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: January 19, 1998
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 3
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Item 5. Other Events
On January 13, 1998, Quality Semiconductor, Inc., a California corporation
(the "Company") announced that David Sear, 53, has been named Executive Vice
President and Chief Operating Officer. Further details of this announcement are
contained in the Company's press release dated January 13, 1998 attached as an
exhibit hereto and incorporated by reference herein.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
Exhibit 10.19 Change of Control Agreement effective August 28, 1997 between
the Company and employees.
Exhibit 99 Quality Semiconductor, Inc. Press Release dated
January 13, 1998
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QUALITY SEMICONDUCTOR, INC.
CURRENT REPORT ON FORM 8-K
EXHIBIT INDEX
Exhibit No. Exhibit
10.19 Change of Control Agreement effective August 28, 1997 between
theCompany and employees.
99 Quality Semiconductor, Inc. Press Release dated January 13, 1998
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Exhibit 10.19
CHANGE OF CONTROL AGREEMENT
This Change of Control Agreement (the "Agreement") is made and entered into
effective as of August 28, 1997, by and among the employees signing this
Agreement (each an "Employee and, collectively, the "Employees") and Quality
Semiconductor, Inc., a California corporation (the "Company"). RECITALS
A. It is expected that another company or other entity may from time to
time consider the possibility of acquiring the Company or that a change in
control may otherwise occur, with or without the approval of the Company's Board
of Directors (the "Board"). The Board recognizes that such consideration can be
a distraction to the Employees and can cause the Employees to consider
alternative employment opportunities. The Board has determined that it is in the
best interests of the Company and its shareholders to assure that the Company
will have the continued dedication and objectivity of the Employees,
notwithstanding the possibility, threat or occurrence of a Change of Control (as
defined below) of the Company.
B. The Board believes that it is in the best interests of the Company and
its shareholders to provide the Employees with an incentive to continue their
employment with the Company.
C. The Board believes that it is imperative to provide the Employees with
certain benefits upon a Change of Control and, under certain circumstances, upon
termination of the Employees' employment in connection with a Change of Control,
which benefits are intended to provide the Employees with financial security and
provide sufficient income and encouragement to the Employees to remain with the
Company notwithstanding the possibility of a Change of Control.
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D. To accomplish the foregoing objectives, the Board of Directors has
directed the Company, upon execution of this Agreement by the Employees, to
agree to the terms provided in this Agreement.
E. Certain capitalized terms used in the Agreement are defined in Section 4
below.
In consideration of the mutual covenants herein contained, and in
consideration of the continuing employment of Employees by the Company, the
parties agree as follows:
1. At-Will Employment. The Company and each of the Employees acknowledge
that his or her employment is and shall continue to be at-will, as defined under
applicable law. If any Employee's employment terminates for any reason,
including (without limitation) any termination prior to a Change of Control,
such Employee shall not be entitled to any payments, benefits, damages, awards
or compensation other than as provided by this Agreement, the terms of certain
Board resolutions and agreements issued to the Employee with respect to the
grant of stock options for the Company's securities (as described in Section 2
below) and the Company's established employee plans and written policies at the
time of termination. The terms of this Agreement shall terminate upon the date
that all obligations of the parties hereunder have been satisfied. A termination
of the terms of this Agreement pursuant to the preceding sentence shall be
effective for all purposes, except that such termination shall not affect the
payment or provision of compensation or benefits on account of a termination of
employment occurring prior to the termination of the terms of this Agreement.
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2. Restricted Stock and Stock Options. Subject to Section 6 below, in the
event of a Change of Control and regardless of whether an Employee's employment
with the Company is terminated in connection with the Change of Control, the
vesting schedule for each unvested share of Common Stock or option to purchase
Common Stock held by such Employee (collectively referred to as the "Shares")
shall be accelerated by two (2) years. Thereafter, so long as Employee remains
employed by the Company (or a successor Corporation), the remaining Shares that
have not otherwise vested as of the Change of Control shall vest over the
remaining vesting term applicable to the Shares. Each stock option shall be
exercisable to the extent so vested in accordance with the provisions of the
option agreement and Plan pursuant to which such option was granted and each
share of restricted stock shall be freely transferable to the extent so vested
in accordance with the provisions of the agreement pursuant to which such stock
was purchased by Employee.
3. Change of Control.
(a) Termination Following A Change of Control. If an Employee's employment
with the Company is terminated at any time within one (1) year after a Change of
Control, then such Employee shall be entitled to receive severance benefits as
follows:
(i) Voluntary Resignation. If the Employee voluntarily resigns from the
Company (other than as an Involuntary Termination (as defined below) or if the
Company terminates the Employee's employment for Cause (as defined below)), then
the Employee shall not be entitled to receive severance payments. The Employee's
benefits will be terminated under the Company's then existing benefit plans and
policies in accordance with such plans and policies in effect on the date of
termination or as otherwise determined by the Board of Directors of the Company.
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(ii) Involuntary Termination. If the Employee's employment is terminated as
a result of an Involuntary Termination other than for Cause, the Employee shall
be entitled to receive the following benefits: (i) a lump sum severance payment
consisting of (a) twelve (12) months (the "Severance Period") of the monthly
salary which the Employee was receiving immediately prior to the Change of
Control and (b) the Employee's "target bonus" prorated over the Severance
Period, with such payment being made on the termination date; (ii) a prorated
amount of the Employee's "target bonus" for the fiscal year in which the
termination occurs (or for the prior fiscal year if a target bonus has not yet
been determined for the fiscal year in which the termination occurs), calculated
based on the number of months during such fiscal year in which the Employee was
employed by the Company (or a successor corporation), with such payment being
made on the termination date; (iii) continuation of all benefits through the end
of the Severance Period substantially identical to those to which the Employee
was entitled immediately prior to the Change of Control; and (iv) outplacement
services with a total value not to exceed $15,000. For purposes of this
Agreement, the term "target bonus" shall mean that percentage of the Employee's
base salary that is prescribed by the Company under its Management Bonus Program
as the percentage of such base salary payable to the Employee as a bonus if the
Company pays bonuses at one-hundred percent (100%) of its operating plan.
(iii) Involuntary Termination for Cause. If the Employee's employment is
terminated for Cause, then the Employee shall not be entitled to receive
severance payments. The Employee's benefits will be terminated under the
Company's then existing benefit plans and policies in accordance with such plans
and policies in effect on the date of termination.
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(b) Termination Apart from Change of Control. In the event the Employee's
employment terminates for any reason, either prior to the occurrence of a Change
of Control or after the one year period following the effective date of a Change
of Control, then the Employee shall not be entitled to receive any severance
payments under this Agreement. The Employee's benefits will be terminated under
the Company's then existing benefit plans and policies in accordance with such
plans and policies in effect on the date of termination or as otherwise
determined by the Board of Directors of the Company.
4. Definition of Terms. The following terms referred to in this Agreement
shall have the following meanings:
(a) Change of Control. "Change of Control" shall mean the occurrence of any
of the following events:
(i) Ownership. Any "Person" (as such term is used in Sections 13(d) and
14(d) of the --------- Securities Exchange Act of 1934, as amended) is or
becomes the "Beneficial Owner" (as defined in Rule 13d-3 under said Act),
directly or indirectly, of securities of the Company representing fifty-one
percent (51%) or more of the total voting power represented by the Company's
then outstanding voting securities without the approval of the Board of
Directors of the Company;
(ii) Merger/Sale of Assets. A merger or consolidation of the Company
whether or not approved by the Board of Directors of the Company, other than a
merger or consolidation which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total voting power
<PAGE>
represented by the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;
(iii) Sale of Assets; Liquidation. An agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets or the
shareholders of the Company approve a plan of complete liquidation of the
Company in connection with an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets; or
(iv) Change in Board Composition. A change in the composition of the Board
of Directors of the Company, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean directors
who either (A) are directors of the Company as of the date of this Agreement or
(B) are elected, or nominated for election, to the Board of Directors of the
Company with the affirmative votes of at least a majority of the Incumbent
Directors at the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the Company).
(b) Cause. "Cause" shall mean (i) gross negligence or willful misconduct in
the performance of an Employee's duties to the Company where such gross
negligence or willful misconduct has resulted or is likely to result in
substantial and material damage to the Company or its subsidiaries, (ii)
repeated unexplained or unjustified absence from the Company, (iii) a material
and willful violation of any federal or state law; (iv) commission of any act of
fraud with respect to the Company; or (v) conviction of a felony or a crime
involving moral turpitude causing material harm to the standing and reputation
<PAGE>
of the Company, in each case as determined in good faith by the Board of
Directors of the Company.
(c) Involuntary Termination. "Involuntary Termination" shall include any
termination by the Company other than for Cause and an Employee's voluntary
termination, upon 30 days prior written notice to the Company, following (i) a
material reduction or change in job duties, responsibilities and requirements
inconsistent with an Employee's position with the Company and the Employee's
prior duties, responsibilities and requirements; (ii) any reduction of an
Employee's base compensation or target bonus (other than in connection with a
general decrease for most officers of the successor corporation); or (iii) an
Employee's refusal to relocate to a facility or location more than 50 miles from
the Company's current location.
5. Tax Liability on Payments. To the extent that any of the payments or
benefits provided for in this Agreement to an Employee constitute "parachute
payments" within the meaning of Section 280G of the Internal Revenue Code of
1986, as amended (the "Code") and would be subject to the excise tax imposed by
Section 4999 of the Code, the Company will pay the Employee an amount equal to
such excise tax; provided, however, that the Employee will be responsible for
paying any and all income taxes owed by him or her as a result of receipt of
such payment from the Company and the Company will not be further obligated to
gross up Employee's payments and/or benefits to offset such income tax
obligation.
6. Certain Business Combinations. In the event it is determined by the
Board, upon receipt of a written opinion of the Company's independent auditors,
<PAGE>
that the enforcement of any agreement between an Employee and the Company which
allows for the acceleration of vesting of stock and/or stock options granted for
the Company's securities upon the effective date of a Change of Control, would
preclude accounting for any proposed business combination of the Company
involving a Change of Control as a pooling of interests, and the Board otherwise
desires to approve such a proposed business transaction which requires as a
condition to the closing of such transaction that it be accounted for as a
pooling of interests, then any such Section of this Agreement shall be null and
void. For purposes of this Section 6, the Board's determination shall require
the unanimous approval of the non-employee Board members.
7. Successors. Any successor to the Company (whether direct or indirect and
whether by purchase, lease, merger, consolidation, liquidation or otherwise) to
all or substantially all of the Company's business and/or assets shall assume
the obligations under this Agreement and agree expressly to perform the
obligations under this Agreement in the same manner and to the same extent as
the Company would be required to perform such obligations in the absence of a
succession. The terms of this Agreement and all of the Employees' rights
hereunder shall inure to the benefit of, and be enforceable by, each Employee's
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees.
8. Notice. Notices and all other communications contemplated by this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered or when mailed by U.S. registered or certified mail, return
receipt requested and postage prepaid. Mailed notices to any Employee shall be
addressed to such Employee at the home address which the Employee most recently
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communicated to the Company in writing. In the case of the Company, mailed
notices shall be addressed to its corporate headquarters, and all notices shall
be directed to the attention of its Secretary.
9. Miscellaneous Provisions.
(a) No Duty to Mitigate. The Employees shall not be required to mitigate
the amount of any payment contemplated by this Agreement (whether by seeking new
employment or in any other manner), nor, except as otherwise provided in this
Agreement, shall any such payment be reduced by any earnings that any Employee
may receive from any other source.
(b) Waiver. No provision of this Agreement shall be modified, waived or
discharged as to an Employee unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Company (other than the Employee). No waiver by either party of any breach
of, or of compliance with, any condition or provision of this Agreement by the
other party shall be considered a waiver of any other condition or provision or
of the same condition or provision at another time.
(c) Whole Agreement. No agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof. This Agreement supersedes any agreement of
the same title and concerning similar subject matter dated prior to the date of
this Agreement, and by execution of this Agreement both parties agree that any
such predecessor agreement shall be deemed null and void.
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(d) Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
California without reference to conflict of laws provisions.
(e) Severability. If any term or provision of this Agreement or the
application thereof to any circumstance shall, in any jurisdiction and to any
extent, be invalid or unenforceable, such term or provision shall be ineffective
as to such jurisdiction to the extent of such invalidity or unenforceability
without invalidating or rendering unenforceable the remaining terms and
provisions of this Agreement or the application of such terms and provisions to
circumstances other than those as to which it is held invalid or unenforceable,
and a suitable and equitable term or provision shall be substituted therefor to
carry out, insofar as may be valid and enforceable, the intent and purpose of
the invalid or unenforceable term or provision.
(f) Arbitration. Any dispute or controversy arising under or in connection
with this Agreement may be settled at the option of either party by binding
arbitration in the County of Santa Clara, California, in accordance with the
rules of the American Arbitration Association then in effect. Judgment may be
entered on the arbitrator's award in any court having jurisdiction. Punitive
damages shall not be awarded.
(g) Legal Fees and Expenses. The parties shall each bear their own
expenses, legal fees and other fees incurred in connection with this Agreement.
(h) No Assignment of Benefits. The rights of any person to payments or
benefits under this Agreement shall not be made subject to option or assignment,
either by voluntary or involuntary assignment or by operation of law, including
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(without limitation) bankruptcy, garnishment, attachment or other creditor's
process, and any action in violation of this subsection (h) shall be void.
(i) Employment Taxes. All payments made pursuant to this Agreement will be
subject to withholding of applicable income and employment taxes.
(j) Assignment by Company. The Company may assign its rights under this
Agreement to an affiliate, and an affiliate may assign its rights under this
Agreement to another affiliate of the Company or to the Company; provided,
however, that no assignment shall be made if the net worth of the assignee is
less than the net worth of the Company at the time of assignment. In the case of
any such assignment, the term "Company" when used in a section of this Agreement
shall mean the corporation that actually employs the Employee.
(k) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together will constitute one
and the same instrument.
[Signature pages follow]
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the
case of the Company by its duly authorized officer, as of the day and year first
above written.
QUALITY SEMICONDUCTOR, INC. EMPLOYEE
By: _____________________________ _____________________________
Title: __________________________
<PAGE>
Exhibit 99
For more information contact:
R. Paul Gupta
President and Chief Executive Officer
Quality Semiconductor, Inc.
(408) 450-8000
Morgen-Walke Associates, Inc.
Doug Sherk, Carolyn Bass, Jim Byers
(415) 296-7383
Vince Daniels, Josh Passman
(212) 850-5698
FOR IMMEDIATE RELEASE
QUALITY SEMICONDUCTOR NAMES CHIEF OPERATING OFFICER
SANTA CLARA, CA -- (January 13, 1998) -- Quality Semiconductor, Inc.
(Nasdaq:QUAL) today announced that David Sear, 53, has been named Executive Vice
President and Chief Operating Officer. Dr. Sear was previously President and
Chief Executive Officer of Integrated Circuit Systems, Inc., a leader in the
ethernet transceiver market.
Dr. Sear brings extensive operational, engineering, manufacturing, and
sales and marketing experience gained during his 22 year career in the
semiconductor industry. Prior to joining Integrated Circuit Systems, Dr. Sear
was President and Chief Operating Officer of Catalyst Semiconductor, and held a
number of senior management positions with Fujitsu Microelectronics, ICI Array
Technology, Perex, Advanced Micro Devices, and American Microsystems Inc. Dr.
Sear has a Ph.D. in solid state physics from the University of London, England.
"David brings years of solid experience and success in all aspects of
engineering, manufacturing, process technology development, business development
and operations," stated R. Paul Gupta, the Company's President and Chief
Executive Officer. "We believe his extensive background within the semiconductor
industry, particularly in the networking arena, will be of tremendous benefit to
Quality as we pursue our objectives in the coming year."
Quality Semiconductor, Inc. designs, develops and markets high-performance
logic as well as networking and clock management products. The Company targets
systems manufacturers principally in the networking, computer and communications
markets. The Company's products include the 3.3-volt and 5-volt FCT and LCX
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.
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SIGNATURES
Pursuant the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
QUALITY SEMICONDUCTOR, INC.
Date: January 19, 1998 By: /s/ Richard A. Bottomley
------------------------------
Richard A. Bottomley
Acting, Chief Financial Officer
