE UNSECURED NOTE
November __, 1996
1. This Note is issued to the Noteholder in consideration of the
advance to Quality Semiconductor Australia Pty. Limited (the "Company") by the
Noteholder of an amount equal to the Principal Amount, the receipt of which the
Company acknowledges.
2. The Principal Amount, together with interest, is payable on the
Repayment Date, unless this Note is converted into Shares.
3. This Note is convertible at the election of the Noteholder into either:
(a) 146,586 QSI Shares; or
(b) 146,586 QSA Series B Shares,
in accordance with the terms and conditions of this Note.
TERMS AND CONDITIONS
1. DEFINITIONS
In this Note:
`Business Day' means a day on which trading banks (as defined
in the Banking Act 1959 (C'th)) are open for business in
Sydney, New South Wales;
`Company' means Quality Semiconductor Australia Pty Limited ACN 072 373
730;
`Conversion Date' means, where notice is given:
(a) under clause 3.1(a), 5 days after the date of that notice;
(b) under clause 7, the Repayment Date,
provided that where a day is not a Business Day, the next
Business Day after that date is the Conversion Date:
<PAGE>
`Interest Payment Date' means 30 June and 31 December of each
calendar year, or if that date is not a Business Day, the next
Business Day with the first Interest Payment Date being 31
December 1996;
`ITTA' means the Income Tax Assessment Act 1936 (C'th).
`Note' means this convertible unsecured note issued by the Company;
`Principal Amount' means U.S. $999,995.03;
`Public Authority' means any government or minister or governmental,
semi-governmental or judicial entity, department, instrumentality or authority;
`QSA Series B Shares' means redeemable preference shares in
the issued share capital of the Company, with the rights set
out in Schedule 1;
`QSI Shares' means shares of common stock of Quality Semiconductor, Inc., a
California, U.S.A. corporation ("QSI");
"Shares' means:
(a) QSI Shares; or
(b) QSA Series B Shares;
`Tax Change' means:
(a) any amendment, modification or replacement of the ITAA;
(b) the announcement of any proposed amendment,
modification or replacement of the ITAA by the
Minister of State of the Commonwealth of Australia,
the Commonwealth Government or the Commissioner of
Taxation of the Australian Taxation Office or by any
other responsible public Authority;
(c) any ruling or decision of a tribunal or court of competent
jurisdiction;
(d) any announcement or ruling by any of the Commissioner
of Taxation or the Australian Taxation Office of, or
any assessment from the Commissioner of Taxation
disclosing, any change in the interpretation or
administration by the Commissioner of Taxation of the
ITAA or any legislation replacing the ITAA;
2. GENERAL TERMS OF ISSUE
2.1 This Note:
(a) was issued for the Principal Amount;
<PAGE>
(b) is convertible in the manner and at the times provided by clause 3 and,
subject to clause 7 into the number of Shares determined in accordance with
clause 4.6; and
(c) was paid in full on application by the Noteholder; and
(d) is not transferable.
2.2 Interest on this Note:
(a) is payable on the Principal Amount of this Note at the rate of 8% per
annum on each Interest Payment Date;
(b) ceases to accrue:
(i) in the case of conversion of this Note into Shares, on the Conversion
Date; and
(ii) in any other case, on the Repayment Date.
2.3 The Company will pay to the Noteholder on conversion of this Note
interest accrued on this Note during the period commencing on the date after the
last Interest Repayment Date and ending on the Conversion Date or the Repayment
Date, as applicable.
3. GENERAL RIGHTS OF CONVERSION
3.1 This Note is convertible into Shares:
(a) at any time before redemption or repayment under
clause 7 by the Noteholder giving to the Company a
written notice, in the form set out in Schedule 2 (or
in such other form as the Company may require or
accept) requiring the Company to convert; or
(b) in the circumstances and in the manner provided in clause 7.8.
3.2 A notice given by the Noteholder under clause 3.1:
(a) is irrevocable unless the Company otherwise determines;
(b) must specify whether the Noteholder requires the Company
to convert the Note into QSA Series B Shares or QSI Shares.
3.3 On conversion of this Note, the Company will apply the Principal Amount
in either:
(a) paying up the QSA Series B Shares to be issued to the Noteholder on
conversion; or
<PAGE>
(b) subscribing for fully paid QSI Shares to be distributed to the
Noteholder on conversion.
in full discharge of the Company's liability for the Principal Amount.
4. ALLOTMENT OF SHARES
4.1 The Company must allot the Shares to which the Noteholder is
entitled within 20 Business Days of the receipt of a notice under clause 3.1.
4.2 Any allotment of Shares will have effect on the Conversion Date.
4.3 The Company must, not later than 20 Business Days after allotment
forward, free of charge, to the holder of the Note converted (or to such other
person as the holder may in writing request) a share certificate for the number
of Shares allotted on conversion of this Note.
4.4 QSI Shares allotted on conversion of this Note will rank equally in
all respects with shares of common stock of QSI existing on the Conversion Date.
4.5 QSA Series B Shares allotted on conversion of this Note will have the
rights attaching to QSA Series B Shares.
4.6 This Note will convert into either:
(a) 146,586 QSI Shares; or
(b) 146,586 QSA Series B Shares.
5. NON-PARTICIPATION IN ISSUES AND LIMITED VOTING RIGHTS
5.1 Except as set out in this Note, this Note carries no right to
participate in any offering of securities by the Company.
5.2 Except as required by the Corporations Law, the Noteholder will not
have any right to vote at general meetings of the Company.
6. NON-RESIDENT NOTEHOLDER
Where this Note is held by or on behalf of a person resident
outside Australia, then, despite anything to the contrary
contained in or implied by this Note, it is a condition
precedent to any right of the Noteholder:
(a) to receive payment of the Principal Amount;
(b) to receive payment of any interest on this Note; or
(c) to obtain Shares on conversion of this Note.
<PAGE>
that all necessary Authorisations (if any) and any other
statutory requirements which may then be in existence are
obtained at the cost of, unless the Company determines
otherwise, the Noteholder
7. MATURITY AND REPAYMENT
7.1 The date of maturity (`Repayment Date') of this Note is the first
date on which an order is made or an effective resolution is passed for the
winding up of the Company in accordance with the Corporations Law and on that
Repayment Date, the Company will be obliged to repay this Note.
7.2 Subject to clause 7.1, there is no fixed repayment date for this
Note and the Company may only repay it in accordance with the following
provisions of this clause 7.
7.3 The Company may redeem this Note at any time on giving same day notice
to the Noteholder concerned.
7.4 If the Company exercises a right to redeem under this clause 7, the
Company must repay the Principal Amount and all interest accrued but unpaid on
the Note to the date of payment.
7.5 If:
(a) the Company is satisfied that the interest or any part of the interest
paid or payable on this Note is not or may not be allowed as a deduction for
Australian income tax purposes; or
(b) (i) a Tax Change occurs or is officially announced; or
(ii) a bill to effect a Tax Change is presented to the Parliament of the
Commonwealth of Australia.
and the Company is of the opinion that it is
reasonably probable that any such change has or will
have the result that the interest or any part of the
interest paid or payable on this Note is or may not
be allowed as a deduction for Australian income tax
purposes.
the Company may in its discretion (on giving same day notice to the
Noteholder) redeem this Note.
7.6 If the Company exercises a right to redeem under clause 7.3, the
Company must (unless the Noteholder has by the redemption date already converted
the Note) pay to the Noteholder the Principal Amount and all interest accrued
but unpaid to the redemption date on the Note or make repayment in accordance
with clause 7.10.
<PAGE>
7.7 At the time that the Company intends to redeem the Note under this
clause 7, the Company must give written notice to this effect to the Noteholder.
7.8 The Noteholder may, then, within 5 days from the date of receipt of
that notice, by notice in writing to the Company, require the Company to convert
this Note into QSI Shares in accordance with clause 2.1(b) with effect on the
same day as the receipt of written notice by the Company.
7.9 If a Noteholder does not require the Company to convert this Note
in accordance with clause 7.8, the Company may repay this Note under this clause
7.
7.10 The repayment of the Principal Amount and any interest under this
clause 7 may be satisfied, at the election of the Company, by the issue of
146,586 QSI Shares, which have been allotted to the Company by QSI. The QSI
Shares will be issued in accordance with and subject to the terms and conditions
of Sections 4 through 8 of the Terms and Conditions for Exchange of the QSA Note
and QSA Stock attached hereto as Schedule 3.
8. CANCELLATION OF NOTE
On repayment, redemption or conversion of this Note by the
Company, this Note will immediately be cancelled and may not
be reissued.
9. STATUS AND SUBORDINATION
9.1 This Note constitutes an unsecured obligation of the Company.
9.2 The rights of the Noteholder against the Company, in the event of
the winding up of the Company, are subordinated in right of payment to the
claims of Ordinary Creditors.
9.3 The obligations of the Company in respect of this Note will rank at
least equally with the obligations of the Company to its Subordinated Creditors.
9.4 So long as this Note remains outstanding, the Company will not
create or permit to be outstanding any subordinated obligations ranking in the
liquidation of the Company in priority in right of payment to the rights of the
Noteholder under or in respect of this Note.
9.5 In this clause 9:
(a) `Ordinary Creditors' means all present or future creditors of the
Company whose claims:
(i) are admitted in the winding up of the Company;
(ii) are not, or are not by their terms expressed to be, subordinated to
the claims of all other unsubordinated creditors of the Company; and
<PAGE>
(b) `Subordinated Creditors' means persons whose claims
against the Company are subordinated in the event of
a winding up of the Company in any manner (or even by
statute) to the claims of any unsecured and
unsubordinated creditor of the Company.
10. FAILURE TO PAY PRINCIPAL, INTEREST OR BOTH
If:
(a) the Company makes default for a period of 30 days in the payment of any
interest required by this Note to be paid;
(b) the Company fails to issue a required number of Shares within 30 days
of the Conversion Date; or
(c) the Company fails to repay the Principal Amount within 30 days of the
date required for payment under this Note,
the Principal Amount, at the option of the Noteholder and on
the Noteholder giving written notice to the Company,
immediately becomes due and payable together with all unpaid
interest on this Note to the date of payment.
11. INDEMNITY TO THE COMPANY
11.1 Whenever in consequence of:
(a) the non-payment of any income tax or other tax payable by the
Noteholder;
(b) the non-payment of any stamp or other duty by the Noteholder;
(c) any other act or thing in relation to this Note or the Noteholder,
any law imposes or purports to impose any liability of any
nature whatever on the Company to make any payments to any
Public Authority, the Company is, in respect of that
liability, indemnified by the Noteholder and any moneys paid
by the Company in respect of that liability may be recovered
by action from the Noteholder as a debt due to the Company.
11.2 The Company will have a lien in respect of those moneys on this Note
and on the principal and interest payable in respect of this Note.
11.3 Nothing in this clause 11 will prejudice or affect any right or remedy
which any such law may confer or purport to confer on the Company.
12. PAYMENT TO NOTEHOLDER
12.1 Any interest, principal or other moneys payable on or in respect
of this Note may be paid by cheque marked `not negotiable' and sent through the
post.
<PAGE>
12.2 Every cheque referred to in this clause 12 will be sent
at the risk of the person beneficially entitled to the money represented by the
cheque and payment will be deemed to have been made when the cheque is posted.
13. NOTICES
13.1 A notice given to the Noteholder must be in writing and may be
given to the Noteholder by being delivered to the Noteholder or a representative
appointed by the Noteholder to receive notice on behalf of the Noteholder (the
"Noteholder's Representative") or posted by prepaid envelope addressed to the
Noteholder or the Noteholder's Representative at the address given by the
Noteholder to the Company.
13.2 Where a notice is sent by post, it will be deemed to have been given
on the Business Day on which it was posted.
13.3 A post office receipt for the envelope containing a notice will be
taken as conclusive evidence of the date on which the notice was posted.
13.4 In this clause 13 `Notice' includes any communication to be given by
the Company under this Note.
14. AMENDMENT
Any amendment to this Note must be in writing signed by both
the Company and the Noteholder.
15. GOVERNING LAW
This Note is governed by the laws of New South Wales and the
parties submit to the non-exclusive jurisdiction of the Courts
of New South Wales.
<PAGE>
THE COMMON SEAL of ))))))
QUALITY SEMICONDUCTOR
AUSTRALIA PTY LIMITED
is affixed in accordance with its articles of association in
the presence of
.................................. .....................................
Secretary Director
................................... .....................................
Name of secretary (print) Name of director (print)
Executed by ___________________ on behalf of Technology Associates Corporation
for the purpose of signifying its acceptance of this Note.
THE COMMON SEAL of
TECHNOLOGY ASSOCIATES )
CORPORATION is affixed )
in accordance with its )
articles of association in )
the presence of )
................................... ....................................
Secretary Director
................................... ....................................
Name of secretary (print) Name of director (print)
<PAGE>
THE COMMON SEAL of )
QUALITY SEMICONDUCTOR )
AUSTRALIA PTY LIMITED )
is affixed in accordance )
with its articles of )
association in )
the presence of )
.................................. .....................................
Secretary Director
.................................. .....................................
Name of secretary (print) Name of director (print)
Executed by ___________________ on behalf of Fidelity Venture Capital
Corporation for the purpose of signifying its acceptance of this Note.
THE COMMON SEAL of )
TECHNOLOGY ASSOCIATES )
CORPORATION is affixed )
in accordance with its )
articles of association in )
the presence of )
.................................... .....................................
Secretary Director
..................................... .....................................
Name of secretary (print) Name of director (print)
<PAGE>
SCHEDULE 1
RIGHTS ATTACHING TO QSA SERIES B SHARES
1. The QSA Series B Shares will be redeemable preference shares in the
issued share capital of the Company.
2. The QSA Series B Shares will be under the control of the directors
who may allot or otherwise dispose of the QSA Series B Shares (at a premium or
otherwise) to any persons (whether or not a member of Company) on any terms and
conditions that the directors think fit.
3. Each QSA Series B Share irrespective of its date of issue will rank
equally with all other QSA Series B Shares and any allotment of QSA Series B
Shares will not be regarded as a variation of the rights attached to any
existing QSA Series B Shares.
4. Each QSA Series B Share will have a par value of A$0.01.
5. The QSA Series B Shares will confer on the holder, and be issued subject
to:
(a) the rights to such dividends (if any) as the
directors or Company in general meeting may declare
with respect to the QSA Series B Shares, but do not
have the right to payment of a fixed or other
dividend;
(b) the right in the event of:
(i) the winding up of the Company; or
(ii) a reduction in the share capital of the Company,
in priority to all other classes of shares in the
capital of the Company except the QSA Series A Shares
to the payment of the Redemption Amount applicable at
the time a resolution to wind up the Company or
reduce the share capital is passed or a Court Order
to wind up the Company is made (as applicable);
but without:
(iii) any additional right to payment of any
capital paid up or credited as paid up on
the QSA Series B Shares or any premium paid
in respect of the QSA Series B Shares.
(iv) any further rights to participate in the assets or profits of the
Company;
(c) the right to receive notice of all general meetings
(including all reports, balance sheets and accounts
issued with any notice) and to attend all general
meetings of the Company; but with no right to vote at
any general, special or other meetings of the
Company, or in any other manner.
<PAGE>
6. Subject to section 192 of the Corporation Law:
(a) at any time after issuance of the QSA Series B
Shares, the holder of the QSA Series B Shares may
give to the Company a written notice (`Redemption
Notice') requiring the Company to redeem the QSA
Series B Shares not less than 30 clear days after the
date of the Redemption Notice, in which event the
Company must redeem the QSA Series B Shares
immediately on expiry of such 30 clear days;
(b) at any time after issuance of the QSA Series B
Shares, the Company may redeem the QSA Series B
Shares, by resolution of a majority of the directors.
7. On redemption of the QSA Series B Shares under clause 6 becoming due:
(a) the Company must pay the Redemption Amount applicable at the time of
redemption to the holder of the QSA Series B Shares;
(b) the holder of the QSA Series B Shares must surrender for cancellation
to the Company the Certificate for the QSA Series B Shares,
in which even the QSA Series B Shares will be fully redeemed.
8. Except to the extent otherwise permitted by the Corporations Law,
the QSA Series B Shares may not be redeemed except out of profits which would
otherwise be available for dividend, or out of the proceeds of a fresh issue of
shares made for the purpose of the redemption, and unless they are fully paid.
9. The payment of the Redemption Amount may be satisfied, at the
election of the Company, by the exchange of shares of common stock of Quality
Semiconductor, Inc., for shares of QSA Series B Shares being redeemed pursuant
to the Terms and Conditions for Exchange of the QSA Note and QSA Stock attached
as Schedule 3 to Annex I.
10. `Redemption Amount' means the product of the closing price of a share
in the common stock of Quality Semiconductor, Inc. on the date of redemption of
a QSA Series B Share and the number of shares in the common stock of Quality
Semiconductor, Inc. received after redemption of the QSA Series B Shares.
11. The QSA Series B Shares may not be transferred for a period of one
year; thereafter, any proposed transfer of the QSA Series B Shares shall be
subject to redemption into QSI Shares.
<PAGE>
SCHEDULE 2
NOTICE OF CONVERSION NOTE
TO: Quality Semiconductor Australia Pty Limited
ACN 072 373 730
c/o Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050
Notice is given of the exercise of my/our right to convert the Note
attached to this notice into:
146,586 fully paid ordinary shares of common stock of Quality
Semiconductor, Inc.; or
146,586 fully paid Series B redeemable preference shares in
the issued share capital of Quality Semiconductor Australia
Pty Limited.
[Delete which ever is inapplicable.]
If this notice is signed by an attorney, the attorney declares that he or she
has no notice of revocation of the poser of attorney of which this notice is
signed.
[Companies must sign under seal or by attorney.]
<PAGE>
SCHEDULE 3
TERMS AND CONDITIONS FOR EXCHANGE OF THE QSA NOTE AND QSA STOCK
1. Authorization of QSI Stock. Quality Semiconductor, Inc. ("QSI") has
authorized the issuance of up to 732,932 shares of the Common Stock of QSI (the
"QSI Stock") in exchange for the QSA Notes or up to 732,932 shares of the Series
B Redeemable Preference Shares of QSA (the "QSA Stock") pursuant to the QSA
Convertible/Redeemable Note Issuance Agreement (the "Note Issuance Agreement").
2. Exchange of Shares for the QSA Note. Each Holder of the QSA Note
shall have certain rights to convert the QSA Note into QSI Stock, and QSA shall
have certain rights to redeem the QSA Note for QSI Stock, as provided for by the
terms of such Holder's QSA Note. The QSI Stock issued pursuant to such
conversion or redemption shall be issued in accordance with, and subject to the
terms and conditions of Sections 4 through 8 of this document.
3. Exchange of Shares; Conversion and Redemption Rights. The Holders
shall have the right to convert shares of QSA Stock into shares of QSI Stock,
and QSA shall have the right to redeem shares of QSA Stock for shares of QSI
Stock in accordance with this Section 3.
3.1 Conversion. The holders of shares of the QSA Stock shall have
conversion rights as follows (the "Conversion Rights"): ----------
(a) Right to Convert. Subject to Section 3.1(b), each share of
the QSA Stock shall be convertible, at the option of the
holder thereof, at any time after the date of issuance of such
share, at the office of QSI or any transfer agent for such
stock, into such number of fully paid and nonassessable shares
of QSI Stock as is determined by dividing the number of shares
of QSA Stock presented for exchange by the Exchange Ratio
applicable to each share of QSA Stock, determined as provided
in Section 3.3 below, in effect on the date the certificate is
surrendered for conversion. The initial Exchange Ratio per
share of QSA Stock shall be ten. Such initial Exchange Ratio
shall be subject to adjustment as set forth in Section 3.3.
(b) Mechanics of Conversion. Before any holder of QSA Stock
shall be entitled to convert the same into shares of QSI
Stock, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of QSA or of any
transfer agent for the QSA Stock, and shall give written
notice to QSA at its principal corporate office, of the
election to convert the same and shall state therein the name
or names in which the certificate or certificates for shares
of QSI Stock are to be issued. QSA shall, as soon as
practicable thereafter, issue and deliver at such office to
such holder of QSA Stock , or to the nominee or nominees of
such holder, a certificate or certificates for the number of
shares of QSI Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such
surrender of the shares of QSA Stock to be converted, and the
person or persons entitled to receive the shares of QSI Stock
issuable upon such conversion
<PAGE>
shall be treated for all purposes as the record holder or
holders of such shares of QSI Stock as of such date.
3.2 Redemption. QSA shall have redemption rights with respect to the QSA
Stock as follows: (the "Redemption Rights"): -----------
(a) Right to Redeem. Subject to Section 3.2(b), each share of
the QSA Stock shall be redeemable, at the option of QSA, at
any time after the date of issuance of such share, at the
office of QSA or any transfer agent for such stock, into such
number of fully paid and nonassessable shares of QSI Stock as
is determined by dividing the number of shares of QSA Stock
presented for exchange by the Exchange Ratio applicable to
each share of QSA Stock, determined as provided in Section 3.3
below, in effect on the date the certificate is surrendered
for redemption. The initial Exchange Ratio per share of QSA
Stock shall be ten. Such initial Exchange Ratio shall be
subject to adjustment as set forth in Section 3.3.
(b) Mechanics of Redemption. QSA shall provide written notice
of redemption to those holders of QSA Stock whose shares are
being redeemed. Within five (5) business days after receipt of
notification of redemption by QSA, a holder of QSA Stock whose
shares are being redeemed shall surrender the certificate or
certificates therefor, duly endorsed, at the office of QSA or
of any transfer agent for the QSA Stock, and shall give
written notice to QSA at its principal corporate office
stating therein the name or names in which the certificate or
certificates for shares of QSI Stock are to be issued. QSA
shall, as soon as practicable thereafter, issue and deliver at
such office to such holder of QSA Stock or to the nominee or
nominees of such holder, a certificate or certificates for the
number of shares of QSI Stock to which such holder shall be
entitled as aforesaid. Such redemption shall be deemed to have
been made immediately prior to the close of business on the
date of such surrender of the shares of QSA Stock to be
redeemed, and the person or persons entitled to receive the
shares of QSI Stock issuable upon such redemption shall be
treated for all purposes as the record holder or holders of
such shares of QSI Stock as of such date.
Splits and Combinations. The Exchange Ratio of the QSA
Stock shall be subject to adjustment from time to time as follows:
(a) In the event QSI should at any time or from time to time
after the Closing Date of the Note Issuance Agreement (the
"Closing Date") fix a record date for the effectuation of a
split or subdivision of the outstanding shares of QSI Stock or
the determination of holders of QSI Stock entitled to receive
a dividend or other distribution payable in additional shares
of QSI Stock or other securities or rights convertible into,
or entitling the holder thereof to receive directly or
indirectly, additional shares of QSI Stock then, as of such
record date, the Exchange Ratio of the QSA Stock shall be
appropriately decreased so that the number of shares of QSI
Stock issuable on conversion of each share of QSA Stock shall
be increased in proportion to such increase of the aggregate
of shares of QSI Stock outstanding.
<PAGE>
(b) If the number of shares of QSI Stock outstanding at any
time after the Closing Date is decreased by a combination of
the outstanding shares of QSI Stock, then, following the
record date of such combination, the Exchange Ratio for the
QSA Stock shall be appropriately increased so that the number
of shares of QSI Stock issuable on exchange of each share of
such series shall be decreased in proportion to such decrease
in outstanding shares.
3.5 Recapitalizations. If at any time or from time to time there shall
be a recapitalization of the QSI Stock, provision shall be made so that the
holders of the QSA Stock shall thereafter be entitled to receive upon exchange
of the QSA Stock the number of shares of stock or other securities or property
of QSI or otherwise, to which a holder of QSI Stock deliverable upon exchange
would have been entitled on such recapitalization.
3.6 No Fractional Shares and Certificate as to Adjustments.
(a) No fractional shares shall be issued upon the exchange of
any share or shares of the QSA Stock , and the number of
shares of QSI Stock to be issued shall be rounded to the
nearest whole share. Whether or not fractional shares are
issuable upon such conversion shall be determined on the basis
of the total number of shares of QSA Stock the holder is at
the time exchanging into QSI Stock and the number of shares of
QSI Stock issuable upon such aggregate conversion.
(b) Upon the occurrence of each adjustment or readjustment of
the Exchange Ratio of QSA Stock pursuant to this Section 3.3,
QSI, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare
and furnish to each holder of QSA Stock a certificate setting
forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based.
QSI shall, upon the written request at any time of any holder
of QSA Stock, furnish or cause to be furnished to such holder
a like certificate setting forth (A) such adjustment and
readjustment, (B) the Exchange Ratio for the QSA Stock at the
time in effect, and (C) the number of shares of QSI Stock and
the amount, if any, of other property which at the time would
be received upon the exchange of a share of the QSA Stock.
3.7 Reservation of QSI Stock Issuable Upon Conversion. QSI shall at all times
reserve and keep available out of its authorized but unissued shares of QSI
Stock, solely for the purpose of effecting the conversion of the shares of the
QSA Stock , such number of its shares of QSI Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of QSA Stock; and
if at any time the number of authorized but unissued shares of QSI Stock shall
not be sufficient to effect the conversion of all then outstanding shares of QSA
Stock, in addition to such other remedies as shall be available to the holder of
such QSA Stock, QSI will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of QSI
Stock to such number of shares as shall be sufficient for such purposes,
including, without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to the Articles of
Incorporation.
<PAGE>
3.8 Notices. Any notice required by the provisions of this Section 3 to
be given to the holders of shares of QSA Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of QSI.
4. Representations and Warranties of QSI
For purposes of Sections 4 through 8 of this Note Issuance Agreement,
the term "Holder" refers to a person who has exchanged a QSA Note or shares of
QSA Stock for shares of QSI Stock whether through conversion or by redemption.
QSI represents and warrants to the Holders as of the Closing Date as follows:
4.1 Organization; Standing; Qualification to Do Business. QSI is a
corporation duly organized and validly existing under, and by virtue of, the
laws of the State of California and is in good standing as a domestic
corporation under the laws of said state. QSI is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or be
in good standing is not reasonably likely to have a material adverse effect on
QSI.
4.2 Corporate Power; Authorization. QSI has all requisite legal and
corporate power and has taken all requisite corporate action to execute and
deliver the Note Issuance Agreement, to authorize the issuance of the QSI Stock
in exchange for the QSA Note or QSA Stock and to carry out and perform all of
its obligations under the Note Issuance Agreement. The Note Issuance Agreement
constitutes the legal, valid and binding obligation of QSI, enforceable in
accordance with its terms, except (a) as rights to indemnification and
contribution hereunder may be limited by applicable law, equitable principles or
public policy, (b) as limited by applicable bankruptcy, insolvency,
reorganization or similar laws relating to or affecting the enforcement of
creditors' rights generally and (c) as limited by equitable principles
generally. The execution and delivery of the Note Issuance Agreement does not,
and the performance of the Note Issuance Agreement and the compliance with the
provisions hereof and the issuance of the QSI Stock by QSI will not materially
conflict with, or result in a material breach or violation of the terms,
conditions or provisions of, or constitute a material default under, or result
in the creation or imposition of any material lien pursuant to the terms of, the
Amended and Restated Articles of Incorporation or Bylaws of QSI or any statute,
law, rule or regulation or any state or federal order, judgment or decree or any
indenture, mortgage, lease or other material agreement or instrument to which
QSI or any of its properties is subject.
4.3 Issuance and Delivery of the QSI Stock. The QSI Stock,
when issued in compliance with the provisions of the Note Issuance Agreement,
will be validly issued, fully paid and nonassessable. The issuance and delivery
of the QSI Stock is not subject to preemptive or any other similar rights of the
shareholders of QSI or any liens or encumbrances.
5. Representations, Warranties and Covenants of the Holders
Each Holder hereby severally represents and warrants, and covenants and
agrees with, to QSI, as of the Closing Date, as follows;
<PAGE>
5.1 Authorization. Holder has all requisite legal and corporate or
other power and capacity and has taken all requisite corporate or other action
to execute and deliver the Note Issuance Agreement, to carry out and perform all
of its obligations under the Note Issuance Agreement. The Note Issuance
Agreement constitutes the legal, valid and binding obligation of the Holder,
enforceable in accordance with its terms, except (a) as rights to
indemnification and contribution hereunder may be limited by applicable law,
equitable principles or public policy, (b) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and (c) as limited by equitable
principles generally.
5.2 Investment Experience. Holder is an "accredited investor" as
defined in Rule 501(a) under the Securities Act. Holder is aware of QSI's
business affairs and financial condition and has had access to and has acquired
sufficient information about QSI to reach an informed and knowledgeable decision
to acquire the QSI Stock. Holder has such business and financial experience as
is required to give it the capacity to protect its own interests in connection
with the exchange of the QSA Stock for QSI Stock. Holder is not a "broker" or a
"dealer" as defined in the Exchange Act and is not an "affiliate" of QSI as
defined in the Securities Act.
5.3 Investment Intent. To the extent that Holder acquires QSI Stock
pursuant to this Note Issuance Agreement, Holder is acquiring such QSI Stock for
its own account as principal, for investment purposes only, and not with a
present view to, or for, resale, distribution or fractionalization thereof, in
whole or in part, within the meaning of the Securities Act. Holder understands
that its acquisition of the QSI Stock under the terms and provisions of this
Note Issuance Agreement has not been registered under the Securities Act or
registered or qualified under any state securities law in reliance on specific
exemptions therefrom, which exemptions may depend upon, among other things, the
bona fide nature of Holder's investment intent as expressed herein. Holder has,
in connection with its decision to be subject to acquire the number of QSI Stock
set forth in the Note Issuance Agreement, relied solely upon the Memorandum and
the representations and warranties of QSI contained herein. Holder will not,
directly or indirectly, offer, sell, pledge, transfer or otherwise dispose of
(or solicit any offers to buy, purchase or otherwise acquire or take a pledge
of) any of the QSI Stock except in compliance with the Securities Act and the
rules and regulations promulgated thereunder.
5.4 Restrictions on Transferability of QSI Stock. Holder agrees not to
sell or otherwise transfer the QSI Stock that it acquires pursuant to this Note
Issuance Agreement for a period of one year following the closing date of the
QSA Common Stock Purchase Agreement (the "Closing Date") of even date herewith.
Holder acknowledges and agrees that all share certificates issued to it pursuant
to this Note Issuance Agreement will be imprinted with legend that indicates
that transfer of the QSI Stock is subject to restrictions as specified by this
Section 5.4 of this Note Issuance Agreement.
5.5 Registration or Exemption Requirements. Holder further acknowledges
and understands that the QSI Stock may not be resold or otherwise transferred
except in a transaction registered under the Securities Act or unless an
exemption from such registration is available. Holder understands that the
certificates evidencing the QSI Stock will be imprinted with a legend that
prohibits the transfer of the QSI Stock unless (a) such transaction is
registered or such registration is not required, and (b) if the transfer is
pursuant to an exemption from registration other than Rule 144 under the
Securities Act, and if QSI shall so request in writing, an opinion
<PAGE>
reasonably satisfactory to QSI of counsel reasonably satisfactory to
QSI is obtained to the effect that the transaction is so exempt.
5.6 Restriction on Sales, Short Sales and Hedging Transactions. Holder
will not, prior to the effectiveness of the Registration Statement, sell, offer
to sell, solicit offers to buy, dispose of, loan, pledge, or grant any right
with respect to (collectively, a "Disposition"), the QSI Stock, nor will Holder
engage in any hedging or other transaction which is designed to or could
reasonably be expected to lead to or result in a Disposition of QSI Stock by the
Holder or any other person or entity. Such prohibited hedging or other
transactions would include without limitation effecting any short sale or having
in effect any short position (whether or not such sale or position is against
the box and regardless of when such position was entered into) or any purchase,
sale or grant of any right (including without limitation any put or call option)
with respect to the QSI Stock or with respect to any security (other than a
broad-based market basket or index) that includes, relates to or derives any
significant part of its value from the QSI Stock.
5.7 No Legal, Tax or Investment Advice. Holder understands that nothing
in the Memorandum, the Note Issuance Agreement or any other materials presented
to Holder in connection with the issuance of the QSI Stock constitutes legal,
tax or investment advice. Holder has consulted such legal, tax and investment
advisors as it, in its sole discretion, has deemed necessary or appropriate in
connection with its likely exchange or exchange of the QSI Stock.
5.8 Further Representation by Foreign Holders. If such Holder is not a
U.S. Person, such Holder hereby represents that it has satisfied itself as to
the full observance of the laws of its jurisdiction in connection with any
invitation to subscribe for the QSI Stock or any use of this Note Issuance
Agreement, including (a) the legal requirements with its jurisdiction for the
acquisition of the QSI Stock, (b) any foreign exchange restrictions applicable
to such purchase, (c) any governmental or other consents that may need to be
obtained, and (d) the income tax and other consequences, if any, that may be
relevant to the purchase, exchange for, holding, redemption, sale or transfer of
the QSI Stock. Such Holder's acquisition of, and its continued beneficial
ownership of the QSI Stock, will not violate any applicable securities or other
laws of its jurisdiction.
<PAGE>
5.9 Regulation S. 3.6 Regulation S
(a) The Holder is not a "U.S. Person" as that term is defined
in Regulation S promulgated under the Securities Act and is not acquiring the
QSI Stock for the account or benefit of a U.S. Person. Under Regulation S, with
certain exceptions, "U.S. person" means: (i) any natural person resident in the
U.S.; (ii) any partnership or corporation organized or incorporated under the
laws of the U.S.; (iii) any estate of which any executor or administrator is a
U.S. person; (iv) any trust of which any trustee is a U.S. person; (v) any
agency or branch of a foreign entity located in the U.S.; (vi) any non
discretionary account or similar account (other than an estate or trust) held by
a dealer or other fiduciary for the benefit or account of a U.S. person; (vii)
any discretionary account or similar account (other than an estate or trust)
held by a dealer or other fiduciary organized, incorporated, or (if an
individual) resident in the U.S.; and (viii) any partnership or corporation if:
(A) organized or incorporated under the laws of any foreign jurisdiction; and
(B) formed by a U.S. person principally for the purpose of investing in
securities not registered under the Securities Act, unless it is organized or
incorporated and owned by accredited investors (as defined in Rule 501(a) under
the Securities Act) who are not natural persons, estates or trusts.
(b) Without in any way limiting the representations set forth
above, the Holder further agrees not to make any disposition of all or any
portion of the QSI Stock unless and until:
(i) Such disposition is in accordance with Regulation S promulgated under
the Securities Act, or
(ii) There is then in effect a Registration Statement under the Securities
Act of 1933, as amended (the "Securities Act") covering such proposed
disposition and such disposition is made in accordance with such Registration
Statement, or
(iii) (y) The Holder shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (z) if reasonably
requested by the Company, the Holder shall have furnished the Company with an
opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the Securities Act. It is agreed
that the Company will not require opinions of counsel for transactions made
pursuant to Rule 904 of Regulation S or Rule 144 except in unusual
circumstances.
6. Affirmative Covenants
QSI and the Holder hereby covenant as follows:
6.1 Financial Information. QSI will mail the following reports to each
Holder until such Holder transfers, assigns or sells the QSI Stock acquired by
such Holder pursuant to the Note Issuance Agreement:
<PAGE>
(a) Within 100 days after the end of each fiscal year, a copy of its Annual
Report on Form 10-K.
(b) Within 55 days after the end of the first, second and
third quarterly accounting periods of each fiscal year of QSI,
a copy of its Quarterly Report on Form 10-Q.
6.2 Registration Requirements.
(a) After the first anniversary of the Closing Date, the
Holder may make a written request to QSI that QSI file a
registration statement on Form S-3 to register resales of
outstanding shares of the Holder's QSI Stock. Upon receipt of
such request, if QSI meets the eligibility requirements for
use of Form S-3, QSI shall prepare and file a registration
statement (the "Registration Statement") with the SEC under
the Securities Act to register the resale of the QSI Stock
(the "Registrable Securities") and shall use its best efforts
to secure the effectiveness of such registration statement as
soon as reasonably practicable thereafter.
(b) QSI shall pay all Registration Expenses (as defined below)
in connection with any registration, qualification or
compliance hereunder, and each Holder shall pay all Selling
Expenses (as defined below) and other expenses that are not
Registration Expenses relating to the Registrable Securities
resold by such Holder. "Registration Expenses" shall mean all
expenses, except for Selling Expenses, incurred by QSI in
complying with the registration provisions herein described,
including, without limitation, all registration, qualification
and filing fees, printing expenses, escrow fees, fees and
disbursements of counsel for QSI, blue sky fees and expenses
and the expense of any special audits incident to or required
by any such registration. "Selling Expenses" shall mean all
selling commissions, underwriting fees and stock transfer
taxes applicable to the Registrable Securities and all fees
and disbursements of counsel for any Holder.
(c) In the case of the registration effected by QSI pursuant
to these registration provisions, QSI will use its best
efforts to: (i) keep such registration effective until the
earlier of (A) the first anniversary of the effective date of
the registration, (B) such date as all of the Registrable
Securities have been resold or (C) such time as all of the
Registrable Securities held by the Holders can be sold within
a given three-month period without compliance with the
registration requirements of the Securities Act pursuant to
Rule 144 promulgated thereunder ("Rule 144"); (ii) prepare and
file with the SEC such amendments and supplements to the
Registration Statement and the prospectus used in connection
with the Registration Statement as may be necessary to comply
with the provisions of the Securities Act with respect to the
disposition of all securities covered by the Registration
Statement; (iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or
supplement to the prospectus, as a Holder from time to time
may reasonably request; (iv) cause the QSI Stock to be listed
on each securities exchange and quoted on each quotation
service on which similar securities issued by QSI are then
listed or quoted; (v) provide a transfer agent and registrar
for all securities registered pursuant to the
<PAGE>
Registration Statement and a CUSIP number for all such
securities; (vi) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC; and (vii)
file the documents required of QSI and otherwise use its best
efforts to maintain requisite blue sky clearance in (X) all
jurisdictions in which any shares of the QSI Stock are
originally issued pursuant to this Note Issuance Agreement and
(Y) all other states specified in writing by a Holder,
provided, however, that, as to clause (Y), QSI shall not be
required to qualify to do business or consent to service of
process in any state in which it is not now so qualified or
has not so consented.
(d) QSI shall furnish to each Holder upon request a reasonable
number of copies of a supplement to or an amendment of the
prospectus used in connection with the Registration Statement
as may be necessary in order to facilitate the public sale or
other disposition of all or any of the Registrable Securities
held by the Holder.
(e) With a view to making available to the Holders the
benefits of Rule 144 and any other rule or regulation of the
SEC that may at any time permit a Holder to sell Registrable
Securities to the public without registration or pursuant to a
registration statement on Form S-3, QSI covenants and agrees
to use its best efforts to: (i) make and keep public
information available, as those terms are understood and
defined in Rule 144, until the earlier of (A) the first
anniversary of the date hereof or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with
the SEC in a timely manner all reports and other documents
required of QSI under the Securities Act and Exchange Act; and
(iii) furnish to any Holder upon request, as long as the
Holder owns any Registrable Securities, (A) a written
statement by QSI that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a
copy of the most recent annual or quarterly report of QSI, and
(C) such other information as may be reasonably requested in
order to avail any Holder of any rule or regulation of the SEC
that permits the selling of any such Registrable Securities
without registration or pursuant to such registration
statement on Form S-3.
(f) If any Holder shall propose to sell any Registrable
Securities pursuant to the Registration Statement, it shall
notify QSI of its intent to do so at least five (5) full
business days prior to such sale. Such notice shall be deemed
to constitute a representation that any written information
previously supplied by such Holder (including without
limitation the information referred to in Section 6.4 hereof)
is accurate as of the date of such notice. At any time within
such five (5) business-day period, QSI may refuse to permit
the Holder to resell any Registrable Securities pursuant to
the Registration Statement for an initial period not to exceed
thirty (30) days; provided, however, that in order to exercise
this right, QSI must deliver a certificate in writing to the
Holder to the effect that a delay in such sale is necessary
because a sale pursuant to such Registration Statement in its
then-current form would not be in the best interests of QSI
and its shareholders. In such an event, QSI shall use its best
efforts to amend the Registration Statement if necessary and
to take all other actions necessary to allow such sale, and
shall notify
<PAGE>
the Holder promptly after it has determined that such sale has
become permissible. Notwithstanding the foregoing, QSI shall
not be entitled to exercise its right to withdraw the
registration statement more than three (3) times in any
calendar year or for more than two consecutive thirty (30) day
periods in any calendar year. Each Holder hereby covenants and
agrees that it will not sell any Registrable Securities
pursuant to the Registration Statement during the periods the
Registration Statement is withdrawn as set forth in this
Section 6.2(f).
6.3 Indemnification and Contribution.
(a) QSI agrees to indemnify and hold harmless each Holder from
and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which such
Holder may become subject (under the Securities 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 of a
material fact or omission to state a material fact in the
Registration Statement on the effective date thereof, or arise
out of any failure by QSI to fulfill any undertaking included
in the Registration Statement, and QSI will, as incurred,
reimburse such Holder for any legal or other expenses
reasonably incurred in investigating, defending or preparing
to defend any such action, proceeding or claim; provided,
however, that QSI shall not be liable in any such case to the
extent that such loss, claim, damage or liability arises out
of, or is based upon (i) an untrue statement or omission in
such Registration Statement in reliance upon and in conformity
with written information furnished to QSI by or on behalf of
such Holder specifically for use in preparation of the
Registration Statement, (ii) the failure of such Holder to
comply with the covenants and agreements contained in Sections
6.2(f), 7.3 or 7.4 hereof, or (iii) an untrue statement or
omission in any prospectus that is corrected in any subsequent
prospectus, or supplement or amendment thereto, that was
delivered to the Holder prior to the pertinent sale or sales
by the Holder.
(b) Each Holder, severally and not jointly, agrees to
indemnify and hold harmless QSI from and against any losses,
claims, damages or liabilities (or actions or proceedings in
respect thereof) to which QSI may become subject (under the
Securities 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) an untrue
statement of a material fact or omission to state a material
fact in the Registration Statement in reliance upon and in
conformity with written information furnished to QSI by or on
behalf of such Holder specifically for use in preparation of
the Registration Statement; provided, however, that no Holder
shall be liable in any such case for any untrue statement or
omission in any prospectus which statement has been corrected,
in writing, by such Holder and delivered to QSI before the
sale from which such loss occurred, (ii) the failure of such
Holder to comply with the covenants and agreements contained
in Sections 6.2(f), 7.3 or 7.4 hereof, or (iii) an untrue
statement or omission in any prospectus that is corrected in
any subsequent prospectus, or supplement or amendment thereto,
that was delivered to the Holder prior to the pertinent sale
or sales by the Holder, and each
<PAGE>
Holder, severally and not jointly, will, as incurred,
reimburse QSI for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend
any such action, proceeding or claim.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of
which indemnity is to be sought against an indemnifying person
pursuant to this Section 6.3, such indemnified person shall
notify the indemnifying person in writing of such claim or of
the commencement of such action, and, subject to the
provisions hereinafter stated, in case any such action shall
be brought against an indemnified person and the indemnifying
person shall have been notified thereof, the indemnifying
person shall be entitled to participate therein, and, to the
extent that it shall wish, to assume the defense thereof, with
counsel reasonably satisfactory to the indemnified person.
After notice from the indemnifying person to such indemnified
person of the indemnifying person's election to assume the
defense thereof, the indemnifying person shall not be liable
to such indemnified person for any legal expenses subsequently
incurred by such indemnified person in connection with the
defense thereof; provided, however, that if there exists or
shall exist a conflict of interest that would make it
inappropriate in the reasonable judgment of the indemnified
person for the same counsel to represent both the indemnified
person and such indemnifying person or any affiliate or
associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying
person.
(d) If the indemnification provided for in this Section 6.3 is
unavailable to or insufficient to hold harmless an indemnified
party under subsection (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 result of such losses,
claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative
fault of QSI on the one hand and the Holders on the other in
connection with the statements or omissions which resulted in
such losses,claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable
considerations. 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 QSI on the one hand or a Holder on the
other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such
statement or omission. QSI and the Holders agree that it would
not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if
the Holders were treated as one entity for such purpose) or by
any other method of allocation which does not take into
account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified
party as a result of the losses, claims, damages or
liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party
in connection with investigating or defending
<PAGE>
any such action or claim. Notwithstanding the provisions of
this subsection (d), no Holder shall be required to contribute
any amount in excess of the amount by which the gross amount
received by the Holder from the sale of the QSI Stock to which
such loss relates exceeds the amount of any damages which such
Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged
omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 1 l(f) of the Securities Act)
shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. The Holders'
obligations in this subsection (d) to contribute are several
in proportion to their sales of QSI Stock to which such loss
relates and not joint.
(e) The obligations of QSI and the Holders under this Section
6.3 shall be in addition to any liability which QSI and the
respective Holders may otherwise have and shall extend, upon
the same terms and conditions, to each person, if any, who
controls QSI or any Holder within the meaning of the
Securities Act and the Exchange Act.
7. Restrictions on Transferability of QSI Stock; Compliance with Securities
Act
7.1 Restrictions on Transferability. The QSI Stock shall not be
transferable in the absence of registration under the Securities Act or an
exemption therefrom or in the absence of compliance with any term of the Note
Issuance Agreement. The QSI Stock shall not be transferable for a period of one
year following the Closing Date. QSI shall be entitled to give stop transfer
instructions to its transfer agent with respect to the QSI Stock in order to
enforce the foregoing restrictions.
7.2 Restrictive Legend. Each certificate representing the QSI Stock shall
bear substantially the following legends (in addition to any legends required
under applicable state securities laws):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM, OR
COMPLIANCE WITH REGULATION S.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN A NOTE
ISSUANCE AGREEMENT DATED NOVEMBER __, 1996 BETWEEN THE COMPANY AND THE
ORIGINAL PURCHASER, AND NO TRANSFER OF SECURITIES SHALL BE VALID OR
EFFECTIVE ABSENT COMPLIANCE WITH SUCH RESTRICTIONS. ALL SUBSEQUENT
HOLDERS OF THIS CERTIFICATE WILL HAVE AGREED TO BE BOUND BY CERTAIN OF
THE TERMS OF THE NOTE ISSUANCE AGREEMENT, INCLUDING SECTIONS 7.1, 7.3
AND 7.4 OF SCHEDULE 3 TO ANNEX I OF THE AGREEMENT. A COPY OF THE NOTE
ISSUANCE AGREEMENT MAY BE OBTAINED AT NO COST BY
<PAGE>
WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY.
7.3 Transfer of QSI Stock. Each Holder hereby covenants with QSI not to
make any sale of the QSI Stock except: (a) a sale of QSI Stock in accordance
with the Registration Statement, in which case the Holder covenants to comply
with the requirement of delivering a current prospectus, (b) a sale of QSI Stock
in accordance with Rule 144, in which case the Holder covenants to comply with
Rule 144; or (c) subject to such conditions as QSI in its sole discretion shall
impose, in accordance with another exemption from the registration requirements
of the Securities Act. Each Holder further acknowledges and agrees that such
shares of QSI Stock are not transferable on the books of QSI unless the
certificate submitted to QSI's transfer agent evidencing such QSI Stock is
accompanied by such additional certification, documentation or information as
QSI in its sole discretion shall require in order to effect such sale in
accordance with the Registration Statement or Rule 144, or such other exemption
from the registration requirements of the Securities Act. No transfer of QSI
Stock will be effected to any "affiliate" of QSI as defined in the Securities
Act except pursuant to subsection (a) or (b) hereof. The legend set forth in
Section 7.2 will be removed from a certificate representing QSI Stock following
and in connection with any sale of QSI Stock pursuant to subsection (a) or (b)
hereof but not in connection with any sale of QSI Stock pursuant to subsection
(c) hereof.
7.4 Holder Information. Each Holder covenants that it will promptly notify
QSI of any changes in the information set forth in the Registration Statement
regarding such Holder or such Holder's "Plan of Distribution."
8. Miscellaneous
8.1 Waivers and Amendments. With the exception of Sections 6 and 7
hereof, the terms of this Schedule 3 may be waived or amended with the written
consent of QSI and each Holder. With respect to Sections 6 and 7 hereof, with
the written consent of QSI and the record holders of more than 50% of the (X)
QSI Stock then outstanding and held by Holders together with (Y) QSA Stock then
outstanding and held by the Holders, the terms of this Schedule 3 may be waived
or amended and any such amendment or waiver shall be binding upon QSI and all
holders of QSI Stock and QSA Stock.
<PAGE>
For more information contact: EXHIBIT 99
Stephen H. Vonderach
Chief Financial Officer
Quality Semiconductor, Inc.
(408) 450-8000
Morgan-Walke Associates, Inc.
Doug Sherk, Suzanne Craig,
Lisa Laukkanen
(415) 296-7383
Emily Dupree, Elissa Grabowski
(212) 850-5698
FOR IMMEDIATE RELEASE
QUALITY SEMICONDUCTOR ANNOUNCES PRIVATE FINANCING
SANTA CLARA, CA -- (November 22, 1996) -- Quality Semiconductor, Inc.
(Nasdaq:QUAL) today announced the closing of a private placement of unsecured,
convertible promissory notes in the principal amount of $5 million, of Quality
Semiconductor Australia, Pty. Limited, a subsidiary of Quality Semiconductor,
Inc. The notes may be converted, at the option of the investors of the Company,
for up to 732,931 shares of the Common Stock of Quality Semiconductor, Inc. The
notes are also non-transferable and are convertible into 732,931 shares of the
non-voting Series B Preference shares of Quality Semiconductor Australia, Pty.
Limited. The lead investors are affiliated with Fidelity Venture Capital
Corporation and Technology Associates Corporation, both of Taiwan. The investors
have initially funded $2 million dollars of the total financing and have agreed
to complete the balance of the funding no later than February 28, 1997. The
Company intends to use the proceeds for payment of the debt incurred in
connection with the acquisition of a wafer fabrication facility by Quality
Semiconductor Australia, Pty., general corporate purposes and working capital.
"This important financing provides us with additional resources to expand our
capabilities and to meet the demand for our products," commented Paul Gupta,
president and chief executive officer. Quality Semiconductor, Inc. designs,
develops and markets high-performance logic as well as networking and
logic-intensive specialty memory semiconductor products. The Company targets
systems manufacturers principally in the networking, personal computer and
workstation markets. The Company's logic products include the 3.3-volt and
5-volt QSFCT families of high-speed, low-noise interface logic devices, the
QuickSwitch family of high-speed, low-resistance bus switches, a family of
low-skew clock management products, a family of analog switch devices, and new
JTAG products designed to allow board-level testing of complex products. Quality
Semiconductor, Inc.'s networking products include an ATM
multiplexer/demultiplexer, and two Fast Ethernet transceivers that provide
on-chip solutions for glue-less interface. Quality Semiconductor, Inc.'s
specialty memory products include some of the fastest FIFO (first-in, first-out)
devices currently available.
Except for historical information, the matters discussed in this press
release are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected, including the ability of the Company to enforce the contractual
commitment of the investors to fund the notes, as well as the factors identified
in the Company's 10-K for the year ended September 24, 1995 and in the Company's
10-Qs for the quarters ended December 31, 1995, March 31, 1996 and June 30,
1996, respectively. The Company assumes no obligation to update the
forward-looking statements included in this press release.
###
<PAGE>
