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 June 11, 1997
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 May 22, 1997, Quality Semiconductor, Inc., a California corporation
(the "Company") announced that it had arranged a private placement (the "Private
Placement") of 108,000 units, each consisting of ten (10) shares of the
Company's Common Stock and a one-year warrant to purchase one (1) additional
share of the Company's Common Stock. The units were priced at $85.00 per unit
for a total of $9.2 million in cash. The closing of the Private Placement took
place on May 28, 1997. Needham & Company, Inc. received a placement fee of equal
to $60,000 for services rendered in connection with the Private Placement. The
investors included funds affiliated with Galleon Group, Zesiger Capital Group
LLC, CG Funds and Weiss Peck & Greer LLC. The Company relied on Rule 506 of
Regulation D under the Securities Act of 1933, as amended (the "Act"), which,
among other things, provides an exemption from the registration requirements of
the Act for sales to accredited investors (as defined by Rule 501(a) of
Regulation D under the Act). Under the terms of the Private Placement, the
Company has agreed to file a Registration Statement on Form S-3 within thirty
days of the closing of the transaction, to cover the shares of the Company's
Common Stock that were delivered to the investors at the closing and that are
issuable upon exercise of the warrants. The specific terms of the Units are
contained in the instruments defining the rights of the holders of the Units
attached as an exhibit hereto and incorporated by reference herein. Further
details of this transaction are contained in the Company's press release dated
May 22, 1997, attached 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 Unit Purchase Agreement (including Warrant), dated
May 22, 1997 between Quality Semiconductor, Inc. and the
Purchasers (as defined therein).
Exhibit 99 Quality Semiconductor, Inc. Press Release dated May 22, 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
QUALITY SEMICONDUCTOR, INC.
Date: June 11, 1997 By: /s/ JOHN P. GOLDSBERRY
-----------------------------
John P. Goldsberry
Vice President - Finance and
Chief Financial Officer
(Duly Authorized and Principal
Financial and Accounting Officer)
<PAGE>
QUALITY SEMICONDUCTOR, INC.
INDEX TO EXHIBITS
Sequential
Exhibit Number Description Page Number
Exhibit 4.1 Form of Unit Purchase Agreement (including 5
Warrant), dated May 22, 1997 between Quality
Semiconductor, Inc. and the Purchasers (as
defined therein).
Exhibit 99 Press Release dated May 22, 1997 31
<PAGE>
EXHIBIT 4.1
UNIT PURCHASE AGREEMENT
Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050-2903
Ladies & Gentleman:
The undersigned, ____________________(the "Purchaser"), hereby confirms
its agreement with you as follows:
1. This Unit Purchase Agreement (the "Agreement") is made as of May 16,
1997 between Quality Semiconductor, Inc., a California corporation (the
"Company"), and the Purchaser.
2. The Company has authorized the sale and issuance of up to 108,000
units (the "Units"), each consisting of ten (10) shares (the "Shares") of Common
Stock of the Company and one warrant (the "Warrants") to purchase one (1) share
of Common Stock of the Company.
3. The Company and the Purchaser agree that the Purchaser will purchase
and the Company will sell, for a purchase price of $85.00 per Unit, or an
aggregate purchase price of $_________________________,
_____________________Units pursuant to the Terms and Conditions for Purchase of
Units attached hereto as Annex I and incorporated herein by reference as if
fully set forth herein. Unless otherwise requested by the Purchaser,
certificates representing the Shares and Warrants purchased by the Purchaser
will be registered in the Purchaser's name and address as set forth below.
4. The Purchaser represents that, except as set forth below, (a) it has had
no position, office or other material relationship within the past three years
with the Company or its affiliates and (b) neither it nor any group of which it
is a member beneficially owns any securities of the Company. 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.
PURCHASER
By: ____________________________________
Title: _________________________________
Address: _______________________________
Tax ID No.: ____________________________
AGREED AND ACCEPTED:
___________________________
Quality Semiconductor, Inc.
By: _______________________
Title: ____________________
<PAGE>
ANNEX I
TERMS AND CONDITIONS FOR PURCHASE OF UNITS
1. Authorization and Sale of Units
1.1 Authorization. The Company has authorized the sale and
issuance of up to 108,000 units (the "Units"), each consisting of ten (10)
shares of Common Stock of the Company (the "Shares") and one warrant to purchase
one (1) share of Common Stock of the Company (the "Warrants"), pursuant to the
Agreement. The shares of Common Stock of the Company to be issued upon exercise
of the Warrants are hereinafter referred to as the "Warrant Shares."
1.2 Sale of Units. Subject to the terms and conditions of the
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company the number of Units set
forth in the Agreement.
2. Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of the
Units hereunder (the "Closing") shall be held at the offices of Venture Law
Group, P.C., 2800 Sand Hill Road, Menlo Park, California at 3:00 p.m., on May
28, 1997 or at such other time and place as the Company and the Purchasers
purchasing a majority of the Units shall agree. The date of the Closing is
hereinafter referred to as the "Closing Date."
2.2 Delivery. At the Closing, the Company will deliver to each
Purchaser (a) a certificate, registered in the Purchaser's name and address as
shown in the Agreement, representing the number of Shares to be purchased by the
Purchaser and (b) a Warrant certificate, substantially in the form attached
hereto as Exhibit A, representing the number of Warrants to be purchased by such
Purchaser. Such delivery shall be against payment therefor by wire transfer of
the aggregate purchase price of the Units set forth in the Agreement to an
escrow account established at Silicon Valley Bank by Venture Law Group, P.C.,
escrow agent for the Company (the "Escrow Agent"), in accordance with the
instructions set forth in Exhibit B hereto. All payments received by the Escrow
Agent prior to the Closing Date shall be held in a trust account for the benefit
of the Purchasers pending Closing of the offering.
3. Representations and Warranties of the Company
The Company represents and warrants to the Purchasers as of
the Closing Date as follows:
3.1 Organization, Standing; Qualification to Do Business. The
Company 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. The Company is duly qualified
to do business as a foreign corporation and is in good standing in each
<PAGE>
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 the Company and its subsidiaries considered as one enterprise.
3.2 Corporate Power; Authorization. The Company has all
requisite legal and corporate power and has taken all requisite corporate action
to execute and deliver the Agreement, to sell and issue the Units and to carry
out and perform all of its obligations under the Agreement. The Agreement
constitutes the legal, valid and binding obligation of the Company, 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 Agreement does not, and the
performance of the Agreement and the compliance with the provisions hereof and
the issuance, sale and delivery of the Units by the Company 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 the Company 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 the Company or any of its properties is subject.
3.3 Issuance and Delivery of the Shares, Warrants and Warrant
Shares. The Shares and the Warrants, when issued in compliance with the
provisions of the Agreement, and the Warrant Shares, when issued in compliance
with the Agreement and the Warrants, will be validly issued, fully paid and
nonassessable. The issuance and delivery of the Shares, the Warrants and the
Warrant Shares are not subject to preemptive or any other similar rights of the
shareholders of the Company or any liens or encumbrances.
3.4 Private Placement Offering Memorandum; SEC Documents;
Financial Statements. Each complete or partial statement, report or proxy
statement included as an exhibit to the Company's Private Placement Offering
Memorandum dated May 14, 1997 as amended on May 16,1997 (such Private Placement
Offering Memorandum, including all exhibits thereto, being hereinafter referred
to as the "Memorandum") is a true and complete copy of or a true excerpt from
such document as filed by the Company with the Securities and Exchange
Commission (the "SEC"). The Company has filed in a timely manner all documents
that the Company was required to file with the SEC under Sections 13, 14(a) and
15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
during the 12 months preceding the date of the Agreement. As of their respective
filing dates, all documents filed by the Company with the SEC (the "SEC
Documents") complied in all material respects with the requirements of the
Exchange Act or the Securities Act of 1933, as amended (the "Securities Act"),
as applicable. Neither the Agreement, the Memorandum nor any of the SEC
Documents as of their respective dates included an untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents or the Memorandum (the "Financial Statements") comply as to form
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto. The Financial
Statements have been prepared in accordance with generally accepted accounting
<PAGE>
principles consistently applied and fairly present the consolidated financial
position of the Company and any subsidiaries at the dates thereof and the
consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring adjustments).
3.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by the Agreement, except for (a) compliance with the securities and
blue sky laws in the states in which Units are offered and/or sold, which
compliance will be effected in accordance with such laws, (b) the filing of a
registration statement and any amendments thereto with the SEC as contemplated
by Section 7.2 of the Agreement and (c) the filing of a Notification Form For
the Listing of Additional Shares with The Nasdaq Stock Market and a Form 10-C
with the SEC.
3.6 No Material Adverse Change. Except as otherwise disclosed
herein, since March 31, 1997, there has not been (a) any changes in the assets,
liabilities, financial condition, business prospects or operations of the
Company from that reflected in the Financial Statements except changes in the
ordinary course of business which, individually and in the aggregate, have not
had a material adverse effect on the Company and its subsidiaries considered as
one enterprise; (b) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject; (c) any resignation or termination of employment, or to the Company's
knowledge, any impending resignation or termination of employment, of any
executive officer or key employee of the Company; (d) notice of any loss of, or
the cancellation or any material order by, any material customer of the Company;
or (e) any declaration or payment of any dividend or other distribution of
assets of the Company.
3.7 Intellectual Property. Each of the Company and its
subsidiaries owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets and
know-how described or referred to in the Memorandum as owned or used by it or
that are necessary for the conduct of its business as now conducted and as
proposed to be conducted as described in the Memorandum; neither the Company nor
any of its subsidiaries has received any notice of, or has any knowledge of, any
infringement of or conflict with asserted rights of others with respect to any
patent, patent right, trademark, copyright, invention, trade secret or know-how
that, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would have a material adverse effect on the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise.
3.8 Authorized Capital Stock; Options. The authorized capital
stock of the Company consists of (a) 25,500,000 shares of Common Stock, of which
6,048,845 shares were outstanding as of April 30, 1997 and (b) 1,000,000 shares
of Preferred Stock, none of which is outstanding. As of April 30, 1997, the
Company had authorized options to purchase an aggregate of 2,391,666 shares of
Common Stock of the Company (the "Options"), of which Options to purchase
1,590,114 shares of Common Stock were outstanding as of such date. Except for
(i) the Options, (ii) 50,000 warrants, each to purchase one share of the Common
Stock of the Company, issued in connection with the acquisition of certain
assets from AWA Microelectronics Pty. Ltd., a subsidiary of AWA Limited, on
February 16, 1996, and (iii) as set forth in the Memorandum, there are no
outstanding options to purchase, or any preemptive rights or other rights to
subscribe for or to purchase, any securities of the Company.
3.9 Litigation. Except as set forth in the Memorandum, there
are no actions, suits, proceedings or investigations pending or, to the best of
the Company's knowledge, threatened against the Company or any of its properties
before or by any court or arbitrator or any governmental body, agency or
official that (a) might have a material adverse effect on the Company and its
subsidiaries considered as one enterprise or (b) might impair the ability of the
Company to perform in any material respect its obligations under the Agreement.
3.10 Use of Proceeds. The Company intends to apply the net
proceeds from the sales of the shares in the manner set forth under the caption
"Use of Proceeds" in the Memorandum.
3.11 Private Placement. Assuming the accuracy of the
representations and warranties of the Purchasers, and compliance by the
Purchasers of all of their covenants and agreements contained in the Agreement,
the offer, sale and issuance by the Company of the Units to the Purchasers as
contemplated in the Agreement constitute transactions exempt from the
registration requirements of Section 5 of the Securities Act.
4. Representations, Warranties and Covenants of the Purchasers
Each Purchaser hereby severally represents and warrants, and
covenants and agrees with, to the Company, as of the Closing Date, as follows:
4.1 Authorization. Purchaser 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 Agreement, to purchase the Units to be
purchased by it and to carry out and perform all of its obligations under the
Agreement. The Agreement constitutes the legal, valid and binding obligation of
the Purchaser, 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.
4.2 Investment Experience. Purchaser is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Purchaser is aware
of the Company's business affairs and financial condition and has had access to
and has acquired sufficient information about the Company to reach an informed
and knowledgeable decision to acquire the Units. Purchaser has such business and
financial experience as is required to give it the capacity to protect its own
interests in connection with the purchase of the Units. Purchaser is not a
"broker" or a "dealer" as defined in the Exchange Act and is not an "affiliate"
of the Company as defined in the Securities Act.
<PAGE>
4.3 Investment Intent. Purchaser is purchasing the Units 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. Purchaser
understands that its acquisition of the Units 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 Purchaser's investment intent as
expressed herein. Purchaser has, in connection with its decision to purchase the
number of Units set forth in the Agreement, relied solely upon the Memorandum
and the representations and warranties of the Company contained herein.
Purchaser 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 Shares, Warrants or Warrant Shares
except in compliance with the Securities Act and the rules and regulations
promulgated thereunder.
4.4 Registration or Exemption Requirements. Purchaser further
acknowledges and understands that the Shares, the Warrants and the Warrant
Shares 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. Purchaser understands that the certificates
evidencing the Shares and the Warrant Shares, and the Warrants, will be
imprinted with a legend that prohibits the transfer of the Shares, the Warrants
or the Warrant Shares 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
the Company shall so request in writing, an opinion reasonably satisfactory to
the Company of counsel reasonably satisfactory to the Company is obtained to the
effect that the transaction is so exempt.
4.5 Restriction on Sales, Short Sales and Hedging
Transactions. Purchaser 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 Common
Stock of the Company, nor will Purchaser 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 Common Stock of the Company by the Purchaser 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 Common Stock of the Company 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 Common Stock of the Company.
4.6 No Legal, Tax or Investment Advice. Purchaser understands
that nothing in the Memorandum, the Agreement or any other materials presented
to Purchaser in connection with the purchase and sale of the Units constitutes
legal, tax or investment advice. Purchaser has consulted such legal, tax and
investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Units.
<PAGE>
5. Conditions to Closing of Purchasers
Each Purchaser's obligation to purchase the Units at the
Closing is, at the option of such Purchaser, subject to the fulfillment or
waiver as of the Closing Date of the following conditions:
5.1 Representations and Warranties. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects when made and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions
contained in the Agreement to be performed by the Company on or prior to the
Closing Date shall have been performed or complied with in all respects.
5.3 Blue Sky. The Company shall have obtained all necessary blue sky law
permits and qualifications, or secured exemptions therefrom, required by any
state or foreign or other jurisdiction for the offer and sale of the Units.
6. Conditions to Closing of Company
The Company's obligation to sell and issue the Units at the
Closing is, at the option of the Company, subject to the fulfillment or waiver
of the following conditions:
6.1 Representations and Warranties. The representations and
warranties made by each Purchaser in Section 4 hereof shall be true and correct
in all material respects when made and shall be true and correct in all material
respects on the Closing Date with the same force and effect as if they had been
made on and as of the Closing Date.
6.2 Covenants. All covenants, agreements and conditions
contained in the Agreement to be performed by the Purchasers on or prior to the
Closing Date shall have been performed or complied with in all material
respects.
6.3 Blue Sky. The Company shall have obtained all necessary blue sky law
permits and qualifications, or secured exemptions therefrom, required by any
state or foreign or other jurisdiction for the offer and sale of the Units.
7. Affirmative Covenants
The Company and the Purchasers hereby respectively covenant
and agree as follows:
7.1 Financial Information. The Company will mail the following
reports to each Purchaser until such Purchaser transfers, assigns or sells the
Shares, the Warrants and the Warrant Shares purchased by such Purchaser pursuant
to the 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 the Company, a copy of its Quarterly
Report on Form 10-Q.
(c) Within ten days after the Company files any Current Report on Form 8-K
with the SEC, such Current Report on Form 8-K.
7.2 Registration Requirements.
(a) Not later than the date which is 30 days following the Closing Date,
the Company shall prepare and file a registration statement (the "Registration
Statement") with the SEC under the Securities Act to register the resale of the
Shares and the Warrant Shares (collectively, the "Registerable Securities") and
shall use its best efforts to secure the effectiveness of such registration
statement as soon as reasonably practicable thereafter.
(b) The Company shall pay all Registration Expenses (as defined below) in
connection with any registration, qualification or compliance hereunder, and
each Purchaser shall pay all Selling Expenses (as defined below) and other
expenses that are not Registration Expenses relating to the Registerable
Securities resold by such Purchaser. "Registration Expenses" shall mean all
expenses, except for Selling Expenses, incurred by the Company 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 the Company, 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 Registerable
Securities and all fees and disbursements of counsel for any Purchaser.
(c) In the case of the registration effected by the Company pursuant to
these registration provisions, the Company will use its best efforts to: (i)
keep such registration effective until the earlier of (A) the second anniversary
of the date hereof, (B) such date as all of the Registerable Securities have
been resold or (C) such time as all of the Registerable Securities held by the
Purchasers 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 Purchaser from time to time may reasonably
request; (iv) cause the Shares and the Warrant Shares to be listed on each
<PAGE>
securities exchange and quoted on each quotation service on which similar
securities issued by the Company are then listed or quoted; (v) provide a
transfer agent and registrar for all securities registered pursuant to the
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 the Company and
otherwise use its best efforts to maintain requisite blue sky clearance in (X)
all jurisdictions in which any of the Units are originally sold and (Y) all
other states specified in writing by a Purchaser, provided, however, that, as to
clause (Y), the Company 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) The Company shall furnish to each Purchaser 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
Registerable Securities held by the Purchaser.
(e) With a view to making available to the Purchasers the benefits of Rule
144 and any other rule or regulation of the SEC that may at any time permit a
Purchaser to sell Registerable Securities to the public without registration or
pursuant to a registration statement on Form S-3, the Company 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 second anniversary of the date hereof or (B) such date as all
of the Registerable Securities shall have been resold; (ii) file with the SEC in
a timely manner all reports and other documents required of the Company under
the Securities Act and Exchange Act; and (iii) furnish to any Purchaser upon
request, as long as the Purchaser owns any Registerable Securities, (A) a
written statement by the Company 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 the Company, and (C) such other information
as may be reasonably requested in order to avail any Purchaser of any rule or
regulation of the SEC that permits the selling of any such Registerable
Securities without registration or pursuant to such registration statement on
Form S-3.
(f) If any Purchaser shall propose to sell any Registerable Securities
pursuant to the Registration Statement, it shall notify the Company of its
intent to do so at least two (2) full business days prior to such sale. Such
notice shall be deemed to constitute a representation that any written
information previously supplied by such Purchaser (including without limitation
the information referred to in Section 8.4 hereof) is accurate as of the date of
such notice. At any time within such two (2) business-day period, the Company
may refuse to permit the Purchaser to resell any Registerable Securities
pursuant to the Registration Statement for an initial period not to exceed
fifteen (15) days; provided, however, that in order to exercise this right, the
Company must deliver a certificate in writing to the Purchaser 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 the Company and its shareholders due to disclosure obligations of
the Company. In such an event, the Company 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 the Purchaser promptly after it has
determined that such sale has become permissible. Notwithstanding the foregoing,
the Company 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 fifteen (15) day periods in any calendar year. Each
Purchaser hereby covenants and agrees that it will not sell any Registerable
<PAGE>
Securities pursuant to the Registration Statement during the periods the
Registration Statement is withdrawn as set forth in this Section 7.2(f).
7.3 Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each Purchaser from
and against any losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) to which such Purchaser 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 the Company to fulfill any undertaking included in
the Registration Statement, and the Company will, as incurred, reimburse such
Purchaser for any legal or other expenses reasonably incurred in investigating,
defending or preparing to defend any such action, proceeding or claim; provided,
however, that the Company 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 the Company by or on
behalf of such Purchaser specifically for use in preparation of the Registration
Statement, (ii) the failure of such Purchaser to comply with the covenants and
agreements contained in Sections 7.2(f), 8.3 or 8.4 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
Purchaser prior to the pertinent sale or sales by the Purchaser.
(b) Each Purchaser, severally and not jointly, agrees to indemnify and hold
harmless the Company from and against any losses, claims, damages or liabilities
(or actions or proceedings in respect thereof) to which the Company 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 the Company by or on behalf of
such Purchaser specifically for use in preparation of the Registration
Statement; provided, however, that no Purchaser 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 Purchaser and delivered to the Company before the
sale from which such loss occurred, (ii) the failure of such Purchaser to comply
with the covenants and agreements contained in Sections 7.2(f), 8.3 or 8.4
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 Purchaser prior to the pertinent sale or sales by the
Purchaser, and each Purchaser, severally and not jointly, will, as incurred,
reimburse the Company 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 7.3, such indemnified
person shall notify the indemnifying person in writing of such claim or of the
<PAGE>
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 7.3 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
the Company on the one hand and the Purchasers 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 the Company on the one hand or a Purchaser 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 Purchasers 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 Purchasers 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 any such
action or claim. Notwithstanding the provisions of this subsection (d), no
Purchaser shall be required to contribute any amount in excess of the amount by
which the net amount received by the Purchaser from the sale of the Shares or
Warrant Shares, as the case may be, to which such loss relates exceeds the
amount of any damages which such Purchaser 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 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Purchasers' obligations in this subsection (d) to contribute are several in
proportion to their respective sales of Shares or Warrant Shares, as the case
may be, to which such loss relates and not joint.
(e) The obligations of the Company and the Purchasers under this Section
7.3 shall be in addition to any liability which the Company and the respective
<PAGE>
Purchasers may otherwise have and shall extend, upon the same terms and
conditions, to each person, if any, who controls the Company or any Purchaser
within the meaning of the Securities Act and the Exchange Act.
8. Restrictions on Transferability of Shares, Warrants and Warrant Shares;
Compliance with Securities Act.
8.1 Restrictions on Transferability. The Shares, the Warrants
and the Warrant Shares 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 Agreement. The Company shall be entitled to give
stop transfer instructions to its transfer agent with respect to the Shares, the
Warrants and the Warrant Shares in order to enforce the foregoing restrictions.
8.2 Restrictive Legend. Each certificate representing the Shares, the
Warrants and the Warrant Shares 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.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED
IN A UNIT PURCHASE AGREEMENT DATED MAY 16, 1997 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
AGREEMENT, INCLUDING SECTIONS 7.2, 8.3 AND 8.4 OF THE
AGREEMENT. A COPY OF THE AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS
CERTIFICATE TO THE SECRETARY OF THE COMPANY.
8.3 Transfer of Shares, Warrants and Warrant Shares. Each
Purchaser hereby covenants with the Company not to make any sale of the Shares,
the Warrants or the Warrant Shares except either (a) a sale of Shares or Warrant
Shares in accordance with the Registration Statement, in which case the
Purchaser covenants to comply with the requirement of delivering a current
prospectus, (b) a sale of Shares, Warrants or Warrant Shares in accordance with
Rule 144, in which case the Purchaser covenants to comply with Rule 144, or (c)
subject to such conditions as the Company in its sole discretion shall impose,
in accordance with another exemption from the registration requirements of the
Securities Act. Each Purchaser further acknowledges and agrees that such Shares,
Warrants and Warrant Shares are not transferable on the books of the Company
<PAGE>
unless the certificate submitted to the Company's transfer agent evidencing such
Shares, Warrants or Warrant Shares is accompanied by such additional
certification, documentation or information as the Company in its sole
discretion shall require in order to effect such sale in accordance with the
Registration Statement, Rule 144 or such other exemption from the registration
requirements of the Securities Act. No transfer of Shares, Warrants or Warrant
Shares will be effected to any "affiliate" of the Company as defined in the
Securities Act except pursuant to subsection (a) or (b) hereof. The legend set
forth in Section 8.2 will be removed from a certificate representing Shares,
Warrants or Warrant Shares following and in connection with any sale of Shares,
Warrants or Warrant Shares, as the case may be, pursuant to subsection (a) or
(b) hereof but not in connection with any sale of Shares, Warrants or Warrant
Shares, as the case may be, pursuant to subsection (c) or (d) hereof.
8.4 Purchaser Information. Each Purchaser covenants that it will promptly
notify the Company of any changes in the information set forth in the
Registration Statement regarding such Purchaser or such Purchaser's "Plan of
Distribution."
9. Miscellaneous
9.1 Waivers and Amendments. With the exception of Sections 7
and 8 hereof, the terms of the Agreement may be waived or amended with the
written consent of the Company and each Purchaser. With respect to Sections 7
and 8 hereof, with the written consent of the Company and the record holders of
more than 50% of the Shares then outstanding and held by Purchasers (including,
for purposes of such calculation, outstanding Warrant Shares and shares of
Common Stock issuable upon exercise of outstanding Warrants), the terms of the
Agreement may be waived or amended and any such amendment or waiver shall be
binding upon the Company and all holders of Shares, Warrants or Warrant Shares.
9.2 Broker's Fee. Each Purchaser acknowledges that the Company
intends to pay a fee to Needham & Company, Inc. ("Needham"), in respect of the
sale of the Units to the Purchasers. Each of the parties hereto hereby
represents that, on the basis of any actions and agreements by it, and except
for certain finders to be paid a fee out of Needham's fee, there are no other
brokers or finders entitled to compensation in connection with the sale of the
Units to the Purchasers.
9.3 Governing Law. The Agreement shall be governed in all respects by and
construed in accordance with the laws of the State of California without regard
to conflicts of laws principles.
9.4 Survival. The representations, warranties, covenants and
agreements made in the Agreement shall survive any investigation made by the
Company or the Purchasers and shall survive the Closing.
9.5 Successors and Assigns. The provisions hereof shall inure
to the benefit of, and be binding upon, the successors, assigns, heirs,
executors and administrators of the parties to the Agreement. Notwithstanding
the foregoing, no Purchaser shall assign the Agreement without the prior written
consent of the Company. The provisions of Sections 7, 8 and 9 hereof shall be
<PAGE>
binding on and shall inure to the benefit of subsequent holders of Shares,
Warrants or Warrant Shares, other than subsequent holders purchasing pursuant to
Section 8.3(a) or 8.3(b).
9.6 Entire Agreement. The Agreement constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof.
9.7 Indemnification of Escrow Agent. The Company and each of
the Purchasers jointly and severally agree to indemnify and hold harmless
Venture Law Group, P.C. ("VLG") against any and all losses, claims, damages,
liabilities, costs, expenses and disbursements (including fees and expenses of
counsel) (collectively, "Losses") arising out of or in connection with VLG's
services hereunder, other than Losses finally judicially determined to be solely
attributable to VLG's bad faith or gross negligence. Each of the Company and the
Purchasers further agree that VLG shall not have any liability whatsoever
(whether direct or indirect, in contract or tort or otherwise) to the Company or
any Purchaser (or any party claiming through either of them) arising out of or
in connection with its services hereunder except in the event that such
liability is finally judicially determined to be solely attributable to VLG's
bad faith or gross negligence. The Company and the Purchasers further agree that
VLG shall be entitled to rely on their respective representations, warranties,
covenants and agreements herein and pursuant hereto. The Company and the
Purchasers acknowledge and agree that VLG is an intended third-party beneficiary
of this Section 9.7.
9.8 Notices, etc. All notices and other communications
required or permitted under the Agreement shall be in writing and may be
delivered in person, by telecopy, overnight delivery service or United States
mail, addressed to the Company or the Purchasers, as the case may be, at their
respective addresses set forth at the beginning of in the Agreement, or at such
other address as the Company or the Purchasers shall have furnished to the other
party in writing. All notices and other communications shall be effective upon
the earlier of (a) actual receipt thereof by the person to whom notice is
directed or (b) (i) in the case of notices and communications sent by personal
delivery or telecopy, the time such notice or communication arrives at the
applicable address or is successfully sent to the applicable telecopy number,
(ii) in the case of notices and communications sent by overnight delivery
service, at noon (local time) on the second business day following the day such
notice or communication is sent, and (iii) in the case of notices and
communications sent by United States mail, five days after such notice or
communication is deposited in the United States mail.
9.9 Severability of the Agreement. If any provision of the
Agreement shall be judicially determined to be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
9.10 Counterparts. The Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
9.11 Further Assurances. Each party to the Agreement shall do
and perform or cause to be done and performed all such further acts and things
and shall execute and deliver all such other agreements, certificates,
instruments and documents as the other party hereto may reasonably request in
<PAGE>
order to carry out the intent and accomplish the purposes of the Agreement and
the consummation of the transactions contemplated hereby.
9.12 Termination. In the event that the Closing shall not have
occurred on or before ninety (90) days from the date hereof, the Agreement shall
terminate at the close of business on such date.
9.13 Expenses. The Company and each such Purchaser shall bear
its own expenses incurred on its behalf with respect to the Agreement and the
transactions contemplated hereby, including fees of legal counsel.
9.14 Currency. All references to "dollars" or "$" in the Agreement shall be
deemed to refer to United States dollars.
<PAGE>
EXHIBIT A
FORM OF WARRANT CERTIFICATE
<PAGE>
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.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED IN A UNIT
PURCHASE AGREEMENT DATED MAY 16, 1997 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 AGREEMENT, INCLUDING SECTIONS 7.2, 8.3 AND 8.4 OF THE
AGREEMENT. A COPY OF THE AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS CERTIFICATE TO
THE SECRETARY OF THE COMPANY.
CUSIP: 74758B104
WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF QUALITY SEMICONDUCTOR, INC.
This certifies that _____________ (the "Holder"), for value received,
is entitled to purchase from Quality Semiconductor, Inc., a California
corporation (the "Company"), ____________ (_______) fully paid and nonassessable
shares of the Company's Common Stock (the "Warrant Shares") at a price of $8.50
per share of Common Stock (the "Stock Purchase Price") at any time or from time
to time on or after the date hereof up to and including 5:00 p.m. (Pacific time)
on the Expiration Date (as defined below), upon surrender to the Company at its
principal office at 851 Martin Avenue, Santa Clara, California 95050-2903 (or at
such other location as the Company may advise the Holder in writing) of this
Warrant properly endorsed with the Form of Subscription attached hereto duly
completed and signed and upon payment by cash, check or wire transfer of
immediately available funds of the aggregate Stock Purchase Price for the number
of shares for which this Warrant is being exercised determined in accordance
with the provisions hereof. The Stock Purchase Price and the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of this
Warrant. "Expiration Date" means the earlier of (i) May 31, 1998 or (ii) the
occurrence of an event the proposal of which is described in subsection (d) of
Section 3.4 which causes termination of this Warrant under Section 3.4. This
Warrant is issued pursuant to the Unit Purchase Agreement between the Company
and the Holder dated May 16, 1997 (the "Purchase Agreement").
<PAGE>
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for Shares. This Warrant
is exercisable at the option of the Holder at any time or from time to time on
or after the date hereof and prior to or on the Expiration Date for all or a
portion of the Warrant Shares which may be purchased hereunder. The Holder shall
not be entitled to exercise this Warrant without delivering the Form of
Subscription attached hereto, and the Company shall have no liability whatsoever
to any Holder by reason of any attempted exercise hereof if such Form of
Subscription is not delivered or such Holder is unable to make any of the
representations set forth therein. The Company agrees that the Warrant Shares
purchased under this Warrant shall be and are deemed to be issued to the Holder
as the record owner of such shares as of the close of business on the date on
which this Warrant shall have been surrendered and payment made for such shares.
Subject to the provisions of Section 2, certificates for the Warrant Shares so
purchased, together with any other securities or property to which the Holder is
entitled upon such exercise, shall be delivered to the Holder by the Company's
transfer agent at the Company's expense within a reasonable time after the
rights represented by this Warrant have been exercised. Each stock certificate
so delivered shall be in such denominations of Warrant Shares as may be
requested by the Holder and shall be registered in the name of the Holder or
such other name as shall be designated by the Holder, subject to the limitations
contained in Sections 2 and 4 hereof. If, upon exercise of this Warrant, fewer
than all of the Warrant Shares evidenced by this Warrant are purchased prior to
the date of expiration of this Warrant, one or more new warrants substantially
in the form of, and on the terms in, this Warrant will be issued for the
remaining number of Warrant Shares not purchased upon exercise of this Warrant.
2. Shares to be Fully Paid; Reservation of Shares. The Company
covenants and agrees that all Warrant Shares which may be issued upon the
exercise of the rights represented by this Warrant will, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable and free from all
preemptive rights of any shareholder and free of all taxes, liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
it shall approve, and shall seek shareholder approval at its next regularly
scheduled meeting of shareholders for, an increase in the number of authorized
shares of Common Stock sufficient to provide for the exercise of the rights
represented by this Warrant. Thereafter, during the period within which the
rights represented by this Warrant may be exercised, the Company covenants and
agrees that it will at all times have authorized and reserved, for the purpose
of issue or transfer upon exercise of the subscription rights evidenced by this
Warrant, a sufficient number of shares of authorized but unissued Common Stock,
when and as required to provide for the exercise of the rights represented by
this Warrant. The Company will use its reasonable best efforts to take all such
action as may be necessary to assure that such shares of Common Stock may be
issued as provided herein without violation of any applicable law or regulation,
or of any requirements of any domestic securities exchange or automated
quotation system upon which the Common Stock may be listed.
3. Adjustment of Stock Purchase Price; Number of Warrant Shares. The
Stock Purchase Price and the number of Warrant Shares purchasable upon the
exercise of this Warrant shall be subject to adjustment from time to time upon
the occurrence of certain events described in this Section 3.
<PAGE>
3.1 Adjustment of Purchase Price. In the event that the
Company at any time or from time to time after the issuance of this Warrant
shall declare or pay, without consideration, any dividend on the Common Stock
pa yable in Common Stock or in any right to acquire Common Stock for no
consideration, or shall effect a subdivision of the outstanding shares of Common
Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Stock
Purchase Price in effect immediately prior to such event shall, concurrently
with the effectiveness of such event, be proportionately decreased or increased,
as appropriate. In the event that the Company shall declare or pay, without
consideration, any dividend on the Common Stock payable in any right to acquire
Common Stock for no consideration, then the Company shall be deemed to have made
a dividend payable in Common Stock in an amount of shares equal to the maximum
number of shares issuable upon exercise of such rights to acquire Common Stock.
Upon each adjustment of the Stock Purchase Price pursuant to this Section 3.1,
the Holder shall thereafter be entitled to purchase, at the Stock Purchase Price
resulting from such adjustment, the number of shares of Common Stock obtained by
multiplying the Stock Purchase Price in effect immediately prior to such
adjustment by the number of shares of Common Stock purchasable pursuant hereto
immediately prior to such adjustment, and dividing the product thereof by the
Stock Purchase Price resulting from such adjustment.
3.2 Adjustments for Reclassification and Reorganization. If
the Common Stock shall be changed into the same or a different number of shares
of any other class or classes of stock, whether by capital reorganization,
reclassification or otherwise (other than a subdivision or combination of shares
provided for in Section 3.1), the Stock Purchase Price then in effect shall,
concurrently with the effectiveness of such reorganization or reclassification,
be proportionately adjusted so that this Warrant shall represent the right to
purchase, in lieu of the number of shares of Common Stock which this Warrant
would otherwise represent the right to purchase, that number of shares of such
other class or classes of stock equivalent to the number of shares of Common
Stock which this Warrant would have otherwise entitled the Holder to purchase
immediately before that change at the same aggregate Stock Purchase Price.
3.3 Notice of Adjustment. Upon any adjustment of the Stock
Purchase Price or any increase or decrease in the number of shares of Common
Stock purchasable upon the exercise of this Warrant, the Company shall within
five business days give written notice thereof, by first class mail, postage
prepaid, addressed to the registered Holder of this Warrant at the address of
such Holder as shown on the books of the Company. The notice shall be signed by
the Company's chief financial officer and shall state the Stock Purchase Price
resulting from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this Warrant,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based.
3.4 Other Notices. If at any time:
(a) the Company shall propose to declare any cash dividend upon its Common
Stock;
<PAGE>
(b) the Company shall propose to declare or make any dividend or other
distribution to the holders of its Common Stock, whether in cash, property or
other securities;
(c) the Company shall propose to effect any reorganization or
reclassification of the capital stock of the Company or any consolidation or
merger of the Company with or into another corporation in which the Company
shall not be the continuing or surviving entity of such consolidation or merger,
or any transaction or series of transactions in which an excess of 50% of the
Company's voting power is transferred, or any sale, lease or conveyance of all
or substantially all of the property of the Company; or
(d) the Company shall propose to effect a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, addressed to the Holder at the address of such
Holder as shown on the books of the Company (i) at least 15 business days' prior
written notice of the date on which the books of the Company shall close or a
record shall be taken for such dividend or distribution or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, transaction or series of transactions, sale, lease,
conveyance, dissolution, liquidation or winding-up, and (ii) in the case of any
such reorganization, reclassification, consolidation, merger, transaction or
series of transactions, sale, lease, conveyance, dissolution, liquidation or
winding-up, at least 15 business days' written notice of the date when the same
shall take place. Any notice given in accordance with clause (i) above shall
also specify, in the case of any dividend or distribution, the record date for
such dividend or distribution, which must be after the date thereof. Any notice
given in accordance with clause (ii) above shall also specify the date on which
the holders of the Common Stock shall be entitled to exchange their Common Stock
for securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, transaction or series of transactions,
sale, lease, conveyance, dissolution, liquidation or winding-up, as the case may
be. In the event that the Holder does not exercise this Warrant prior to the
occurrence of an event described in clause (a) or (b) above, the Holder shall
not be entitled to receive the benefits accruing to existing holders of the
Common Stock in such event. Upon the occurrence of an event described in clause
(c), the Holder shall be entitled thereafter, in lieu of and in substitution for
all other rights under this Warrant, upon payment of the Stock Purchase Price in
effect immediately prior to such action, to receive upon exercise of this
Warrant the class and number of shares which the Holder would have been entitled
to receive after the occurrence of such event had this Warrant been exercised
immediately prior to such event. Upon the occurrence of an event the proposal of
which is described in clause (d), this Warrant shall terminate.
4. Issue Tax. The issuance of certificates for the Warrant Shares upon
the exercise of this Warrant shall be made without charge to the Holder for any
issue tax in respect thereof; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any certificate in a name other than that of the
then holder of this Warrant being exercised.
<PAGE>
5. No Voting or Dividend Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a shareholder in
respect of meetings of shareholders for the election of directors of the Company
or any other matters or any rights whatsoever as a shareholder of the Company.
Except for the adjustment to the Stock Purchase Price pursuant to Section 3.1 in
the event of a dividend on the Common Stock payable in shares of Common Stock,
no dividends or interest shall be payable or accrued in respect of this Warrant
or the interest represented hereby or the Warrant Shares purchasable hereunder
until, and only to the extent that, this Warrant shall have been exercised. No
provisions hereof, in the absence of affirmative action by the Holder to
purchase Warrant Shares, and no mere enumeration herein of the rights or
privileges of the Holder hereof, shall give rise to any liability of such Holder
for the Stock Purchase Price or as a shareholder of the Company whether such
liability is asserted by the Company or by its creditors.
6. Restrictions on Transferability of Securities; Compliance With
Securities Act.
6.1 Restrictions on Transferability. The Warrant and the
Warrant Shares (collectively, the "Securities"), shall not be transferable
except upon the conditions specified in the Purchase Agreement, which conditions
are intended to insure compliance with the provisions of the Securities Act and
applicable "blue sky" law.
6.2 Restrictive Legend. Each certificate representing the
Securities or any other securities issued in respect of the Securities upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event shall (unless otherwise permitted by the provisions of the Purchase
Agreement) be stamped or otherwise imprinted with a legend substantially in the
following form (in addition to any legend 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.
ADDITIONALLY, THE TRANSFER OF THE SECURITIES REPRESENTED BY
THIS CERTIFICATE IS SUBJECT TO CERTAIN RESTRICTIONS SPECIFIED
IN A UNIT PURCHASE AGREEMENT DATED MAY 16, 1997 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
AGREEMENT, INCLUDING SECTIONS 7.2, 8.3 AND 8.4 OF THE
AGREEMENT. A COPY OF THE AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE REGISTERED HOLDER OF THIS
CERTIFICATE TO THE SECRETARY OF THE COMPANY.
<PAGE>
7. Modification and Waiver. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
8. Notices. Any notice, request or other communication required or
permitted to be given or delivered to the Holder hereof or the Company shall be
in writing and may, except as otherwise set forth herein, be delivered in
person, by telecopy, overnight delivery service or United States mail, addressed
to the Holder at its address as shown on the books of the Company, or to the
Company at the address indicated therefor in the first paragraph of this
Warrant, or at such other address as the Holder or the Company shall have
furnished to the other party in writing. All notices, requests and other
communications shall be effective upon the earlier of (a) actual receipt thereof
by the person to whom notice is directed or (b) (i) in the case of notices or
communications sent by personal delivery or telecopy, the time such notice or
communication arrives at the applicable address or is successfully sent to the
applicable telecopy number, (ii) in the case of notices and communications sent
by overnight delivery service, at noon (local time) on the second business day
following the day such notice or communication is sent, and (iii) in the case of
notices and communications sent by United States mail, five days after such
notice or communication is deposited in the United States mail.
9. Descriptive Headings and Governing Law. The descriptive headings of
the several sections and paragraphs of this Warrant are inserted for convenience
only and do not constitute a part of this Warrant. This Warrant shall be
governed in all respects by and construed in accordance with the laws of the
State of California without regard to conflicts of laws principles.
10. Lost Warrants or Stock Certificates. The Company represents and
warrants to the Holder that upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction, or mutilation of any Warrant or
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity and, if requested, bond reasonably satisfactory to the
Company or, in the case of any such mutilation upon surrender and cancellation
of such Warrant or stock certificate, the Company at its expense will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
11. Fractional Shares. No fractional shares shall be issued upon
exercise of this Warrant. The Company shall, in lieu of issuing any fractional
share, pay the Holder entitled to such fraction a sum in cash equal to such
fraction multiplied by the market price of the Common Stock, which shall be, on
any date, the closing price for the Common Stock or the closing bid if no sales
were reported, as quoted on The Nasdaq Stock Market.
[Signature page follows]
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its officers, thereunto duly authorized this _____ day of ________ 1997.
QUALITY SEMICONDUCTOR, INC.
By: _____________________________________
Nme: John Goldsberry
Title: Vice President - Finance and
Chief Financial Officer
<PAGE>
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050-2903
The undersigned, the Holder of the within Warrant, hereby irrevocably
elects to exercise the purchase right represented by such Warrant for, and to
purchase thereunder, ____________________ (__________) shares of Common Stock of
Quality Semiconductor, Inc. (the "Company") and herewith makes payment of
$__________ therefor and requests that the certificates for such shares be
issued in the name of, and delivered to ______________________ at the address
set forth below.
The undersigned represents, unless the exercise of this Warrant has
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), that (i) the undersigned is acquiring such Common Stock for his own
account for investment and not with a view to or for sale in connection with any
distribution thereof (except for any resale pursuant to a Registration Statement
under the Securities Act), (ii) the undersigned has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of the undersigned's investment in the shares of Common Stock,
(iii) the undersigned has received all of the information the undersigned
requested from the Company and the undersigned considers necessary or
appropriate for deciding whether to purchase the shares, (iv) the undersigned
has the ability to bear the economic risks of his prospective investment, and
(v) the undersigned is able, without materially impairing his financial
condition, to hold the shares of Common Stock for an indefinite period of time
and to suffer complete loss on his investment. The undersigned is an "accredited
investor" as defined in Regulation D of the Securities Act on the date hereof.
DATED: ____________________
__________________________________________
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
__________________________________________
__________________________________________
(Address)
<PAGE>
EXHIBIT B
WIRE TRANSFER INSTRUCTIONS
The following wire transfer instructions should be used:
SILICON VALLEY BANK
San Jose, CA
ABA(routing & transit) # 121140399
Account # 3300035861
Account Name: California State Bar Account, Venture Law Group
By Order of: "Name of Sender"
Make reference to: Quality Semiconductor, Inc.
<PAGE>
EXHIBIT 99
For more information contact:
John P. Goldsberry
Chief Financial Officer
Quality Semiconductor, Inc.
(408) 450-8000
Morgen-Walke Associates, Inc.
Suzanne Craig, Jim Byers, Laura Guerrant
(212) 850-5600
FOR IMMEDIATE RELEASE
QUALITY SEMICONDUCTOR ANNOUNCES $9.2 MILLION PRIVE PLACEMENT
OF COMMON STOCK AND WARRANTS
SANTA CLARA, CA - (May 22, 1997) - Quality Semiconductor, Inc. (Nasdaq:QUAL)
today announced that it had arranged a private placement of 108,000 units, each
consisting of 10 shares of common stock and a one-year warrant to purchase an
additional share of common stock. The units were priced at $85.00 per unit, for
a total of $9.2 million. The transaction is anticipated to close on or about May
28, 1997.
Proceeds from the private placement will be used for general corporate
purposes and to fund the growth of its business. The company will exercise its
best efforts to file within 30 days a registration statement on Form S-3
covering the shares of common stock and warrant shares associated with the
private placement. Needham & Company, Inc. acted as agent for the private
placement.
"We are pleased to have arranged this equity private placement which
will allow us to continue to expand the scope of our operations," commented Paul
Gupta, President and Chief Executive Officer of Quality Semiconductor.
Except for historical information contained herein, the matters
discussed in this press release are forward-looking statements that are subject
to certain risks and uncertainties that could cause the actual results to differ
materially from those projected, including, among others, litigation, the impact
of competitive products and pricing, general economic conditions and conditions
specific to the semiconductor industry, fluctuations in customer demand, the
timing and market acceptance of new product introductions, the timely
development of new products and other risk factors listed in the Company's SEC
reports including the Company's periodic reports filed pursuant to the Security
Exchange Act of 1934 and the Registration Statement on form S-1 filed by the
Company in connection with its initial public offering. Quality Semiconductor
assumes no obligation to update the information included in this press release.
-continued-
<PAGE>
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's
networking products include two Fast Ethernet CMOS transceivers that provide
high integration solutions for the adapter, repeater, switch and card bus
markets.
###
