SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
SCHEDULE 13D
Under the Securities Exchange Act of 1934
QUALITY SEMICONDUCTOR, INC.
(Name of Issuer)
COMMON STOCK, PAR VALUE $.001 PER SHARE
(Title of Class of Securities)
74758B104
(CUSIP Number)
RAJ RAJARATNAM
GALLEON ADVISORS, L.L.C.
135 EAST 57TH STREET
NEW YORK, NEW YORK 10022
(212) 371-2809
(Name, address and telephone number of person
authorized to receive notices and communications)
May 28, 1997
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
Check the following box if a fee is being paid with the statement [ ].
(A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
NOTE: Six copies of this statement, including all exhibits, should be
filed with the Commission. See Rule 13d-1(a) for other parties to whom copies
are to be sent.
* The remainder of this cover page shall be filled out for a reporting
person's initial filing on this form with respect to the subject class of
securities, and for any subsequent amendment containing information which
would alter the disclosures provided in a prior cover page.
The information required in the remainder of this cover page shall not
be deemed to be "filed" for purposes of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
Page 1 of 37 Pages
<PAGE>
13D
CUSIP No. 74758B104
____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Galleon International Fund, Ltd.
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [x]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS **
WC
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Bermuda
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
- 0 -
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
476,300
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
- 0 -
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
476,300
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
476,300
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
6.0%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
CO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 37 Pages
<PAGE>
13D
CUSIP No. 74758B104
____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Galleon Management, L.P.
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [x]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS **
AF
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
- 0 -
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
476,300
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
- 0 -
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
476,300
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
476,300
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
6.0%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
PN
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 37 Pages
<PAGE>
13D
CUSIP No. 74758B104
____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Galleon Management, L.L.C.
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [x]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS **
AF
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
- 0 -
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
476,300
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
- 0 -
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
476,300
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
476,300
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
6.0%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
CO
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 4 of 37 Pages
<PAGE>
13D
CUSIP No. 74758B104
____________________________________________________________________________
(1) NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO.
OF ABOVE PERSON
Raj Rajaratnam
_____________________________________________________________________________
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP **
(a) [x]
(b) [ ]
_____________________________________________________________________________
(3) SEC USE ONLY
_____________________________________________________________________________
(4) SOURCE OF FUNDS **
AF
_____________________________________________________________________________
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ]
_____________________________________________________________________________
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.A.
_____________________________________________________________________________
NUMBER OF (7) SOLE VOTING POWER
- 0 -
SHARES ______________________________________________________________
BENEFICIALLY (8) SHARED VOTING POWER
476,300
OWNED BY ______________________________________________________________
EACH (9) SOLE DISPOSITIVE POWER
- 0 -
REPORTING ______________________________________________________________
PERSON WITH (10) SHARED DISPOSITIVE POWER
476,300
_____________________________________________________________________________
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED
BY EACH REPORTING PERSON
476,300
_____________________________________________________________________________
(12) CHECK BOX IF THE AGGREGATE AMOUNT
IN ROW (11) EXCLUDES CERTAIN SHARES ** [ ]
_____________________________________________________________________________
(13) PERCENT OF CLASS REPRESENTED
BY AMOUNT IN ROW (11)
6.0%
_____________________________________________________________________________
(14) TYPE OF REPORTING PERSON **
IN
_____________________________________________________________________________
** SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 5 of 37 Pages
<PAGE>
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D (the "Schedule 13D") is being filed on
June 24, 1997 by the undersigned with respect to the common stock, par value
$.001 per share ("Common Stock") of Quality Semiconductor, Inc. (the
"Company"). The principal executive offices of the Company are located at 851
Martin Avenue, Santa Clara, California 95050.
ITEM 2. IDENTITY AND BACKGROUND.
This statement is filed by (a) Galleon International Fund, Ltd. (the
"Offshore Fund"), (b) Galleon Management, L.P. ("Management LP"), (c) Galleon
Management, L.L.C. ("Management LLC") and (d) Raj Rajaratnam ("Rajaratnam").
The persons listed in (a) through (d) above are collectively referred to
herein as the "Reporting Persons" and information regarding each Reporting
Person is set forth below.
The Offshore Fund is a company incorporated under the laws of Bermuda
with its principal place of business at 6 Front Street, Hamilton HM11,
Bermuda. The principal business of the Offshore Fund, a private investment
fund, is to achieve long-term capital appreciation primarily through
investments in equity securities. Management LP is the investment advisor to
the Offshore Fund. Management LLC is the general partner of Management LP.
Rajaratnam is the managing member of Management LLC.
Management LP is a Delaware limited partnership with its principal place
of business at 135 East 57th Street, New York, New York 10022. Management LP
manages the investment portfolios of the Offshore Fund and other advisory
clients. Management LLC is the general partner of Management LP.
Rajaratnam is the managing member of Management LLC.
Management LLC is a Delaware limited liability company with its principal
place of business at 135 East 57th Street, New York, New York 10022.
Management LLC is the general partner of Management LP. Rajaratnam is the
managing member of Management LLC.
Rajaratnam is a U.S. citizen and is the managing member of Management
LLC. The principal place of business of Rajaratnam is 135 East 57th Street,
New York, NY 10022. Through Management LLC and Management LP, Rajaratnam has
primary investment discretion for the investment portfolio of the Offshore
Fund.
None of the persons described in this Item 2, during the last five
years, (a) has been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (b) was a party to a civil proceeding
of a judicial or administrative body of competent jurisdiction and as a result
of such proceeding was or is subject to a judgment, decree or final order
enjoining future violations of, or prohibiting or mandating activities subject
to, federal or state securities laws or finding any violation with respect to
such laws.
Page 6 of 37 Pages
<PAGE>
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The aggregate number of shares of Common Stock purchased and the net
investment cost of such shares is as follows:
Aggregate Net
Name # of Shares Investment Cost
Offshore Fund 476,300 $4,048,550
The source of the funds used to make the purchases of the Common Stock
was working capital and no part of the purchase price was represented by funds
or other consideration specially borrowed or otherwise specifically obtained
for the purpose of acquiring, holding, trading or voting the Common Stock.
ITEM 4. PURPOSE OF THE TRANSACTION.
The Reporting Persons have no present plans or proposals that relate to
or would result in any of the actions enumerated in paragraphs (a) through (j)
of Item 4 of the instructions to Schedule 13D, although they reserve the right
to buy additional securities of the Company or sell securities of the Company
from time to time.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
(a) The Offshore Fund owns in the aggregate 476,300 (6.0%) of the
outstanding shares of Common Stock of the Company, including 43,300 shares of
Common Stock issuable upon exercise of certain warrants.
The approximate aggregate percentage of shares of Common Stock
beneficially owned by each person herein is based on 7,172,145 shares
outstanding, which is the total number of shares of Common Stock outstanding
as of April 30, 1997, as reflected in the Company's Private Placement Offering
Memorandum dated May 14, 1997, as amended May 16, 1997. Included in the
number of shares outstanding is the number of shares of Common Stock which
would be issued in exchange for the warrants as discussed below.
The Offshore Fund, in connection with the acquisition of the Common
Stock, received 43,300 warrants (the "Warrants") which may be exercised at any
time or from time to time on or after the date hereof through May 31, 1998
(unless otherwise terminated under certain circumstances). Each Warrant
entitles its holder to purchase one (1) share of Common Stock of the Company
at a price of $8.50 per share.
(b) The power to vote the Common Stock with respect to each Reporting
Person noted in paragraph (a) above is as set forth on the cover sheet of this
Schedule 13D for such Reporting Person.
Management LP does not directly own any of the Common Stock or Warrants.
Management LP may be deemed to indirectly beneficially own 476,300 shares of
Common Stock by virtue of its investment advisory relationship with the
Offshore Fund, pursuant to which Management LP provides discretionary
investment advisory services.
Page 7 of 37 Pages
<PAGE>
Management LLC does not directly own any of the Common Stock or
Warrants. Management LLC may be deemed to indirectly beneficially own 476,300
shares of Common Stock by virtue of its position as general partner of
Management LP.
Rajaratnam does not directly own any of the Common Stock or Warrants.
Rajaratnam may be deemed to indirectly beneficially own 476,300 shares of
Common Stock as the managing member of Management LLC.
(c) The Offshore Fund acquired the Common Stock through a private
placement dated May 28, 1997 pursuant to a Unit Purchase Agreement dated May
16, 1997.
(d) Except as set forth above, no other person is known to have the
right to receive or the power to direct the receipt of dividends from, or the
proceeds from the sale of the Common Stock.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
The Common Stock and the Warrants were acquired by the Offshore Fund in a
private placement pursuant to a purchase agreement (the "Unit Purchase
Agreement"). Under the terms of the Unit Purchase Agreement and various
federal and state securities laws, the Common Stock and the Warrants (and any
Common Stock received through the exercise of the Warrants) may not be resold
or otherwise transferred except in a transaction registered under the
Securities Act of 1933, as amended (the "Securities Act"), or unless an
exemption from such registration is available. The Unit Purchase Agreement
requires the Company no later than June 27, 1997 to prepare and file with the
Securities and Exchange Commission a registration statement under the
Securities Act to register the Common Stock and the Warrants and to use its
best efforts to secure the effectiveness of such registration statement as
soon as reasonably practicable thereafter. A copy of the Unit Purchase
Agreement is filed herewith as Exhibit II.
Except as described above, none of the Reporting Persons is a party to
any contract, arrangement, understanding or relationship with respect to any
securities of the Company.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Filed herewith as Exhibit I is a written agreement relating to the filing
of joint acquisition statements as required by Rule 13d-1(f)(1) of the Act.
Filed herewith as Exhibit II is a copy of a purchase agreement (the "Unit
Purchase Agreement") dated May 16, 1997 between Galleon International Fund,
Ltd. and Quality Semiconductor, Inc.
Page 8 of 37 Pages
<PAGE>
SIGNATURES
After reasonable inquiry and to the best of our knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
DATED: June 24, 1997 GALLEON INTERNATIONAL FUND, LTD.
By: Galleon Management, L.P.
Management Company
By: Galleon Management, L.L.C.
General Partner
By: /s/ Raj Rajaratnam
_____________________________
Raj Rajaratnam
Managing Member
GALLEON MANAGEMENT, L.P.
By: Galleon Management, L.L.C.
General Partner
By: /s/ Raj Rajaratnam
_____________________________
Raj Rajaratnam
Managing Member
GALLEON MANAGEMENT, L.L.C.
By: /s/ Raj Rajaratnam
_____________________________
Raj Rajaratnam
Managing Member
RAJ RAJARATNAM
By: /s/ Raj Rajaratnam
_____________________________
Page 9 of 37 Pages
<PAGE>
EXHIBIT I
JOINT ACQUISITION STATEMENT
PURSUANT TO RULE 13D-1(F)(1)
The undersigned acknowledge and agree that the foregoing statement on Schedule
13D is filed on behalf of each of the undersigned and that all subsequent
amendments to this statement on Schedule 13D shall be filed on behalf of each
of the undersigned without the necessity of filing additional joint
acquisition statements. The undersigned acknowledge that each shall be
responsible for the timely filing of such amendments, and for the completeness
and accuracy of the information concerning it contained therein, but shall not
be responsible for the completeness and accuracy of the information concerning
the others, except to the extent that it knows or has reason to believe that
such information is inaccurate.
DATED: June 24, 1997 GALLEON INTERNATIONAL FUND, LTD.
By: Galleon Management, L.P.
Management Company
By: Galleon Management, L.L.C.
General Partner
By: /s/ Raj Rajaratnam
_____________________________
Raj Rajaratnam
Managing Member
GALLEON MANAGEMENT, L.P.
By: Galleon Management, L.L.C.
General Partner
By: /s/ Raj Rajaratnam
_____________________________
Raj Rajaratnam
Managing Member
GALLEON MANAGEMENT, L.L.C.
By: /s/ Raj Rajaratnam
_____________________________
Raj Rajaratnam
Managing Member
RAJ RAJARATNAM
By: /s/ Raj Rajaratnam
_____________________________
Page 10 of 37 Pages
<PAGE>
UNIT PURCHASE AGREEMENT
Quality Semiconductor, Inc.
851 Martin Avenue
Santa Clara, CA 95050-2903
Ladies & Gentlemen:
The undersigned Galleon International Fund, Ltd. (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 $3,680,500, 43,300 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: None.
Page 11 of 37 Pages
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between us by signing in the space provided below for that purpose.
GALLEON INTERNATIONAL FUND. LTD.
PURCHASER
By: Raj Rajaratnam
Title: Managing General Partner
Address: 135 East 57th Street, 26th Fl.
New York, NY 10022
Tax I.D. No.: __________________
AGREED AND ACCEPTED
John P. Goldsberry
Quality Semiconductor
By: John P. Goldsberry
Title: Chief Financial Officer
Page 12 of 37 Pages
<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:
Page 13 of 37 Pages
<PAGE>
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 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
Page 14 of 37 Pages
<PAGE>
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 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
Page 15 of 37 Pages
<PAGE>
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:
Page 16 of 37 Pages
<PAGE>
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.
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.
Page 17 of 37 Pages
<PAGE>
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.
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.
Page 18 of 37 Pages
<PAGE>
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:
(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.
Page 19 of 37 Pages
<PAGE>
(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 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.
Page 20 of 37 Pages
<PAGE>
(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 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 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,
Page 21 of 37 Pages
<PAGE>
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 Section 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 Section 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 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
Page 22 of 37 Pages
<PAGE>
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.
Page 23 of 37 Pages
<PAGE>
(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 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
Page 24 of 37 Pages
<PAGE>
agrees that such Shares, Warrants and Warrant Shares are not transferable on
the books of the Company 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.
Page 25 of 37 Pages
<PAGE>
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
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.
Page 26 of 37 Pages
<PAGE>
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
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 27 of 37 Pages
<PAGE>
EXHIBIT A
---------
FORM OF WARRANT CERTIFICATE
Page 28 of 37 Pages
<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: 74758Bl04
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 29 of 37 Pages
<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.
Page 30 of 37 Pages
<PAGE>
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.
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
payable 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.
Page 31 of 37 Pages
<PAGE>
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 War-
rant, 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;
(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
Page 32 of 37 Pages
<PAGE>
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.
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):
Page 33 of 37 Pages
<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.
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.
Page 34 of 37 Pages
<PAGE>
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 35 of 37 Pages
<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:-------------------------------------
Name: John Goldsberry
Title: Vice President, Finance and
Chief Financial Officer
Page 36 of 37 Pages
<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 37 of 37 Pages
