<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1997
REGISTRATION NO. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
QUICKLOGIC CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
CALIFORNIA (Prior to 3674 77-0188504
reincorporation) (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
DELAWARE (After CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
reincorporation)
(STATE OR OTHER
JURISDICTION OF
INCORPORATION OR
ORGANIZATION)
1277 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 990-4000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
E. THOMAS HART
CHIEF EXECUTIVE OFFICER
QUICKLOGIC CORPORATION
1277 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
(408) 990-4000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
LARRY W. SONSINI JOSHUA L. GREEN
AARON J. ALTER JEFFREY Y. SUTO
WILSON SONSINI GOODRICH & ROSATI VENTURE LAW GROUP
PROFESSIONAL CORPORATION 2800 SAND HILL ROAD
650 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304 (415) 854-4488
(415) 493-9300
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) PRICE(2) REGISTRATION FEE
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.001 par
value................ 3,450,000 shares $13.00 $44,850,000 $13,591
</TABLE>
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(1) Includes 450,000 shares that the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a).
---------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS +
+OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JUNE 9, 1997
[LOGO OF QUICKLOGIC]
- --------------------------------------------------------------------------------
3,000,000 SHARES
COMMON STOCK
- --------------------------------------------------------------------------------
Of the 3,000,000 shares of Common Stock, par value $.001 per share ("Common
Stock"), of QuickLogic Corporation ("QuickLogic" or the "Company") offered
hereby, 1,800,000 shares are being offered by the Company and 1,200,000
shares are being offered by a stockholder of the Company (the "Selling
Stockholder"). The Company will not receive any proceeds from the sale of
shares by the Selling Stockholder. See "Principal and Selling Stockholders."
Prior to this offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be
between $11.00 and $13.00 per share. See "Underwriting" for a discussion of
the factors to be considered in determining the initial public offering
price. The Company has applied to have the Common Stock approved for listing
on the Nasdaq National Market under the trading symbol "QWIK."
FOR INFORMATION CONCERNING CERTAIN RISK FACTORS WHICH SHOULD BE CONSIDERED BY
PROSPECTIVE INVESTORS, SEE "RISK FACTORS" COMMENCING ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDER(3)
<S> <C> <C> <C> <C>
Per Share $ $ $ $
Total $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholder have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of this offering estimated at $750,000, payable
by the Company.
(3) The Selling Stockholder has granted to the Underwriters a 30-day option
to purchase up to an additional 450,000 shares of Common Stock for the
purpose of covering over-allotments, if any. If such option is exercised
in full, the total Price to Public, Underwriting Discount and Proceeds to
Selling Stockholder will be $ , $ and $ , respectively. See
"Underwriting."
The shares of Common Stock are offered by the Underwriters, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to
approval of certain legal matters by counsel and certain other conditions.
The Underwriters reserve the right to withdraw, cancel or modify such offer
and to reject orders in whole or in part. Delivery of the shares of Common
Stock offered hereby to the Underwriters is expected to be made in New York,
New York on or about , 1997.
DEUTSCHE MORGAN GRENFELL
UBS SECURITIES
COWEN & COMPANY
The date of this Prospectus is , 1997.
<PAGE>
COMPANY ARTWORK
Title: QuickLogic logo, "The High Performance Programmable Logic Solution"
Text underneath title: "QuickLogic's FPGA products are used in complex,
high-performance electronics systems such as video, graphics and imaging,
telecommunications and data communications, instrumentation and test,
high-performance computers and military systems"
Graphic: QuickLogic FPGA device in the middle, surrounded by end market
application products (digital projector, cell phone with satellite dish and
microwave antenna, computer workstation, data networking multiplexer, etc.),
with each end market picture accompanied by a title (video, graphics and
imaging, telecommunications and data communications, instrumentation and test,
high-performance computers and military systems).
ViaLink, pASIC, QuickLogic and the QuickLogic logo are registered trademarks
of QuickLogic Corporation. QuickTools and QuickWorks are trademarks of
QuickLogic Corporation. All other trademarks or service marks appearing in
this Prospectus are the property of their respective companies.
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK OF
THE COMPANY, INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE
COVERING TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DISCUSSION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
Unless otherwise indicated, the information in this Prospectus (i) assumes
no exercise of the Underwriters' over-allotment option, (ii) reflects the
conversion of all outstanding preferred stock into Common Stock and the
exercise of all outstanding Common Stock warrants, (iii) reflects a 7-for-1
reverse split of the Company's Common Stock effected through the
reincorporation of the Company in Delaware prior to the date of this offering
and (iv) reflects the authorization of 10,000,000 shares of undesignated
preferred stock upon the closing of this offering.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the information
appearing elsewhere in this Prospectus.
THE COMPANY
QuickLogic develops, markets and supports advanced field programmable gate
array ("FPGA") semiconductors and software design tools. QuickLogic products
enable designers of complex electronic systems to achieve rapid time to market
by optimizing design speed, design flexibility and cost. The Company's products
target complex, high-performance electronics systems in rapidly changing
markets including video, graphics and imaging, telecommunications and data
communications, instrumentation and test, high-performance computers and
military systems. The key components of the QuickLogic solution are the
Company's ViaLink proprietary antifuse technology and pASIC architectures, and
its software design tools. The Company's fabless manufacturing strategy allows
the Company to focus its resources on product design, development and marketing
rather than on manufacturing expenditures. The Company has a foundry
relationship with Cypress Semiconductor Corporation ("Cypress") for its
existing products and has entered into a memorandum of understanding with TSMC,
Ltd. ("TSMC") for the production of its anticipated 0.35(mu) CMOS products.
QuickLogic sells its products through independent sales representatives,
distributors and a direct sales force in North America, Europe and Asia. The
Company's customers include Alcatel Alsthom, Compaq, Honeywell, IBM, McDonnell
Douglas, NEC, Northern Telecom, Rockwell, Saab, Silicon Graphics, Sony, Texas
Instruments, 3Com and Toshiba.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered...... 3,000,000 shares (including 1,800,000 shares by the
Company and 1,200,000 shares by the Selling
Stockholder)(1)
Common Stock to be
outstanding after the
offering................. 13,817,422 shares (2)
Use of proceeds........... For working capital, capital expenditures and other
general corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National
Market symbol............ QWIK
</TABLE>
SUMMARY FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED QUARTER ENDED
DECEMBER 31, MARCH 31,
------------------------- -----------------------
1994 1995 1996 1996 1997
------- ------- ------- ------- --------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $ 6,024 $15,148 $23,758 $ 5,154 $ 6,268
Gross profit............ 1,971 7,409 12,600 2,591 3,455
Contract termination
and other expense(3).. -- (2,700) (4,125) -- (23,009)
Loss from operations.... (5,609) (4,660) (3,897) (136) (23,200)
Net income (loss)....... (5,828) (4,707) (3,597) 21 (23,103)
Pro forma net income
(loss) per share(4).... $ (0.29) $ -- $ (1.83)
Net income (loss) from
operations excluding
contract termination
and other expense(3)... (5,609) (1,960) $ 528 $ 21 $ (947)
======= ======= ========
Pro forma net income
(loss) per share
excluding contract
termination and other
expense(3)(4).......... $ 0.04 $ -- $ (0.01)
======= ======= ========
Shares used in pro forma
net income (loss) per
share.................. 12,612 12,438 12,612
======= ======= ========
<CAPTION>
AT MARCH 31, 1997
-----------------------
ACTUAL AS ADJUSTED(5)
------- --------------
<S> <C> <C>
SELECTED BALANCE SHEET
DATA:
Cash............................................ $10,366 $29,788
Total assets.................................... 21,476 40,898
Long-term obligations........................... 1,658 1,658
Stockholders' equity............................ 8,059 27,481
</TABLE>
- --------
(1) Assumes no exercise of the Underwriters' over-allotment option to purchase
up to an additional 450,000 shares of Common Stock.
(2) Based on Common Stock outstanding at May 31, 1997. Excludes 1,604,750
shares of Common Stock issuable upon exercise of outstanding options under
the Company's 1989 Stock Option Plan (the "1989 Plan") and 714,478 shares
reserved for future grant under the 1989 Plan as of May 31, 1997. See
"Management--Employee Benefit Plans" and Note 7 of Notes to Financial
Statements.
(3) See Notes 8 and 11 of Notes to Financial Statements and "Risk Factors--
Actel Litigation."
(4) See Note 1 of Notes to Financial Statements.
(5) As adjusted to reflect the sale of 1,800,000 shares of Common Stock offered
by the Company hereby at an assumed initial public offering price of $12.00
per share and receipt of the estimated proceeds therefrom (after deducting
underwriting discount and offering expenses payable by the Company) of
$19,338,000. See "Use of Proceeds" and "Capitalization."
3
<PAGE>
THE COMPANY
QuickLogic develops, markets and supports advanced FPGA semiconductors and
software design tools. QuickLogic products enable designers of complex
electronic systems to achieve rapid time to market by optimizing design speed,
design flexibility and cost. The Company's products target complex, high-
performance electronic systems in rapidly changing markets including video,
graphics and imaging, telecommunications and data communications,
instrumentation and test, high-performance computers and military systems. The
key components of the QuickLogic solution are the Company's proprietary
ViaLink antifuse technology and pASIC architectures, and its software design
tools.
QuickLogic's proprietary ViaLink antifuse technology places logic
interconnects between the metal layers of an FPGA device instead of on the
silicon substrate, thereby minimizing die size and cost. The ViaLink antifuse
technology offers lower resistance and lower capacitance than competing
interconnect technologies, thereby optimizing a device's performance. The
Company's pASIC architectures facilitate full routability and utilization of a
device's logic cells, enabling a high degree of design flexibility.
QuickLogic's QuickTools software design tools place and route logic cells on
an FPGA device, and the QuickWorks design software suite incorporates
QuickTools and industry-leading design tools for hardware description language
("HDL")/schematic entry, synthesis and simulation. In addition, QuickWorks
incorporates Institute of Electrical and Electronic Engineers ("IEEE")
standard design languages Verilog HDL and VHDL.
QuickLogic's fabless manufacturing strategy allows the Company to focus its
resources on product design, development and marketing rather than on
manufacturing expenditures. The Company has a foundry relationship with
Cypress for its existing products and has entered into a memorandum of
understanding with TSMC for the production of its anticipated 0.35^ CMOS
products. QuickLogic sells its products through independent sales
representatives, distributors and a direct sales force in North America,
Europe and Asia. The Company's customers include Alcatel Alsthom, Compaq
Computer Corporation, Honeywell, Inc., International Business Machines
Corporation, McDonnell Douglas Corp., NEC Corporation, Northern Telecom Ltd.,
Rockwell International Corp., Saab Automobile AB, Silicon Graphics, Inc., Sony
Corp., Texas Instruments Incorporated, 3Com Corporation and Toshiba
Corporation.
In March 1997, the Company became the exclusive supplier of all of its
products worldwide, which affords significant advantages in supply, pricing,
and quality control. From October 1992 to March 1997, the Company had granted
to Cypress certain technology development, manufacturing and marketing rights
to the Company's products, making it a second source of such products. In
exchange for the termination of this arrangement in March 1997, the Company
paid Cypress $4.5 million in cash and agreed to issue 2,603,817 shares of
Common Stock to Cypress, increasing the aggregate number of shares of Common
Stock of the Company held by Cypress to 3,339,785, prior to the sale of any
shares by Cypress in this offering. In addition, the Company granted Cypress
certain contractual rights as to the shares of the Company's stock, including
the right to sell shares in this offering. The parties also entered into a new
foundry agreement and a cross-license agreement. See "Business--Cypress
Transaction" and "Principal and Selling Stockholders."
The Company was incorporated in California in April 1988 as Peer
Semiconductor, Inc., and changed its name in May 1988 to Peer Research, Inc.
and in February 1991 to QuickLogic Corporation. The Company intends to
reincorporate in Delaware prior to the date of this offering. Unless the
context requires otherwise, references in this Prospectus to the "Company" or
"QuickLogic" refer to the Delaware corporation and its California predecessor
corporation. The address of the Company's corporate headquarters is 1277
Orleans Drive, Sunnyvale, California 94089. The Company's telephone number is
(408) 990-4000. The Company's Web site is located at
http://www.quicklogic.com. Neither the information contained in the Company's
Web site nor Web sites linked to the Company's Web site shall be deemed to be
a part of this Prospectus.
4
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
may be found in this section and under the sections entitled "Prospectus
Summary," "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Business--Industry Background," "--Strategy," "--
Sales, Support and Marketing," "--Research and Development," "--Manufacturing"
and "--Actel Litigation." Actual events or results could differ materially
from those discussed in the forward-looking statements as a result of various
factors, including, without limitation, the risk factors set forth below and
elsewhere in the Prospectus. The following risk factors should be considered
carefully before purchasing the Common Stock offered hereby.
LIMITED OPERATING HISTORY; NO ASSURANCE OF FUTURE PROFITABILITY. The Company
was incorporated in 1988 and did not begin shipping products in volume until
1992. Accordingly, the Company has a limited operating history upon which
investors may evaluate the Company and its prospects. The Company had an
accumulated deficit of $50.9 million as of March 31, 1997. Although the
Company has experienced revenue growth in each of the past five fiscal years,
and first achieved profitability in the fourth quarter of 1995, this growth
rate should not be considered to be indicative of future revenue growth, if
any, nor is there any assurance that the Company will be profitable in any
future period. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
FLUCTUATIONS IN OPERATING RESULTS. Fluctuations in the Company's operating
results have occurred in the past and may occur in the future due to a variety
of factors, any of which may have a material adverse effect on the Company's
operating results. In particular, the Company's quarterly results of
operations may vary significantly due to general business conditions in the
semiconductor industry, fluctuations in manufacturing yields at the Company's
wafer suppliers, the availability of foundry capacity, cancellations or delays
of deliveries of products to the Company, new product introductions by the
Company or its competitors, product obsolescence, price erosion for maturing
products, competition, changes in the mix of products sold, seasonal
fluctuations in demand, changes in distributor inventory levels, availability
of wafer supply, increases in the costs of materials, cancellations or delays
of product orders, developments in the Company's litigation with Actel
Corporation ("Actel"), the ability to safeguard intellectual property in a
rapidly evolving market, changing customer product requirements, changes in
demand for customers' products and fluctuations in foreign currency exchange
rates. A large portion of the Company's operating expenses is fixed and
difficult to reduce or modify. If revenue does not meet the Company's
expectations, the adverse effect of any such revenue shortfall will be
magnified by the fixed nature of these operating expenses. In addition, the
Company's quarterly operating results can vary due to the volume and timing of
product orders received and delivered during a quarter, the ability of the
Company and its key suppliers to respond to changes made in customer orders,
and the timing of new product introductions by the Company and its
competitors. All of the above factors are difficult for the Company to
forecast, and these and other factors could have a material adverse effect on
the Company's business, financial condition and results of operations. As a
result, the Company believes that period-to-period comparisons are not
necessarily meaningful and should not be relied upon as indicative of future
operating results. See "--Actel Litigation" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
ACTEL LITIGATION. On January 20, 1994, Actel, a competitor of the Company,
filed a lawsuit against the Company entitled Actel Corporation v. QuickLogic
Corporation in the United States District Court for the Northern District of
California (the "Court"), Case No. C-94 20050JW (PVT). The lawsuit alleges
infringement by the Company of four U.S. patents held by Actel: U.S. Patent
4,873,459 (the "'459 Patent") issued October 10, 1989 and entitled
"Programmable Interconnect Architecture;" U.S.
5
<PAGE>
Patent 4,758,745 (the "'745 Patent") issued July 19, 1988 and entitled "User
Programmable Integrated Circuit Interconnect Architecture and Test Method;"
U.S. Patent 5,055,718 (the "'718 Patent") issued October 8, 1991 and entitled
"Logic Module With Configurable Combinational and Sequential Blocks;" and U.S.
Patent 5,198,705 (the "'705 Patent") issued March 30, 1993 and entitled "Logic
Modular and Configurable Combinational and Sequential Blocks." In each of
March 1995 and March 1996, Actel added a claim that an additional Actel patent
was infringed: U.S. Patent 5,367,208 (the "'208 Patent") issued November 22,
1994 and entitled "Reconfigurable Programmable Interconnect Architecture" and
U.S. Patent 5,479,113 the (the "'113 Patent") issued December 26, 1995 and
entitled "User Configurable Logic Circuits Comprising Antifuses and
Multiplexer-Based Logic Modules." The '459, '745, '208 and '113 Patents all
relate to user programmable interconnect architectures and are based upon the
same application. Actel's '705 and '718 Patents relate to logic modules for
use in FPGAs. As to the '745 and '459 Patents, Actel asserts that QuickLogic's
programmable interconnect circuits and architecture found in its pASIC 1 and
pASIC 2 product families infringe one or more claims of these patents. As to
the '705, '718, and '208 Patents, Actel asserts that QuickLogic's programmable
logic module used in its pASIC1 and pASIC2 product families infringes one or
more claims of each patent. As to Actel's '113 patent, Actel asserts that
QuickLogic's control circuit controlling the program voltage within
QuickLogic's user programmable interconnect architecture infringes one or more
claims. As to each patent-in-suit, Actel seeks an injunction preventing
QuickLogic from further use of the claimed inventions, damages for past
infringement of the inventions, Actel's attorneys' fees and increased damages
for willful infringement. Sales of the Company's pASIC products have accounted
for substantially all of the Company's revenue to date and are expected to
account for substantially all of the Company's revenue for the foreseeable
future. Fees from licenses of the QuickWorks and QuickTools software design
tools have accounted for substantially all of the remainder of the Company's
revenue. The Company has filed answers to each of these complaints and
counter-claims seeking declarations that the Actel patents at issue are not
infringed by the Company, are invalid, and are unenforceable. On April 19,
1994, QuickLogic moved to stay proceedings pending reexamination by the United
States Patent and Trademark Office (the "USPTO") of two of the patents
involved in the litigation, the '745 Patent and the '459 Patent. The Court
granted this stay on July 21, 1994. The USPTO confirmed the patentability of
these two patents on November 15, 1994 and January 10, 1995, respectively,
which Actel may argue will increase the burden upon QuickLogic to prove the
invalidity of the two reexamined patents. The Court lifted the stay on
November 8, 1994.
On November 15, 1994, Actel filed a motion for summary judgment with respect
to the Company's infringement of claim 1 of the '705 Patent. Actel's claims in
the '705 Patent relating to its logic module technology include an
interconnect structure, programming structures, and logic circuits wherein a
multiplicity of logic circuits are arranged in a regular pattern on the
semiconductor substrate. The logic circuits or logic modules contain a number
of logic blocks which ultimately determine the function that the FPGA could
perform. The '705 Patent covers a logic module, and its structure and its
connections to the interconnect structure and architecture. Actel has referred
to this technology as its "nested three multiplexer" architecture, which
involves three dual input, single output multiplexers. The logic module, as
claimed in the '705 Patent, includes two multiplexers wherein each output is
commonly coupled to one of the pair of inputs of a third multiplexer. The
first and second multiplexer have four inputs or "data nodes." The output of
the third multiplexer may be connected to a single memory cell or "latch."
First and second multiplexers are controlled by a single level logic gate at
their select inputs as is the third multiplexer which is similarly controlled
by a second single level logic gate. The Court appointed a Special Master to
assist it in determining certain issues related to this litigation, and the
Special Master recommended on October 4, 1996 that the Court find that the
Company's pASIC 1 products infringe claim 1 of the '705 Patent. On April 14,
1997, the Court adopted the recommendation of the Special Master and granted
Actel's motion for summary judgment that the Company's pASIC 1 products
infringe claim 1 of the '705 Patent. Any appeal of the summary judgment motion
on infringement of the '705 Patent cannot be made until after there is a final
6
<PAGE>
judgment. If the '705 Patent is finally adjudicated to be valid and
enforceable, and the summary judgment motion is upheld on appeal, then Actel
would be entitled to significant damages for past infringement and potentially
would be entitled to an injunction on future infringement. Such an injunction
and/or the payment of damages would have a material adverse effect on the
Company's business, financial condition and results of operations, and could
potentially render it insolvent.
On April 12, 1995, QuickLogic filed a counterclaim alleging that Actel has
infringed two U.S. patents held by the Company, U.S. Patent Nos. 5,220,213
(the "'213 Patent") and 5,396,127 (the "'127 Patent"), which involve the
Company's logic module having three multiplexers wherein the outputs of two of
the multiplexers are commonly coupled to the pair of inputs of the third, all
other inputs in the module are connected to logic gates, and the output of the
third multiplexer is connected to a flip flop. As to each patent-in-suit in
the counterclaim, the Company alleges infringement of one or more claims and
seeks an injunction preventing Actel from further infringement of the claimed
inventions. The Company seeks damages for past infringement of the inventions
and the Company's attorneys' fees based on the alleged infringement. On
January 18, 1996, Actel filed a motion for summary judgment declaring the '213
and '127 Patents to be invalid. Actel's motion is based on an "on-sale bar"
defense, i.e. that the Actel products which the Company claims infringe these
patents were offered for sale more than one year before the filing dates of
the '213 and '127 Patents which, if proven under patent law, would invalidate
these patents. Discovery is currently in progress to allow QuickLogic to file
its opposition to this motion, which the Company believes will be filed in
1997, with the hearing on this motion to be scheduled thereafter. On February
5, 1996, QuickLogic filed a motion for summary judgment of infringement by
Actel of claim 1 of the '213 Patent. Actel has opposed this motion, and
discovery is currently in progress. Actel also requested a separate trial on
the "on-sale bar" defense, which request was denied by the Special Master on
June 4, 1997 in a Notice of Intention to Rule. After the issuance of a formal
recommendation by the Special Master, the Court must then decide whether to
adopt this recommendation.
On January 14, 1997, an additional U.S. patent was issued to the Company,
U.S. Patent No. 5,594,364 (the "'364 Patent"). On February 28, 1997, the
Company filed a motion to add a counterclaim for Actel's infringement of this
patent. A hearing on this motion was held on May 19, 1997 before the Special
Master, who granted the Company's motion on June 4, 1997 in a Notice of
Intention to Rule. After the issuance of a formal recommendation by the
Special Master, the Court must then decide whether to adopt this
recommendation.
On June 4, 1997, the Special Master also notified the parties of his intent
to accept the parties' stipulation that Actel be allowed to amend its
complaint to add a claim for infringement of an additional patent, U.S. Patent
No. 5,610,534 (the "'534 Patent"), issued March 11, 1997 and entitled "Logic
Module For A Programmable Logic Device." Actel alleges that the Company has
infringed one or more claims of this patent and is likely to seek both
monetary and injunctive relief, but has not yet filed or served an amended
complaint. After the issuance of a formal recommendation by the Special
Master, the Court must then decide whether to adopt this recommendation.
In addition to the patent infringement actions, Actel amended its claims
against the Company to include a claim against the Company and one of its
employees on June 14, 1995 alleging misappropriation of trade secrets, breach
of contract, breach of confidential relationship, and unfair competition.
Actel has sought assignment of certain issued and future patents of the
Company, two of which are part of this lawsuit, in relation to this claim in
addition to unspecified money damages, that the damages be doubled, attorneys'
fees and other remedies. These claims are based on allegations that this
employee, who had once been a consultant to Actel, had misappropriated
confidential information from Actel related to logic cells, which the Company
then incorporated into its pASIC products. The employee and the Company have
filed answers denying each of these claims. Discovery is ongoing at this time
and no dispositive motions have been filed or heard.
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Trial on the patent infringement and trade misappropriation claims is
currently scheduled for September 1998. However, there can be no assurance
that the trial will occur at such time and may be delayed significantly. As
the outcome of any litigation is inherently uncertain, the Company is unable
to predict the outcome of this litigation. Therefore, there can be no
assurance that the Company will prevail in the trial on the patent
infringement claims and counter-claims, the trial on the alleged
misappropriation of intellectual property, or hearings on any motions related
to such proceedings. The timing of the filing of any motions by Actel,
hearings on motions by either Actel or the Company, the issuance of rulings on
such motions, the issuance of recommendations by the Special Master and the
adoption or rejection of such recommendations by the Court are not within the
Company's control and could occur at any time. The announcement of any rulings
or recommendations, or the adoption or rejection of recommendations, that are
adverse to the Company, will likely have a material adverse effect upon the
market price for the Company's stock.
The semiconductor industry is characterized by frequent litigation of this
type regarding patent and other intellectual property rights, which involve
highly technical and subjective analysis. Discovery and litigation of such
issues are time-consuming and costly, and Actel possesses more personnel and
greater financial resources than the Company and is able to conduct extensive
and protracted litigation at less of a relative detriment to its current
business. While patent infringement litigation in the semiconductor industry
has at times resulted in voluntary settlements by the parties, often involving
cross-licensing of the patents involved, there can be no assurance that such a
result will be reached in this case. In addition, the terms of any settlement
may require the Company to stop selling all or certain of its products, pay
damages or royalties or other forms of consideration or grant licenses to all
or a portion of its intellectual property portfolio, any or all of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Patent infringement litigation in the semiconductor
industry has also resulted in court orders to pay significant damages and/or
injunctions preventing a party from making, using or offering to sell, selling
or importing any products that incorporate technology covered by such patents.
As referenced above, sales of the allegedly infringing products by the Company
have accounted for substantially all of the Company's past revenue and are
expected to account for substantially all of the Company's revenue for the
foreseeable future. This litigation could result in the Company being required
to cease selling its products and/or could also result in the Company paying
significant damages, including treble damages for willful infringement, either
of which would have a material adverse effect on the Company's business,
financial condition and results of operations and could potentially render it
insolvent.
There can be no assurance that the Company will prevail in its claims or
defenses or that it would be able to obtain a license under any Actel patents
that are found to be infringed, or if such a license were obtained, that it
would be on terms that would not have an adverse effect on the Company's
business, financial condition and results of operations. The current
litigation and any future litigation, whether or not determined in the
Company's favor or settled by the Company, has been and will continue to be
costly and will divert the efforts and attention of the Company's management
and technical personnel from normal business operations, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. It is expected that legal fees and other litigation-
related expenses will continue to adversely affect the Company's operating
results for the foreseeable future. Any adverse determinations in this
litigation or a settlement could result in the loss of the Company's
proprietary rights, subject the Company to significant liabilities, require
the Company to seek licenses from or to grant licenses to third parties or
prevent the Company from licensing its technology, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
INDUSTRY PRESSURES. The semiconductor industry in general and the
programmable logic device ("PLD") segment of this industry, in particular, are
characterized by rapid technological change,
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intense competitive pressure and fluctuating demand. The semiconductor
industry has historically been cyclical and subject to significant downturns
at various times, characterized by diminished product demand, accelerated
erosion of average selling prices ("ASPs") and production over-capacity. to
general semiconductor industry conditions. ASPs typically decrease rapidly
over the first three to six months following product introduction and continue
to decline thereafter. Therefore, the Company must develop and introduce new
products which incorporate features that can be sold at higher ASPs on a
timely basis. In addition, the Company's ability to maintain desired gross
margins depends upon its ability to achieve manufacturing efficiencies and
material cost reductions, such as manufacturing its products in smaller
product geometries on larger wafers. Failure to achieve any or all of the
foregoing could cause the Company's revenue and gross margins to decline,
which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Management's Discussion of
Financial Condition and Results of Operations."
DEPENDENCE ON INDEPENDENT WAFER MANUFACTURERS. The Company does not
manufacture the wafers used to produce its products. In the past, wafer
foundry capacity in the semiconductor industry has been very limited and may
become limited in the future. To date, wafers have been manufactured for the
Company principally by Cypress and in limited quantities by TSMC. In the
future, the Company expects its wafers to be manufactured principally by TSMC.
The Company depends on these suppliers to produce wafers at acceptable yields
and prices and to deliver them to the Company in a timely manner. The process
used to manufacture the Company's semiconductors can be performed in only a
limited number of foundries, increasing the Company's dependence on Cypress
and TSMC. Although the Company has a supply contract with Cypress and is
negotiating a new supply contract for its future products with TSMC, either
Cypress or TSMC could allocate capacity to the manufacture of other products
and reduce deliveries to the Company on short notice.
Under its wafer supply arrangements, the Company is obligated to provide
rolling forecasts of anticipated purchases and place binding purchase orders
months prior to shipment. Forecasts for monthly purchases may not increase or
decrease by more than a certain percentage from the previous month's forecast
without the supplier's consent. Thus, the Company must make forecasts and
place purchase orders for wafers before it receives purchase orders from its
own customers. This limits the Company's ability to react to fluctuations in
demand for its products, which could cause the Company to have an excess or a
shortage of wafers for a particular product. Any delays in obtaining an
adequate supply of wafers at acceptable yields and prices would have a
material adverse effect on the Company's business, financial condition and
results of operations. The Company's long-term growth will depend
substantially on the Company's ability to obtain increased wafer fabrication
capacity at acceptable prices from Cypress, TSMC and other suppliers. The
Company's current supply contract with Cypress expires in 2001. The inability
of the Company to obtain increased wafer fabrication capacity at acceptable
prices, or any delay or interruption in supply, could reduce the Company's
supply of wafers or increase the Company's cost of such wafers and could have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Business--Manufacturing."
DEPENDENCE ON CUSTOMIZED MANUFACTURING PROCESSES. The Company's products are
manufactured using customized steps which are added to the standard
manufacturing processes of its wafer suppliers. There is considerably less
operating history for the Company's customized process steps than for the
foundries' standard manufacturing processes. The Company's dependence on
customized processing steps means that, in contrast to competitors using only
a standard manufacturing process, the Company has more difficulty establishing
relationships with suppliers, takes longer to qualify a new supplier, must pay
more for wafers and may not obtain access as early as competitors to state-of-
the-art processes. Any of the above could be a material disadvantage for the
Company versus a competitor using a standard manufacturing process without
customized steps and could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
planned future products that the Company anticipates will be supplied
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by TSMC will involve production of new products utilizing 0.35^ CMOS
technology and on 8-inch wafers, which is a manufacturing process that has not
previously been used by the Company. Accordingly, the development of this
manufacturing process is subject to the risks and uncertainties inherent in
the technology and equipment necessary for such manufacturing. This
manufacturing process may not be able to be implemented for any of the
Company's products by TSMC, or by any other wafer manufacturer, or may be
delayed substantially due to development or implementation difficulties. Even
if this manufacturing process is successfully implemented by TSMC for the
Company's products, the Company will continue to be subject to unforeseen
problems or delays as this new process is developed. See "Business--
Manufacturing."
PRODUCTION YIELD FLUCTUATIONS. The manufacture of semiconductor products is
a highly complex and precise process. Defects in masks, impurities in the
materials used, contamination of the manufacturing environment, equipment
failure and other difficulties in the fabrication process can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
to be nonfunctional. Yields can decline without warning, resulting in
substantially higher product costs and inventory shortages. Yield problems may
take substantial time to analyze and correct, particularly for the Company
because it utilizes independent facilities for all of its manufacturing. The
Company has from time to time experienced lower than anticipated production
yields, and there can be no assurance that the Company will not experience
production yield problems in the future, or that any such problem will not
have a material adverse effect on the Company's business, financial condition
and results of operations. See "Business--Manufacturing."
NEW PRODUCT DEVELOPMENT AND TECHNOLOGICAL CHANGE. The market for the
Company's products is characterized by rapidly changing technology.
Accordingly, the Company's future performance depends on a number of factors,
including its ability to identify emerging technological trends in its target
markets, to develop and maintain competitive products, to enhance its products
by adding innovative features that differentiate its products from those of
competitors, to introduce products to market on a timely basis at competitive
prices, to properly identify target markets and to respond effectively to new
technological changes or new product announcements by others. The Company
recently introduced new products within its pASIC family of FPGAs and
currently is in the process of introducing new versions of its software design
tool suites. No assurance can be given that the Company's design and
introduction schedules for its pASIC families of products or any other new
products will be met, that these products will achieve market acceptance, or
that these products will be able to be sold at ASPs that are acceptable to the
Company. In evaluating new product decisions, the Company must anticipate well
in advance both the future demand and the technology that will be available to
supply such demand. The Company must also continue to make significant
investments in research and development in order to develop new products and
achieve market acceptance for such products. The failure of the Company to
accomplish any or all of the foregoing could have a material adverse effect on
its business, financial condition and results of operations. See "Business--
Products."
COMPETITION. The semiconductor industry is intensely competitive and is
characterized by constant technological change, rapid rates of product
obsolescence and price erosion. The Company's existing competitors include
suppliers of conventional gate arrays, complex programmable logic devices
("CPLDs") and FPGAs, particularly Xilinx, Inc. ("Xilinx"), a supplier of
static random access memory ("SRAM") based FPGAs, Actel, an anti-fuse FPGA
supplier, and Altera Corporation ("Altera"), a supplier of CPLDs. The Company
also faces competition from companies that offer standard gate arrays, which
can be obtained at a lower cost for high volumes and may have gate densities
and performance equal or superior to the Company's products. In addition, the
Company expects significant competition in the future from major domestic and
international semiconductor suppliers, and the Company's patents may not bar
competitors from manufacturing similar products. The Company also may face
competition from suppliers of products based on new or emerging technologies.
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The PLD market is dominated by Xilinx and Altera, which together control
over 55% of the market, according to Pace Technologies, a semiconductor market
research firm. The Xilinx products dominate the FPGA segment of the market
while Altera dominates the CPLD segment of the market. In addition, the
Company expects significant competition in the future from major domestic and
international suppliers which have entered or are considering entering the PLD
market. Such suppliers include Lucent Technologies, Vantis
Corporation/Advanced Micro Devices, Inc., Motorola, Inc. and Atmel
Corporation. Most of the Company's current and prospective competitors offer
broader product lines and have significantly greater financial, technical,
manufacturing and marketing resources than the Company. In particular,
companies such as Lucent Technologies, Motorola, Inc. and others have
proprietary wafer manufacturing ability, preferred vendor status with many of
the Company's customers, extensive marketing power and name recognition,
greater financial resources than the Company, and other significant advantages
over the Company. Certain of the current and prospective competitors of the
Company are or may become customers as well. There can be no assurance that
such customers will continue to buy the Company's products if they are
offering their own competing products, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company believes that important competitive factors in its
market are length of development cycle, price, performance, installed base of
development systems, adaptability of products to specific applications, ease
of use and functionality of development system software, reliability and
technical service and support, wafer fabrication capacity and sources of raw
materials, and protection of products by effective utilization of intellectual
property laws. Failure of the Company to compete successfully in any of these
or other areas could have a material adverse effect on its operating results.
In addition, the Company's competitive position is substantially dependent
upon industry competition for effective sales and distribution channels. There
can be no assurance that the Company's products will be competitive. The
failure of the Company to develop and market products that compete
successfully with those of other companies in the market would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Business--Competition."
DEPENDENCE UPON DESIGN WINS. The Company's success depends upon its ability
to convince a customer to incorporate the Company's FPGA into the customer's
circuit board during the design phase of a product. Accordingly, the Company
devotes substantial resources, which it may not recover through product sales,
in support of potential customer design efforts and in persuading potential
customers to incorporate the Company's FPGAs into new or updated products. The
typical engineer designing a circuit board will make an FPGA decision only
three or four times during the year. Accordingly, the Company's sales force
has limited windows of opportunity within which to successfully sell the
Company's products to design engineers. Sales efforts may be targeted at a
particular customer or market segment for several months and may not be
successful or, if successful, may not generate revenue for a year or longer
after the initial design win until the customer's products using the Company's
devices are being produced in volume. In addition, the Company may achieve a
design win with a customer, but the designed product may not ever be produced
and therefore not generate revenue. The value of any design win depends in
large part upon the ultimate success of the customer's product. No assurance
can be given that the Company will win sufficient designs or that any design
win will result in significant revenue. The failure of the Company to achieve
design wins in sufficient number or the failure of a substantial number of
such products to be produced would have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business--Sales, Support and Marketing."
PROTECTION OF INTELLECTUAL PROPERTY. Since its inception, the Company has
devoted significant resources to research and development. The Company relies
primarily on a combination of nondisclosure agreements, mask work rights and
other contractual provisions and patent, trademark, trade secret, and
copyright law to protect its proprietary rights. Failure of the Company to
enforce its patents, trademarks, mask work rights or copyrights or to protect
its trade secrets could have a
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material adverse effect on the Company's business, financial condition and
results of operations. There can be no assurance that such intellectual
property rights can be successfully asserted in the future or will not be
invalidated, circumvented or challenged. From time to time, third parties,
including competitors of the Company, may assert patent, copyright and other
intellectual property rights to technologies that are important to the
Company. There can be no assurance that third parties will not assert
infringement claims against the Company in the future, that assertions by
third parties will not result in costly litigation or that the Company would
prevail in any such litigation or be able to license any valid and infringed
patents from third parties on commercially reasonable terms. Litigation,
regardless of the outcome, could result in substantial cost and diversion of
resources of the Company. Any infringement claim or other litigation against
or by the Company could materially adversely affect the Company's business,
financial condition and results of operations. See "--Actel Litigation."
In addition, there can be no assurance that competitors of the Company, many
of which have substantial resources and have made substantial investments in
competing technologies, do not have, or will not seek to apply for and obtain,
patents that will prevent, limit or interfere with the Company's ability to
make, use or sell its products either in the United States or in international
markets. There can be no assurance that the Company will not in the future
become subject to patent infringement claims and litigation or interference
proceedings declared by the USPTO to determine the priority of inventions. The
defense and prosecution of intellectual property suits, USPTO interference
proceedings and related legal and administrative proceedings are both costly
and time consuming. Any such suit or proceeding involving the Company could
have a material adverse effect on the Company's business, financial condition
and results of operations. See "--Actel Litigation."
ORDER AND SHIPMENT UNCERTAINTIES. The Company's sales are generally made
pursuant to individual purchase orders that may be canceled or deferred by
customers on short notice without significant penalty. Cancellation or
deferral of product orders could result in excess inventory to the Company,
which could have a material adverse effect on the Company's profit margins and
restrict its ability to fund its operations. The Company sells to domestic
distributors under agreements which allow certain rights of return and price
adjustments on unsold inventory. The Company recognizes revenue from such
sales to domestic distributors upon shipment of products to the end-user.
Revenue from all other products is recognized at the time of shipment by the
Company. Delays or difficulties in collecting receivable accounts could result
in significant charges against income, which could have a material adverse
effect on the Company's business, financial condition and results of
operations.
RISKS OF GROWTH AND EXPANSION. The Company has recently experienced and
expects to continue to experience growth in the number of its employees and
the scope of its operations, resulting in increased responsibilities for
management personnel. To manage recent and potential future growth
effectively, the Company will need to continue to hire, train, motivate and
manage a growing number of employees. The future success of the Company will
also depend on its ability to attract and retain qualified technical,
marketing, and management personnel. In particular, the current availability
of qualified design, process, and test engineers is limited, and competition
among companies for skilled experienced engineering personnel is very intense.
The Company has been attempting to hire a number of engineering personnel and
has experienced delays in filling such positions. During strong business
cycles, the Company expects to experience continued difficulty in filling its
needs for qualified engineers and other personnel. No assurance can be given
that the Company will be able to achieve or manage effectively any growth, and
the failure to do so could delay product development and introductions and
otherwise have a material adverse effect on the Company's business, financial
condition and results of operations.
RELIANCE ON DISTRIBUTORS. Approximately 53.3% and 68.8%, respectively, of
the Company's worldwide sales were made through independent distributors in
1996 and the first quarter of 1997, respectively. In these periods, most of
the Company's sales outside the United States were made through independent
distributors. No assurance can be given that future sales by these or other
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distributors will continue at current levels or that the Company will be able
to retain its current distributors on terms that are acceptable to the
Company. The Company's distributors generally offer products of several
different companies, including products that are competitive with the
Company's products. Accordingly, there is a risk that these distributors may
give higher priority to products of other suppliers, thus reducing their
efforts to sell the Company's products. In addition, the Company's agreements
with its distributors are generally terminable at the distributor's option.
The Company recently terminated its distribution relationships with Seymour
Electronics and Reptron Electronics Inc. The failure of the Company to
successfully transition from the termination of these relationships, a
reduction in sales efforts by one or more of the Company's current
distributors, or a termination of any other distributor relationship with the
Company could have a material adverse effect on the Company's business,
financial condition and results of operations. The Company's distributors have
on occasion increased inventories in anticipation of substantial growth in
sales and, when such growth did not occur as rapidly as anticipated,
substantially decreased the amount of products ordered from the Company in
subsequent periods. Such a slowdown in sales would adversely affect the
Company's future revenue. No assurance can be given that one or more of the
Company's distributors will not experience financial difficulties. The failure
of one or more of the Company's distributors to pay for products ordered from
the Company or to continue operations because of financial difficulties or for
other reasons could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Sales, Support
and Marketing."
RISKS ASSOCIATED WITH INTERNATIONAL BUSINESS ACTIVITIES. Sales to customers
located outside the United States accounted for approximately 29.6% and 46.7%
of revenue in 1996 and the first quarter of 1997, respectively. The Company
expects that revenue derived from international sales will continue to
represent a significant portion of its total revenue. International sales are
subject to a variety of risks, including those arising from currency exchange
fluctuations, taxes, export license requirements, reduced protection for
intellectual property rights in some countries, the difficulty in enforcing
contractual rights, the impact of general business conditions of economies
outside the United States and generally longer periods for receivables
collection. Because all of the Company's foreign sales are denominated in U.S.
dollars, the Company's products become less price competitive in countries
whose currencies are declining in value against the dollar. The Company's
business is also subject to the risks associated with the imposition of
legislation and regulations relating to the import or export of semiconductor
products. In order to expand international sales and service capabilities, the
Company must maintain and expand existing foreign operations or establish new
foreign operations. Significant management attention and financial resources
of the Company will be necessary to hire additional personnel and maintain or
expand existing relationships with international distributors and sales
representatives. There can be no assurance that the Company will be able to
maintain or expand existing foreign operations, establish new foreign
operations or preserve and develop its relationships with international
distributors or sales representatives. The failure to take any of such
measures could have a material adverse effect on the Company's business,
financial condition and results of operations.
The Company has entered into a memorandum of understanding with TSMC to
manufacture its products at TSMC's foundries in the Republic of China
(Taiwan), and TSMC is currently producing research and development wafers for
the Company. The research and development of the technology that is planned to
be used at the TSMC foundry, negotiation of a manufacturing agreement with
TSMC, and any production by TSMC, are subject to the risk of political
instability in Taiwan, including but not limited to the potential for conflict
between Taiwan and the People's Republic of China. In addition, the United
States has had disputes with China relating to trade and human rights issues
and has also considered trade sanctions against Japan. If trade sanctions were
imposed, Japan or China could enact trade sanctions in response. Because the
Company plans to manufacture the majority of its products at the TSMC facility
in the future, and because a number of the Company's current and prospective
customers and suppliers are located in Japan and China, trade sanctions, if
imposed,
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could have a material adverse effect on the Company's business, financial
condition and results of operations. Similarly, protectionist trade
legislation in either the United States or foreign countries could have a
material adverse effect on the Company's ability to manufacture or to sell its
products in foreign markets. See "Business--Manufacturing."
KEY PERSONNEL; RECENT MANAGEMENT ADDITIONS. The Company's future success
depends substantially on the continued service of its key management,
engineering, marketing, and sales and support employees, many of whom have
worked together for only a short period of time. In particular, two of the
Company's executive officers joined the Company in late 1996, and two of the
Company's executive officers joined the Company in early 1997. Competition for
qualified personnel is intense in the semiconductor industry, and the loss of
any of the Company's current key employees, or the inability of the Company to
attract and retain other qualified personnel, could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company has not entered into any employment agreements with
any of its employees, nor does it have "key person" insurance on any of its
employees.
POSSIBLE VOLATILITY OF STOCK PRICE. The Company believes that factors such
as announcements of developments related to the Company's business, including
the Actel litigation, announcements by competitors, quarterly fluctuations in
the Company's financial results and general conditions in the semiconductor
industry or the national and international economies in which the Company
conducts business, and release of reports by securities analysts, among other
factors, could cause the price of the Company's Common Stock to fluctuate,
perhaps substantially. In addition, in recent years the stock market in
general, and the market for shares of technology stocks in particular, have
experienced extreme price fluctuations, which have often been unrelated to the
operating performance of affected companies. Such fluctuations could have a
material adverse effect on the price of the Company's Common Stock.
DISCRETIONARY USE OF PROCEEDS OF THIS OFFERING. The Company has no current
specific plans for the use of the net proceeds of this offering. As a
consequence, the Company's management will retain broad discretion in the
allocation of the net proceeds of this offering. The Company ultimately
expects to use the net proceeds from this offering for general corporate
purposes, including working capital and capital expenditures. There can be no
assurance that the proceeds will be utilized in a manner that the stockholders
deem optimal or that the proceeds can or will be invested to yield a
significant return upon the completion of this offering. Substantially all of
the net proceeds to the Company from the sale of the 1,800,000 shares of
Common Stock offered by the Company hereby which are estimated to be
$19,338,000, assuming an initial public offering price of $12.00 per share and
after deducting the underwriting discount and estimated offering expenses
payable by the Company, will be invested in U.S. short-term or medium-term,
investment-grade, interest-bearing securities for an indefinite period. See
"Use of Proceeds."
FUTURE CAPITAL NEEDS. In order to secure additional foundry capacity,
finance ongoing litigation, finance research and development, acquire new
technologies or businesses, satisfy personnel needs, or for other general
corporate purposes, the Company has considered and will continue to consider
various possible transactions, which could include, without limitation, equity
investments in, prepayments to, non-refundable deposits with, or loans to,
foundries in exchange for guaranteed capacity, "take or pay" contracts that
commit the Company to purchase specified quantities of wafers over extended
periods, joint ventures or other partnership relationships with foundries,
private or public financings or borrowings, or licenses of the Company's
technology. There can be no assurance that the Company will be able to make
any such arrangement in a timely fashion or at all, that the Company will not
require additional issuances of equity or debt in order to raise capital for
any such arrangements or that any such financing would be available to the
Company on acceptable terms or at all. The failure to obtain additional
capital when necessary, could have a material adverse effect on the Company's
business, financial condition and results of operations.
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EFFECT OF ANTITAKEOVER PROVISIONS. Certain provisions of the Company's
Restated Certificate of Incorporation and Bylaws and of Delaware law could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. Such provisions could diminish the opportunities
for a stockholder to participate in tender offers, including tender offers at
a price above the then current market value of the Common Stock. Such
provisions may also inhibit fluctuations in the market price of the Common
Stock that could result from takeover attempts. In addition, the Restated
Certificate of Incorporation authorizes 10,000,000 shares of undesignated
preferred stock. The Board of Directors of the Company, without further
stockholder approval, may issue this preferred stock with such terms as the
Board of Directors may determine, which could have the effect of delaying or
preventing a change in control of the Company. The issuance of preferred stock
could also adversely affect the voting power of the holders of Common Stock,
including the loss of voting control to others. Such preferred stock could be
utilized to implement, without stockholder approval, a stockholders' rights
plan that could be triggered by certain change in control transactions, which
could delay or prevent a change in control of the Company or could impede a
merger, consolidation, takeover or other business combination involving the
Company, or discourage a potential acquiror from making a tender offer or
otherwise attempting to obtain control of the Company. The Company's charter
documents also provide that one-third of the directors will be elected each
year which could prevent or delay an attempt to change the composition of the
Board. See "Description of Capital Stock."
RISKS ASSOCIATED WITH POTENTIAL ACQUISITIONS. An important element of the
Company's strategy is to review acquisition prospects that would complement
its existing product offerings, augment its market coverage or enhance its
technological capabilities or that may otherwise offer growth opportunities.
While the Company has no current agreements or negotiations underway with
respect to any such acquisitions, the Company may make acquisitions of
businesses, products or technologies in the future. Future acquisitions by the
Company could result in potentially dilutive issuances of equity securities,
the incurrence of debt and contingent liabilities and amortization expenses
related to goodwill and other intangible assets, any of which could materially
adversely affect the Company's operating results and/or the price of the
Company's Common Stock. Acquisitions entail numerous risks, including
difficulties in the assimilation of acquired operations, technologies and
products, diversion of management's attention to other business concerns,
risks of entering markets in which the Company has no or limited prior
experience and potential loss of key employees of acquired organizations. No
assurance can be given as to the ability of the Company to successfully
integrate any businesses, products, technologies or personnel that might be
acquired in the future, and the failure of the Company to do so could have a
material adverse effect on the business, financial condition and results of
operations of the Company. See "Use of Proceeds."
CONTROL BY PRINCIPAL STOCKHOLDERS. A substantial majority of the Company's
capital stock is held by a limited number of stockholders. At the completion
of this offering, Cypress and the Company's seven largest stockholders
(including Cypress) will own approximately 15.5% and 60.7%, respectively, of
the shares of Common Stock outstanding or issuable upon conversion of
convertible securities. Accordingly, such stockholders are likely, for the
foreseeable future, to continue to be able to control major decisions of
corporate policy and determine the outcome of any major transaction or other
matter submitted to the Company's stockholders or Board of Directors,
including potential mergers or acquisitions involving the Company, amendments
to the Company's Certificate of Incorporation or Bylaws, and the like.
Stockholders other than such principal stockholders are therefore likely to
have little or no influence on decisions regarding such matters. See
"Principal and Selling Stockholders."
DILUTION. Investors participating in this offering will incur immediate and
substantial dilution in the net tangible book value of their shares of Common
Stock in the amount of approximately $9.78 per share, at an assumed initial
public offering price of $12.00 per share, after deducting the underwriting
discount and commissions and estimated offering expenses payable by the
Company. Additional dilution will occur upon the exercise of outstanding stock
options. See "Dilution."
15
<PAGE>
ABSENCE OF DIVIDENDS. The Company has not declared or paid cash dividends on
its capital stock to date. The Company presently intends to retain future
earnings, if any, for use in the operation and expansion of its business and
does not anticipate paying cash dividends with respect to the Common Stock in
the foreseeable future. See "Dividend Policy."
SHARES ELIGIBLE FOR FUTURE SALE. Sales of the Company's Common Stock in the
public market after this offering could adversely affect the market price of
the Company's Common Stock. Upon completion of this offering, the Company will
have approximately 13,817,422 shares of Common Stock outstanding, of which
approximately 3,000,000 shares (approximately 3,450,000 if the Underwriters'
over-allotment option is exercised in full) will be freely transferable
without restriction or registration under the Securities Act of 1933, as
amended (the "Securities Act"), unless such shares are held by "affiliates" of
the Company, as that term is defined in Rule 144 under the Securities Act.
Upon completion of this offering, Cypress will continue to hold approximately
2,139,783 shares (1,689,783 shares if the Underwriters' over-allotment option
is exercised in full), and will be eligible to sell these shares in the public
market pursuant to Rule 144, subject to certain contractual restrictions on
resale, including lock-up agreements under which the Company, officers and
directors of the Company and Cypress have agreed, subject to certain
exceptions, not to sell or otherwise dispose of any of their shares for a
period of 180 days after the date of this offering (the "Lock Up Period"),
provided, however, that in the event that the Lock Up Period would expire in a
period where the Company's directors and officers are prevented from trading
because of the set "blackout" period between earnings releases provided in the
Company's insider trading policy, then, notwithstanding the 180-day limit set
forth above, the Lock Up Period shall not expire until the date that trading
can commence under the Company's insider trading policy. However, Deutsche
Morgan Grenfell may, in its sole discretion, at any time without notice,
release all or any portion of the shares subject to lock-up agreements. In
addition, Cypress will have certain rights with respect to registration of
such shares of Common Stock for sale to the public. Sales of Common Stock by
Cypress in the public market, or the availability of such shares for sale,
could adversely affect the market price of the Common Stock. In addition,
approximately 1,601,750 shares are issuable upon exercise of outstanding
options granted under the Company's stock option plans as of May 31, 1997. See
"Management--Employee Benefit Plans," "Description of Capital Stock--
Registration Rights" and "Shares Eligible for Future Sale."
16
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,800,000 shares of
Common Stock offered by the Company hereby are estimated to be $19,338,000,
assuming an initial public offering price of $12.00 per share and after
deducting the underwriting discount and estimated offering expenses payable by
the Company. The principal purposes of this offering are to obtain additional
capital, to create a public market for the Company's Common Stock, to enhance
the Company's ability to use its Common Stock as consideration for
acquisitions and as a means of attracting and retaining key employees, to
provide increased visibility and credibility in a marketplace where many of
the Company's current and potential competitors are or will be publicly held
companies, and to facilitate future access by the Company to public equity
markets. As of the date of this Prospectus, the Company has no specific plans
as to the use of the net proceeds of this offering. However, the Company
ultimately expects to use the net proceeds from this offering for general
corporate purposes, including working capital and capital expenditures,
including at least $2.0 million of capital expenditures in 1997. A portion of
the proceeds may also be used to make strategic acquisitions of complementary
businesses, technologies or products. Although the Company evaluates such
potential acquisitions from time to time, the Company currently has no
understanding, commitment or agreement with respect to any such acquisitions.
Pending such uses, the Company intends to invest the net proceeds of this
offering in U.S. short-term or medium-term, investment grade, interest-bearing
securities. The Company will not receive any proceeds from the sale of the
shares of Common Stock offered by Cypress hereby. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
DIVIDEND POLICY
The Company has not and does not intend to pay any cash dividends on its
capital stock. The Company presently intends to retain future earnings, if
any, for use in the operation and expansion of its business and does not
anticipate paying cash dividends in the foreseeable future.
17
<PAGE>
CAPITALIZATION
The following table sets forth the long-term obligations and capitalization
of the Company at March 31, 1997 (i) on an actual basis and (ii) as adjusted
to give effect to the sale of 1,800,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $12.00 per
share, after deducting the underwriting discount and estimated offering
expenses payable by the Company, the conversion of all outstanding shares of
preferred stock into Common Stock, the issuance of 2,603,817 shares of Common
Stock to Cypress in connection with the contract termination and the exercise
of a warrant to purchase 18,750 shares of Common Stock. This table should be
read in conjunction with the Financial Statements and the Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1997
--------------------------
ACTUAL AS ADJUSTED
----------- -------------
(IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
Long-term obligations............................... $ 1,658 $ 1,658
----------- -----------
Stockholders' equity:
Preferred Stock, $.001 par value; 8,766,836 shares
authorized, 8,495,712 shares issued and
outstanding, actual; 10,000,000 shares
authorized, no shares issued and outstanding,
as adjusted...................................... 9
Common stock, $.001 par value; 12,142,857 shares
authorized; 860,957 shares issued and
outstanding, actual; 100,000,000 shares
authorized, 13,779,236 issued and outstanding, as
adjusted(1)...................................... 1 14
Additional paid-in capital.......................... 43,528 81,355
Common stock to be issued: 2,603,817 shares actual;
and no shares, as adjusted......................... 18,409 --
Stockholder note receivable......................... (119) (119)
Deferred compensation............................... (2,897) (2,897)
Accumulated deficit................................. (50,872) (50,872)
----------- -----------
Total stockholders' equity........................ 8,059 27,481
----------- -----------
Total capitalization.......................... $ 9,717 $ 29,139
=========== ===========
</TABLE>
- --------
(1) Excludes as of March 31, 1997 1,657,592 shares of Common Stock subject to
outstanding options under the Company's 1989 Stock Option Plan and 714,289
shares reserved for future issuance thereunder. See "Management--Employee
Benefit Plans" and Note 7 of Notes to Financial Statements.
18
<PAGE>
DILUTION
The pro forma net tangible book value of the Company as of March 31, 1997,
was approximately $8.1 million, or $0.86 per share of Common Stock. Pro forma
net tangible book value per share represents the amount of total tangible
assets of the Company reduced by the amount of its total liabilities and
divided by the total number of shares of Common Stock outstanding after giving
effect to the conversion of all outstanding shares of preferred stock into
Common Stock. After giving effect to the sale by the Company of 1,800,000
shares of Common Stock offered hereby at an assumed initial public offering
price of $12.00 per share, after deducting the underwriting discount and
estimated offering expenses payable by the Company, after giving effect to the
sale of 2,603,817 shares of Common Stock by Cypress in this offering, and
after giving effect to the exercise of a warrant to purchase 18,750 shares of
Common Stock, the pro forma net tangible book value of the Company as of March
31, 1997, would have been $27,481,000, or $1.99 per share. This amount
represents an immediate increase in such net tangible book value of $1.13 per
share to existing stockholders and an immediate dilution of $10.01 per share
to new investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............. $12.00
Pro forma net tangible book value per share as of March
31, 1997................................................. $ 0.86
Increase per share attributable to new investors.......... $ 1.13
Pro forma net tangible book value per share after the
offering................................................... 1.99
------
Dilution per share to new investors......................... $10.01
======
</TABLE>
The following table summarizes, on a pro forma basis as of March 31, 1997,
the differences between the existing stockholders and the new investors with
respect to the number of shares of Common Stock purchased from the Company,
the total consideration paid to the Company and the average price paid per
share, based upon an assumed initial public offering price of $12.00 per share
(before deducting the underwriting discount and estimated offering expenses
payable by the Company) with respect to the 1,800,000 shares offered by the
Company hereby:
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
------------------ -------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ------------ ------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders........ 11,979,236 86.9% $ 62,021,000 74.2% $ 5.18
New investors(1)............. 1,800,000 13.1 21,600,000 25.8 12.00
---------- ----- ------------ -----
Total...................... 13,779,236 100.0% $ 83,611,000 100.0%
========== ===== ============ =====
</TABLE>
- --------
(1) The sale of shares of Common Stock by Cypress in the offering will reduce
the number of shares held by existing stockholders to 10,779,236 or 78.2%
of the total number of shares of Common Stock outstanding after the
offering, and will increase the number of shares to be purchased by the
new public investors to 3,000,000 or 21.8% of the total number of shares
of Common Stock outstanding after the offering. See "Principal and Selling
Stockholders."
The above computations assume that (i) no part of the Underwriters' over-
allotment option is exercised and (ii) no options are exercised after March
31, 1997. As of March 31, 1997, there were outstanding options to purchase an
aggregate of 1,657,592 shares of Common Stock at a weighted average exercise
price of $1.94 per share. To the extent the above options have been or are
exercised, there will be further dilution to new investors. See "Management--
Employee Benefit Plans," "Description of Capital Stock" and Notes 5 and 7 of
Notes to Financial Statements.
19
<PAGE>
SELECTED FINANCIAL DATA
The selected financial data set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the Financial Statements and Notes thereto included
elsewhere in this Prospectus. The balance sheet information as of December 31,
1995 and 1996 and the statement of operations data set forth below for 1994,
1995, and 1996 are derived from the audited financial statements included
elsewhere in this Prospectus. The balance sheet information as of December 31,
1992, 1993 and 1994 and the statement of operations data for 1992 and 1993 are
derived from unaudited financial statements of the Company not included
herein. The balance sheet information as of March 31, 1997 and the statement
of operations data for the quarters ended March 31, 1996 and 1997 are derived
from unaudited financial statements included herein. In the opinion of
management, such unaudited financial statements have been prepared on the same
basis as the audited financial statements referred to above and include all
adjustments, consisting of normal recurring adjustments, necessary for the
fair presentation of the financial position of the Company and the results of
operations for the indicated periods. Operating results for the quarter ended
March 31, 1997 are not necessarily indicative of the results that may be
expected for the full year.
<TABLE>
<CAPTION>
QUARTER QUARTER
YEAR ENDED DECEMBER 31, ENDED ENDED
------------------------------------------- MARCH 31, MARCH 31,
1992 1993 1994 1995 1996 1996 1997
------- ------- ------- ------- ------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Revenue................. $ 1,325 $ 4,141 $ 6,024 $15,148 $23,758 $5,154 $ 6,268
Cost of revenue......... 1,191 2,889 4,053 7,739 11,158 2,563 2,813
------- ------- ------- ------- ------- ------ --------
Gross profit............ 134 1,252 1,971 7,409 12,600 2,591 3,455
------- ------- ------- ------- ------- ------ --------
Operating expenses:
Research and
development........... 2,389 2,762 3,172 3,599 4,642 1,042 1,333
Sales, general and
administrative........ 2,232 2,625 4,408 5,770 7,730 1,685 2,313
Contract termination
and other expense(1).. -- -- -- 2,700 4,125 -- 23,009
------- ------- ------- ------- ------- ------ --------
Total operating
expenses.............. 4,621 5,387 7,580 12,069 16,497 2,727 26,655
------- ------- ------- ------- ------- ------ --------
Loss from operations.... (4,487) (4,135) (5,609) (4,660) (3,897) (136) (23,200)
Interest expense........ -- (223) (240) (200) (60) (7) (21)
Interest income and
other, net............. 30 60 21 153 360 164 118
------- ------- ------- ------- ------- ------ --------
Net income (loss)(2)... $(4,457) $(4,298) $(5,828) $(4,707) $(3,597) $ 21 $(23,103)
======= ======= ======= ======= ======= ====== ========
Pro forma net income
(loss) per
share (unaudited)(2)... $ (0.29) $ -- $ (1.83)
======= ====== ========
Shares used in pro forma
net income (loss) per
share.................. 12,612 12,438 12,612
======= ====== ========
</TABLE>
- --------
(1) Includes a charge of $23.0 million in the year ended December 31, 1996 for
termination of the Existing Agreement (as defined herein) and charges of
$2.7 million and $4.1 million in the years ended December 31, 1995 and
1996, respectively, for expected costs of litigation. See "Risk Factors--
Actel Litigation" and Notes 8 and 11 of Notes to Financial Statements.
(2) Excluding the contract termination expense and charge for legal reserves,
net loss and pro forma net loss per share would have been $94,000 and
$0.01, respectively, for the quarter ended March 31, 1996 and $528,000 and
$0.04, respectively, for the quarter ended March 31, 1997.
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------- MARCH 31,
1992 1993 1994 1995 1996 1997
------ ------ ------- ------- ------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash......................... $5,071 $2,836 $ 488 $ 3,856 $10,336 $10,366
Working capital (deficit).... 4,484 553 (4,792) 7,068 10,650 7,172
Total assets................. 7,076 4,696 2,531 12,199 22,577 21,476
Long-term obligations........ 534 383 509 137 602 1,658
Total stockholders' equity
(deficit)................... 5,255 956 (4,848) 7,149 11,799 8,059
</TABLE>
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Financial
Statements and the Notes thereto included elsewhere in this Prospectus. This
Prospectus contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ significantly from
those discussed in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" and elsewhere in this
Prospectus.
OVERVIEW
From its inception in April 1988 through the third quarter of 1991,
QuickLogic was primarily engaged in product development. Accordingly, the
majority of the Company's operating expenses during such period were related
to research and development activities. The Company recorded revenue from its
first product family, pASIC 1, in August 1991. The pASIC 1 product family
includes logic devices consisting of 1-, 2-, 4- and 8-thousand usable ASIC
gates. The Company first recorded revenue from its pASIC 2 product family in
the third quarter of 1996. The pASIC 2 product family includes logic devices
consisting of 3-, 5-, 7- and 9-thousand usable ASIC gates. At March 31, 1997,
the Company had an accumulated deficit of $50.9 million.
Revenue from the Company's pASIC products represented over 90.0% of revenue
for each of 1994, 1995 and 1996 and the first quarter of 1997. The Company
derives the remainder of revenue from licenses of its QuickWorks and
QuickTools design software. One customer accounted for approximately 27.0% and
11.1% of revenue in 1996 and the first quarter of 1997, respectively. No other
customer accounted for more than 10% of revenue in 1994, 1995, 1996 or the
first quarter of 1997.
Sales through distributors represented 65.4%, 60.5% and 53.3% of revenue in
1994, 1995 and 1996, respectively, and 49.8% and 68.8% for the first quarters
of 1996 and 1997, respectively. The Company expects that these percentages
will increase over time. The Company's general policy is to defer recognition
of revenue on shipments to domestic distributors until the product is sold by
such distributors to the end-user. Revenue from all other products is
recognized at the time of shipment by the Company.
International revenue accounted for 30.0%, 29.4% and 29.6% of the Company's
revenue for 1994, 1995 and 1996, respectively and 47.1% and 46.7% for the
first quarters of 1996 and 1997, respectively. The Company expects that
revenue derived from purchases by international customers will continue to
represent a significant portion of its total revenue. All of the Company's
sales are denominated in U.S. dollars.
Average selling prices ("ASPs") for the Company's products typically decline
rapidly during the first six to 12 months after introduction, then decline
less rapidly as the product matures. To date, the Company has been able to
offset price declines by periodically introducing higher-priced, higher-
density products, which results in relatively constant overall ASPs. In
addition, the Company seeks to maintain acceptable gross margins through
manufacturing efficiencies and cost reductions, including manufacturing its
products using smaller product geometries on larger wafers. However, the
markets in which the Company competes are highly competitive, and there can be
no assurance that the Company will continue to successfully introduce higher-
density products, that overall ASPs can be maintained or that the Company will
continue to achieve manufacturing efficiencies or material cost reductions.
Any significant decline in the Company's overall ASPs or gross margins could
have a material adverse effect on the Company's business, financial condition
or results of operations. See "Risk Factors--Industry Pressures."
In March 1997, the Company and Cypress terminated the existing Technical
Transfer, Joint Development License and Foundry Supply Agreement between the
parties dated October 2, 1992 (the
21
<PAGE>
"Existing Agreement") related to the Company's FPGA products, and replaced it
with a new arrangement whereby the Company's FPGA products will no longer be
second sourced by Cypress. In exchange for the termination of the Existing
Agreement and the reversion of the rights to the intellectual property
developed thereunder to the Company, the Company paid $4.5 million in cash and
agreed to issue 2,603,817 shares of Common Stock to Cypress, resulting in a
charge of approximately $23 million in the first quarter of 1997. In addition,
the Company granted Cypress certain contractual rights as to the shares of the
Company's stock held by Cypress, including the right to sell shares in this
offering. The parties also entered into a new foundry agreement and a cross-
license agreement. See "Business--Cypress Transaction."
Under its wafer supply arrangements, the Company is obligated to provide
rolling forecasts of anticipated purchases and place binding purchase orders
months prior to shipment. Forecasts for monthly purchases may not increase or
decrease by more than a certain percentage from the previous month's forecast
without the supplier's consent. Thus, the Company must typically make
forecasts and place purchase orders for wafers 60 to 90 days prior to
receiving purchase orders from its own customers. This limits the Company's
ability to react to fluctuations in demand for its products, which could cause
the Company to have an excess or a shortage of wafers for a particular
product. See "Risk Factors--Fluctuations in Operating Results" and "--
Dependence on Independent Wafer Manufacturers."
In 1995 and 1996, the Company recorded a $2.7 million and $4.1 million,
respectively, increase to its legal reserves for the Actel litigation (see
Note 11 of Notes to Financial Statements). The Company intends to continue to
reassess anticipated litigation costs and will adjust its reserve as
necessary. See "Risk Factors--Actel Litigation."
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenue for certain items
in the Company's statements of operations for the periods indicated:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------- ---------------
1994 1995 1996 1996 1997
------- ------- ------- ------ -------
<S> <C> <C> <C> <C> <C>
Revenue........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue................ 67.3 51.1 47.0 49.7 44.9
------- ------- ------- ------ -------
Gross margin................... 32.7 48.9 53.0 50.3 55.1
------- ------- ------- ------ -------
Operating expenses:
Research and development..... 52.6 23.8 19.5 20.2 21.2
Selling, general and
administrative.............. 73.2 38.1 32.5 32.7 36.9
Contract termination and
other expense............... -- 17.8 17.4 -- 367.1
------- ------- ------- ------ -------
Total operating expenses... 125.8 79.7 69.4 52.9 425.2
------- ------- ------- ------ -------
Operating loss................. (93.1) (30.8) (16.4) (2.6) (370.1)
Interest expense............... (3.9) (1.3) (0.2) (0.2) (0.3)
Interest income and other,
net........................... 0.3 1.0 1.5 3.2 1.9
------- ------- ------- ------ -------
Net income (loss).............. (96.7)% (31.1)% (15.1)% 0.4% (368.5)%
======= ======= ======= ====== =======
</TABLE>
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
Revenue. Revenue for 1994, 1995 and 1996 was $6.0 million, $15.1 million and
$23.8 million, respectively, an increase of 151.5% in 1995 and 56.8% in 1996
over the respective prior year periods. The majority of the 1995 increase was
due to a substantial growth in sales of the Company's 4-thousand gate ("4K")
logic device products, first commercially shipped in the third quarter of
1994,
22
<PAGE>
the introduction of its 8-thousand gate ("8K") logic device products, first
commercially shipped in the second quarter of 1995, and increased sales to
customers in the data communications markets, primarily in North America and
Europe. The 1996 revenue growth was primarily attributable to increased
acceptance of the Company's 4K and 8K products in North America and Europe,
and a substantial increase in volume of sales to Texas Instruments. Increased
unit sales in 1995 and 1996 were partially offset by declining ASPs as newly
introduced products matured in 1995 and 1996. The Company expects rapid ASP
declines for a product during the first six to 12 months after introduction
and slowing declines thereafter, and seeks to increase revenue through the
introduction of new products and increased unit sales of its existing
products. However, no assurance can be given that the Company's efforts in
this regard will be successful.
Gross Profit. Gross profit was $2.0 million, $7.4 million and $12.6 million
in 1994, 1995 and 1996, respectively, which constituted 32.7%, 48.9% and 53.0%
of revenue for such periods. The improvement in 1995 gross margin was
primarily attributable to increased efficiencies as the Company's
manufacturing volume increased. The 1996 improvement resulted primarily from
continued volume-related efficiencies, wafer yield improvement and reductions
in wafer prices as foundry capacity constraints experienced in 1995 eased. The
improvement in margins in 1995 and 1996 was somewhat offset by yield
fluctuations as production began on the 8K products. The Company attempts to
offset declining ASPs as products mature through achieving manufacturing
efficiencies and material cost reductions as well as introducing new products
with higher prices. The Company's operating environment and resource
requirements necessitate managing a variety of factors such as general
business conditions in the semiconductor industry, fluctuations in
manufacturing yields at the Company's wafer suppliers, the availability of
foundry capacity, cancellations or delays of deliveries of products to the
Company, new product introductions by the Company or its competitors, product
obsolescence, price erosion for maturing products, competition, changes in the
mix of products sold, seasonal fluctuations in demand, changes in distributor
inventory levels, availability of wafer supply, increases in the costs of
materials, cancellations or delays of product orders, developments in the
Company's litigation with Actel, the ability to safeguard intellectual
property in a rapidly evolving market, changing customer product requirements,
changes in demand for customers' products and fluctuations in foreign currency
exchange rates. As a result of changes in these factors, the Company's past
results may not be indicative of future operating results. See "Risk Factors--
Fluctuations in Operating Results" and "--Industry Pressures."
Research and Development Expense. Research and development ("R&D") expense
includes personnel and other costs associated with product design and
development, process technology development and software development. R&D
expense was $3.2 million, $3.6 million, and $4.6 million in 1994, 1995 and
1996, respectively, which constituted 52.6%, 23.8% and 19.4% of revenue for
such periods. The increases in R&D expense in 1995 and 1996 were primarily due
to increases in headcount. The decline in R&D expense as a percentage of
revenue in 1995 and 1996 was primarily attributable to the increase in revenue
during those periods. The Company believes that continued investment in
process technology and product development are essential for it to remain
competitive in the markets it serves and expects to continue to increase R&D
expense in the future. The Company also expects R&D expense to increase as a
result of deferred compensation charges in future periods (see "--Deferred
Compensation") and costs associated with the migration to a new wafer
supplier.
Selling, General and Administrative Expense. Selling, general and
administrative ("SG&A") expense was $4.4 million, $5.8 million and $7.7
million in 1994, 1995 and 1996, respectively, which constituted 73.2%, 38.1%
and 32.5% of revenue for such periods, respectively. The increase in 1995 SG&A
expense over the year earlier period was primarily attributable to an increase
in personnel and increased sales and marketing efforts in support of existing
and new products. The increase in SG&A expense in 1996 was attributable to
increased sales commissions, marketing efforts and increased headcount. SG&A
expense decreased in 1995 and 1996 as a percentage of revenue primarily as a
23
<PAGE>
result of increased revenue. The Company anticipates that SG&A expense will
increase as a result of deferred compensation charges in future periods (see
"--Deferred Compensation") and as a result of costs associated with the
Company becoming a public company.
Deferred Compensation. The Company grants incentive stock options to hire,
incent and retain employees. With respect to the grant of certain stock
options to employees, the Company recorded aggregate deferred compensation of
approximately $851,000 and $2.2 million in 1996 and in the first quarter of
1997, respectively. Deferred compensation is presented as a reduction of
stockholders' equity and amortized ratably over the vesting period of the
applicable options, generally four years. The Company currently expects to
record amortization of deferred compensation of approximately $644,000,
$755,000, $755,000, $712,000 and $107,000 during the years ended 1997, 1998,
1999, 2000 and 2001, respectively. The amortization of deferred compensation
will be recorded as R&D and SG&A expense in such periods.
Interest Income and Other, Net. Interest and other income was $21,000,
$153,000 and $360,000 in 1994, 1995 and 1996, respectively. Interest and other
income increased in 1995 and 1996 as a result of increased interest income on
higher average cash and investment balances in 1995 and 1996. See "--Liquidity
and Capital Resources."
Interest Expense. Interest expense was $240,000, $200,000 and $60,000 in
1994, 1995 and 1996, respectively. Interest expense decreased in 1996 as a
result of the conversion to preferred stock of notes payable to stockholders
during 1995.
Provision for Income Taxes. No provision for income taxes has been recorded
in the years ended December 31, 1994, 1995 and 1996, as the Company incurred
net operating losses ("NOLs") in those years. At December 31, 1996, the
Company had NOL carryforwards for federal and state tax purposes of
approximately $16 million and $1 million respectively. These carryforwards, if
not utilized to offset future taxable income and income taxes payable, will
expire through the year 2010.
QUARTERS ENDED MARCH 31, 1996 AND MARCH 31, 1997
Revenue. Revenue was $5.2 million and $6.3 million for the first quarter of
1996 and 1997, respectively. Revenue increased 21.6% for the first quarter of
1997 compared to the year earlier period due to revenue from the sale of the
Company's first pASIC 2 product, which began shipping in the second quarter of
1996, as well as an expanded presence in the marketplace through the addition
of two significant distributors.
Gross Profit. Gross profit was $2.6 million and $3.5 million for the first
quarter of 1996 and 1997, respectively. Gross margins improved from 50.3% for
the first quarter of 1996 to 55.1% in the first quarter of 1997 due to yield
improvements on the 4K and 8K products, increased operating efficiencies due
to greater volumes of the Company's higher-ASP, higher-density products. Gross
margin improvements were partially offset by declining ASPs of the Company's
lower-density products.
Research and Development Expense. R&D expense was $1.0 million and $1.3
million for the first quarter of 1996 and 1997, respectively. The increase in
R&D expense was primarily due to the hiring of additional research and
development personnel, as well as $37,000 attributable to deferred
compensation charges in the first quarter of 1997 associated with the grant of
incentive stock options to employees. R&D expense increased as a percentage of
revenue from 20.2% in the first quarter of 1996 to 21.3% in the first quarter
of 1997.
Selling, General and Administrative Expense. SG&A expense was $1.7 million
and $2.3 million for the first quarter of 1996 and 1997, respectively. SG&A
expense increased as a percentage of revenue from 32.7% in the first quarter
of 1996 to 36.9% in the first quarter of 1997 due to hiring of additional
sales, marketing, finance and human resources personnel. In addition, SG&A
expense includes $39,000 attributable to deferred compensation charges in the
first quarter of 1997 associated with the grant of incentive stock options to
employees.
24
<PAGE>
Interest Income and Other, Net. Interest income and other, net for the first
quarter of 1996 was $164,000 compared to $118,000 for the first quarter of
1997. The decrease was due to lower average cash and investment balances in
the first quarter of 1997 compared to the first quarter of 1996.
Interest Expense. Interest expense was $7,000 and $21,000 in the first
quarter of 1996 and 1997, respectively. The increase was due to additional
financing of capital expenditures for furniture, test equipment and leasehold
improvements.
QUARTERLY RESULTS OF OPERATIONS
The following tables set forth certain unaudited statement of operations
data for the four quarters of each of 1995 and 1996 and the first quarter of
1997, as well as such data expressed as a percentage of the Company's revenue
for the periods indicated. This data has been derived from unaudited financial
statements that, in the opinion of management, include all adjustments
(consisting only of normal recurring adjustments) necessary for a fair
presentation of such information. The Company's quarterly results have been in
the past, and in the future may be, subject to fluctuations. See "Risk
Factors--Fluctuations in Operating Results." As a result, the Company believes
that results of operations for the interim periods are not necessarily
indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 2,644 $2,715 $ 3,951 $5,838 $5,154 $6,286 $6,047 $ 6,271 $ 6,268
Cost of revenue......... 1,372 1,391 2,108 2,868 2,563 2,982 2,828 2,785 2,813
------- ------ ------- ------ ------ ------ ------ ------- --------
Gross profit............ 1,272 1,324 1,843 2,970 2,591 3,304 3,219 3,486 3,455
------- ------ ------- ------ ------ ------ ------ ------- --------
Operating expenses
Research and
development........... 784 942 749 1,124 1,042 1,131 1,127 1,342 1,333
Selling, general
and administrative.... 1,455 1,198 1,615 1,502 1,685 2,006 2,058 1,981 2,313
Contract termination
and other expense..... -- -- 2,700 -- -- 265 -- 3,860 23,009
------- ------ ------- ------ ------ ------ ------ ------- --------
Total operating
expenses.............. 2,239 2,140 5,064 2,626 2,727 3,402 3,185 7,183 26,655
------- ------ ------- ------ ------ ------ ------ ------- --------
Operating income
(loss)................. (967) (816) (3,221) 344 (136) (98) 34 (3,697) (23,200)
Interest expense........ (90) (67) (41) (2) (7) (6) (30) (17) (21)
Interest income and
other, net............. 2 37 65 49 164 146 57 (7) 118
------- ------ ------- ------ ------ ------ ------ ------- --------
Net income (loss)....... $(1,055) $ (846) $(3,197) $ 391 $ 21 $ 42 $ 61 $(3,721) $(23,103)
======= ====== ======= ====== ====== ====== ====== ======= ========
</TABLE>
<TABLE>
<CAPTION>
AS A PERCENTAGE OF REVENUE
QUARTER ENDED
-------------------------------------------------------------------------------------
MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31,
1995 1995 1995 1995 1996 1996 1996 1996 1997
-------- -------- --------- -------- -------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 51.9 51.2 53.3 49.1 49.7 47.4 46.8 44.4 44.9
----- ----- ----- ----- ----- ----- ----- ----- ------
Gross profit............ 48.1 48.8 46.7 50.9 50.3 52.6 53.2 55.6 55.1
----- ----- ----- ----- ----- ----- ----- ----- ------
Operating expenses
Research and
development........... 29.7 34.7 19.0 19.3 20.2 18.0 18.6 21.4 21.2
Selling, general
and administrative.... 55.0 44.1 40.9 25.7 32.7 31.9 34.0 31.6 36.9
Contract termination
and other expense..... -- -- 68.3 -- -- 4.2 -- 61.6 367.1
----- ----- ----- ----- ----- ----- ----- ----- ------
Total operating
expenses.............. 84.7 78.8 128.2 45.0 52.9 54.1 52.6 114.6 425.2
----- ----- ----- ----- ----- ----- ----- ----- ------
Operating income
(loss)................. (36.6) (30.0) (81.5) 5.9 (2.6) (1.5) 0.6 (59.0) (370.1)
Interest expense........ (3.4) (2.5) (1.0) -- (0.2) (0.1) (0.5) (0.3) (0.3)
Interest income and
other, net............. 0.1 1.4 1.6 0.8 3.2 2.3 0.9 (0.1) 1.9
----- ----- ----- ----- ----- ----- ----- ----- ------
Net income (loss)....... (39.9)% (31.1)% (80.9)% 6.7% 0.4% 0.7% 1.0% (59.4)% (368.5)%
===== ===== ===== ===== ===== ===== ===== ===== ======
</TABLE>
25
<PAGE>
Revenue increased and gross margin improved substantially from the third to
the fourth quarters of 1995 due to market acceptance of the Company's 4K
products as well as yield improvements and manufacturing efficiencies
attributable to greater volume production. Revenue declined in the first
quarter of 1996 due to a slowdown in demand affecting the entire semiconductor
industry. Revenue and gross margin declined in the first quarter of 1996
compared to the fourth quarter of 1995 due to a general slowdown in the
semiconductor industry, which resulted in relatively more rapid declines in
ASPs of the Company's pASIC 1 products. Revenue increased and gross margin
improved in the second quarter of 1996 due to market acceptance of the
Company's new 8K products. Quarter-to-quarter revenue has been relatively
constant since the second quarter of 1996 due to general semiconductor
industry conditions as well as demand for the Company's products partially
shifting to products with lower ASPs. Gross margins in the fourth quarter of
1995 and the first quarter of 1996 were also adversely affected by lower than
expected fabrication and test yields. Gross margins continued to increase
throughout 1996 due to manufacturing efficiencies and material cost reductions
and remained flat in the first quarter of 1997.
SG&A increased significantly in the third quarter of 1995 and the second
quarter of 1996 primarily as a result of higher commissions. The increase in
the first quarter of 1997 was due primarily to the hiring of additional
personnel. SG&A is expected to continue to increase due to increasing
commissions as revenue increases, additional costs associated with being a
public company, and deferred compensation charges related to certain option
grants. See "--Deferred Compensation."
Total operating expenses increased substantially in the third quarter of
1995 and the fourth quarter of 1996 due to charges for legal reserves. In the
first quarter of 1997, the Company incurred a $23.0 million charge in
connection with the termination of the Existing Agreement with Cypress. See
"Business--Cypress Transaction" and "--Actel Litigation."
Interest expense declined in the third quarter of 1995 as the Company
converted notes payable to stockholders to preferred stock and increased in
the third quarter of 1996 due to financing of capital acquisitions. Interest
and other income, net increased in the first quarter of 1996 due to higher
yields from investments and decreased in the third quarter of 1996 due to a
$4.5 million payment to Cypress. See "Business--Cypress Transaction." The
increase in the first quarter of 1997 was due to higher cash balances from the
issuance of preferred stock in December 1996.
Fluctuations in the Company's operating results have occurred in the past
and may occur in the future due to a variety of factors, any of which may have
a material adverse effect on the Company's operating results. In particular,
the Company's quarterly results of operations may vary significantly due to
general business conditions in the semiconductor industry, fluctuations in
manufacturing yields at the Company's wafer suppliers, the availability of
foundry capacity, cancellations or delays of deliveries of products to the
Company, new product introductions by the Company or its competitors, product
obsolescence, price erosion for maturing products, competition, changes in the
mix of products sold, seasonal fluctuations in demand, changes in distributor
inventory levels, availability of wafer supply, increases in the costs of
materials, cancellations or delays of product orders, developments in the
Company's litigation with Actel, the ability to safeguard intellectual
property in a rapidly evolving market, changing customer product requirements,
changes in demand for customers' products and fluctuations in foreign currency
exchange rates. A large portion of the Company's operating expenses is fixed
and difficult to reduce or modify. If revenue does not meet the Company's
expectations, the material adverse effect of any such revenue shortfall will
be magnified by the fixed nature of these operating expenses. In addition, the
Company's quarterly operating results can vary due to the volume and timing of
product orders received and delivered during a quarter, the ability of the
Company and its key suppliers to respond to changes made in customer orders,
and the timing of new product introductions by the Company and its
competitors. All of the above factors are difficult for the Company to
forecast, and these and other factors could have a material adverse effect on
the Company's business, financial condition and results of operations. As a
result, the Company believes
26
<PAGE>
that period-to-period comparisons are not necessarily meaningful and should
not be relied upon as indicative of future operating results. See "Risk
Factors--Fluctuations in Operating Results."
LIQUIDITY AND CAPITAL RESOURCES
The Company has primarily financed its operations and capital requirements
through sales of preferred stock, borrowings from stockholders and, in the
most recent two quarters, bank debt to finance its capital requirements. At
March 31, 1997, the Company had $10.4 million in cash, an increase of $2.0
million from cash and short-term investments held at March 31, 1996. This
increase was primarily attributable to the issuance of $8.9 million in
preferred stock in December 1996 and January 1997, offset in part by the
payment of $4.5 million to Cypress and increased cash used in operating
activities. As of March 31, 1997, the Company had an accumulated deficit of
$50.9 million. See "Business--Cypress Transaction" and Note 8 of Notes to
Financial Statements.
The Company currently has a $5.0 million bank facility which will increase
to $6.0 million upon the closing of this offering. Under this facility, the
Company has a $2.0 million domestic accounts receivable revolving line of
credit, a $2.0 million equipment term loan facility, and a $1.0 million
foreign accounts receivable and inventory revolving line of credit. The
domestic and foreign revolving lines of credit are available for general
working capital purposes, bear interest at the bank's prime rate and expire
August 7, 1997. The Company expects to renew these lines of credit. At March
31, 1997, the Company had utilized $1.8 million of the equipment term loan
facility, and has not drawn down under the other lines as of such time or to
date. The equipment term loan facility is available for drawdown through June
30, 1997, bears interest at prime plus 0.25% and is payable in equal monthly
installments from July 1997 through June 2000. See Note 4 of Notes to
Financial Statements.
Through March 31, 1997, the Company has purchased approximately $4.9 million
in capital assets, $1.9 million of which were purchased through bank financing
during 1996 and the first quarter of 1997. The Company intends to purchase
approximately $2.0 million of additional capital assets during the remainder
of 1997 but currently has no other significant commitments to acquire capital
equipment.
Net cash used in operations was $3.5 million, $5.0 million, $4.6 million and
$1.4 million in 1994, 1995, 1996 and the first quarter of 1997, respectively.
The increase in cash used in 1995 as compared to 1994 was primarily
attributable to a $2.6 million increase in accounts receivable, partially
offset by a $2.0 million increase in liabilities in 1995 and $122,000
reduction in accounts payable in 1995 compared to a $1.5 million increase in
accounts payable in 1994, partially offset by a $1.1 million decrease in net
loss in 1995 compared to 1994. The decline in cash used for operations
(excluding the increase in the charge for legal reserves) in 1996 as compared
to 1995 was due to net income of $528,000 in 1996 compared to a net loss of
$2.0 million in 1995, and a substantial increase in accounts payable in 1996,
offset in part by the $4.5 million payment to Cypress and a substantial
increase in inventory in 1996. Net cash used in operations during the first
quarter of 1997 resulted primarily from increases in accounts receivable and
inventory.
Net cash provided by (used for) investing activities was $(259,000), $(4.1)
million, $2.5 million and $(915,000) in 1994, 1995, 1996 and the first quarter
of 1997, respectively. In 1995, the Company invested $4.0 million in short-
term investments which were sold in 1996. The Company acquired $1.5 million
and $915,000 in property and equipment in 1996 and the first quarter of 1997,
respectively, primarily furniture, leasehold improvements and computer and
networking equipment as a result of its move to its new facility in December
of that year. The majority of these acquisitions were financed under the
Company's equipment term loan facility.
Net cash provided from financing activities was $1.4 million, $12.5 million,
$8.6 million and $2.3 million in 1994, 1995, 1996 and the first quarter of
1997, respectively, and resulted primarily from the issuance of $11.8 million
of preferred stock in 1995 and $8.1 million of preferred stock in 1996, and
27
<PAGE>
$1.5 million and $1.2 million in borrowings from stockholders in 1994 and
1995, respectively. In 1996 and the first quarter of 1997, the Company had
bank borrowings of $470,000 and $1.5 million, respectively.
The Company requires substantial working capital to fund its business,
particularly to finance inventories and accounts receivable. The Company's
future capital requirements will depend on many factors, including the rate of
sales growth, market acceptance of the Company's existing and new products,
the amount and timing of research and development expenditures, the timing of
the introduction of new products, expansion of sales and marketing efforts,
and the status of ongoing litigation. See "Risk Factors--Actel Litigation."
There can be no assurance that additional equity or debt financing, if
required, will be available on terms satisfactory to the Company. See "Risk
Factors--Future Capital Needs." The Company believes the net proceeds of this
offering combined with its existing capital resources and cash generated from
operations will be sufficient to meet the Company's needs for the next 12
months, although the Company could seek to raise additional capital during
that period.
28
<PAGE>
BUSINESS
QuickLogic develops, markets and supports advanced FPGA semiconductors and
software design tools. QuickLogic products enable designers of complex
electronic systems to achieve rapid time to market by optimizing design speed,
design flexibility and cost. The Company's products target complex, high-
performance electronic systems in rapidly changing markets including video,
graphics and imaging, telecommunications and data communications,
instrumentation and test, high-performance computers and military systems. The
key components of the QuickLogic solution are the Company's proprietary
ViaLink antifuse technology and pASIC architectures, and its software design
tools. QuickLogic's proprietary ViaLink antifuse technology places logic
interconnects between the metal layers of an FPGA device, instead of on the
silicon substrate, thereby minimizing die size and cost. The ViaLink antifuse
technology offers lower resistance and lower capacitance than competing
interconnect technologies, resulting in high speed. The Company's pASIC
architectures facilitate full routability and utilization of a device's logic
cells, enabling a high degree of design flexibility. QuickLogic's QuickTools
software design tools place and route logic cells on an FPGA device, and the
QuickWorks design software suite incorporates QuickTools and industry-leading
design tools for HDL/schematic entry, synthesis and simulation. In addition,
QuickWorks incorporates IEEE standard design languages Verilog and VHDL.
INDUSTRY BACKGROUND
Competitive pressures are forcing manufacturers of electronic systems to
bring increasingly complex products to market rapidly. Electronic systems such
as video, graphics and imaging, telecommunications and data communications,
instrumentation and test, high-performance computers and military systems
require improved functionality, performance and reliability, all at lower
cost. These requirements are addressed through combinations of advanced
semiconductors such as microprocessors, memory and logic devices, which enable
electronic systems to achieve greater competitive differentiation through
faster speed, smaller size, lower power consumption and lower cost.
These competitive pressures have driven the evolution of logic devices,
which are used in virtually every complex electronic system to coordinate the
functions of other semiconductor devices such as microprocessors and memory
devices. However, the inherent technological limitations of certain logic
devices typically force system manufacturers to make trade offs among speed,
density, design flexibility and cost.
The gate array is one of the most common types of logic devices, made up of
a matrix of uncommitted logic elements. The two most commonly used logic
solutions are mask-programmed or "standard" gate arrays and customer-
programmed PLDs. Standard gate arrays typically offer higher gate densities
and faster performance than PLDs. The logic elements of standard gate arrays
are configured by the device manufacturer during the manufacturing process for
a specific customer application. However, as standard gate arrays are
customized during the manufacturing process, these devices generally require
significant initial non-recurring engineering costs ("NREs"), and therefore
restrict design flexibility, cause longer device delivery times, and generate
dedicated custom product inventory that becomes obsolete when product life
cycles end. Therefore, standard gate arrays are effective in high-volume
applications where design changes are infrequent and time-to-market
considerations are less critical.
Unlike standard gate arrays which are semi-custom devices, PLDs are standard
products purchased by systems manufacturers in a "blank" state, which are then
rapidly configured by a system designer into specific logic circuits. This
approach shortens design cycles, and therefore enables faster time to market
for manufacturers of electronic systems. The PLD market consists of
29
<PAGE>
three product categories: low density simple PLDs ("SPLDs"), which are devices
with generally less than 1,000 gates; higher-density CPLDs; and FPGAs. CPLDs
and FPGAs are devices that integrate up to tens of thousands of gates. CPLDs
and FPGAs have different architectural models that allow them to more
effectively solve various functional problems on a circuit board. However, as
market requirements have become more stringent and competition more intense,
many systems manufacturers have found that typical PLDs, including traditional
higher-density FPGAs and CPLDs, have inherent architectural and technological
constraints.
Traditional CPLD and FPGA manufacturers have employed transistor-based
interconnect technologies such as SRAM, EPROM and Flash, but these
technologies often fail to achieve the optimal combination of high speed,
design flexibility and low cost. Device speed is slowed because transistor-
based interconnections have a relatively high electrical resistance. In
addition, transistor- based interconnects are placed on the silicon substrate,
consuming large amounts of silicon area, and therefore limiting the number of
programming elements for device routability. Design flexibility is
subsequently compromised because of limited device utilization, inability to
maintain pin-outs, and device timing uncertainties. These inadequacies often
require manual design to supplement the use of automatic software design
tools, thereby slowing time to market. End-users are also required to use the
proprietary software of the device manufacturer, which compels the customer to
use a specific device vendor, even if the vendor does not provide a device
that is optimal for a given application. In addition, the cost of the device
increases as die sizes increase, and additional design time is required.
Some device manufacturers have attempted to address the limitations of
transistor-based interconnects with antifuse technologies. Antifuse
interconnects are smaller than transistor-based interconnects and offer lower
electrical resistance and smaller die size, resulting in higher speed, greater
design flexibility and lower cost. However, traditional antifuse technology
still requires interconnects to be placed on the silicon substrate and retains
relatively high electrical resistance. Therefore, traditional antifuse
technology fails to fully address the die size, electrical resistance and
design flexibility problems of transistor-based interconnects.
THE QUICKLOGIC SOLUTION
QuickLogic produces FPGA semiconductors that offer high speed and design
flexibility at low cost. QuickLogic products enable designers of complex
electronic systems to achieve rapid time to market by optimizing design speed,
design flexibility and cost. The key components of the QuickLogic solution are
the Company's proprietary ViaLink antifuse technology and pASIC architectures,
and its software design tools.
ViaLink Antifuse Technology. QuickLogic's ViaLink antifuse technology places
logic interconnects between the metal layers of a chip, instead of on the
silicon substrate thereby minimizing die size and cost. The ViaLink antifuse
technology features lower resistance and capacitance than competing
interconnect technologies, thereby optimizing a device's performance.
pASIC Architectures. QuickLogic's pASIC architectures facilitate full
utilization of a device's logic cells and I/O pins. The architectures use
ViaLink antifuse technology to maximize interconnects at every routing wire
intersection. The abundance of wiring resources allows more paths between
logic cells and I/O pins. As a result, designers can maintain pin-out
assignments throughout the design cycle, and can achieve more complex designs
utilizing more of a device's circuit elements.
QuickWorks and QuickTools Software Design Tools. QuickLogic's QuickWorks
software design tools provide high-level design entry, schematic capture,
synthesis, simulation, and placement and routing on Windows, while QuickTools
place and route software operates on UNIX platforms. QuickWorks incorporates
IEEE standard design languages (Verilog and VHDL) and leading
30
<PAGE>
third-party software to offer a cost-effective solution for the rapid design
of complex logic devices. QuickTools integrates with all leading third-party
design environments to support QuickLogic's pASIC products. QuickLogic tools
also optimize the design for device utilization and in-system operating speed
and also transfer the design to its FPGA devices.
THE QUICKLOGIC STRATEGY
QuickLogic's objective is to be a leading provider of high-speed, flexible,
cost-effective FPGA solutions that allow customers to accelerate design cycles
to satisfy demanding time-to-market requirements. To achieve this objective,
the Company has adopted the following key strategies:
Target High-Performance, Rapidly Changing Markets. QuickLogic focuses its
design and marketing efforts on complex electronics systems that require high
speed, design flexibility, low cost and rapid time to market. These
electronics systems include video, graphics and imaging systems,
telecommunications and data communications, instrumentation and test, and
high-performance computers. Competition within these high-growth markets is
intense, and the Company's proprietary technologies allow customers to deliver
faster products and accelerate time to market.
Apply Proprietary Technology to High Density Applications. The Company
believes that future applications of PLDs will require logic density that will
be difficult to achieve using traditional FPGA technology. The placement of
the Company's ViaLink antifuse interconnects between metal layers maximizes
interconnect resources and minimizes die size. These attributes will become
increasingly critical as logic density requirements increase.
Optimize Product Offerings. The Company's current product offerings are
designed to address the segments of the logic market with the highest levels
of design activity. The Company's marketing efforts and product features will
continue to be determined by market demand. Based on market requirements for
devices that are faster, less costly and consume less power, the Company plans
to release its third generation of products utilizing 0.35(mu) CMOS technology
on 8-inch wafers during 1998.
Exploit Shift in Design Technologies. Historically, designers of electronic
systems have been tied to device-specific schematic design software offered by
FPGA device companies and have been reluctant to consider alternative vendors
because of the costs and difficulties associated with switching to new design
software. However, as logic densities increase and designs become more
complex, end-users are shifting to Verilog and VHDL, IEEE standard high level
design languages, to simplify the management of more complex design processes.
The Company offers software design products that are inexpensive and that
incorporate both Verilog and VHDL as well as leading third-party software for
use on Windows or Unix platforms. The Company believes the combination of its
design software and pASIC architectures enables customers using Verilog or
VHDL to choose FPGA devices based on speed, design flexibility and cost, while
minimizing the impact of switching design software.
Leverage Manufacturing Alliances. QuickLogic's manufacturing strategy is to
establish close relationships with third-party manufacturers for its wafer
requirements. This allows the Company to focus its resources on product
design, development and marketing rather than on manufacturing expenditures.
The Company has a foundry relationship with Cypress for its existing products
and has entered into a memorandum of understanding with TSMC for the
production of its anticipated 0.35(mu) CMOS products on 8-inch wafers.
31
<PAGE>
TECHNOLOGY
QuickLogic believes that its products have distinct advantages over
traditional FPGA solutions with regard to speed, design flexibility, cost and
time to market. QuickLogic's key technologies are the proprietary ViaLink
antifuse technology and pASIC architectures, and the QuickWorks and QuickTools
design software packages. The following table sets forth certain specific
features and benefits of each of these key technologies.
VIALINK ANTIFUSE
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
Features Benefits
.Interconnect resides between metal .More room on the silicon substrate for
layers logic cells; protection against
reverse engineering of end-user
designs
.Smaller interconnect element .Smaller, less expensive die with dense
interconnect resources
.Lower resistance and capacitance .Faster performance
- -------------------------------------------------------------------------------
PASIC ARCHITECTURES
- -------------------------------------------------------------------------------
Features Benefits
.Dense interconnect resources .Design flexibility with pin-out
stability
.Variable grain logic cell .High utilization of available logic
.Pin-out compatibility among product .Ease of migration among different
lines density devices
- -------------------------------------------------------------------------------
QUICKWORKS AND QUICKTOOLS DESIGN SOFTWARE
- -------------------------------------------------------------------------------
Features Benefits
.Windows and UNIX platform support .Choice of design platform
.Incorporates leading third-party tools .Easy-to-use, fast, low-cost software
.IEEE standard languages Verilog and .Choice of optimal silicon device
VHDL
</TABLE>
ViaLink Antifuse Technology
A key distinguishing feature of FPGAs is the programmable element. The
technology used to provide programmability determines practical parameters for
logic capacity, amount of interconnect resources, architecture and
performance.
QuickLogic's ViaLink antifuse is based on a patented amorphous silicon
antifuse technology. The ViaLink antifuse enables a vertical interconnect
architecture by placing programming elements above the substrate, between the
layers of metal routing tracks on the die. Removing interconnects from the
substrate allows more logic cells to reside in the die and results in a die
size reduction for a given number of logic cells. In addition, the location of
the ViaLink antifuse between metal layers helps to protect against
unauthorized reverse engineering of a PLD circuit design. The ViaLink "metal
to metal" connections also have lower resistance and capacitance, the primary
inhibitors of circuit performance, thereby optimizing speed and performance.
The Company believes that the ViaLink antifuse is scalable down to at least
0.18^. In addition, the ViaLink's programming algorithm produces a link
filament that tolerates operating voltage and current overloads, reducing the
likelihood of device malfunction.
32
<PAGE>
QuickLogic's proprietary ViaLink interconnect technology provides solutions
to the primary design problems inherent in using traditional FPGAs and CPLDs.
The large programmable elements created using traditional dielectric antifuse
and SRAM technologies reside on the die. Therefore, in order to minimize die
size, traditional technologies must limit the number of transistor
interconnections, thereby constraining flexibility and device utilization.
This increases the time and cost needed to design with traditional FPGAs and
CPLDs. The high resistance and capacitance of these transistor- based
technologies also limit devices to relatively low performance. To illustrate,
the resistance of a transistor-based SRAM interconnect is a maximum of 1,000
ohms, whereas a ViaLink interconnect presents a maximum of 50 ohms of
resistance.
Based upon published industry materials, the following table compares the
critical features of the Company's ViaLink antifuse technology with the
comparable features of competing dielectric antifuse and SRAM interconnect
technologies.
<TABLE>
<CAPTION>
VIALINK DIELECTRIC SRAM
PROGRAMMING TECHNOLOGY ANTIFUSE ANTIFUSE INTERCONNECT
---------------------- -------- ---------- ------------
<S> <C> <C> <C>
Relative Interconnect Performance
(Speed).................................. 1.0x 0.1x 0.05x
Relative Interconnect Density (Design
Flexibility)............................. 1.0x 0.8x 0.24x
Silicon Area Required (Cost).............. 1.0x 2.5x 12.50x
</TABLE>
The Company's ViaLink interconnect make it one time programmable. While
certain traditional FPGA devices allow reprogrammability, the use of SRAM
interconnect technologies in such devices compromises speed, design
flexibility and cost. The Company believes that in most customer applications
the benefit of reprogrammability is less important than time-to-market
pressures, speed, design flexibility and cost effectiveness. QuickLogic's
ViaLink antifuse and one time programmability also assure that after a fuse is
programmed it remains programmed. By contrast, SRAM-based interconnect
technologies require reprogramming each time the device is powered up.
Unlike dielectric antifuse technologies that require more complex
manufacturing processes, the amorphous silicon used to manufacture ViaLink
antifuses can be deposited by any plasma enhanced chemical vapor deposition
("CVD") system without affecting the underlying CMOS process and requires only
one additional mask. This allows the Company's devices to be produced at a
lower price and with greater yields than other antifuse processes. Because the
ViaLink technology creates a flat surface, additional metal layers and
interconnects can be stacked one above another yet retain a stable
architecture. The Company's next generation of pASIC products, which use a
four-layer metal process, are designed to take further advantage of this
feature. See "--Manufacturing: Relationship with TSMC."
pASIC Architectures
The Company's pASIC architectures incorporate more programmable elements and
routing wire resources than traditional FPGAs and offer pin-out compatibility
across the Company's product offerings. In addition, the pASIC 2 architecture
uses a variable grain logic cell that can be utilized for either a large,
single function or up to five independent functions. These features provide
users with greater design flexibility, a high utilization of available logic,
minimal need to change pin-out and the ability to move among product offerings
according to changing requirements.
The ViaLink antifuse allows the Company's pASIC devices to have a fully
populated interconnect scheme in combination with abundant routing tracks to
enable full design routability for the user. Typically, pASIC devices have
from four to six times the total number of programmable elements per usable
gate of logic than SRAM-based FPGAs. Full design routability allows complete
utilization of logic cells and I/O pins, reduces timing problems associated
with circuitous routing of logic paths, maintains pin-out stability and
eliminates the need for manual routing, thereby accelerating the
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development process to reduce time to market. By contrast, lack of full
routability may force more design iterations, require considerable manual
overrides of automated design tools and may cause designers to abandon their
selected FPGAs late in a design cycle for more expensive devices. In addition,
full routability is crucial to Verilog and VHDL users, who lose the
productivity offered by an HDL when large amounts of time are required to
relate HDL code to specific routing paths in an attempt to meet design
requirements through manual routing.
The routability and pin-out maintenance of the Company's products allow an
engineer to program a chip, designate pin-out and know that the device will be
automatically, fully routed while holding the set pin-out. This technology
also allows an engineer to alter the design of a chip and remain assured of
the designated pin-out that is required for the chip to function in the
circuit board. The Company designs its product architectures so that product
densities may be scaled up or down to create a family of standard products to
meet a wide variety of customer needs. This feature, combined with pin-out
compatibility between products, allows a customer to move among density
choices in the QuickLogic product lines to meet design requirements.
The pASIC 2 variable grain logic cell was engineered to operate as one large
cell for high performance or separated into as many as five independent logic
fragments for high utilization. A larger logic cell delivers higher
performance by consolidating multiple logic fragments to perform a specific
function. However, traditional HDL synthesis tools were originally designed
for the architecture used in standard gate arrays that chain smaller logic
fragments together to perform the same function, resulting in lower
performance when applied to the larger logic cells typical of FPGAs. As HDL
synthesis tools become more capable of utilizing larger logic cells, these
tools can utilize QuickLogic's pASIC 2 variable grain logic cell either as a
large cell for higher performance or as independent logic fragments for higher
utilization.
Software
QuickLogic offers software design tools that are inexpensive and incorporate
IEEE standard languages Verilog and VHDL and leading third-party software for
use on Windows and UNIX platforms. The use of devices with greater densities
to implement more complex designs, while reducing costs and meeting time-to-
market pressures, have led to increased reliance on HDLs. Verilog and VHDL as
well as sophisticated third-party software design tools have emerged as FPGA
industry standards because they make front-end design more efficient resulting
in accelerated design cycles. The Company's inclusion of these languages in
its software design tools helps customers migrate to QuickLogic easily and
inexpensively.
In addition, the Company believes that its software tools facilitate the use
of these languages more effectively than the software tools offered by the
Company's competitors. The Company's proprietary ViaLink technology and pASIC
architectures provide QuickLogic products with the abundance of interconnect
resources necessary for logic synthesis design tools to efficiently synthesize
designs. Accordingly, QuickLogic's products require less silicon to implement
the Verilog and VHDL code. The Company intends to exploit the market shift to
Verilog and VHDL and the competitive advantage that the Company's products
afford in implementing these languages.
The Company has developed software that maximizes the usability of VHDL and
Verilog, includes tutorials in these languages, optimizes the HDL output,
simulates and transfers the design to the lowest cost device. The
compatibility of the Company's QuickWorks and QuickTools software tools with
Verilog and VHDL fully supports engineers experienced in these design
languages and, when combined with the pASIC products, affords 100% placement
and routing, stable timing, and the ability to hold pin-out through all design
iterations. Engineers who are unfamiliar with these HDLs are able to train
themselves and program at their desktops simultaneously by utilizing the
bundled tutorial programs for Verilog and VHDL in the Company's software
tools. Software support for the pASIC
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families is available through two basic environments: QuickWorks and
QuickTools. A wide assortment of design environments is supported on both
Windows and UNIX platforms by combining QuickLogic's software packages with
design libraries from vendors such as Cadence, Mentor, Synario, Synopsys,
Veribest and Viewlogic. Interoperability is also provided for other third-
party vendors by supporting industry standard interfaces such as EDIF, OVI,
SDF and VITAL.
PRODUCTS
The Company has developed its pASIC products to address the primary
requirements of the FPGA market, including speed, design flexibility, cost and
time to market. The Company's current product line consists of two families of
FPGAs, and the QuickWorks and QuickTools design software. The Company's
product offerings are designed to address the segments of the logic market
with the highest levels of design activity. The Company's marketing efforts
and product parameters will continue to be determined by market demand. Based
on market requirements for devices that are faster, less costly and consume
less power, the Company plans to release its third generation of products
during 1998. The Company has entered into a memorandum of understanding with
TSMC to manufacture this third generation product family utilizing a 0.35(mu)
CMOS technology on 8-inch wafers. However, the projections regarding the
timing, and the type of, the releases of the Company's third generation family
of products are forward-looking statements that involve risks and
uncertainties. The completion and release of any new product family depends
upon the development of necessary technology, the Company's relationship with
its manufacturers, in particular TSMC, market conditions and other factors.
Accordingly, new products may not be released within the time frame stated or
at all. See "Risk Factors--New Product Development and Technological Change,"
"--Dependence on Independent Wafer Manufacturers" and "Dependence on
Customized Manufacturing Processes."
The following table describes the available usable gate densities of the
Company's two families of FPGAs, their product release dates and applicable
process technologies.
<TABLE>
<CAPTION>
PRODUCT FAMILY USABLE GATE DENSITIES
- -------------- --------------------------------------------
<S> <C> <C> <C> <C>
PASIC 1 1K 2K 4K 8K
Product Release/Process 1991/1.0(mu)* 1992/1.0(mu)* 1994/0.65(mu) 1995/0.65(mu)
Technology 1994/0.65(mu) 1994/0.65(mu)
PASIC 2 3K 5K 7K 9K
Product Release/Process 1997+/0.65(mu) 1997/0.65(mu) 1996/0.65(mu) 1997/0.65(mu)
Technology
</TABLE>
- --------
* No Longer Offered
+ Anticipated Release Date
The Company offers devices in a range of speeds to address differing
customer performance and cost requirements. The Company also offers most of
its devices in commercial, industrial and military temperature ranges. A
variety of package types are available to satisfy varying customer demand for
I/O pin count and space constraints. Package styles include PLCC (plastic
leaded chip carrier), PQFP (plastic quad flat pack), TQFP (thin plastic quad
flat pack) and PBGA (plastic ball grid array). Military package styles include
CPGA (ceramic pin grid array) and CQFP (ceramic quad flat pack). The Company
plans to introduce additional package styles as customer demand warrants.
QuickWorks. The QuickWorks suite provides a complete FPGA software solution,
including design entry, logic synthesis, place and route, and simulation.
QuickWorks' fully integrated design solution consists of internally developed
and licensed third-party software operating on Microsoft Windows. QuickWorks
includes VHDL, Verilog, schematic, boolean and mixed mode entry for fast and
efficient logic design.
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QuickTools. The QuickTools package provides a solution for designers who use
Cadence, Mentor, Synario, Synopsys, Veribest, Viewlogic or other third-party
software tools for design entry, synthesis or simulation. QuickTools provides
optimization, place and route, timing analysis and back-annotation support for
all QuickLogic devices. QuickTools runs on Windows and UNIX platforms.
MARKETS AND APPLICATIONS
QuickLogic's FPGA solutions are well suited for applications that have
demanding requirements for high performance, design flexibility, low cost and
time to market. During the year ended December 31, 1996 and the quarter ended
March 31, 1997, Texas Instruments ("TI") accounted for 27.0% and 11.1% of
revenue, respectively. The examples below describe some typical applications
and the reasons for the selection of QuickLogic FPGAs.
Video, Graphics and Imaging
The video, graphics and imaging industries are characterized by the rapid
emergence of new, more complex and faster-performing technologies and by short
product life cycles. Applications for QuickLogic FPGAs include LCD display
panel controls, high speed image cameras, image editing and display hardware,
and audio processing/mixing systems. Manufacturers of these systems usually
require components that can meet extremely high performance standards as they
must quickly process large amounts of data. They also demand a fast design
cycle to help get their products to market as quickly as possible.
QuickLogic's FPGA products address these particularly demanding speed and
time-to-market requirements.
For example, in 1993, TI required an extremely high performance PLD for its
new Digital Light Processing video projector component. After evaluating a
number of alternatives, TI determined that the QuickLogic FPGA products were
the only solution that met the performance and design flexibility demands of
the Digital Light Processing system and, in particular, TI's requirement that
the device maintain pin-out assignments as TI refined its design. During the
following one-year period, TI determined that the QuickLogic products also
demonstrated superior ease-of-use, and QuickLogic FGPAs were subsequently
designed into every PLD socket in the TI Digital Light Processing system.
Telecommunications and Data Communications
Telecommunications and data communications equipment manufacturers are
forced to make product and design changes quickly to keep pace with new and
rapidly evolving industry standards and technologies. Applications include
satellite-based and Internet telephones, cable television equipment, wireless
Internet communications systems and networking equipment. New products in the
telecommunications and data communications industries often require high
performance components to handle the ever-increasing data rates and latest
digital communications standards. QuickLogic's products facilitate this
market's accelerating time-to-market goals and meet the high performance
demands of communications equipment manufacturers.
An example of the demanding time-to-market requirements in the data
communications industry is 3Com's large-bandwidth ISDN "superchannel" board,
the "143." After using competing devices, 3Com found that only QuickLogic's
FPGAs allowed simultaneous design of both the circuit board layout and the
circuitry within the FPGA. 3Com has stated that it found no other solution
that enabled full device utilization with rigidly fixed pin-out assignments.
Instrumentation and Test
Test equipment and industrial electronics manufacturers require components
that afford a high degree of reliability. Applications include aircraft
controls, semiconductor test and instrumentation circuit boards. The Company's
proprietary ViaLink antifuse technology creates stable, permanent
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<PAGE>
circuit connections unlike traditional reprogrammable FPGA solutions. In
addition, QuickLogic's range of device packages and operating temperatures
allow pASIC products to be designed into a variety of applications.
For example, Honeywell selected QuickLogic for its flight navigation and
control systems for business jets. QuickLogic products demonstrated
significant performance advantages when implementing Honeywell's industrial
temperature PCI-bus design. In addition, Honeywell determined that QuickLogic
designs could be fully implemented with VHDL without compromising system
performance. Honeywell subsequently designed QuickLogic products into five
additional circuit boards, including Honeywell's redundant CPU boards.
High-Performance Computers
The ability to bring new computer models to market as quickly as possible is
the hallmark of the computer industry. QuickLogic's FPGAs accelerate time to
market by allowing computer companies to manufacture hardware products
immediately upon the completion of the design, without waiting for production
quantities of a standard gate array. IBM, for example, uses QuickLogic's FPGAs
for the prototype and initial production of its display controllers for
ThinkPad laptop computers.
Military
Military systems manufacturers must meet demanding reliability and
performance requirements in system designs. Applications include weapons
control systems and navigational equipment. QuickLogic's permanently
programmed products are well-suited components for such systems. The Company's
proprietary ViaLink antifuse technology creates interconnects which are more
stable and reliable than traditional reprogrammable FPGA solutions. The range
of ceramic package options, which include both surface-mount and through-hole
packages, are also attractive to military systems designers. Hughes Aircraft,
for example, uses QuickLogic devices in a wide range of applications from
missile tail-fin controllers to helicopter instrumentation.
The following chart illustrates ways that certain of the Company's customers
use QuickLogic products.
<TABLE>
<CAPTION>
INDUSTRY CUSTOMER APPLICATION
-------- -------- -----------
<S> <C> <C>
Video, Graphics Digidesign (AVID) PC-based audio editing
and Imaging (used to edit "Lion King" and other movies)
Dome Imaging Medical imaging products
Fujitsu Stadium display controls
Hitachi DVD, MPEG image compression
Miro Computer Image editing PC hardware
Silicon Graphics Flat panel display controller
Texas Instruments Video display projectors
TV/Com Satellite TV signal encryption & compression
Telecommunications AG Communications Telephone networking equipment
Alcatel Alsthom Microwave communication systems
NEC PBX electronics
Northern Telecom Satellite-based telephone systems
Uniden Internet telephone
</TABLE>
37
<PAGE>
<TABLE>
<CAPTION>
INDUSTRY CUSTOMER APPLICATION
-------- -------- -----------
<S> <C> <C>
Data Bay Networks/Xylogics ISDN networking and PC cards
Communications Compaq/Networth Networking equipment
Daewoo ATM switch, fiber optic equipment
EMC/McData Mainframe I/O communications
3Com Data-com boards
Instrumentation Analog Devices Integrated circuit testers
and Test Honeywell Aircraft navigation and flight controls
National Instruments PC-based instrumentation boards
Teradyne Semiconductor test equipment
Toshiba Mail sorting equipment
Unisys Test boards for VME applications
High-Performance Asea Brown Boveri Industrial control for power distribution
systems
Computers Colorbus/Concept Color copier add-ons for photographic quality
IBM Pre-production ThinkPad display controller
Mitsubishi Mobile PC Pen-input display controller
Sony MiniDisk editing equipment
Synopsys Hardware simulation accelerator
Military Systems Hughes Aircraft Helicopter and missile motor controls, radars
McDonnell Douglas C-17 flight controller
Rockwell Submarine navigational equipment
Saab Automobile AB Simulation systems for military training
</TABLE>
SALES, SUPPORT & MARKETING
QuickLogic sells its products through a network of Company sales managers,
independent sales representatives and electronics distributors in North
America, Europe and Asia. In addition to its corporate headquarters in
Sunnyvale, the Company has regional sales operations in Los Angeles, San Jose,
Dallas, Boston, Raleigh, Chicago and London. The Company's direct sales
organization consists of 18 sales managers, field application engineers and
administrative personnel. In North America, the Company's six sales managers
direct the activities of 19 independent manufacturers' representative firms
operating out of more than 40 offices totaling approximately 182 sales
representatives, as well as the activities of five distributor organizations
with more than 220 locations. Internationally, four sales managers direct the
activities of 11 distributors in Europe and nine distributors in Asia. All of
the foregoing numbers are as of May 31, 1997.
QuickLogic's major North American distributors include Anthem Electronics,
Bell Industries, Bell Microproducts, Future Electronics and Sterling
Electronics. The Company added Anthem Electronics as a distributor in March
1997. Future Electronics also distributes the Company's products in Europe and
Asia. During 1996 and the first quarter of 1997, 53.3% and 68.8%,
respectively, of the Company's revenue from the United States was realized
through distributors, while most of the Company's revenue from outside of
North America was realized through third-party distributors.
As of May 31, 1997, the Company's applications support organization included
four direct field application engineers and 140 application engineers employed
by the Company's distributors. These application engineers provide pre-sales
and on-site technical support to customers. Application support is also
provided by five factory-based customer engineers, who offer the majority of
post-sale support through a dedicated customer support hotline.
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<PAGE>
Under its arrangement with Cypress, the Company provides support for former
Cypress FPGA customers. With the elimination of Cypress as an alternate source
of the Company's products, the Company no longer faces competition with
respect to its proprietary products. The Company's and Cypress' sales
organizations have transitioned most customer accounts to QuickLogic. See "--
Cypress Transaction."
As of May 31, 1997, the Company's marketing organization consisted of nine
employees that promote the performance and flexibility offered by the
Company's products. The Company believes that the opportunity for design wins
with individual design engineers arises several times throughout the year, and
uses various forms of advertising, seminars, shows and conferences to maintain
visibility with these engineers.
RESEARCH AND DEVELOPMENT
The Company's R&D efforts are focused on three areas: device architecture,
development tools, and foundry process development. As of May 31, 1997, the
research and development staff consisted of 47 employees. The device design
engineers endeavor to design products with the optimal combination of speed,
flexibility, HDL compatibility, testability and low cost. Devices are designed
so that their capacities can be quickly scaled up or down to create a family
of standard products that meet a diverse range of user needs. The Company's
software engineering group develops place and route tools (which fit the
design into specific logic cell elements within a device, then devise the
necessary interconnections), and delay modeling tools (which estimate the
timing of all the circuit paths for accurate simulation). The software group
also incorporates third-party software tools into the QuickWorks tool suite,
and develops the design libraries needed for the QuickTools product to
integrate with third-party design environments. The Company's process
engineering group maintains the Company's proprietary antifuse processes,
oversees product manufacturing and process development in its third-party
foundries, and is involved in ongoing process improvements to increase yields
and optimize device characteristics.
The Company's R&D expense for 1994, 1995 and 1996 and for the first quarter
of 1997 was $3.2 million, $3.6 million, $4.6 million and $1.3 million,
respectively. The Company anticipates that it will continue to commit
substantial resources to research and development in the future.
MANUFACTURING
The Company's manufacturing strategy is to establish close relationships
with third-party manufacturers for its wafer fabrication and package assembly
requirements. This allows the Company to focus its resources on product
design, development and marketing rather than on manufacturing expenditures.
Assembly of the Company's devices is primarily performed by Anam/Amkor in
Korea. Final testing is primarily performed by the Company internally, and the
Company is exploring additional outsourcing of its testing.
The Company's relationships with wafer foundries are intended to provide the
Company with stability in the supply of its products, while seeking to
maintain its position as a technology leader. The current pASIC 1 and pASIC 2
product wafers are fabricated by Cypress. The Company expects that its future
products, utilizing smaller product geometries and larger wafer sizes, will be
fabricated by TSMC, which is one of the world's largest dedicated
semiconductor foundries. See "Risk Factors--Dependence on Independent Wafer
Manufacturers" and "--Dependence on Customized Manufacturing Process."
Relationship with Cypress
In connection with the Company's new relationship with Cypress, the
companies entered into a new foundry agreement effective through the year
2001. This agreement guarantees weekly wafer
39
<PAGE>
starts at established prices and yields for the Company's pASIC 1 and pASIC 2
product families, which are fabricated using a 0.65(mu) three-layer metal CMOS
process on 6-inch wafers. These products will continue to be manufactured at
Cypress' Round Rock, Texas facility, and will continue to utilize the
Company's proprietary ViaLink amorphous silicon antifuse technology.
Relationship with TSMC
In October 1996, the Company entered into a memorandum of understanding with
TSMC to co-develop a 0.35(mu) four-layer metal CMOS process for 8-inch wafers
using the Company's ViaLink antifuse technology. The memorandum of
understanding contemplates that the parties will enter into a "take or pay"
contract substantially similar to that offered to TSMC's current customers,
which would be effective for three years following the date of the contract
with successive automatic one-year renewal terms. TSMC's foundries are located
in Hsin Chu, Taiwan.
TSMC is now processing R&D wafers for the Company's FPGA products.
QuickLogic intends that its 9-thousand usable gate pASIC 2 device will be the
first Company product manufactured at TSMC. The high density members of
QuickLogic's third generation pASIC FPGA family are intended to be in
production at TSMC during 1998. The Company anticipates migrating selected
other pASIC 2 devices (which are also currently in production on a 0.65(mu)
process) to the 0.35(mu) CMOS process at TSMC during 1998.
The projections regarding the timing and type of releases of the Company's
third generation family of products are forward-looking statements that
involve risks and uncertainties. The completion and release of any new product
family depend upon the development of necessary technologies, the Company's
relationship with its manufacturers, in particular TSMC, market conditions and
other factors. Accordingly, new products may not be released within the time
frame stated or at all. See "Risk Factors--Dependence on Independent Wafer
Manufacturers," "--Dependence on Customized Manufacturing Processes" and "--
Risks Associated with International Business Activities."
CYPRESS TRANSACTION
In March 1997, the Existing Agreement related to the Company's FPGA products
was terminated and replaced with a new arrangement whereby the Company's FPGA
products will no longer be second sourced by Cypress. In addition, Cypress
agreed to not compete with the Company with respect to antifuse FPGAs or
products that are pin-compatible with the Company's existing pASIC 1 and pASIC
2 products. QuickLogic has commenced support for Cypress's FPGA customers, and
Cypress assisted the Company in the transition of these customers to the
Company. In exchange for the termination of the Existing Agreement and the
reversion of the rights to the intellectual property developed thereunder to
the Company, the Company paid $4.5 million in cash and agreed to issue
2,603,817 shares of Common Stock to Cypress, increasing the aggregate number
of shares of Common Stock of the Company held by Cypress to 3,339,785, prior
to the sale of any shares by Cypress in this offering. In addition, the
Company granted Cypress, including the right to sell shares of Common Stock in
this offering, certain contractual rights as to the shares of the Company's
stock held by Cypress. The parties also entered into a new foundry agreement
and a cross-license agreement. The terms of the new foundry agreement are
discussed under "--Manufacturing: Relationship with Cypress."
Under the terms of the cross-license agreement, Cypress granted to the
Company a royalty-free, non-exclusive, non-sublicensable license to make, have
made, use, offer for sale, sell and distribute programmable logic products
under patents that are currently issued to Cypress or are issued prior to
March 2007. In the event of an acquisition of the Company, the license
continues only as to those products that were commercially available as of the
acquisition or the design of which is in the layout stage and subsequently
become commercially available within one year after the acquisition. The
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<PAGE>
Company granted a reciprocal right to Cypress under its patent portfolio,
except that the license does not extend to antifuse FPGAs or products that are
pin-compatible with the Company's existing pASIC 1 and pASIC 2 products. The
parties also licensed to each other the intellectual property rights developed
under the Existing Agreement, within the scope of the patent licenses set
forth above.
The shares issued to Cypress in connection with the termination of the
Existing Agreement were provided with the same contractual rights as the other
shares of the Company's stock held by Cypress and the other holders of the
Company Common Stock issuable upon conversion of the Preferred Stock. In
addition, the Company granted registration rights to Cypress that are in
addition to those held by other stockholders of the Company. See "Description
of Capital Stock--Registration Rights." First, Cypress may sell a minimum of
one-third of the shares in this offering, and any subsequent public offerings
of the Company's stock. Second, the Company is obligated to file a
registration statement with respect to all of the shares of Common Stock held
by Cypress and not sold in this offering, with such registration statement
being effective upon the expiration of the lockup period imposed by the
Underwriters in connection with this offering. The Company must keep this
registration statement effective until the earlier of (i) the date all of such
shares held by Cypress are sold; (ii) three years from the closing of this
offering; or (iii) the date all such shares are able to be sold in a three-
month period pursuant to Rule 144. Notwithstanding the foregoing, the Company
has the right to suspend Cypress's ability to sell under such registration
statement under certain circumstances. Finally, Cypress has the individual
right to require registration of its shares that is separate from a similar
right held by the other holders of registration rights. The other stockholders
of the Company do not have the right to require inclusion of their shares in
these separate Cypress registrations.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
constant technological change, rapid rates of product obsolescence and price
erosion. The Company's existing competitors include suppliers of conventional
gate arrays, CPLDs and FPGAs, particularly Xilinx, a supplier of SRAM-based
FPGAs, Actel, an anti-fuse FPGA supplier, and Altera, a supplier of CPLDs. The
Company also faces competition from companies that offer standard gate arrays,
which can be obtained at a lower cost for high volumes and may have gate
densities and performance equal or superior to the Company's products. In
addition, the Company expects significant competition in the future from major
domestic and international semiconductor suppliers, and the Company's patents
may not bar competitors to which it has not granted a license from
manufacturing similar products. The Company also may face competition from
suppliers of products based on new or emerging technologies.
The PLD market is dominated by Xilinx and Altera, which together control
over 55% of the market, according to Pace Technologies, a semiconductor market
research firm. The Xilinx products dominate the FPGA segment of the market
while Altera dominates the CPLD segment of the market. In addition, the
Company expects significant competition in the future from major domestic and
international suppliers which have entered or are considering entering the PLD
market. Such suppliers include Lucent Technologies, Vantis
Corporation/Advanced Micro Devices, Inc., Motorola, Inc. and Atmel
Corporation. Most of the Company's current and prospective competitors offer
broader product lines and have significantly greater financial, technical,
manufacturing and marketing resources than the Company. In particular,
companies such as Lucent Technologies, Motorola, Inc. and others have
proprietary wafer manufacturing ability, preferred vendor status with many of
the Company's customers, extensive marketing power and name recognition,
greater financial resources than the Company, and other significant advantages
over the Company. Certain of the current and prospective competitors of the
Company are or may become customers as well. There can be no assurance that
such customers will continue to buy the Company's products if they are
offering their own competing products, which could have a material adverse
effect on the Company's business, financial condition and results of
operations. The Company believes that important competitive factors in its
market are
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<PAGE>
length of development cycle, price, performance, installed base of development
systems, adaptability of products to specific applications, ease of use and
functionality of development system software, reliability and technical
service and support, wafer fabrication capacity and sources of raw materials,
and protection of products by effective utilization of intellectual property
laws. Failure of the Company to compete successfully in any of these or other
areas could have a material adverse effect on its operating results. In
addition, the Company's competitive position is substantially dependent upon
industry competition for effective sales and distribution channels. There can
be no assurance that the Company's products will be competitive. The failure
of the Company to develop and market products that compete successfully with
those of other companies in the market would have a material adverse effect on
the Company's business, financial condition and results of operations.
INTELLECTUAL PROPERTY
The Company holds 30 U.S. patents and has filed 19 applications for
additional U.S. patents containing claims covering various aspects of
programmable integrated circuits, programmable interconnect structures,
programmable antifuse devices, as well as methods and apparatus for
programming antifuse devices. In addition, the Company has two patent
applications pending in Japan. The Company's patents expire between June 2009
and March 2015. The Company has also registered four of its trademarks in the
United States with applications to register an additional two trademarks now
pending. See "Risk Factors--Protection of Intellectual Property."
ACTEL LITIGATION
On January 20, 1994, Actel, a competitor of the Company, filed a lawsuit
against the Company entitled Actel Corporation v. QuickLogic Corporation in
the United States District Court for the Northern District of California (the
"Court"), Case No. C-94 20050JW (PVT). The lawsuit alleges infringement by the
Company of four U.S. patents held by Actel: U.S. Patent 4,873,459 (the "'459
Patent") issued October 10, 1989 and entitled "Programmable Interconnect
Architecture;" U.S.
Patent 4,758,745 (the "'745 Patent") issued July 19, 1988 and entitled "User
Programmable Integrated Circuit Interconnect Architecture and Test Method;"
U.S. Patent 5,055,718 (the "'718 Patent") issued October 8, 1991 and entitled
"Logic Module With Configurable Combinational and Sequential Blocks;" and U.S.
Patent 5,198,705 (the "'705 Patent") issued March 30, 1993 and entitled "Logic
Modular and Configurable Combinational and Sequential Blocks." In each of
March 1995 and March 1996, Actel added a claim that an additional Actel patent
was infringed: U.S. Patent 5,367,208 (the "'208 Patent") issued November 22,
1994 and entitled "Reconfigurable Programmable Interconnect Architecture" and
U.S. Patent 5,479,113 the (the "'113 Patent") issued December 26, 1995 and
entitled "User Configurable Logic Circuits Comprising Antifuses and
Multiplexer-Based Logic Modules." The '459, '745, '208 and '113 Patents all
relate to user programmable interconnect architectures and are based upon the
same application. Actel's '705 and '718 Patents relate to logic modules for
use in FPGAs. As to the '745 and '459 Patents, Actel asserts that QuickLogic's
programmable interconnect circuits and architecture found in its pASIC 1 and
pASIC 2 product families infringe one or more claims of these patents. As to
the '705, '718, and '208 Patents, Actel asserts that QuickLogic's programmable
logic module used in its pASIC1 and pASIC2 product families infringes one or
more claims of each patent. As to Actel's '113 patent, Actel asserts that
QuickLogic's control circuit controlling the program voltage within
QuickLogic's user programmable interconnect architecture infringes one or more
claims. As to each patent-in-suit, Actel seeks an injunction preventing
QuickLogic from further use of the claimed inventions, damages for past
infringement of the inventions, Actel's attorneys' fees and increased damages
for willful infringement. Sales of the Company's pASIC products have accounted
for substantially all of the Company's revenue to date and are expected to
account for substantially all of the Company's revenue for the foreseeable
future. Fees from licenses of the QuickWorks and QuickTools software design
tools have accounted for substantially all of the remainder of the Company's
revenue. The Company has filed answers to each
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of these complaints and counter-claims seeking declarations that the Actel
patents at issue are not infringed by the Company, are invalid, and are
unenforceable. On April 19, 1994, QuickLogic moved to stay proceedings pending
reexamination by the United States Patent and Trademark Office (the "USPTO")
of two of the patents involved in the litigation, the '745 Patent and the '459
Patent. The Court granted this stay on July 21, 1994. The USPTO confirmed the
patentability of these two patents on November 15, 1994 and January 10, 1995,
respectively, which Actel may argue will increase the burden upon QuickLogic
to prove the invalidity of the two reexamined patents. The Court lifted the
stay on November 8, 1994.
On November 15, 1994, Actel filed a motion for summary judgment with respect
to the Company's infringement of claim 1 of the '705 Patent. Actel's claims in
the '705 Patent relating to its logic module technology include an
interconnect structure, programming structures, and logic circuits wherein a
multiplicity of logic circuits are arranged in a regular pattern on the
semiconductor substrate. The logic circuits or logic modules contain a number
of logic blocks which ultimately determine the function that the FPGA could
perform. The '705 Patent covers a logic module, and its structure and its
connections to the interconnect structure and architecture. Actel has referred
to this technology as its "nested three multiplexer" architecture, which
involves three dual input, single output multiplexers. The logic module, as
claimed in the '705 Patent, includes two multiplexers wherein each output is
commonly coupled to one of the pair of inputs of a third multiplexer. The
first and second multiplexer have four inputs or "data nodes." The output of
the third multiplexer may be connected to a single memory cell or "latch."
First and second multiplexers are controlled by a single level logic gate at
their select inputs as is the third multiplexer which is similarly controlled
by a second single level logic gate. The Court appointed a Special Master to
assist it in determining certain issues related to this litigation, and the
Special Master recommended on October 4, 1996 that the Court find that the
Company's pASIC 1 products infringe claim 1 of the '705 Patent. On April 14,
1997, the Court adopted the recommendation of the Special Master and granted
Actel's motion for summary judgment that the Company's pASIC 1 products
infringe claim 1 of the '705 Patent. Any appeal of the summary judgment motion
on infringement of the '705 Patent cannot be made until after there is a final
judgment. If the '705 Patent is finally adjudicated to be valid and
enforceable, and the summary judgment motion is upheld on appeal, then Actel
would be entitled to significant damages for past infringement and potentially
would be entitled to an injunction on future infringement. Such an injunction
and/or the payment of damages would have a material adverse effect on the
Company's business, financial condition and results of operations, and could
potentially render it insolvent.
On April 12, 1995, QuickLogic filed a counterclaim alleging that Actel has
infringed two U.S. patents held by the Company, U.S. Patent Nos. 5,220,213
(the "'213 Patent") and 5,396,127 (the "'127 Patent"), which involve the
Company's logic module having three multiplexers wherein the outputs of two of
the multiplexers are commonly coupled to the pair of inputs of the third, all
other inputs in the module are connected to logic gates, and the output of the
third multiplexer is connected to a flip flop. As to each patent-in-suit in
the counterclaim, the Company alleges infringement of one or more claims and
seeks an injunction preventing Actel from further infringement of the claimed
inventions. The Company seeks damages for past infringement of the inventions
and the Company's attorneys' fees based on the alleged infringement. On
January 18, 1996, Actel filed a motion for summary judgment declaring the '213
and '127 Patents to be invalid. Actel's motion is based on an "on-sale bar"
defense, i.e. that the Actel products which the Company claims infringe these
patents were offered for sale more than one year before the filing dates of
the '213 and '127 Patents which, if proven under patent law, would invalidate
these patents. Discovery is currently in progress to allow QuickLogic to file
its opposition to this motion, which the Company believes will be filed in
1997, with the hearing on this motion to be scheduled thereafter. On February
5, 1996, QuickLogic filed a motion for summary judgment of infringement by
Actel of claim 1 of the '213 Patent. Actel has opposed this motion, and
discovery is currently in progress. Actel also requested a separate trial on
the "on-sale bar" defense, which request was denied by the Special Master on
June 4, 1997 in a Notice of
43
<PAGE>
Intention to Rule. After the issuance of a formal recommendation by the
Special Master, the Court must then decide whether to adopt this
recommendation.
On January 14, 1997, an additional U.S. patent was issued to the Company,
U.S. Patent No. 5,594,364 (the "'364 Patent"). On February 28, 1997, the
Company filed a motion to add a counterclaim for Actel's infringement of this
patent. A hearing on this motion was held on May 19, 1997 before the Special
Master, who granted the Company's motion on June 4, 1997 in a Notice of
Intention to Rule. After the issuance of a formal recommendation by the
Special Master, the Court must then decide whether to adopt this
recommendation.
On June 4, 1997, the Special Master also notified the parties of his intent
to accept the parties' stipulation that Actel be allowed to amend its
complaint to add a claim for infringement of an additional patent, U.S. Patent
No. 5,610,534 (the "'534 Patent"), issued March 11, 1997 and entitled "Logic
Module For A Programmable Logic Device." Actel alleges that the Company has
infringed one or more claims of this patent and is likely to seek both
monetary and injunctive relief, but has not yet filed or served an amended
complaint. After the issuance of a formal recommendation by the Special
Master, the Court must then decide whether to adopt this recommendation.
In addition to the patent infringement actions, Actel amended its claims
against the Company to include a claim against the Company and one of its
employees on June 14, 1995 alleging misappropriation of trade secrets, breach
of contract, breach of confidential relationship, and unfair competition.
Actel has sought assignment of certain issued and future patents of the
Company, two of which are part of this lawsuit, in relation to this claim in
addition to unspecified money damages, that the damages be doubled, attorneys'
fees and other remedies. These claims are based on allegations that this
employee, who had once been a consultant to Actel, had misappropriated
confidential information from Actel related to logic cells, which the Company
then incorporated into its pASIC products. The employee and the Company have
filed answers denying each of these claims. Discovery is ongoing at this time
and no dispositive motions have been filed or heard.
Trial on the patent infringement and trade misappropriation claims is
currently scheduled for September 1998. However, there can be no assurance
that the trial will occur at such time and may be delayed significantly. As
the outcome of any litigation is inherently uncertain, the Company is unable
to predict the outcome of this litigation. Therefore, there can be no
assurance that the Company will prevail in the trial on the patent
infringement claims and counter-claims, the trial on the alleged
misappropriation of intellectual property, or hearings on any motions related
to such proceedings. The timing of the filing of any motions by Actel,
hearings on motions by either Actel or the Company, the issuance of rulings on
such motions, the issuance of recommendations by the Special Master and the
adoption or rejection of such recommendations by the Court are not within the
Company's control and could occur at any time. The announcement of any rulings
or recommendations, or the adoption or rejection of recommendations, that are
adverse to the Company, will likely have a material adverse effect upon the
market price for the Company's stock.
The semiconductor industry is characterized by frequent litigation of this
type regarding patent and other intellectual property rights, which involve
highly technical and subjective analysis. Discovery and litigation of such
issues are time-consuming and costly, and Actel possesses more personnel and
greater financial resources than the Company and is able to conduct extensive
and protracted litigation at less of a relative detriment to its current
business. While patent infringement litigation in the semiconductor industry
has at times resulted in voluntary settlements by the parties, often involving
cross-licensing of the patents involved, there can be no assurance that such a
result will be reached in this case. In addition, the terms of any settlement
may require the Company to stop selling all or certain of its products, pay
damages or royalties or other forms of consideration or grant licenses to all
or a portion of its intellectual property portfolio, any or all of which could
have a material adverse effect on the Company's business, financial condition
and results of operations. Patent infringement
44
<PAGE>
litigation in the semiconductor industry has also resulted in court orders to
pay significant damages and/or injunctions preventing a party from making,
using or offering to sell, selling or importing any products that incorporate
technology covered by such patents. As referenced above, sales of the
allegedly infringing products by the Company have accounted for substantially
all of the Company's past revenue and are expected to account for
substantially all of the Company's revenue for the foreseeable future. This
litigation could result in the Company being required to cease selling its
products and/or could also result in the Company paying significant damages,
including treble damages for willful infringement, either of which would have
a material adverse effect on the Company's business, financial condition and
results of operations and could potentially render it insolvent.
There can be no assurance that the Company will prevail in its claims or
defenses or that it would be able to obtain a license under any Actel patents
that are found to be infringed, or if such a license were obtained, that it
would be on terms that would not have an adverse effect on the Company's
business, financial condition and results of operations. The current
litigation and any future litigation, whether or not determined in the
Company's favor or settled by the Company, has been and will continue to be
costly and will divert the efforts and attention of the Company's management
and technical personnel from normal business operations, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. It is expected that legal fees and other litigation-
related expenses will continue to adversely affect the Company's operating
results for the foreseeable future. Any adverse determinations in this
litigation or a settlement could result in the loss of the Company's
proprietary rights, subject the Company to significant liabilities, require
the Company to seek licenses from or to grant licenses to third parties or
prevent the Company from licensing its technology, any of which could have a
material adverse effect on the Company's business, financial condition and
results of operations. See "Risk Factors--Actel Litigation."
EMPLOYEES
As of May 31, 1997, the Company had a total of 144 employees worldwide, with
45 people in operations, 47 people in research and development, 18 people in
sales, 14 people in marketing, 18 people in general and administrative and two
people in management information systems. The Company believes that its future
success will depend in part on its continued ability to attract, hire and
retain qualified personnel. Competition for such personnel is intense, and
there can be no assurance that the Company will be able to identify, attract
and retain such personnel in the future. None of the Company's employees is
represented by a labor union, and management believes its employee relations
are good.
FACILITIES
The Company's principal administrative, sales, marketing, research and
development and final testing facility is located in a building of
approximately 42,624 square feet in Sunnyvale, California. This facility is
leased through the 2003 with an option to renew through 2006. In addition, the
Company leases sales offices in London, England. The London offices are leased
through December 1997. The Company believes that its existing facilities are
adequate for its current needs.
45
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information regarding the executive
officers and directors of the Company as of May 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
E. Thomas Hart.................. 55 President, Chief Executive Officer and
Director
John M. Birkner................. 53 Vice President, Computer-Aided Engineering
Andrew K. Chan.................. 46 Vice President, Product Development
Donald F. Faria................. 37 Vice President, Marketing
Richard C. Johnson.............. 45 Vice President, Worldwide Sales
Vincent A. McCord............... 50 Vice President, Finance, Chief Financial
Officer and Secretary
Philip J. Ong................... 46 Vice President, Operations
Scott D. Ward................... 43 Vice President, Engineering
Ronald D. Zimmerman............. 49 Vice President, Human Resources
Irwin B. Federman (1)(2)........ 61 Chairman and Director
Hua-Thye Chua(1)(2)............. 62 Director
</TABLE>
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
E. THOMAS HART has served as President and Chief Executive Officer and a
director of the Company since June 1994. Prior to joining the Company, Mr.
Hart was Vice President and General Manager of the Advanced Networks Division
at National Semiconductor Corp., a semiconductor manufacturing company, where
he worked from September 1992 to June 1994. Prior to joining National
Semiconductor Corporation, Mr. Hart was a private consultant from February
1986 to September 1992 with Hart Weston International, a technology-based
management consulting firm. Mr. Hart earned a B.S.E.E. degree from the
University of Washington.
JOHN M. BIRKNER, a co-founder of the Company, has served with the Company
since April 1988, most recently as Vice President of Computer-Aided
Engineering. As a fellow at Monolithic Memory Inc. ("MMI"), a semiconductor
manufacturing company, from September 1975 to June 1986, he co-invented the
PAL device and helped to lead its development and marketing efforts. Mr.
Birkner holds a B.S.E.E. degree from the University of California at Berkeley
and an M.S.E.E. degree from the University of Akron.
ANDREW K. CHAN, a co-founder of the Company, has served with the Company
since April 1988, most recently as Vice President of Product Development.
Prior to joining the Company, Mr. Chan was a design engineering manager at
MMI. Mr. Chan earned a B.S.E.E. degree from Washington State University and an
M.S.E.E. degree from the University of New York at Stony Brook.
DONALD F. FARIA joined the Company in April 1997 as Vice President of
Marketing. Prior to joining QuickLogic, Mr. Faria was Director of FPGA
Solutions at Synopsys, Inc., a computer automated design technology company,
from September 1995 to March 1997. From January 1995 to August 1995, he was
director of Product Marketing at Chip Express Corporation, a laser
programmable gate array company. Mr. Faria was employed by Altera Corporation,
a CPLD company, from July 1984 until December 1994. While at Altera, Mr. Faria
held several positions including Director of Marketing for Development Tools
and Special Projects, Director of Applications and Product Planning, Product
Planning Manager and Application Manager. Mr. Faria received a B.S.E.E. degree
from the University of Massachusetts.
46
<PAGE>
RICHARD C. JOHNSON has served as Vice President of Worldwide Sales for the
Company since August 1995. From June 1992 to July 1995, Mr. Johnson was Vice
President of Sales and Corporate Marketing at Integrated Information
Technology, a semiconductor manufacturing company. He received a B.S. degree
in Marketing and an M.B.A. degree from the University of Southern California.
VINCENT A. MCCORD joined the Company in November 1996 as Vice President,
Finance, Chief Financial Officer and Secretary. From July 1996 to October
1996, Mr. McCord was a business and financial consultant. From April 1996 to
June 1996, Mr. McCord was Chief Financial Officer at Exergy, Inc., an energy
company. Prior to joining Exergy, Inc., Mr. McCord was Vice President and
Corporate Controller at LSI Logic, Inc., a semiconductor manufacturing
company, from September 1991 to April 1996. Mr. McCord received a B.S. degree
in Applied Mathematics from the Georgia Institute of Technology and an M.B.A.
degree from Harvard University.
PHILIP J. ONG joined the Company in December 1994 as Vice President of
Operations. Prior to joining the Company, he held a series of director
positions at Advanced Micro Devices, Inc. ("AMD"), a semiconductor
manufacturing company, from November 1989 to December 1994. From June 1992 to
December 1994, Mr. Ong was Director of Operations for AMD's Submicron
Development Center and prior to that was Director of Fab Operations at one of
AMD's facilities. Prior to joining AMD, Mr. Ong worked at a variety of
companies including MMI. Mr. Ong received a B.S. degree in Chemical
Engineering from the University of California at Berkeley.
SCOTT D. WARD joined the Company in April 1997 as Vice President of
Engineering. From June 1980 to March 1997, Mr. Ward was employed by National
Semiconductor Corporation. While at National Semiconductor Corporation, Mr.
Ward held several positions, including Product Line Director--New Venture
Start-Up, Product Line Director--Automotive Systems Group, Product Line
Director--Amplifier Products Group, Product Line Manager for SLIC, Senior
Product Engineering Manager and Section Head--MOS 1, where he was responsible
for product engineering. Mr. Ward obtained a B.S.E.T. degree from California
Polytechnic University at San Luis Obispo.
RONALD D. ZIMMERMAN joined the Company in October 1996 as Vice President of
Human Resources with more than 15 years experience in the human resources
industry. From August 1988 to October 1996, Mr. Zimmerman was the group human
resources director of the Analog Products Group at National Semiconductor
Corporation. Also during his eight years at National Semiconductor
Corporation, he was group human resources director of the corporate technology
and quality/reliability organizations and the human resources director of
corporate administration. Mr. Zimmerman received a B.A. degree in Sociology
and Psychology and an M.A. in Psychology from San Jose State University.
IRWIN B. FEDERMAN has served as a director of the Company since September
1989. Mr. Federman has been a general partner of U.S. Venture Partners, a
venture capital company, since 1990. From 1988 to 1990 he was a Managing
Director of Dillon Read & Co., an investment banking firm, and a general
partner in its venture capital affiliate, Concord Partners. Mr. Federman
serves on the Boards of Directors of TelCom Semiconductor, Inc., a
semiconductor company, SanDisk Corporation, a semiconductor company, Western
Digital Corporation, a disk drive manufacturer, Komag Incorporated, a thin
film media manufacturer, NeoMagic Corporation, a developer of multimedia
accelerators, and Check Point Software Technologies, Ltd, a network security
software company. He is on the Dean's Advisory Board of Santa Clara
University's Leavy School of Business. He received a B.S. degree in Accounting
from Brooklyn College, is a Certified Public Accountant, and was awarded an
honorary Doctorate of Engineering Science from Santa Clara University.
HUA-THYE CHUA, a co-founder of the Company, served as Vice President of
Technology Development from April 1989 to December 1996. He has been a
director since the Company's inception in April 1988. During the prior 25
years, Mr. Chua worked at semiconductor companies Fairchild Semiconductor
Corporation, Intel Corporation and MMI where he was involved in the design
47
<PAGE>
of bipolar and CMOS integrated circuits. While at MMI, Mr. Chua co-invented
the PAL device. Mr. Chua holds a B.S.E.E. degree from Ohio University and an
M.S.E.E. degree from the University of California at Berkeley.
There are no family relationships among any of the Company's directors or
executive officers.
AUDIT COMMITTEE
The Audit Committee was first formed in June 1995 and currently consists of
Messrs. Federman and Chua. The Audit Committee makes recommendations to the
Board regarding the selection of independent accountants, reviews the results
and scope of the audit and other services provided by the Company's
independent accountants and reviews and evaluates the Company's internal audit
and control functions.
COMPENSATION COMMITTEE; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The Compensation Committee was first formed in June 1995 and currently
consists of Messrs. Federman and Chua. The Compensation Committee administers
the Company's stock option plans and makes recommendations to the Board
concerning salaries and incentive compensation for employees, directors and
consultants of the Company. No member of the Compensation Committee or
executive officer of the Company has a relationship that would constitute an
interlocking relationship with executive officers or directors of another
entity. In addition to serving as a director of the Company, Mr. Chua was an
employee of the Company until December 1996.
DIRECTOR COMPENSATION
The Company's non-employee directors currently do not receive any cash
compensation for attending board meetings, including the meetings of any
committees on which they sit. Board members will be reimbursed for their out-
of-pocket expenses incurred in attending Board of Directors and committee
meetings. The directors will be eligible to receive stock option grants under
the Company's 1997 Director Option Plan.
48
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth, for the fiscal year ended December 31, 1996,
all compensation earned for services rendered to the Company by the Company's
Chief Executive Officer and each of the other four most highly compensated
executive officers of the Company and a former executive officer of the
Company each of whose total salary and bonus compensation for 1996 exceeded
$100,000 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
IN 1996 AWARDS
------------------ ---------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY($) BONUS($) OPTION GRANTS(#) COMPENSATION($)
- --------------------------- --------- -------- ---------------- ---------------
<S> <C> <C> <C> <C>
E. Thomas Hart............. 171,635 33,731 -- $8,515(1)
Chief Executive Officer
and President
Richard C. Johnson......... 140,865 39,585 -- 6,581(2)
Vice President, Sales
Philip J. Ong.............. 116,255 26,244 28,571 --
Vice President, Operations
Nim Cho Lam(3)............. 62,234 59,932 -- 4,133(4)
Vice President,
Engineering
Andrew K. Chan............. 107,885 -- -- --
Vice President,
Product Development
John M. Birkner............ 102,981 -- -- --
Vice President, Computer-
Aided Engineering
</TABLE>
- --------
(1) Represents reimbursement of automobile lease payments.
(2) Represents automobile allowance.
(3) Mr. Lam was employed at the Company until July 1996.
(4) Represents compensation for vacation time not taken.
Vincent A. McCord, the Company's Vice President, Finance, Chief Financial
Officer and Secretary was employed by the Company beginning in November 1996
and received $18,846 in salary in 1996. On an annualized basis, his salary for
1996 would have been $140,000. Ronald D. Zimmerman, the Company's Vice-
President, Human Resources, was employed by the Company beginning in October
1996 and received $20,000 in salary in 1996. On an annualized basis, his
salary for 1996 would have been $140,000.
49
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1996
The following table sets forth certain information with respect to stock
options granted to each of the Company's Named Executive Officers during the
fiscal year ended December 31, 1996.
OPTION GRANTS IN FISCAL YEAR 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS(1)
------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
NUMBER OF OPTIONS STOCK PRICE
SECURITIES GRANTED TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(2)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED 1996 SHARE(3) DATE 5% 10%
---- ---------- ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart.......... -- -- -- -- -- --
Richard C. Johnson...... -- -- -- -- -- --
Philip J. Ong........... 28,571 9.0% $1.05 10/14/2006 $ 17,968 $ 45,535
Nim Cho Lam(4).......... -- -- -- -- -- --
Andrew K. Chan.......... -- -- -- -- -- --
John M. Birkner......... -- -- -- -- -- --
</TABLE>
- --------
(1) All options are fully exercisable, subject to the Company's right to
repurchase any unvested shares at the original exercise price in the event
of the optionee's termination. Shares generally vest at the rate of 12.5%
after six months of service from the date of grant and 6.25% of the total
number of shares each three month period of service thereafter.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. The assumed
5% and 10% rates of stock price appreciation are mandated by rules of the
Securities and Exchange Commission and do not represent the Company's
estimate or projection of the future Common Stock price. Actual gains, if
any, on stock option exercises are dependent on the future finalized
performance of the Company, overall conditions and the option holder's
continued employment through the vesting period and option term. This
table does not take into account any appreciation in the fair market value
of the Common Stock from the date of grant to the date of this offering,
other than the columns reflecting assumed rates of appreciation of 5% and
10%.
(3) The exercise price per share of options granted represented the fair
market value of the underlying shares of Common Stock on the dates the
respective options were granted as determined by the Company's Board of
Directors.
(4) Mr. Lam was employed at the Company until July 1996.
Mr. McCord was employed by the Company beginning in November 1996. If he
were a Named Executive Officer, the information set forth opposite his name in
the above table would have been 92,857; 29.3%; $1.05; 11/14/2006; $65,960; and
$147,990. Mr. Zimmerman was employed by the Company beginning in October 1996.
If he were a Named Executive Officer, the information set forth opposite his
name in the above table would have been 57,143; 9.0%; $1.05; 10/14/2006;
$35,937; and $91,071.
50
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table sets forth for each of the Named Executive Officers
certain information concerning the number of shares subject to both
exercisable and nonexercisable stock options at December 31, 1996. Also
reported are values for "in-the-money" options that represent the positive
spread between the respective exercise prices of outstanding stock options and
the fair value of the Company's Common Stock as of December 31, 1996, as
determined by the Board of Directors.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY OPTIONS
ACQUIRED VALUE OPTIONS AT FISCAL YEAR END: AT FISCAL YEAR END (1):
ON REALIZED ---------------------------- ----------------------------
NAME EXERCISE ($) EXERCISABLE(2) UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE
---- -------- -------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart.......... -- -- 342,857 -- $1,704,000 --
Richard C. Johnson...... -- -- 178,571 -- 887,500 --
Philip J. Ong........... -- -- 78,571 -- 380,500 --
Nim Cho Lam(3).......... 19,197 $40,314(4) 19,197 -- 6,719 --
Andrew K. Chan.......... -- -- -- -- 67,452 --
John M. Birkner......... -- -- 12,679 -- 67,452 --
</TABLE>
- --------
(1) Calculated by determining the difference between the fair value of the
securities underlying the option at December 31, 1996 as determined by the
Company's Board of Directors ($5.67 per share) and the weighted average
exercise price of the Named Executive Officer's option.
(2) Options granted under the 1989 Stock Plan may be exercised immediately
upon grant and prior to full vesting subject to the optionee's entering a
Restricted Stock Purchase Agreement with the Company with respect to
unvested shares. Any exercises of unvested shares are subject to
repurchase by the Company at the original exercise price until fully
vested. Shares generally vest at the rate of 12.5% after six months of
service from the date of grant and 6.25% of the total number of shares
each three-month period of service thereafter.
(3) Mr. Lam was employed at the Company until July 1996.
(4) Calculated by determining the differences between the fair value of the
securities underlying the option at the time of exercise and the exercise
price.
Mr. McCord was employed by the Company beginning in November 1996. He had
92,857 shares subject to unexercised options at fiscal year end having value
at fiscal year end of $429,000. Mr. Zimmerman was employed by the Company
beginning in October 1996. He had 57,143 shares subject to unexercised options
at fiscal year end having value at fiscal year end of $264,000.
EMPLOYEE BENEFIT PLANS
1989 Stock Option Plan
The Company's 1989 Stock Option Plan (the "Option Plan") was adopted by the
Board of Directors and approved by its stockholders in October 1989. In
February 1996, the Board of Directors amended the Option Plan to increase the
number of shares of Common Stock reserved for issuance thereunder from
1,385,714 shares to 2,100,000 shares, which increase was approved by the
Company's stockholders in March 1996. In July 1996, the Board of Directors
amended the Option Plan to allow employees to exercise unvested stock options
(prior to vesting), and to have those exercised unvested shares deposited with
an escrow agent until the shares are fully vested and the Company's repurchase
option lapses. In March 1997, the Board of Directors amended the Option Plan
to increase the number of shares of Common Stock reserved for issuance
thereunder to a total of 2,814,286 shares. The amendment will be submitted to
the stockholders for approval in June 1997. As of May 31, 1997, options to
purchase a total of 1,604,750 shares at a weighted average exercise price of
$2.00 per share were outstanding, and 714,478 shares remained available for
future option grants.
51
<PAGE>
The Option Plan provides for the grant to employees (including officers and
employee-directors) of "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), and for the
grant to employees, consultants and directors of nonstatutory stock options.
The Option Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator") and is currently
administered by the Compensation Committee. The Administrator determines the
terms of options granted under the Option Plan, including the number of shares
subject to option, the exercise price and the exercisability of the option.
The exercise price of all incentive stock options granted under the Option
Plan must be at least equal to the fair market value of the Common Stock of
the Company on the date of grant. The exercise price of all nonstatutory stock
options must equal at least 85% of the fair market value of the Common Stock
on the date of grant. The exercise price of any incentive stock option granted
to an optionee who owns stock representing more than 10% of the voting power
of the Company's outstanding capital stock must equal at least 110% of the
fair market value of the Common Stock on the date of grant. Payment of the
exercise price may be made in cash, check, certain other shares of the
Company's stock, promissory notes or other consideration determined by the
Administrator.
The Administrator determines the term of options. The term of an incentive
stock option may not exceed ten years; provided, however, that the term of an
incentive stock option granted to an optionee who, at the time of grant, owns
stock representing more than 10% of the voting power of the Company's
outstanding capital stock may not exceed five years. No options may be
transferred by the optionee other than by will or the laws of descent or
distribution. Each option may be exercised during the lifetime of the optionee
only by such optionee. Options granted to each employee under the Option Plan
generally become exercisable cumulatively as to 12.5% of the shares subject to
the option six months after the vesting start date, and as to 6.25% of the
shares subject to the option at the end of each succeeding three-month period.
As of July 16, 1996, options granted to employees under the Option Plan became
immediately exercisable, subject to the provisions of the Exercise Notice and
Restricted Stock Agreement for Unvested Shares signed by optionees at the time
of exercise pursuant to which any unvested shares are subject to repurchase by
the Company at the original exercise price.
In the event the Company merges with or into another corporation, all
outstanding options shall be assumed or an equivalent option substituted by
the successor corporation. In the event that such successor corporation does
not agree to assume such options or to substitute an equivalent option,
options granted prior to February 1996 may be exercised in full, including
shares as to which would not otherwise be exercisable. Options granted
subsequent to February 1996 may be exercised for a period of 15 days to the
extent vested upon the expiration of such period, after which any such options
not exercised will terminate immediately. The Administrator has the authority
to amend or terminate the Option Plan as long as such action does not
adversely affect any outstanding option, and provided that stockholder
approval shall be required for an amendment to increase the number of shares
subject to the Option Plan, to change the designation of the class of persons
eligible to be granted options, or to materially increase benefits accruing to
participants under the Option Plan if the Company is registered under Section
12 of the Exchange Act. Unless terminated earlier, the Option Plan will
terminate in October 1999.
1997 Stock Plan
The Company's 1997 Stock Plan (the "1997 Plan") was approved by the Board of
Directors in May 1997 and will be submitted to the stockholders for approval
in June 1997. The 1997 Plan is intended to be a successor to the Option Plan.
Upon stockholder approval of the 1997 Plan, the remaining shares reserved for
issuance pursuant to the Option Plan will roll over and be reserved for
issuance pursuant to the 1997 Plan. The 1997 Plan provides for the grant of
incentive
52
<PAGE>
stock options to employees (including officers and employee directors) and for
the grant of nonstatutory stock options and stock purchase rights ("SPRs") to
employees, directors and consultants. A total of 1,000,000 shares of Common
Stock, including the remaining shares reserved under the Option Plan, are
currently reserved for issuance pursuant to the 1997 Plan, plus annual
increases equal to the lesser of (i) 800,000 shares, (ii) 5% of the
outstanding shares, or (iii) a lesser amount determined by the Board of
Directors. Unless terminated sooner, the 1997 Plan will terminate
automatically in May 2007.
The 1997 Plan may be administered by the Board of Directors or a committee
of the Board (as applicable, the "Administrator"). It is currently
contemplated that the 1997 Plan will be administered by the Compensation
Committee of the Board of Directors. The Administrator has the power to
determine the terms of the options or SPRs granted, including the exercise
price of the option or SPR, the number of shares subject to each option or
SPR, the exercisability thereof, and the form of consideration payable upon
such exercise. In addition, the Administrator has the authority to amend,
suspend or terminate the 1997 Plan, provided that no such action may affect
any share of Common Stock previously issued and sold or any option previously
granted under the 1997 Plan.
Options and SPRs granted under the 1997 Plan are not generally transferable
by the optionee, and each option and SPR is exercisable during the lifetime of
the optionee only by such optionee. Options granted under the 1997 Plan must
generally be exercised within 90 days after the end of optionee's status as an
employee, director or consultant of the Company, or within 12 months after
such optionee's termination by death or disability, but in no event later than
the expiration of the option's ten year term. In the case of SPRs, unless the
Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser's employment with the Company for any
reason (including death or disability). The purchase price for shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original price paid by the purchaser and may be paid by cancellation of any
indebtedness of the purchaser to the Company. The repurchase option shall
lapse at a rate determined by the Administrator. The exercise price of all
incentive stock options granted under the 1997 Plan must be at least equal to
the fair market value of the Common Stock on the date of grant. The exercise
price of nonstatutory stock options and SPRs granted under the 1997 Plan is
determined by the Administrator, but with respect to nonstatutory stock
options intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended,
the exercise price must at least be equal to the fair market value of the
Common Stock on the date of grant. With respect to any participant who owns
stock possessing more than 10% of the voting power of all classes of the
Company's outstanding capital stock, the exercise price of any incentive stock
option granted must equal at least 110% of the fair market value on the grant
date and the term of such incentive stock option must not exceed five years.
The term of all other options granted under the 1997 Plan may not exceed ten
years.
The 1997 Plan provides that in the event of a merger of the Company with or
into another corporation, or a sale of substantially all of the Company's
assets, each option shall be assumed or an equivalent option substituted for
by the successor corporation. If the outstanding options are not assumed or
substituted for by the successor corporation, the Administrator shall provide
for the optionee to have the right to exercise the option or SPR as to all of
the optioned stock, including shares which would not otherwise be exercisable.
If the Administrator makes an option or SPR exercisable in full in the event
of a merger or sale of assets, the Administrator shall notify the optionee
that the option or SPR shall be fully exercisable for a period of 15 days from
the date of such notice, and the option or SPR will terminate upon the
expiration of such period.
53
<PAGE>
1997 Director Option Plan
The 1997 Director Option Plan (the "Director Plan") was adopted by the Board
of Directors in May 1997 and will be submitted to the stockholders for
approval in June 1997. The Director Plan provides for the grant of
nonstatutory stock options to non-employee directors. The Director Plan has a
term of ten years, unless terminated sooner by the Board. A total of 500,000
shares of Common Stock have been reserved for issuance under the Director
Plan, plus annual increases equal to (i) 25,000 shares or (ii) a lesser amount
determined by the Board.
The Director Plan provides for the automatic grant of 30,000 shares of
Common Stock (the "First Option") to each non-employee director on the later
of (i) the effective date of the Director Plan, or (ii) the date on which the
non-employee director was appointed to the Board, unless immediately prior to
becoming a non-employee director, such person was an employee director of the
Company. In addition to the First Option, each non-employee director shall
automatically be granted an option to purchase 6,000 shares (a "Subsequent
Option") on the first day of May of each year, if on such date he or she shall
have served on the Board for at least six months. Each First Option and each
Subsequent Option shall have a term of ten years. The shares subject to the
First Option and to the Subsequent Option shall vest as to 25% of the optioned
stock one year from the date of grant, and 1/48 of the optioned stock shall
vest each month thereafter, provided the person continues to serve as a
Director on such dates. The exercise price of each First Option and each
Subsequent Option shall be 100% of the fair market value per share of the
Common Stock, generally determined with reference to the closing price of the
Common Stock as reported on the Nasdaq National Market, on the last trading
day prior to date of grant.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option granted under the Director Plan may be
assumed or an equivalent option substituted for by the successor corporation.
If an option is assumed or substituted for by the successor corporation, it
shall continue to vest as provided in the Director Plan. However, if a non-
employee director's status as a director of the Company or the successor
corporation, as applicable, is terminated other than upon a voluntary
resignation by the non-employee director, each option granted to such non-
employee director shall become fully vested and exercisable. If the successor
corporation does not agree to assume or substitute for the option, each option
shall become fully vested and exercisable for a period of 15 days from the
date the Board notifies the optionee of the option's full exercisability,
after which period the option shall terminate. Options granted under the
Director Plan must be exercised within three months of the end of the
optionee's tenure as a director of the Company, or within 12 months after such
director's termination by death or disability, but in no event later than the
expiration of the option's ten-year term. No option granted under the Director
Plan is transferable by the optionee other than by will or the laws of descent
and distribution, and each option is exercisable, during the lifetime of the
optionee, only by such optionee.
1997 Employee Stock Purchase Plan
The Company's 1997 Employee Stock Purchase Plan (the "1997 Purchase Plan")
was adopted by the Board of Directors in May 1997 and will be submitted to the
stockholders in June 1997. A total of 750,000 shares of Common Stock has been
reserved for issuance under the 1997 Purchase Plan, plus annual increases
equal to the lesser of (i) 500,000 shares, (ii) 3% of the outstanding shares
on such date or (iii) a lesser amount determined by the Board.
The 1997 Purchase Plan, which is intended to qualify under Section 423 of
the Internal Revenue Code of 1986, as amended, contains consecutive,
overlapping, 24-month offering periods. Each offering period includes four
six-month purchase periods. The offering periods generally start on the first
trading day on or after the first of October and the first of April of each
year, except for the first such offering period which commences on the first
trading day on or after the date of this offering and ends on the last trading
day on or before April 1, 1999.
54
<PAGE>
Employees are eligible to participate if they are customarily employed by
the Company or any participating subsidiary for at least 20 hours per week and
more than five months in any calendar year. However, any employee who (i)
immediately after grant owns stock possessing 5% or more of the total combined
voting power or value of all classes of the capital stock of the Company, or
(ii) whose rights to purchase stock under all employee stock purchase plans of
the Company accrues at a rate which exceeds $25,000 worth of stock for each
calendar year may be not be granted an option to purchase stock under the 1997
Purchase Plan. The 1997 Purchase Plan permits participants to purchase Common
Stock through payroll deductions of up to 20% of the participant's
"compensation." Compensation is defined as the participant's base straight
time gross earnings and commissions but excludes payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation. The maximum number of shares a participant may purchase during a
single purchase period is 2,500 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of Common Stock at the end of each purchase period. The price of stock
purchased under the 1997 Purchase Plan is 85% of the lower of the fair market
value of the Common Stock at the beginning of the offering period or at the
end of the purchase period. In the event the fair market value at the end of a
purchase period is less than the fair market value at the beginning of the
offering period, the participants will be withdrawn from the current offering
period following exercise and automatically re-enrolled in a new offering
period. The new offering period will use the lower fair market value as of the
first date of the new offering period to determine the purchase price for
future purchase periods. Participants may end their participation at any time
during an offering period, and they will be paid their payroll deductions to
date. Participation ends automatically upon termination of employment with the
Company.
Rights granted under the 1997 Purchase Plan are not transferable by a
participant other than by will, the laws of descent and distribution, or as
otherwise provided under the 1997 Purchase Plan. The 1997 Purchase Plan
provides that, in the event of a merger of the Company with or into another
corporation or a sale of substantially all of the Company's assets, each
outstanding option may be assumed or substituted for by the successor
corporation. If the successor corporation refuses to assume or substitute for
the outstanding options, the offering period then in progress will be
shortened and a new exercise date will be set prior to the date of any such
Merger. The 1997 Purchase Plan will terminate in April 2007. The Board of
Directors has the authority to amend or terminate the 1997 Purchase Plan,
except that no such action may adversely affect any outstanding rights to
purchase stock under the 1997 Purchase Plan.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Company's Certificate of Incorporation limits the liability of directors
to the maximum extent permitted by Delaware law. Delaware law provides that
directors of a corporation will not be personally liable for monetary damages
for breach of their fiduciary duties as directors, except liability for (i)
any breach of their duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) unlawful payments of dividends
or unlawful stock repurchase or redemptions or (iv) any transaction from which
the director derived an improper personal benefit.
The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers and employees and
other agents to the fullest extent permitted by law. The Company believes that
indemnification under its Bylaws covers at least negligence and gross
negligence on the part of indemnified parties. The Company's Bylaws also
permit it to secure insurance on behalf of any officer, director, employee or
other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the Bylaws would permit indemnification.
55
<PAGE>
The Company intends to enter into agreements to indemnify its directors and
executive officers, in addition to indemnification provided for in the
Company's Bylaws. These agreements, among other things, will indemnify the
Company's directors and executive offices for certain expenses (including
attorneys' fees), judgments, fines and settlement amounts incurred by any such
person in any action or proceeding, including any action by or in the right of
the Company, arising out of such person's services as a director or executive
officer of the Company, any subsidiary of the Company or any other company or
enterprise to which the person provides services at the request of the
Company. The Company believes that these provisions and agreements are
necessary to attract and retain qualified persons as directors and executive
officers.
56
<PAGE>
CERTAIN TRANSACTIONS
SERIES E PREFERRED FINANCING; ISSUANCE AND CONVERSION OF PROMISSORY NOTES
From December 1993 through February 1995, the Company issued promissory
notes at varying interest rates to certain investors in exchange for an
aggregate principal amount of $4,639,693. In June 1995 the Company issued and
sold shares of its Series E Preferred Stock ("Series E Preferred") convertible
into an aggregate of 3,410,481 shares of Common Stock at a price per common
equivalent share of $4.90. The Company sold the shares pursuant to a preferred
stock purchase agreement and a registration rights agreement under which,
among other things, it made standard representations, warranties and
covenants, and provided the purchasers with registration rights and
information rights. As part of the Series E Preferred financing, the holders
of the outstanding promissory notes issued by the Company converted the notes,
including accrued but unpaid interest, into shares of Series E Preferred Stock
convertible into an aggregate of 989,786 shares of Common Stock. See "Shares
Eligible for Future Sale--Registration Rights." The purchasers of the Series E
Preferred included, among others, the following principal stockholders,
directors and affiliated entities:
<TABLE>
<CAPTION>
COMMON
EQUIVALENT AGGREGATE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES(1) SHARES PURCHASE PRICE
-------------------------------------------------- ---------- --------------
<S> <C> <C>
Cypress Semiconductor Corporation..................... 289,537 $1,418,740
Morgenthaler Venture Partners III..................... 290,289 $1,422,420
New Enterprise Associates and affiliated funds........ 653,061 $3,200,000
Sequoia Capital and affiliated funds.................. 312,427 $1,530,897
Technology Venture Investors and affiliated funds..... 562,121 $2,754,396
U.S. Venture Partners and affiliated funds............ 588,785 $2,885,050
Vertex Investments and affiliated funds............... 282,161 $1,382,590
</TABLE>
- --------
(1) See "Principal and Selling Stockholders."
SERIES F PREFERRED FINANCING
In November 1996 and January 1997, the Company sold shares of its Series F
Preferred Stock ("Series F Preferred") convertible into an aggregate of
1,102,303 shares of Common Stock at a price per common equivalent share of
$8.12. The Company sold the shares pursuant to a preferred stock purchase
agreement and a registration rights agreement under which, among other things,
it made standard representations, warranties and covenants, and provided the
purchasers with registration rights and information rights. See "Shares
Eligible for Future Sale--Registration Rights." The purchasers of the Series F
Preferred included, among others, the following principal stockholders,
directors and affiliated entities:
<TABLE>
<CAPTION>
COMMON
EQUIVALENT AGGREGATE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES(1) SHARES PURCHASE PRICE
-------------------------------------------------- ---------- --------------
<S> <C> <C>
Hua-Thye Chua(2)...................................... 14,284 $ 116,000
Morgenthaler Venture Partners III..................... 78,869 $ 640,416
New Enterprise Associates and affiliated funds........ 113,183 $ 919,050
Sequoia Capital and affiliated funds.................. 30,788 $ 250,000
Technology Venture Investors and affiliated funds..... 123,152 $1,000,000
U.S. Venture Partners and affiliated funds............ 73,891 $ 600,000
Vertex Investments and affiliated funds............... 184,729 $1,500,000
</TABLE>
- --------
(1) See "Principal and Selling Stockholders."
(2) Includes 3,571 shares beneficially owned by Mr. Chua for Bryan Shyang-Ming
Chua; 3,571 shares beneficially owned by Mr. Chua for Caroline Siok-Yau
Chua; 3,571 shares beneficially owned by Mr. Chua for Cathleen Siok-Syuan
Chua; and 3,571 shares beneficially owned by Mr. Chua for Christine Siok-
Pee Chua.
57
<PAGE>
CYPRESS TRANSACTION
In March 1997, the Company and Cypress terminated the Existing Agreement
related to the Company's FPGA products and replaced it with a new arrangement
whereby the Company's FPGA products will no longer be second sourced by
Cypress. In addition, Cypress agreed to not compete with the Company with
respect to antifuse FPGAs or products that are pin-compatible with the
Company's existing pASIC 1 and pASIC 2 products. QuickLogic has commenced
support for Cypress's FPGA customers, and Cypress assisted the Company in the
transition of these customers to the Company. In exchange for the termination
of the Existing Agreement and the reversion of the rights to the intellectual
property developed thereunder to the Company, the Company paid $4.5 million in
cash and agreed to issue 2,603,817 shares of Common Stock to Cypress,
increasing the aggregate number of shares of Common Stock of the Company held
by Cypress to 3,339,785, prior to the sale of any shares by Cypress in this
offering. In addition, the Company granted Cypress, including the right to
sell shares of Common Stock in this offering, certain contractual rights as to
the shares of the Company's stock held by Cypress. The parties also entered
into a new foundry agreement and a cross-license agreement.
Under the terms of the cross-license agreement, Cypress granted to the
Company a royalty-free, non-exclusive, non-sublicensable license to make, have
made, use, offer for sale, sell and distribute programmable logic products
under patents that are currently issued to Cypress or are issued prior to
March 2007. In the event of an acquisition of the Company, the license
continues only as to those products that were commercially available as of the
acquisition or the design of which is in the layout stage and subsequently
become commercially available within one year after the acquisition. The
Company granted a reciprocal right to Cypress under its patent portfolio,
except that the license does not extend to antifuse FPGAs or products that are
pin-compatible with the Company's existing pASIC 1 and pASIC 2 products. The
parties also licensed to each other the intellectual property rights developed
under the Existing Agreement, within the scope of the patent licenses set
forth above.
The shares issued to Cypress in connection with the termination of the
Existing Agreement were provided with the same contractual rights as the other
shares of the Company's stock held by Cypress and the other holders of the
Company Common Stock issued upon conversion of the Preferred Stock. In
addition, the Company granted registration rights to Cypress that are in
addition to those held by other stockholders of the Company. See "Description
of Capital Stock--Registration Rights." First, Cypress may sell a minimum of
one-third of the shares of Common Stock offered hereby, and in any subsequent
public offerings of the Company's stock. Second, the Company is obligated to
file a registration statement with respect to all of the shares of Common
Stock held by Cypress and not sold in this offering, with such registration
statement being effective upon the expiration of the lockup period imposed by
the underwriters in connection with this offering. The Company must keep this
registration statement effective until the earlier of (i) the date all of such
shares held by Cypress are sold; (ii) three years from the closing of this
offering; or (iii) the date all such shares are able to be sold in a three-
month period pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended. Notwithstanding the foregoing, the Company has the right to
suspend Cypress's ability to sell under such registration statement under
certain circumstances. Finally, Cypress has the right to require registration
of its shares that is separate from a similar right held by the other holders
of registration rights. The other stockholders of the Company do not have the
right to require inclusion of their shares in these separate Cypress
registrations.
Payments to Cypress under the Existing Agreement were $554,143, $5,850,944,
$12,101,598 and $2,335,914 for 1994, 1995, 1996 and the first quarter of 1997,
respectively.
LOANS TO JOHN BIRKNER
From time to time, the Company has made loans to John Birkner, an officer of
the Company. Mr. Birkner's current loan obligation to the Company totals
$125,300 plus interest at annual rates ranging from 6.7% to 8.5%, and is
evidenced by demand promissory notes from Mr. Birkner to the Company secured
by a pledge of Mr. Birkner's shares of the Company's stock. The largest amount
outstanding under these loans since December 1, 1994 is $125,300, the current
amount. These loans were approved by the Company's Board of Directors.
The Company and Mr. Birkner are co-parties in litigation with Actel. The
Company's legal counsel in connection with the litigation is also representing
Mr. Birkner. The Company has borne and expects to continue to bear all fees
and expenses related to the litigation. See "Risk Factors--Actel Litigation."
58
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's outstanding Common Stock as of May 31, 1997, and as
adjusted to reflect the sale of the securities offered by the Company and the
Selling Stockholder in the offering made hereby, (i) by each person (or group
of affiliated persons) who is known by the Company to own beneficially more
than 5% of the Company's Common Stock or Common Stock equivalents, (ii) each of
the Company's directors and executive officers and (iii) all directors and
executive officers as a group. Except as indicated in the footnotes to this
table and subject to applicable community property laws, the persons named in
the table, based on information provided by such persons, have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
NUMBER OF NUMBER OF BENEFICIALLY OWNED(1)
SHARES SHARES -------------------------
NAMES AND ADDRESS, IF REQUIRED, BENEFICIALLY BEING BEFORE THE AFTER THE
OF BENEFICIAL OWNER OWNED(1) OFFERED OFFERING OFFERING
- ------------------------------- ------------ --------- ----------- ----------
<S> <C> <C> <C> <C>
5% STOCKHOLDERS
Technology Venture 1,441,748 -- 12.0% 10.4%
Investors(2)..............
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
U.S. Venture Partners(3)... 1,205,669 -- 10.0% 8.7%
2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
Vertex Investments(4)...... 1,166,458 -- 9.7% 8.4%
3 Lagoon Drive, Ste. 220
Redwood City, CA 94065
Sequoia Capital(5)......... 962,093 -- 8.0% 7.0%
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
New Enterprise 766,244 -- 6.4% 5.5%
Associates(6).............
1119 St. Paul Street
Baltimore, MD 21202
Morgenthaler Venture 703,980 -- 5.9% 5.1%
Partners III..............
2730 Sand Hill Road
Suite 280
Menlo Park, CA 94025
Cypress Semiconductor 3,339,783 1,200,000 27.8% 15.5%
Corporation...............
3901 N. First Street
San Jose, CA 95134
EXECUTIVE OFFICERS AND
DIRECTORS
E. Thomas Hart(7).......... 428,571 -- 3.4% 3.0%
Vincent A. McCord(8)....... 107,142 -- * *
Richard C. Johnson(9)...... 185,713 -- 1.5% 1.3%
Philip J. Ong(10).......... 102,033 -- * *
Andrew K. Chan(11)......... 171,424 -- 1.4% 1.2%
John M. Birkner(12)........ 157,141 -- 1.3% 1.1%
Hua-Thye Chua(13).......... 171,426 -- 1.4% 1.2%
Ronald D. Zimmerman(14).... 62,856 -- * *
Donald F. Faria(15)........ 100,000 -- * *
Scott D. Ward(16).......... 100,000 -- * *
Irwin B. Federman(17)...... 1,205,669 -- 10.0% 8.7%
All executive officers and
directors as a group
(11 persons).............. 3,339,783 -- 21.3% 18.7%
</TABLE>
59
<PAGE>
- --------
* Under 1%
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by
that person that are currently exercisable or will become exercisable
within 60 days after May 31, 1997 are deemed outstanding, while such
shares are not deemed outstanding for purposes of computing percentage
ownership of any other person.
(2) Includes 1,368,252 shares held by Technology Investors-IV; 72,112 shares
held by Technology Venture Investors-3, L.P.; and 1,384 shares held by
TVI Management-3, L.P.
(3) Includes 802,676 shares held by U.S. Venture Partners III; 308,463 shares
held by U.S.V. Entrepreneur Partners; 38,803 shares held by Second
Ventures II, L.P.; 25,083 shares held by Second Ventures Limited
Partnership; 19,558 shares held by U.S. Venture Partners IV, L.P.; and
11,086 shares held by U.S.V.P. Entrepreneur Partners II, L.P.
(4) Includes 879,688 shares held by Vertex Investment Pte. Ltd.; 184,134
shares held by Vertex Investment (II) Limited; 82,094 shares held by
Vertex Asia Limited; and 20,542 shares held by HWH Investment Pte. Ltd.
(5) Includes 874,188 shares held by Sequoia Capital V; 47,828 shares held by
Sequoia Technology Partners V; 15,419 shares hold by Sequoia XXI; 10,923
shares held by Sequoia XXIV; 6,643 shares held by Sequoia Capital XXI;
4,285 shares held by Sequoia XX; and 2,807 shares held by Sequoia XXIII.
(6) Includes 735,456 shares held by New Enterprise Associates VI, Limited
Partnership and 30,788 shares held by New Venture Partners III L.P.
(7) Includes 428,571 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(8) Includes 107,142 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(9) Includes 185,713 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(10) Includes 57,141 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(11) Includes 125,714 shares beneficially owned by Mr. Chan as trustee for
Andrew Ka-Lab Chan and Amy Shuk-Chun Chan, Trustees or successor(s), U/a
of trust dated January 30, 1991; 4,285 shares beneficially owned by Mr.
Chan for Michael P. Gamboa, Trustee under Erica H. Chan trust agreement
dated May 14, 1992; 4,285 shares beneficially owned by Mr. Chan for
Michael P. Gamboa, Trustee under Rebecca H. Chan trust agreement dated
May 14, 1992; 4,285 shares beneficially owned by Mr. Chan for Michael P.
Gamboa, Trustee under Vicki H. Chan trust agreement dated May 14, 1992;
2,142 shares beneficially owned by Mr. Chan for Clement Chan and Susie
S.J. Chan, Trustees under Nicholas Chan trust agreement dated July 3,
1996; 2,142 shares beneficially owned by Mr. Chan for Clement Chan and
Susie S.J. Chan, Trustees under Phillip Chan trust agreement dated
July 3, 1996; and 28,571 shares issuable pursuant to stock options and
exercisable within 60 days of May 31, 1997.
(12) Includes 26,963 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(13) Includes 30,179 shares beneficially owned by Mr. Chua, as trustee for
H.T. Chua & Jessie Chua TTEES for the H.T. Chua Trust Agreement dated
December 20, 1974; 17,857 shares beneficially owned by Mr. Chua, as
custodian for Bryan Shyang-Ming Chua; 17,857 shares beneficially owned by
Mr. Chua, as custodian for Caroline Siok-Yau Chua; 17,857 shares
beneficially owned by Mr. Chua, as custodian for Cathleen Siok-Syuan
Chua; 17,857 shares beneficially owned by Mr. Chua, as custodian for
Christine Siok-Pee Chua; and 14,285 shares issuable pursuant to stock
options exercisable within 60 days of May 31, 1997.
(14) Includes 62,856 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(15) Includes 100,000 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(16) Includes 100,000 shares issuable pursuant to stock options exercisable
within 60 days of May 31, 1997.
(17) Includes 1,205,669 shares held by U.S. Venture Partners Entities. Mr.
Federman is a general partner of U.S. Venture Partners. See Footnote 3
above. Mr. Federman disclaims beneficial ownership of all shares held by
U.S. Venture Partners Entities except to the extent of his pecuniary
interest therein.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
Upon the completion of this offering, the Company will be authorized to
issue 100,000,000 shares of Common Stock, $0.001 par value, and 10,000,000
shares of undesignated Preferred Stock, $0.001 par value. Immediately after
the completion of this offering, the Company estimates there will be an
aggregate of 13,817,422 shares of Common Stock outstanding, 1,604,750 shares
of Common Stock will be issuable upon exercise of outstanding options, no
shares of Common Stock will be issuable upon exercise of outstanding warrants,
and no shares of Preferred Stock will be issued and outstanding. As of May 31,
1997, there were 228 stockholders of the Company.
The following description of the Company's capital stock does not purport to
be complete and is subject to and qualified in its entirety by the Company's
Amended and Restated Certificate of Incorporation and Bylaws and by the
provisions of applicable Delaware law.
The Amended and Restated Certificate of Incorporation and Bylaws contain
certain provisions that are intended to enhance the likelihood of continuity
and stability in the composition of the Board of Directors and which may have
the effect of delaying, deferring, or preventing a future takeover or change
in control of the Company unless such takeover or change in control is
approved by the Board of Directors. See "Risk Factors--Effect of Antitakeover
Provisions."
COMMON STOCK
Holders of Common Stock are entitled to one vote per share on all matters to
be voted upon by the stockholders. Holders of Common Stock do not have
cumulative voting rights under the Company's Bylaws or Certificate of
Incorporation, and, therefore, holders of a majority of the shares voting for
the election of directors can elect all of the directors. In such event, the
holders of the remaining shares will not be able to elect any directors.
Holders of the Common Stock are entitled to receive such dividends as may be
declared from time to time by the Board of Directors out of funds legally
available therefor, subject to the rights of preferred stockholders and the
terms of any existing or future agreements between the Company and its
debtholders. The Company has never declared or paid cash dividends on its
capital stock, expects to retain future earnings, if any, for use in the
operation and expansion of its business, and does not anticipate paying any
cash dividends in the foreseeable future. In the event of the liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to share ratably in all assets legally available for distribution
after payment of all debts and other liabilities and subject to the prior
rights of any holders of Preferred Stock then outstanding.
PREFERRED STOCK
Effective prior to the closing of this offering, the Company will be
authorized to issue 10,000,000 shares of undesignated Preferred Stock. The
Board of Directors has the authority to issue the Preferred Stock in one or
more series and to fix the price, rights, preferences, privileges and
restrictions thereof, including dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption prices, liquidation
preferences and the number of shares constituting a series or the designation
of such series, without any further vote or action by the Company's
stockholders. The issuance of Preferred Stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of delaying, deferring or preventing a change
in control of the Company without further action by the stockholders and may
adversely affect the market price of, and the voting and other rights of, the
holders of Common Stock. The issuance of Preferred Stock with voting and
conversion rights may adversely affect the voting power of the holders of
Common Stock, including the loss of voting control to others. The Company has
no current plans to issue any shares of Preferred Stock.
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<PAGE>
WARRANTS
As of May 31, 1997, the Company had one outstanding warrant to purchase
18,750 shares of its Common Stock with an exercise price of $4.48 per share.
The warrant to purchase the shares expires on the earlier to occur of this
offering or January 1999.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar is Boston EquiServe, L.P.
LISTING
The Company has applied to designate its Common Stock for quotation on the
Nasdaq National Market System under the trading symbol "QWIK." The Company has
not applied to list its Common Stock on any other exchange or quotation
system.
REGISTRATION RIGHTS
Following the closing of this offering, the holders of approximately
9,899,413 shares of Common Stock (the "Registrable Securities") will be
entitled to certain rights with respect to the registration of such shares
under the Securities Act. In the event that the Company proposes to register
any of its securities under the Securities Act, either for its own account or
for the account of other security holders, the holders of Registrable
Securities are entitled to notice of such registration and are entitled to
include their Registrable Securities in such registration, subject to certain
marketing and other limitations. Beginning six months after the closing of
this offering, the holders of at least thirty percent (30%) of the Registrable
Securities have the right to require the Company, on not more than two
occasions, to file a registration statement under the Securities Act in order
to register all or any part of their Registrable Securities. The Company may
in certain circumstances defer such registrations and the underwriters have
the right, subject to certain limitations, to limit the number of shares
included in such registrations. Further, holders of Registrable Securities may
require the Company to register all or a portion of their shares on Form S-3,
when such form becomes available to the Company, subject to certain conditions
and limitations.
In connection with the Company's transaction with Cypress, Cypress was
granted registration rights in addition to those held by other stockholders of
the Company. First, Cypress may sell a minimum of one-third of the shares of
Common Stock offered hereby, and in any subsequent public offerings of the
Company's stock. Second, the Company is obligated to file a registration
statement with respect to all shares of Common Stock held by Cypress and not
sold in this offering, with such registration statement being effective upon
the expiration of the lockup period imposed by the underwriters in connection
with this offering. The Company must keep this registration statement
effective until the earlier of (i) the date all of such shares held by Cypress
are sold; (ii) three years from the closing of this offering; or (iii) the
date all such shares are able to be sold in a three-month period pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended.
Notwithstanding the foregoing, the Company has the right to suspend Cypress's
ability to sell under such registration statement under certain circumstances.
Finally, Cypress has the right to require registration of its shares that is
separate from a similar right held by the other holders of registration
rights. The other stockholders of the Company do not have the right to require
inclusion of their shares in these separate Cypress registrations.
DELAWARE ANTITAKEOVER LAW AND CERTAIN CHARTER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and Bylaws
could discourage potential acquisition proposals and could delay or prevent a
change in control of the Company. Such provisions could diminish the
opportunities for a stockholder to participate in tender offers, including
tender offer at a price above the then current market value of the Common
Stock. Such provisions may also inhibit fluctuations in the market price of
the Common Stock that could result from takeover
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<PAGE>
attempts. The Company is also afforded the protections of Section 203 of the
Delaware General Corporation Law, which could delay or prevent a change in
control of the Company or could impede a merger, consolidation, takeover or
other business combination involving the Company or discourage a potential
acquiror from making a tender offer or otherwise attempting to obtain control
of the Company. In addition, the Board of Directors has authority to issue up
to 10,000,000 shares of Preferred Stock and to fix the rights, preferences,
privileges and restrictions, including voting rights, of these shares without
any further vote or action by the stockholders. The rights of the holders of
the Company's Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third-party to acquire a
majority of the outstanding voting stock of the Company, thereby delaying,
deferring or preventing a change in control of the Company. Furthermore, such
Preferred Stock may have other rights, including economic rights, senior to
the Common Stock, and as a result, the issuance of such Preferred Stock could
have a material adverse effect on the market value of the Common Stock. The
Company has no present plan to issue shares of Preferred Stock. The Company's
Certificate of Incorporation provides that, so long as the Board of Directors
consists of more than two directors, the Board of Directors will be divided
into three classes of directors serving staggered three-year terms. As a
result, only one of the three classes of the Company's Board of Directors will
be elected each year, which could have the effect of delaying a change in the
composition of the Board of Directors. See "Risk Factors--Effect of
Antitakeover Provisions."
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for the Common Stock of the
Company. Therefore, future sales of substantial amounts of Common Stock in the
public market could adversely affect the prevailing market price from time to
time. Furthermore, because only a limited number of shares will be available
for sale shortly after this offering because of certain contractual and legal
restrictions on resale (as described below), sales of substantial amounts of
Common Stock of the Company in the public market after the restrictions lapse
could adversely affect the prevailing market price and the ability of the
Company to raise equity capital in the future.
Upon completion of this offering, the Company will have outstanding an
aggregate of approximately 13,817,422 shares of Common Stock, assuming no
exercise of outstanding options under the Option Plan. Of these outstanding
shares of Common Stock, the 3,000,000 shares sold in this offering will be
freely tradeable without restriction or further registration under the
Securities Act of 1933, as amended (the "Securities Act"), unless purchased by
"affiliates" of the Company as that term is defined in Rule 144 under the
Securities Act. The remaining 10,817,422 shares of Common Stock outstanding
upon completion of this offering and held by existing stockholders will be
"restricted securities" as that term is defined in Rule 144 under the
Securities Act ("Restricted Shares").
The holders of 8,190,572 Restricted Shares, including all officers and
directors of the Company, are subject to "lock up" agreements with the
Representatives of the Underwriters and/or the Company providing that they
will not offer, sell, contract to sell or grant any option to purchase or
otherwise dispose of the shares of Common Stock owned by them or that could be
purchased by them through the exercise of options to purchase Common Stock of
the Company for a period of at least 180 days after the effective date of this
offering (the "Lock Up Period") without the prior written consent of Deutsche
Morgan Grenfell, UBS Securities LLC, Cowen & Company and/or the Company, as
applicable. The lock up agreements provide that the Lock Up Period will be
extended in the event that the Lock Up Period would expire in a period where
the Company's directors and officers are prevented from trading because of the
set "blackout" period between earnings releases provided in the Company's
insider trading policy, until the date that trading will commence under the
Company's insider trading policy. The Company has agreed with Representatives
of the Underwriters not to release any holders from such agreements without
the prior written consent of Deutsche Morgan Grenfell. Such lock up agreements
may be released at any time as to all or any portion of the shares subject to
such agreements at the sole discretion of Deutsche Morgan Grenfell. Of the
10,813,138 Restricted Shares that first become eligible for sale in the public
market 180 days after the date of this Prospectus (depending upon the duration
of the lock-up), 2,235,509 shares will be immediately eligible for sale
without restriction under Rule 144(k) or Rule 701, and 6,969,860 shares will
be immediately eligible for sale subject to certain volume and other
restrictions pursuant to Rule 144. All 10,817,422 shares will be eligible for
sale pursuant to Rule 144 upon the expiration of one-year holding periods, all
of which will expire on or before March 31, 1998, subject in some cases to
Rule 144's volume and other restrictions.
In general, under Rule 144, beginning 90 days after the date of this
Prospectus, a person (or persons whose shares are aggregated) who has
beneficially owned Restricted Shares for at least one year, including persons
who may be deemed to be "affiliates" of the Company, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of: (i) one percent of the number of shares of Common Stock then
outstanding (which will equal approximately 138,174 shares immediately after
this offering); or (ii) the average weekly trading volume of the Common Stock
as reported through the Nasdaq National Market during the four calendar weeks
preceding the filing of a Form 144 with respect to such sale. Sales under Rule
144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about the
Company. Under Rule 144(k), a person who is not deemed to have been an
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<PAGE>
affiliate of the Company at any time during the 90 days preceding a sale, and
who has beneficially owned for at least two years the Restricted Shares
proposed to be sold (including the holding period of any prior owner except an
affiliate), is entitled to sell such shares without complying with the manner
of sale, public information, volume limitation or notice provisions of Rule
144.
Subject to certain limitations on the aggregate offering price of a
transaction and certain other conditions, Rule 701 permits resales of shares
issued prior to the date the issuer becomes subject to the reporting
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), pursuant to certain compensatory benefit plans and contracts commencing
90 days after the issuer becomes subject to the reporting requirements of the
Exchange Act, in reliance upon Rule 144 but without compliance with certain
restrictions, including the holding period requirements, contained in Rule
144. In addition, the Securities and Exchange Commission has indicated that
Rule 701 will apply to typical stock options granted by an issuer before it
becomes subject to the reporting requirements of the Exchange Act, along with
the shares acquired upon exercise of such options (including exercises after
the date of this offering). Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 90 days after the date of this Prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its two-year
minimum holding period requirements.
Except with respect to (a) the shares of Common Stock to be sold hereunder
and (b) any shares of such Common Stock sold by the Company pursuant to the
Company's Employee Stock Purchase Plan or upon the exercise of an option or
warrant, or the conversion of a security outstanding on the date hereof, the
Company hereby agrees that, without the prior written consent of Deutsche
Morgan Grenfell Inc., it will not, during the Lock Up Period (and any
extension thereof), (x) offer, pledge, sell, contract to sell, sell any
option, or contract to purchase, purchase any option or contract to sell,
grant any option, right, or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for such Common
Stock or (y) enter into any swap or similar agreement that transfers, in whole
or in part, the economic risk of ownership of the Common Stock, whether any
such transaction described in (x) or (y) above is to be settled by delivery of
Common Stock or such other securities, in cash or otherwise. The foregoing
prohibitions shall not prevent the Company from granting options and other
rights under its existing equity compensation plans.
The Company intends to file a registration statement under the Securities
Act covering approximately 1,000,000 shares of Common Stock subject to
outstanding options or reserved for issuance under the 1997 Plan and 750,000
shares of Common Stock reserved for issuance under the Purchase Plan. See
"Management--Employee Benefit Plans." Such registration statement is expected
to be filed simultaneously with the effectiveness of the registration
statement covering the shares of Common Stock offered in this offering and
will automatically become effective upon filing. Accordingly, shares
registered under such registration statement will, subject to Rule 144 volume
limitations applicable to affiliates and the lapsing of the Company's
repurchase options, be available for sale in the open market, except to the
extent that such shares are subject to vesting restrictions with the Company
or the contractual restrictions described above.
In addition, the Company granted registration rights to Cypress that are in
addition to those held by other stockholders of the Company. See "Description
of Capital Stock--Registration Rights." First, Cypress may sell a minimum of
one-third of the shares of Common Stock offered hereby, and any subsequent
public offerings of the Company's stock. Second, the Company is obligated to
file a registration statement with respect to all of the shares of Common
Stock held by Cypress and not sold in this offering, with such registration
statement being effective upon the expiration of the lockup period imposed by
the underwriters in connection with this offering. The Company must keep this
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<PAGE>
registration statement effective until the earlier of (i) the date all of such
shares held by Cypress are sold; (ii) three years from the closing of this
offering; or (iii) the date all such shares are able to be sold in a three-
month period pursuant to Rule 144 promulgated under the Securities Act of
1933, as amended. Notwithstanding the foregoing, the Company has the right to
suspend Cypress's ability to sell under such registration statement under
certain circumstances. Finally, Cypress has the individual right to require
registration of its shares that is separate from a similar right held by the
other holders of registration rights. The other stockholders of the Company do
not have the right to require inclusion of their shares in these separate
Cypress registrations.
66
<PAGE>
UNDERWRITING
The Underwriters named below (the "Underwriters"), for whom Deutsche Morgan
Grenfell Inc., UBS Securities LLC and Cowen & Company are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the underwriting agreement (the form of
which is filed as an exhibit to the Company's Registration Statement, of which
this Prospectus is a part, (the "Underwriting Agreement"), purchase from the
Company and the Selling Stockholder the number of shares of Common Stock set
forth below opposite their respective names:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
Deutsche Morgan Grenfell Inc....................................
UBS Securities LLC..............................................
Cowen & Company.................................................
---
Total.........................................................
===
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
thereunder are subject to approval of certain legal matters by counsel and to
various other conditions.
The Representatives have advised the Company and the Selling Stockholder
that the Underwriters propose initially to offer the Common Stock to the
public on the terms set forth on the cover page of this offering. The
Underwriters may allow to selected dealers (who may include the Underwriters)
a concession of not more than $ per share. The selected dealers may reallow
a concession of not more than $ per share to certain other dealers. After
the initial public offering, the price and concessions and re-allowances to
dealers and other selling terms may be changed by the Representatives. The
Common Stock is offered subject to receipt and acceptance by the Underwriters,
and to certain other conditions, including the right to reject orders in whole
or in part. The Underwriters do not intend to sell any of the shares of Common
Stock offered hereby to accounts for which they exercise discretionary
authority.
The Selling Stockholder has granted an option to the Underwriters to
purchase up to a maximum of 450,000 additional shares of Common Stock to cover
over-allotments, if any, at the public offering price, less the underwriting
discount set forth on the cover page of this Prospectus. Such option may be
exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent the Underwriters exercise this option, each of the
Underwriters will be committed, subject to certain conditions, to purchase
such additional shares in approximately the same proportion as set forth in
the above table. The Underwriters may purchase such shares only to cover over-
allotments made in connection with the offering.
In connection with the offering, the Company and the directors, executive
officers and certain stockholders of the Company have agreed not to offer or
sell any Common Stock until the expiration of 180 days following the closing
of this offering without the prior written consent of Deutsche Morgan Grenfell
Inc.
The Underwriting Agreement provides that the Company and the Selling
Stockholder will indemnify the several Underwriters against certain
liabilities, including civil liabilities under the Securities Act, as amended,
or will contribute to payments the Underwriters may be required to make in
respect thereof.
Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price will be determined by negotiation
between the Company and the Representatives. The principal factors to be
considered in determining the public offering price include the information
set forth in this offering and otherwise available to the Representatives; the
history and the prospects for
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<PAGE>
the industry in which the Company will compete; the ability of the Company's
management; the prospects for future earnings of the Company; the present
state of the Company's development and its current financial condition; the
general condition of the securities markets at the time of this offering; and
the recent market prices of, and the demand for, publicly traded common stock
of generally comparable companies. Each of the Representatives has informed
the Company that it currently intends to make a market in the shares
subsequent to the effectiveness of this offering, but there can be no
assurance that the Representatives will take any action to make a market in
any securities of the Company.
Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the
open market, including by entering stabilizing bids, effecting syndicate
covering transactions or imposing penalty bids. A stabilizing bid means the
placing of any bid or effecting of any purchase for the purpose of pegging,
fixing or maintaining the price of the Common Stock. A syndicate covering
transaction means the placing of any bid on behalf of the underwriting
syndicate or the effecting of any purchase to reduce a short position created
in connection with this offering. A penalty bid means an arrangement that
permits the Underwriters to reclaim a selling concession from a syndicate
member in connection with this offering when shares of Common Stock sold by
the syndicate member are purchased in syndicate covering transactions. Such
transactions may be effected on the Nasdaq Stock Market, in the over-the-
counter market, or otherwise. Such stabilizing, if commenced, may be
discontinued at any time.
The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the Common Stock offered hereby for employees and directors
of the Company and certain other individuals who have expressed an interest in
purchasing such shares of Common Stock in the offering. The number of shares
available for sale to the general public will be reduced to the extent such
persons purchase such reserved shares. Any reserved shares not so purchased
will be offered by the Underwriters to the general public on the same basis as
other shares offered hereby.
LEGAL MATTERS
Certain legal matters relating to the legality of the Common Stock offered
hereby will be passed upon for the Company by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. Certain legal matters
in connection with the offering will be passed upon for the Underwriters by
Venture Law Group, A Professional Corporation, Menlo Park, California. As of
the date of this Prospectus, three investment partnerships composed of certain
members of and persons associated with Wilson Sonsini Goodrich & Rosati
beneficially owned an aggregate of 16,152 shares of Common Stock of the
Company and a member of Wilson Sonsini Goodrich & Rosati owned 644 shares of
Common Stock of the Company.
EXPERTS
The financial statements of the Company as of December 31, 1996 and 1995 and
for each of the three years in the period ended December 31, 1996 included in
this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of said firm
as experts in auditing and accounting.
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<PAGE>
CHANGE IN INDEPENDENT ACCOUNTANTS
Effective January 23, 1996, Price Waterhouse LLP was engaged as the
Company's principal independent accountants. Prior to January 1996, Deloitte
and Touche LLP ("Deloitte & Touche") had been the Company's independent
accountants. The decision to change independent accountants was approved by
the Company's Board of Directors. In the period from January 1994 through
January 1996, there were no disagreements with Deloitte & Touche on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedures which disagreements if not resolved to the
satisfaction of Deloitte & Touche would have caused them to make reference
thereto in their report on the financial statements. The report of Deloitte &
Touche on the financial statements of the Company as of and for the year ended
December 31, 1994, contained no adverse opinion or disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope, or accounting
principle. Prior to January 23, 1996, the Company had not consulted with Price
Waterhouse LLP on either the application of accounting principles to a
specified transaction, either complete or proposed, or on the type of opinion
that might be rendered on the Company's financial statements.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form S-1, including amendments thereto, under the
Securities Act with respect to the Common Stock offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules filed therewith. For further information with respect
to the Company and the Common Stock offered hereby, reference is hereby made
to such Registration Statement and to the exhibits and schedules filed
therewith. Statements contained in this Prospectus regarding the contents of
any contract or other document referred to are not necessarily complete, and
in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference. The Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the principal office of the Securities and Exchange
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of all
or any part thereof may be obtained from such office upon the payment of the
prescribed fees. Such materials may also be obtained from the Commission's web
site at http://www.sec.gov. Information concerning the Company is also
available for inspection at the offices of the Nasdaq National Market, Reports
Section, 1735 K Street, N.W., Washington, D.C. 20006.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by its independent
auditors and quarterly reports containing unaudited consolidated financial
information.
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<PAGE>
QUICKLOGIC CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheet as of December 31, 1995, December 31, 1996 and March
31,1997 (unaudited)..................................................... F-3
Statement of Operations for the Years Ended December 31, 1994, 1995 and
1996 and for the Three Months Ended March 31, 1996 (unaudited) and 1997
(unaudited)............................................................. F-4
Statement of Stockholders' Equity (Deficit) for the Years Ended December
31, 1994, 1995 and 1996 and for the Three Months Ended March 31, 1997
(unaudited)............................................................. F-5
Statement of Cash Flows for the Years Ended December 31, 1994, 1995 and
1996 and for the Three Months Ended March 31, 1996 (unaudited) and 1997
(unaudited)............................................................. F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
QuickLogic Corporation
The reincorporation described in Note 12 to the financial statements has not
been consummated at June 9, 1997. When it has been consummated, we will be in
a position to furnish the following report:
"In our opinion, the accompanying balance sheet and the related
statements of operations, stockholders' equity (deficit) and cash flows
present fairly, in all material respects, the financial position of
QuickLogic Corporation at December 31, 1995 and 1996, and the results of
its operations and its cash flows for each of the three years in the period
ended December 31, 1996, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above."
Price Waterhouse LLP
San Jose, California
June 9, 1997
F-2
<PAGE>
QUICKLOGIC CORPORATION
BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
------------------ MARCH 31, MARCH 31,
1995 1996 1997 1997
-------- -------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash............................. $ 3,856 $ 10,336 $ 10,366
Short term investments........... 4,000 -- --
Accounts receivable, less
allowance for doubtful accounts
and sales returns and allowances
of $982, $2,084, and $2,284..... 2,680 2,609 3,653
Inventory........................ 1,324 3,248 4,667
Other current assets............. 121 4,633 245
-------- -------- --------
Total current assets........... 11,981 20,826 18,931
Property and equipment, net........ 218 1,708 2,502
Other assets....................... -- 43 43
-------- -------- --------
$ 12,199 $ 22,577 $ 21,476
======== ======== ========
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable................. $ 1,610 $ 3,044 $ 3,159
Accrued and other liabilities.... 3,228 6,929 7,995
Current portion of long-term
obligations..................... 75 203 605
-------- -------- --------
Total current liabilities...... 4,913 10,176 11,759
Long-term obligations.............. 137 602 1,658
-------- -------- --------
5,050 10,778 13,417
-------- -------- --------
Commitments and contingencies
(Notes 10 and 11)
Stockholders' equity:
Preferred stock, $0.001 par
value; 8,093, 8,767, and 8,767
shares authorized, 10,000 shares
authorized pro forma; 7,390,
8,394, and 8,496 shares issued
and outstanding, no shares
issued and outstanding pro
forma........................... 7 8 9 $ --
Common stock, $0.001 par value;
10,714, 12,143, and 12,143
shares authorized; 100,000
shares authorized pro forma;
551, 722, and 861 shares issued
and outstanding; 9,357 shares
issued and outstanding pro
forma........................... 1 1 1 10
Additional paid-in capital....... 31,432 40,486 43,528 43,528
Common stock to be issued:
2,604 shares.................... -- -- 18,409 18,409
Stockholder note receivable...... (119) (119) (119) (119)
Deferred compensation............ -- (808) (2,897) (2,897)
Accumulated deficit.............. (24,172) (27,769) (50,872) (50,872)
-------- -------- -------- --------
Total stockholders' equity..... 7,149 11,799 8,059 $ 8,059
-------- -------- -------- ========
$ 12,199 $ 22,577 $ 21,476
======== ======== ========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
QUICKLOGIC CORPORATION
STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- -----------------
1994 1995 1996 1996 1997
------- ------- -------- ------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue......................... $ 6,024 $15,148 $23,758 $ 5,154 $ 6,268
Cost of revenue................. 4,053 7,739 11,158 2,563 2,813
------- ------- -------- ------- --------
Gross profit.................... 1,971 7,409 12,600 2,591 3,455
------- ------- -------- ------- --------
Operating expenses:
Research and development...... 3,172 3,599 4,642 1,042 1,333
Selling, general and
administrative............... 4,408 5,770 7,730 1,685 2,313
Contract termination and other
expense...................... -- 2,700 4,125 -- 23,009
------- ------- -------- ------- --------
Loss from operations............ (5,609) (4,660) (3,897) (136) (23,200)
Interest expense................ (240) (200) (60) (7) (21)
Interest and other income, net.. 21 153 360 164 118
------- ------- -------- ------- --------
Net income (loss)............... $(5,828) $(4,707) $(3,597) $ 21 $(23,103)
======= ======= ======== ======= ========
Pro forma net income (loss) per
share (unaudited).............. $ (.29) $ -- $ (1.83)
======== ======= ========
Shares used in pro forma net
income (loss) per share
calculation (unaudited)........ 12,612 12,438 12,612
======== ======= ========
</TABLE>
See notes to financial statements.
F-4
<PAGE>
QUICKLOGIC CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK TOTAL
PREFERRED STOCK COMMON STOCK TO BE ISSUED ADDITIONAL STOCKHOLDER STOCKHOLDERS'
---------------- ------------- -------------- PAID-IN NOTE DEFERRED ACCUMULATED EQUITY
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION DEFICIT (DEFICIT)
------- ------- ------ ------ ------ ------- ---------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31,
1993............. 3,983 $ 4 417 $ 1 -- $ -- $14,726 $(119) $ -- $(13,637) $ 975
Common stock
issued under
stock option
plan............ -- -- 100 -- -- -- 31 -- -- -- 31
Net loss........ -- -- -- -- -- -- -- -- -- (5,828) (5,828)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at
December 31,
1994............ 3,983 4 517 1 -- -- 14,757 (119) -- (19,465) (4,822)
Common stock
issued under
stock option
plan............ -- -- 34 -- -- -- 17 -- -- -- 17
Issuance of
Series E
preferred stock
for cash and
conversion of
notes payable to
stockholders,
net of issuance
cost............ 3,407 3 -- -- -- -- 16,658 -- -- -- 16,661
Net loss........ -- -- -- -- -- -- -- -- -- (4,707) (4,707)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at
December 31,
1995............. 7,390 7 551 1 -- -- 31,432 (119) -- (24,172) 7,149
Common stock
issued under
stock option
plan, net of
repurchases..... -- -- 171 -- -- -- 99 -- -- -- 99
Issuance of
Series E
preferred stock
in exchange for
services........ 4 -- -- -- -- -- 15 -- -- -- 15
Issuance of
Series F
preferred stock
for cash, net of
issuance cost... 1,000 1 -- -- -- -- 8,089 -- -- -- 8,090
Deferred
compensation.... -- -- -- -- -- -- 851 -- (851) -- --
Amortization of
deferred
compensation.... -- -- -- -- -- -- -- -- 43 -- 43
Net income
loss............ -- -- -- -- -- -- -- -- -- (3,597) (3,597)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at
December 31,
1996............. 8,394 8 722 1 -- -- 40,486 (119) (808) (27,769) 11,799
Common stock
issued under
stock option
plan, net of
repurchases
(unaudited)..... -- -- 139 -- -- -- 110 -- -- -- 110
Issuance of
Series F
preferred stock
for cash, net of
issuance cost
(unaudited)..... 102 1 -- -- -- -- 767 -- -- -- 768
Common stock to
be issued in
exchange for
contract
termination
(unaudited)..... -- -- -- -- 2,604 18,409 -- -- -- -- 18,409
Deferred
compensation
(unaudited)..... -- -- -- -- -- -- 2,165 -- (2,165) -- --
Amortization of
deferred
compensation
(unaudited)..... -- -- -- -- -- -- -- -- 76 -- 76
Net loss
(unaudited)..... -- -- -- -- -- -- -- -- -- (23,103) (23,103)
------- ------- --- ---- ----- ------- ------- ----- ------- -------- --------
Balance at March
31, 1997
(unaudited)...... 8,496 $ 9 861 $ 1 2,604 $18,409 $43,528 $(119) $(2,897) $(50,872) $ 8,059
======= ======= === ==== ===== ======= ======= ===== ======= ======== ========
</TABLE>
See notes to financial statements.
F-5
<PAGE>
QUICKLOGIC CORPORATION
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------- ----------------
1994 1995 1996 1996 1997
------- ------- -------- ------ --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net income (loss)............... $(5,828) $(4,707) $ (3,597) $ 21 $(23,103)
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities:
Depreciation................... 562 320 220 60 121
Provision for doubtful
accounts...................... 34 912 1,102 372 200
Amortization of deferred
compensation.................. -- -- 43 -- 76
Contract termination and other
expense....................... -- 2,700 4,125 -- 23,009
Changes in assets and
liabilities:
Accounts receivable........... (602) (2,567) (1,031) (1) (1,244)
Inventory..................... 185 (880) (1,924) 145 (1,419)
Other assets.................. 5 -- (4,555) (214) (212)
Accounts payable.............. 1,472 (122) 1,434 469 115
Accrued and other
liabilities.................. 674 (673) (409) (378) 1,075
------- ------- -------- ------ --------
Net cash provided by (used
in) operating activities.... (3,498) (5,017) (4,592) 474 (1,382)
------- ------- -------- ------ --------
Cash flows from investing
activities:
Capital expenditures for
property and equipment......... (259) (85) (1,478) (192) (915)
Proceeds on sale of
investments.................... -- -- 4,000 -- --
Investments in short-term
instruments.................... -- (4,000) -- -- --
------- ------- -------- ------ --------
Net cash provided by (used
in) investing activities.... (259) (4,085) 2,522 (192) (915)
------- ------- -------- ------ --------
Cash flows from financing
activities:
Repayment of debt and capital
leases......................... (148) (755) (124) (21) (47)
Proceeds from issuance of common
stock, net..................... 31 28 99 -- 110
Proceeds from issuance of
preferred stock, net........... -- 11,785 8,105 -- 768
Borrowings on notes payable to
stockholders................... 1,526 1,198 -- -- --
Borrowings from bank............ -- 214 470 100 1,496
------- ------- -------- ------ --------
Net cash provided by
financing activities........ 1,409 12,470 8,550 79 2,327
------- ------- -------- ------ --------
Net increase (decrease) in cash.. (2,348) 3,368 6,480 361 30
Cash at beginning of the period.. 2,836 488 3,856 3,856 10,336
------- ------- -------- ------ --------
Cash at end of period............ $ 488 $ 3,856 $10,336 $4,217 $ 10,366
======= ======= ======== ====== ========
Supplemental information:
Conversion of notes payable to
stockholder into Series E
preferred stock................. $ -- $ 4,850 $ -- $ -- $ --
======= ======= ======== ====== ========
</TABLE>
See notes to financial statements.
F-6
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. THE COMPANY AND BASIS OF PRESENTATION:
QuickLogic Corporation ("QuickLogic" or the "Company") was incorporated in
California in April 1988. The Company develops, markets, and supports field
programmable gate arrays (FPGAs) and software design tools.
The FPGA business is highly cyclical and has been subject to significant
downturns at various times that have been characterized by diminished product
demand, production overcapacity and accelerated erosion of average selling
prices. The selling price that the Company is able to command for its products
is highly dependent on industry-wide production capacity and demand. Both of
these factors could result in rapid changes in product pricing and could
adversely affect the Company's operating results.
The Company's fiscal year ends on the Sunday closest to December 31. For
presentation purposes the financial statements and notes refer to December 31
as year end and March 31 as quarter end. Certain reclassifications have been
made to the 1995 financial statements to conform to the 1996 presentation.
Such reclassifications had no effect on the results of operations or the
accumulated deficit.
Use of Estimates
The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could vary from those estimates, particularly
in relation to sales returns and allowances, product obsolescence and
litigation. (See Note 11--Contingencies)
Interim Results (unaudited)
The accompanying balance sheet as of March 31, 1997, the statements of
operations and of cash flows for the three months ended March 31, 1996 and
1997 and the statement of stockholders' equity (deficit) for the three months
ended March 31, 1997 are unaudited. In the opinion of management, these
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the results of the interim
periods. The data disclosed in these financial statements, including notes to
the financial statements, at such date and for such periods are unaudited.
Operating results for the quarter ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the full year.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES:
Short Term Investments
All short term investments are classified as available for sale and are
accounted for at fair value with unrealized gains and losses, if any, reported
as a separate component of stockholders' equity. Management determines the
appropriate classification of investments at the time of purchase and
reassesses the classification at each reporting date. Short-term investments
represent high grade marketable corporate debt securities and one government
agency security at December 31, 1995.
F-7
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Fair Value of Financial Instruments
The estimated fair values of financial instruments are determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required to interpret and
analyze the available data and to develop estimates. Accordingly, estimates
could differ significantly from the amounts the Company would realize in a
current market exchange. The estimated fair values of all financial
instruments at December 31, 1996 and 1995, approximate the amounts presented
in the balance sheet.
Inventory
Inventory is stated at the lower of standard cost (which approximates actual
cost on a first-in, first-out basis) or market.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the assets estimated
useful life of three to seven years. Amortization of leasehold improvements is
computed on a straight-line basis over the shorter of the facility lease term
or the estimated useful lives of the improvements.
Revenue Recognition
The Company sells to certain domestic distributors under agreements which
allow certain rights of return and price adjustments on unsold inventory. Such
sales are not recognized until the inventory is sold by the distributor.
Amounts billed to such distributors for shipments are included as accounts
receivable, inventory is relieved and the related gross profit is deferred and
recorded as a current liability until the inventory is resold by the
distributor. Revenue from all other products is recognized upon shipment.
Software revenue is recognized upon shipment by the Company, provided that no
significant Company obligations remain and collection of the resulting
receivables is probable.
Stock-Based Compensation
In October 1995, the FASB issued Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), which
establishes a fair value method of accounting for stock-based compensation
plans and requires additional disclosures for those companies who elect not to
adopt the new method of accounting. The Company has elected to continue to
measure compensation costs using the intrinsic value method prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees" and to comply with
the pro forma disclosure requirements of SFAS 123.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash, short-term
investments and accounts receivable. Cash and short-term investments are
maintained with high quality institutions. The Company's accounts receivable
are derived primarily from sales to customers located in North America,
Europe, Japan and Korea. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral.
F-8
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At December 31, 1996, accounts receivable from four customers represented
24%, 12%, 11% and 10%, respectively, of the Company's accounts receivable. At
December 31, 1995, accounts receivables from three customers represented 12%,
10% and 10%, respectively, of the Company's accounts receivable.
Software Development Costs
Software development costs incurred prior to the establishment of
technological feasibility are included in research and development and are
expensed as incurred. Development costs incurred subsequent to the
establishment of technological feasibility through the period of general
market availability are capitalized, if material. To date, all software
development costs have been expensed as incurred due to their immateriality.
Pro Forma Stockholders' Equity (Unaudited)
If the offering contemplated by this Prospectus is consummated, unaudited
pro forma stockholders' equity would be adjusted for the conversion of
8,496,000 shares of preferred stock outstanding into 8,496,000 shares of
common stock.
The pro forma effect of this transaction has been reflected in the
accompanying unaudited pro forma stockholders' equity as of March 31, 1997.
Pro Forma Net Income (Loss) Per Share (Unaudited)
Pro forma net income (loss) per share is computed using the weighted average
number of common and common equivalent shares outstanding during the periods.
Common equivalent shares consist of preferred stock (using the "as if
converted" method) and stock options and warrants (using the "treasury stock"
method). Common equivalent shares are excluded from the computation if their
effect is antidilutive. Pursuant to a Securities and Exchange Commission Staff
Accounting Bulletin, preferred stock (using the "as if converted" method) and
common and common equivalent shares (using the "treasury stock" method and the
assumed initial public offering price) issued subsequent to May 1996 have been
included in the computation as if they were outstanding for all periods
presented.
Prior period loss per share data have not been presented since such amounts
are not deemed to be meaningful, as such calculations would have excluded
preferred stock.
F-9
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Recent Accounting Pronouncements (Unaudited)
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, "Earnings per Share." This
statement is effective for the Company's fiscal year ending December 31, 1997.
The Statement defines the calculation of earnings per share under generally
accepted accounting principles. Under the new standard, primary earnings per
share is replaced by basic earnings per share and fully diluted earnings per
share is replaced by diluted earnings per share. If the Company had adopted
this Statement for the year ended December 31, 1996 and for the three month
periods ended March 31, 1996 and 1997, the Company's pro forma earnings (loss)
per share would have been as follows:
<TABLE>
<CAPTION>
QUARTER ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, --------------
1996 1996 1997
------------ ------ -------
<S> <C> <C> <C>
Pro forma basic earnings (loss) per share...... $ (.44) $ -- $(2.49)
Pro forma diluted earnings (loss) per share.... $ (.29) $ -- $(1.83)
</TABLE>
NOTE 3. BALANCE SHEET COMPONENTS:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) ---------------- MARCH 31,
1995 1996 1997
------- ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
Inventory:
Raw materials................................... $ 533 $ 1,693 $ 2,013
Work-in-process................................. 512 1,268 2,225
Finished goods.................................. 279 287 429
------- ------- -------
$ 1,324 $ 3,248 $ 4,667
======= ======= =======
Property and equipment:
Equipment....................................... $ 1,755 $ 2,323 $ 3,033
Software........................................ 492 601 642
Furniture and fixtures.......................... 23 555 693
Leasehold improvements.......................... 18 519 545
------- ------- -------
2,288 3,998 4,913
Accumulated depreciation........................ (2,070) (2,290) (2,411)
------- ------- -------
$ 218 $ 1,708 $ 2,502
======= ======= =======
Accrued and other liabilities:
Accrued employee compensation................... $ 320 $ 731 $ 1,070
Accrued legal costs............................. 2,200 4,860 4,600
Deferred income................................. 318 662 1,629
Other liabilities............................... 390 676 696
------- ------- -------
$ 3,228 $ 6,929 $ 7,995
======= ======= =======
</TABLE>
F-10
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. DEBT FACILITIES:
<TABLE>
<CAPTION>
DECEMBER 31,
(IN THOUSANDS) ------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Installment notes payable to bank..................... $212 $580 $2,038
====== ====== ======
</TABLE>
At December 31, 1996, the Company had outstanding installment notes totaling
$210,000. The notes bear interest at prime plus 0.25% (8.5% as of December 31,
1996), and are secured by the specific equipment financed. Principal payments
are due in equal monthly installments over the term of the notes which mature
between 1998 and 1999.
At December 31, 1996, the Company had a $5.0 million bank facility which
includes a $2.0 million equipment term loan, a $1.0 million export/import
revolving line of credit and a $2.0 million revolving line of credit. At
December 31, 1996, $370,000 had been drawn down under the equipment line and
no borrowings were outstanding against the revolving lines of credit.
Borrowings under the equipment term loan bear interest at prime plus 0.25%
(8.5% as of December 31, 1996) and are secured by the specific equipment
financed. Principal payments are due in equal monthly installments over the
term of the note which matures in the year 2000. The revolving line of credit
bears interest at prime (8.25% as of December 31, 1996).
During the three month period ended March 31, 1997, the Company drew down an
additional $1.5 million under the equipment term loan.
In conjunction with the bank facility, the Company must comply with certain
financial covenants related to profitability, tangible net worth, working
capital, debt leverage and liquidity. The Company was in breach of certain
financial covenants as of March 31, 1997, for which it has obtained a waiver
from the bank.
The Company paid $126,000, $103,000, $56,000 and $24,000 in interest during
1994, 1995, 1996, and the three months ended March 31, 1997, respectively.
F-11
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 5. STOCKHOLDERS' EQUITY:
Preferred Stock
Preferred stock consists of the following at December 31, 1995 and 1996 and
March 31, 1997 (in thousands, except per share data):
<TABLE>
<CAPTION>
DECEMBER 31,
------------- MARCH 31,
1995 1996 1997
------ ------ -----------
(UNAUDITED)
<S> <C> <C> <C>
Series A, par value $0.001 per share; 358 shares
designated, issued and outstanding................. $ -- $ -- $ --
Series B, par value $0.001 per share; 1,468 shares
designated, issued and outstanding................. 1 1 1
Series C, par value $0.001 per share; 1,729 shares
designated, 1,711 shares issued and outstanding.... 2 2 2
Series D, par value $0.001 per share; 446 shares
designated, issued and outstanding................. 1 1 1
Series E, par value $0.001 per share; 3,411 shares
designated, 3,407, 3,411 and 3,411 shares issued
and outstanding.................................... 3 3 4
Series F, par value $0.001 per share; 1,355 shares
designated, 1,000 and 1,102 shares issued and
outstanding........................................ -- 1 1
------ ------ -----
$ 7 $ 8 $ 9
====== ====== =====
</TABLE>
The holders of the outstanding Series A, Series B, Series C, Series D,
Series E and Series F preferred stock shall be entitled to an annual dividend
of $.0233, $.0289, $0.448, $0.448, $0.49 and $0.812 per share, respectively,
when and if declared by the Board of Directors. Such dividends are payable
prior to any payment of dividends on the shares of common stock. No dividends
have been declared or paid as of December 31, 1996.
In the event of liquidation, dissolution or winding up of the Company, the
holders of Series F preferred stock shall be entitled to receive $8.12 per
share plus declared but unpaid dividends thereon, prior to any distribution to
holders of Series A, Series B, Series C, Series D and Series E preferred stock
and holders of common stock. The holders of Series A, Series B, Series C,
Series D and Series E preferred stock shall be entitled to receive $2.331,
$2.891, $4.48, $4.48 and $4.90 per share, respectively, plus declared but
unpaid dividends thereon, prior to any distribution to holders of common
stock. As of December 31, 1996, the aggregate liquidation preference of Series
A, Series B, Series C, Series D, Series E and Series F preferred stock is
approximately $39.6 million.
Each share of preferred stock is convertible at the option of the holder
into one share of common stock, subject to adjustment for dilutive events, as
defined. Each share of preferred stock will be automatically converted into
common stock upon the earlier of (i) closing of an underwritten public
offering of the Company's common stock, the aggregate gross proceeds of which
exceed $15,000,000, at a per share issuance price of at least $8.75 or (ii)
upon the vote or written consent of holders of at least two-thirds of the
total number of shares of Series A, Series B, Series C, Series D, Series E and
Series F preferred stock then outstanding.
The holders of the preferred shares have voting rights equivalent to the
number of common shares into which the preferred shares are convertible. The
Company must obtain the approval of the holders of at least two-thirds of such
outstanding preferred shares, voting together as a single class,
F-12
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
to alter the preferences, rights or privileges of the preferred stock; create
a new class of stock having preference over the Series A, Series B, Series C,
Series D, Series E and Series F preferred stock, or increase the authorized
number of shares of Series A, Series B, Series C, Series D, Series E or
Series F preferred stock.
In December 1991, in conjunction with the issue of Series C preferred stock,
the Company issued warrants to purchase 18,750 shares of Series C preferred
stock at $4.48 per share. The warrants expire seven years from date of
issuance or upon the closing of the Company's initial public offering,
whichever is sooner.
In January 1997, the Company issued 101,593 shares of Series F preferred
stock at $8.12 per share for cash of $0.8 million.
Common Stock
In November 1996, in conjunction with the issuance of Series F preferred
stock, the Company authorized an additional 1,428,571 shares of common stock.
NOTE 6. INCOME TAXES:
No provision for federal or state income taxes has been recorded for the
years ended December 31, 1994, 1995, and 1996 as the Company incurred net
operating losses.
Deferred tax balances comprise the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward.......................... $ 6,149 $ 5,742
Accruals and reserves.................................... 2,431 2,355
Credit carryforward...................................... 772 1,159
Capitalized research and development..................... 554 692
------- -------
9,906 9,948
Valuation allowances..................................... (9,906) (9,948)
------- -------
Deferred tax asset....................................... $ -- $ --
======= =======
</TABLE>
Management believes that, based on a number of factors, the available
objective evidence creates sufficient uncertainty regarding the realizability
of the deferred tax assets such that a full valuation allowance has been
recorded. These factors include the Company's history of losses, recent
increases in expense levels, the fact that the market in which the Company
competes is intensely competitive and characterized by rapidly changing
technology, the lack of carryback capacity to realize deferred tax assets, and
uncertainty regarding market acceptance of the Company's products. The Company
will continue to assess the realizability of the deferred tax assets in future
periods.
At December 31, 1996, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $16 million and $1
million, respectively. These carryforwards, if not utilized to offset future
taxable income and income taxes payable, will expire through the year 2010.
F-13
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Under the Tax Reform Act of 1986, the amount of and the benefit from net
operating losses that can be carried forward may be impaired in certain
circumstances. Events which may cause changes in the Company's tax carryovers
include, but are not limited to, a cumulative ownership change of more than
50% over a three year period. The issuance of Series A and Series C preferred
stock resulted in an annual limitation of the Company's ability to utilize net
operating losses incurred prior to that date. The limitation is insignificant.
Net operating losses incurred between the time of the Series C preferred stock
issuance and March 31, 1997, had not been subject to any annual limitations as
of March 31, 1997.
NOTE 7. EMPLOYEE BENEFIT PLANS:
Stock Option Plan
As of December 31, 1996, under the Company's 1989 Stock Option Plan, as
amended in 1996, (the "Plan"), incentive and nonqualified stock options to
purchase up to 2,100,000 shares of common stock may be granted to key
employees, directors and consultants of the Company. Options are granted at an
exercise price equal to the fair market value of the Company's common stock
(as determined by the Board of Directors) at the date of grant and generally
vest over four years, and expire up to ten years from the date of grant.
In July 1996, the 1989 Stock Option Plan was amended to allow options to be
exercised prior to vesting. Unvested shares must be deposited with an escrow
agent and the Company has a right to repurchase such shares at their initial
issuance price if the optionee is terminated from service prior to vesting.
The following table summarizes the Company's stock option activity and
related weighted average exercise price for each of the years ended December
31, 1996, 1995 and 1994 and the three months ended March 31, 1997 (in
thousands, except per share data):
<TABLE>
<CAPTION>
OPTIONS EXERCISE
OUTSTANDING PRICE
----------- --------
<S> <C> <C>
Balance at December 31, 1993............................ 366 $0.39
Granted............................................... 470 $0.70
Canceled.............................................. (139) $0.41
Exercised............................................. (100) $0.36
-----
Balance at December 31, 1994............................ 597 $0.64
Granted............................................... 635 $0.70
Canceled.............................................. (24) $0.64
Exercised............................................. (34) $0.51
-----
Balance at December 31, 1995............................ 1,174 $0.67
Granted............................................... 317 $0.98
Canceled.............................................. (200) $0.70
Exercised............................................. (193) $0.62
-----
Balance at December 31, 1996............................ 1,098 $0.77
Granted (unaudited)................................... 706 $3.52
Canceled (unaudited).................................. (5) $0.71
Exercised (unaudited)................................. (142) $0.78
-----
Balance at March 31, 1997 (unaudited)................... 1,657 $1.94
=====
</TABLE>
F-14
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1996, 674,000 options were vested, 697,660 shares were
available for grant and 14,317 unvested shares had been exercised and remain
subject to the Company's buyback rights.
In March 1997, an additional 714,286 shares were authorized for issuance
under the 1989 Stock Option Plan.
At March 31, 1997, 735,671 options were vested and 714,289 shares were
available for grant.
Related weighted average exercise price and contractual life information at
December 31, 1996 are as follows (share amounts in thousands):
<TABLE>
<CAPTION>
OPTIONS WITH OUTSTANDING EXERCISABLE REMAINING
EXERCISE PRICES OF: SHARES SHARES LIFE (YEARS)
------------------- ----------- ----------- ------------
<S> <C> <C> <C>
$0.35.............................. 43 43 3.3
$0.70.............................. 802 802 8.0
$1.05.............................. 253 253 9.8
</TABLE>
The weighted average estimated grant date fair value, as defined by SFAS
123, for options granted during 1995 and 1996 was $ 0.70 and $ 3.71 per
option, respectively. The fair value of each option grant is estimated on the
date of grant using the Black-Scholes option pricing model. The Black-Scholes
model, as well as other currently accepted option valuation models, was
developed to estimate the fair value of freely tradable, fully transferable
options without vesting restrictions, which significantly differ from the
Company's stock option awards.
The following weighted average assumptions are included in the estimated
grant date fair value calculations for grants in 1995 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------
1995 1996
------ ------
<S> <C> <C>
Expected life (years)........................................ 4.5 5
Risk-free interest rate...................................... 5.99% 6.05%
Volatility................................................... -- --
Dividend yield............................................... -- --
</TABLE>
Had the Company recorded compensation cost based on the estimated grant date
fair value, as defined by SFAS 123, for awards granted under its stock option
plan, the Company's net income (loss) and earnings (loss) per share would have
been as follows for the years ended December 31, 1996 and 1995 (in thousands
except per share data):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1995 1996
------- -------
<S> <C> <C>
Pro forma net income (loss)................................ $(4,715) $(3,676)
Pro forma net income (loss) per share...................... (.34) (.29)
</TABLE>
The pro forma effect on net income (loss) for 1995 and 1996 is not
representative of the pro forma effect on net income (loss) in future years
because it does not take into consideration pro forma compensation expense
related to grants made prior to 1995 and because the determination of the fair
value of all options granted after the Company becomes a public entity will
include an expected volatility factor.
F-15
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Deferred Compensation
During the year ended December 31, 1996 and the three months ended March 31,
1997, the Company granted options for value. Accordingly, the Company has
recorded deferred compensation of $851,000 and $2,165,000 for the year ended
December 31, 1996 and for three months ended March 31, 1997, respectively.
Such deferred compensation will be amortized ratably over the vesting period
of the options.
NOTE 8. RELATED PARTY TRANSACTIONS:
Technology Development and Foundry Supply Agreement
In October 1992, in conjunction with the issuance of Series D preferred
stock, the Company entered into a Technical Transfer, Joint Development
License and Foundry Supply Agreement (the Existing Agreement) with Cypress
Semiconductor Corporation ("Cypress"). Cypress owns 100% of the Company's
Series D preferred stock. The agreement provides that the Company and the
investor share processing technologies and licenses to market developed FPGA
products and that the investor guarantees the Company a certain wafer start
capacity. The Company purchased all of its wafer requirements under this
agreement during 1995 and 1996.
In March 1997, the Company and Cypress terminated the Existing Agreement
related to the Company's FPGA products, and replaced it with a new arrangement
whereby the Company's FPGA products will no longer be second sourced by
Cypress. In exchange for the termination of the Existing Agreement and the
reversion of the rights to the intellectual property developed thereunder to
the Company, the Company paid $4.5 million in cash and agreed to issue
2,603,817 shares of Common Stock to Cypress, resulting in a charge of
approximately $23 million in the first quarter of 1997. In addition, the
Company granted Cypress certain contractual rights as to the shares of the
Company's stock held by Cypress, including the right to sell shares in this
offering. The parties also entered into a new foundry agreement and a cross-
license agreement.
Notes Receivable From Stockholder
As of December 31, 1996, the Company has $119,000 of demand promissory notes
from a stockholder. The notes bear interest at rates ranging from 6.7% to
8.02% per annum, and are secured by shares of the Company's common stock held
by the stockholder.
NOTE 9. GEOGRAPHIC REPORTING AND CUSTOMER CONCENTRATION:
<TABLE>
<CAPTION>
NORTH
AMERICA EUROPE ASIA TOTAL
------- ------ ------ -------
<S> <C> <C> <C> <C>
Net revenue (in thousands):
Year ended December 31, 1994................ $ 4,217 $ 865 $ 942 $ 6,024
Year ended December 31, 1995................ $10,694 $2,779 $1,675 $15,148
Year ended December 31, 1996................ $16,726 $4,124 $2,908 $23,758
</TABLE>
During the year ended December 31, 1996, one customer accounted for
approximately 27% of revenue. All sales are made from the United States and
are denominated in U.S. dollars.
F-16
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10. COMMITMENTS:
The Company leases its primary facility under a noncancelable operating
lease which expires in 2003, and includes an option to renew through 2006. The
lease is secured by a $300,000 standby letter of credit which expires in June
1997. Rent expense for the years ended December 31, 1994, 1995 and 1996 was
approximately $314,000, $358,000 and $358,000, respectively.
The Company also leases certain equipment and leasehold improvements under
capital leases which expire in 1997 and 2003. At December 31, 1996, $232,000
of assets acquired under capital leases were included in plant and equipment.
Future minimum lease commitments, excluding property taxes and insurance,
are as follows (in thousands):
<TABLE>
<CAPTION>
OPERATING CAPITAL
YEAR ENDING DECEMBER 31, LEASES LEASES
------------------------ --------- -------
<S> <C> <C>
1997..................................................... $ 523 $ 57
1998..................................................... 523 45
1999..................................................... 546 45
2000..................................................... 563 45
2001 and thereafter...................................... 1,694 136
------ -----
$3,849 328
======
Less amount representing interest........................ (103)
-----
Present value of capital lease obligations............... 225
Less current portion..................................... (33)
-----
Long term portion of capital lease obligations........... $ 192
=====
</TABLE>
In October 1996, the Company executed a memorandum of understanding with
TSMC Ltd., which contemplates that third the parties will enter into a three
year "take or pay" wafer manufacturing agreement.
NOTE 11. CONTINGENCIES:
During 1994, Actel Corporation ("Actel"), a competitor of the Company, filed
a lawsuit seeking unspecified damages and alleging that the Company's products
infringe upon its patents. During 1995 and 1996, the suit was amended to
include a trade secret claim and additional patents. The Company has filed
answers to each of these complaints seeking that the Actel patents are
invalid, void, not enforceable and are not infringed. Additionally, the
Company has filed counterclaims against Actel claiming that Actel has
infringed upon the Company's patents.
In April 1997, the court adopted the recommendation of the Special Master
and granted Actel's motion for summary judgment that the Company's products
infringe on one claim of one of the patents. If the patent is finally found to
be valid and enforceable, and the summary judgment motion is upheld on appeal,
then Actel would be entitled to significant damages and an injunction
preventing the sale of products incorporating the infringing patent. Such an
injunction and/or the payment of damages could have a material adverse effect
on the Company's business, financial condition and results of operations and
could potentially render it insolvent.
In addition to the patent infringement actions, Actel amended its claims
against the Company to include a claim against the Company and one of its
employees on June 14, 1995 alleging
F-17
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
misappropriation of trade secrets, breach of contract, breach of confidential
relationship, and unfair competition. Actel has sought assignment of certain
issued and future patents of the Company, two of which are part of this
lawsuit, in relation to this claim in addition to unspecified money damages,
that the damages be doubled, attorneys' fees and other remedies. These claims
are based on allegations that this employee, who had once been a consultant to
Actel, had misappropriated confidential information from Actel related to
logic cells, which the Company then incorporated into its pASIC products. The
employee and the Company have filed answers denying each of these claims.
Discovery is ongoing at this time and no dispositive motions have been filed
or heard.
Trial on the patent infringement and trade misappropriation claims is
currently scheduled for September 1998. However, there can be no assurance
that the trial will occur at such time and may be delayed significantly. As
the outcome of any litigation is inherently uncertain, the Company is unable
to predict the outcome of this litigation. Therefore, there can be no
assurance that the Company will prevail in the trial on the patent
infringement claims and counter-claims, the trial on the alleged
misappropriation of intellectual property, or hearings on any motions related
to such proceedings. The timing of the filing of any motions by Actel,
hearings on motions by either Actel or the Company, the issuance of rulings on
such motions, the issuance of recommendations by the Special Master and the
adoption or rejection of such recommendations by the Court are not within the
Company's control and could occur at any time. The announcement of any rulings
or recommendations, or the adoption or rejection of recommendations, that are
adverse to the Company, will likely have a material adverse effect upon the
market price for the Company's stock.
Due to the inherent uncertainty of litigation, management cannot estimate
the possible loss, if any, that may ultimately be incurred in connection with
the allegations. Any adverse determinations in this litigation or a settlement
could result in the loss of the Company's proprietary rights, subject the
Company to significant liabilities, require the Company to seek or to grant
licenses with third parties, require the Company to cease selling its products
or prevent the Company from licensing its technology, any of which could have
a material adverse effect on the Company's business, financial condition and
results of operations.
Management intends to vigorously defend itself against the allegations that
the Company's products infringe upon Actel's patents as well as pursue its
claims that Actel's products infringe upon the Company's patents. Accordingly,
the Company recorded charges of $2.7 million and $4.1 million in the years
ended December 31, 1995 and 1996, respectively, in conjunction with the Actel
litigation. As of March 31, 1997, the Company has accrued $4.6 million for
this litigation.
NOTE 12. SUBSEQUENT EVENTS:
In May 1997, the Board of Directors authorized the reincorporation of the
Company in Delaware and, in conjunction with such reincorporation a 7-for-1
reverse stock split (the "Stock Split") of the Company's preferred stock and
common stock. All references to the number of shares of preferred stock,
common stock and per share amounts have been retroactively restated in the
accompanying financial statements to reflect the effect of the Stock Split.
The Board of Directors also approved a recapitalization that would increase
the total of authorized shares of common stock to one hundred million and
authorized ten million shares of undesignated stock. In addition the Board of
Directors approved the adoption of the 1997 Employee Stock Purchase Plan, the
1997 Stock Plan and the 1997 Director Option Plan. Adoption of these plans is
subject to stockholder approval.
All of the above items will be effected prior to the date of the offering.
F-18
<PAGE>
Title: The QuickLogic Solution
Graphic: Three rows, with text on the left column and a corresponding graphic on
the right column accompanied by a short description of the graphic.
<TABLE>
<CAPTION>
Left Column Text Graphic Description of graphic (presented as a caption)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
"ViaLink Antifuse Cross section of a ViaLink "Cross Section of a metal-layer ViaLink
QuickLogic's interconnect as photographed by connection as photographed by a scanning
interconnect a scanning electron microscope electron microscope (SEM)"
technology enables
high speed
connections"
- ---------------------------------------------------------------------------------------------------------------------------
"pASIC Architecture Two graphics for this row
Programmable Diagram of the silicon substrate "Wiring resources and ViaLink interconnects are
interconnects are with the logic gates, and the metal located above the silicon substrate, allowing
placed between the layers floating above more logic cells to reside on the die"
metal layers above the
silicone substrate,
maximizing wiring "ViaLink interconnects are placed at every
resources and possible intersection of routing wires"
minimizing die size Zoom in of picture above, showing
and cost" a small cross section of the chip,
with the silicon substrate on the
bottom and three layers of metal
routing wires above it
- ---------------------------------------------------------------------------------------------------------------------------
"QuickWorks and Picture of a PC [none]
QuickTools Design A box of software with QuickLogic
Software logo on the cover as well as the
A comprehensive titles "QuickWorks" and
software design tool "QuickTools"
solution that supports CD-ROM disk with the QuickLogic
schematic entry and logo
IEEE standard design
languages Verilog and
VHDL, and operates
on Windows and UNIX
platforms"
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS. IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, THE COM-
MON STOCK IN ANY JURISDICTION WHERE, TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IM-
PLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS
PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary..................................................... 3
The Company............................................................ 4
Risk Factors........................................................... 5
Use of Proceeds........................................................ 17
Dividend Policy........................................................ 17
Capitalization......................................................... 18
Dilution............................................................... 19
Selected Financial Data................................................ 20
Management's Discussion and Analysis of Financial Condition and Results
of Operations......................................................... 21
Business............................................................... 30
Management............................................................. 46
Certain Transactions................................................... 57
Principal and Selling Stockholders..................................... 59
Description of Capital Stock........................................... 61
Shares Eligible for Future Sale........................................ 64
Underwriting........................................................... 67
Legal Matters.......................................................... 68
Experts................................................................ 68
Change in Independent Accountants...................................... 69
Additional Information................................................. 69
Index to Financial Statements.......................................... F-1
</TABLE>
UNTIL , 1997 (25 DAYS FROM THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
[LOGO OF QUICKLOGIC]
3,000,000 SHARES
COMMON STOCK
DEUTSCHE MORGAN GRENFELL
UBS SECURITIES
COWEN & COMPANY
PROSPECTUS
, 1997
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the estimated costs and expenses payable by
the Registrant in connection with the sale of the Common Stock being
registered hereby, other than underwriting commissions and discounts which are
not applicable under this offering.
<TABLE>
<CAPTION>
ITEM AMOUNT
---- --------
<S> <C>
SEC Registration Fee............................................... $ 13,591
NASD Filing Fee.................................................... 4,985
Nasdaq National Market Listing Fee................................. 50,000
Blue Sky Fees and Expenses......................................... 5,000
Printing and Engraving Expenses.................................... 150,000
Legal Fees and Expenses............................................ 250,000
Accounting Fees and Expenses....................................... 225,000
Transfer Agent and Registrar Fees.................................. 3,000
Miscellaneous...................................................... 48,424
--------
Total............................................................ $750,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 145 of the Delaware General Corporation Law (the
"DGCL"), the Registrant's Certificate of Incorporation provides that each
person who is or was or who had agreed to become a director or officer of the
Registrant or who had agreed at the request of the Registrant's Board of
Directors or an officer of the Registrant to serve as an employee or agent of
the Registrant or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, shall be
indemnified by the Registrant to the full extent permitted by the DGCL or any
other applicable laws. Such Certificate of Incorporation also provides that
the Registrant may enter into one or more agreements with any person which
provides for indemnification greater of different than that provided in such
Certificate, and that no amendment or repeal of such Certificate shall apply
to or have any effect on the right to indemnification permitted or authorized
thereunder for or with respect to claims asserted before or after such
amendment or repeal arising from acts or omissions occurring in whole or in
part before the effective date of such amendment or repeal.
The Registrant's Bylaws provide that the Registrant shall indemnify to the
full extent authorized by law any person made or threatened to be made a party
to an action or a proceeding, whether criminal, civil, administrative or
investigative, by reason of the fact that he, his testator or intestate was or
is a director, officer or employee of the Registrant or any predecessor of the
Registrant or serves or served any other enterprise as a director, officer or
employee at the request of the Registrant or any predecessor of the
Registrant.
The Registrant intends to enter into indemnification agreements with its
directors and certain of its officers.
The Registrant intends to purchase and maintain insurance on behalf of any
person who is or was a director or officer against any loss arising from any
claim asserted against him and incurred by him in any such capacity, subject
to certain exclusions.
See also the undertakings set out in response to Item 17 herein.
II-1
<PAGE>
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since June 1, 1994, the Registrant has issued and sold the following
securities:
1. From June 1, 1994 through May 31, 1997, the Registrant issued and sold
432,927 shares of Common Stock to employees of the Registrant at prices
ranging from $0.35 to $2.10 per share upon exercise of stock options
pursuant to Registrant's 1989 Stock Option Plan, as amended.
2. On June 1, 1995 and June 9, 1995, the Registrant issued and sold to
certain private investors 3,410,481 shares of Series E Preferred Stock
convertible into an aggregate of 3,410,481 shares of Common Stock at a
purchase price per share of $4.90.
3. On November 27, 1996 and January 24, 1997, the Registrant issued and
sold to certain private investors an aggregate of 1,102,279 shares of
Series F Preferred Stock convertible into an aggregate of 1,102,279 shares
of Common Stock at a purchase price per share of $8.12.
4. On March 29, 1997, the Registrant agreed to issue an aggregate of
2,603,816 shares of Common Stock to Cypress as partial consideration for
the termination of the Existing Agreement and the reversion to the Company
of certain intellectual property rights developed thereunder.
The above share and dollar amounts reflect the 7-for-1 reverse stock split
to be effected upon the reincorporation of the Company in Delaware. The sales
of the above securities were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act, or
Regulation D promulgated thereunder, or Rule 701 promulgated under Section
3(b) of the Securities Act as transactions by an issuer not involving a public
offering or transactions pursuant to compensatory benefit plans and contracts
relating to compensation as provided under such Rule 701. The recipients of
securities in each such transaction represented their intention to acquire the
securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed
to the share certificates and warrants issued in such transactions. All
recipients had adequate access, through their relationships with the Company,
to information about the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
A. EXHIBITS.
<TABLE>
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Articles of Incorporation of the Registrant (California).
3.2* Certificate of Incorporation of the Registrant (Delaware) to be
effective prior to the closing of the offering.
3.3* Amended and Restated Certificate of Incorporation of the Registrant to
be effective upon closing of the offering.
3.4 Bylaws of the Registrant (California).
3.5* Bylaws of the Registrant (Delaware) to be effective prior to the
closing of the offering.
4.1* Specimen Common Stock certificate of the Registrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation.
10.1* Form of Indemnification Agreement for directors and executive
officers.
10.2 1989 Stock Option Plan.
10.3 1991 Sales Representative Stock Purchase Plan.
10.4 1997 Stock Plan.
10.5 1997 Employee Stock Purchase Plan.
10.6 1997 Director Option Plan.
10.7 Series E Preferred Stock Purchase Agreement dated June 1, 1995 and
June 9, 1995 by and among the Registrant and the Purchasers named
therein.
10.8 Series F Preferred Stock Purchase Agreement dated November 27, 1996
and January 24, 1997 by and among the Registrant and the Purchasers
named therein.
10.9+* Termination Agreement dated March 29, 1997 between the Registrant and
Cypress Semiconductor Corporation ("Cypress").
10.10+* Cross License Agreement dated March 29, 1997 between the Registrant
and Cypress.
10.11+* Wafer Fabrication Agreement March 29, 1997 between the Registrant and
Cypress.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.12 Sixth Amended and Restated Shareholders Rights Agreement dated March
29, 1997 by and among the Registrant, Cypress and certain stockholders.
10.13 Sixth Amended and Restated Registration Rights Agreement dated March
29, 1997 by and among the Registrant, Cypress and certain stockholders.
10.14* Technical Transfer, Joint Development License and Foundry Supply
Agreement, dated October 2, 1992, between the Registrant and Cypress.
10.15 Lease dated June 17, 1995, as amended, between Kairos, LLC and Moffet
Orchard Investors as Landlord and the Registrant for the Registrant's
facility located in Sunnyvale, California.
10.16 Business Loan Agreement dated August 9, 1995 between the Registrant and
Silicon Valley Bank, as amended.
10.17 Loan and Security Agreement dated August 8, 1996 between the Registrant
and Silicon Valley Bank, as amended.
10.18 Export-Import Bank Loan and Security Agreement dated August 8, 1996
between the Registrant and Silicon Valley Bank.
11.1 Statement regarding calculation of earnings per share.
23.1 Consent of Price Waterhouse LLP, independent accountants (see page II-
5).
23.2 Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(See Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1* Financial Data Schedule (EDGAR filed version only).
</TABLE>
- --------
* Documents to be filed by amendment.
+ Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.46.
B. FINANCIAL STATEMENT SCHEDULES.
All schedules are omitted because they are inapplicable or the requested
information is shown in the financial statements of the Registrant or notes
thereto.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 14, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that: (1) for purposes of
determining any liability under the Securities Act, the information omitted
from the form of prospectus filed as part of this registration statement in
reliance upon Rule 430A and contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of the time
it was declared effective; and (2) for the purpose of determining any
liability under the Securities Act, each post-effective amendment that
contains a form of prospectus shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned Registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF SUNNYVALE, STATE OF
CALIFORNIA, ON THE 9TH DAY OF JUNE, 1997.
QuickLogic Corporation
/s/ E. Thomas Hart
By: _________________________________
E. THOMAS HART,
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints E. Thomas Hart and Vincent A. McCord,
and each of them acting individually, as his true and lawful attorneys-in-fact
and agents, with full power of each to act alone, with full powers of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Registration
Statement (including post-effective amendments or any abbreviated registration
statement and any amendments thereto filed pursuant to Rule 462(b) increasing
the number of securities for which registration is sought), and file the same,
with all exhibits thereto, and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact
and agents, with full power of each to act alone, full power and authority to
do and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorneys-
in-fact and agents, or his or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
/s/ E. Thomas Hart President, Chief June 9, 1997
- ------------------------------------- Executive Officer
E. THOMAS HART and Director
(Principal
Executive Officer)
/s/ Vincent A. McCord Vice President, June 9, 1997
- ------------------------------------- Finance, Chief
VINCENT A. MCCORD Financial Officer
and Secretary
(Principal
Financial and
Accounting Officer)
Director June , 1997
- -------------------------------------
IRWIN B. FEDERMAN
/s/ Hua-Thye Chua Director June 9, 1997
- -------------------------------------
HUA-THYE CHUA
II-4
<PAGE>
CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated June 9, 1997, relating
to the financial statements of Quicklogic Corporation, which appears in such
Prospectus. We also consent to the references to use under the headings
"Experts" in such Prospectus.
Price Waterhouse LLP
San Jose, California
June 9, 1997
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. DESCRIPTION PAGE
------- ----------- ------------
<C> <S> <C>
1.1* Form of Underwriting Agreement.
3.1 Articles of Incorporation of the Registrant
(California).
3.2* Certificate of Incorporation of the Registrant
(Delaware) to be effective prior to the closing of the
offering.
3.3* Amended and Restated Certificate of Incorporation of
the Registrant to be effective upon closing of the
offering.
3.4 Bylaws of the Registrant (California).
3.5* Bylaws of the Registrant (Delaware) to be effective
prior to the closing of the offering.
4.1* Specimen Common Stock certificate of the Registrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation.
10.1* Form of Indemnification Agreement for directors and
executive officers.
10.2 1989 Stock Option Plan.
10.3 1991 Sales Representative Stock Purchase Plan.
10.4 1997 Stock Plan.
10.5 1997 Employee Stock Purchase Plan.
10.6 1997 Director Option Plan.
10.7 Series E Preferred Stock Purchase Agreement dated June
1, 1995 and June 9, 1995 by and among the Registrant
and the Purchasers named therein.
10.8 Series F Preferred Stock Purchase Agreement dated
November 27, 1996 and January 24, 1997 by and among
the Registrant and the Purchasers named therein.
10.9+* Termination Agreement dated March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation
("Cypress").
10.10+* Cross License Agreement dated March 29, 1997 between
the Registrant and Cypress.
10.11+* Wafer Fabrication Agreement March 29, 1997 between the
Registrant and Cypress.
10.12 Sixth Amended and Restated Shareholders Rights
Agreement dated March 29, 1997 by and among the
Registrant, Cypress and certain stockholders.
10.13 Sixth Amended and Restated Registration Rights
Agreement dated March 29, 1997 by and among the
Registrant, Cypress and certain stockholders.
10.14* Technical Transfer, Joint Development License and
Foundry Supply Agreement, dated October 2, 1992,
between the Registrant and Cypress.
10.15 Lease dated June 17, 1995, as amended, between Kairos,
LLC and Moffet Orchard Investors as Landlord and the
Registrant for the Registrant's facility located in
Sunnyvale, California.
10.16 Business Loan Agreement dated August 9, 1995 between
the Registrant and Silicon Valley Bank, as amended.
10.17 Loan and Security Agreement dated August 8, 1996
between the Registrant and Silicon Valley Bank, as
amended.
10.18 Export-Import Bank Loan and Security Agreement dated
August 8, 1996 between the Registrant and Silicon
Valley Bank.
11.1 Statement regarding calculation of earnings per share.
23.1 Consent of Price Waterhouse LLP, independent
accountants (see page II-5).
23.2 Consent of Wilson Sonsini Goodrich & Rosati,
Professional Corporation (See Exhibit 5.1).
24.1 Power of Attorney (see page II-4).
27.1* Financial Data Schedule (EDGAR filed version only).
</TABLE>
- --------
* Documents to be filed by amendment.
+ Certain information in these exhibits has been omitted and filed separately
with the Securities and Exchange Commission pursuant to a confidential
treatment request under 17 C.F.R. Sections 200.80(b)(4), 200.83 and 230.46.
<PAGE>
EXHIBIT 3.1
QUICKLOGIC CORPORATION
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
E. Thomas Hart and Vincent A. McCord certify that:
1. They are the President and Secretary, respectively of QuickLogic
Corporation, a California corporation.
2. That the Articles of Incorporation of this Corporation are amended and
restated to read in full as follows:
I
The name of this Corporation is QuickLogic Corporation.
II
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California, other than the banking business, the trust company business, or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III
A. Classes of Stock. This Corporation is authorized to issue two classes
----------------
of shares to be designated respectively Common Stock ("Common Stock") and
Preferred Stock ("Preferred Stock"). The total number of shares of Common Stock
this Corporation shall have authority to issue is 105,000,000 and the total
number of shares of Preferred Stock this Corporation shall have authority to
issue is 61,567,874.
B. Authorization Of Preferred Stock. There shall be six series of
--------------------------------
Preferred Stock designated and known as Series A Preferred Stock (hereinafter
referred to as the "Series A Preferred"), Series B Preferred Stock (hereinafter
referred to as the "Series B Preferred"), Series C Preferred Stock (hereinafter
referred to as "Series C Preferred"), Series D Preferred Stock (hereinafter
referred to as "Series D Preferred"), Series E Preferred Stock (hereinafter
referred to as "Series E Preferred") and Series F Preferred Stock (hereinafter
referred to as "Series F
-1-
<PAGE>
Preferred"). The Series A Preferred shall consist of 2,505,000 shares having the
rights, preferences and privileges as set forth in this Article III, the Series
B Preferred shall consist of 10,274,637 shares having the rights, preferences
and privileges as set forth in this Article III and the Series C Preferred shall
consist of 12,106,811 shares having the rights, preferences and privileges as
set forth in this Article III, the Series D Preferred shall consist of 3,125,000
shares having the rights, preferences and privileges as set forth in this
Article III, the Series E Preferred shall consist of 23,873,667 shares having
the rights, preferences and privileges as set forth in this Article III and the
Series F Preferred shall consist of 9,482,759 shares having the rights,
preferences and privileges as set forth in this Article III.
C. Rights, Preferences and Privileges of Capital Stock. The rights,
---------------------------------------------------
preferences, privileges and restrictions granted to or imposed on the respective
classes of the shares of capital stock or the holders thereof are as follows:
1. Dividends. The holders of the outstanding Series A Preferred,
---------
Series B Preferred, Series C Preferred, Series D Preferred, Series E Preferred
and Series F Preferred shall be entitled to receive in any fiscal year, when and
as declared by the Board of Directors, out of any assets legally available
therefor, dividends at the rate of $0.033 per share of Series A Preferred per
annum, $0.041 per share of Series B Preferred per annum, $0.064 per share of
Series C Preferred per annum., and $0.064 per share of Series D Preferred per
annum, $0.07 per share of Series E Preferred per annum, and $0.116 per share of
Series F Preferred per annum, before any dividend is paid on Common Stock. Such
dividends may be payable quarterly or otherwise as the Board of Directors may
from time to time determine. No dividend shall be paid on or declared and set
apart for the shares of any series of Preferred Stock for any dividend period
unless at the same time a like propor tionate dividend for the same dividend
period, ratably in proportion to the respective annual dividend rates fixed
therefor, shall be paid on or declared and set apart for the shares of all other
such series of Preferred Stock. No dividends or other distributions (other than
those payable solely in Common Stock) shall be declared or paid upon Common
Stock in any fiscal year of the Corporation unless dividends shall have been
paid to or declared and set apart upon all shares of Series A Preferred, Series
B Preferred, Series C Preferred, Series D Preferred, Series E Preferred and
Series F Preferred at such annual rate for such fiscal year of the Corporation.
To the extent that dividends or other distributions are paid on the Common Stock
(other than those payable solely in Common Stock), the holders of shares of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
Series E Preferred and Series F Preferred shall be entitled to dividends at
least as large per share (based on the number of shares of Common Stock into
which such shares of Preferred Stock are convertible) as those declared or paid
with respect to the Common Stock. Such dividends shall not be cumulative and no
right to such dividends shall accrue to holders of Preferred Stock unless
declared by the Board of Directors.
2. Liquidation Preference. In the event of any liquidation,
----------------------
dissolution, or winding up of the Corporation, either voluntary or involuntary,
distributions to the shareholders of the Corporation shall be made in the
following manner:
-2-
<PAGE>
(a) The holders of the Series F Preferred shall be entitled to
receive, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Series A Preferred, the
Series B Preferred, the Series C Preferred, the Series D Preferred, the Series E
Preferred and the Common Stock, the sum of $1.16 (adjusted for any subdivisions,
combinations, consolidations or stock distributions or dividends with respect to
such shares effected after the date these Amended and Restated Articles were
filed with the Secretary of State), plus declared and unpaid dividends for each
such share of Series F Preferred then held by them. If upon the occurrence of
such event, the assets and funds thus distributed among the holders of the
Series F Preferred shall be insufficient to permit the payment to such holders
of the full aforesaid preferential amounts, then the entire assets and funds of
the Corporation legally available for distribution shall be distributed among
the holders of the Series F Preferred, based on the number of shares of Series F
Preferred then held by them.
(b) After payment has been made to the holders of Series F Preferred
of the full amounts to which they shall be entitled under Section 2(a), the
holders of the Series A Preferred, Series B Preferred, Series C Preferred,
Series D Preferred and Series E Preferred shall be entitled to receive, prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of the Common Stock by reason of their ownership
of such stock, the sum of $0.333, $0.413, $0.64, $0.64 and $0.70, respectively
(adjusted for any subdivisions, combinations, consolidations or stock
distributions or dividends with respect to such shares effected after the date
these Amended and Restated Articles were filed with the Secretary of State),
plus declared and unpaid dividends for each such share of each such series of
Preferred Stock then held by them. If upon the occurrence of such event, the
assets and funds thus distributed among the holders of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred and Series E
Preferred shall be insufficient to permit the payment to such holders of the
full aforesaid preferential amounts, then, after payment has been made to the
holders of Series F Preferred of the full amounts to which they shall be
entitled under Section 2(a), the entire assets and funds of the Corporation
legally available for distribution shall be distributed among the holders of the
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred
and Series E Preferred in proportion to the full aforesaid preferential amounts
to which each such holder is entitled under this Section 2(b).
(c) After payment has been made to the holders of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred and Series F Preferred of the full amounts to which they shall be
entitled as aforesaid in Sections 2(a) and 21(b), the holders of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred and Series F Preferred and the Common Stock shall be entitled to share
ratably in the remaining assets of the Corporation, based on the number of
shares of Common Stock then held by them (treating the shares of the Series A
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred and Series F Preferred as if they had been converted into Common Stock
at the then applicable Conversion Prices).
-3-
<PAGE>
(d) For purposes of this Section 2, a liquidation, dissolution
or winding up of the Corporation shall be deemed to be occasioned by, and to
include (i) any transaction or series of related transactions (including,
without limitation, a merger, reorganization or consolidation of the Corporation
with or into any other corporation or corporations) which will result in the
holders of the outstanding voting equity securities of the Corporation
immediately prior to such transaction or series of related transactions holding
securities representing less than 50% of the voting power of the surviving
entity immediately following such transaction or series of related transactions
or (ii) the Corporation's sale, lease or conveyance of all or substantially all
of its assets.
3. Voting Rights. Except as otherwise required by law or by Section
-------------
5 hereof, the holder of each share of Common Stock issued and outstanding shall
have one vote and the holder of each share of Preferred Stock shall be entitled
to the number of votes equal to the number of shares of Common Stock into which
the Preferred Stock could be converted at the record date for determination of
the shareholders entitled to vote on such matters, or, if no such record date is
established, at the date such vote is taken or any written consent of
shareholders is solicited, such votes to be counted together with all other
shares of stock of the Company having general voting power and not separately as
a class. Holders of Common Stock and Preferred Stock shall be entitled to
notice of any shareholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes by the holder of Preferred Stock (after
aggregating all shares into which shares of Preferred Stock held by each holder
could be converted) shall be rounded to the nearest whole number (with one-half
being rounded upward).
4. Conversion. The holders of the Preferred Stock have conversion
----------
rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of the Series A Preferred,
----------------
Series B Preferred, Series C Preferred, Series D Preferred, Series E Preferred
and Series F Preferred shall be convertible, at the option of the holder
thereof, at any time after the date of issuance of such share at the office of
the Corporation or any transfer agent for the Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, Series E Preferred and Series
F Preferred. Each share of Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred, Series E Preferred and Series F Preferred shall
be convertible into the number of fully paid and nonassessable shares of Common
Stock as is determined by dividing $0.333, $0.413, $0.64, $0.64, $0.70 and
$1.16, respectively, by the "Conversion Price" per share in effect for such
share at the time of the conversion. The initial Conversion Prices per share of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
Series E Preferred and Series F Preferred shall be $0.333, $0.413, $0.64, $0.64,
$0.70 and $1.16, respectively. Each such initial Conversion Price shall be
subject to adjustment as hereinafter provided.
(b) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at the then effective
Conversion Price applicable to such Preferred Stock upon the earlier of (i) the
closing of a firm commitment
-4-
<PAGE>
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock for the account of the Corporation to the public at a price per
share (prior to underwriter commissions and offering expenses) of not less than
$3.33) per share (appropriately adjusted for any subdivisions, combinations,
consolidations or stock distributions or dividends with respect to such shares
effected after the date these Amended and Restated Articles were filed with the
Secretary of State) and an aggregate offering price greater than $15,000,000
(before deduction of any underwritten commissions and/or expenses) or (ii) the
affir mative vote or written consent of holders of at least two-thirds of the
then outstanding Preferred Stock (voting together as a class on an as-converted
basis) to convert such Preferred Stock. In the event of the automatic conversion
of the Preferred Stock upon a public offering as aforesaid, the person(s)
entitled to receive the Common Stock issuable upon such conversion of Preferred
Stock shall not be deemed to have converted such Preferred Stock until
immediately prior to the closing of such public offering.
(c) Mechanics of Conversion. No fractional shares of Common
-----------------------
Stock shall be issued upon conversion of Preferred Stock. In lieu of any
fractional shares to which the holder would otherwise be entitled, the
Corporation shall pay cash equal to such fraction multiplied by the fair market
value of such converted shares. Before any holder of Preferred Stock shall be
entitled to convert the same into full shares of Common Stock and to receive
certificates therefor, he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation or of any transfer
agent for the Preferred Stock, and shall give written notice to the Corporation
at such office that he elects to convert the same (except that no such written
notice of election to convert shall be necessary in the event of an automatic
conversion pursuant to Section 4(b)). The Corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Preferred Stock, a certificate or certificates for the number of shares of
Common Stock to which he shall be entitled as aforesaid and a check payable to
the holder in the amount of any cash amounts payable as the result of a
conversion into fractional shares of Common Stock plus any declared but unpaid
dividends on the converted Preferred Stock to which the holder may be entitled.
Such conver sion shall be deemed to have been made immediately prior to the
close of business on the date of such surrender of the shares of Preferred Stock
to be converted, or in the case of automatic conversion, upon such automatic
conversion, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(d) Adjustments to Conversion Price for Diluting Issues.
---------------------------------------------------
(i) Special Definitions. For purposes of this Section
-------------------
4(d), the following definitions shall apply:
(1) "Options" shall mean rights, options or warrants
-------
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
-5-
<PAGE>
(2) "Original Issue Date" shall mean the date on which
-------------------
the first share of Series A Preferred was issued.
(3) "Convertible Securities" shall mean any
----------------------
evidences of indebtedness, shares (other than the shares of Common Stock, Series
A Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series
E Preferred and Series F Preferred) or other securities convertible into or
exchangeable for Common Stock.
(4) "Additional Shares of Common Stock" shall mean
---------------------------------
all shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to
be issued) by the Corporation after the Original Issue Date, other than shares
of Common Stock issued or issuable at any time:
(A) upon conversion of the Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, Series E Preferred
and Series F Preferred authorized herein;
(B) shares to officers, directors, or employees of
or consultants to, the Corporation pursuant to a stock grant, option plan,
purchase plan or other employee stock incentive program approved by the Board of
Directors;
(C) up to an aggregate of 100,000 shares issued to
entities pursuant to the Company's 1991 Sales Representative Stock Purchase
Plan;
(D) as a dividend or distribution on Preferred
Stock;
(E) shares of Common Stock issued or deliverable
to Cypress Semiconductor Corporation ("Cypress") pursuant to that certain
Termination Agreement and Common Stock Purchase Agreement between the
Corporation and Cypress;
(F) pursuant to the acquisition of another
corporation by the Corporation by merger, purchase of substantially all of its
assets or other reorganization;
(G) shares issued to banks, savings and loan
associations, equipment lessors or other similar institutions or entities in
connection with such entities providing debt financing to the Corporation which
has been unanimously approved by the Board of Directors ;
-6-
<PAGE>
(H) by way of dividend or other distribution on
shares of Common Stock excluded from the definition of Additional Shares of
Common Stock by the foregoing clauses (A) through (G) or this clause (H).
(ii) No Adjustment of Conversion Price. No adjustment in
---------------------------------
the Conversion Price of a particular share of Series A Preferred, Series B
Preferred, Series C Preferred, Series D Preferred, Series E Preferred or Series
F Preferred shall be made in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Conversion Price in effect on the date of, and immediately prior to such issue,
for such share of the Series A Preferred, Series B Preferred, Series C
Preferred, Series D Preferred, Series E Preferred or Series F Preferred.
(iii) Deemed Issue of Additional Shares of Common Stock. In
-------------------------------------------------
the event the Corporation at any time or from time to time after the Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that
Additional Shares of Common Stock shall not be deemed to have been issued unless
the consideration per share (determined pursuant to Section 4(d)(v) hereof) of
such Additional Shares of Common Stock would be less than the Conversion Price
in effect on the date of and immediately prior to such issue, or such record
date, as the case may be, and provided further that in any such case in which
Additional Shares of Common Stock are deemed to be issued:
(1) no further adjustment in the Conversion Prices shall be
made upon the subsequent issue of Convertible Securities or shares of Common
Stock upon the exercise of such Options or conversion or exchange of such
Convertible Securities;
(2) if such Options or Convertible Securities by their terms
provide, with the passage of time or otherwise, for any increase or decrease in
the consideration payable to the Corporation, or increase or decrease in the
number of shares of Common Stock issuable, upon the exercise, conversion or
exchange thereof, the Conversion Prices computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto) and any
subsequent adjustments based thereon, shall, upon any such increase or decrease
becoming effective, be recomputed to reflect such increase or decrease insofar
as it affects such Options or the rights of conversion or exchange under such
Convertible Securities;
-7-
<PAGE>
(3) upon the expiration of any such Options or any rights
of conversion or exchange under such Convertible Securities which shall not have
been exercised, the Conversion Prices computed upon the original issue thereof
(or upon the occurrence of a record date with respect thereto) and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(A) in the case of Convertible Securities or Options
for Common Stock., the only Additional Shares of Common Stock issued were shares
of Common Stock, if any, actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible Securities and the consideration
received therefor was the consideration actually received by the Corporation for
the issue of all such Options, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or for the issue of all
such Convertible Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Corporation upon such
conversion or exchange, and
(B) in the case of Options for Convertible Securities,
only the Convertible Securities, if any, actually issued upon the exercise
thereof were issued at the time of issue of such Options, and the consideration
received by the Corporation for the Additional Shares of Common Stock deemed to
have been then issued was the consideration actually received by the Corporation
for the issue of all such Options, whether or not exercised, plus the
consideration deemed to have been received by the Corporation upon the issue of
the Convertible Securities with respect to which such Options were actually
exercised;
(4) no readjustment pursuant to clause (A) or (B) above
shall have the effect of increasing the Conversion Price to an amount which
exceeds the lower of (i) the Conversion Price on the original adjustment date,
or (ii) the Conversion Price that would have resulted from any issuance of
Additional Shares of Common Stock between the original adjustment date and such
readjustment date; and
(5) in the case of any Options which expire by their terms
not more than thirty (30) days after the date of issue thereof, no adjustment of
the Conversion Price shall be made until the expiration or exercise of all such
Options.
(iv) Adjustment of Conversion Prices Upon Issuance of Additional
-----------------------------------------------------------
Shares of Common Stock. In the event this Corporation shall issue Additional
- ----------------------
Shares of Common Stock (including Additional Shares of Common Stock deemed to be
issued pursuant to Section 4(d)(iii)) without considera tion or for a
consideration per share less than the Conversion Price or Series A Preferred,
the Conversion Price for the Series B Preferred, the Conversion Price for Series
C Preferred, the Conversion Price for the Series D Preferred, the Conversion
Price for the Series E Preferred or the Conversion Price for the Series F
Preferred in effect immediately prior to such event, then and in such event,
such Conversion Price shall be reduced, concurrently with such issue, to a price
(calculated to the nearest tenth of a cent)
-8-
<PAGE>
determined by multiplying such Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of Additional
Shares of Common Stock so issued would purchase at such Conversion Price; and
the denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issue plus the number of such Additional
Shares of Common Stock so issued; and provided further that, for the purposes of
this Section (iv), all shares of Common Stock issuable upon conversion of
outstanding Convertible Securities and the Preferred Stock (giving effect to any
then applicable anti-dilution adjustment to each series of Preferred Stock) and
issuable upon the exercise of any dilutive Options shall be deemed to be
outstanding, and immediately after any Additional Shares of Common Stock are
deemed issued pursuant to Section 4(d)(iii), such Additional Shares of Common
Stock shall be deemed to be outstanding. For the purpose of this Section
4(d)(iv), a dilutive Option shall be deemed to be any then outstanding Option
which provides for an exercise price per share of Common Stock (or per share of
Common Stock following conversion of any Convertible Securities subject thereto)
equal to or less than eighty percent (80%) of the price per share of the
Additional Shares of Common Stock issued (or deemed issued pursuant to Section
4(d)(iii) hereof) for which the adjustment to the applicable Conversion Price
pursuant to this Section 4(d)(iv) is then being made.
(v) Determination of Consideration. For purposes of this
------------------------------
Section 4(d), the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(1) Cash and Property. Such consideration shall:
-----------------
(A) insofar as it consists of cash, be computed at the
aggregate amount of cash received by the Corporation excluding amounts paid or
payable for accrued interest or accrued dividends;
(B) insofar as it consists of property other than cash,
be computed at the fair market value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(C) in the event Additional Shares of Common Stock are
issued, together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (A) and B) above, as
determined in good faith by the Board of Directors.
(2) Options and Convertible Securities. The consideration per
----------------------------------
share received by the Corporation for Additional Shares of Common Stock deemed
to have been issued pursuant to Section 4(d)(iii)(1), relating to Options and
Convertible Securities, shall be determined by dividing
-9-
<PAGE>
(x) the total amount, if any, received or receivable by
the Corporation as consideration for the issue of such Options or Convertible
Securities, plus the minimum aggregate amount of additional consideration (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration) payable to
the Corporation upon the exercise of such Options or the conversion or exchange
of such Convertible Securities, or in the case of Options for Convertible
Securities, the exercise of such Options for Convertible Securities and the
conversion or exchange of such Convertible Securities by
(y) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
(vi) Adjustments for Subdivisions, Combinations, Stock Dividends
-----------------------------------------------------------
or Consolidation of Common Stock. In the event that, at any time after the
- --------------------------------
filing of these Amended and Restated Articles with the Secretary of State, the
outstanding shares of Common Stock shall be subdivided (by stock split, or
otherwise) into a greater number of shares of Common Stock, or a distribution or
dividend payable in Common Stock shall be declared or paid on the Common Stock,
the Conversion Prices for the Series A Preferred, the Series B Preferred, the
Series C Preferred, the Series D Preferred, the Series E Preferred and Series F
Preferred Stock then in effect shall, concurrently with the effectiveness of
such subdivision, be proportionately decreased. In the event that, at any time
after the filing of these Amended and Restated Articles with the Secretary of
State, the outstanding shares of Common Stock shall be combined or consolidated,
by reclassification or otherwise, into a lesser number of shares of Common
Stock, the Conversion Prices for the Series A Preferred, the Series B Preferred,
the Series C Preferred, the Series D Preferred, the Series E Preferred and the
Series F Preferred Stock then in effect shall, concurrently with the
effectiveness of such combination or consolidation, be proportionately
increased.
(vii) Adjustments for Other Distributions. In the event the
-----------------------------------
Corporation at any time or from time to time makes, or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution payable in securities of the Corporation other than shares of
Common Stock and other than as otherwise adjusted in this Section 4, then and in
each such event provision shall be made so that the holders of Preferred Stock
shall receive upon conversion thereof, in addition to the number of shares of
Common Stock receivable thereupon, the amount of securities of the Corporation
which they would have received had their Preferred Stock been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the date of conversion,
retained such securities receivable by them as aforesaid during such period,
subject to all other adjustments called for during such period under this
Section 4 with respect to the rights of the holders of the Preferred Stock.
-10-
<PAGE>
(viii) Adjustments for Reclassification, Exchange and
----------------------------------------------
Substitution. If the Common Stock issuable upon conversion of the Preferred
- ------------
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, reclassi
fication or otherwise (other than a subdivision or combination of shares
provided for above), the Conversion Prices for the Series A Preferred, the
Series B Preferred, the Series C Preferred, the Series D Preferred, the Series E
Preferred and Series F Preferred Stock then in effect shall, concurrently with
the effectiveness of such reorganization or reclassification, be proportionately
adjusted such that the Preferred Stock shall be convertible into, in lieu of the
number of shares of Common Stock which the holders would otherwise have been
entitled to receive, a number of shares of such other class or classes of stock
equivalent to the number of shares of Common Stock that would have been subject
to receipt by the holders upon conversion of the Preferred Stock immediately
before that change.
(e) No Impairment. The Corporation will not, by amendment of its
-------------
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or perfor mance of any
of the terms to be observed or performed hereunder by the Corporation but will
at all times in good faith assist in the carrying out of all the provisions of
this Section 4 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of the
Preferred Stock against impairment.
(f) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Price any series of the Preferred
Stock pursuant to this Section 4, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
furnish to each holder of such series of Preferred Stock, a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Prices for the shares of
Preferred Stock held by such holder at the time in effect, and (iii) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the shares of Preferred Stock held
by such holder.
(g) Notices of Record Date. In the event that this Corporation shall
----------------------
propose at any time:
(i) to declare any dividend or distribution upon its Common
Stock, whether in cash, property, stock or other securities, whether or not are
regular cash dividend and whether or not out of earnings or earned surplus;
-11-
<PAGE>
(ii) to offer for subscription pro rata to the holders of any
class or series of its stock any additional shares of stock of any class or
series or other rights;
(iii) to effect any reclassification or recapitalization of its
Common Stock outstanding involving a change in the Common Stock; or
(iv) to merge or consolidate with or into any other corporation,
or sell, lease or convey all or substantially all its property or business, or
to liquidate, dissolve or wind up;
then, in connection with each such event, this Corporation shall send to the
holders of the Preferred Stock:
(1) at least twenty (20) days' prior written notice of the
date: on which a record shall be taken for such dividend, distribution or
subscription rights (and specifying the date on which the holders of Common
Stock shall be entitled thereto) or for determining rights to vote in
respect of the matters referred to in (iii) and (iv) above; and
(2) in the case of the matters referred to in (iii) and (iv)
above, at least twenty (20) days' prior written notice of the date when the
same shall take place (and specifying the date on which the holders of
Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon the occurrence of such
event).
Each such written notice shall be delivered personally or given by first
class mail, postage prepaid, addressed to the holders of the Preferred Stock at
the address for each such holder as shown on the books of this Corporation.
(h) Issue Taxes. The Corporation shall pay any and all issue and
-----------
other taxes that may be payable in respect of any issue or delivery of shares of
Common Stock on conversion of shares of Preferred Stock; provided, however, that
the Corporation shall not be liable for property taxes or income taxes
attributable to the holders of Preferred Stock upon conversion thereof.
(i) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock. If at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
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<PAGE>
5. Repurchase of Common Stock. Each holder of an outstanding share
--------------------------
of Preferred Stock shall be deemed to have consented, for purposes of Sections
502, 503 and 506 of the California General Corporation Law to distributions made
by the Corporation in connection with the repurchase, at cost, of shares of
Common Stock issued to or held by employees, directors or consultants upon
termination of their employment, directorship or consultancy pursuant to
agreement providing for the right of such repurchase between the Corporation and
such persons.
6. Covenants.
---------
(a) General. In addition to any other rights provided by law,
-------
so long as at least 1,300,000 shares of Preferred Stock shall be outstanding,
this Corporation shall not, without first obtaining the affirmative vote or
written consent of the holders of two-thirds of the outstanding shares of
Preferred Stock, voting together as a single class on an as-converted basis:
(i) amend or repeal any provision of, or add any provision
to, this Corporation's Articles of Incorporation if such action would alter or
change the preferences, rights, privileges or powers of, or the restrictions
provided for the benefit of, the Preferred Stock;
(ii) authorize any additional shares of Series A Preferred,
Series B Preferred, Series C Preferred, Series D Preferred, Series E Preferred
or Series F Preferred;
(iii) designate or issue shares of any class of stock, or
reclassify any shares of Common Stock or other shares of this Corporation into
shares, having any preference or priority as to dividends, conversion rights,
voting rights or liquidation superior to or on a parity with any such preference
or priority of any series of Preferred Stock then outstanding;
(iv) sell, convey or otherwise dispose of or encumber all
or substantially all of its property or business, or merge into or consolidate
with any other corporation (other than a wholly owned subsidiary corporation),
or effect any transaction or series of related transactions pursuant to which
shares of the Corporation representing more than fifty percent (50%) of the
voting power of the Corporation are disposed of; or
(v) amend any provision of this Section 6.
(b) Series F Liquidation Preference. In addition to any other
-------------------------------
rights by law, so long as at least 2,750,000 shares of Series F Preferred shall
be outstanding, this Corporation shall not without first obtaining the
affirmative vote or written consent of the holders of at least 75% of the
outstanding shares of Series F Preferred, amend or repeal any provision of, or
add any provision to, this Corporation's Articles of Incorporation if such
action would alter or change the liquidation preference in favor of the holders
of shares of Series F Preferred set forth in Section 2(a) of these Articles of
Incorporation.
-13-
<PAGE>
IV
A. Limitation of Directors' Liability. The liability of the directors of
----------------------------------
this corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
B. Indemnification of Directors and Officers. This corporation is
-----------------------------------------
authorized to indemnify the directors and officers of the corporation to the
fullest extent permissible under California law.
C. Repeal or Modification. Any repeal or modification of the foregoing
----------------------
provisions of this Article IV shall not adversely affect any right of
indemnification or limitation of liability of a director or officer of this
corporation relating to acts or omissions occurring prior to such repeal or
modification.
3. The foregoing Amendment and Restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing Amendment and Restatement of the Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 903 of the Corporation Code. The total number of
outstanding shares of the corporation at the time of such approval was 5,239,020
shares of Common Stock, 2,505,000 shares of Series A Preferred Stock, 10,274,637
of Series B Preferred Stock, 11,975,561 shares of Series C Preferred Stock,
3,125,000 shares of Series D Preferred Stock, 23,873,667 shares of Series E
Preferred Stock, and 7,716,119 shares of Series F Preferred Stock. The number
of shares voting in favor of the amendment equaled or exceeded the vote
required. The percentage vote required was more than fifty percent (50%) of the
outstanding Common Stock voting as a separate class and more than two-thirds of
the outstanding Series A Preferred Stock, Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock and Series E Preferred, voting
together as a single class.
-14-
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this Certificate are true and correct
of our own knowledge.
Dated: March __, 1997
/s/ E. Thomas Hart
--------------------------------------
E. Thomas Hart, President
/s/ Vincent A. McCord
--------------------------------------
Vincent A. McCord, Secretary
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<PAGE>
BYLAWS
OF
PEER RESEARCH, INC.
<PAGE>
BYLAWS OF
PEER RESEARCH, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES.............................................. 1
1.1 PRINCIPAL OFFICE................................................ 1
1.2 OTHER OFFICES................................................... 1
ARTICLE II - MEETINGS OF SHAREHOLDERS...................................... 1
2.1 PLACE OF MEETINGS............................................... 1
2.2 ANNUAL MEETING.................................................. 1
2.3 SPECIAL MEETING................................................. 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS................................ 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE.................... 2
2.6 QUORUM.......................................................... 3
2.7 ADJOURNED MEETING; NOTICE....................................... 3
2.8 VOTING.......................................................... 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT............... 4
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING......... 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS..... 6
2.12 PROXIES.......................................................... 6
2.13 INSPECTORS OF ELECTION.......................................... 7
ARTICLE III - DIRECTORS.................................................... 8
3.1 POWERS.......................................................... 8
3.2 NUMBER OF DIRECTORS............................................. 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS........................ 8
3.4 RESIGNATION AND VACANCIES....................................... 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE........................ 9
3.6 REGULAR MEETINGS................................................ 9
3.7 SPECIAL MEETINGS; NOTICE........................................ 9
3.8 QUORUM.......................................................... 10
3.9 WAIVER OF NOTICE................................................ 10
3.10 ADJOURNMENT..................................................... 10
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
3.11 NOTICE OF ADJOURNMENT........................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING............... 10
3.13 FEES AND COMPENSATION OF DIRECTORS.............................. 11
3.14 APPROVAL OF LOANS TO OFFICERS................................... 11
ARTICLE IV - COMMITTEES.................................................... 11
4.1 COMMITTEES OF DIRECTORS......................................... 11
4.2 MEETINGS AND ACTION OF COMMITTEES............................... 12
ARTICLE V - OFFICERS....................................................... 12
5.1 OFFICERS........................................................ 12
5.2 ELECTION OF OFFICERS............................................ 13
5.3 SUBORDINATE OFFICERS............................................ 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS............................. 13
5.5 VACANCIES IN OFFICES............................................ 13
5.6 CHAIRMAN OF THE BOARD........................................... 13
5.7 PRESIDENT....................................................... 13
5.8 VICE PRESIDENTS................................................. 14
5.9 SECRETARY....................................................... 14
5.10 CHIEF FINANCIAL OFFICER......................................... 14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS................................................. 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS....................... 15
6.2 INDEMNIFICATION OF OTHERS....................................... 15
ARTICLE VII - RECORDS AND REPORTS.......................................... 16
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER.................... 16
7.2 MAINTENANCE AND INSPECTION OF BYLAWS............................ 16
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS 17
7.4 INSPECTION BY DIRECTORS......................................... 17
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER........................... 17
7.6 FINANCIAL STATEMENTS............................................ 17
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.................. 18
ARTICLE VIII - GENERAL MATTERS............................................. 18
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING........... 18
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS....................... 19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED.............. 19
8.4 CERTIFICATES FOR SHARES......................................... 19
8.5 LOST CERTIFICATES............................................... 19
8.6 CONSTRUCTION; DEFINITIONS....................................... 20
ARTICLE IX - AMENDMENTS.................................................... 20
9.1 AMENDMENT BY SHAREHOLDERS....................................... 20
9.2 AMENDMENT BY DIRECTORS.......................................... 20
</TABLE>
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<PAGE>
EXHIBIT 3.4
BYLAWS
------
OF
--
PEER RESEARCH, INC.
-------------------
ARTICLE I
CORPORATE OFFICES
-----------------
I.1 PRINCIPAL OFFICE
----------------
The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
I.2 OTHER OFFICES
-------------
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
II.1 PLACE OF MEETINGS
-----------------
Meetings of shareholders shall be held at any place within or outside the
State of California designated by the board of directors. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
II.2 ANNUAL MEETING
--------------
The annual meeting of shareholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the 2nd Tuesday
of April in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected, and
any other proper business may be transacted.
II.3 SPECIAL MEETING
---------------
<PAGE>
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding shares in the aggregate entitled to cast not
less than ten percent (10%) of the votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and the general
nature of the business proposed to be transacted, and shall be delivered
personally or sent by registered mail or by telegraphic or other facsimile
transmission to the chairman of the board, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
II.4 NOTICE OF SHAREHOLDERS' MEETINGS
--------------------------------
All notices of meetings of shareholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent
by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
II.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
-2-
<PAGE>
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the shareholder on written
demand of the shareholder at the principal executive office of the corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
II.6 QUORUM
------
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting at which a quorum is present may continue to do business
until adjournment, notwithstanding the withdrawal of enough shareholders to
leave less than a quorum, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
II.7 ADJOURNED MEETING; NOTICE
-------------------------
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the
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<PAGE>
meeting at which the adjournment is taken. However, if a new record date for the
adjourned meeting is fixed or if the adjournment is for more than forty-five
(45) days from the date set for the original meeting, then notice of the
adjourned meeting shall be given. Notice of any such adjourned meeting shall be
given to each shareholder of record entitled to vote at the adjourned meeting in
accordance with the provisions of Sections 2.4 and 2.5 of these bylaws. At any
adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
II.8 VOTING
------
The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or a vote by classes is
required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit.
The candidates receiving the highest number of affirmative votes, up to the
number of directors to be elected, shall be elected; votes against any candidate
and
-4-
<PAGE>
votes withheld shall have no legal effect.
II.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
-------------------------------------------------
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if, either before or after the
meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the purpose
of any annual or special meeting of shareholders, except that if action is taken
or proposed to be taken for approval of any of those matters specified in the
second paragraph of Section 2.4 of these bylaws, the waiver of notice or consent
or approval shall state the general nature of the proposal. All such waivers,
consents, and approvals shall be filed with the corporate records or made a part
of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
II.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with the secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing and if the
-5-
<PAGE>
unanimous written consent of all such shareholders has not been received, then
the secretary shall give prompt notice of the corporate action approved by the
shareholders without a meeting. Such notice shall be given to those shareholders
entitled to vote who have not consented in writing and shall be given in the
manner specified in Section 2.5 of these bylaws. In the case of approval of (i)
a contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Code, (ii) indemnification of a
corporate "agent," pursuant to Section 317 of the Code, (iii) a reorganization
of the corporation, pursuant to Section 1201 of the Code, and (iv) a
distribution in dissolution other than in accordance with the rights of
outstanding preferred shares, pursuant to Section 2007 of the Code, the notice
shall be given at least ten (10) days before the consummation of any action
authorized by that approval.
II.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.
If the board of directors does not so fix a record date:
(a) the record date for determining shareholders entitled to notice of
or to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII
of these bylaws.
II.12 PROXIES
-------
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and
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filed with the secretary of the corporation. A proxy shall be deemed signed if
the shareholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the shareholder or the
shareholder's attorney-in-fact. A validly executed proxy which does not state
that it is irrevocable shall continue in full force and effect unless (i) the
person who executed the proxy revokes it prior to the time of voting by
delivering a writing to the corporation stating that the proxy is revoked or by
executing a subsequent proxy and presenting it to the meeting or by voting in
person at the meeting, or (ii) written notice of the death or incapacity of the
maker of that proxy is received by the corporation before the vote pursuant to
that proxy is counted; provided, however, that no proxy shall be valid after the
expiration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Sections
705(e) and 705(f) of the Code.
II.13 INSPECTORS OF ELECTION
----------------------
Before any meeting of shareholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (l) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (l) or more shareholders
or proxies, then the holders of a majority of shares or their proxies present at
the meeting shall determine whether one (l) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising
in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine when the polls shall close;
(f) determine the result; and
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(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
---------
III.1 POWERS
------
Subject to the provisions of the Code and any limitations in the articles
of incorporation and these bylaws relating to action required to be approved by
the shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors.
III.2 NUMBER OF DIRECTORS
-------------------
See attached amendment.
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
III.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
----------------------------------------
Directors shall be elected at each annual meeting of shareholders to hold
office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
III.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute a majority of the required quorum), or by the unanimous written
consent of all shares entitled to vote thereon. Each director so elected shall
hold office until the next annual meeting of the shareholders and until a
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successor has been elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
(i) in the event of the death, resignation or removal of any director, (ii) if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election other
than to fill a vacancy created by removal, if by written consent, shall require
the consent of the holders of a majority of the outstanding shares entitled to
vote thereon.
III.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
Regular meetings of the board of directors may be held at any place within
or outside the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
California that has been designated in the notice of the meeting or, if not
stated in the notice or if there is no notice, at the principal executive office
of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
III.6 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
III.7 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time
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of the holding of the meeting. Any oral notice given personally or by telephone
may be communicated either to the director or to a person at the office of the
director who the person giving the notice has reason to believe will promptly
communicate it to the director. The notice need not specify the purpose or the
place of the meeting, if the meeting is to be held at the principal executive
office of the corporation.
III.8 QUORUM
------
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
III.9 WAIVER OF NOTICE
----------------
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such directors. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
III.10 ADJOURNMENT
-----------
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
III.11 NOTICE OF ADJOURNMENT
---------------------
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
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III.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------
Any action required or permitted to be taken by the board of directors may
be taken without a meeting, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed with
the minutes of the proceedings of the board.
III.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
III.14 APPROVAL OF LOANS TO OFFICERS
-----------------------------
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
----------
IV.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (l) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (l) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the
_________________
*
This section is effective only if it has been approved by the shareholders
in accordance with Sectiond 315(b) and 152 of the Code.
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authorized number of directors. Any committee, to the extent provided in the
resolution of the board, shall have all the authority of the board, expect with
respect to:
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
bylaws;
(e) the amendment or repeal of any resolution of the board of
directors which by its express terms is not so amendable or repealable;
(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or
(g) the appointment of any other committees of the board of directors
or the members of such committees.
IV.2 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the com-mittee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
--------
V.1 OFFICERS
--------
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The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
V.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer under
any contract of employment.
V.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
V.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
V.5 VACANCIES IN OFFICES
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
V.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is
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no president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
V.7 PRESIDENT
---------
Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
V.8 VICE PRESIDENTS
---------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
V.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the cor poration, if one be adopted,
in safe custody and shall have such other powers and perform such other duties
as may be prescribed by the board of directors or by these bylaws.
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V.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
--------------------------------------------------
AND OTHER AGENTS
----------------
VI.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Section 6.1,
a "director" or "officer" of the corporation includes any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
VI.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Section 6.2, an "employee" or "agent" of the
corporation (other than a director or officer)
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includes any person (i) who is or was an employee or agent of the corporation,
(ii) who is or was serving at the request of the corporation as an employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, or (iii) who was an employee or agent of a corporation which was a
predecessor corpo ration of the corporation or of another enterprise at the
request of such predecessor corporation.
ARTICLE VII
RECORDS AND REPORTS
-------------------
VII.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
--------------------------------------------
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (l%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
VII.2 MAINTENANCE AND INSPECTION OF BYLAWS
------------------------------------
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of
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these bylaws as amended to date, which bylaws shall be open to inspection by the
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California and the
corporation has no principal business office in such state, then the secretary
shall, upon the written request of any shareholder, furnish to that shareholder
a copy of these bylaws as amended to date.
VII.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
-----------------------------------------------------
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written form,
and the accounting books and records shall be kept either in written form or in
any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. The inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
VII.4 INSPECTION BY DIRECTORS
-----------------------
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
VII.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
-------------------------------------
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
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The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
VII.6 FINANCIAL STATEMENTS
--------------------
If no annual report for the fiscal year has been sent to shareholders, then
the corporation shall, upon the written request of any shareholder made more
than one hundred twenty (120) days after the close of such fiscal year, deliver
or mail to the person making the request, within thirty (30) days thereafter, a
copy of a balance sheet as of the end of such fiscal year and an income
statement and statement of changes in financial position for such fiscal year.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
VII.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VII
GENERAL MATTERS
---------------
VIII.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------
-18-
<PAGE>
For purposes of determining the shareholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
VIII.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
-----------------------------------------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
VIII.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED
--------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
VIII.4 CERTIFICATES FOR SHARES
-----------------------
A certificate or certificates for shares of the corporation shall be issued
to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or the secretary or
an assistant secretary, certifying the number of shares and the class or series
of shares owned by the shareholder. Any or all of the signatures on the
certificate may be facsimile.
-19-
<PAGE>
In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
VIII.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
VIII.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
----------
IX.1 AMENDMENT BY SHAREHOLDERS
-------------------------
New bylaws may be adopted or these bylaws may be amended or repealed by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
IX.2 AMENDMENT BY DIRECTORS
----------------------
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
-20-
<PAGE>
CERTIFICATE OF ADOPTION OF BYLAWS
OF
PEER RESEARCH, INC.
Certificate by Assistant Secretary of Adoption
----------------------------------------------
by Shareholders' Vote
---------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Assistant Secretary of Peer Research, Inc. and that the foregoing
Bylaws, comprising twenty-four (24) pages, were adopted by the unanimous written
consent of the shareholders of the corporation on June __, 1988.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ____ day of ____________ 19__.
_________________________________________
Robert T. Clarkson,
Assistant Secretary
-25-
<PAGE>
PEER RESEARCH, INC.
CERTIFICATE OF AMENDMENT
OF BYLAWS
The undersigned hereby certifies that Article III, Section 3.2 of the
Bylaws of Peer Research, Inc. was amended by written consent of the Board of
Directors dated August 23, 1989 to fix the exact number of directors at five
(5).
John M. Birkner, Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF BYLAWS OF
QUICKLOGIC CORPORATION
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Assistant Secretary of Quicklogic Corporation and that Section 3.2 of
the Bylaws of this Corporation was amended on November 22, 1991 to read as
follows:
"3.2 NUMBER OF DIRECTORS
-------------------
The number of directors of the corporation shall be not less than four (4)
nor more than seven (7). The exact number of directors shall be six (6) until
changed, within the limits specified above, by a bylaw amending this Section
3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than six (6) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires."
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 22nd day of November, 1991.
/s/ Robert T. Clarkson
---------------------------------------
Robert T. Clarkson,
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF BYLWS OF
QUICKLOGIC CORPORATION
The undersigned, being theAssistant Secretary of QuickLogic Corporation
hereby certified that Section 3.2 of Article III of the Bylaws of this
corporation was amended effective October 20, 1992 by the Board of Directors to
provide in its entirety as follows:
3.2 NUMBER OF DIRECTORS
-------------------
The number of directors of the corporation shall be not less than five
(5) nor more than seven (7). The exact number of direcctors shall be five
(5) until changed, within the limits specified above, by a bylaw amending
this Section 3.2, duly adopted by the board fo director may be changed,or
definite number may be fixed without provision for an indefinite number, by
a duly adopted amendment to the articles of incorporation or by an
amendment to this bylaw duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however,that an amendment reducing the fixed number or the minimum number
of directors to a number less than five (5) cannot be adopted if the votes
cast against iuts soption at a meeting, or the shares not consenting in the
cse of an action by written consent, are equal to more than sixteen and
two-thirds percent (16-2/3%) of the outstanding shares entited to vote
thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number
of directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing ny director before that director's term of office
expires.
Dated: October 20, 1992
/s/ Robert T. Clarkson
-----------------------------------------
Robert T. Clarkson,
Assistant Secretary
<PAGE>
CERTIFICATE OF AMENDMENT
OF BYLAWS OF
QUICKLOGIC CORPORATION
The undersigned, being the Assistant Secretary of QuickLogic Corporation
hereby certifies that Section 3.2 of Article III of the Bylaws of this
corporation was amended effective June 10, 1994 by the Board of Directors to
proved in its entirety as follows:
3.2 NUMBER OF DIRECTORS
-------------------
The number of directors of the corporation shall be not less than four
(4) nor more than seven (7). The exact number of directors shall be six
(6) until changed, within the limits specified above, by a bylaw amending
this Section 3.2, duly adopted by the board of directors or by the
shareholders. The indefinite number of directors may be changed, or a
definite number may be fixed without provision for an indefinite number, by
a duly adopted amendment to the articles of incorporation or by an
amendment to this bylaw duly adopted by the vote or written consent of
holders of a majority of the outstanding shares entitled to vote; provided,
however, that an amendment reducing the fixed number or the minimum number
of directors to a number less than six (6) cannot be adopted if the votes
cast against its adoption at a meeting, or the shares not consenting in the
case of an action by written consent, are equal to more than sixteen and
two thirds percent (16-2/3%) of the outstanding shares entitled to vote
thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number
of directors minus one (1).
No reduction of the authorized number of directors shall have the
effect of removing any director before that director's term of office
expires.
Dated: June 10, 1994
/s/ Robert T. Clarkson
-----------------------------------------
Robert T. Clarkson,
Assistant Secretary
<PAGE>
Exhibit 5.1
QuickLogic Corporation
1227 Orleans Drive
Sunnyvale, California 94089-1138
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in
connection with the filing by QuickLogic Corporation (the "Company") of a
Registration Statement on Form S-1 (the "Registration Statement") with the
Securities and Exchange Commission (the "Commission"), covering an underwritten
public offering of up to 3,000,000 shares of Common Stock (the "Common Stock").
In connection with this opinion, we have (i) examined and relied upon the
Registration Statement and related Prospectus, the Company's Amended and
Restated Certificate of Incorporation, as amended, and Bylaws, and the originals
or copies certified to our satisfaction of such records, documents,
certificates, memoranda and other instruments as in our judgment are necessary
or appropriate to enable us to render the opinion expressed below, (ii) assumed
that the Amended and Restated Certificate of Incorporation, as amended, as set
forth in Exhibit 3.4 to the Registration Statement, will have been duly approved
and filed with the office of the Delaware Secretary of State and (iii) assumed
that the shares of Common Stock will be sold by the Underwriters at a price
established by the Pricing Committee of the Board of Directors of the Company.
On the basis of the foregoing, and in reliance thereon, we are of the
opinion that the Common Stock, when sold and issued in accordance with the
Registration Statement and related Prospectus, will be duly and validly issued,
fully paid and nonassessable.
We consent to the reference to our firm under the caption "Legal Matters"
in the Prospectus included in the Registration Statement and any amendment
thereto and to the filing of this opinion as an exhibit to the Registration
Statement and any amendment thereto.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
/s/ Wilson, Sonsini, Goodrich & Rosati
<PAGE>
EXHIBIT 10.2
QUICKLOGIC CORPORATION
1989 STOCK OPTION PLAN
(as amended February 21,1996)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Committee, if one has been appointed, or
-----
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Committee" shall mean the Committee appointed by the Board of
---------
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
------------
(e) "Company" shall mean QuickLogic Corporation, a California
-------
corporation.
(f) "Consultant" means any person who is engaged by the Company or
----------
any Parent or Subsidiary to render consulting services or advisory services and
is compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term paid
only a director's fee by the Company.
(g) "Continuous Status as an Employee, Consultant or Director" shall
--------------------------------------------------------
mean the absence of any interruption or termination of service as an Employee,
Consultant or Director. Continuous Status as an Employee, Consultant or
Director shall not be considered interrupted in the case of sick leave, military
leave, or any other leave of absence approved by the Board; provided that such
leave is for a period of not more than 90 days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(h) "Director" shall mean a member of the Board of Directors of the
--------
Company.
(i) "Employee" shall mean any person, including officers and
--------
directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934,
------------
as amended.
(k) "Incentive Stock Option" shall mean an Option intended to
----------------------
qualify as an incentive stock option within the meaning of Section 422A of the
Code.
<PAGE>
(l) "Nonstatutory Stock Option" shall mean an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(m) "Option" shall mean a stock option granted pursuant to the Plan.
------
(n) "Optioned Stock" shall mean the Common Stock subject to an
--------------
Option.
(o) "Optionee" shall mean an Employee or Consultant who receives an
--------
Option.
(p) "Parent" shall mean a "parent corporation", whether now or
------
hereafter existing, as defined in Section 425(e) of the Code.
(q) "Plan" shall mean this 1989 Stock Option Plan.
----
(r) "Share" shall mean a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(s) "Subsidiary" shall mean a "subsidiary corporation," whether now
----------
or hereafter existing, as defined in Section 425(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 14,700,000 shares of Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. Notwithstanding any other provision of the Plan,
shares issued under the Plan and later repurchased by the Company shall not
become available for future grant or sale under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board of
---------
Directors of the Company, or by a committee appointed by the Board of Directors
consisting of two (2) or more Directors, in accordance with the following
provisions:
(i) Members of the Board who are either eligible for Options or
have been granted Options may vote on any matters affecting administration of
the Plan or the grant of Options pursuant to the Plan; provided, however, no
member of the Board shall act upon the granting of an Option to himself or
herself, but any such member may be counted in determining the existence of a
quorum at any meeting of the Board during which action is taken with respect to
the granting of options to him or her.
(ii) The Committee shall administer the Plan on behalf of the
Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe. Once appointed, a Committee shall continue to serve
until otherwise directed by the Board of Directors. Subject to the foregoing,
from time to time the Board of Directors may increase the size of the Committee
and appoint new members in substitution therefor, fill vacancies however caused,
or remove all members of the Committee and there after directly administer the
Plan.
-2-
<PAGE>
(b) Powers of the Board. Subject to the provisions of the Plan, the
-------------------
Board shall have the authority, in its discretion: (i) to grant Incentive Stock
Options or Nonstatutory Stock Options; (ii) to determine, upon review of
relevant information and in accordance with Section 8(b) of the Plan, the fair
market value of the Common Stock; (iii) to determine the exercise price per
share of Options to be granted, which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iv) to determine the Employees,
Consultants and Directors to whom, and the time or times at which, Options shall
be granted and the number of shares to the represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and regulations
relating to the Plan; (vii) to determine the terms and provisions of each Option
granted (which need not be identical) and, with the consent of the holder
thereof, modify or amend each Option (including the exercise price thereof);
(viii) to defer (with the consent of the Optionee) the exercise date of any
Option, consistent with the provisions of Section 5 of the Plan; (ix) to
authorize any person to execute on behalf of the Company any instrument required
to effectuate the grant of an option previously granted by the Board; and (x) to
make all other determinations deemed necessary or advisable for the
administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
--------------------------
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees,
Consultants and Directors. Incentive Stock Options may be granted only to
Employees. An Employee, Consultant or Director who has been granted an Option
may, if he is otherwise eligible, be granted an additional Option or Options.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted to such Employee
by the Company or any Parent or Subsidiary, would result in Shares having an
aggregate fair market value (determined for each Share as of the date of grant
of the incentive stock option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more incentive
stock options during any calendar year.
(c) Section 5(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall qualify as an
Incentive Stock Option. Section 5(b) of the Plan shall not apply to any Option
evidenced by a "Nonstatutory Stock Option Agreement" which sets forth the
intention of the Company and the Optionee that such Option shall be a
Nonstatutory Stock Option.
(d) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment with, consulting relationship with, or
membership on the Board of Directors of, the Company, nor shall it interfere in
any way with his or her right or the Company's right to terminate such
employment, consulting relationship or membership on the Board of Directors at
any time.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be ten (10) years from
--------------
the date of grant thereof or such shorter term as may be provided in the Stock
Option Agreement. However, in the case of an Option granted to an Optionee who,
at the time the Option is granted, owns stock representing more than ten percent
(10%) of the voting
-3-
<PAGE>
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Option shall be five (5) years from the date of grant thereof or
such shorter term as may be provided in the Stock Option Agreement.
8. Exercise Price and Consideration.
--------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
fair market value per Share on the date of grant or, if the Incentive Stock
Option is amended to reduce the per Share exercise price, less than 110% of the
fair market value per Share on the date the Board approves such amendment.
(B) granted to any Employee, the per Share exercise
price shall be no less than 100% of the fair market value per Share on the date
of grant or, if the Incentive Stock Option is amended to reduce the per Share
exercise price, 100% of the fair market value per Share on the date the Board
approves such amendment.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the fair market value per
Share on the date of the grant or, if the Nonstatutory Stock Option is amended
to reduce the per Share exercise price, 110% of the fair market value per Share
on the date the Board approves the amendment.
(B) granted to any person, the per Share exercise price
shall be no less than 85% of the fair market value per Share on the date of
grant or, if the Nonstatutory Stock Option is amended to reduce the per Share
exercise price, 85% of the fair market value per Share on the date the Board
approves the amendment.
(b) The fair market value per Share shall be determined by the Board
in its discretion; provided, however, that where there is a public market for
the Common Stock, the fair market value per Share shall be the mean of the bid
and asked prices (or the closing price per share if the Common Stock is listed
on the National Association of Securities Dealers Automated Quotation ("NASDAQ")
National Market System) of the Common Stock for the date of grant (or date of
approval of an amendment to reduce the exercise price per Share, as the case may
be), as reported in the Wall Street Journal (or, if not so reported, as
otherwise reported by the NASDAQ System) or, in the event the Common Stock is
listed on a stock exchange, the fair market value per Share shall be the closing
price on such exchange on such date, as reported in the Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Board and may consist entirely of (i) cash, (ii) check, (iii) other Shares
having a fair market value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (iv)
promissory note, (v) any combination of such methods of payment
-4-
<PAGE>
or (vi) such other consideration and method of payment for the issuance of
Shares to the extent permitted under Sections 408 and 409 of the California
General Corporation Law.
9. Exercise of Option.
------------------
(a) (i) Procedure for Exercise; Rights as a
Shareholder. Any Option granted hereunder shall be exercisable at such times
and under such conditions as may determined by the Board, including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan.
(ii) An Option may not be exercised for a
fraction of a Share.
(iii) An Option shall be deemed to be exercised
when written notice of such exercise has been given to the Company in accordance
with the terms of the Option and full payment for the Shares with respect to
which the Option is exercised has been received by the Company. Full payment
may, as authorized by the Board, consist of any consideration and method of
payment allowable under Section 8(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 11 of the
Plan.
(iv) Exercise of an Option in any manner shall
result in a decrease in the number of Shares which thereafter may be available,
both for purposes of the Plan and for sale under the Option, by the number of
Shares as to which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event
--------------------------------------------------
of termination of an Optionee's Continuous Status as an Employee, Consultant or
Director (as the case may be), such Optionee may exercise his or her Option to
the extent that he or she was entitled to exercise it at the date of such
termination (or to such greater extent as the Board may determine). Any such
exercise must occur within the period set forth in the written option agreement
which, in the case of an Incentive Stock Option, shall be no more than three (3)
months after the date of termination. The Option shall terminate on the date of
such termination of Continuous Status as an Employee, Consultant or Director to
the extent of the number of shares of Optioned Stock as to which the Option was
not exercisable on the date of such termination, as set forth in the written
option agreement or as the Board may otherwise determine. To the extent the
Optionee fails, within the time period specified in the written option
agreement, to exercise the Option for those shares of Optioned Stock as to which
he or she is entitled to exercise, the Option shall terminate upon the
expiration of such time period.
(c) Disability of Optionee. Notwithstanding the provisions of Section
----------------------
9(b) above, in the event of termination of an Optionee's consulting relationship
or Continuous Status as an Employee as a result of his or her disability,
Optionee may, but only within six (6) months from the date of such termination
(and in no event later than the expiration date of the term of such Option as
set forth in the Option Agreement), exercise the Option to the extent otherwise
entitled to exercise it at the date of such termination; provide, however, that
if such disability is not a "disability" as such term is defined in Section
22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive
Stock Option shall automatically convert to a Nonstatutory Stock Option on the
day three months and one day following such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of
-5-
<PAGE>
termination, or if Optionee does not exercise such option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee:
-----------------
(i) during the term of the Option who is at the time of his
death an Employee, Consultant or Director of the Company and who shall have been
in Continuous Status as an Employee, Consultant or Director since the date of
grant of the Option, the Option may be exercised by the Optionee's estate or by
a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent, and within the time period, set forth in
the Option Agreement (or such greater extent or time period as the Board may
determine) subject to the limitation set forth in Section 5(b).
(ii) within three (3) months after the termination of Continuous
Status as an Employee or Consultant, the Option may be exercised by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent, and within the time period,
set forth in the Option Agreement (or such greater extent or time period as the
Board may determine).
10. Non-Transferability of Options. The Option may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
----------------------------------------------------
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Board shall notify the Optionee at least fifteen (15) days prior to such
proposed action. To the extent it has not been previously exercised, the Option
will terminate immediately prior to the consummation of such proposed action.
In the event of a merger of the Company with or into another corporation, the
Option shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation.
With respect to any Option granted prior to the issuance of the amending order
by the California Department of Corporations (the "Department") increasing the
number of shares qualified for issuance under the Plan to 14,700,000, in the
event that such successor corporation does not agree to assume such Option or to
substitute an equivalent option, the Board shall, in lieu of such assumption or
substitution, provide for the Optionee to have the right to exercise such Option
as to all of the Optioned Stock, including Shares as to which such Option would
not otherwise be exercisable. If the Board makes an Option fully exercisable in
lieu of assumption or substitution in the event of a merger, the Board shall
notify the Optionee that the Option shall be fully exercisable for a period of
thirty (30) days from the date of such notice, and the Option
-6-
<PAGE>
will terminate upon the expiration of such period. With respect to any option
granted after the issuance of the amending order by the Department increasing
the number of shares qualified for issuance under the Plan to 14,700,000, in the
event that such successor corporation does not agree to assume such Option or to
substitute an equivalent option, the Board shall notify the Optionee that the
Option shall be exercisable for a period of fifteen (15) days from the date of
such notice to the extent that Optionee was entitled to exercise it upon the
expiration of such period, and, to the extent that Optionee was not entitled to
exercise such Option upon the expiration of such period, or if Optionee does not
exercise such Option to the extent so entitled within such period, the Option
shall terminate.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may amend or terminate
-------------------------
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 17 of the
Plan:
(i) any increase in the number of Shares subject to the Plan,
other than in connection with an adjustment under Section 11 of the Plan; or
(ii) any change in the designation of the class of persons
eligible to be granted Options.
(iii) if the Company has a class of equity security registered
under Section 12 of the Exchange Act at the time of such revision or amendment,
any material increase in the benefits accruing to participants under the Plan.
(b) Shareholder Approval. If any amendment requiring shareholder
--------------------
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity security by the Company under Section 12 of
the Exchange Act, such shareholder approval shall be solicited as described in
Section 17(a) of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for
-7-
<PAGE>
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
----------------
agreements in such form as the Board shall approve.
17. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. If such shareholder approval is obtained at
a duly held shareholders' meeting, it must be obtained by the affirmative vote
of the holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon. If and in the event that the Company
has registered any class of any equity security pursuant to Section 12 of the
Exchange Act, the approval of such shareholders of the Company shall be:
(a) (1) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or (2)
solicited after the Company has furnished in writing to the holders entitled to
vote substantially the same information concerning the Plan as that which would
be required by the rules and regulations in effect under Section 14(a) of the
Exchange Act at the time such information is furnished; and
(b) obtained at or prior to the first annual meeting of shareholders
held subsequent to the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act.
If such shareholder approval is obtained by written consent, it must
be obtained by the unanimous written consent of all shareholders of the Company.
18. Information to Optionee. The Company shall provide to each Optionee,
-----------------------
during the period for which such Optionee has one or more Options outstanding, a
balance sheet and an income statement at least annually. The Company shall not
be required to provide such information to key employees whose duties in
connection with the Company assure their access to equivalent information.
-8-
<PAGE>
QUICKLOGIC CORPORATION
______________________
______________________
Date:_______________
______________________
RE: QUICKLOGIC CORPORATION OPTION AGREEMENT
-------------------------------------------
Dear Optionee:
The Option Agreement(s) dated __________________________________ (the
"Option Agreement") by and between you and QuickLogic Corporation (the
"Company") is/are hereby AMENDED TO ALLOW FOR AN EARLY EXERCISE AND TO PROVIDE A
REPURCHASE OPTION BY THE COMPANY. The vesting schedule listed in Section 3(i) of
the Option Agreement to which you are a party, shall be amended and restated in
its entirety to read as follows:
"3. Exercise of Option. This option shall be exercisable during its term
------------------
in accordance with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise
-----------------
(a) Subject to subsections 3(i)(b), (c), (d) and (e) below, this
Option shall be exercisable in full at any time prior to expiration or earlier
termination. 1/8 of the Shares subject to the Option shall vest six months after
the Vesting Commencement Date, and an additional 6.25% of the Shares subject to
the Option shall vest every three (3) months thereafter. If the Option is
exercised for unvested shares, it shall be subject to the Exercise Notice and
Restricted Stock Agreement attached hereto as Exhibit A, whether or not you sign
---------
such Agreement at the time of exercise."
If and when you decide to exercise your option to purchase shares of the
Company, please execute the attached documentation. including attachments.
Please note that the Company only permits you to pay the exercise price of your
stock option by tendering a personal check for such amount payable to the
Company.
All of the other terms and conditions set forth in the Option Agreement
remain in fall force and effect.
Sincerely, AGREED TO AND ACCEPTED BY:
___________________________
Vincent A. McCord
Chief Financial Officer/Corporate Secretary Name:______________________
Enclosures: Exhibits A/B/C
<PAGE>
EXHIBIT A
EXERCISE NOTICE AND RESTRICTED STOCK AGREEMENT FOR UNVESTED SHARES
------------------------------------------------------------------
QuickLogic Corporation, a California corporation having its principal place of
business at 1277 Orleans Drive, Sunnyvale, CA 94089 (the "COMPANY"), has
granted to the person whose name is written on the last page hereof (the
"OPTIONEE"), an option to purchase certain number of shares of Common Stock (the
"SHARES") as evidenced in certain Stock Option Agreements(s), at the price
determined as provided therein, and in all respects subject to the terms,
definitions and provisions of the 1989 Stock Option Plan (the "PLAN") adopted by
the Company which is incorporated herein by reference. The terms defined in the
Plan shall have the same defined meanings herein.
1. Exercise of Option. Effective as of today, __________, 19__, the
------------------
undersigned Optionee hereby elects to exercise Optionee's option to purchase
__________ Shares of the Company under and pursuant to the Plan and the [ ]
Incentive [ ] Nonstatutory Stock Option Agreements dated ____________________
(the "OPTION AGREEMENT"). The aforesaid Shares that Optionee has elected to
purchase have not yet vested under the Plan (the "UNVESTED SHARES").
2. Representations of Optionee. Optionee acknowledges that Optionee has
---------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
3. Rights as Shareholder.
---------------------
(a) Until the stock certificate evidencing such Unvested Shares is
issued (as evidenced by the appropriate entry on the books of the Company or of
a duly authorized transfer agent of the Company), no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for
which the record date is prior to the date the stock certificate is issued,
except as provided in Section 11 of the Plan.
(b) Optionee shall enjoy rights as a shareholder until such time as
Optionee disposes of the Unvested Shares or the Company, and/or its assignee(s)
exercises the Repurchase Option or Right of First Refusal hereunder. Upon such
exercise, Optionee shall have no further rights as a holder of the Unvested
Shares so purchased except the right to receive payment for the Unvested Shares
so purchased in accordance with the provisions of this Agreement, and Optionee
shall forthwith cause the certificate(s) evidencing the Unvested Shares so
purchased to be surrendered to the Company for transfer or cancellation.
<PAGE>
4. Company's Repurchase Option. In the event that the Option is
---------------------------
exercised as to Unvested Shares, the Company, or its assignee(s) shall have the
option to repurchase all or any portion of the Unvested Shares on the terms and
conditions set forth in this Section 4 (the "REPURCHASE OPTION") if the Optionee
should cease to be employed by or cease to be a consultant of the Company for
any reason or no reason, including, but without limitation to death, disability,
voluntary resignation or termination by the Company, with or without cause.
(a) Restrictions on Transfer. For so long as Unvested Shares remain
------------------------
as unvested, Optionee may not transfer, sell, hypothecate or otherwise dispose
of, or grant any interest in, such Unvested Shares.
(b) Escrow of Unvested Shares. The stock certificate representing the
-------------------------
Unvested Shares, together with two (2) executed blank stock assignments in the
form attached hereto as ATTACHMENT 1 (for use in transferring all or a portion
------------
of the Unvested Shares if, as and when required by this Agreement) shall be
deposited with the Escrow Agent pursuant to the Escrow Agreement attached hereto
as ATTACHMENT 2 .
------------
(c) Right of Termination Unaffected. Nothing in this Agreement shall
-------------------------------
be construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company to terminate Optionee's employment at any time for any
reason or no reason, with or without cause. Optionee shall be considered to be
employed by the Company, if Optionee is an officer, director or full-time
employee of the Company, or any Parent or Subsidiary of the Company (as defined
in the Plan) or if the Board of Directors determines that Optionee is rendering
substantial services as a part-time employee, consultant or independent
contractor to the Company or any Parent or Subsidiary of the Company.
Notwithstanding any provisions to the contrary included in the Option
Agreement(s), the employment relationship ceases on the date when the Optionee
discontinues services to the Company as an employee or as a consultant (the
"TERMINATION DATE"). In case of any dispute, the Board of Directors of the
Company shall have discretion to determine (i) whether Optionee has ceased to be
employed by the Company and (ii) the Termination Date.
(d) Exercise of Repurchase Option. At any time within ninety (90)
-----------------------------
days after Optionee's Termination Date, the Company or its assignee(s) may elect
to repurchase any or all of the Unvested Shares by giving Optionee (or
Optionee's personal representative as the case may be) written notice of
exercise of the Repurchase Option.
(e) Repurchase Price. The per share price for Unvested Shares
----------------
repurchased pursuant to the Repurchase Option shall be equal to the Exercise
Price (as defined in the Stock Option Agreement), as such price may be adjusted
from time to time to reflect any subsequent stock dividend, stock split, reverse
stock split or recapitalization of the Company (the "REPURCHASE PRICE").
-2-
<PAGE>
(f) Payment of Repurchase Price. The Repurchase Price shall be
---------------------------
payable, at the option of the Company or its assignee(s), by check or by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company (or in the case of repurchase by an assignee, to the assignee) or
any combination thereof. The Repurchase Price shall be paid without interest
within ninety (90) days after the Termination Date.
(g) Lapse of Repurchase Option. All Unvested Shares held by the
--------------------------
Optionee shall be released from the Company's Repurchase Option and cease to be
Unvested Shares according to the Vesting Schedule set out in the Notice of
Grant.
5. Company's Right of First Refusal. Before any Vested Shares (the
--------------------------------
"VESTED SHARES") held by Optionee or any transferee (either being sometimes
referred to herein as the "HOLDER") may be sold or otherwise transferred
(including transfer by gift or operation of law), the Company or its assignee(s)
shall have a right of first refusal to purchase the Vested Shares on the terms
and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
(a) Notice of Proposed Transfer. The Holder of the Vested Shares
---------------------------
shall deliver to the Company a written notice (the "NOTICE") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Vested Shares,
(ii) the name of each proposed purchaser or other transferee ("PROPOSED
TRANSFEREE"), (iii) the number of Vested Shares to be transferred to each
Proposed Transferee, and (iv) the bona fide cash price or other consideration
for which the Holder proposes to transfer the Vested Shares (the "OFFERED
PRICE"), and the Holder shall offer the Vested Shares at the Offered Price to
the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within sixty (60)
----------------------------------
days after receipt of the Notice, the Company and/or its assignee(s) may, by
giving written notice to the Holder, elect to purchase all, but not less than
all, of the Vested Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection(c) below.
(c) Purchase Price. The purchase price ("PURCHASE PRICE") for the
--------------
Vested Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price in consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check) or by cancellation
of all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee) or by any
combination thereof, within ninety (90) days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
-3-
<PAGE>
(e) Holder's Right to Transfer. If all of the Vested Shares proposed
--------------------------
in the Notice to be transferred to a given Proposed Transferee are not purchased
by the Company and/or its assignee(s) as provided in this Section, then the
Holder may sell or otherwise transfer such Vested Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer is consummated within one hundred twenty (120) days after the
date of the Notice and provided further that any such sale or other transfer is
effected in accordance with any applicable securities laws and the Proposed
Transferee agrees in writing that the provisions of this Section shall continue
to apply to the Vested Shares in the hands of such Proposed Transferee. If the
Vested Shares described in the Notice are not transferred to the Proposed
Transferee within such period, a new Notice shall be given to the Company, and
the Company and/or its assignees shall again be offered the Right of First
Refusal before any Vested Shares held by the Holder may be sold or otherwise
transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Vested Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to the Optionee's immediate family or a trust for the benefit of
the Optionee's immediate family shall be exempt from the provisions of this
Section. "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal descendant
or antecedent, father, mother, brother or sister. In such case, the transferee
or other recipient shall receive and hold the Vested Shares so transferred
subject to the provisions of this Section, and there shall be no further
transfer of such Vested Shares except in accordance with the terms of this
Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Vested Shares ninety (90) days after the first sale of
Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the 1933 Act.
6. Tax Consultation. Optionee understands and acknowledges that Optionee
----------------
may suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Unvested Shares. Optionee represents that Optionee has
consulted with any tax consultant(s) Optionee deems advisable in connection with
the purchase or disposition of the Unvested Shares and that Optionee is not
relying on the Company for any tax advice.
7. Section 83(b) Elections.
-----------------------
(a) Election for Unvested Shares Purchased Pursuant to Nonqualified
---------------------------------------------------------------
Stock Options. Optionee hereby acknowledges that he or she has been informed
- -------------
that, with respect to the exercise of a nonqualified stock option for Unvested
Shares, that unless an election is filed by the Optionee with the Internal
Revenue Service and, if necessary, the proper state taxing authorities, within
------
thirty (30) days of the purchase of the Unvested Shares, electing pursuant to
- ----------------
Section 83(b) of the Code (and similar state tax provisions if applicable) to be
taxed currently on any difference between the purchase price of the Unvested
Shares and their Fair Market Value on the date of purchase, there will be a
recognition of taxable income to the Optionee, measured by the excess, if
-4-
<PAGE>
any, of the fair market value of the shares, at the time the Company's
Repurchase Option lapses over the purchase price for the Unvested Shares.
Optionee represents that Optionee has consulted any tax consultant(s) Optionee
deems advisable in connection with the purchase of the Unvested Shares or the
filing of the Election under Section 83(b) and similar tax provisions.
(b) Election for Unvested Shares Purchased Pursuant to Incentive
------------------------------------------------------------
Stock Options. Optionee hereby acknowledges that he or she has been informed
- -------------
that, with respect to the exercise of an incentive stock option for Unvested
Shares. that unless an election is filed by the Optionee with the Internal
Revenue Service and, if necessary, the proper state taxing authorities, within
------
thirty (30) days of the purchase of the Unvested Shares, electing pursuant to
- ----------- ----
Section 83(b) of the Code (and similar state tax provisions if applicable) to be
taxed currently, on any difference between the purchase price of the Unvested
Shares and their Fair Market Value on the date of purchase, there will be a
recognition of income to the Optionee, for alternative minimum tax purposes,
measured by the excess, if any, of the fair market value of the Unvested Shares,
at the time the Company's Repurchase Option lapses over the purchase price for
the Unvested Shares. Optionee represents that Optionee has consulted any tax
consultant(s) Optionee deems advisable in connection with the purchase of the
Unvested Shares or the filing of the Election under Section 83(b) and similar
tax provisions.
OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY AND NOT THE
COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION 83(B).
8. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto.
to be placed upon any certificate(s) evidencing ownership of the Unvested Shares
to ether with any other legends that may be required by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES. SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION
IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF REPURCHASE AND RIGHT OF
FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS
SET FORTH IN THE EXERCISE
-5-
<PAGE>
NOTICE AND RESTRICTED STOCK AGREEMENT BETWEEN THE ISSUER AND THE
ORIGINAL HOLDER OF THESE SHARES. A COPY OF WHICH MAY BE OBTAINED
AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS. RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to EXHIBIT B, THE INVESTMENT REPRESENTATION STATEMENT.
---------
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Vested Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Agreement or (ii) to
treat as owner of such Vested Shares or to accord the right to vote or pay
dividends to any purchaser or other transferee to whom such Vested Shares shall
have been so transferred.
9. Successors and Assigns. The Company may assign any of its rights
----------------------
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth. this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
10. Interpretation. Any dispute regarding the interpretation of this
--------------
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors (the "BOARD") or the committee thereof (the
"COMMITTEE") that administers the Plan, which shall review such dispute at its
next regular meeting. The resolution of such a dispute by the Board or
Committee shall be final and binding on the Company and on Optionee.
11. Governing Law; Severability. This Agreement shall be governed by and
---------------------------
construed in accordance with the laws of the State of California, excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
12. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal deliver, or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the Company, attention: the Corporate
-6-
<PAGE>
Secretary; and to the Optionee at the respective address as shown below beneath
its signature, or to such other address as such party may designate in writing
from time to time to the other party.
13. Further Instruments. The parties agree to execute such further
-------------------
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
14. Delivery of Payments. Optionee herewith delivers to the Company the
--------------------
full Exercise Price for the Unvested Shares.
15. Entire Agreement. The Plan and Notice of Grant/Option Agreement are
----------------
incorporated herein by reference. This Agreement, the Plan, the Option
Agreements and the Investment Representation Statement constitute the entire
Agreement of the parties and supersede in their entirety all prior
understandings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by California law except for that body of
law pertaining to conflict of laws.
SUBMITTED BY: ACCEPTED BY:
- ------------- ------------
OPTIONEE: QUICKLOGIC CORPORATION
____________________________ By:____________________________
Name:_______________________ Title:_________________________
Social Security #:__________
ADDRESS ADDRESS
- ------- -------
____________________________ 1277 Orleans Drive
Sunnyvale, CA 94089
____________________________
____________________________
-7-
<PAGE>
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
-----------------------------------
OPTIONEE : ______________________
COMPANY : QUICKLOGIC CORPORATION
SECURITY : __________________ SHARES OF COMMON STOCK
AMOUNT : $_________________
DATE : __________________, 19__
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one (1) year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the securities. Optionee
understands that the certificate evidencing the securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company, a legend prohibiting their transfer without the,
consent of the Commissioner of Corporations of the State of California and any
other legend required under applicable state securities laws.
<PAGE>
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a nonpublic offering subject to the satisfaction of
certain conditions. Rule 701 provides that if the issuer qualifies under Rule
701 at the time of the grant of the Option to the Optionee, the exercise will be
exempt from registration under the Securities Act. In the event the Company
becomes subject to the reporting requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, ninety (90) days thereafter (or such longer
period as any market stand-off Agreement may require) the securities exempt
under Rule 701 may be resold, subject to the satisfaction of certain of the
conditions specified by Rule 144, including: (1) the resale being made through a
broker in an unsolicited "broker's transaction" or in transactions directly with
a market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, (3) the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
and (4) the timely filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the time
of grant of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires the resale
to occur not less than two years after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and, in
the case of an affiliate, or of a non-affiliate who has held the securities less
than three years, the satisfaction of the conditions set forth in sections (1),
(2), (3) and (4) of the paragraph immediately above.
(d) Optionee hereby agrees that if so requested by the Company or any
representative of the underwriters in connection with any registration of the
offering of any securities of the Company under the 1933 Act, Optionee shall not
sell or otherwise transfer any Shares or other securities of the Company during
the 180-day period following the effective date of a registration statement of
the Company filed under the 1933 Act; provided, however, that such restriction
shall only apply to the first registration statement of the Company to become
effective under the 1933 Act which include securities to be sold on behalf of
the Company to the public in an underwritten public offering under the 1933 Act.
The Company may impose stop-transfer instructions with respect to securities
subject to the foregoing restrictions until the end of such 180-day period.
(e) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
-2-
<PAGE>
(f) Optionee understands that the certificate evidencing the
Securities will be imprinted with a legend which prohibits the transfer of the
Securities without the consent of the Commissioner of Corporations of
California. Optionee has read the applicable Commissioner's Rules with respect
to such restriction, a copy of which is attached.
SIGNATURE OF OPTIONEE: _________________________
Signature
_________________________
Please Print Name
_________________________
Social Security Number
_________________________
Address
-3-
<PAGE>
EXHIBIT C
NOTICE OF EXERCISE OF STOCK OPTION
----------------------------------
QuickLogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
Attention: Corporate Secretary
Ladies and Gentlemen:
The undersigned hereby elects to exercise the Option indicated below with
respect to the number of Shares of Common Stock of QuickLogic Corporation (the
"Company") set forth:
Option Grant Date: _________________________
Type of Option: [_] Incentive Stock Option
[_] Nonstatutory Option
Number of Shares Being Exercised: __________
Exercise Price Per Shares: $_________
Total Exercise Price: $_________
Method of Payment: [_] Cash
[_] Check
Enclosed herewith is payment in full of the total exercise price.
My exact name, address and social security number for purposes of the stock
certificates to be issued and the shareholder list of the Company are:
Name: ______________________________
Address: ______________________________
______________________________
Social Security Number: _______________
Sincerely,
________________________ Dated:______________
Optionee's Signature
<PAGE>
ATTACHMENT 1
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATCE FROM CERTIFICATE
-------------------------
FOR VALUE RECEIVED and pursuant to that certain Exercise Notice and
Restricted Stock Agreement dated as of __________, 19__, the undersigned hereby
sells, assigns and transfers unto
________________________________________________________________________________
shares of the Common Stock of QUICKLOGIC CORPORATION, a California corporation,
standing in the undersigned's name on the books of said corporation represented
by Certificate No. __________ delivered herewith and does hereby irrevocably
constitute ____________________________________________________________________
_____________ as attorney-in-fact, with full power of substitution, to transfer
said stock on the books of said corporation.
Dated: __________, 19__
OPTIONEE:
____________________________________
Signature
____________________________________
Please Print Name
____________________________________
Spouse's Signature (if applicable)
____________________________________
Please Print Spouse's Name
<PAGE>
ATTACHMENT 2
ESCROW AGREEMENT
----------------
This Escrow Agreement is entered into as of __________, 19__ by and between
QUICKLOGIC CORPORATION, a California corporation (the "Company"),______________
an individual purchasing shares of Common Stock from the Company ("Purchaser")
and the Corporate Secretary of the Company as Escrow Agent hereunder (the
"Escrow Agent").
RECITALS
- --------
WHEREAS, the Purchaser has exercised an Option to purchase shares of the
Company's Common Stock (the "Shares") pursuant to an Exercise Notice and
Restricted Stock Agreement (the "Stock Agreement"); and
WHEREAS, pursuant to the Stock Agreement, Purchaser is required to deposit
certain shares, together with executed blank Stock Assignments in this Escrow to
assure that Unvested Shares will be available for delivery to the Company if and
when the Company exercises its Repurchase Option;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions. Unless otherwise indicated, all defined terms used herein
-----------
shall have the meaning set forth in the Stock Agreements.
2. Shares Subject to Escrow. This Escrow Agreement shall apply to the shares
------------------------
______ of the Company's Common Stock represented by Certificate(s) No._______.
In addition:
(a) In the event that during the term of the escrow any stock dividend,
reclassification or other changes are declared or made in the capital structure
of the Company, all new, substituted or additional shares issued in connection
with the Shares by reason of any such change shall be delivered to and held by
the Escrow Agent under the terms of this Agreement in the same manner as the
Shares originally escrowed hereunder.
(b) In the event of substitution of such securities, Purchaser, the
Company and Escrow Agent shall cooperate and execute such documents as are
reasonable so as to provide for the substitution of such Collateral and, upon
such substitution, references to "Shares" in this Agreement and the Escrow
Agreement shall include the substituted shares of capital stock of Optionee as a
result thereof.
(c) In the event that, during the term of this escrow, subscription
Options or other rights or options shall be issued in connection with the
escrowed Shares, such rights, Options and options shall be the property of
Optionee and, if exercised by Purchaser, all new stock or other securities so
acquired by Optionee as it relates to the escrowed Shares then held by Escrow
Agent shall be
<PAGE>
immediately delivered to Escrow Agent, to be held under the terms of this
Agreement in the same manner as the Shares escrowed.
3. Instruction re: Shares. Company and the Purchaser hereby authorize and
----------------------
direct the Escrow Agent to hold the documents delivered herewith in accordance
with the following instructions:
(a) In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the
Repurchase Option set forth in the Stock Agreement, the Company shall give to
Purchaser and Escrow Agent a written notice specifying the number of Shares to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Purchaser and the Company hereby irrevocably
authorize and direct Escrow Agent to close the transaction contemplated by such
notice in accordance with the terms of said notice. At the closing, Escrow
Agent is directed (i) to date the stock assignments necessary for the transfer
in question, (ii) to fill in the number of shares being transferred, and (iii)
to deliver same, together with the certificate evidencing the shares of stock to
be transferred, to the Company against the simultaneous delivery to Escrow Agent
of the purchase price (by check or by cancellation of any debt owed by Purchaser
to the Company) for the number of Shares being purchased pursuant to the
exercise of the Repurchase Option.
(b) Shares shall be delivered to Purchaser in accordance with the
provisions of this Section 3. All shares held by the Escrow Agent hereunder
will remain in this Escrow until the date on which the Repurchase Option has
lapsed as to such Shares. Notwithstanding the foregoing, upon written request
from the Purchaser not more frequently than once in any three-month period, and
subject to any applicable contrary rules under Regulation G, the Escrow Agent
will deliver to Purchaser so many shares of stock as are no longer subject to
the Repurchase Option.
Ninety (90) days after cessation of Purchaser's service as an
employee, consultant and/or director of the Company, Escrow Agent will deliver
to Purchaser a certificate or certificates representing the aggregate number of
shares sold and issued pursuant to the Stock Agreement and not purchased by the
Company or its assignees pursuant to exercise of the Repurchase Option.
(c) If at the time of termination of this Escrow Agreement, Escrow Agent
should have in his/her possession any documents, securities, or other property
belonging to Purchaser, Escrow Agent shall deliver all of same to Purchaser and
shall be discharged of all further obligations hereunder.
4. Power of Attorney. Purchaser irrevocably authorizes the Company to deposit
-----------------
with Escrow Agent any certificates evidencing shares of stock to be held by
Escrow Agent hereunder and any additions and substitutions to said shares as
defined in the Agreement. Purchaser does hereby irrevocably constitute and
appoint Escrow Agent as his attorney-in-fact and agent for the term of this
escrow to execute with respect to such securities all documents necessary or
appropriate to make such securities negotiable and to complete any transaction
herein contemplated, including but not limited to the filing with the Department
of Corporations of the State of California of an Application for Consent to
Transfer Securities Subject to Legend or Escrow Condition Pursuant to Section
25151
-2-
<PAGE>
of the California Corporate Securities Law of 1968. Subject to the provisions of
this paragraph, Purchaser shall exercise all rights and privileges of a
stockholder of the Company while the stock is held by Escrow Agent.
5. Amendment. This Escrow Agreement and Escrow Agent's duties hereunder may
---------
be altered, amended, modified or revoked only by a writing signed by all of the
parties hereto.
6. Escrow Agents Liability Limited.
-------------------------------
(a) Escrow Agent shall be obligated only for the performance of such
duties as are specifically set forth herein and may rely and shall be protected
in relying or refraining from acting on any instrument reasonably believed by
Escrow Agent to be genuine and to have been signed or presented by the proper
party or parties. Escrow Agent shall not be personally liable for any act Escrow
Agent may do or omit to do hereunder as Escrow Agent or as attorney-in-fact for
Purchaser while acting in good faith and in the exercise of Escrow Agent's own
good judgment, and any act done or omitted by Escrow Agent pursuant to the
advice of Escrow Agent's own attorneys shall be conclusive evidence of such good
faith.
(b) Escrow Agent shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
(c) Escrow Agent shall not be liable for the outlawing of any rights under
the Statute of Limitations with respect to this Escrow Agreement or any
documents deposited with Escrow Agent.
7. Compliance with Court Orders. Escrow Agent is hereby expressly authorized
----------------------------
to disregard any and all warnings given by any of the parties hereto or by any
other person or corporation, excepting only orders or process of courts of law,
and is hereby expressly authorized to comply with and obey orders, judgments or
decrees of any court. In case Escrow Agent shall obey or comply with any such
order, judgment or decree, Escrow Agent shall not be liable to any of the
parties hereto or to any other person, firm or corporation by reason of such
compliance, notwithstanding any such order, judgment or decree being
subsequently reversed, modified, annulled, set aside, vacated or found to have
been entered without jurisdiction.
8. Reliance on Counsel. Escrow Agent shall be entitled to employ such legal
-------------------
counsel and other experts as Escrow Agent may deem necessary properly to advise
Escrow Agent in connection with Escrow Agent's obligations hereunder, may rely
upon the advice of such counsel, and may pay such counsel reasonable
compensation therefor.
9. Termination of Escrow Agents Status. Escrow Agent's responsibilities as
-----------------------------------
Escrow Agent hereunder shall terminate if Escrow Agent shall cease to be
Secretary of the Company or if Escrow Agent shall resign by written notice to
each party. In the event of any such termination, the Company shall appoint a
successor Escrow Agent.
-3-
<PAGE>
10. Further Instruments. If Escrow Agent reasonably requires other or further
-------------------
instruments in connection with this Escrow Agreement or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
11. Retention of Securities. It is understood and agreed that should any
-----------------------
dispute arise with respect to the delivery and/or ownership or right of
possession of the securities held by Escrow Agent hereunder, Escrow Agent is
authorized and directed to retain in Escrow Agent's possession without liability
to anyone all or any part of said securities until such disputes shall have been
settled either by mutual written Agreement of the parties concerned or by a
final order, decree or judgment of a court of competent jurisdiction after the
time for appeal has expired and no appeal has been perfected, but Escrow Agent
shall be under no duty whatsoever to institute or defend any such proceedings.
12. Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party may
designate by ten (10) days' advance notice to each of the other parties hereto.
COMPANY: QUICKLOGIC CORPORATION
1277 Orleans Drive
Sunnyvale, CA 94089
PURCHASER: ____________________________
____________________________
____________________________
ESCROW AGENT: The Corporate Secretary
QuickLogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
13. Escrow Agent Status. By signing this Escrow Agreement, Escrow Agent
-------------------
becomes a party hereto only for the purpose of this Escrow Agreement; Escrow
Agent does not become a party to the Stock Agreement.
-4-
<PAGE>
14. Successors and Assigns. This instrument shall be binding upon and inure to
----------------------
the benefit of the parties hereto, and their respective successors and permitted
assigns.
QUICKLOGIC CORPORATION
A California Corporation
By:________________________________________
Title:_____________________________________
PURCHASER:
___________________________________________
___________________________________________
(Please Print Name)
ESCROW AGENT:
___________________________________________
Corporate Secretary, QUICKLOGIC CORPORATION
Name:______________________________________
-5-
<PAGE>
EXHIBIT 10.3
QUICKLOGIC CORPORATION
1991 SALES REPRESENTATIVE STOCK PURCHASE PLAN
1. Purpose of the Plan. The purpose of the Plan is to provide the Board
-------------------
of Directors of QuickLogic Corporation (the "Company") with the authority and
flexibility to authorize the sale of Common Stock to Consultants and Sales
Representatives on favorable terms in order to attract and retain the best
available key personnel for positions as consultants and sales representatives
and to promote the sale of the Company's products and success of the Company's
business.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Board" shall mean the Committee (as defined below) or the
-----
Board of Directors of the Company if no Committee is then designated.
(b) "Committee" shall have the meaning as specified in Section 4(a)
---------
of the Plan.
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean QuickLogic Corporation, a California
-------
corporation.
(e) "Consultant" shall mean any person who is engaged by the Company
----------
or any Subsidiary to render consulting services.
(f) "Plan" shall mean this 1991 Stock Purchase Plan.
----
(g) "Restricted Stock Purchase Agreement" shall mean an agreement
-----------------------------------
providing for Stock Purchase Rights between the Company and the Consultant or
Sales Representative which may, in the discretion of the Board of Directors,
provide to the Company a right of repurchase and/or a right of first refusal
with respect to the Shares.
(h) "Sales Representative" shall mean any firm designated by the
--------------------
Company, in its sole discretion, as an authorized manufacturer's representative
or distributor or any employee of such firm engaged in services which relate to
the sale of the Company's products.
(i) "Share" shall mean a share of Common Stock.
-----
(j) "Stock Bonus Agreement" shall mean an agreement between the
---------------------
Company and the Consultant or Sales Representative which grants a Stock Bonus in
consideration for services rendered by the Consultant or Sales Representative.
<PAGE>
(k) "Subsidiary" shall mean a corporation of which not less than
----------
50% of the voting shares are held by the Company or a Subsidiary, whether or not
such corporation now exists or is hereafter organized or acquired by the Company
or a Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section 8 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be sold under the
Plan is 100,000 shares of Common Stock which may be authorized, but unissued, or
reacquired Common Stock.
If Shares are repurchased by the Company pursuant to a Restricted Stock
Purchase Agreement, such Shares, unless the Plan shall have been terminated,
shall become available for reissuance under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure. The Plan shall be administered by the Board of
---------
Directors of the Company. The Board of Directors may appoint a Committee
consisting of not less than two members of the Board of Directors to administer
the Plan on behalf of the Board of Directors, subject to such terms and
conditions as the Board of Directors may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board of
Directors. From time to time the Board of Directors may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies
however caused, or remove all members of the Committee and thereafter directly
administer the Plan.
Members of the Board who are either eligible to receive a Stock Bonus
or purchase Shares pursuant to a Restricted Stock Purchase Agreement under the
Plan or who have received a Stock Bonus or purchased Shares pursuant to a
Restricted Stock Purchase Agreement under the Plan may vote on any matters
affecting the administration of the Plan, except that no such member shall act
upon the authorization of the sale or bonus of Shares under the Plan to himself,
but any such member may be counted in determining the existence of a quorum at
any meeting of the Board during which action is taken with respect to the
authorization of the sale or bonus of Shares under the Plan to such member.
(b) Powers of the Board. Subject to the provisions of the Plan,
-------------------
the Board shall have the authority, in its discretion: (i) to determine the
Consultants or Sales Representatives to whom, and the time or times at which,
Shares shall be sold or bonused; (ii) to interpret the Plan; (iii) to prescribe,
amend and rescind rules and regulations relating to the Plan; (iv) to determine
the terms and provisions of rights to acquire Shares under the Plan and of each
Restricted Stock Purchase Agreement (which need not be identical); (v) with the
consent of the holder thereof, to modify or amend each Restricted Stock Purchase
Agreement; (vi) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the Plan; and (vii) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
-2-
<PAGE>
(c) Effect of Board's Decision. All decisions, deter minations and
--------------------------
interpretations of the Board shall be final and binding on Consultants and Sales
Representatives who have acquired Shares under the Plan, or as to whom sales or
bonuses of Shares under the Plan have been authorized.
5. Eligibility. Shares may be issued only to Consultants or Sales
-----------
Representatives. Neither the Plan, any Restricted Stock Purchase Agreement or
any Stock Bonus Agreement shall confer any rights with respect to continuation
of any particular consulting or product marketing arrangement.
6. Term of Plan. The Plan shall become effective upon adoption by the
------------
Board. The Plan shall continue in effect for a term of ten (10) years from such
date of Board adoption unless sooner terminated under Section 10 of the Plan.
7. Consideration and Terms of Payment for Restricted Stock Purchase
----------------------------------------------------------------
Agreements.
- ----------
(a) The price of Shares to be purchased, the terms of payment and the
consideration to be paid for the Shares shall be determined by the Board in
accordance with the California Corporations Code, provided that such price in
the case of a Consultant or Sales Representative owning less than 10% of the
voting power of all classes of stock of the Company or any Parent or Subsidiary
shall not be less than the fair market value of such Shares at such time, and in
the case of a Consultant or Sales Representative owning 10% or more of the
voting power of all classes of stock of the Company or any Parent or Subsidiary
shall not be less than 110% of the fair market value of such Shares at such
time.
(b) Payment for the Shares shall be made in cash or other legal
consideration as may be determined by the Board.
8. Consideration for Stock Bonus Agreements. A Stock Bonus may be
----------------------------------------
granted by the Board in consideration for services rendered to the Company. In
the case of a Sales Representative or Consultant owning less than 10% of the
voting power of all classes of stock of the Company or Parent or Subsidiary,
such consideration shall have a value of not less than 100% of the fair market
value of such shares at the time of the grant of the Stock Bonus, and in the
case of a Consultant or Sales Representative owning 10% or more of the voting
power of all classes of stock of the Company or Parent or Subsidiary, such
consideration shall have a value of not less than 110% of the fair market value
of such shares at the time of the grant of the Stock Bonus. The value of such
consideration shall be determined in good faith by the Board of Directors.
9. Adjustments upon Changes in Capitalization. Subject to any required
------------------------------------------
action by shareholders of the Company, the number of shares of Common Stock in
the Plan shall be proportionately adjusted if any recapitalization,
reclassification, stock dividend, stock split or combination of shares of Common
Stock is effected.
10. Amendment and Termination of the Plan.
-------------------------------------
-3-
<PAGE>
(a) Amendment and Termination. The Board may amend, suspend or
-------------------------
terminate the Plan from time to time in such respects as the Board may deem
advisable.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Shares already issued.
11. Compliance with Laws and Regulations. Shares shall not be issued
------------------------------------
under this Plan unless the issuance and delivery of such Shares shall comply
with all relevant provisions of law, including without limitation, the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder, state securities laws and the requirements of any stock exchange
upon which Shares may then be listed.
12. Reservation of Shares. The Company, during the term of the Plan, will
---------------------
at all times reserve and keep available, such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
13. Governing Law. The Plan shall be governed by the laws of the State of
-------------
California.
14. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. If such shareholder approval is obtained at
a duly held share-holders' meeting, it must be obtained by the affirmative vote
of the holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon. If and in the event that the Company
has registered any class of any equity security pursuant to Section 12 of the
Exchange Act, the approval of such shareholders of the Company must be:
(a) (1) solicited substantially in accordance with Section 14(a) of
the Exchange Act and the rules and regulations promulgated thereunder, or (2)
solicited after the Company has furnished in writing to the holders entitled to
vote substantially the same information concerning the Plan as that which would
be required by the rules and regulations in effect under Section 14(a) of the
Exchange Act at the time such information is furnished; and
(b) obtained at or prior to the first annual meeting of shareholders
held subsequent to the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act.
If such shareholder approval is obtained by written consent, it must
be obtained by the unanimous written consent of all shareholders of the Company.
15. Information to Purchasers. The Company shall provide to each
-------------------------
individual who purchases stock pursuant to this plan a balance sheet and an
income statement at least annually.
-4-
<PAGE>
EXHIBIT 10.4
QUICKLOGIC CORPORATION
1997 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are:
--------------------
. to attract and retain the best available personnel for
positions of substantial responsibility,
. to provide additional incentive to Employees,
Directors and Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant. Stock Purchase Rights may also be granted under the Plan.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Administrator" means the Board or any of its
-------------
Committees as shall be administering the Plan, in accordance with Section 4 of
the Plan.
(b) "Applicable Laws" means the requirements relating to
---------------
the administration of stock option plans under U. S. state corporate laws,
U.S. federal and state securities laws, the Code, any stock exchange or
quotation system on which the Common Stock is listed or quoted and the
applicable laws of any foreign country or jurisdiction where Options or Stock
Purchase Rights are, or will be, granted under the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as
----
amended.
(e) "Committee" means a committee of Directors appointed by
---------
the Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Quicklogic Corporation, a California
-------
corporation.
(h) "Consultant" means any person, including an advisor,
----------
engaged by the Company or a Parent or Subsidiary to render services to such
entity.
(i) "Director" means a member of the Board.
--------
<PAGE>
(j) "Disability" means total and permanent disability as
----------
defined in Section 22(e)(3) of the Code.
(k) "Employee" means any person, including Officers and
--------
Directors, employed by the Company or any Parent or Subsidiary of the Company. A
Service Provider shall not cease to be an Employee in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
Neither service as a Director nor payment of a director's fee by the Company
shall be sufficient to constitute "employment" by the Company.
(l) "Exchange Act" means the Securities Exchange Act of
------------
1934, as amended.
(m) "Fair Market Value" means, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such stock
(or the closing bid, if no sales were reported) as quoted on such exchange or
system for the last market trading day prior to the time of determination, as
reported in The Wall Street Journal or such other source as the Administrator
deems reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to
----------------------
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not
-------------------------
intended to qualify as an Incentive Stock Option.
-2-
<PAGE>
(p) "Notice of Grant" means a written or electronic notice
---------------
evidencing certain terms and conditions of an individual Option or Stock
Purchase Right grant. The Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the
-------
Company within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the
------
Plan.
(s) "Option Agreement" means an agreement between the
----------------
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of
the Plan.
(t) "Option Exchange Program" means a program whereby
-----------------------
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(u) "Optioned Stock" means the Common Stock subject to an
--------------
Option or Stock Purchase Right.
(v) "Optionee" means the holder of an outstanding Option or
--------
Stock Purchase Right granted under the Plan.
(w) "Parent" means a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1997 Stock Plan.
----
(y) "Restricted Stock" means shares of Common Stock acquired
----------------
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(z) "Restricted Stock Purchase Agreement" means a written
-----------------------------------
agreement between the Company and the Optionee evidencing the terms and
restrictions applying to stock purchased under a Stock Purchase Right. The
Restricted Stock Purchase Agreement is subject to the terms and conditions of
the Plan and the Notice of Grant.
(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(cc) "Service Provider" means an Employee, Director or
----------------
Consultant.
-3-
<PAGE>
(dd) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 13 of the Plan.
(ee) "Stock Purchase Right" means the right to purchase Common
--------------------
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
(ff) "Subsidiary" means a "subsidiary corporation", whether
----------
now or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section
-------------------------
13 of the Plan, the maximum aggregate number of Shares which may be optioned and
sold under the Plan is (i) 1,000,000 shares, including the Shares which have
been reserved but unissued under the Company's 1989 Stock Option Plan (as
amended) (the "1989 Plan") as of the date of shareholder approval of this Plan
and (ii) any Shares returned to the 1989 Plan as a result of termination of
options under the 1989 Plan, plus an annual increase to be added on each
anniversary date of the adoption of the Plan equal to the lesser of (i) 800,000
Shares, (ii) five percent (5%) of the outstanding Shares on such date or (iii) a
lesser amount determined by the Board. The Shares may be authorized, but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is surrendered pursuant
to an Option Exchange Program, the unpurchased Shares which were subject thereto
shall become available for future grant or sale under the Plan (unless the Plan
has terminated); provided, however, that Shares that have actually been issued
--------
under the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if Shares of Restricted Stock are repurchased by the
Company at their original purchase price, such Shares shall become available for
future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be
------------------------------
administered by different Committees with respect to different groups of
Service Providers.
(ii) Section 162(m). To the extent that the
--------------
Administrator determines it to be desirable to qualify Options granted
hereunder as "performance-based compensation" within the meaning of Section
162(m) of the Code, the Plan shall be administered by a Committee of two or
more "outside directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder shall be structured to satisfy the requirements for
exemption under Rule 16b-3.
-4-
<PAGE>
(iv) Other Administration. Other than as provided
--------------------
above, the Plan shall be administered by (A) the Board or (B) a Committee,
which committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions
---------------------------
of the Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options
and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of Common
Stock to be covered by each Option and Stock Purchase Right granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock Purchase Right
granted hereunder. Such terms and conditions include, but are not limited to,
the exercise price, the time or times when Options or Stock Purchase Rights
may be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right of the shares of
Common Stock relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vi) to reduce the exercise price of any Option or
Stock Purchase Right to the then current Fair Market Value if the Fair Market
Value of the Common Stock covered by such Option or Stock Purchase Right shall
have declined since the date the Option or Stock Purchase Right was granted;
(vii) to institute an Option Exchange Program;
(viii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
(x) to modify or amend each Option or Stock Purchase
Right (subject to Section 15(c) of the Plan), including the discretionary
authority to extend the post-termination exercisability period of Options
longer than is otherwise provided for in the Plan;
-5-
<PAGE>
(xi) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option or Stock Purchase Right that number of
Shares having a Fair Market Value equal to the amount required to be withheld.
The Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined. All elections
by an Optionee to have Shares withheld for this purpose shall be made in such
form and under such conditions as the Administrator may deem necessary or
advisable;
(xii) to authorize any person to execute on behalf of
the Company any instrument required to effect the grant of an Option or Stock
Purchase Right previously granted by the Administrator;
(xiii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The
----------------------------------
Administrator's decisions, determinations and interpretations shall be final
and binding on all Optionees and any other holders of Options or Stock
Purchase Rights.
5. Eligibility. Nonstatutory Stock Options and Stock Purchase
-----------
Rights may be granted to Service Providers. Incentive Stock Options may be
granted only to Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase Right shall
confer upon an Optionee any right with respect to continuing the Optionee's
relationship as a Service Provider with the Company, nor shall they interfere in
any way with the Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than [ ] Shares.
-6-
<PAGE>
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional [ ]
Shares which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization
as described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in connection with a
transaction described in Section 13), the cancelled Option will be counted
against the limits set forth in subsections (i) and (ii) above. For this
purpose, if the exercise price of an Option is reduced, the transaction will
be treated as a cancellation of the Option and the grant of a new Option.
7. Term of Plan. Subject to Section 19 of the Plan, the Plan shall
------------
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 15 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
--------------
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided
in the Option Agreement. Moreover, in the case of an Incentive Stock Option
granted to an Optionee who, at the time the Incentive Stock Option is granted,
owns stock representing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option shall be five (5) years
from the date of grant or such shorter term as may be provided in the Option
Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the
--------------
Shares to be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no less than
110% of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the
date of grant.
-7-
<PAGE>
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share
on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six months on the date of surrender, and (B) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to the
Optionee's participation in any Company-sponsored deferred compensation
program or arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
-8-
<PAGE>
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in accordance with the
Option Agreement) from the person entitled to exercise the Option, and (ii)
full payment for the Shares with respect to which the Option is exercised.
Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and his
or her spouse. Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of
the Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be made
for a dividend or other right for which the record date is prior to the date
the Shares are issued, except as provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Relationship as a Service Provider. If an
-------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a Service
----------------------
Provider as a result of the Optionee's Disability, the Optionee may exercise his
or her Option within such period of time as is specified in the Option Agreement
to the extent the Option is vested on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option shall remain exercisable for
-9-
<PAGE>
twelve (12) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified herein, the Option shall terminate, and the Shares covered by
such Option shall revert to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
-----------------
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to
-----------------
buy out for a payment in cash or Shares an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued
------------------
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing or electronically, by means of a Notice of Grant,
of the terms, conditions and restrictions related to the offer, including the
number of Shares that the offeree shall be entitled to purchase, the price to be
paid, and the time within which the offeree must accept such offer. The offer
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's service with the Company for any reason (including death or
Disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at a rate determined by the
Administrator.
-10-
<PAGE>
(c) Other Provisions. The Restricted Stock Purchase
----------------
Agreement shall contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Administrator in its
sole discretion.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 13
of the Plan.
12. Non-Transferability of Options and Stock Purchase Rights. Unless
--------------------------------------------------------
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, such Option
or Stock Purchase Right shall contain such additional terms and conditions as
the Administrator deems appropriate.
13. Adjustments Upon Changes in Capitalization, Dissolution, Merger
---------------------------------------------------------------
or Asset Sale.
-------------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option and Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase
-11-
<PAGE>
option applicable to any Shares purchased upon exercise of an Option or Stock
Purchase Right shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option or
Stock Purchase Right will terminate immediately prior to the consummation of
such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option and Stock Purchase Right shall be
assumed or an equivalent option or right substituted by the successor
corporation or a Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for the Option or
Stock Purchase Right, the Optionee shall fully vest in and have the right to
exercise the Option or Stock Purchase Right as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or exercisable. If
an Option or Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee in writing or electronically that the
Option or Stock Purchase Right shall be fully vested and exercisable for a
period of fifteen (15) days from the date of such notice, and the Option or
Stock Purchase Right shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right shall be
considered assumed if, following the merger or sale of assets, the option or
right confers the right to purchase or receive, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right immediately prior to the merger or
sale of assets, the consideration (whether stock, cash, or other securities or
property) received in the merger or sale of assets by holders of Common Stock
for each Share held on the effective date of the transaction (and if holders
were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding Shares); provided, however, that if
such consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option or Stock Purchase Right, for each Share
of Optioned Stock subject to the Option or Stock Purchase Right, to be solely
common stock of the successor corporation or its Parent equal in fair market
value to the per share consideration received by holders of Common Stock in the
merger or sale of assets.
14. Date of Grant. The date of grant of an Option or Stock Purchase
-------------
Right shall be, for all purposes, the date on which the Administrator makes the
determination granting such Option or Stock Purchase Right, or such other later
date as is determined by the Administrator. Notice of the determination shall be
provided to each Optionee within a reasonable time after the date of such grant.
15. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time
-------------------------
amend, alter, suspend or terminate the Plan.
-12-
<PAGE>
(b) Shareholder Approval. The Company shall obtain
--------------------
shareholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment,
----------------------------------
alteration, suspension or termination of the Plan shall impair the rights of
any Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the Optionee
and the Company. Termination of the Plan shall not affect the Administrator's
ability to exercise the powers granted to it hereunder with respect to Options
granted under the Plan prior to the date of such termination.
16. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant
----------------
to the exercise of an Option or Stock Purchase Right unless the exercise of
such Option or Stock Purchase Right and the issuance and delivery of such
Shares shall comply with Applicable Laws and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the
--------------------------
exercise of an Option or Stock Purchase Right, the Company may require the
person exercising such Option or Stock Purchase Right to represent and warrant
at the time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is
required.
17. Inability to Obtain Authority. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
19. Shareholder Approval. The Plan shall be subject to approval by
--------------------
the shareholders of the Company within twelve (12) months after the date the
Plan is adopted. Such shareholder approval shall be obtained in the manner and
to the degree required under Applicable Laws.
-13-
<PAGE>
QUICKLOGIC CORPORATION
1997 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
Vesting Schedule:
----------------
This Option may be exercised, in whole or in part, in accordance with
the following schedule:
25% of the Shares subject to the Option shall vest twelve months after
the Vesting Commencement Date, and 1/48 of the Shares subject to the Option
shall vest each month thereafter, subject to the Optionee continuing to be a
Service Provider on such dates.
<PAGE>
Termination Period:
------------------
This Option may be exercised for three months after Optionee ceases to
be a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for one year after Optionee ceases to be a Service Provider. In
no event shall this Option be exercised later than the Term/Expiration Date as
provided above.
II. AGREEMENT
---------
1. Grant of Option. The Plan Administrator of the Company hereby grants
---------------
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (the "Optionee") an option (the "Option") to purchase the number of
Shares, as set forth in the Notice of Grant, at the exercise price per share set
forth in the Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference. Subject to
Section 15(c) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its term
-----------------
in accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of
------------------
an exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to Vince McCord, the Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares. This Option shall be deemed to be exercised upon
receipt by the Company of such fully executed Exercise Notice accompanied by
such aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
3. Method of Payment. Payment of the aggregate Exercise Price
-----------------
shall be by any of the following, or a combination thereof, at the election of
the Optionee:
(a) cash; or
(b) check; or
(c) consideration received by the Company under a cashless
exercise program implemented by the Company in connection with the Plan; or
(d) surrender of other Shares which (i) in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee for more
than six (6) months on the date of surrender, AND (ii) have a Fair Market Value
on the date of surrender equal to the aggregate Exercise Price of the Exercised
Shares; or
(e) with the Administrator's consent, delivery of Optionee's
promissory note (the "Note") in the form attached hereto as Exhibit C, in the
amount of the aggregate Exercise Price of the Exercised Shares together with the
execution and delivery by the Optionee of the Security Agreement attached hereto
as Exhibit B. The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase, and shall be
secured by a pledge of the Shares purchased by the Note pursuant to the Security
Agreement.
4. Non-Transferability of Option. This Option may not be
-----------------------------
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by the
Optionee. The terms of the Plan and this Option Agreement shall be binding
upon the executors, administrators, heirs, successors and assigns of the
Optionee.
5. Term of Option. This Option may be exercised only within the
--------------
term set out in the Notice of Grant, and may be exercised during such term
only in accordance with the Plan and the terms of this Option Agreement.
6. Tax Consequences. Some of the federal tax consequences
----------------
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
---------------------
(i) Nonstatutory Stock Option. The Optionee may
-------------------------
incur regular federal income tax liability upon exercise of a NSO. The
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price. If the Optionee is
-3-
<PAGE>
an Employee or a former Employee, the Company will be required to withhold from
his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.
(ii) Incentive Stock Option. If this Option
----------------------
qualifies as an ISO, the Optionee will have no regular federal income tax
liability upon its exercise, although the excess, if any, of the Fair Market
Value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to alternative minimum taxable
income for federal tax purposes and may subject the Optionee to alternative
minimum tax in the year of exercise. In the event that the Optionee ceases to
be an Employee but remains a Service Provider, any Incentive Stock Option of
the Optionee that remains unexercised shall cease to qualify as an Incentive
Stock Option and will be treated for tax purposes as a Nonstatutory Stock
Option on the date three (3) months and one (1) day following such change of
status.
(b) Disposition of Shares.
---------------------
(i) NSO. If the Optionee holds NSO Shares for at
---
least one year, any gain realized on disposition of the Shares will be treated
as long-term capital gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at
---
least one year after exercise and two years after the grant date, any gain
realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes. If the Optionee disposes of ISO Shares
within one year after exercise or two years after the grant date, any gain
realized on such disposition will be treated as compensation income (taxable
at ordinary income rates) to the extent of the excess, if any, of the lesser
of (A) the difference between the Fair Market Value of the Shares acquired on
the date of exercise and the aggregate Exercise Price, or (B) the difference
between the sale price of such Shares and the aggregate Exercise Price. Any
additional gain will be taxed as capital gain, short-term or long-term
depending on the period that the ISO Shares were held.
(c) Notice of Disqualifying Disposition of ISO Shares. If the
-------------------------------------------------
Optionee sells or otherwise disposes of any of the Shares acquired pursuant to
an ISO on or before the later of (i) two years after the grant date, or (ii) one
year after the exercise date, the Optionee shall immediately notify the Company
in writing of such disposition. The Optionee agrees that he or she may be
subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
7. Entire Agreement; Governing Law. The Plan is incorporated
-------------------------------
herein by reference. The Plan and this Option Agreement constitute the entire
agreement of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely
-4-
<PAGE>
to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This agreement is governed by the internal substantive laws, but
not the choice of law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES
---------------------------------
THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED
ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT
THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO
NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A
SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL
NOT INTERFERE WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE
OPTIONEE'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT
CAUSE.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: QUICKLOGIC CORPORATION
- ----------------------------------- ---------------------------------------
Signature By
- ------------------------------------ --------------------------------------
Print Name Title
- ------------------------------------
Residence Address
- ------------------------------------
-5-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the
terms and conditions of the Plan and this Option Agreement. In consideration of
the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
---------------------------------------
Spouse of Optionee
-6-
<PAGE>
EXHIBIT A
---------
1997 STOCK PLAN
EXERCISE NOTICE
Quicklogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
Attention: Vince McCord, Secretary
1. Exercise of Option. Effective as of today, ________________,
------------------
199__, the undersigned ("Purchaser") hereby elects to purchase ______________
shares (the "Shares") of the Common Stock of Quicklogic Corporation (the
"Company") under and pursuant to the 1997 Stock Plan (the "Plan") and the
Stock Option Agreement dated , 19___ (the "Option Agreement"). The purchase
price for the Shares shall be $ , as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the
-------------------
Company the full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that
----------------------------
Purchaser has received, read and understood the Plan and the Option Agreement
and agrees to abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 13 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
6. Entire Agreement; Governing Law. The Plan and Option Agreement
-------------------------------
are incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings
and agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except
by means of a writing
<PAGE>
signed by the Company and Purchaser. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: QUICKLOGIC CORPORATION
- ---------------------------------- -------------------------------------
Signature By
- ---------------------------------- -------------------------------------
Print Name Its
Address: Address:
- ------- -------
- --------------------------------- Quicklogic Corporation
1277 Orleans Drive
- --------------------------------- Sunnyvale, CA 94089
-------------------------------------
Date Received
-2-
<PAGE>
EXHIBIT B
---------
SECURITY AGREEMENT
This Security Agreement is made as of __________, 19___ between
Quicklogic Corporation, a California corporation ("Pledgee"), and
_________________________ ("Pledgor").
Recitals
--------
Pursuant to Pledgor's election to purchase Shares under the Option
Agreement dated ________ (the "Option"), between Pledgor and Pledgee under
Pledgee's 1997 Stock Plan, and Pledgor's election under the terms of the Option
to pay for such shares with his promissory note (the "Note"), Pledgor has
purchased _________ shares of Pledgee's Common Stock (the "Shares") at a price
of $________ per share, for a total purchase price of $__________. The Note and
the obligations thereunder are as set forth in Exhibit C to the Option.
NOW, THEREFORE, it is agreed as follows:
1. Creation and Description of Security Interest. In consideration
---------------------------------------------
of the transfer of the Shares to Pledgor under the Option Agreement, Pledgor,
pursuant to the California Commercial Code, hereby pledges all of such Shares
(herein sometimes referred to as the "Collateral") represented by certificate
number ______, duly endorsed in blank or with executed stock powers, and
herewith delivers said certificate to the Secretary of Pledgee ("Pledgeholder"),
who shall hold said certificate subject to the terms and conditions of this
Security Agreement.
The pledged stock (together with an executed blank stock assignment for
use in transferring all or a portion of the Shares to Pledgee if, as and when
required pursuant to this Security Agreement) shall be held by the Pledgeholder
as security for the repayment of the Note, and any extensions or renewals
thereof, to be executed by Pledgor pursuant to the terms of the Option, and the
Pledge holder shall not encumber or dispose of such Shares except in accordance
with the provisions of this Security Agreement.
2. Pledgor's Representations and Covenants. To induce Pledgee to
---------------------------------------
enter into this Security Agreement, Pledgor represents and covenants to
Pledgee, its successors and assigns, as follows:
a. Payment of Indebtedness. Pledgor will pay the
-----------------------
principal sum of the Note secured hereby, together with interest thereon, at
the time and in the manner provided in the Note.
b. Encumbrances. The Shares are free of all other
------------
encumbrances, defenses and liens, and Pledgor will not further encumber the
Shares without the prior written consent of Pledgee.
c. Margin Regulations. In the event that Pledgee's Common
------------------
Stock is now or later becomes margin-listed by the Federal Reserve Board and
Pledgee is classified as a "lender" within the
-1-
<PAGE>
meaning of the regulations under Part 207 of Title 12 of the Code of Federal
Regulations ("Regulation G"), Pledgor agrees to cooperate with Pledgee in making
any amendments to the Note or providing any additional collateral as may be
necessary to comply with such regulations.
3. Voting Rights. During the term of this pledge and so long as
-------------
all payments of principal and interest are made as they become due under the
terms of the Note, Pledgor shall have the right to vote all of the Shares
pledged hereunder.
4. Stock Adjustments. In the event that during the term of the
-----------------
pledge any stock dividend, reclassification, readjustment or other changes are
declared or made in the capital structure of Pledgee, all new, substituted and
additional shares or other securities issued by reason of any such change
shall be delivered to and held by the Pledgee under the terms of this Security
Agreement in the same manner as the Shares originally pledged hereunder. In
the event of substitution of such securities, Pledgor, Pledgee and
Pledgeholder shall cooperate and execute such documents as are reasonable so
as to provide for the substitution of such Collateral and, upon such
substitution, references to "Shares" in this Security Agreement shall include
the substituted shares of capital stock of Pledgor as a result thereof.
5. Options and Rights. In the event that, during the term of this
------------------
pledge, subscription Options or other rights or options shall be issued in
connection with the pledged Shares, such rights, Options and options shall be
the property of Pledgor and, if exercised by Pledgor, all new stock or other
securities so acquired by Pledgor as it relates to the pledged Shares then held
by Pledgeholder shall be immediately delivered to Pledgeholder, to be held under
the terms of this Security Agreement in the same manner as the Shares pledged.
6. Default. Pledgor shall be deemed to be in default of the Note
-------
and of this Security Agreement in the event:
a. Payment of principal or interest on the Note shall be
delinquent for a period of 10 days or more; or
b. Pledgor fails to perform any of the covenants set forth
in the Option or contained in this Security Agreement for a period of 10 days
after written notice thereof from Pledgee.
In the case of an event of Default, as set forth above, Pledgee shall
have the right to accelerate payment of the Note upon notice to Pledgor, and
Pledgee shall thereafter be entitled to pursue its remedies under the California
Commercial Code.
7. Release of Collateral. Subject to any applicable contrary rules
---------------------
under Regulation G, there shall be released from this pledge a portion of the
pledged Shares held by Pledgeholder hereunder upon payments of the principal of
the Note. The number of the pledged Shares which shall be released shall be that
number of full Shares which bears the same proportion to the initial number of
-2-
<PAGE>
Shares pledged hereunder as the payment of principal bears to the initial full
principal amount of the Note.
8. Withdrawal or Substitution of Collateral. Pledgor shall not
----------------------------------------
sell, withdraw, pledge, substitute or otherwise dispose of all or any part of
the Collateral without the prior written consent of Pledgee.
9. Term. The within pledge of Shares shall continue until the
----
payment of all indebtedness secured hereby, at which time the remaining
pledged stock shall be promptly delivered to Pledgor, subject to the
provisions for prior release of a portion of the Collateral as provided in
paragraph 7 above.
10. Insolvency. Pledgor agrees that if a bankruptcy or insolvency
----------
proceeding is instituted by or against it, or if a receiver is appointed for the
property of Pledgor, or if Pledgor makes an assignment for the benefit of
creditors, the entire amount unpaid on the Note shall become immediately due and
payable, and Pledgee may proceed as provided in the case of default.
11. Pledgeholder Liability. In the absence of willful or gross
----------------------
negligence, Pledgeholder shall not be liable to any party for any of his acts,
or omissions to act, as Pledgeholder.
12. Invalidity of Particular Provisions. Pledgor and Pledgee agree
-----------------------------------
that the enforceability or invalidity of any provision or provisions of this
Security Agreement shall not render any other provision or provisions herein
contained unenforceable or invalid.
13. Successors or Assigns. Pledgor and Pledgee agree that all of the
---------------------
terms of this Security Agreement shall be binding on their respective successors
and assigns, and that the term "Pledgor" and the term "Pledgee" as used herein
shall be deemed to include, for all purposes, the respective designees,
successors, assigns, heirs, executors and administrators.
14. Governing Law. This Security Agreement shall be interpreted
-------------
and governed under the internal substantive laws, but not the choice of law
rules, of California.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"PLEDGOR" _________________________________
Signature
_________________________________
Print Name
Address: _________________________________
_________________________________
"PLEDGEE" Quicklogic Corporation,
a California corporation
________________________________
Signature
________________________________
Print Name
________________________________
Title
"PLEDGEHOLDER" ________________________________
Secretary of
Quicklogic Corporation
-4-
<PAGE>
EXHIBIT C
---------
NOTE
$_______________ [City, State]
______________, 19___
FOR VALUE RECEIVED, _______________ promises to pay to Quicklogic
Corporation, a California corporation (the "Company"), or order, the principal
sum of _______________________ ($_____________), together with interest on the
unpaid principal hereof from the date hereof at the rate of _______________
percent (____%) per annum, compounded semiannually.
Principal and interest shall be due and payable on __________, 19___.
Payment of principal and interest shall be made in lawful money of the United
States of America.
The undersigned may at any time prepay all or any portion of the
principal or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of
________________. This Note is secured in part by a pledge of the Company's
Common Stock under the terms of a Security Agreement of even date herewith and
is subject to all the provisions thereof.
The holder of this Note shall have full recourse against the
undersigned, and shall not be required to proceed against the collateral
securing this Note in the event of default.
In the event the undersigned shall cease to be an employee, director or
consultant of the Company for any reason, this Note shall, at the option of the
Company, be accelerated, and the whole unpaid balance on this Note of principal
and accrued interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
____________________________________
____________________________________
<PAGE>
1997 STOCK PLAN
NOTICE OF GRANT OF STOCK PURCHASE RIGHT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Notice of Grant.
[Grantee's Name and Address]
You have been granted the right to purchase Common Stock of the Company,
subject to the Company's Repurchase Option and your ongoing status as a Service
Provider (as described in the Plan and the attached Restricted Stock Purchase
Agreement), as follows:
Grant Number _________________________
Date of Grant _________________________
Price Per Share $________________________
Total Number of Shares Subject _________________________
to This Stock Purchase Right
Expiration Date: _________________________
YOU MUST EXERCISE THIS STOCK PURCHASE RIGHT BEFORE THE EXPIRATION DATE
OR IT WILL TERMINATE AND YOU WILL HAVE NO FURTHER RIGHT TO PURCHASE THE SHARES.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Stock Purchase Right is granted under
and governed by the terms and conditions of the 1997 Stock Plan and the
Restricted Stock Purchase Agreement, attached hereto as Exhibit A-1, both of
which are made a part of this document. You further agree to execute the
attached Restricted Stock Purchase Agreement as a condition to purchasing any
shares under this Stock Purchase Right.
GRANTEE: QUICKLOGIC CORPORATION
- --------------------------- --------------------------------
Signature By
- --------------------------- --------------------------------
Print Name Title
<PAGE>
EXHIBIT A-1
-----------
1997 STOCK PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Restricted Stock Purchase Agreement.
WHEREAS the Purchaser named in the Notice of Grant, (the "Purchaser") is
an Service Provider, and the Purchaser's continued participation is considered
by the Company to be important for the Company's continued growth; and
WHEREAS in order to give the Purchaser an opportunity to acquire an
equity interest in the Company as an incentive for the Purchaser to participate
in the affairs of the Company, the Admin istrator has granted to the Purchaser a
Stock Purchase Right subject to the terms and conditions of the Plan and the
Notice of Grant, which are incorporated herein by reference, and pursuant to
this Restricted Stock Purchase Agreement (the "Agreement").
NOW THEREFORE, the parties agree as follows:
1. Sale of Stock. The Company hereby agrees to sell to the
-------------
Purchaser and the Purchaser hereby agrees to purchase shares of the Company's
Common Stock (the "Shares"), at the per Share purchase price and as otherwise
described in the Notice of Grant.
2. Payment of Purchase Price. The purchase price for the Shares may
-------------------------
be paid by delivery to the Company at the time of execution of this Agreement of
cash, a check, or some combination thereof.
3. Repurchase Option.
-----------------
(a) In the event the Purchaser ceases to be a Service Provider
for any or no reason (including death or disability) before all of the Shares
are released from the Company's Repurchase Option (see Section 4), the Company
shall, upon the date of such termination (as reasonably fixed and determined by
the Company) have an irrevocable, exclusive option (the "Repurchase Option") for
a period of sixty (60) days from such date to repurchase up to that number of
shares which constitute the Unreleased Shares (as defined in Section 4) at the
original purchase price per share (the "Repurchase Price"). The Repurchase
Option shall be exercised by the Company by delivering written notice to the
Purchaser or the Purchaser's executor (with a copy to the Escrow Holder) AND, at
the Company's option, (i) by delivering to the Purchaser or the Purchaser's
executor a check in the amount of the aggregate Repurchase Price, or (ii) by
cancelling an amount of the Purchaser's indebtedness to the Company equal to the
aggregate Repurchase Price, or (iii) by a combination of (i) and (ii) so that
the combined payment and cancellation of indebtedness equals the aggregate
Repurchase Price. Upon delivery of such notice and the payment of the aggregate
Repurchase Price, the Company shall become the legal and beneficial owner of the
Shares being repurchased and all
<PAGE>
rights and interests therein or relating thereto, and the Company shall have the
right to retain and transfer to its own name the number of Shares being
repurchased by the Company.
(b) Whenever the Company shall have the right to repurchase
Shares hereunder, the Company may designate and assign one or more employees,
officers, directors or shareholders of the Company or other persons or
organizations to exercise all or a part of the Company's purchase rights under
this Agreement and purchase all or a part of such Shares. If the Fair Market
Value of the Shares to be repurchased on the date of such designation or
assignment (the "Repurchase FMV") exceeds the aggregate Repurchase Price of such
Shares, then each such designee or assignee shall pay the Company cash equal to
the difference between the Repurchase FMV and the aggregate Repurchase Price of
such Shares.
4. Release of Shares From Repurchase Option.
----------------------------------------
(a) _______________________ percent (______%) of the Shares shall
be released from the Company's Repurchase Option [one year] after the Date of
Grant and __________________ percent (______%) of the Shares [at the end of each
month thereafter], provided that the Purchaser does not cease to be a Service
Provider prior to the date of any such release.
(b) Any of the Shares that have not yet been released from
the Repurchase Option are referred to herein as "Unreleased Shares."
(c) The Shares that have been released from the Repurchase Option
shall be delivered to the Purchaser at the Purchaser's request (see Section 6).
5. Restriction on Transfer. Except for the escrow described in
-----------------------
Section 6 or the transfer of the Shares to the Company or its assignees
contemplated by this Agreement, none of the Shares or any beneficial interest
therein shall be transferred, encumbered or otherwise disposed of in any way
until such Shares are released from the Company's Repurchase Option in
accordance with the provi sions of this Agreement, other than by will or the
laws of descent and distribution.
6. Escrow of Shares.
----------------
(a) To ensure the availability for delivery of the Purchaser's
Unreleased Shares upon repurchase by the Company pursuant to the Repurchase
Option, the Purchaser shall, upon execution of this Agreement, deliver and
deposit with an escrow holder designated by the Company (the "Escrow Holder")
the share certificates representing the Unreleased Shares, together with the
stock assignment duly endorsed in blank, attached hereto as Exhibit A-2. The
Unreleased Shares and stock assignment shall be held by the Escrow Holder,
pursuant to the Joint Escrow Instructions of the Company and Purchaser attached
hereto as Exhibit A-3, until such time as the Company's Repurchase Option
expires. As a further condition to the Company's obligations under this
Agreement, the
-2-
<PAGE>
Company may require the spouse of Purchaser, if any, to execute and deliver to
the Company the Consent of Spouse attached hereto as Exhibit A-4.
(b) The Escrow Holder shall not be liable for any act it may do
or omit to do with respect to holding the Unreleased Shares in escrow while
acting in good faith and in the exercise of its judgment.
(c) If the Company or any assignee exercises the Repurchase
Option hereunder, the Escrow Holder, upon receipt of written notice of such
exercise from the proposed transferee, shall take all steps necessary to
accomplish such transfer.
(d) When the Repurchase Option has been exercised or expires
unexercised or a portion of the Shares has been released from the Repurchase
Option, upon request the Escrow Holder shall promptly cause a new certificate to
be issued for the released Shares and shall deliver the certificate to the
Company or the Purchaser, as the case may be.
(e) Subject to the terms hereof, the Purchaser shall have all the
rights of a shareholder with respect to the Shares while they are held in
escrow, including without limitation, the right to vote the Shares and to
receive any cash dividends declared thereon. If, from time to time during the
term of the Repurchase Option, there is (i) any stock dividend, stock split or
other change in the Shares, or (ii) any merger or sale of all or substantially
all of the assets or other acquisition of the Company, any and all new,
substituted or additional securities to which the Purchaser is entitled by
reason of the Purchaser's ownership of the Shares shall be immediately subject
to this escrow, deposited with the Escrow Holder and included thereafter as
"Shares" for purposes of this Agreement and the Repurchase Option.
7. Legends. The share certificate evidencing the Shares, if any,
-------
issued hereunder shall be endorsed with the following legend (in addition to any
legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY.
8. Adjustment for Stock Split. All references to the number of
--------------------------
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock split, stock dividend or other
change in the Shares which may be made by the Company after the date of this
Agreement.
9. Tax Consequences. The Purchaser has reviewed with the
----------------
Purchaser's own tax advisors the federal, state, local and foreign tax
consequences of this investment and the transactions contem plated by this
Agreement. The Purchaser is relying solely on such advisors and not on any
statements
-3-
<PAGE>
or representations of the Company or any of its agents. The Purchaser
understands that the Purchaser (and not the Company) shall be responsible for
the Purchaser's own tax liability that may arise as a result of the transactions
contemplated by this Agreement. The Purchaser understands that Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income
the difference between the purchase price for the Shares and the Fair Market
Value of the Shares as of the date any restrictions on the Shares lapse. In this
context, "restriction" includes the right of the Company to buy back the Shares
pursuant to the Repurchase Option. The Purchaser understands that the Purchaser
may elect to be taxed at the time the Shares are purchased rather than when and
as the Repurchase Option expires by filing an election under Section 83(b) of
the Code with the IRS within 30 days from the date of purchase. The form for
making this election is attached as Exhibit A-5 hereto.
THE PURCHASER ACKNOWLEDGES THAT IT IS THE PURCHASER'S SOLE
RESPONSIBILITY AND NOT THE COMPANY'S TO FILE TIMELY THE ELECTION UNDER SECTION
83(b), EVEN IF THE PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE
THIS FILING ON THE PURCHASER'S BEHALF.
10. General Provisions.
------------------
(a) This Agreement shall be governed by the internal substantive
laws, but not the choice of law rules of California. This Agreement, subject to
the terms and conditions of the Plan and the Notice of Grant, represents the
entire agreement between the parties with respect to the purchase of the Shares
by the Purchaser. Subject to Section 15(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Agreement, the terms and conditions of the Plan shall
prevail. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Agreement.
(b) Any notice, demand or request required or permitted to be
given by either the Company or the Purchaser pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth at the end of
this Agreement or such other address as a party may request by notifying the
other in writing.
Any notice to the Escrow Holder shall be sent to the Company's
address with a copy to the other party hereto.
(c) The rights of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of the Purchaser
under this Agreement may only be assigned with the prior written consent of the
Company.
(d) Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
nor prevent that party from thereafter enforcing
-4-
<PAGE>
any other provision of this Agreement. The rights granted both parties hereunder
are cumulative and shall not constitute a waiver of either party's right to
assert any other legal remedy available to it.
(e) The Purchaser agrees upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
(f) PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES
PURSUANT TO SECTION 4 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED OR
PURCHASING SHARES HEREUNDER). PURCHASER FURTHER ACKNOWLEDGES AND AGREES THAT
THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT
ALL, AND SHALL NOT INTERFERE WITH PURCHASER'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE PURCHASER'S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR
WITHOUT CAUSE.
By Purchaser's signature below, Purchaser represents that he or she is
familiar with the terms and provisions of the Plan, and hereby accepts this
Agreement subject to all of the terms and provisions thereof. Purchaser has
reviewed the Plan and this Agreement in their entirety, has had an opportunity
to obtain the advice of counsel prior to executing this Agreement and fully
understands all provisions of this Agreement. Purchaser agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Agreement.
Purchaser further agrees to notify the Company upon any change in the residence
indicated in the Notice of Grant.
DATED:
---------------------
PURCHASER: QUICKLOGIC CORPORATION
- ------------------------------ ----------------------------------
Signature By
- ------------------------------ ----------------------------------
Print Name Title
-5-
<PAGE>
EXHIBIT A-2
-----------
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED I, __________________________, hereby sell, assign
and transfer unto (__________) shares of the Common Stock of Quicklogic
Corporation standing in my name of the books of said corporation represented by
Certificate No. _____ herewith and do hereby irrevocably constitute and appoint
______________________ to transfer the said stock on the books of the within
named corporation with full power of substitution in the premises.
This Stock Assignment may be used only in accordance with the Restricted
Stock Purchase Agreement (the "Agreement") between________________________ and
the undersigned dated ______________, 19__.
Dated: _______________, 19
Signature:______________________________
INSTRUCTIONS: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise the
Repurchase Option, as set forth in the Agreement, without requiring additional
signatures on the part of the Purchaser.
<PAGE>
EXHIBIT A-3
-----------
JOINT ESCROW INSTRUCTIONS
-------------------------
______, 19 __
Corporate Secretary
Quicklogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
Dear _______________:
As Escrow Agent for both Quicklogic Corporation, a California
corporation (the "Company"), and the undersigned purchaser of stock of the
Company (the "Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Purchase Agreement ("Agreement") between the Company and the undersigned,
in accordance with the following instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively as the "Company") exercises the Company's Repurchase Option set
forth in the Agreement, the Company shall give to Purchaser and you a written
notice specifying the number of shares of stock to be purchased, the purchase
price, and the time for a closing hereunder at the principal office of the
Company. Purchaser and the Company hereby irrevocably authorize and direct you
to close the transaction contemplated by such notice in accordance with the
terms of said notice.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, against the simultaneous delivery to you of the purchase price (by
cash, a check, or some combination thereof) for the number of shares of stock
being purchased pursuant to the exercise of the Company's Repurchase Option.
3. Purchaser irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as Purchaser's
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with any applicable state blue sky
authority of any required applications for consent to, or notice of transfer of,
the securities. Subject to the provisions of this paragraph 3, Purchaser shall
exercise all rights and privileges of a shareholder of the Company while the
stock is held by you.
<PAGE>
4. Upon written request of the Purchaser, but no more than once per
calendar year, unless the Company's Repurchase Option has been exercised, you
shall deliver to Purchaser a certificate or certificates representing so many
shares of stock as are not then subject to the Company's Repurchase Option.
Within 90 days after Purchaser ceases to be a Service Provider, you shall
deliver to Purchaser a certificate or certificates representing the aggregate
number of shares held or issued pursuant to the Agreement and not purchased by
the Company or its assignees pursuant to exercise of the Company's Repurchase
Option.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of the same to Purchaser and shall be discharged of all
further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties. You
shall not be personally liable for any act you may do or omit to do hereunder as
Escrow Agent or as attorney-in-fact for Purchaser while acting in good faith,
and any act done or omitted by you pursuant to the advice of your own attorneys
shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree, you shall not
be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under the
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
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<PAGE>
12. Your responsibilities as Escrow Agent hereunder shall terminate if
you shall cease to be an officer or agent of the Company or if you shall resign
by written notice to each party. In the event of any such termination, the
Company shall appoint a successor Escrow Agent.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise with
respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: Quicklogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
PURCHASER: _________________________________
_________________________________
_________________________________
ESCROW AGENT: Corporate Secretary
Quicklogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
16. By signing these Joint Escrow Instructions, you become a party
hereto only for the purpose of said Joint Escrow Instructions; you do not become
a party to the Agreement.
-3-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and permitted assigns.
18. These Joint Escrow Instructions shall be governed by, and construed
and enforced in accordance with, the internal substantive laws, but not the
choice of law rules, of California.
Very truly yours,
QUICKLOGIC CORPORATION
-------------------------------------
By
-------------------------------------
Title
PURCHASER:
-------------------------------------
Signature
-------------------------------------
Print Name
ESCROW AGENT:
- -------------------------------------
Corporate Secretary
-4-
<PAGE>
EXHIBIT A-4
-----------
CONSENT OF SPOUSE
-----------------
I, ____________________, spouse of ___________________, have read and
approve the foregoing Restricted Stock Purchase Agreement (the "Agreement"). In
consideration of the Company's grant to my spouse of the right to purchase
shares of Quicklogic Corporation, as set forth in the Agreement, I hereby
appoint my spouse as my attorney-in-fact in respect to the exercise of any
rights under the Agreement and agree to be bound by the provisions of the
Agreement insofar as I may have any rights in said Agreement or any shares
issued pursuant thereto under the community property laws or similar laws
relating to marital property in effect in the state of our residence as of the
date of the signing of the foregoing Agreement.
Dated: _______________, 19
------------------------------------------
Signature of Spouse
<PAGE>
EXHIBIT A-5
-----------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include in taxpayer's gross income
for the current taxable year the amount of any compensation taxable to taxpayer
in connection with his or her receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of
the undersigned are as follows:
NAME: TAXPAYER: SPOUSE:
ADDRESS:
IDENTIFICATION NO.: TAXPAYER: SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows: shares (the "Shares") of the Common Stock of Quicklogic
Corporation (the "Company").
3. The date on which the property was transferred is: , 19__.
4. The property is subject to the following restrictions:
The Shares may be repurchased by the Company, or its assignee, upon
certain events. This right lapses with regard to a portion of the Shares
based on the continued performance of services by the taxpayer over
time.
5. The fair market value at the time of transfer, determined without regard
to any restriction other than a restriction which by its terms will
never lapse, of such property is:
$_______________.
6. The amount (if any) paid for such property is:
$_______________.
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ___________________, 19____ ___________________________________
Taxpayer
The undersigned spouse of taxpayer joins in this election.
Dated: ___________________, 19____ ___________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT 10.5
QUICKLOGIC CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1997 Employee Stock
Purchase Plan of Quicklogic Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the
-----
Company.
(b) "Code" shall mean the Internal Revenue Code of
----
1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the
------------
Company.
(d) "Company" shall mean Quicklogic Corporation and any
-------
Designated Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time
------------
gross earnings and commissions, but exclusive of payments for overtime, shift
premium, incentive compensation, incentive payments, bonuses and other
compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary
---------------------
which has been designated by the Board from time to time in its sole
discretion as eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an
--------
Employee of the Company for tax purposes whose customary employment with the
Company is at least twenty (20) hours per week and more than five (5) months
in any calendar year. For purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds 90 days and the individual's right to reemployment is not guaranteed
either by statute or by contract, the employment relationship shall be deemed
to have terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each
---------------
Offering Period.
<PAGE>
(i) "Exercise Date" shall mean the last day of each
-------------
Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the
-----------------
value of Common Stock determined as follows:
(1) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as quoted on
such exchange or system for the last market trading day on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable, or;
(2) If the Common Stock is regularly quoted by
a recognized securities dealer but selling prices are not reported, its Fair
Market Value shall be the mean of the closing bid and asked prices for the
Common Stock on the date of such determination, as reported in The Wall Street
Journal or such other source as the Board deems reliable, or;
(3) In the absence of an established market
for the Common Stock, the Fair Market Value thereof shall be determined in
good faith by the Board, or;
(4) For purposes of the Enrollment Date of the
first Offering Period under the Plan, the Fair Market Value shall be the
initial price to the public as set forth in the final prospectus included
within the registration statement in Form S-1 filed with the Securities and
Exchange Commission for the initial public offering of the Company's Common
Stock (the "Registration Statement").
(k) "Offering Periods" shall mean the periods of
----------------
approximately twenty-four (24) months during which an option granted pursuant
to the Plan may be exercised, commencing on the first Trading Day on or after
October 1 and April 1 of each year and terminating on the last Trading Day in
the periods ending twenty-four months later; provided, however, that the first
Offering Period under the Plan shall commence with the first Trading Day on or
after the date on which the Securities and Exchange Commission declares the
Company's Registration Statement effective and ending on the last Trading Day
on or before September 30, 1999. The duration and timing of Offering Periods
may be changed pursuant to Section 4 of this Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
----
(m) "Purchase Price" shall mean an amount equal to 85%
--------------
of the Fair Market Value of a share of Common Stock on the Enrollment Date or
on the Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six
---------------
month period commencing after one Exercise Date and ending with the next
Exercise Date, except that the first Purchase Period of any Offering Period
shall commence on the Enrollment Date and end with the next Exercise Date.
-2-
<PAGE>
(o) "Reserves" shall mean the number of shares of
--------
Common Stock covered by each option under the Plan which have not yet been
exercised and the number of shares of Common Stock which have been authorized
for issuance under the Plan but not yet placed under option.
(p) "Subsidiary" shall mean a corporation, domestic or
----------
foreign, of which not less than 50% of the voting shares are held by the Company
or a Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national
-----------
stock exchanges and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company
on a given Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary
notwithstanding, no Employee shall be granted an option under the Plan (i) to
the extent that, immediately after the grant, such Employee (or any other person
whose stock would be attributed to such Employee pursuant to Section 424(d) of
the Code) would own capital stock of the Company and/or hold outstanding options
to purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) to the extent that his or her rights to
purchase stock under all employee stock purchase plans of the Company and its
subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the fair market value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by
----------------
consecutive, overlapping Offering Periods with a new Offering Period
commencing on the first Trading Day on or after October 1 and April 1 each
year, or on such other date as the Board shall determine, and continuing
thereafter until terminated in accordance with Section 20 hereof; provided,
however, that the first Offering Period under the Plan shall commence with the
first Trading Day on or after the date on which the Securities and Exchange
Commission declares the Company's Registration Statement effective and ending on
the last Trading Day on or before April 1, 1999. The Board shall have the power
to change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without shareholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected thereafter.
-3-
<PAGE>
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan
by completing a subscription agreement authorizing payroll deductions in the
form of Exhibit A to this Plan and filing it with the Company's payroll office
prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the
first payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each pay day
during the Offering Period in an amount not exceeding twenty percent (20%) of
the Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be
credited to his or her account under the Plan and shall be withheld in whole
percentages only. A participant may not make any additional payments into such
account.
(c) A participant may discontinue his or her participation in
the Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by completing or
filing with the Company a new subscription agreement authorizing a change in
payroll deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) hereof, a
participant's payroll deductions may be decreased to zero percent (0%) at any
time during a Purchase Period. Payroll deductions shall recommence at the rate
provided in such participant's subscription agreement at the beginning of the
first Purchase Period which is scheduled to end in the following calendar year,
unless terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part,
or at the time some or all of the Company's Common Stock issued under the Plan
is disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the
-4-
<PAGE>
Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period,
---------------
each eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than [
________ ] shares of the Company's Common Stock (subject to any adjustment
pursuant to Section 19) on the Enrollment Date, and provided further that such
purchase shall be subject to the limitations set forth in Sections 3(b) and 12
hereof. Exercise of the option shall occur as provided in Section 8 hereof,
unless the participant has withdrawn pursuant to Section 10 hereof. The option
shall expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
------------------
provided in Section 10 hereof, his or her option for the purchase of shares
shall be exercised automatically on the Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the
payroll deductions credited to his or her account and not yet used to exercise
his or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's payroll
deductions credited to his or her account shall be paid to such participant
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall
-5-
<PAGE>
not resume at the beginning of the succeeding Offering Period unless the
participant delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall
not have any effect upon his or her eligibility to participate in any similar
plan which may hereafter be adopted by the Company or in succeeding Offering
Periods which commence after the termination of the Offering Period from which
the participant withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any
reason, he or she shall be deemed to have elected to withdraw from the Plan and
the payroll deductions credited to such participant's account during the
Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant's option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant's customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions
--------
of a participant in the Plan.
13. Stock.
-----
(a) The maximum number of shares of the Company's Common Stock
which shall be made available for sale under the Plan shall be seven hundred
fifty thousand (750,000) shares, plus an annual increase to be added on each
anniversary date of the adoption of the Plan equal to the lesser of (i) 500,000
shares, (ii) 3% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board, subject to adjustment upon changes in capitalization of
the Company as provided in Section 19 hereof. If, on a given Exercise Date, the
number of shares with respect to which options are to be exercised exceeds the
number of shares then available under the Plan, the Company shall make a pro
rata allocation of the shares remaining available for purchase in as uniform a
manner as shall be practicable and as it shall determine to be equitable.
(b) The participant shall have no interest or voting right in
shares covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan
shall be registered in the name of the participant or in the name of the
participant and his or her spouse.
-6-
<PAGE>
14. Administration. The Plan shall be administered by the Board
--------------
or a committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a
beneficiary who is to receive any shares and cash, if any, from the
participant's account under the Plan in the event of such participant's death
subsequent to an Exercise Date on which the option is exercised but prior to
delivery to such participant of such shares and cash. In addition, a participant
may file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required for
such designation to be effective.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by
------------
the Company under the Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.
18. Reports. Individual accounts shall be maintained for each
-------
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
-7-
<PAGE>
19. Adjustments Upon Changes in Capitalization, Dissolution,
-------------------------------------------------------
Liquidation, Merger or Asset Sale.
---------------------------------
(a) Changes in Capitalization. Subject to any required action
-------------------------
by the shareholders of the Company, the Reserves, the maximum number of shares
each participant may purchase each Purchase Period (pursuant to Section 7), as
well as the price per share and the number of shares of Common Stock covered by
each option under the Plan which has not yet been exercised shall be
proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of shares of Common Stock effected without
receipt of consideration by the Company; provided, however, that conversion of
any convertible securities of the Company shall not be deemed to have been
"effected without receipt of consideration". Such adjustment shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of
--------------------
all or substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each outstanding option shall be
assumed or an equivalent option substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that the
successor corporation refuses to assume or substitute for the option, any
Purchase Periods then in progress shall be shortened by setting a new Exercise
Date (the "New Exercise Date") and any Offering Periods then in progress shall
end on the New Exercise Date. The New Exercise Date shall be before the date of
the Company's proposed sale or merger. The Board shall notify each participant
in writing, at least ten (10) business days prior to the New Exercise Date, that
the Exercise Date for the participant's option has been changed to the New
Exercise Date and that the participant's option shall be exercised automatically
on the New Exercise Date, unless prior to such date the participant has
withdrawn from the Offering Period as provided in Section 10 hereof.
-8-
<PAGE>
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and
for any reason terminate or amend the Plan. Except as provided in Section 19
hereof, no such termination can affect options previously granted, provided that
an Offering Period may be terminated by the Board of Directors on any Exercise
Date if the Board determines that the termination of the Plan is in the best
interests of the Company and its shareholders. Except as provided in Section 19
hereof, no amendment may make any change in any option theretofore granted which
adversely affects the rights of any participant. To the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law, regulation or stock exchange rule), the Company shall
obtain shareholder approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether
any participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods, limit
the frequency and/or number of changes in the amount withheld during an Offering
Period, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each participant properly correspond with amounts withheld from the
participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
21. Notices. All notices or other communications by a
-------
participant to the Company under or in connection with the Plan shall be
deemed to have been duly given when received in the form specified by the
Company at the location, or by the person, designated by the Company for the
receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be
----------------------------------
issued with respect to an option unless the exercise of such option and the
issuance and delivery of such shares pursuant thereto shall comply with all
applicable provisions of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange upon which the shares may then be
listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an option, the Company may
require the person exercising such option to represent and warrant at the time
of any such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
-9-
<PAGE>
23. Term of Plan. The Plan shall become effective upon the
------------
earlier to occur of its adoption by the Board of Directors or its approval by
the shareholders of the Company. It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 20 hereof.
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE>
EXHIBIT A
---------
QUICKLOGIC CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date: ___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ______________________ hereby elects to participate in the Quicklogic
Corporation 1997 Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's
Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of ____% of my Compensation on each payday (from 1 to _____%) during
the Offering Period in accordance with the Employee Stock Purchase
Plan. (Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise
my option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is
in all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is
subject to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse
only):____________________________________.
6. I understand that if I dispose of any shares received by me pursuant to
the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after
the Exercise Date, I will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an
amount equal to the excess of the fair market value of the shares at
the time such shares were purchased by me over the price which I paid
for the shares. I hereby agree to notify the Company in writing
-----------------------------------------------
<PAGE>
within 30 days after the date of any disposition of my shares and I
-------------------------------------------------------------------
will make adequate provision for Federal, state or other tax
------------------------------------------------------------
withholding obligations, if any, which arise upon the disposition of
--------------------------------------------------------------------
the Common Stock. The Company may, but will not be obligated to,
----------------
withhold from my compensation the amount necessary to meet any
applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year
and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time
of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the
excess of the fair market value of the shares at the time of such
disposition over the purchase price which I paid for the shares, or (2)
15% of the fair market value of the shares on the first day of the
Offering Period. The remainder of the gain, if any, recognized on such
disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent
upon my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)______________________________________________
(First) (Middle) (Last)
_______________________________ _____________________________________________
Relationship
_____________________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________ ________________________________________
Signature of Employee
_______________________________________
Spouse's Signature (If beneficiary
other than spouse)
-3-
<PAGE>
EXHIBIT B
---------
QUICKLOGIC CORPORATION
1997 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Quicklogic
Corporation 1997 Employee Stock Purchase Plan which began on ____________,
19____ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:__________________________
<PAGE>
EXHIBIT 10.6
QUICKLOGIC CORPORATION
1997 DIRECTOR OPTION PLAN
1. Purposes of the Plan. The purposes of this 1997 Director
--------------------
Option Plan are to attract and retain the best available personnel for service
as Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and
to encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock
options.
2. Definitions. As used herein, the following definitions
-----------
shall apply:
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as
----
amended.
(c) "Common Stock" means the common stock of the Company.
------------
(d) "Company" means Quicklogic Corporation, a
-------
California corporation.
(e) "Director" means a member of the Board.
--------
(f) "Employee" means any person, including officers and
--------
Directors, employed by the Company or any Parent or Subsidiary of the Company.
The payment of a Director's fee by the Company shall not be sufficient in and of
itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of
------------
1934, as amended.
(h) "Fair Market Value" means, as of any date, the
-----------------
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any
established stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market of The
Nasdaq Stock Market, its Fair Market Value shall be the closing sales price
for such stock (or the closing bid, if no sales were reported) as quoted on
such exchange or system for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by
a recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the date of determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable; or
<PAGE>
(iii) In the absence of an established market
for the Common Stock, the Fair Market Value thereof shall be determined in
good faith by the Board.
(i) "Inside Director" means a Director who is an
---------------
Employee.
(j) "Option" means a stock option granted pursuant to
------
the Plan.
(k) "Optioned Stock" means the Common Stock subject to
--------------
an Option.
(l) "Optionee" means a Director who holds an Option.
--------
(m) "Outside Director" means a Director who is not an
----------------
Employee.
(n) "Parent" means a "parent corporation," whether now
------
or hereafter existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1997 Director Option Plan.
----
(p) "Share" means a share of the Common Stock, as
-----
adjusted in accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation,"
----------
whether now or hereafter existing, as defined in Section 424(f) of the
Internal Revenue Code of 1986.
3. Stock Subject to the Plan. Subject to the provisions of
-------------------------
Section 10 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan is 500,000 Shares, plus an annual increase to
be added on each anniversary date of adoption of the Plan equal to (i) 25,000
Shares, or (ii) a lesser amount determined by the Board (collectively, the
"Pool"). The Shares may be authorized, but unissued, or reacquired Common
Stock.
If an Option expires or becomes unexercisable without having
been exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. Administration and Grants of Options under the Plan.
---------------------------------------------------
(a) Procedure for Grants. All grants of Options to Outside
--------------------
Directors under this Plan shall be automatic and nondiscretionary and shall be
made strictly in accordance with the following provisions:
(i) No person shall have any discretion to
select which Outside Directors shall be granted Options or to determine the
number of Shares to be covered by Options granted to Outside Directors.
-2-
<PAGE>
(ii) Each Outside Director shall be
automatically granted an Option to purchase 30,000 Shares (the "First Option")
on the date on which the later of the following events occurs: (A) the effective
date of this Plan, as determined in accordance with Section 6 hereof, or (B) the
date on which such person first becomes an Outside Director, whether through
election by the shareholders of the Company or appointment by the Board to fill
a vacancy; provided, however, that an Inside Director who ceases to be an Inside
Director but who remains a Director shall not receive a First Option.
(iii) Each Outside Director shall be
automatically granted an Option to purchase 6,000 Shares (a "Subsequent Option")
on the first day of May of each year provided he or she is then an Outside
Director and if as of such date, he or she shall have served on the Board for at
least the preceding six (6) months.
(iv) Notwithstanding the provisions of
subsections (ii) and (iii) hereof, any exercise of an Option granted before
the Company has obtained shareholder approval of the Plan in accordance with
Section 16 hereof shall be conditioned upon obtaining such shareholder
approval of the Plan in accordance with Section 16 hereof.
(v) The terms of a First Option granted
hereunder shall be as follows:
(A) the term of the First Option shall be
ten (10) years.
(B) the First Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the First
Option. In the event that the date of grant of the First Option is not a
trading day, the exercise price per Share shall be the Fair Market Value on
the next trading day immediately following the date of grant of the First
Option.
(D) subject to Section 10 hereof, the
First Option shall become exercisable as to 25% of the Shares subject to the
First Option on the first anniversary of its date of grant, and 1/48 of the
Shares subject to the First Option shall vest each month thereafter, provided
that the Optionee continues to serve as a Director on such dates.
(vi) The terms of a Subsequent Option granted
hereunder shall be as follows:
(A) the term of the Subsequent Option
shall be ten (10) years.
(B) the Subsequent Option shall be
exercisable only while the Outside Director remains a Director of the Company,
except as set forth in Sections 8 and 10 hereof.
-3-
<PAGE>
(C) the exercise price per Share shall
be 100% of the Fair Market Value per Share on the date of grant of the
Subsequent Option. In the event that the date of grant of the Subsequent
Option is not a trading day, the exercise price per Share shall be the Fair
Market Value on the next trading day immediately following the date of grant
of the Subsequent Option.
(D) subject to Section 10 hereof, the
Subsequent Option shall become exercisable as to 25% of the Shares subject to
the Subsequent Option on the first anniversary of its date of grant, and 1/48
of the Shares subject to the Subsequent Option shall vest each month
thereafter, provided that the Optionee continues to serve as a Director on
such dates.
(vii) In the event that any Option granted under
the Plan would cause the number of Shares subject to outstanding Options plus
the number of Shares previously purchased under Options to exceed the Pool,
then the remaining Shares available for Option grant shall be granted under
Options to the Outside Directors on a pro rata basis. No further grants shall
be made until such time, if any, as additional Shares become available for
grant under the Plan through action of the Board or the shareholders to
increase the number of Shares which may be issued under the Plan or through
cancellation or expiration of Options previously granted hereunder.
5. Eligibility. Options may be granted only to Outside
-----------
Directors. All Options shall be automatically granted in accordance with the
terms set forth in Section 4 hereof.
The Plan shall not confer upon any Optionee any right with
respect to continuation of service as a Director or nomination to serve as a
Director, nor shall it interfere in any way with any rights which the Director
or the Company may have to terminate the Director's relationship with the
Company at any time.
6. Term of Plan. The Plan shall become effective upon the
------------
earlier to occur of its adoption by the Board or its approval by the
shareholders of the Company as described in Section 16 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 11 of the Plan.
7. Form of Consideration. The consideration to be paid for the
---------------------
Shares to be issued upon exercise of an Option, including the method of
payment, shall consist of (i) cash, (ii) check, (iii) other shares which (x)
in the case of Shares acquired upon exercise of an Option, have been owned by
the Optionee for more than six (6) months on the date of surrender, and (y)
have a Fair Market Value on the date of surrender equal to the aggregate
exercise price of the Shares as to which said Option shall be exercised, (iv)
consideration received by the Company under a cashless exercise program
implemented by the Company in connection with the Plan, or (v) any combination
of the foregoing methods of payment.
8. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any
-----------------------------------------------
Option granted hereunder shall be exercisable at such times as are set forth
in Section 4 hereof; provided, however,
-4-
<PAGE>
that no Options shall be exercisable until shareholder approval of the Plan in
accordance with Section 16 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease
in the number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to
----------------------------------------------
Section 10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or her
Option, but only within three (3) months following the date of such termination,
and only to the extent that the Optionee was entitled to exercise it on the date
of such termination (but in no event later than the expiration of its ten (10)
year term). To the extent that the Optionee was not entitled to exercise an
Option on the date of such termination, and to the extent that the Optionee does
not exercise such Option (to the extent otherwise so entitled) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as
----------------------
a Director terminates as a result of total and permanent disability (as defined
in Section 22(e)(3) of the Code), the Optionee may exercise his or her Option,
but only within twelve (12) months following the date of such termination, and
only to the extent that the Optionee was entitled to exercise it on the date of
such termination (but in no event later than the expiration of its ten (10) year
term). To the extent that the Optionee was not entitled to exercise an Option on
the date of termination, or if he or she does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
(d) Death of Optionee. In the event of an Optionee's death,
-----------------
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance may exercise the Option, but only within twelve (12)
months following the date of death, and only to the extent that
-5-
<PAGE>
the Optionee was entitled to exercise it on the date of death (but in no event
later than the expiration of its ten (10) year term). To the extent that the
Optionee was not entitled to exercise an Option on the date of death, and to the
extent that the Optionee's estate or a person who acquired the right to exercise
such Option does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
9. Non-Transferability of Options. The Option may not be sold,
------------------------------
pledged, assigned, hypothecated, transferred, or disposed of in any manner
other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
10. Adjustments Upon Changes in Capitalization, Dissolution,
-------------------------------------------------------
Merger or Asset Sale.
--------------------
(a) Changes in Capitalization. Subject to any required action
-------------------------
by the shareholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for issuance
under the Plan but as to which no Options have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option, as well
as the price per Share covered by each such outstanding Option, and the number
of Shares issuable pursuant to the automatic grant provisions of Section 4
hereof shall be proportionately adjusted for any increase or decrease in the
number of issued Shares resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued Shares effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof shall be made with respect to, the number or price of Shares
subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, to the extent that an Option has not
been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the
--------------------
Company with or into another corporation or the sale of substantially all of the
assets of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or substituted
for, the Option or equivalent option shall continue to be exercisable as
provided in Section 4 hereof for so long as the Optionee serves as a Director or
a director of the Successor Corporation. Following such assumption or
substitution, if the Optionee's status as a Director or director of the
Successor Corporation, as applicable, is terminated other than upon a voluntary
resignation by the Optionee, the Option or option shall become fully
exercisable, including as to Shares for which it would not otherwise be
exercisable. Thereafter, the Option or option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
-6-
<PAGE>
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
11. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time
-------------------------
amend, alter, suspend, or discontinue the Plan, but no amendment, alteration,
suspension, or discontinuation shall be made which would impair the rights of
any Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any applicable
law, regulation or stock exchange rule, the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
12. Time of Granting Options. The date of grant of an Option
------------------------
shall, for all purposes, be the date determined in accordance with Section 4
hereof.
13. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
-7-
<PAGE>
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
14. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
15. Option Agreement. Options shall be evidenced by written
----------------
option agreements in such form as the Board shall approve.
16. Shareholder Approval. Continuance of the Plan shall be
--------------------
subject to approval by the shareholders of the Company at or prior to the
first annual meeting of shareholders held subsequent to the granting of an
Option hereunder. Such shareholder approval shall be obtained in the degree
and manner required under applicable state and federal law and any stock
exchange rules.
-8-
<PAGE>
QUICKLOGIC CORPORATION
DIRECTOR OPTION AGREEMENT
Quicklogic Corporation, a California corporation (the "Company"), has
granted to ______________________________________ (the "Optionee"), an option to
purchase a total of [__________________ (_________)] shares of the Company's
Common Stock (the "Optioned Stock"), at the price determined as provided herein,
and in all respects subject to the terms, definitions and provisions of the
Company's 1997 Director Option Plan (the "Plan") adopted by the Company which is
incorporated herein by reference. The terms defined in the Plan shall have the
same defined meanings herein.
1. Nature of the Option. This Option is a nonstatutory option and is
--------------------
not intended to qualify for any special tax benefits to the Optionee.
2. Exercise Price. The exercise price is $_______ for each share of
--------------
Common Stock.
3. Exercise of Option. This Option shall be exercisable during its
------------------
term in accordance with the provisions of Section 8 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option shall become exercisable in installments
cumulatively with respect to 25% of the Optioned Stock one year after the date
of grant, and as to an additional 1/48 of the Optioned Stock each month
thereafter, so that one hundred percent 100% of the Optioned Stock shall be
exercisable four years after the date of grant; provided, however, that in no
event shall any Option be exercisable prior to the date the stockholders of the
Company approve the Plan.
(b) This Option may not be exercised for a fraction of a
share.
(c) In the event of Optionee's death, disability or other
termination of service as a Director, the exercisability of the Option is
governed by Section 8 of the Plan.
(ii) Method of Exercise. This Option shall be exercisable by written
------------------
notice which shall state the election to exercise the Option and the number of
Shares in respect of which the Option is being exercised. Such written notice,
in the form attached hereto as Exhibit A, shall be signed by the Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company. The written notice shall be accompanied by payment of the exercise
price.
4. Method of Payment. Payment of the exercise price shall be by any
-----------------
of the following, or a combination thereof, at the election of the Optionee:
(i) cash;
<PAGE>
(ii) check; or
(iii) surrender of other shares which (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six (6) months on the date of surrender, and (y) have a Fair Market Value
on the date of surrender equal to the aggregate exercise price of the Shares as
to which said Option shall be exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Company and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or loan proceeds required to pay the exercise price.
5. Restrictions on Exercise. This Option may not be exercised if the
------------------------
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulations, or if such issuance
would not comply with the requirements of any stock exchange upon which the
Shares may then be listed. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
6. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
7. Term of Option. This Option may not be exercised more than ten (10)
--------------
years from the date of grant of this Option, and may be exercised during such
period only in accordance with the Plan and the terms of this Option.
8. Taxation Upon Exercise of Option. Optionee understands that, upon
--------------------------------
exercise of this Option, he or she will recognize income for tax purposes in an
amount equal to the excess of the then Fair Market Value of the Shares purchased
over the exercise price paid for such Shares. Since the Optionee is subject to
Section 16(b) of the Securities Exchange Act of 1934, as amended, under certain
limited circumstances the measurement and timing of such income (and the
commencement of any capital gain holding period) may be deferred, and the
Optionee is advised to contact a tax advisor concerning the application of
Section 83 in general and the availability a Section 83(b) election in
particular in connection with the exercise of the Option. Upon a resale of such
Shares by the Optionee, any difference between the sale price and the Fair
Market Value of the Shares on the date
-2-
<PAGE>
of exercise of the Option, to the extent not included in income as described
above, will be treated as capital gain or loss.
DATE OF GRANT: ______________
QUICKLOGIC CORPORATION,
a California corporation
By: __________________________
Optionee acknowledges receipt of a copy of the Plan, a copy of which is
attached hereto, and represents that he or she is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under the Plan.
Dated: _________________
------------------------------
Optionee
-3-
<PAGE>
EXHIBIT A
DIRECTOR OPTION EXERCISE NOTICE
Quicklogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
Attention: Corporate Secretary
1. Exercise of Option. The undersigned ("Optionee") hereby elects to
------------------
exercise Optionee's option to purchase ______ shares of the Common Stock (the
"Shares") of Quicklogic Corporation (the "Company") under and pursuant to the
Company's 1997 Director Option Plan and the Director Option Agreement dated
_______________ (the "Agreement").
2. Representations of Optionee. Optionee acknowledges that Optionee
---------------------------
has received, read and understood the Agreement.
3. Federal Restrictions on Transfer. Optionee understands that the Shares
--------------------------------
must be held indefinitely unless they are registered under the Securities Act of
1933, as amended (the "1933 Act"), or unless an exemption from such registration
is available, and that the certificate(s) representing the Shares may bear a
legend to that effect. Optionee understands that the Company is under no
obligation to register the Shares and that an exemption may not be available or
may not permit Optionee to transfer Shares in the amounts or at the times
proposed by Optionee.
4. Tax Consequences. Optionee understands that Optionee may suffer adverse
----------------
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax
consultant(s) Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
5. Delivery of Payment. Optionee herewith delivers to the Company the
-------------------
aggregate purchase price for the Shares that Optionee has elected to purchase
and has made provision for the payment of any federal or state withholding taxes
required to be paid or withheld by the Company.
6. Entire Agreement. The Agreement is incorporated herein by
----------------
reference. This Exercise Notice and the Agreement constitute the entire
agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
<PAGE>
subject matter hereof. This Exercise Notice and the Agreement are governed by
California law except for that body of law pertaining to conflict of laws.
Submitted by: Accepted by:
OPTIONEE: QUICKLOGIC CORPORATION
By:
------------------------------------
Its:
-----------------------------------
Address:
Dated: Dated:
--------------------------- --------------------------------
-2-
<PAGE>
EXHIBIT 10.7
================================================================================
QUICKLOGIC CORPORATION
Series E Preferred Stock
Purchase Agreement
_______________, 1995
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Authorization and Sale of Preferred Stock.................................... 1
1.1 Authorization.......................................................... 1
1.2 Sale of the Shares..................................................... 1
2. Closing Date; Delivery....................................................... 1
2.1 First Closing Date..................................................... 1
2.2 Delivery............................................................... 2
2.3 Subsequent Closings.................................................... 2
2.4 Minimum Closing Amounts................................................ 2
3. Representations and Warranties of the Company................................ 2
3.1 Organization and Standing; Articles of Incorporation and Bylaws........ 2
3.2 Corporate Power........................................................ 2
3.3 No Subsidiaries........................................................ 3
3.4 Capitalization......................................................... 3
3.5 Authorization.......................................................... 3
3.6 Financial Statements................................................... 4
3.7 Title to Properties; Liens and Encumbrances............................ 4
3.8 Intellectual Property Rights........................................... 5
3.9 Proprietary Information Agreements..................................... 5
3.10 Operating Rights....................................................... 6
3.11 Manufacturing, Distribution and License Rights......................... 6
3.12 Compliance with Other Instruments, None Burdensome, etc................ 6
3.13 Litigation, etc........................................................ 6
3.14 Employee Compensation Plans............................................ 7
3.15 Insurance.............................................................. 7
3.16 Registration Rights.................................................... 7
3.17 Governmental Consent, etc.............................................. 7
3.18 Offering............................................................... 7
3.19 Material Contracts and Obligations..................................... 7
3.20 Tax Returns and Payments............................................... 8
3.21 Related Party Transactions............................................. 8
3.22 Certain Transactions................................................... 8
3.23 Environmental Protection............................................... 8
3.24 Brokers or Finders..................................................... 9
</TABLE>
<PAGE>
<TABLE>
<S> <C>
3.25 Changes................................................................ 9
3.26 Foreign Investment in Real Property Act................................ 10
3.27 Disclosure............................................................. 10
4. Representations and Warranties of the Purchaser.............................. 10
4.1 Authorization.......................................................... 11
4.2 Experience............................................................. 11
4.3 Investment............................................................. 11
4.4 Rule 144............................................................... 11
4.5 No Public Market....................................................... 11
4.6 Access to Data......................................................... 11
4.7 Further Limitations on Dispositions.................................... 11
5. Conditions to Purchasers' Obligations at the Closing......................... 12
5.1 Representations and Warranties Correct................................. 12
5.2 Covenants.............................................................. 12
5.3 Opinion of Counsel..................................................... 12
5.4 Permits................................................................ 12
5.5 Amended and Restated Articles of Incorporation......................... 12
5.6 Good Standing Certificates............................................. 12
5.7 Officer's Certificate.................................................. 12
5.8 Secretary's Certificate................................................ 13
5.9 Stock Certificate...................................................... 13
5.10 Legal Investment....................................................... 13
5.11 Shareholders Agreement................................................. 13
5.12 Registration Rights Agreement.......................................... 13
6. Conditions to Company's Obligations at the Closing........................... 13
6.1 Representations and Warranties Correct................................. 13
6.2 Permits................................................................ 13
6.3 Amended and Restated Articles.......................................... 13
6.4 Payment of the Purchase Price.......................................... 14
7. Covenant to Participate in Future Financings................................. 14
8. Miscellaneous................................................................ 14
8.1 Attorneys' Fees........................................................ 14
8.2 Waivers and Amendments................................................. 14
8.3 Governing Law.......................................................... 14
8.4 Survival............................................................... 14
</TABLE>
<PAGE>
<TABLE>
<S> <C>
8.5 Successors and Assigns................................................. 15
8.6 Entire Agreement....................................................... 15
8.7 Severability of this Agreement......................................... 15
8.8 Finder's Fees.......................................................... 15
8.9 Legends................................................................ 15
8.10 Removal of Legends and Transfer Restrictions........................... 16
8.11 Titles and Subtitles................................................... 16
8.12 Counterparts........................................................... 16
8.13 Delays or Omissions.................................................... 16
8.14 Notices................................................................ 16
8.15 Transaction Fees and Expenses.......................................... 17
</TABLE>
<PAGE>
SCHEDULES AND EXHIBITS
Schedule A Schedule of Purchasers
Exhibit A Amended and Restated Articles of Incorporation
Exhibit B Fourth Amended and Restated Shareholders Agreement
Exhibit C Schedule of Exceptions
Exhibit D Opinion of Wilson, Sonsini, Goodrich & Rosati
Exhibit E Fourth Amended and Restated Registration Rights Agreement
<PAGE>
QUICKLOGIC CORPORATION
SERIES E PREFERRED STOCK
------------------------
PURCHASE AGREEMENT
------------------
This SERIES E PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made
as of _________, 1995 by and among QuickLogic Corporation, a California
corporation (the "Company") and the persons and entities listed on Schedule A
hereto (the "Purchasers").
In consideration of the mutual promises, representations, warranties,
covenants, and conditions set forth in this Agreement, the parties to this
Agreement mutually agree as follows:
1. Authorization and Sale of Preferred Stock.
-----------------------------------------
1.1 Authorization. The Company has authorized the issuance and sale
-------------
of up to 21,428,571 shares of its Series E Preferred Stock (the "Shares") having
the rights, preferences, and privileges set forth in the Amended and Restated
Articles of Incorporation of the Company (the "Articles") attached hereto as
Exhibit A. The aggregate shares of common stock issuable upon conversion of the
Shares are referred to in this Agreement as the "Conversion Stock."
1.2 Sale of the Shares. Subject to the terms and conditions hereof,
------------------
at the Closing Date (as defined in Section 2.1 hereof) the Company will issue
and sell to each Purchaser, and each Purchaser will purchase from the Company
the number of shares specified opposite the name of such Purchaser on Schedule A
hereto at a purchase price of $0.70 per share. The Company's agreement with
each Purchaser hereunder is a separate agreement and the sales of the Shares to
each Purchaser are separate sales.
1.3 Sale of Additional Series E Preferred. The Company shall have
-------------------------------------
until August 31, 1995 to sell any shares of Series E Preferred not sold at the
First Closing (as defined below) at a purchase price of $0.70 per share. Any
such shares sold after the First Closing are referred to herein as "Additional
Shares." The Additional Shares shall be considered "Shares" and the purchasers
of such Additional Shares (the "Additional Purchasers") shall be considered
"Purchasers" for purposes of this Agreement, and shall have the same rights and
obligations as if they had purchased their shares pursuant to this Agreement at
the First Closing. The maximum number of shares of Series E Preferred the
Company may sell under this Agreement is 21,428,571.
2. Closing Date; Delivery.
----------------------
2.1 First Closing Date. The closing of the purchase and sale of the
------------------
Shares hereunder (the "Closing") shall be held at the law offices of Wilson,
Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304 at
__________ on __________, 1995, or at such other time, date or place that the
Company and the Purchasers shall agree (which time and date are
<PAGE>
referred to in this Agreement as the "Closing Date").
2.2 Delivery. Subject to the terms of this Agreement, at the First
--------
Closing the Company shall deliver to each Purchaser a certificate, registered in
such Purchaser's name, representing the number of Shares, designated on Schedule
A hereto, to be purchased by the Purchaser against payment of the purchase price
for the Shares by check or wire transfer of immediately available funds, or by
conversion of promissory notes payable by the Company, or by any combination of
such methods of payment.
2.3 Subsequent Closings. The purchase and sale of any Additional Shares
-------------------
shall be held at a time and place to be agreed upon by the Company and a
majority-in-interest of the Additional Purchasers purchasing at such closing (a
"Subsequent Closing"), but no later than August 31, 1995. At each Subsequent
Closing, the Company shall deliver to each Additional Purchaser purchasing at
such closing the certificates representing the Additional Shares which such
Additional Purchaser is purchasing against delivery to the Company by such
Additional Purchaser of the purchase price therefor by check or wire transfer
payable to the Company, in the amount specified the appropriate revised Schedule
A. The Company and each Additional Purchaser shall execute and deliver
signature pages to this Agreement.
2.4 Minimum Closing Amount. The Company shall not sell any Shares at the
----------------------
First Closing if the aggregate amount to be sold at such closing does not equal
14,285,714 Shares or more.
3. Representations and Warranties of the Company. Except as set forth on
---------------------------------------------
the Schedule of Exceptions attached hereto as Exhibit C, the Company hereby
represents and warrants to each Purchaser as follows:
3.1 Organization and Standing; Articles of Incorporation and Bylaws.
---------------------------------------------------------------
The Company is a corporation duly organized and validly existing under, and by
virtue of, the laws of the State of California, is in good standing under such
laws and is authorized to exercise all of its corporate powers, rights and
privileges. The Company has the requisite legal and corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction where the
failure to be so qualified would have a material adverse effect on the business
of the Company as now conducted or as proposed to be conducted (as reflected in
the Company's March 1995 Business Plan, a copy of which business plan has
previously been delivered to the Purchaser (the "Business Plan")). True, correct
and complete copies of the Company's Articles, Bylaws and other charter
documents, each as will be in effect at the Closing have been delivered to each
Purchaser.
3.2 Corporate Power. The Company has the requisite legal and
---------------
corporate power to execute and deliver the Agreement, the Fourth Amended and
Restated Shareholders Agreement (the "Amended Shareholders Agreement") and the
Fourth Amended and Restated Registration
-2-
<PAGE>
Rights Agreement (the "Amended Registration Rights Agreement") (the Agreement,
Amended Shareholders Agreement and the Amended Registration Rights Agreement are
hereafter collec tively referred to as the "Financing Agreements"), to issue and
sell the Shares hereunder, to issue the Conversion Stock and to carry out and
perform its obligations under the terms of the Financing Agreements.
3.3 No Subsidiaries. The Company has no subsidiaries or affiliated
---------------
companies and does not otherwise own or control, directly or indirectly, any
equity interest in any other corporation, partnership, association or other
business entity.
3.4 Capitalization. The authorized capital stock of the Company
--------------
consists of 75,000,000 shares of Common Stock (the "Common Stock") and
49,508,208 shares of Preferred Stock (the "Preferred Stock"), 2,505,000 of which
are designated Series A Preferred Stock ("Series A Preferred"), 10,274,637 are
designated Series B Preferred Stock ("Series B Preferred"), 12,175,000 of which
are designated Series C Preferred, 3,125,000 of which are designated Series D
Preferred and 21,428,571 of which are designated Series E Preferred Stock.
Immediately prior to the Closing Date, 3,626,939 shares of Common Stock,
2,505,000 shares of Series A Preferred, 10,274,637 shares of Series B Preferred,
11,975,561 shares of Series C Preferred and 3,125,000 shares of Series D
Preferred were issued and outstanding. All such issued and outstanding shares
have been duly authorized and validly issued, are fully paid and nonassessable,
and were issued in compliance with all applicable federal and state securities
laws. The rights, preferences and privileges of the Preferred Stock are as
stated in the Articles. Each share of Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred and Series E Preferred is convertible
into one share of Common Stock of the Company. The Company has reserved
49,508,208 shares of Common Stock for issuance upon conversion of the Preferred
Stock. Except for (i) the conversion privileges of the Preferred Stock, (ii)
9,700,000 shares of Common Stock reserved for issuance pursuant to the Company's
1989 Stock Option Plan, under which options to purchase 4,398,300 shares are
currently outstanding and 4,483,011 shares remain available for future grant,
(iii) 100,000 shares reserved for issuance pursuant to the Company's Sales
Representative Stock Purchase Plan, (iv) 131,250 shares of Series C Preferred
Stock reserved for issuance pursuant to the exercise of a warrant to purchase
Series C Preferred Stock, and (v) the rights provided in Section 3 of the
Amended Shareholders Agreement to the Shareholders (as defined therein), at the
closing there will be no other outstanding rights of first refusal, preemptive
rights or other rights, options, warrants, conversion rights, or other
agreements either directly or indirectly for the purchase or acquisition from
the Company of any shares of its capital stock.
3.5 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of the Financing Agreements and for the
authorization, sale, issuance (or reservation for issuance) and delivery of the
Shares and the Conversion Stock, and the performance of the Company's
obligations hereunder has been taken. The Financing Agreements when executed
and delivered by the Company, will constitute legal, valid and binding
obligations of the Company enforceable against
-3-
<PAGE>
the Company in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the enforcement of creditors' rights and, with respect to
Amended Registration Rights Agreement except as the enforceability of Section 7
thereof may be limited by public policy. The Shares and the Conversion Stock,
when issued in compliance with the provisions of this Agreement, will be,
validly issued, fully paid and nonassessable, and free of any liens or
encumbrances; provided, however, that the Shares and the Conversion Stock may be
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein. The Shares and the Conversion Stock will be, assuming the
accuracy of the representations set forth in Section 4 hereof, issued in
compliance with the state and/or federal securities laws. The Shares and the
Conversion Stock are not subject to any preemptive rights or rights of first
refusal except as have been waived or satisfied. Except as provided in the
Amended Shareholders Agreement, the Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects or
relates to the voting or giving of written consents with respect to any security
or by a director of the Company.
3.6 Financial Statements. The Company has delivered to the Purchaser
--------------------
its audited financial statements (balance sheet and statement of operations) and
statement of shareholders' equity for the years ended December 31, 1993 and 1992
and its unaudited financial statements (balance sheet and statement of
operations) and statement of shareholders' equity for the year ended December
31, 1994 and the three (3) month period ended March 31, 1995 (collectively, the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis for the periods
indicated and with each other. The Finan cial Statements accurately set out
and describe the financial condition and operating results of the Company as of
the dates, and for the periods, indicated therein, subject, in the case of the
unaudited financial statements, to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business and (ii) obligations under contracts and commitments incurred
in the ordinary course of business and not required under generally accepted
accounting principles to be reflected in the Financial Statements, which,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company. The Company maintains and will continue to
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
3.7 Title to Properties; Liens and Encumbrances. The Company has
-------------------------------------------
good and marketable title to all of its properties and assets. Such properties
and assets are not subject to any mortgage, pledge, lien, security interest,
conditional sales agreement, encumbrance or charge, except liens for current
taxes not yet due and payable. The Company is not in default or in breach and
has not received notice of default of any provision of its leases or licenses
and the Company holds valid leaseholds or licensed interests in the properties
which it leases or which is licensed to it. The Company's properties and assets
are in good condition and repair in all material respects.
-4-
<PAGE>
3.8 Intellectual Property Rights. Except as disclosed in Exhibit C,
----------------------------
the Company (a) owns or has the right to use, free and clear of all liens,
claims and restrictions, all patents, trademarks, service marks, trade names,
copyrights and other intangible or intellectual property rights (and licenses
with respect to the foregoing) needed for or used in the conduct of its business
as now conducted and as proposed to be conducted (as reflected in the Business
Plan) without infringing upon or otherwise acting adversely to the right or
claimed right of any person under or with respect to any of the foregoing, and
(b) is not obligated or under any liability whatsoever to make any payments by
way of royalties, fees or otherwise to any owner of, licensor of, or other
claimant to, any patent, trademark, trade name, copyright or other intangible
assets, with respect to the use thereof or in connection with the conduct of its
business or otherwise. Except as disclosed in Exhibit C, the Company owns or
has the unrestricted right to use all trade secrets, including know-how,
inventions, designs, processes, and technical data required for or incident to
the development, manufacture, operation and sale of all products and services
sold or proposed to be sold by the Company and all of the patents, trademarks,
service marks, trade names, copyrights and trade secrets of the Company are held
by the Company free and clear of any rights, liens or claims of others,
including, without limitation, current and former employees, former employers of
all current and former employees, consultants, officers, directors and
shareholders of the Company.
3.9 Proprietary Information Agreements. All employees and
----------------------------------
consultants of the Company are parties to a written agreement ("Proprietary
Information and Inventions Agreement") under which each such employee or
consultant (i) is obligated to disclose and transfer to the Com pany, without
the receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of his employment with or performance of
services for the Company, he makes or conceives of either solely or jointly with
others, that relate to any subject matter with which his work for the Company
may be concerned, or relate to or are connected with the business, products or
projects of the Company, or involve the use of the time, material or facilities
of the Company, and (ii) is obligated to maintain the confidentiality of
proprietary information of the Company. To the best of the Company's knowledge,
none of the Company's employees or consultants, are in violation of the
Proprietary Information and Inventions Agreement to which such employee or
consultant is a party. None of the Company's employees or consultants are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would conflict with their obligation to
use their best efforts to promote the interests of the Company or that would
conflict with the Company's business as conducted or as proposed to be
conducted. Neither the execution nor delivery of the Financing Agreements, nor
the carrying on of the Company's business by its employees and consultants, nor
the conduct of the Company's business as proposed, will conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any of such employees or
consultants are now obligated. The Company does not believe it is or will be
necessary to utilize, and will not utilize, any inventions of any of the
Company's employees or consultants (or people it currently intends to hire) made
or owned prior to
-5-
<PAGE>
their employment by the Company or that it is or will be necessary to utilize
any other assets or rights of any of its employees or consultants (or people it
currently intends to hire) made or owned prior to their employment with or
engagement by the Company, in violation of any limitations or restrictions to
which any such employee or consultant is a party or to which any of such assets
or rights may be subject. To the best of the Company's knowledge, none of the
Company's employees or consultants, have taken, removed or made use of any
proprietary documentation, manuals, products, materials, or any other tangible
item from his previous employer, and the Company will not make use of any such
proprietary items in the business of the Company.
3.10 Operating Rights. The Company has all operating authority,
----------------
licenses, franchises, permits, certificates, consents, rights and privileges
(collectively, the "Permits") as are necessary or appropriate to the operation
of its business as now or as proposed to be conducted, the absence of which
would have a material and adverse effect on the business of the Company. Such
Permits are in full force and effect, no violations have been or are expected to
have been recorded in respect of any such Permits, and no proceeding is pending
or threatened that could result in the revocation or limitation of any of such
Permits. The Company has conducted its business so as to comply in all respects
with all such material Permits.
3.11 Manufacturing, Distribution and License Rights. The Company has
----------------------------------------------
not granted rights or licenses to manufacture, assemble, distribute or sell its
products to any person or entity, is not bound by any agreement that affects the
Company's exclusive right to manufacture, assemble, distribute or sell its
products, and has not licensed or sold any of its technology or proprietary
information to any person or entity.
3.12 Compliance with Other Instruments, None Burdensome, etc. The
-------------------------------------------------------
Company is not in violation of any term of its Articles or Bylaws. The Company
is not in violation of any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree and the Company
is not in violation of any applicable order, statute, rule or regulation where
such violation would have a material and adverse effect on the Company. The
execution, delivery and performance of and compliance with this Agreement and
the other Financing Agreements and the issuance of the Shares and the Conversion
Stock have not resulted and will not result in any violation of or conflict with
the Company's Articles or Bylaws, and have not resulted and will not result in
any material violation of, or be in conflict with, or constitute a default
under, or result in the creation of, any mortgage, pledge, lien, encumbrance or
charge upon any of the properties or assets of the Company; and there is no such
violation or default or event which, with the passage of time or giving of
notice or both, would constitute a violation or default which would materially
and adversely affect the business of the Company or any of its properties or
assets.
3.13 Litigation, etc. Except as disclosed in Exhibit C, there are no
----------------
actions, suits proceedings or investigations pending against the Company or its
properties before any court or governmental agency (nor is there any threat
thereof) which, either in any case or in the aggregate, might result in any
material adverse change in the business or financial condition of the Company or
-6-
<PAGE>
any of its properties or assets, or in any material impairment of the right or
ability of the Company to carry on its business as now conducted or as proposed
to be conducted, or in any material liability on the part of the Company, and
none which questions the validity of this Agree ment and the other Financing
Agreements or any action taken or to be taken in connection herewith or
therewith. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or governmental agency
or instrumentality. The foregoing includes, without limitation, actions pending
or threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreement with prior
employers. There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
3.14 Employee Compensation Plans. Except for the Company's 1989 Stock
----------------------------
Option Plan and 1991 Sales Representative Stock Purchase Plan, the Company is
not a party to or bound by any currently effective employment contract, deferred
compensation agreement, benefit plan, pension, profit-sharing plan, stock
option, retirement agreement, or other employee compensation agreement. The
Company has provided copies of all such plans, contracts, and agreements to
which the Company is currently a party. The Company is not bound by or subject
to (and none of its assets are bound by or subject to) any arrangement with any
labor union and does not have any collective bargaining agreements covering any
of its employees.
3.15 Insurance. The Company has obtained and maintained in full force
----------
and effect fire, casualty and liability insurance policies with recognized
insurers with such coverages as are carried by similar companies, sufficient in
amount to allow replacement of the tangible properties of the Company that might
be damaged or destroyed.
3.16 Registration Rights. Except as contemplated by this Agreement
-------------------
and the Amended Registration Rights Agreement, the Company is not under any
obligation to register any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.17 Governmental Consent, etc. No consent, approval or authorization
--------------------------
of, or designation, declaration or filing with, any governmental authority on
the part of the Company is required in connection with the valid execution,
delivery, and performance of this Agreement and the other Financing Agreements
or the offer, sale or issuance of the Shares or the Conversion Stock, or the
consummation of any other transaction contemplated by this Agreement and the
other Financing Agreements except certain filings as may be under the Securities
Act of 1933, as amended (the "Securities Act") and the California Corporations
Code.
3.18 Offering. Subject to the accuracy of the Purchaser's
--------
representations in Section 4 hereof, the offer, sale and issuance of the Shares
and the Conversion Stock constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act, and from the qualification
requirements of applicable state or other securities laws.
-7-
<PAGE>
3.19 Material Contracts and Obligations. Set forth in Exhibit C
----------------------------------
hereto is a list of all agreements, contracts, indebtedness, liabilities and
other obligations to which the Company is a party or by which the Company is
bound that are material to the conduct and operations of its business and
properties, that provide for payments to or by the Company in excess of $50,000,
that relate to any product or technology the Company is developing, or that
involve transactions or proposed transactions between the Company and its
officers or directors. All of such agreements and contracts are valid, binding
and in full force and effect in all material respects, assuming due execution by
the other parties to such agreements and contracts.
3.20 Tax Returns and Payments. The Company has accurately prepared
------------------------
and timely filed all tax returns (foreign, federal, state and local) required to
be filed by it. All taxes shown to be due and payable on said returns, any
assessments received, and all other taxes due and payable by the Company on or
before the date hereof have been paid or will be paid prior to the time they
become delinquent. The federal income tax returns of the Company have not been
audited by the Internal Revenue Service. No deficiency assessment or proposed
adjustment of the Company's foreign or federal income tax or state or local
taxes is pending and the Company has no knowledge of any proposed liability for
any tax to be imposed upon its properties or assets for which the Company has
not adequately reserved.
3.21 Related Party Transactions. No officer or director of the
--------------------------
Company (a) is an officer, director or general partner of, or directly or
indirectly owns beneficially more than 5% of the equity of, any business which
(i) furnishes or sells services or products which compete with services or
products furnished or sold by the Company, or (ii) purchases from or sells or
furnishes to the Company any goods or services on terms less favorable than the
Company could obtain from third parties, or (b) has a beneficial interest in any
contract or agreement to which the Company is a party or by which it may be
bound or affected involving the payment or receipt of in excess of $10,000.
3.22 Certain Transactions. Except as set forth on Exhibit C attached
--------------------
hereto, the Company is not indebted, directly or indirectly, to any of its
officers, directors or shareholders or to their respective spouses or children,
in any amount whatsoever; none of such officers, directors, or shareholders, or
any members of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company has a business relationship, or any firm or corporation that competes
with the Company. No officer, director or shareholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.23 Environmental Protection. Except as disclosed in Exhibit C:
------------------------
(a) The Company has not caused or allowed, nor has the Company
contracted with any party for, the generation, use, transportation, treatment,
storage or disposal of
-8-
<PAGE>
any Hazardous Substances (as defined below) in connection with the operations of
its business or otherwise.
(b) The Company, the operations of its business, and any real
property that the Company owns, leases, or otherwise occupies or uses (the
"Premises") are in compliance with all applicable Environmental Laws (as defined
below) and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws including, without limitation, any
Environmental Laws or orders or directives with respect to any cleanup or
remediation of any release or threat of release of Hazardous Substances.
(c) The Company has not received any citation, directive, letter
or other communication, written or oral, or any notice of any proceedings,
claims or lawsuits, from any person, entity or governmental authority arising
out of the ownership or occupation of the Premises, or the conduct of its
operations, nor is it aware of any basis therefor.
(d) The Company has obtained and is maintaining in full force and
effect all necessary permits, licenses and approvals required by any
Environmental Laws applicable to the Premises and the business operations
conducted thereon (including operations conducted by tenants on the Premises)
and is in compliance with all such permits, licenses and approvals.
(e) The Company has not caused, or allowed a release, or a threat
of release, of any Hazardous Substance unto, at or near the Premises nor, to the
best of the Company's knowledge, has the Premises or any property at or near the
Premises ever been subject to a release, or a threat of release, of any
Hazardous Substance.
The term "Environmental Laws" shall mean any federal, state or local
law, ordinance or regulation pertaining to the protection of human health or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, 42 U.S.C. Sections 9601, et seq.,
Emergency Planning and Community Right-to-Know Act, 42 U.S.C. Sections 11001, et
seq., and the Resource Conservation and Recovery Act, 42 U.S.C. Sections 6901,
et seq.
The term "Hazardous Substance" includes oil and petroleum products,
asbestos, polychlorinated biphenyls and urea formaldehyde, and any other
materials classified as hazardous or toxic under any Environmental Laws.
3.24 Brokers or Finders. The Company has not incurred, directly or
------------------
indirectly, any liability for brokerage or finders' fees, agent's commission, or
other similar charges in connection with this Agreement or any of the
transactions contemplated hereby.
3.25 Changes. Since March 31, 1995, there has not been:
-------
(a) any changes in the assets, liabilities, financial condition
or operating
-9-
<PAGE>
results of the Company from that reflected in the Financial Statements, except
changes in the ordi nary course of business which have not been, in the
aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
subject;
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect the assets,
properties, financial condition, operating results or business of the Company
(as such business is presently conducted and as it is proposed to be conducted).
3.26 Foreign Investment in Real Property Act. The Company is not a
---------------------------------------
"United States real property holding corporation" for the purposes of Section
897(c)(2) of the Internal Revenue Code of The United States of America and the
Treasury Regulations thereunder ("FIRPTA").
3.27 Disclosure. No statement by the Company contained in the
----------
Financing Agreements, nor any written statement or certificate furnished or to
be furnished to the Purchaser in connection with the transactions contemplated
hereby including without limitation the Business Plan (when read with other
documents so furnished) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made except that, with respect to the financial projections
contained in the Business Plan, the Company only represents that such
projections where made in good faith.
4. Representations and Warranties of the Purchasers. Each Purchaser,
------------------------------------------------
severally and not jointly, represents and warrants to the Company with respect
to the purchase of the Shares as
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<PAGE>
follows:
4.1 Authorization. All action on the part of the Purchaser necessary
-------------
for the authorization, execution, delivery and performance by the Purchaser of
the Financing Agreements has been taken, and the Financing Agreements when
executed and delivered by the Purchaser will constitute valid and binding
obligations of the Purchaser, enforceable in accordance with their terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditor's rights
and, with respect to the Amended Registration Rights Agreement, except as the
enforceability of Section 7 thereof may be limited by public policy.
4.2 Experience. The Purchaser is experienced in evaluating and
----------
investing in new high technology companies such as the Company.
4.3 Investment. The Purchaser is acquiring the Shares for
----------
investment, for its own account, and not with a view to, or for resale in
connection with, any distribution. The Purchaser understands that the Shares
have not been, and will not be (except as contemplated in the Amended
Registration Rights Agreement) registered under the Securities Act or applicable
state or other securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state and other
securities laws which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein.
4.4 Rule 144. The Purchaser acknowledges that the Shares must be
--------
held indefinitely unless subsequently registered under the Securities Act and
applicable state and other securities laws or unless an exemption from such
registration is available. The Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions.
4.5 No Public Market. The Purchaser understands that no public
----------------
market now exists for the Shares or the Conversion Stock and that it is unlikely
that a public market will ever exist for the Shares.
4.6 Access to Data. The Purchaser has had an opportunity to discuss
--------------
the Company's business, management and financial affairs with the Company's
management and an opportunity to review the Company's facilities. The Purchaser
understands that such discussions, as well as the written information issued by
the Company, were intended to describe the aspects of the Company's business and
prospects which it believes to be material but were not necessarily a thorough
or exhaustive description.
4.7 Further Limitations on Dispositions. Without in any way limiting
-----------------------------------
the representations set forth above, the Purchaser further agrees that, if at
the time of any transfer of any Shares or Conversion Stock, such Shares or
Conversion Stock shall not be registered under the Securities Act, prior to any
disposition of all or any portion of the Shares or Conversion Stock, the
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<PAGE>
Company may require, as a condition of allowing such transfer, that the holder
or transferee furnish to the Company (i) such information as is necessary in
order to establish that such transfer may be made without registration under the
Securities Act; and (ii) at the expense of the holder or transferee, an opinion
by legal counsel designated by such holder or transferee and reasonably
satisfactory in form and substance to the Company, to the effect that such
transfer may be made without registration under the Securities Act.
Notwithstanding the foregoing, no such opinion of counsel shall be necessary for
a transfer pursuant to Rule 144 of the Securities and Exchange Commission or by
a Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or to any person or entity that is deemed
to be an "affiliate" of the Purchaser for purposes of the Securities Act.
5. Conditions to Purchasers' Obligations at the Closing. The Purchasers'
----------------------------------------------------
obligation to purchase the Shares at the First Closing or any Subsequent is
subject to the fulfillment on or prior to the Closing Date of each of the
following conditions, any of which may be waived in whole or in part by a
majority-in-interest of the Purchasers.
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on and as of the same date.
5.2 Covenants. All covenants, agreements, and conditions in this
---------
Agreement required to be performed or complied with by the Company on or prior
to the Closing Date shall have been performed or complied with by the Company.
5.3 Opinion of Counsel. The Purchasers shall have received from
------------------
Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, an opinion letter
dated as of the Closing Date, substantially in the form attached hereto as
Exhibit D.
5.4 Permits. All governmental and third party approvals, permits,
-------
licenses and waivers necessary or appropriate for consummation of the
transactions to be consummated at the First Closing Date shall have been
obtained.
5.5 Amended and Restated Articles of Incorporation. The Company
----------------------------------------------
shall have filed the Articles with the Secretary of State of the State of
California on or prior to the Closing Date.
5.6 Good Standing Certificates. The Company shall have delivered a
--------------------------
Certificate dated as of a recent date issued by the Secretary of State of the
State of California to the effect that the Company is legally existing and in
good standing and a letter dated as of a recent date from the Franchise Tax
Board of the State of California to the effect that the Company is in good
standing.
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<PAGE>
5.7 Officer's Certificate. The Company shall have delivered a
---------------------
certificate or certificates, executed by the Chief Executive Officer or the
President of the Company, dated the Closing Date, certifying to the fulfillment
of the conditions specified in Sections 5.1, 5.2, and 5.4 of this Agreement.
5.8 Secretary's Certificate. The Company shall have delivered a
-----------------------
certificate executed by the Secretary or Assistant Secretary of the Company
dated the Closing Date, certifying the following matters: (a) the resolutions
adopted by the Company's Board of Directors and shareholders relating to the
transactions contemplated by this Agreement; (b) the Articles of the Company;
(c) the Bylaws of the Company; and (d) incumbency of officers of the Company.
5.9 Stock Certificate. The Company shall have delivered to each
-----------------
Purchaser a certificate for the number of Shares set forth opposite such
Purchaser's name on Schedule A hereto.
5.10 Legal Investment. At the Closing Date, the purchase of the
----------------
Shares by the Purchasers hereunder shall be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.
5.11 Shareholders Agreement. The Company and the Purchasers shall
----------------------
have entered into the Amended Shareholders Agreement.
5.12 Registration Rights Agreement. The Company and the Purchasers
-----------------------------
shall have entered into the Amended Registration Rights Agreement substantially
in the form attached hereto as Exhibit E.
6. Conditions to Company's Obligations at the Closing. The Company's
--------------------------------------------------
obligation to issue, sell and deliver the Shares at the First Closing or any
Subsequent is subject to the fulfillment at or prior to the Closing Date of the
following conditions, any of which may be waived in whole or in part by the
Company in accordance with the provisions of Section 7.2 hereof:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Purchasers in Section 4 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date with the same force
and effect as if they had been made on or as of the same date.
6.2 Permits. All governmental and third party approvals, permits,
-------
licenses and waivers necessary or appropriate for consummation of the
transactions to be consummated at such Closing shall have been obtained.
6.3 Amended and Restated Articles. The Articles shall have been
-----------------------------
filed with the Secretary of State of the State of California.
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<PAGE>
6.4 Payment of the Purchase Price. The Purchasers shall have
-----------------------------
delivered to the Company the purchase price for the Shares to be purchased
hereby.
7. Miscellaneous.
--------------
7.1 Attorneys' Fees. If either the Company or the Purchasers bring
---------------
any suit, action, counterclaim, or arbitration to enforce the provisions of this
Agreement, the prevailing party therein shall be entitled to recover a
reasonable allowance for attorneys' fees and litigation expenses in addition to
court costs. "Prevailing Party" within the meaning of this section includes,
without limitation, a party who agrees to dismiss an action or proceeding upon
the other party's payment of the sums allegedly due or performance of the
covenants allegedly breached, or who obtains substantially the relief sought by
it.
7.2 Waivers and Amendments. With the written consent of the holders
----------------------
of two-thirds of the Shares, the obligations of the Company under this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely), and with the same consent, the Company, when authorized by
resolution of its Board of Directors, may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement.
7.3 Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
7.4 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
7.5 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
7.6 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof.
7.7 Severability of this Agreement. In case any provision of this
------------------------------
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
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<PAGE>
7.8 Finder's Fees. The Company represents and warrants that it has
-------------
retained no finder or broker in connection with the transactions contemplated by
this Agreement and hereby agrees to indemnify and to hold the Purchasers
harmless of and from any liability for commission or compensation in the nature
of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible. Each
Purchaser represents and warrants that such Purchaser has retained no finder or
broker in connection with the transactions contemplated by this Agreement and
hereby agrees to indemnify and to hold the Company harmless of and from any
liability for any commission or compensation in the nature of a finder's fee to
any broker or other person or firm (and the costs and expenses of defending
against such liability or asserted liability) for which such Purchaser, or any
of its employees or representatives, are responsible.
7.9 Legends. Each certificate representing the Shares shall be
-------
endorsed with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHE CATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE ACT, OR
THE COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT
AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
Each certificate representing the Shares shall also bear any legend required by
any applicable state securities law. The Company need not register a transfer of
Shares, unless the conditions specified in the foregoing legends are satisfied.
The Company may also instruct its transfer agent not to register the transfer of
any of the Shares unless the conditions specified in the foregoing legend is
satisfied.
7.10 Removal of Legends and Transfer Restrictions. The legend
--------------------------------------------
relating to the Securities Act endorsed on a stock certificate pursuant to
Section 8.9 of this Agreement and the stop transfer instructions with respect to
the Shares represented by such certificate shall be removed and the Company
shall issue a certificate without such legend to the holder of such Shares if
such Shares are registered under the Securities Act and a prospectus meeting the
requirements of Section 10 of the Securities Act is available or if such holder
provides to the Company an opinion of counsel reasonably satisfactory to the
Company to the effect that a public sale, transfer or assignment may be made
without registration or if the Shares may be sold pursuant to Rule 144(k) of the
Securities Act of 1933.
7.11 Titles and Subtitles. The titles of the sections and subsections
--------------------
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
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<PAGE>
7.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be an original, but all of which together shall constitute
one instrument.
7.13 Delays or Omissions. It is agreed that no delay or omission to
-------------------
exercise any right, power or remedy accruing to the Purchasers, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by any Purchaser of any breach or default under this
Agreement, or any waiver by any Purchaser of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to the Purchasers, shall be
cumulative and not alternative.
7.14 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon deposit with the United Stated Post Office, by
first class mail, postage prepaid, addressed: (a) if to a Purchaser, at such
Purchaser's address set forth on Schedule A attached hereto, or at such other
address as such Purchaser shall have furnished to the Company in writing, or (b)
if to the Company, at the Company's address as set forth below, or at such other
address as the Company shall have furnished to the Purchaser in writing:
To the Company:
--------------
QuickLogic Corporation
2933 Bunker Hill Lane, Ste. 100A
Santa Clara, CA 95054
Attn: President
7.15 Transaction Fees and Expenses. The Company shall pay the
-----------------------------
reasonable fees and costs of the Purchasers' special counsel, in connection with
the transactions contemplated by this Agreement; provided, however, that the
Company shall not be obligated to pay fees incurred by Purchasers' special
counsel in excess of $__________.
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
THE COMPANY:
QUICKLOGIC CORPORATION
By /s/
______________________________
Title___________________________
"Purchaser"
________________________________
Print Individual or Entity Name
By: /s/
_____________________________
Signature
________________________________
Print Signatory's Name
________________________________
Title of Agent*
* Agent, officer, partner
trustee, etc.
-17-
<PAGE>
SCHEDULE A
----------
Schedule of Purchasers
----------------------
<TABLE>
<CAPTION>
NAME/ADDRESS NUMBER PURCHASE
- ------------ OF PRICE
SHARES -----------------------
OF ACCRUED
STOCK CASH PRINCIPAL INTEREST TOTAL
------ ---- --------- -------- -----
<S> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT C
QUICKLOGIC CORPORATION
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE OF EXCEPTIONS
The disclosures set forth in this Schedule of Exceptions are itemized to
correspond to the first or principal section of the QuickLogic Corporation
Series E Preferred Stock Purchase Agreement (the "Agreement") to which they
relate. Each of the disclosures made herein shall qualify each of the sections
of the Agreement to which they relate.
Section 3.4 Capitalization
--------------
The Company has authorized 175,000 shares of Series C Preferred Stock in
order to enable the Company to issue Preferred Stock Warrants to banks and/or
equipment lessors in connection with debt financing which may be provided by
such entities.
Section 3.7 Title to Properties; Liens and Encumbrances.
-------------------------------------------
The Company owns no real property. The Company has leased certain office
and manufacturing equipment used in its business and does not own such
equipment. The aggregate value of such equipment is approximately $500,000.
Section 3.8 Intellectual Property Rights.
----------------------------
With respect to the representation that the Company has the unrestricted
right to use all trade secrets, including know-how, inventions, design processes
and technical data, the Company has not conducted an investigation or audit of
its or third parties' intellectual property rights or its or third parties'
proprietary rights, nor has it retained patent counsel for that purpose. The
exceptions to the representations contained in Section 3.8 that the Company is
currently aware are set forth below, however the Company's business is in a
field where intellectual property litigation is frequent. Additional claims
and/or litigation maybe brought.
Licenses.
--------
The Company has granted certain technology license rights and manufacturing
rights to VLSI Technology, Inc. ("VLSI") pursuant to an agreement dated May 9,
1990, as amended (the "VLSI" Agreement"). The Company has granted certain
technology license rights and manufacturing rights to Cypress Semiconductor
Corp. ("Cypress") pursuant to an agreement dated October 2, 1992 (the "Cypress
Agreement").
<PAGE>
Actel Litigation.
----------------
On January 20, 1994, Actel Corporation filed suit against QuickLogic
alleging infringement by QuickLogic of U.S. Patents No. 4,758,745; 4,873,459;
5,055,718; and 5,198,705. Plaintiff seeks damages and injunctive relief. On or
about February 10, 1994, QuickLogic filed an answer and counter-claim seeking in
the counter-claim a declaration that each of the patents alleged to be infringed
was not infringed and in addition that each of the patents upon which suit was
brought was invalid, void and unenforceable. Discovery has begun. QuickLogic
moved to stay proceedings pending reexamination of two patents involved in the
litigation and the court granted this motion in early Summer 1994. The United
States Patent and Trademark Office confirmed the patentability of the two Actel
patents placed in reexamination (the '745 and the '459 patents) in late summer
and early fall 1994. The court then lifted the stay in late November 1994 and
shortly thereafter Actel filed a motion for summary judgment with respect to
claim 1 of the '718 patent. QuickLogic has opposed Actel's motion. The court
has scheduled a two hour tutorial on the technology for June 30, 1995. No
hearing has been set for the summary judgment motion.
Actel on or about March 15, 1995 amended its complaint to add to the suit
U.S. Patent No. 5,367,208 (the "'208 patent"), a patent which issued on November
22, 1994 and which is assigned to Actel. On or about April 12, 1995, QuickLogic
filed a counterclaim against Actel alleging infringement by Actel of QuickLogic
U.S. Patents No. 5,220,213 (the "'213 patent") entitled "Programmable
Application in Specific Integrated Circuit and Logic Cell Therefore" and
5,396,127 (the "'127 patent"), entitled "Programmable Application in Specific
Integrated Circuit and Logic Cell Therefore". This counterclaim was in response
to the amended complaint filed by Actel against QuickLogic on or about March 15,
1995.
A trial date has been set for September 23, 1996.
Instant Circuit Corporation.
---------------------------
The Company has received correspondence from Instant Circuit Corporation
"ICC") alleging that the Company's technology may infringe one or more of ICC's
patents. The Company and its patent counsel have reviewed the ICC patents and
have notified ICC that the Company does not believe that the Company's
technology infringes ICC's patents. ICC has responded by letter dated February
5, 1992 reiterating its belief that the Company's products infringe ICC's
patents, but indicating ICC's intent to wait to see whether the Company's
products are successful in the marketplace before pursuing the matter.
On June 12, 1992, the Company received a letter from Xilinx requesting the
Company to review Xilinx's patent 4,870,302 entitled "Configurable Electrical
Circuit Having Configurable Logic Elements and Configurable Interconnects" and
stating Xilinx's belief that at least one claim under that patent is infringed
by the Company's products. No litigation has been instituted by Xilinx, and
there has been no correspondence between the Company and Xilinx regarding this
matter during the year preceding the Closing Date. While the Company does not
believe that there is any basis for a legal claim by Xilinx,
<PAGE>
there can be no assurance that Xilinx will not elect to take further legal
action in the future. Such legal action, if instituted, could have a material
adverse effect on the Company's business.
See disclosure under Section 3.9.
Section 3.9 Proprietary Information Agreements.
----------------------------------
Actel has claimed that QuickLogic has misappropriated the trade secrets of
Actel based, at least in part, upon the fact that John Birkner, a founder of
QuickLogic, performed consulting services for Actel prior to and allegedly after
joining the Company.
Section 3.11 Manufacturing, Distribution and License Rights.
----------------------------------------------
The Company has granted certain rights to VLSI and Cypress pursuant to the
VLSI Agreement and the Cypress Agreement, respectively.
Section 3.13 Litigation
----------
See the discussion of the Actel, Xilinx and ICC and other issued discussed
in Section 3.8 above.
Section 3.19 Material Contracts and Obligations.
----------------------------------
The following is a list of all agreements and obligations described in
Section 3.19:
1. VLSI Agreement.
2. The Company subleases its facility at 2933 Bunker Hill Lane. Its
current lease is due to expire on December 31, 1996.
3. Software OEM Distribution Agreement with Data I/O, Inc. pursuant
to which the Company obtained rights to sublicense certain Data I/O software on
an OEM basis. The Company is required to make annual royalty payments of up to
$100,000 to Data I/O pursuant to this Agreement.
4. Employee Restricted Stock Purchase Agreements between the Company
and each of the founders and option agreements with persons who have been
granted options.
5. Cypress Agreement.
The Company also has outstanding miscellaneous licensing agreement with
entities including Synopsis, Simplicity, SimulCad, Saros, and Premia. None of
these agreements currently involve annual payment obligations in excess of
$50,000.
-3-
<PAGE>
Section 3.21 Related Party Transactions. The Company has entered into
---------------------------
the Cypress
Agreement with Cypress. See also Section 3.22 below regarding loans to John
Birkner and from certain shareholders of the Company.
Section 3.22 Certain Transactions.
--------------------
The Company has loaned John Birkner $114,000, evidenced by demand
promissory notes from Mr. Birkner to the Company secured by a pledge of Mr.
Birkner's shares of the Company's stock. These loans were approved by the
Company's Board of Directors and shareholders.
The Company has obtained loans with a principal amount of approximately
$4.639 million from certain entities, including certain shareholders of the
Company, evidenced by promissory notes made by the Company. The Company expects
all such promissory notes to be converted into Series E Preferred Stock of the
Company pursuant to this Agreement.
-4-
<PAGE>
EXHIBIT 10.8
================================================================================
QUICKLOGIC CORPORATION
Series F Preferred Stock
Purchase Agreement
November 27, 1996
<PAGE>
================================================================================
TABLE OF CONTENTS
PAGE
----
1. Authorization and Sale of Preferred Stock............................... 1
1.1 Authorization..................................................... 1
1.2 Sale of the Shares................................................ 1
1.3 Sale of Additional Series F Preferred............................. 1
2. Closing Date; Delivery.................................................. 1
2.1 First Closing Date................................................ 1
2.2 Delivery.......................................................... 2
2.3 Subsequent Closing................................................ 2
2.4 Minimum Closing Amount............................................ 2
3. Representations and Warranties of the Company........................... 2
3.1 Organization and Standing; Articles of Incorporation and Bylaws... 2
3.2 Corporate Power................................................... 2
3.3 No Subsidiaries................................................... 3
3.4 Capitalization.................................................... 3
3.5 Authorization..................................................... 4
3.6 Financial Statements.............................................. 4
3.7 Title to Properties; Liens and Encumbrances....................... 5
3.8 Intellectual Property Rights...................................... 5
3.9 Proprietary Information Agreements................................ 5
3.10 Operating Rights.................................................. 6
3.11 Manufacturing, Distribution and License Rights.................... 6
3.12 Compliance with Other Instruments, None Burdensome, etc........... 6
3.13 Litigation, etc................................................... 7
3.14 Employee Compensation Plans....................................... 7
3.15 Insurance......................................................... 7
3.16 Registration Rights............................................... 7
3.17 Governmental Consent, etc......................................... 7
3.18 Offering.......................................................... 8
3.19 Material Contracts and Obligations................................ 8
3.20 Tax Returns and Payments.......................................... 8
3.21 Related Party Transactions........................................ 8
-1-
<PAGE>
3.22 Certain Transactions.............................................. 9
3.23 Environmental Protection.......................................... 9
3.24 Brokers or Finders................................................10
3.25 Changes...........................................................10
3.26 Foreign Investment in Real Property Act...........................11
3.27 Disclosure........................................................11
4. Representations and Warranties of the Purchasers........................11
4.1 Authorization.....................................................11
4.2 Experience........................................................11
4.3 Investment........................................................11
4.4 Rule 144..........................................................11
4.5 No Public Market..................................................12
4.6 Access to Data....................................................12
4.7 Further Limitations on Dispositions...............................12
5. Conditions to Purchasers' Obligations at the Closing....................12
5.1 Representations and Warranties Correct............................12
5.2 Covenants.........................................................13
5.3 Opinion of Counsel................................................13
5.4 Permits...........................................................13
5.5 Amended and Restated Articles of Incorporation....................13
5.6 Good Standing Certificates........................................13
5.7 Officer's Certificate.............................................13
5.8 Secretary's Certificate...........................................13
5.9 Stock Certificate.................................................13
5.10 Legal Investment..................................................13
5.11 Shareholders Agreement............................................14
5.12 Registration Rights Agreement.....................................14
6. Conditions to Company's Obligations at the Closing......................14
6.1 Representations and Warranties Correct............................14
6.2 Permits...........................................................14
6.3 Amended and Restated Articles.....................................14
6.4 Payment of the Purchase Price.....................................14
7. Miscellaneous...........................................................14
-2-
<PAGE>
7.1 Attorneys' Fees...................................................14
7.2 Waivers and Amendments............................................14
7.3 Governing Law.....................................................15
7.4 Survival..........................................................15
7.5 Successors and Assigns............................................15
7.6 Entire Agreement..................................................15
7.7 Severability of this Agreement....................................15
7.8 Finder's Fees.....................................................15
7.9 Legends...........................................................15
-3-
<PAGE>
SCHEDULES AND EXHIBITS
Schedule A Schedule of Purchasers
Exhibit A Amended and Restated Articles of Incorporation
Exhibit B Fifth Amended and Restated Shareholders Agreement
Exhibit C Fifth Amended and Restated Registration Rights Agreement
Exhibit D Schedule of Exceptions
Exhibit E Opinion of Wilson, Sonsini, Goodrich & Rosati
-4-
<PAGE>
QUICKLOGIC CORPORATION
SERIES F PREFERRED STOCK
------------------------
PURCHASE AGREEMENT
------------------
This SERIES F PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is made as of
November 27, 1996 by and among QuickLogic Corporation, a California corporation
(the "Company"), and the persons and entities listed on Schedule A hereto (the
"Purchasers").
In consideration of the mutual promises, representations, warranties, covenants,
and conditions set forth in this Agreement, the parties to this Agreement
mutually agree as follows:
1. Authorization and Sale of Preferred Stock.
------------------------------------------
1.1 Authorization. The Company has authorized the issuance and sale
-------------
of up to 9,482,759 shares of its Series F Preferred Stock ("Series F Preferred")
having the rights, preferences, and privileges set forth in the Amended and
Restated Articles of Incorporation (the "Restated Articles") of the Company,
attached hereto as Exhibit A. The aggregate shares of common stock issuable
upon conversion of the shares of Series F Preferred are referred to in this
Agreement as the "Conversion Stock."
1.2 Sale of the Shares. Subject to the terms and conditions hereof,
------------------
at the First Closing (as defined in Section 2.1 hereof) and the Subsequent
Closing (as defined in Section 2.3 hereof), the Company will issue and sell to
each Purchaser, and each Purchaser will purchase from the Company the number of
shares of Series F Preferred (the "Shares") specified opposite the name of such
Purchaser on Schedule A hereto at a purchase price of $1.16 per share. The
Company's agreement with each Purchaser hereunder is a separate agreement and
the sale of the Shares to each Purchaser is a separate sale.
1.3 Sale of Additional Series F Preferred. The Company shall have
-------------------------------------
until December 15, 1996 to sell any Shares not sold at the First Closing (as
defined below) at a purchase price of $1.16 per share. Any such shares sold
after the First Closing are referred to herein as "Additional Shares." The
Additional Shares shall be considered "Shares," and the purchasers of such
Additional Shares (the "Additional Purchasers") shall be considered "Purchasers"
for purposes of this Agreement and shall have the same rights and obligations as
if they had purchased their shares pursuant to this Agreement at the First
Closing. The maximum number of Shares the Company may sell under this Agreement
is 9,482,759. In the event that said maximum number of shares are not sold and
issued on or before December 15, 1996, the Company will promptly take all
necessary action to amend the Articles to reduce the authorized number of shares
to the number of shares sold on or before such date.
2. Closing Date; Delivery.
-----------------------
2.1 First Closing Date. The closing of the purchase and sale of the
------------------
Shares
<PAGE>
hereunder (the "First Closing") shall be held at the law offices of Wilson,
Sonsini, Goodrich & Rosati, 650 Page Mill Road, Palo Alto, California 94304 at
2:00 p.m. on November 27, 1996, or at such other time, date or place that the
Company and the Purchasers shall agree (which time and date are referred to in
this Agreement as the "First Closing Date").
2.2 Delivery. Subject to the terms of this Agreement, at the First
--------
Closing the Company shall deliver to each Purchaser a certificate, registered in
such Purchaser's name, representing the number of Shares, designated on
Schedule A hereto, to be purchased by such Purchaser against payment of the
purchase price for the Shares by check or wire transfer of immediately avail
able funds, or by a combination of such methods of payment.
2.3 Subsequent Closings. The purchase and sale of any Additional
-------------------
Shares shall be held at a time and place to be agreed upon by the Company and a
majority-in-interest of the Additional Purchasers purchasing at such closing
(a "Subsequent Closing"), but no later than December 15, 1996. At each
Subsequent Closing, the Company shall deliver to each Additional Purchaser
purchasing at such closing the certificates representing the Additional Shares
which such Additional Purchaser is purchasing against delivery to the Company by
such Additional Purchaser of the purchase price therefor by check or wire
transfer payable to the Company, in the amount specified the appropriate revised
Schedule A. The Company and each Additional Purchaser shall execute and deliver
signature pages to this Agreement.
2.4 Minimum Closing Amount. The Company shall not sell any Shares at
----------------------
the First Closing if the aggregate amount to be sold at such closing does not
equal $8,100,000 (6,982,759 Shares) or more.
3. Representations and Warranties of the Company. Except as set forth on
---------------------------------------------
the Schedule of Exceptions attached hereto as Exhibit D, the Company hereby
represents and warrants to each Purchaser as follows:
3.1 Organization and Standing; Articles of Incorporation and Bylaws.
---------------------------------------------------------------
The Company is a corporation duly organized and validly existing under, and by
virtue of, the laws of the State of California, is in good standing under such
laws and is authorized to exercise all of its corporate powers, rights and
privileges. The Company has the requisite legal and corporate power and
authority to own, lease and operate its properties and assets and to conduct its
business as presently conducted and as proposed to be conducted. The Company is
qualified to do business as a foreign corporation in each jurisdiction where the
failure to be so qualified would have a material adverse effect on the business
of the Company as now conducted or as proposed to be conducted. True, correct
and complete copies of the Company's Articles, Bylaws and other charter
documents, each as will be in effect at the Closing have been delivered to each
Purchaser.
3.2 Corporate Power. The Company has the requisite legal and
---------------
corporate power to execute and deliver the Agreement, the Fifth Amended and
Restated Shareholders Agreement in substantially the form attached hereto as
Exhibit B (the "Amended Shareholders Agreement") and the Fifth Amended and
Restated Registration Rights Agreement in substantially the form attached
hereto as Exhibit C (the "Amended Registration Rights Agreement") (the
Agreement, Amended
-2-
<PAGE>
Shareholders Agreement and the Amended Registration Rights Agreement are
hereafter collectively referred to as the "Financing Agreements"), to file the
Restated Articles with the Secretary of State of California, to issue and sell
the Shares hereunder, to issue the Conversion Stock and to carry out and perform
its obligations under the terms of the Financing Agreements.
3.3 No Subsidiaries. Except as described in Exhibit D, the Company
---------------
has no subsidiaries or affiliated companies and does not otherwise own or
control, directly or indirectly, any equity interest in any other corporation,
partnership, association or other business entity.
3.4 Capitalization. The authorized capital stock of the Company
--------------
consists of 85,000,000 shares of Common Stock (the "Common Stock") and
61,567,874 shares of Preferred Stock (the "Preferred Stock"), 2,505,000 of which
are designated Series A Preferred Stock ("Series A Preferred"), 10,274,637 of
which are designated Series B Preferred Stock ("Series B Preferred"), 12,106,811
of which are designated Series C Preferred Stock ("Series C Preferred"),
3,125,000 of which are designated Series D Preferred ("Series D Preferred"),
23,873,667 of which are designated Series E Preferred Stock ("Series E
Preferred") and 9,482,759 of which are designated Series F Preferred.
Immediately prior to the First Closing Date, 4,785,364 shares of Common Stock,
2,505,000 shares of Series A Preferred, 10,274,637 shares of Series B Preferred,
11,975,561 shares of Series C Preferred, 3,125,000 shares of Series D Preferred
and 23,873,667 shares of Series E Preferred will be issued and outstanding. All
such issued and outstanding shares have been duly authorized and validly issued,
are fully paid and nonassessable, and were issued in compliance with all
applicable federal and state securities laws. The rights, preferences and
privileges of the Preferred Stock are as stated in the Articles. Each share of
Series A Preferred, Series B Preferred, Series C Preferred, Series D Preferred,
Series E Preferred and Series F Preferred is convertible into one share of
Common Stock of the Company (as subject to adjustment pursuant to its terms).
The Company has reserved 61,567,874 shares of Common Stock for issuance upon
conversion of the Preferred Stock. Except for (i) the conversion privileges of
the Preferred Stock, (ii) 14,700,000 shares of Common Stock reserved for
issuance pursuant to the Company's 1989 Stock Option Plan, under which options
to purchase 7,779,789 shares are currently outstanding and 6,920,211 shares
remain available for future grant, (iii) 100,000 shares reserved for issuance
pursuant to the Company's Sales Representative Stock Purchase Plan, (iv) 131,250
shares of Series C Preferred Stock reserved for issuance pursuant to the
exercise of a warrant to purchase Series C Preferred Stock, and (v) the rights
provided in Section 3 of the Amended Shareholders Agreement to the Shareholders
(as defined therein), at the First Closing there will be no other outstanding
rights of first refusal, preemptive rights or other rights, options, warrants,
conversion rights, or other agreements either directly or indirectly for the
purchase or acquisition from the Company of any shares of its capital stock.
3.5 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution, delivery and performance of
-3-
<PAGE>
the Financing Agreements and for the authorization, sale, issuance (or
reservation for issuance) and delivery of the Shares and the Conversion Stock,
and the performance of the Company's obligations under the Financing Agreements
has been taken. The Financing Agreements when executed and delivered by the
Company, will constitute legal, valid and binding obligations of the Company
enforceable against the Company in accordance with their respective terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditors' rights
and, with respect to the Amended Registration Rights Agreement, except as the
enforceability of Section 7 thereof may be limited by public policy. The Shares
and the Conversion Stock, when issued in compliance with provisions of this
Agreement, will be, validly issued, fully paid and nonassessable, and free of
any liens or encumbrances; provided, however, that the Shares and the Conversion
Stock may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein. The Shares and the Conversion Stock will
be, assuming the accuracy of the representations set forth in Section 4 hereof,
issued in compliance with all applicable state and/or federal securities laws.
The Shares and the Conversion Stock are not subject to any preemptive rights or
rights of first refusal except as have been waived or satisfied. Except as
provided in the Amended Shareholders Agreement, the Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or under standing between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company.
3.6 Financial Statements. The Company has delivered to each
--------------------
Purchaser its audited financial statements (balance sheet, and statement of
operations and statement of cash flows and statement of shareholders' equity)
for the years ended December 31, 1995, 1994 and 1993 and its unaudited financial
statements (balance sheet, statement of operations, statement of cash flows and
statement of shareholders' equity) for the ten (10) month period ended October
31, 1996 (collectively, the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis for the periods indicated and with each other. The Financial Statements
accurately set out and describe the financial condition and operating results of
the Company as of the dates, and for the periods, indicated therein, subject, in
the case of the unaudited financial statements, to normal yearend audit
adjustments. Except as set forth in the Financial Statements, the Company has no
liabilities, contingent or otherwise, other than (i) liabilities incurred in the
ordinary course of business and (ii) obligations under contracts and commitments
incurred in the ordinary course of business and not required under generally
accepted accounting principles to be reflected in the Financial Statements,
which, individually or in the aggregate, are not material to the financial
condition or operating results of the Company. The Company maintains and will
continue to maintain a standard system of accounting established and
administered in accordance with generally accepted accounting principles.
3.7 Title to Properties; Liens and Encumbrances. The Company has
-------------------------------------------
good and marketable title to all of its properties and assets. Such properties
and assets are not subject to any
-4-
<PAGE>
mortgage, pledge, lien, security interest, conditional sales agreement,
encumbrance or charge, except liens for current taxes not yet due and payable.
The Company is not in default or in breach and has not received notice of
default of any provision of its leases or licenses and the Company holds valid
leaseholds or licensed interests in the properties which it leases or which is
licensed to it. The Company's properties and assets are in good condition and
repair in all material respects.
3.8 Intellectual Property Rights. Except as disclosed in Exhibit D,
----------------------------
the Company (a) owns or has the right to use, free and clear of all liens,
claims and restrictions, all patents, trade marks, service marks, trade names,
copyrights and other intangible or intellectual property rights (and licenses
with respect to the foregoing) needed for or used in the conduct of its business
as now conducted and as proposed to be conducted without infringing upon or
otherwise acting adversely to the right or claimed right of any person under or
with respect to any of the foregoing, and (b) is not obligated or under any
liability whatsoever to make any payments by way of royalties, fees or otherwise
to any owner of, licensor of, or other claimant to, any patent, trademark, trade
name, copyright or other intangible assets, with respect to the use thereof or
in connection with the conduct of its business or otherwise. Except as disclosed
in Exhibit D, the Company owns or has the unrestricted right to use all patents,
trademarks, service marks, trade names, copyrights, trade secrets, including
knowhow, inventions, designs, processes, and technical data required for or
incident to the development, manufacture, operation and sale of all products and
services sold or proposed to be sold by the Company and all of the patents,
trademarks, service marks, trade names, copyrights and trade secrets of the
Company are held by the Company free and clear of any rights, licenses, liens or
claims of others, including, without limitation, current and former employees,
former employers of all current and former employees, consultants, officers,
directors and shareholders of the Company.
3.9 Proprietary Information Agreements. All employees and
----------------------------------
consultants of the Company are parties to a written agreement ("Proprietary
Information and Inventions Agreement") under which each such employee or
consultant (i) is obligated to disclose and transfer to the Com pany, without
the receipt by such person of any additional value therefor (other than normal
salary or fees for consulting services), all inventions, developments and
discoveries which, during the period of his employment with or performance of
services for the Company, he makes or conceives of either solely or jointly with
others, that relate to any subject matter with which his work for the Company
may be concerned, or relate to or are connected with the business, products or
projects of the Company, or involve the use of the time, material or facilities
of the Company, and (ii) is obligated to maintain the confidentiality of
proprietary information of the Company. To the best of the Company's knowledge,
none of the Company's employees or consultants, are in violation of the
Proprietary Information and Inventions Agreement to which such employee or
consultant is a party. None of the Company's employees or consultants are
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would conflict with their obligation to
use their best efforts to promote the interests of the Company or that would
conflict with the Company's
-5-
<PAGE>
business as conducted or as proposed to be conducted. Neither the execution nor
delivery of the Financing Agreements, nor the carrying on of the Company's
business by its employees and con sultants, nor the conduct of the Company's
business as proposed, will conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees or consultants are now
obligated. The Company does not believe it is or will be necessary to utilize,
and will not utilize, any inventions of any of the Company's employees or
consultants (or people it currently intends to hire) made or owned prior to
their employment by the Company or that it is or will be necessary to utilize
any other assets or rights of any of its employees or consultants (or people it
currently intends to hire) made or owned prior to their employment with or
engagement by the Company, in violation of any limitations or restrictions to
which any such employee or consultant is a party or to which any of such assets
or rights may be subject. To the best of the Company's knowledge, none of the
Company's employees or consultants, have taken, removed or made use of any
proprietary documentation, manuals, products, materials, or any other tangible
item from his previous employer, and the Company will not make use of any such
proprietary items in the business of the Company.
3.10 Operating Rights. The Company has all operating authority,
----------------
licenses, franchises, permits, certificates, consents, rights and privileges
(collectively, the "Permits") as are necessary or appropriate to the operation
of its business as now or as proposed to be conducted, the absence of which
would have a material and adverse effect on the business of the Company. Such
Permits are in full force and effect, no violations have been or are expected to
be recorded in respect of any such Permits, and no proceeding is pending or
threatened that could result in the revocation or limitation of any of such
Permits. The Company has conducted its business so as to comply in all respects
with all such material Permits.
3.11 Manufacturing, Distribution and License Rights. The Company has
----------------------------------------------
not granted rights or licenses to manufacture, assemble, distribute or sell its
products to any person or entity, is not bound by any agreement that affects the
Company's exclusive right to manufacture, assemble, distribute or sell its
products, and has not licensed or sold any of its technology or proprietary
information to any person or entity.
3.12 Compliance with Other Instruments, None Burdensome, etc. The
-------------------------------------------------------
Company is not in violation of any term of its Articles or Bylaws. The Company
is not in violation of any term or provision of any material mortgage,
indenture, contract, agreement, instrument, judgment or decree and the Company
is not in violation of any applicable order, statute, rule or regulation where
such violation could have a material and adverse effect on the Company. The
execution, delivery and performance of and compliance with this Agreement and
the other Financing Agreements and the issuance of the Shares and the Conversion
Stock have not resulted and will not result in any violation of or conflict with
the Company's Articles or Bylaws, and have not resulted and will not result in
any violation of, or be in conflict with, or constitute a default under, or
result in the creation
-6-
<PAGE>
of, any mortgage, pledge, lien, encumbrance or charge upon any of the properties
or assets of the Company; and there is no such violation or default or event
which, with the passage of time or giving of notice or both, would constitute a
violation or default which would materially and adversely affect the business of
the Company or any of its properties or assets.
3.13 Litigation, etc. Except as disclosed in Exhibit D, there are no
---------------
actions, suits proceedings or investigations pending against the Company or its
properties before any court or governmental agency (nor is there any threat
thereof) which, either in any case or in the aggregate, might result in any
material adverse change in the business or financial condition of the Company or
any of its properties or assets, or in any material impairment of the right or
ability of the Company to carry on its business as now conducted or as proposed
to be conducted, or in any material liability on the part of the Company, and
none which questions the validity of this Agreement and the other Financing
Agreements or any action taken or to be taken in connection herewith or
therewith. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or governmental agency
or instrumentality. The foregoing includes, without limitation, actions pending
or threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with the
Company's business of any information or techniques allegedly proprietary to any
of their former employers, or their obligations under any agreement with prior
employers. There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
3.14 Employee Compensation Plans. Except for the Company's 1989
---------------------------
Stock Option Plan and 1991 Sales Representative Stock Purchase Plan, the Company
is not a party to or bound by any currently effective employment contract,
deferred compensation agreement, benefit plan, pension, profit-sharing plan,
stock option, retirement agreement, or other employee compensation agreement.
The Company has provided copies of all such plans, contracts, and agreements to
which the Company is currently a party. The Company is not bound by or subject
to (and none of its assets are bound by or subject to) any arrangement with any
labor union and does not have any collective bargaining agreements covering any
of its employees.
3.15 Insurance. The Company has obtained and maintained in full
---------
force and effect fire, casualty and liability insurance policies with recognized
insurers with such coverages as are carried by similar companies, sufficient
in amount to allow replacement of the tangible properties of the Company that
might be damaged or destroyed.
3.16 Registration Rights. Except as contemplated by this Agreement
-------------------
and the Amended Registration Rights Agreement, the Company is not under any
obligation to register any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.17 Governmental Consent, etc. No consent, approval or
--------------------------
authorization of, or designation, declaration or filing with, any governmental
authority on the part of the Company is
-7-
<PAGE>
required in connection with the valid execution, delivery, and performance of
this Agreement and the other Financing Agreements or the offer, sale or issuance
of the Shares or the Conversion Stock, or the consummation of any other
transaction contemplated by this Agreement and the other Financing Agreements
except certain filings as may be under the Securities Act of 1933, as amended
(the "Securities Act"), the California Corporations Code and the securities laws
of other states in which Purchasers reside.
3.18 Offering. Subject to the accuracy of the Purchaser's
--------
representations in Section 4 hereof, the offer, sale and issuance of the Shares
and the Conversion Stock constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act, and from the qualification
requirements of applicable state or other securities laws.
3.19 Material Contracts and Obligations. Set forth in Exhibit D
----------------------------------
hereto is a list of all agreements, contracts, indebtedness, liabilities and
other obligations to which the Company is a party or by which the Company is
bound that are material to the conduct and operations of its business,
properties and prospects, that provide for payments to or by the Company in
excess of $80,000, that relate to any product or technology the Company is
developing, or that involve transactions or proposed transactions between the
Company and its officers or directors. All of such agreements and contracts are
valid, binding and in full force and effect in all material respects, assuming
due execution by the other parties to such agreements and contracts.
3.20 Tax Returns and Payments. The Company has accurately prepared
------------------------
and timely filed all tax returns (foreign, federal, state and local) required to
be filed by it. All taxes shown to be due and payable on said returns, any
assessments received, and all other taxes due and payable by the Company on or
before the date hereof have been paid or will be paid prior to the time they
become delinquent. The federal income tax returns of the Company have not been
audited by the Internal Revenue Service. No deficiency assessment or proposed
adjustment of the Company's foreign or federal income tax or state or local
taxes is pending and the Company has no knowledge of any proposed liability for
any tax to be imposed upon its properties or assets for which the Company has
not adequately reserved.
3.21 Related Party Transactions. No officer or director of the
--------------------------
Company (a) is an officer, director or general partner of, or directly or
indirectly owns beneficially more than 5% of the equity of, any business which
(i) furnishes or sells services or products which compete with services or
products furnished or sold by the Company, or (ii) purchases from or sells or
furnishes to the Company any goods or services on terms less favorable than the
Company could obtain from third parties on an armslength basis, or (b) has a
beneficial interest in any contract or agreement to which the Company is a party
or by which it may be bound or affected involving the payment or receipt of in
excess of $10,000.
-8-
<PAGE>
3.22 Certain Transactions. Except as set forth on Exhibit D attached
--------------------
hereto, the Company is not indebted, directly or indirectly, to any of its
officers, directors or shareholders or to their respective spouses or children,
in any amount whatsoever; none of such officers, directors, or shareholders, or
any members of their immediate families, are indebted to the Company or have any
direct or indirect ownership interest in any firm or corporation with which the
Company has a business relationship, or any firm or corporation that competes
with the Company. No officer, director or shareholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company. The Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
3.23 Environmental Protection. Except as disclosed in Exhibit D:
------------------------
(a) The Company has not caused or allowed, nor has the Company
contracted with any party for, the generation, use, transportation, treatment,
storage or disposal of any Hazardous Substances (as defined below) in connection
with the operations of its business or otherwise.
(b) The Company, the operations of its business, and any real
property that the Company owns, leases, or otherwise occupies or uses (the
"Premises") are in compliance with all applicable Environmental Laws (as defined
below) and orders or directives of any governmental authorities having
jurisdiction under such Environmental Laws including, without limitation, any
Environmental Laws or orders or directives with respect to any cleanup or
remediation of any release or threat of release of Hazardous Substances.
(c) The Company has not received any citation, directive, letter or
other communication, written or oral, or any notice of any proceedings, claims
or lawsuits, from any person, entity or governmental authority arising out of
the ownership or occupation of the Premises, or the conduct of its operations,
nor is it aware of any basis therefor.
(d) The Company has obtained and is maintaining in full force and
effect all necessary permits, licenses and approvals required by any
Environmental Laws applicable to the Premises and the business operations
conducted thereon (including operations conducted by tenants on the Premises)
and is in compliance with all such permits, licenses and approvals.
(e) The Company has not caused, or allowed a release, or a threat of
release, of any Hazardous Substance onto, at or near the Premises nor, to the
best of the Company's knowledge, has the Premises or any property at or near the
Premises ever been subject to a release, or a threat of release, of any
Hazardous Substance.
The term "Environmental Laws" shall mean any federal, state or local law,
ordinance or regulation
-9-
<PAGE>
pertaining to the protection of human health or the environment including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Sections 9601, et seq., Emergency Planning and
Community Right-to-Know Act, 42 U.S.C. Sections 11001, et seq., and the Resource
Conservation and Recovery Act, 42 U.S.C. Sections 6901, et seq.
The term "Hazardous Substance" includes oil and petroleum products, asbestos,
polychlorinated biphenyls and urea formaldehyde, and any other materials
classified as hazardous or toxic under any Environmental Laws.
3.24 Brokers or Finders. The Company has not incurred, directly or
------------------
indirectly, any liability for brokerage or finders' fees, agent's commission, or
other similar charges in connection with this Agreement or any of the
transactions contemplated hereby.
3.25 Changes. Since October 31, 1996, there has not been:
-------
(a) any changes in the assets, liabilities, financial
condition,operating results or prospects of the Company from that reflected in
the Financial Statements, except changes in the ordinary course of business
which have not been, in the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, pros pects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
(e) any change or amendment to a material contract or arrangement
by which the Company or any of its assets or properties is bound or subject;
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition
of any character which might materially and adversely affect the assets,
properties, financial condition,
-10-
<PAGE>
operating results, propects or business of the Company (as such business is
presently conducted and as it is proposed to be conducted).
3.26 Foreign Investment in Real Property Act. The Company is not a
---------------------------------------
"United States real property holding corporation" for the purposes of Section
897(c)(2) of the Internal Revenue Code of The United States of America and the
Treasury Regulations thereunder ("FIRPTA").
3.27 Disclosure. No statement by the Company contained in the
----------
Financing Agreements, nor any written statement or certificate furnished or to
be furnished to the Purchaser in connection with the transactions contemplated
hereby including without limitation the Business Plan (when read with other
documents so furnished) contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the statements
contained herein or therein not misleading in light of the circumstances under
which they were made except that, with respect to the financial projections
given by the Company, the Company only represents that such projections where
made in good faith.
4. Representations and Warranties of the Purchasers. Each Purchaser,
------------------------------------------------
severally and not jointly, represents and warrants to the Company with respect
to the purchase of the Shares as follows:
4.1 Authorization. All action on the part of the Purchaser necessary
-------------
for the authorization, execution, delivery and performance by the Purchaser of
the Financing Agreements has been taken, and the Financing Agreements when
executed and delivered by the Purchaser will constitute valid and binding
obligations of the Purchaser, enforceable in accordance with their terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting the enforcement of creditor's rights
and, with respect to the Amended Registration Rights Agreement, except as the
enforceability of Section 7 thereof may be limited by public policy.
4.2 Experience. The Purchaser is experienced in evaluating and
----------
investing in new high technology companies such as the Company.
4.3 Investment. The Purchaser is acquiring the Shares for
----------
investment, for its own account, and not with a view to, or for resale in
connection with, any distribution. The Purchaser understands that the Shares
have not been, and will not be (except as contemplated in the Amended
Registration Rights Agreement) registered under the Securities Act or applicable
state or other securities laws by reason of a specific exemption from the
registration provisions of the Securities Act and applicable state and other
securities laws which depends upon, among other things, the bona fide nature of
the investment intent as expressed herein.
-11-
<PAGE>
4.4 Rule 144. The Purchaser acknowledges that the Shares must be
--------
held indefinitely unless subsequently registered under the Securities Act and
applicable state and other securities laws or unless an exemption from such
registration is available. The Purchaser is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions.
4.5 No Public Market. The Purchaser understands that no public
----------------
market now exists for the Shares or the Conversion Stock and that it is unlikely
that a public market will ever exist for the Shares.
4.6 Access to Data. The Purchaser has had an opportunity to discuss
--------------
the Company's business, management and financial affairs with the Company's
management and an opportunity to review the Company's facilities. The Purchaser
understands that such discussions, as well as the written information issued by
the Company, were intended to describe the aspects of the Company's business and
prospects which it believes to be material but were not necessarily a thorough
or exhaustive description.
4.7 Further Limitations on Dispositions. Without in any way limiting
-----------------------------------
the representations set forth above, the Purchaser further agrees that, if at
the time of any transfer of any Shares or Conversion Stock, such Shares or
Conversion Stock shall not be registered under the Securities Act, prior to any
disposition of all or any portion of the Shares or Conversion Stock, the Company
may require, as a condition of allowing such transfer, that the holder or
transferee furnish to the Company (i) such information as is necessary in order
to establish that such transfer may be made without registration under the
Securities Act; and (ii) at the expense of the holder or transferee, an opinion
by legal counsel designated by such holder or transferee and reasonably
satisfactory in form and substance to the Company, to the effect that such
transfer may be made without registration under the Securities Act.
Notwithstanding the foregoing, no such opinion of counsel shall be necessary for
a transfer pursuant to Rule 144 of the Securities and Exchange Commission or by
a Purchaser which is a partnership to a partner of such partnership or a retired
partner of such partnership who retires after the date hereof, or to the estate
of any such partner or retired partner or to any person or entity that is deemed
to be an "affiliate" of the Purchaser for purposes of the Securities Act.
5. Conditions to Purchasers' Obligations at the Closing. The Purchasers'
----------------------------------------------------
obligation to purchase the Shares at the First Closing or any Subsequent Closing
(either, a "Closing") is subject to the fulfillment on or prior to the closing
date for such Closing (a "Closing Date") of each of the following conditions,
any of which may be waived in whole or in part by the Purchasers holding at
least 75% of the shares at such Closing.
-12-
<PAGE>
5.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Company in Section 3 hereof shall be true and correct
when made, and shall be true and correct on such Closing Date with the same
force and effect as if they had been made on and as of the same date.
5.2 Covenants. All covenants, agreements, and conditions in this
---------
Agreement required to be performed or complied with by the Company on or prior
to such Closing Date shall have been performed or complied with by the Company.
5.3 Opinion of Counsel. The Purchasers shall have received from
------------------
Wilson, Sonsini, Goodrich & Rosati, counsel to the Company, an opinion letter
dated as of such Closing Date, substantially in the form attached hereto as
Exhibit E.
5.4 Permits. All governmental and third party approvals,
-------
permits, licenses and waivers necessary or appropriate for consummation of the
transactions to be consummated at such Closing shall have been obtained.
5.5 Amended and Restated Articles of Incorporation. The Company
----------------------------------------------
shall have filed the Articles with the Secretary of State of the State of
California on or prior to the First Closing Date.
5.6 Good Standing Certificates. The Company shall have delivered a
--------------------------
Certificate dated as of a recent date issued by the Secretary of State of the
State of California to the effect that the Company is legally existing and in
good standing and a letter dated as of a recent date from the Franchise Tax
Board of the State of California to the effect that the Company is in good
standing.
5.7 Officer's Certificate. The Company shall have delivered a
---------------------
certificate or certificates, executed by the Chief Executive Officer or the
President of the Company, dated such Closing Date, certifying to the fulfillment
of the conditions specified in Sections 5.1, 5.2, and 5.4 of this Agreement.
5.8 Secretary's Certificate. The Company shall have delivered a
-----------------------
certificate executed by the Secretary or Assistant Secretary of the Company
dated such Closing Date, certifying the following matters: (a) the resolutions
adopted by the Company's Board of Directors and share holders relating to the
transactions contemplated by this Agreement; (b) the Articles of the Company;
(c) the Bylaws of the Company; and (d) incumbency of officers of the Company.
5.9 Stock Certificate. The Company shall have delivered to each
-----------------
Purchaser purchasing Shares at such Closing a certificate for the number of
Shares being purchased set forth opposite such Purchaser's name on Schedule A
hereto or (for a Subsequent Closing) on a revised
-13-
<PAGE>
Schedule A.
5.10 Legal Investment. At such Closing Date, the purchase of the
----------------
Shares by the Purchasers hereunder shall be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.
5.11 Shareholders Agreement. The Company and the Purchasers shall
----------------------
have entered into the Amended Shareholders Agreement in substantially the form
attached hereto as Exhibit B.
5.12 Registration Rights Agreement. The Company and the Purchasers
-----------------------------
shall have entered into the Amended Registration Rights Agreement in
substantially the form attached hereto as Exhibit C.
6. Conditions to Company's Obligations at the Closing. The Company's
--------------------------------------------------
obligation to issue, sell and deliver the Shares at the First Closing or any
Subsequent Closing is subject to the fulfillment at or prior to the Closing Date
for such Closing of the following conditions, any of which may be waived in
whole or in part by the Company in accordance with the provisions of Section 7.2
hereof:
6.1 Representations and Warranties Correct. The representations and
--------------------------------------
warranties made by the Purchasers purchasing Shares at such Closing in Section 4
hereof shall be true and correct when made, and shall be true and correct on
such Closing Date with the same force and effect as if they had been made on or
as of the same date.
6.2 Permits. All governmental and third party approvals, permits,
-------
licenses and waivers necessary or appropriate for consummation of the
transactions to be consummated at such Closing shall have been obtained.
6.3 Amended and Restated Articles. The Articles shall have been
-----------------------------
filed with the Secretary of State of the State of California.
6.4 Payment of the Purchase Price. The Purchasers shall have
-----------------------------
delivered to the Company the purchase price for the Shares to be purchased at
such Closing.
7. Miscellaneous.
-------------
7.1 Attorneys' Fees. If either the Company or any Purchaser bring
---------------
any suit, action, counterclaim, or arbitration to enforce the provisions of this
Agreement, the prevailing party therein shall be entitled to recover a
reasonable allowance for attorneys' fees and litigation expenses in addition to
court costs. "Prevailing Party" within the meaning of this section includes,
without
-14-
<PAGE>
limitation, a party who agrees to dismiss an action or proceeding upon the other
party's payment of the sums allegedly due or performance of the covenants
allegedly breached, or who obtains substantially the relief sought by it.
7.2 Waivers and Amendments. With the written consent of the holders
----------------------
of two-thirds of the Shares, the obligations of the Company under this Agreement
may be waived (either generally or in a particular instance, either
retroactively or prospectively and either for a specified period of time or
indefinitely), and with the same consent, the Company, when authorized by
resolution of its Board of Directors, may enter into a supplementary agreement
for the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Agreement.
7.3 Governing Law. This Agreement shall be governed in all respects
-------------
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
7.4 Survival. The representations, warranties, covenants and
--------
agreements made herein shall survive any investigation made by the Purchasers
and the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto or in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder as of the date of such certificate or instrument.
7.5 Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
7.6 Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties with regard to the subjects
hereof.
7.7 Severability of this Agreement. In case any provision of this
------------------------------
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
7.8 Finder's Fees. The Company represents and warrants that it has
-------------
retained no finder or broker in connection with the transactions contemplated by
this Agreement and hereby agrees to indemnify and to hold the Purchasers
harmless of and from any liability for commission or compensation in the nature
of a finder's fee to any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, are responsible. Each
Purchaser represents and warrants that such
-15-
<PAGE>
Purchaser has retained no finder or broker in connection with the transactions
contemplated by this Agreement and hereby agrees to indemnify and to hold the
Company harmless of and from any liability for any commission or compensation in
the nature of a finder's fee to any broker or other person or firm (and the
costs and expenses of defending against such liability or asserted liability)
for which such Purchaser, or any of its employees or representatives, are
responsible.
7.9 Legends. Each certificate representing the Shares shall be
-------
endorsed with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE
WITH RULE 144 OR ITS SUCCESSOR RULE UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE.
Each certificate representing the Shares shall also bear any legend required by
any applicable state securities law. The Company need not register a transfer of
Shares, unless the conditions specified in the foregoing legends are satisfied.
The Company may also instruct its transfer agent not to register the transfer of
any of the Shares unless the conditions specified in the foregoing legend is
satisfied.
7.10 Removal of Legends and Transfer Restrictions. The legend
--------------------------------------------
relating to the Securities Act endorsed on a stock certificate pursuant to
Section 7.9 of this Agreement and the stop transfer instructions with respect to
the Shares represented by such certificate shall be removed and the Company
shall issue a certificate without such legend to the holder of such Shares if
such Shares are registered under the Securities Act and a prospectus meeting the
requirements of Section 10 of the Securities Act is available or if such holder
provides to the Company an opinion of counsel reasonably satisfactory to the
Company to the effect that a public sale, transfer or assignment may be made
without registration or if the Shares may be sold pursuant to Rule 144(k) of the
Securities Act of 1933.
7.11 Titles and Subtitles. The titles of the sections and
--------------------
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
7.12 Counterparts. This Agreement may be executed in counterparts,
------------
each of which shall be an original, but all of which together shall constitute
one instrument.
-16-
<PAGE>
7.13 Delays or Omissions. It is agreed that no delay or omission to
-------------------
exercise any right, power or remedy accruing to any Purchaser, upon any breach
or default of the Company under this Agreement, shall impair any such right,
power or remedy, nor shall it be construed to be a waiver of any such breach or
default, or any acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. It is further agreed that any waiver, permit, consent or approval of
any kind or character by any Purchaser of any breach or default under this
Agreement, or any waiver by any Purchaser of any provisions or conditions of
this Agreement must be in writing and shall be effective only to the extent
specifically set forth in writing and that all remedies, either under this
Agreement, or by law or otherwise afforded to the Purchasers, shall be
cumulative and not alternative.
7.14 Notices. All notices and other communications required or
-------
permitted hereunder shall be in writing and shall be deemed effectively given
upon personal delivery or upon deposit with the United Stated Post Office, by
first class mail, postage prepaid, addressed: (a) if to a Purchaser, at such
Purchaser's address set forth on Schedule A attached hereto, or at such other
address as such Purchaser shall have furnished to the Company in writing, or (b)
if to the Company, at the Company's address as set forth below, or at such other
address as the Company shall have furnished to the Purchasers in writing:
To the Company:
QuickLogic Corporation
2933 Bunker Hill Lane, Ste. 100A
Santa Clara, CA 95054
Attn: President
7.15 Transaction Fees and Expenses. The Company shall pay the
-----------------------------
reasonable fees and costs of the Purchasers' special counsel, in connection with
the transactions contemplated by this Agreement, provided that such fees and
costs do not exceed $13,328.
-17-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first written above.
"THE COMPANY"
QUICKLOGIC CORPORATION
By /s/
______________________________
Title
___________________________
"PURCHASERS"
________________________________
Print Individual or Entity Name
By: /s/
____________________________
Signature
________________________________
Print Signatory's Name
________________________________
Title of Agent*
* Agent, officer, partner
trustee, etc.
-18-
<PAGE>
SCHEDULE A
----------
Schedule of Purchasers
----------------------
- ----------------------------------------------------------------------
NAME/ADDRESS NUMBER OF PURCHASE PRICE
SHARES OF
STOCK
- ----------------------------------------------------------------------
US TRUST 2,586,207 $3,000,000.12
UST Private Equity
Investors Fund, Inc.
114 W. 47th Street
New York, NY 10036
Attention: Douglas A. Lindgren
with copy to:
O'Sullivan Graev & Karabell
30 Rockefeller Plaza
New York, NY 10112
Attention: Lawrence G. Graev
- ----------------------------------------------------------------------
ANDREAS BECHTOLSHEIM 75,426 87,494.16
1140 Hamilton Avenue
Palo Alto, CA 94301
- ----------------------------------------------------------------------
BURR, EGAN AND DELEAGE & CO. 272,483 316,080.28
1 Post Office Square, Suite 380
Boston, MA 02109
- ----------------------------------------------------------------------
Alta IV Limited Partnership 230,440 267,310.40
- ----------------------------------------------------------------------
C.V. Sofinnova Partners Five 42,043 48,769.88
- ----------------------------------------------------------------------
GLYNN VENTURES III, L.P. 54,072 62,723.52
3000 Sand Hill Road
Bldg. 4, Suite 235
Menlo Park, CA 94025
- ----------------------------------------------------------------------
MORGENTHALER VENTURE PARTNERS III 552,083 640,416.28
- ----------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------
2730 Sand Hill Road, Suite 280
Menlo Park, CA 94025
- ----------------------------------------------------------------------
NEW ENTERPRISE ASSOCIATES VI, LIMITED 576,768 669,050.88
PARTNERSHIP
1119 St. Paul Street
Baltimore, MD 21202
- ----------------------------------------------------------------------
SEQUOIA ENTITIES 215,517 249,999.72
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
- ----------------------------------------------------------------------
Sequoia Capital V 200,431 232,499.96
- ----------------------------------------------------------------------
Sequoia Technology 6,465 7,499.40
Partners V
- ----------------------------------------------------------------------
Sequoia XXIV 8,621 10,000.36
- ----------------------------------------------------------------------
TECHNOLOGY VENTURE INVESTORS IV 862,069 1,000,000.04
c/o August Capital
2480 Sand Hill Road, Suite 101
Menlo Park, CA 94025
- ----------------------------------------------------------------------
US VENTURE PARTNER ENTITIES 517,241 599,999.56
2180 Sand Hill Road, Suite 300
Menlo Park, CA 94025
- ----------------------------------------------------------------------
U.S. Venture Partners IV, L.P. 136,909 158,814.44
- ----------------------------------------------------------------------
Second Ventures II, L.P. 16,619 19,278.04
- ----------------------------------------------------------------------
USVP Entrepreneur Partners II, L.P. 4,748 5,507.68
- ----------------------------------------------------------------------
U.S. Venture Partners III 344,606 399,742.96
- ----------------------------------------------------------------------
Second Ventures Limited Partners 10,769 12,492.04
- ----------------------------------------------------------------------
U.S.V. Entrepreneur Partners 3,590 4,164.40
- ----------------------------------------------------------------------
VERTEX MANAGEMENT ENTITIES 1,293,104 1,500,000.64
3 Lagoon Drive, Suite 220
Redwood City, CA 94064
- ----------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------
Vertex Asia Limited 574,655 666,599.80
- ----------------------------------------------------------------------
Vertex Investment (II) Limited 574,655 666,599.80
- ----------------------------------------------------------------------
HWH Investment Pte. Ltd. 143,794 166,801.04
- ----------------------------------------------------------------------
TOTAL 7,004,970 $8,125,765.20
- ----------------------------------------------------------------------
<PAGE>
EXHIBIT A
Amended and Restated Articles of Incorporation
See attached.
<PAGE>
EXHIBIT B
Fifth Amended and Restated Shareholders Agreement
See attached.
<PAGE>
EXHIBIT C
Fifth Amended and Restated Registration Rights Agreement
See attached.
<PAGE>
EXHIBIT E
Opinion of Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT D
QUICKLOGIC CORPORATION
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
SCHEDULE OF EXCEPTIONS
The disclosures set forth in this Schedule of Exceptions are itemized
to correspond to the first or principal section of the QuickLogic Corporation
Series F Preferred Stock Purchase Agreement (the "Agreement") to which they
relate. Each of the disclosures made herein shall qualify each of the sections
of the Agreement to which they relate.
Section 3.3 Subsidiaries.
------------
The Company has exercised its right under its agreement with Cypress
Semiconductor to pay Cypress $4,500,000 in exchange for additional wafer
capacity and an equity interest in Cypress or one of its subsidiary. Although
the Company has paid such amount to Cypress, the exact form of the equity
interest has not been determined by the Company and Cypress.
Section 3.7 Title to Properties; Liens and Encumbrances.
-------------------------------------------
The Company owns no real property. The Company has leased certain
office and manufacturing equipment used in its business and does not own such
equipment. The aggregate value of such equipment is approximately $600,000.
Section 3.8 Intellectual Property Rights.
----------------------------
With respect to the representation that the Company has the
unrestricted right to use all trade secrets, including know-how, inventions,
design processes and technical data, the Company has not conducted an
investigation or audit of its or third parties' intellectual property rights or
its or third parties' proprietary rights, nor has it retained intellectual
property counsel for that purpose. The exceptions to the representations
contained in Section 3.8 that the Company is currently aware are set forth
below.
Licenses.
--------
The Company has granted certain technology license rights and
manufacturing rights to
<PAGE>
VLSI Technology, Inc. ("VLSI") pursuant to an agreement dated May 9, 1990, as
amended (the "VLSI" Agreement"). The Company has granted certain technology
license rights and manufacturing rights to Cypress Semiconductor Corp.
("Cypress") pursuant to an agreement dated October 2, 1992 (the "Cypress
Agreement").
Actel Litigation.
----------------
On January 20, 1994, Actel Corporation filed suit against QuickLogic
alleging infringement by QuickLogic of U.S. Patents No. 4,758,745; 4,873,459;
5,055,718; and 5,198,705. Plaintiff seeks damages and injunctive relief. On or
about February 10, 1994, QuickLogic filed an answer and counter-claim seeking in
the counter-claim a declaration that each of the patents alleged to be infringed
was not infringed and in addition that each of the patents upon which suit was
brought was invalid, void and unenforceable. Discovery has begun. QuickLogic
moved to stay proceedings pending reexamination of two patents involved in the
litigation and the court granted this motion in early Summer 1994. The United
States Patent and Trademark Office confirmed the patentability of the two Actel
patents placed in reexamination (the '745 and the '459 patents) in late summer
and early fall 1994. The court then lifted the stay in late November 1994 and
shortly thereafter Actel filed a motion for summary judgment with respect to the
interpretation claim 1 of the '705 patent and its infringement which QuickLogic
opposed. On October 4, 1996, the Special Master recommended that Actel's motion
be granted; QuickLogic has objected to this recommendation. (The recommendation
does not address the validity of claim 1 of the '705 patent. Validity must
still be resolved by the court or at trial.) No hearing on the recommendation
has been set, but it is expected Judge Ware will rule on the matter in December,
1996 or early 1997.
Actel on or about March 15, 1995 amended its complaint to add to the
suit U.S. Patent No. 5,367,208 (the "'208 patent"), a patent which issued on
November 22, 1994 and which is assigned to Actel. On or about April 12, 1995,
QuickLogic filed a counterclaim against Actel alleging infringement by Actel of
QuickLogic U.S. Patents No. 5,220,213 (the "'213 patent") entitled "Programmable
Application in Specific Integrated Circuit and Logic Cell Therefore" and
5,396,127 (the "'127 patent"), entitled "Programmable Application in Specific
Integrated Circuit and Logic Cell Therefore". This counterclaim was in response
to the amended complaint filed by Actel against QuickLogic on or about March 15,
1995. On March 7, 1995, Actel filed its second supplemental complaint, which
alleged patent infringement of Actel U.S. Patent No. 5,479,113 ("the '113'
patent"), entitled "User-Configurable Logic Circuits Comprising Antifuses and
Multiplexer-Based Logic Modules." QuickLogic filed its answer, denying these
allegations, on April 12, 1995. On June 14, 1995, Actel again amended its
complaint to include counterclaims against QuickLogic and John Birkner for
misappropriation of trade secrets, breach of contract, breach of confidential
relationship, unfair competition and assignment of patents. Mr. Birkner and
QuickLogic denied each of these claims, in replies to Actel's counterclaims,
filed July 5, 1995 and July 7, 1995, respectively.
<PAGE>
The parties have each made summary judgment motions covering various
claims of the patents in dispute. No hearing dates on these motions have been
set. For much of 1996 the parties were embroiled in a dispute concerning the
disqualification of Actel's former counsel who was replaced after Judge Ware
ruled in favor of QuickLogic's motion to disqualify the former counsel and
Actel's appeal to the Federal Circuit Court of Appeals was unsuccessful.
Both parties are engaged in discovery. A discovery cut off of January
30, 1998 has been set in the case. No trial date has been set, but both parties
have requested that the trial be held in September or October of 1998.
Instant Circuit Corporation.
---------------------------
The Company has received correspondence from Instant Circuit
Corporation "ICC") alleging that the Company's technology may infringe one or
more of ICC's patents. The Company and its patent counsel have reviewed the ICC
patents and have notified ICC that the Company does not believe that the
Company's technology infringes ICC's patents. ICC has responded by letter dated
February 5, 1992 reiterating its belief that the Company's products infringe
ICC's patents, but indicating ICC's intent to wait to see whether the Company's
products are successful in the marketplace before pursuing the matter. The
Company has not heard anything further from ICC since that date.
Xilinx
------
On June 12, 1992, the Company received a letter from Xilinx requesting
the Company to review Xilinx's patent 4,870,302 entitled "Configurable
Electrical Circuit Having Configurable Logic Elements and Configurable
Interconnects" and stating Xilinx's belief that at least one claim under that
patent is infringed by the Company's products. No litigation has been
instituted by Xilinx, and there has been no correspondence between the Company
and Xilinx regarding this matter during the year preceding the Closing Date.
While the Company does not believe that there is any basis for a legal claim by
Xilinx, there can be no assurance that Xilinx will not elect to take further
legal action in the future. Such legal action, if instituted, could have a
material adverse effect on the Company's business.
Phil Ferguson
-------------
California EDD has filed a claim against the Company relating to
services rendered by Phil Ferguson. The Company expects to settle the claim for
less than $25,000.
See disclosure under Section 3.9.
-3-
<PAGE>
Section 3.9 Proprietary Information Agreements.
----------------------------------
Actel has claimed that QuickLogic has misappropriated the trade
secrets of Actel based, at least in part, upon the fact that John Birkner, a
founder of QuickLogic, performed consulting services for Actel prior to and
allegedly after joining the Company.
Section 3.11 Manufacturing, Distribution and License Rights.
----------------------------------------------
The Company has granted certain rights to VLSI and Cypress pursuant to
the VLSI Agreement and the Cypress Agreement, respectively. The Company has
entered into an MOU with TSMC U.S.A. providing for the acquisition of eight (8)
inch wafers.
Section 3.13 Litigation
----------
See the discussion of the Actel, Xilinx and ICC and other issues
discussed in Section 3.8 above.
Section 3.17 Governmental Consent.
--------------------
See Section 3.5.
Section 3.19 Material Contracts and Obligations.
----------------------------------
The following is a list of all agreements and obligations described in
Section 3.19:
1. VLSI Agreement.
2. The Company subleases its facility at 2933 Bunker Hill Lane. Its
current lease is due to expire on December 31, 1996.
3. The Company has entered into a lease agreement for its new
facility at 1277 Orleans Drive, Saratoga, California. The lease expires on
November 26, 2003.
4. Software OEM Distribution Agreement with Data I/O, Inc. pursuant
to which the Company obtained rights to sublicense certain Data I/O software on
an OEM basis. The Company is required to make annual royalty payments of up to
$100,000 to Data I/O pursuant to this Agreement.
5. Employee Restricted Stock Purchase Agreements between the Company
and each of the founders and option agreements with persons who have been
granted options.
-4-
<PAGE>
6. Cypress Agreement.
The Company also has outstanding miscellaneous licensing agreements
with entities including Synplicity, SimuCad, Doulos, Saros, Premia and Data I/O.
None of these agreements currently involve annual payment obligations in excess
of $80,000.
Section 3.21 Related Party Transactions. The Company has entered
---------------------------
into the Cypress Agreement with Cypress. See also Section 3.22 below regarding
loans to John Birkner and from certain shareholders of the Company. In addition
to the existing relationships directly between the Company and Cypress, Pierre
Lamond, a partner in the Sequoia Capital venture funds, is a director of
Cypress. Mark Stevens, a director of the Company, is also a partner in the
Sequoia Capital venture funds.
Section 3.22 Certain Transactions.
--------------------
The Company has loaned John Birkner $114,000, plus interest, evidenced
by demand promissory notes from Mr. Birkner to the Company secured by a pledge
of Mr. Birkner's shares of the Company's stock. These loans were approved by
the Company's Board of Directors and shareholders.
-5-
<PAGE>
<PAGE>
EXHIBIT 10.12
EXHIBIT G TO TERMINATION AGREEMENT
---------------------------------
QUICKLOGIC CORPORATION
SIXTH AMENDED AND RESTATED
SHAREHOLDERS AGREEMENT
This SIXTH AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (the "Agreement") is
made and entered into this 29th day of March 1997 by and among QuickLogic
Corporation, a California corporation (the "Company"); John Birkner, Andrew Chan
and H. T. Chua (the "Founders"); the purchasers of Series A Preferred Stock of
the Company (the "Series A Purchasers") pursuant to the Series A Preferred Stock
and Series B Warrant Purchase Agreement dated September 6, 1989 (the "Series A
Agreement"); the purchasers of Series B Preferred Stock (the "Series B
Purchasers") pursuant to the Series B Preferred Stock Purchase Agreement dated
September 7, 1990 (the "Series B Agreement"); the purchasers of Series C
Preferred Stock of the Company (the "Series C Purchasers") pursuant to the
Series C Preferred Stock Purchase Agreement dated December 9, 1991 (the "Series
C Agreement"); the purchaser of Series D Preferred Stock (the "Series D
Purchaser") pursuant to the Series D Preferred Stock Purchase Agreement dated
October 8, 1992 (the "Series D Agreement"), the purchasers of Series E Preferred
Stock (the "Series E Purchasers") pursuant to the Series E Preferred Stock
Purchase Agreement dated June 1, 1995 (the "Series E Agreement"), the purchasers
of Series F Preferred Stock (the "Series F Purchasers") pursuant to the Series F
Preferred Stock Purchase Agreement dated November 27, 1996 (the "Series F
Agreement") and Cypress Semiconductor Corporation (the "Common Purchaser")
pursuant to the Common Stock Purchase Agreement of even date (the "Common
Agreement"). The Series A Purchasers, the Series B Purchasers, the Series C
Purchasers, the Series D Purchaser, the Series E Purchasers, the Series F
Purchasers and the Common Purchaser are collectively referred to herein as the
"Purchasers". The Purchasers and the Founders are collectively referred to
herein as the "Shareholders".
RECITALS
--------
A. Pursuant to the Series A Agreement and the exercise of certain
Warrants to purchase Series B Preferred Stock of the Company granted under the
Series A Agreement, the Series A Purchasers have purchased shares of Series A
Preferred Stock of the Company ("Series A Preferred"), and pursuant to the
Series B Agreement, the Series B Purchasers purchased Series B Preferred Stock
of the Company ("Series B Preferred"), and pursuant to the Series C Agreement,
the Series C Purchasers purchased Series C Preferred Stock of the Company (the
"Series C Preferred"), and pursuant to the Series D Agreement, the Series D
Purchaser purchased Series D Preferred Stock of the Company ("Series D
Preferred"), and pursuant to the Series E Agreement, the Series E Purchasers
purchased Series E Preferred Stock of the Company ("Series E Preferred"), and
pursuant to the Series F Agreement, the Series F Purchasers purchased Series F
Preferred Stock of the Company ("Series F Preferred") (the Series A
<PAGE>
Preferred, Series B Preferred, Series C Preferred, Series D Preferred, Series E
Preferred and Series F Preferred are collectively referred to herein as the
"Preferred Stock") and pursuant to the Common Agreement, the Common Purchaser
purchased Common Stock of the Company ("Common Stock"). In connection with the
Series F Agreement, the Company, the Founders, the Series A Purchasers, the
Series B Purchasers, the Series C Purchasers, the Series D Purchaser, the Series
E Purchasers and the Series F Purchasers entered into the Fifth Amended and
Restated Shareholders Agreement (the "Prior Shareholders Agreement") dated
November 27, 1996 setting forth their agreement and understandings with respect
to voting of shares of the Company's Capital Stock (as defined below) in the
election of directors and to transactions in shares of the Capital Stock held by
the Founders.
B. The Company has issued and sold to the Common Purchaser shares of its
Common Stock pursuant to the Common Agreement.
C. The Shareholders own a majority of the outstanding shares of Common
Stock and the Preferred Stock (the Common Stock and Preferred Stock collectively
referred to herein as the "Capital Stock").
D. The Series A Purchasers, Series B Purchasers, Series C Purchasers, the
Series D Purchaser, Series E Purchasers, Series F Purchasers and Founders desire
to waive their rights under the Prior Shareholders Agreement and to accept in
lieu of those rights the rights set forth in this Agreement.
NOW THEREFORE, the Series A Purchasers, the Series B Purchasers, the Series
C Purchasers, the Series D Purchasers, the Series E Purchasers and the Series F
Purchasers agree to terminate the Prior Shareholders Agreement and all parties
agree as follows:
1. Board of Directors.
------------------
(a) The Founders and Purchasers hereby agree to vote that number of
shares of the Capital Stock of the Company as to which they have beneficial
ownership sufficient to elect and appoint to the Board of Directors of the
Company (the "Board of Directors") the following persons: (i) one member as
shall be designated from time to time by each of the Major Holders (as
hereinafter defined), (ii) one member as shall be designated, from time to time,
by the Founders, (iii) one member who shall be the Chief Executive Officer of
the Company (provided that, during any period in which a Founder shall be
serving as Chief Executive Officer of the Company, one position on the Board of
Directors shall remain vacant), and (iv) one or more members (as may be
necessary to fill all board seats not occupied by members elected and appointed
pursuant to Sections 1(a)(i)-(iii) above) as may be designated, from time to
time, by all Purchasers other than the Major Holders and Cypress Semiconductor
Corporation. "Major Holders," as the term is used in this Section 1(a), shall
include the following: (x) Technology Venture Investors IV and its affiliated
entities (collectively, "TVM"), for so long as TVM beneficially owns at least
seventy-five percent (75%) of the number of shares of the Company's Capital
Stock beneficially owned by it immediately following the closing of the last
sale of Series F Preferred Stock pursuant to the Series F Agreement, (y) Sequoia
Capital V and its
<PAGE>
affiliated entities (collectively, "Sequoia"), for so long as Sequoia
beneficially owns at least seventy-five percent (75%) of the number of shares of
the Company's Capital Stock beneficially owned by it immediately following the
closing of the last sale of Series F Preferred Stock pursuant to the Series F
Agreement, and (z) Vertex Investment Pte. Ltd. ("Vertex"), for so long as Vertex
beneficially owns at least seventy-five percent (75%) of the number of shares of
the Company's Capital Stock beneficially owned by it immediately following the
closing of the last sale of Series F Preferred Stock pursuant to the Series F
Agreement. The designation of a director by the Founders pursuant to Section
1(a)(iii) shall be made by Founders holding a majority of shares of Common Stock
held by all Founders, and the designation of a director or directors by the
Purchasers other than the Major Holders pursuant to Section 1(a)(iv) shall be
made by persons holding a majority of shares held by such persons voting on an
as-converted basis and such designation shall be binding on the remaining
members of each respective group. The appointee of Sequoia is currently Mark
Stevens. The appointee of TVI is currently David Marquardt. The initial
appointee of Vertex is currently Bruce Graham. The appointee of the Purchasers
other than TVI, Sequoia and Vertex is currently Irwin Federman. The appointee of
the Founders is currently H. T. Chua. The Chief Executive Officer is currently
E. Thomas Hart. In the event that any director elected pursuant to the terms
hereof ceases to serve as a member of the Board of Directors, the Company, the
Purchasers and the Founders agree to take all such action as is reasonable and
necessary, including the voting of shares of Capital Stock of the Company by the
Founders and Purchasers as to which they have beneficial ownership, to cause the
election or appointment of such other substitute person to the Board of
Directors as may be designated on the terms as herein provided. The Company
shall promptly give the Purchasers written notice of any election to or
appointment of, or change in composition of, the Board of Directors of the
Company. In the election of directors pursuant to this Section 1, the Founders
and Purchasers shall vote that number of their shares sufficient to elect such
persons to the Board of Directors utilizing cumulative voting.
(b) During the term of this Agreement, the Founders and the Purchasers
agree to vote their shares of Capital Stock of the Company and otherwise to take
such action so as to maintain the number of authorized positions on the Board of
Directors at no less than six (6).
(c) Each of the Founders, Purchasers and the Company agrees not to
take any actions which would materially and adversely affect the provisions of
this Agreement and the intention of the parties with respect to the composition
of the Board of Directors as herein stated.
2. Right of First Refusal--Founders Shares. In the event that a Founder
---------------------------------------
proposes to sell, transfer, assign or otherwise alienate any shares of the
Capital Stock of the Company now or hereafter owned by such Founder (the
"Founder Shares"), each Purchaser shall have the right to purchase, pro rata, a
portion of such Founder Shares. Each Purchaser's pro rata share, for purposes
of this right of first refusal, shall be the ratio of the number of shares of
Capital Stock held by such Purchaser (assuming conversion of all shares of
Preferred Stock held by such Purchaser and delivery of all shares of Common
Stock deliverable to the Common Purchaser (the "Cypress Common")) to the total
number of shares of Capital Stock then outstanding (assuming conversion of all
shares of Preferred Stock held by all Purchasers and delivery of all shares of
the
<PAGE>
Cypress Common) at the time of such Founder's proposed sale, transfer,
assignment or alienation of Founder Shares. This right of first refusal shall be
subject to the following provisions:
(a) In the event that a Founder proposes to sell or transfer any
Founder Shares, the Founder shall give written notice of his intention,
describing the type and amount of Founder Shares, the price, the general terms
upon which he proposes to sell or transfer the same, and the names and addresses
of the other proposed offerees. Each Purchaser shall have twenty (20) days from
the date of receipt of any such notice to agree to purchase up to his pro rata
share of such Founder Shares for the price and upon the general terms specified
in the notice by giving written notice to the Founder and stating therein the
quantity of Founder Shares to be purchased. The Founder shall promptly give
written notice to the other Purchasers in the event any Purchaser fails to
exercise his right of first refusal in full. Each Purchaser shall have a right
of over-allotment such that if any Purchaser fails to exercise his right
hereunder to purchase his full pro rata portion of Founder Shares, the other
Purchasers may elect to purchase the non-participating Purchaser's portion on a
pro rata basis, by giving notice to the Founder within ten (10) days from the
date of receipt of written notice from the Founder that such non-participating
Purchaser has failed to exercise his rights hereunder to purchase his full pro
rata share of Founder Shares.
(b) In the event that the Purchasers fail to exercise in full their
right of first refusal within said time periods, the Founder shall have ninety
(90) days thereafter to sell (or enter into an agreement pursuant to which the
sale of Founder Shares covered thereby shall be closed, if at all, within ninety
(90) days from the date of said agreement) the Founder Shares covered by the
Purchasers' right but with respect to which such rights were not exercised, at a
price and upon general terms no less favorable to the Founder than specified in
the notice. In the event that the Founder has not sold the Founder Shares
within said time period, the Founder shall not thereafter sell or transfer any
Founder Shares, without first offering such Founder Shares to the Purchasers in
the manner provided above.
(c) The right of any Purchaser to participate in the purchase of any
Founder Shares pursuant to this Section 2 shall be: (i) subject to the ability
of the Purchaser to purchase its portion of the Founder Shares in a transaction
which is exempt from registration under the Securities Act of 1933, as amended
(the "Securities Act") and under applicable blue sky laws, as determined in good
faith by the Company's counsel; (ii) assignable by each Purchaser to any
transferee who acquires any of such Purchaser's shares of Series A Preferred in
accordance with Section 4.7 of the Series A Agreement or such Purchaser's shares
of Series B Preferred in accordance with Section 4.7 of the Series B Agreement
or such Purchaser's shares of Series C Preferred in accordance with Section 4.7
of the Series C Agreement or such Purchaser's shares of Series D Preferred in
accordance with Section 4.7 of the Series D Agreement or such Purchaser's shares
of Series E Preferred in accordance with Section 4.7 of the Series E Agreement
or such Purchaser's shares of Series F Preferred in accordance with Section 4.7
of the Series F Agreement, or such Purchaser's shares of Common Stock in
accordance with Section 4.7 of the Common Agreement; (iii) assignable by each
Purchaser, subject to compliance with applicable federal securities and blue sky
laws, to such Purchaser's limited and/or general partner(s) or other
affiliate(s) and (iv) available only to those Purchasers (in combination with
any of such Purchasers' affiliates) holding an aggregate of 250,000 shares of
Preferred Stock, an equivalent
<PAGE>
number of shares of Common Stock issued upon conversion of the Preferred Stock
("Conversion Stock"), an equivalent number of shares of Cypress Common, or a
combination thereof, at the time of such proposed sale or transfer.
3. Right of First Refusal -- New Securities. The Company hereby grants
----------------------------------------
to each Purchaser the right to purchase, pro rata, a portion of any New
Securities (as defined below in this Section 3) that the Company may from time
to time propose to sell and issue. Each Purchaser's pro rata share, for
purposes of this right of first refusal, shall be the ratio of the number of
shares of Capital Stock held by such Purchaser (assuming conversion of all
shares of Preferred Stock held by such Purchaser and delivery of all shares of
Cypress Common) to the total number of shares of Capital Stock then outstanding
(assuming conversion of all outstanding shares of Preferred Stock and other
convertible securities and delivery of all shares of Cypress Common) at the time
of issuance of such New Securities. This right of first refusal shall be
subject to the following provisions:
(a) "New Securities" shall mean any capital stock of the Company,
whether now authorized or not, and rights, options or warrants to purchase
capital stock, and securities of any type whatsoever that are, or may become,
convertible into capital stock; provided, however, that "New Securities" shall
not include (i) the Conversion Stock, (ii) securities offered pursuant to a
registration statement filed under the Securities Act, (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of its assets or other reorganization, (iv) shares
of Common Stock issued in connection with any stock split, reverse stock split
or stock dividend, (v) shares of Common Stock issuable after the date hereof to
employees, directors, officers or consultants of the Company pursuant to any
employee or consultant stock offering plan or arrangement unanimously approved
by the Board of Directors of the Company, (vi) shares of Common Stock issued in
connection with the Company's 1991 Sales Representative Stock Purchase Plan,
(vii) shares of the Company's Common Stock or Preferred Stock, or options or
warrants exercisable therefor, issued to banks, savings and loan associations,
equipment lessors or other similar institutions or entities in connection with
such entities providing debt financing to the Company which has been unanimously
approved by the Board of Directors, or (viii) the Cypress Common.
(b) In the event that the Company proposes to undertake an issuance of
New Securities, the Company shall give written notice of its intention,
describing the type and amount of New Securities, the price, the general terms
upon which the Company proposes to issue the same, and the names and addresses
of any other proposed offerees. Each Purchaser shall have twenty (20) days from
the date of receipt of any such notice to agree to purchase up to his pro rata
share of such New Securities for the price and upon the general terms specified
in the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.
(c) In the event that the Purchasers fail to exercise in full the
right of first refusal within said time periods, the Company shall have ninety
(90) days' thereafter to sell (or enter into an agreement pursuant to which the
sale of New Securities covered thereby shall be closed, if at all, within ninety
(90) days from the date of said agreement) the New Securities
<PAGE>
covered by the Purchasers' right but with respect to which such rights were not
exercised, at a price and upon general terms no more favorable to the purchasers
thereof than specified in the Company's notice. In the event the Company has not
sold the New Securities within said time period, the Company shall not
thereafter issue and sell any New Securities, without first offering such
securities to the Purchasers in the manner provided above.
(d) The right of any Purchaser to participate in the purchase of any
New Securities pursuant to this Section 3 shall be: (i) subject to the ability
of the Company to sell such New Securities in a transaction which is exempt from
registration under the Securities Act and under applicable blue sky laws, as
determined in good faith by its counsel; (ii) assignable by each Purchaser to
any transferee who acquires any of such Purchaser's Shares of Series A Preferred
in accordance with Section 4.7 of the Series A Agreement or such Purchaser's
shares of Series B Preferred in accordance with Section 4.7 of the Series B
Agreement or such Purchaser's shares of Series C Preferred in accordance with
Section 4.7 of the Series C Agreement or such Purchaser's shares of Series D
Preferred in accordance with Section 4.7 of the Series D Agreement or such
Purchaser's shares of Series E Preferred Stock in accordance with Section 4.7 of
the Series E Agreement or such Purchaser's shares of Series F Preferred in
accordance with Section 4.7 of the Series F Agreement, or such Purchaser's
shares of Common Stock in accordance with Section 4.7 of the Common Agreement;
(iii) assignable by each Purchaser, subject to compliance with applicable
federal securities and blue sky laws, to such Purchaser's limited and/or general
partner(s) or other affiliate(s); and (iv) available only to those Purchasers
(in combination with any of such Purchasers' affiliates) holding an aggregate of
250,000 shares of Preferred Stock, an equivalent number of shares of Conversion
Stock, an equivalent number of shares of Cypress Common, or a combination
thereof at the time of such proposed issuance.
4. Transferees; Legends on Certificates.
------------------------------------
(a) All transferees or assignees of shares of Capital Stock of the
Company from the Shareholders shall be bound by and subject to the terms and
conditions of this Agreement.
(b) The Shareholders agree that all share certificates now or
hereafter held by them will be stamped with the following legend, substantially
in the following form:
"THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS IN
REGARD TO THEIR VOTING RIGHTS AND TRANSFER BY THE PROVISIONS OF AN
AGREEMENT, A COPY OF WHICH IS ON FILE IN THE OFFICE OF THE SECRETARY OF THE
CORPORATION."
5. Covenants of the Company. The Company hereby covenants and agrees
------------------------
that:
(a) Financial Statements. The Company shall mail the following
--------------------
reports to each Purchaser for so long as such Purchaser is the holder of any
Preferred Stock, Conversion Stock or Cypress Common: (a) as soon as available,
and in any event within 90 days after the end of each fiscal year of the
Company, an audited balance sheet of the Company as of the end of
<PAGE>
such fiscal year, an audited statement of income and retained earnings of the
Company for such fiscal year, and an audited statement of cash flows of the
Company for such fiscal year, prepared by a nationally recognized accounting
firm in accordance with generally accepted accounting principles consistently
applied, all in reasonable detail, and setting forth in comparative form the
figures as of the end of and for the previous fiscal year, accompanied by a
written report from the Company's Chief Financial Officer explaining in
narrative form any material discrepancies between the results of operations as
reported and the Company's annual budget for the same period, as well as any
other financial or business events of material importance, and the Company shall
use its best efforts to ensure that each related audit opinion is unqualified;
(b) as soon as available, and in any event within 45 days after the end of each
fiscal quarter, a commentary on any major changes affecting operations in such
fiscal quarter, including such changes in the area of personnel (management
team), product line, competition, marketing, finance, labor relations,
supplier/customer relations and any other relevant areas; and (c) as soon as
available, and in any event within 30 days after the end of each month, an
unaudited report of financial results during the preceding month prepared in
accordance with generally accepted accounting principles consistently applied,
which report shall include a balance sheet, profit and loss statement, cash flow
analysis, and comparison of results with results during the prior fiscal year
and with the Company's annual budget, with revisions on such budget as approved
by the Company's Board of Directors, and with such financial and budget
information shown both on a monthly and year-to-date basis. In the event that
the Company at any time hereafter shall be required, by law or by generally
accepted accounting principles, to consolidate its financial statements with
those of a subsidiary corporation, the Company shall thereafter furnish the
financial statements required by this Section 5(a) on a consolidated basis, and
the annual finan cial statements specified above shall be furnished also with
consolidating financial statements.
(b) Additional Information. For so long as any Purchaser (in
----------------------
combination with any of such Purchaser's affiliates) is a holder of an aggregate
250,000 shares of Preferred Stock, an equivalent number of shares of Conversion
Stock, an equivalent number of shares of Cypress Common, or a combination
thereof, the Company shall (a) prior to the end of each fiscal year, furnish to
such Purchaser an annual budget for the next fiscal year, and (b) promptly after
each meeting or the execution of an action by unanimous written consent, furnish
copies of the minutes of proceedings or actions by written consent of the
Company's Board of Directors and shareholders; (c) furnish to such Purchaser
such information concerning the Company as the Purchaser may from time to time
reasonably request; and (d) offer the Purchaser the right to visit the
properties of the Company at reasonable times, to interview key employees of the
Company at their places of employment at reasonable times and to examine the
books of account and tax returns of the Company and to make copies therefrom;
provided, however, that the Company may require any Purchaser seeking to obtain
information of the Company pursuant to this Section 5(b), to the extent such
information contains proprietary information of the Company, to enter into a
non-disclosure agreement with the Company.
(c) Board Composition. Until the closing of the Company's initial
-----------------
firm commitment public offering which is underwritten by a nationally recognized
underwriting firm at a price per share of not less than $3.33 (as such number
may be adjusted as a result of stock splits, reverse stock splits or other
similar events after the date hereof) and an aggregate offering
<PAGE>
price to the public of not less than fifteen million dollars ($15,000,000) (the
"Initial Public Offering"), the Bylaws of the Company shall provide, unless
amended by a resolution unanimously adopted by the Company's Board of Directors
after the date hereof, that the number of directors on the Company's Board of
Directors shall be six (6).
(d) Maintain Assets. The Company shall maintain its properties in
---------------
good repair, working order and condition, will maintain its leases and other
instruments comprising its properties in full force and effect, will not sell or
transfer any of its assets other than in the ordinary course of its business,
will keep its properties free and clear of all liens (other than liens permitted
hereunder or incurred in the normal course of business) and adverse claims of
any party, and will maintain insurance covering its properties and its business
with responsible and reputable insurance companies or associations in such
amounts and covering such risks as is usually carried by companies engaged in
similar businesses and owning similar properties.
(e) Taxes. The Company will pay all taxes, assessments, government
-----
charges and levies imposed on the Company and its assets, income and profits
prior to the date on which penalties attach thereto; provided that the Company
shall not be required to pay any such charge which is being contested in good
faith by proper proceedings.
(f) Preserve Legal Standing. The Company will preserve and maintain
-----------------------
in good standing its legal corporate existence and all of its rights, privileges
and franchises and conduct its business in an orderly, efficient and regular
manner and in compliance with all applicable laws, rules, regulations and orders
of government authorities.
(g) Employee Agreements. For so long as Purchasers own any Shares,
-------------------
the Company will require all new employees and consultants of the Company having
access to proprietary information to sign and deliver the Company's standard
form of Proprietary Information and Inventions Agreement.
(h) Perform Obligations. The Company will duly and punctually pay,
-------------------
observe and perform each of its obligations set forth herein and under any
material binding agreement to which it may be obliged as the same may be at any
time amended, modified or supplemented and in effect, in accordance with the
terms thereof.
(i) Use of Proceeds. The cash proceeds received by the Company from
---------------
the sale of the Shares hereunder will be used for working capital.
(j) Cooperation. The Company and the Purchasers hereby agree that
-----------
each will cooperate fully with the other in securing any governmental permits,
approvals, licenses or waivers necessary or appropriate for the consummation of
the transactions contemplated by this Agreement and the agreements and documents
attached as exhibits hereto.
6. Specific Performance. The parties acknowledge that execution,
--------------------
delivery and performance of this Agreement were material inducements to the
Purchasers to make an equity investment in the Company pursuant to the terms and
conditions of the Series A Agreement,
<PAGE>
Series B Agreement, Series C Agreement, the Series D Agreement, the Series E
Agreement, Series F Agreement and/or the Common Agreement and that they will be
irreparably damaged in the event that this Agreement is not specifically
enforced. Accordingly, should any dispute arise pursuant to this Agreement, the
parties agree that a decree of specific performance shall be an appropriate
remedy. Such remedy shall be cumulative and shall be in addition to any other
remedies which the parties may have.
7. Term. This Agreement shall commence on the date first above written
----
and shall terminate upon the first to occur of the following events:
(a) The adjudication by a court of competent jurisdiction that the
Company is bankrupt or insolvent;
(b) The filing of a certificate of dissolution of the Company;
(c) Immediately upon the effectiveness of a registration statement
filed under the Securities Act covering the offer and sale of the Company's
Common Stock to the public at a price per share of not less than $3.33 (which
number shall be adjusted to reflect any stock split, reverse stock split or
similar event after the date hereof) with estimated gross proceeds to the
Company (prior to underwriting commissions and expenses) of at least fifteen
million dollars ($15,000,000); or
(d) Termination pursuant to Section 8(f) of this Agreement.
8. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of California applicable to contracts
made among residents of, and wholly to be performed in, the State of California.
(b) Further Instruments. From time to time, each party hereto shall
-------------------
execute and deliver such instruments and documents as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
(c) Binding Effect. This Agreement shall be binding upon and shall
--------------
inure to the benefit of the executors, administrators, legal representatives,
heirs, successors, and assigns of the parties hereto.
(d) Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Entire Agreement. This document constitutes and contains the
----------------
entire agreement of the parties and supersedes any and all prior negotiations,
correspondence, understandings and agreements among the parties respecting the
subject matter hereof, and each
<PAGE>
of the Purchasers hereby waives any and all rights under the Prior Shareholders
Agreement, the Fourth Amended and Restated Shareholders Agreement dated June 1,
1995, the Third Amended and Restated Shareholders Agreement dated October 8,
1992 among the Company and the Shareholders named therein, the Second Amended
and Restated Shareholders Agreement dated December 9, 1991 among the Company and
the Shareholders named therein, the First Amended and Restated Shareholders
Agreement dated September 7, 1990 among the Company and the Shareholders named
therein, and the Shareholders Agreement dated September 6, 1989 among the
Company and the Shareholders named therein.
(f) Amendment. Neither this Agreement nor any term hereof may be
---------
amended, waived, discharged or terminated other than by a written instrument
signed by the party against whom enforcement of any such amendment, waiver,
discharge or termination is sought; provided, however, that any provision hereof
may be amended, waived, discharged or terminated upon the written consent of the
Company and the holders of at least two-thirds of the outstanding shares of
Preferred Shares and the Cypress Common (whether outstanding or not) voting
together as a single class and Founders holding a majority of the outstanding
shares of Common Stock of the Company held by all Founders; provided further,
however, that any amendment, waiver, discharge or termination of Section 1 of
this Agreement which would have the effect of termi nating a board seat
designated pursuant to paragraphs 1(a)(i)-(iv) while not similarly terminating
each of the board seats designated pursuant to Sections 1(a)(i)-(iv) shall not
be effective unless approved by holders of the party adversely affected and
provided further that this Agreement shall not be amended without the consent of
the holders of two-thirds of the outstanding shares of Preferred Stock, and the
Cypress Common (whether outstanding or not) voting together as a single class,
voting together as a single class on an as-converted basis, if such amendment
would alter or change the preferences, rights, privileges or powers of, or the
restrictions provided for the benefit of, the Preferred Stock. Notwithstanding
the foregoing, neither this Agreement nor any term hereof may be amended,
waived, discharged or terminated without the written consent of Cypress to the
extent such amendment, waiver, discharge or termination affects Cypress in a
manner different from the other Shareholders.
(g) Transfer. The rights and obligations of this Agreement may be
--------
assigned by a Shareholder to a transferee, provided that the transferee execute
an agreement in the form satisfactory to the Company agreeing to be bound by the
provisions of this Agreement. Notwithstanding the foregoing, the right to
designate a member of the board pursuant to Section 1(a)(i)-(iii) shall not be
transferable except to a partner or affiliate (as that term is defined in Rule
405 of the Regulations under the Securities Act of 1933) of a Shareholder.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date and year first above written.
"COMPANY" "FOUNDERS"
QUICKLOGIC CORPORATION /s/ John Birkner
a California corporation __________________________
John Birkner
/s/ E. Thomas Hart /s/ Andrew Chan
____________________________ __________________________
E. Thomas Hart Andrew Chan
President
/s/ H.T. Chua
__________________________
H.T. Chua
<PAGE>
"SHAREHOLDERS"
/s/ Ronald L. Perkins
__________________________
Ronald L. Perkins
/s/ Tench Coxe
__________________________
Tench Coxe
/s/ William H. Younger, Jr.
__________________________
William H. Younger, Jr.
Saunders Holdings, L.P.
By: /s/ G. Leonard Baker, Jr.
________________________________________
G. Leonard Baker, Jr., General Partner
/s/ G. Leonard Baker, Jr.
__________________________
G. Leonard Baker, Jr.
/s/ David L. Anderson
__________________________
David L. Anderson
Anvest, L.P.
By: /s/ David L. Anderson
________________________________________
David L. Anderson, General Partner
Paul M. & Marsha R. Wythes,
Trustees of the Wythes Living Trust
By: /s/ Paul M. Wythes
________________________________________
Paul M. Wythes, Trustee
TOW Partners, A California Limited
Partnership
By: /s/ Paul M. Wythes
________________________________________
Paul M. Wythes, General Partner
<PAGE>
Sutter Hill Ventures, A California Limited
Partnership
By: /s/ David L. Anderson
________________________________________
David L. Anderson
General Partner of the General Partner
TVI Management-3, L.P.
By: /s/
________________________________________
General Partner
TVI Venture Investors-3, L.P.
By: TVI Management-3 General Partner
By: /s/
________________________________________
General Partner
Technology Venture Investors-IV, as nominee
for Technology Venture Investors-4, L.P.
TVI Partners-4, L.P. and TVI Affiliates-4,
L.P.
By: TVI Management-4, L.P.
General Partner
By: /s/
________________________________________
General Partner
New Enterprise Associates VI, Limited
Partnership
By: NEA Partners VI, Limited Partnership
Its General Partner
By: /s/ Nancy Dorman
________________________________________
Nancy Dorman
Glynn Ventures III, L.P.
By: /s/ John W. Glynn, Jr.
________________________________________
John W. Glynn, Jr., General Partner
<PAGE>
U.S. Venture Partners III,
A California Limited Partnership,
By: BHMS Partners III
A California Limited partnership
Its General Partner
By: /s/ Michael P. Maher
________________________________________
Attorney-In-Fact
Michael P. Maher
Second Ventures Limited Partnership
By: BHMS Partners III
A California Limited Partnership
Its General Partner
By: /s/ Michael P. Maher
________________________________________
Attorney-In-Fact
Michael P. Maher
U.S.V. Entrepreneur Partners,
A California Limited Partnership
By: BHMS Partners III,
A California Limited Partnership
Its General Partner
By: /s/ Michael P. Maher
________________________________________
Attorney-In-Fact
Michael P. Maher
Vertex Investment Pte. Ltd.
By: /s/
________________________________________
Cypress Semiconductor Corporation
By: /s/ Emmanuel Hernandez
________________________________________
Emmanuel Hernandez
V.P. of Finance, CFO
<PAGE>
C.V. Sofinnova Partners Five
By: Sofinnova (International) Five N.V.
General Partner
By: /s/
________________________________________
Under Power of Attorney
ALTA IV LIMITED PARTNERSHIP
By: Alta IV Management Partners, L.P.
By: /s/
________________________________________
General Partner
Morgenthaler Venture Partners III
by Morgenthaler Management Partners III
its General Partner
By: /s/ Gary J. Morgenthaler
________________________________________
Gary J. Morgenthaler, General Partner
SEQUOIA CAPITAL V
SEQUOIA TECHNOLOGY PARTNERS V
SEQUOIA XXIV, SEQUOIA XXIII
By: /s/ Mark Stevens
________________________________________
Mark Stevens, General Partner
/s/ A. Bechtolsheim
___________________________________________
A. Bechtolsheim
U.S. Venture partners IV, L.P.
By Presidio Management Group IV, L.P.,
Its General partner
By: /s/ Phil Young
________________________________________
Phil Young, General Partner
<PAGE>
SECOND VENTURES II, L.P.
By Presidio Management Group IV, L.P.
Its General Partner
By: /s/ Phil Young
________________________________________
Phil Young, General Partner
USVP ENTREPRENEUR PARTNERS II, L.P.
A Delaware Limited Partnership
By Presidio Management Group IV, L.P.
Its General Partner
By: /s/ Phil Young
________________________________________
Phil Young, General Partner
/s/ James C. Gaither
___________________________________________
James C. Gaither
___________________________________________
Print Individual or Entity Name
By: /s/
________________________________________
Signature
___________________________________________
Print Name (if Agent*)
___________________________________________
Title of Agent*
* Agent, officer, partner, trustee, etc.
<PAGE>
Print Individual or Entity Name
By: /s/
________________________________________
Signature
___________________________________________
Print Signatory's Name
(if Agent)
___________________________________________
Title of Agent*
* Agent, officer, partner, trustee, etc.
-Shareholders' Agreement-
<PAGE>
EXHIBIT 10.13
EXHIBIT F TO TERMINATION AGREEMENT
----------------------------------
QUICKLOGIC CORPORATION
SIXTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
This SIXTH AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is entered into as of March 29, 1997 by and among QuickLogic
Corporation, a California corporation (the "Company"), and the persons named on
the signature pages hereof (the "Shareholders").
RECITALS
--------
WHEREAS, certain Shareholders (the "Prior Holders") possess
registration rights granted under the Fifth Amended and Restated Registration
Rights Agreement (the "Prior Registration Agreement") dated November 27, 1996
among the Company and the Prior Holders;
WHEREAS, the Company has entered into that certain Termination
Agreement (the "Termination Agreement") dated March 29, 1997 and that certain
Common Stock Purchase Agreement (the "Stock Purchase Agreement") of even date
herewith, both by and between the Company and Cypress Semiconductor Corporation
("Cypress");
WHEREAS, the obligations of the Company and Cypress under the
Termination Agreement are conditioned, among other things, upon the execution
and delivery by the Shareholders and the Company of this Agreement; and
WHEREAS, the Prior Holders desire to waive the registration rights held
by them pursuant to the Prior Registration Agreement and to accept the rights
created herein in lieu of those rights.
NOW, THEREFORE, in consideration of the recitals and the mutual
covenants and conditions set forth herein, the Prior Holders agree to terminate
the Prior Registration Agreement and all parties hereto agree as follows:
AGREEMENT
---------
1. Definitions. As used in this Agreement:
-----------
(a) The terms "register", "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and the declaration or ordering
of the effectiveness of such registration statement by the SEC;
<PAGE>
(b) The term "Preferred Stock" means the Company's Series A,
Series B, Series C, Series D, Series E and Series F Preferred Stock;
(c) The term "Registrable Securities" means: (i) any Common
Stock of the Company issued or issuable upon conversion of the Preferred Stock;
(ii) any Common Stock issued or issuable to any bank, savings and loan
association, equipment lessor or other similar institution or entity which
provides debt financing to the Company now holding or hereafter issued warrants
to purchase shares of the Company's equity securities provided that (a) at the
time a warrant is issued to such entity the Board of Directors grants such
entity rights hereunder and (b) such entity agrees to be bound by the provisions
hereof, which agreement shall be evidenced by such entity's execution hereof
(and, upon execution hereof, such entity shall be deemed to be included within
the definition of "Shareholder" for all purposes hereunder); (iii) Common Stock
issued or deliverable pursuant to the Stock Purchase Agreement (the "Cypress
Stock") (iv) any Common Stock of the Company issued or issuable in respect to
the Common Stock referred to in (i), (ii) or (iii) or in respect of the
Preferred Stock; and (v) any Common Stock issued or issuable in respect to other
securities issued or issuable in respect of the Common Stock referred to in (i),
(ii) or (iii) or the Preferred Stock, including in each case and without
limitation, upon any stock split, stock dividend, recapitalization, or as a
distribution; provided, however, that shares of Common Stock or other securities
shall only be treated as Registrable Securities if and so long as they have not
been (A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, or (B) sold or are available
for sale in a single three-month period in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act so that
all transfer restrictions and restrictive legends with respect thereto are
removed upon the consummation of such sale;
(d) The term "Holder" means any Shareholder holding
Registrable Securities or Preferred Stock (and any person holding Preferred
Stock or Registrable Securities to whom the registration rights have been
transferred pursuant to Section 12);
(e) The term "SEC" means the Securities and Exchange
Commission or any successor agency thereto;
(f) The term "Securities Act" means the Securities Act of
1933, as amended, or any successor statute thereto, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect at the
time;
(g) The term "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Sections 2, 3, 4, 5 and 7, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for the Company and one
special counsel for the selling Holders (including for Cypress pursuant to
Sections 3 and 4), and blue sky fees and expenses (all as limited by Section 7)
provided, however, that the term "Registration Expenses" shall not include
compensation of regular employees of the Company which in any event shall be
paid by the Company; and
<PAGE>
(h) The term "Selling Expenses" shall mean all underwriting
discounts, selling commissions and stock transfer taxes applicable to the
securities registered by the Holders (including when registered by Cypress
pursuant to Sections 3 and 4).
2. Requested Registration -- General.
---------------------------------
(a) In case the Company shall receive from the Holders a
written request that the Company effect any registration, qualification or
compliance with respect to at least thirty percent (30%) of the Registrable
Securities or any lesser percentage of Registrable Securities if the reasonable
anticipated aggregate offering price (net of Selling Expenses) would exceed
$5,000,000, the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) use its best efforts to effect, as soon as
practicable, all such registrations, qualifications and compliances (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under the applicable blue sky or other
state securities laws, and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within thirty (30) days after written
notice pursuant to Section 2(a)(i) is given; provided, however, that
(iii) the Company shall not be obligated to take any
action to effect any such registration, qualification, or compliance pursuant to
this Section 2:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Within six (6) months immediately following
the effective date of any registration statement pertaining to an underwritten
public offering of securities of the Company for its own account (other than a
registration relating solely to a transaction under SEC Rule 145 or any
successor thereto or a registration relating solely to employee benefit plans);
(C) Prior to the earlier of (i) November 30, 1996
or (ii) the effective date of the first registration statement filed by the
Company for an offering of its securities to the general public (the "Initial
Public Offering");
<PAGE>
(D) After the Company has effected two (2) such
registrations pursuant to this Section 2; or
(E) If the Company shall furnish to such Holders a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 2 shall be deferred for a period not to
exceed 120 days from the date of receipt of written request from the Holders.
Subject to the foregoing, the Company will use its best
efforts to file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
or requests of the Holders.
(b) From and after the date hereof, the Company shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder to require
the Company to include shares or securities in any registration initiated under
this Agreement, nor shall the Company include any shares or securities for its
own account, without the written consent of a majority in interest of the
Holders requesting registration unless under the terms of such agreement such
holder or prospective holder may include such securities in such registration
only to the extent that the inclusion of its securities will not diminish the
amount of Registrable Securities which are included.
(c) The Holders shall include in their request made pursuant
to this Section 2 the name, if any, of the underwriter or underwriters that the
majority in interest of such Holders would propose, with the consent of the
Company (which consent shall not be unreasonably withheld) to employ in
connection with the public offering proposed to be made pursuant to the
registration requested; and the Company shall include such information in the
written notice referred to in Section 2(a)(i). The right of any Holder to
registration pursuant to this Section 2 shall be conditioned on such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent requested (unless
otherwise mutually agreed by a majority in interest of the Holders and such
Holder) to the extent provided herein. The Company shall (together with all
Holders proposing to distribute their Registrable Securities through such
underwriting) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting in the manner set
forth above. Notwithstanding any other provision of this Section 2 (with the
exception of subsection (d) below), if the underwriter advises such Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among such
Holders therein in proportion, as nearly as practicable, to the respective
amounts of Registrable Securities held by such Holders at the time of filing the
registration statement. No Registrable Securities excluded from the underwriting
by reason of the underwriter's marketing limitation shall be included in such
registration.
<PAGE>
(d) Notwithstanding the cutback provisions of Section 2(c), if
Cypress desires to include Registrable Securities held by it in a registration
of the Company's securities pursuant to this Section 2, unless Cypress consents
in writing, in no event shall the number of Registrable Securities held by
Cypress and included in such registration be less than thirty-three and
one-third percent (33-1/3%) of the total number of shares of the Company's
securities registered thereunder.
(e) If any Holder disapproves of the terms of the
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company, the underwriter and the other Holders proposing to distribute
Registrable Securities through such underwriting. The Registrable Securities so
withdrawn shall also be withdrawn from registration and shall not be transferred
in a public distribution prior to 120 days after the effective date of such
registration statements or such shorter period of time as the underwriter may
require; provided, however, that, if by the withdrawal of such Registrable
Securities a greater number of Registrable Securities held by other Holders may
be included in such registration (up to the maximum of any limitation imposed by
the underwriters), then the Company shall offer to all Holders who have included
Registrable Securities in the registration the right to include additional
shares of Registrable Securities in the proportions specified in Section 2(c).
3. Requested Registration -- Cypress.
---------------------------------
(a) In case the Company shall receive from Cypress a written
request that the Company effect any registration, qualification or compliance
with respect to Registrable Securities held by Cypress if the reasonable
anticipated aggregate offering price (net of Selling Expenses) would exceed
$5,000,000, the Company will:
(i) use its best efforts to effect, as soon as
practicable, all such registrations, qualifications and compliances (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under the applicable blue sky or other
state securities laws, and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Registrable Securities as are
specified in such request; provided, however, that
(ii) the Company shall not be obligated to take any
action to effect any such registration, qualification, or compliance pursuant to
this Section 3:
(A) In any particular jurisdiction in which the
Company would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) Within (i) six (6) months immediately
following the effective date of the registration statement pertaining to the
initial underwritten public offering of securities of the Company for its own
account or (ii) ninety (90) days immediately following the
<PAGE>
effective date of any registration statement pertaining to any other
underwritten public offering of securities of the Company for its own account
(in either case other than a registration relating solely to a transaction under
SEC Rule 145 or any successor thereto or a registration relating solely to
employee benefit plans);
(C) Prior to the effective date of the Initial
Public Offering;
(D) After the Company has effected one (1) such
registration pursuant to this Section 3; or
(E) If the Company shall furnish to Cypress a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors it would be seriously detrimental to
the Company or its stockholders for a registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to register,
qualify or comply under this Section 3 shall be deferred for a period not to
exceed 120 days from the date of receipt of written request from Cypress.
Subject to the foregoing, the Company will use its best
efforts to file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
or requests of Cypress.
(b) From and after the date hereof, the Company shall not
enter into any agreement with any holder or prospective holder of any securities
of the Company which would allow such holder or prospective holder to require
the Company to include shares or securities in any registration initiated under
this Section 3, nor shall the Company include any shares or securities for its
own account, without the written consent of Cypress unless, with respect to all
cases set forth above, under the terms of such agreement such holder or
prospective holder may include such securities in such registration only to the
extent that if the underwriter advises such holder in writing that marketing
factors require a limitation of the number of shares underwritten, the number of
shares of securities that may be included in the registration shall be so
reduced and in the event of such cutback, Cypress shall receive full priority
with respect to all of its Registrable Securities to be registered.
(c) Cypress shall include in its request made pursuant to this
Section 3 the name, if any, of the underwriter or underwriters that Cypress
would propose, with the consent of the Company (which consent shall not be
unreasonably withheld) to employ in connection with the public offering proposed
to be made pursuant to the registration requested. The Company shall (together
with Cypress) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting in the manner set
forth above. Notwithstanding any other provision of this Section 3, if the
underwriter advises Cypress in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the
<PAGE>
number of shares of Registrable Securities that may be included in the
registration and underwriting shall be so reduced. No Registrable Securities
excluded from the underwriting by reason of the underwriter's marketing
limitation shall be included in such registration.
(d) A registration effected pursuant to this Section 3 shall
not be counted as a request for registration effected pursuant to Section 2.
(e) If Cypress disapproves of the terms of the underwriting
agreement or the nature of the underwriter's cutback pursuant to Section 3(c)
above, Cypress may elect to withdraw from such underwriting by written notice to
the Company, the underwriter and other Holders, if any, proposing to distribute
Registrable Securities through such underwriting. The Registrable Securities so
withdrawn shall also be withdrawn from registration, and such registration shall
not count as Cypress's right to request registration under this Section 3.
4. Shelf Registration -- Cypress.
-----------------------------
(a) The Company shall use its best efforts to promptly cause
all of the issued and/or deliverable but unsold shares of the Cypress Stock to
be registered under the Securities Act as to permit the sale thereof. The filing
of such registration statement shall be filed at least forty-five (45) days
before the expiration of the market stand-off period (the "Initial Lockup
Period") imposed upon the Company's directors, officers and greater than 1%
shareholders in connection with the Initial Public Offering.
(b) The Company shall use its best efforts (i) to cause such
registration statement to become effective concurrent with the expiration of the
Initial Lockup Period (including any extension to such period in the event of an
offering of the Company's securities following the Initial Public Offering that
occurs during the Initial Lockup Period), and (ii) to keep such registration
statement effective until the earlier of (A) the date all of the shares of
Cypress Stock are sold; (B) the date three (3) years after the "Closing" (as
defined in the Termination Agreement); or (C) the date Cypress is able to sell
all of the shares of the Cypress Stock pursuant to SEC Rule 144 in a three-month
period.
(c) The Company may suspend Cypress's ability to sell under
such registration statement pursuant to this Section 4 (i) during the period
from expiration of the Lockup Period until one year from the effective date of
the Initial Public Offering for the last four weeks of each fiscal quarter until
the day after the end of the set "blackout" period with respect to such fiscal
quarter's earnings release provided in the Company's insider trading policy and
(ii) beginning one year after the effective date of the Initial Public Offering
for up to forty-five (45) days if such registration would be detrimental to the
Company based upon the good faith determination of its Board of Directors;
provided, the Company's right to suspend use of such registration pursuant to
this Section 4 (a) shall terminate earlier upon the public disclosure of such
material information (by a party other than Cypress) underlying the need for
suspension, and (b) once exercised, may not be again exercised for one hundred
twenty (120) days.
<PAGE>
5. Form S-3 Registration.
---------------------
(a) In case the Company shall receive from any Holder or
Holders a written request or requests that the Company effect a registration on
Form S-3 (or any successor thereto) and any related qualification or compliance
with respect to all or a part of the Registrable Securities held by such Holder
or Holders, the Company will use its best efforts to cause such Registrable
Securities to be registered on such form; provided, however, that the Company
shall not be obligated to take any action to effect such registration,
qualification or compliance pursuant to this Section 5:
(i) if the Company is not qualified as a registrant
entitled to use Form S-3;
(ii) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(iii) if the Company has effected one such registration
pursuant to this Section 5 during the preceding six (6) months; or
(iv) if the reasonably anticipated offering price to the
public of all shares of Common Stock to be sold pursuant to such registration
(net of Selling Expenses) is less than $500,000.
(b) Subject to the foregoing, the Company shall file a
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
(c) The provisions of Sections 2(a)(i) and (ii), 2(c), 2(d)
and 2(e) shall apply to any registration effected pursuant to this Section 5.
(d) Registrations effected pursuant to this Section 5 shall
not be counted as requests for registration effected pursuant to Section 2 or
Section 3.
6. Company Registration.
--------------------
(a) If at any time, or from time to time, the Company shall
determine to register any of its securities, either for its own account or for
the account of a security holder or holders, other than (i) a registration
relating solely to a transaction under SEC Rule 145 or any successor thereto, or
(ii) a registration relating solely to employee benefit plans, or (iii) a
registration pursuant to sections 2, 3 or 4, the Company will:
<PAGE>
(i) promptly give to each Holder written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky laws or other
state securities laws) and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance) and in any underwriting
involved therein, all the Registrable Securities specified in any written
request or requests by any Holder or Holders received by the Company within
thirty (30) days after such written notice is given on the same terms and
conditions as the Common Stock, if any, otherwise being sold through the
underwriter in such registration.
(b) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holders as a part of the written notice given pursuant to Section
6(a)(i). In such event the right of any Holder to registration pursuant to this
Section 6 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting (together with the Company and the
other holders distributing their securities through such underwriting) shall
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company.
(c) Notwithstanding any other provision of this Section 6
(with the exception of subsection (d) below), if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the amount of Registrable Securities to
be included in such registration and underwriting; provided, however, that the
underwriter may not limit the Registrable Securities to be included in any
proposed registration (other than the Initial Public Offering) to an amount that
is less than thirty percent (30%) of the total value of the securities to be
distributed through such registration and underwriting. In the case of the
Initial Public Offering, the underwriter shall have the right pursuant to this
Section 6(c) to reduce the number of Registrable Securities to be included in
such registration to zero, subject to Section 6(d) herein. The Company shall so
advise all Holders, and the number of shares of Registrable Securities that may
be included in the registration and underwriting shall be allocated in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the registration
statement.
(d) Notwithstanding the cutback provisions of Section 6(c), if
Cypress desires to include Registrable Securities held by it in a registration
of the Company's securities pursuant to this Section 6, unless Cypress consents
in writing, in no event shall the number of Registrable Securities held by
Cypress and included in such registration be less than thirty-three and
one-third percent (33-1/3%) of the total number of shares of the Company's
securities registered thereunder.
(e) If any Holder disapproves of the terms of any such
underwriting, such Holder may elect to withdraw therefrom by written notice to
the Company and the underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall also be
<PAGE>
withdrawn from registration and shall not be transferred in a public
distribution prior to 120 days after the effective date of the registration
statement relating thereto, or such shorter period of time as the underwriter
may require.
7. Expenses of Registration. All Registration Expenses incurred
------------------------
in connection with any registration pursuant to Sections 2, 3, 4, 5 or 6 shall
be borne by the Company. Unless otherwise stated, all Selling Expenses relating
to securities registered on behalf of the Holders shall be borne by the Holders
pro rata on the basis of the number of shares so registered; provided, however,
that the Company shall not be required to effect or to pay any Registration
Expenses of any registration begun pursuant to Section 2 or Section 3, the
request for which has been subsequently withdrawn by Holders (including Cypress,
for purposes of Section 3) of a number of shares of Registrable Securities such
that there are no Holders of Registrable Securities intending to participate in
the registration sufficient to request such a registration, in which case such
expenses shall be borne by the Holders (including Cypress, for purposes of
Section 3) of securities (including Registrable Securities) requesting or
causing such withdrawal; provided further, however, that if at the time of such
withdrawal, the Holders (including Cypress, for purposes of Section 3) have
learned of a material adverse change in the condition, business or prospects of
the Company from that known to the Holders (including Cypress, for purposes of
Section 3) at the time of their request, then the Holders (including Cypress,
for purposes of Section 3) shall not be required to pay any of such Registration
Expenses and shall retain their rights pursuant to Sections 2, 3 and 7.
8. Registration Procedures. If and whenever the Company is
-----------------------
required by the provisions of this Agreement to use its best efforts to effect
the registration of any of the Registrable Securities under the Securities Act,
the Company will, as expeditiously as possible:
(a) Prepare and file with the SEC a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least 120 days or
until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the Securities
Act and to keep such registration statement effective for that period of time
specified in Section 8(a);
(c) Prepare and file with the SEC promptly upon the request of
any such Holders, any amendments or supplements to such registration statement
or prospectus which, in the reasonable opinion of special counsel for such
Holders, is required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the Registrable Securities by
such Holders;
(d) Prepare and promptly file with the SEC, and promptly
notify such Holders or their special counsel of the filing of, such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time
<PAGE>
when a prospectus relating to such securities is required to be delivered under
the Securities Act, any event has occurred as the result of which any such
prospectus must be amended in order that it does not make any untrue statement
of a material fact or omit to state any material fact necessary to make the
statements therein not misleading, in light of the circumstances in which they
were made;
(e) In case any of such Holders or any underwriter for any
such Holders is required to deliver a prospectus at a time when the prospectus
then in effect may no longer be used under the Securities Act, prepare promptly
upon request such amendment or amendments to such registration statement and
such prospectus as may be necessary to permit compliance with the requirements
of the Securities Act;
(f) Furnish to each Holder participating in the registration
such number of prospectuses, preliminary prospectuses, final prospectuses and
such other documents as such seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable Securities
being sold by such Holder;
(g) Enter into a written underwriting agreement in customary
form and substance reasonably satisfactory to the Company, the Holders and the
underwriters, if the offering is to be underwritten in whole or in part; and
(h) Use its best efforts to register or qualify the
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as each such selling Holder of
Registrable Securities shall reasonably request and do any and all other acts
and things which may be necessary or desirable to enable such Holder to
consummate the public sale or other disposition in such jurisdictions; provided,
however, that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or file a general consent to service
of process in any such jurisdictions.
(i) Except with respect to subsections (c), (d), (e), (f) and
(h), the provisions of this Section 8 shall not apply to the registration
effected pursuant to Section 4.
9. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless each
Holder of Registrable Securities with respect to which a registration statement
has been filed under the Securities Act pursuant to this Agreement, each of such
Holder's partners, officers and directors, each underwriter of any of the
Registrable Securities included in such registration statement, and each person,
if any, who controls any such Holder or underwriter within the meaning of the
Securities Act (hereinafter collectively referred to as the
"Holder-Underwriters"), as follows:
<PAGE>
(i) against any and all loss, liability, claim, damage
and expense whatsoever arising out of any untrue statement or alleged untrue
statement of a material fact contained in such registration statement (or any
amendment thereto) or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any preliminary prospectus or
prospectus (or any amendment or supplement thereto) or the omission or alleged
omission therefrom of a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, or any violation by the Company of any rule or regulation
promulgated under the any state or federal securities laws applicable to the
Company or such Holder-Underwriters in connection with any such registration,
qualification and compliance unless such untrue statement or omission, or such
alleged untrue statement or omission, or any alleged violation or violation was
made in reliance upon and in conformity with or was the result of written
information furnished to the Company by any such Holder-Underwriter expressly
for use in such registration statement (or any amendment thereto) or such
preliminary prospectus or prospectus (or any amendment or supplement thereto);
(ii) against any and all loss, liability, claim, damage
and expense whatsoever to the extent of the aggregate amount paid in settlement
of any litigation, commenced or threatened, or of any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue statement
or omission, or any such alleged violation or violation if such settlement is
effected with the written consent of the Company; and
(iii) against any and all expense whatsoever reasonably
incurred in investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, or any
such alleged violation or violation, to the extent that any such expense is not
paid under Section 9(a)(i) or (ii);
provided, however, that the foregoing indemnity agreement is subject to the
condition that, insofar as it relates to any such untrue statement or alleged
untrue statement, omission or alleged omission, violation or alleged violation
made in a preliminary prospectus but eliminated or remedied in the amended
prospectus on file with the SEC at the time the registration statement becomes
effective, or in the amended prospectus filed with the SEC pursuant to Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any Holder if the underwriter of any such Holder fails to furnish (to
the extent and only to the extent such Holder's underwriter is in fact required
to furnish) a copy of the Final Prospectus to the person or entity asserting the
loss, liability, claim or damage at or prior to the time such action is required
by the Securities Act.
In no case shall the Company be liable under this indemnity
agreement with respect to any loss, liability, claim, damage or expense with
respect to any claim made against any Holder-Underwriter unless the Company
shall be notified in writing of the nature of the claim within a reasonable time
after the assertion thereof, but failure to so notify the Company shall not
relieve the Company from any liability which it may have otherwise than on
account of
<PAGE>
this indemnity agreement. In case of any such notice, the Company shall be
entitled to participate at its expense in the defense, or if it so elects within
a reasonable time after receipt of such notice, to assume the defense of any
suit brought to enforce any such claim; but if it so elects to assume the
defense, such defense shall be conducted by counsel chosen by it and approved by
the Holder-Underwriter and other defendant or defendants, if any, in any suit so
brought, which approval shall not be unreasonably withheld. In the event that
the Company elects to assume the defense of any such suit and retain such
counsel, the Holder-Underwriter and other defendant or defendants, if any, in
the suit, shall bear the fees and expenses of any additional counsel thereafter
retained by them; provided, however, that if a conflict of interests exists or
arises such that the it would be inappropriate for counsel selected by the
Company to represent the Holder-Underwriters, the Company will pay the
reasonable fees and expenses of one counsel to the Holder-Underwriter.
(b) Each Holder severally agrees that it will indemnify and
hold harmless the Company, each officer and director of the Company, each
person, if any, who controls the Company within the meaning of the Securities
Act, each underwriter of Registrable Securities included in any registration
statement which has been filed under the Securities Act pursuant to this
Agreement, each person, if any, who controls such underwriter within the meaning
of the Securities Act, each other Holder, each of such other Holder's partners,
officers and directors, and each person controlling such other holder within the
meaning of the Securities Act against any and all loss, liability, claim, damage
and expense described in clauses (a)(i) through (a)(iii), inclusive, of this
Section 9, but only with respect to statements or omissions, or alleged
statements or omissions, or violations or alleged violations made in such
registration statement (or any amendment thereto) or any preliminary prospectus
or prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with or as a result of written information furnished to the Company
by such Holder expressly for use in such registration statement (or any
amendment thereto) or such preliminary prospectus or prospectus (or any
amendment or supplement thereto). In case any action shall be brought against
the Company or any person so indemnified pursuant to the provisions of this
Section 9(b) and in respect of which indemnity may be sought against any Holder,
the Holders from whom indemnity is sought shall have the rights and duties given
to the Company, and the Company and the other persons so indemnified shall have
the rights and duties given to the persons entitled to indemnification by the
provisions of Section 9 (a). Notwithstanding anything to the contrary herein
contained, a Holder's indemnity obligation shall be limited to the amount
received by such Holder from the offering out of which the indemnity obligation
arises.
10. Information by Holder. The Holder or Holders of Registrable
---------------------
Securities included in any registration shall furnish to the Company such
information regarding such Holder or Holders, and the distribution proposed by
such Holder or Holders, as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
11. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the SEC which may permit the sale of the
Registrable Securities to the public without registration, the Company agrees to
use its best efforts to:
<PAGE>
(a) Make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration filed by the Company for an
offering of its securities to the general public;
(b) File with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act; and
(c) Furnish the Holders forthwith upon request (i) a written
statement by the Company as to its compliance with the public information
requirements of said Rule 144 (at any time after ninety (90) days after the
Initial Public Offering), (ii) a copy of the most recent annual or quarterly
report of the Company, and (iii) such other reports and documents as may be
reasonably requested in availing the Holders of any rule or regulation of the
SEC permitting the sale of any such securities without registration.
12. Transfer of Registration Rights.
-------------------------------
(a) The rights to cause the Company to register securities
granted by the Company under Sections 2, 5 and 6 may be assigned in writing by
any Holder of Registrable Securities to a partner, shareholder, equity holder,
officer or director of any Holder without regard to the number of Registrable
Securities transferred or assigned or to a transferee or assignee of not less
than 10,000 shares of the Registrable Securities (as appropriately adjusted from
time to time for stock splits and the like) if such transfer may otherwise be
effected in accordance with applicable securities laws and if the Company is
given written notice by such Holder at the time of or within a reasonable time
after said transfer, stating the name and address of said transferee or assignee
and identifying the securities with respect to which such registration rights
are being assigned and if such transferee or assignee executes and delivers to
the Company an agreement in form and substance satisfactory to the Company
agreeing to be bound by all terms and provisions of this agreement applicable to
a Holder.
(b) The rights of Cypress to cause the Company to register
securities under Sections 3 and 4 may be assigned to a successor-in-interest of
all or substantially all the stock and/or assets of Cypress.
(c) The right of Cypress to cause the Company to register
securities under Section 3 may be assigned, prior to the Initial Public
Offering, to a transferee or assignee (or, subject to Section 12(e), transferees
or assignees) of not less than an aggregate 3,000,000 shares of the Cypress
Stock (as appropriately adjusted from time to time for stock splits and the
like) if such assignment or transfer may otherwise be effected in accordance
with applicable securities laws and if the Company is given written notice by
Cypress at the time of or within a reasonable time after said transfer, stating
the name and address of said transferee(s) or assignee(s) and identifying the
securities with respect to which such registration rights are being assigned and
if such transferee(s) or assignee(s) execute(s) and deliver(s) to the Company an
agreement in form and substance satisfactory to the Company agreeing to be bound
by all terms and provisions of this agreement applicable to Cypress. If, after
such transfer or assignment, Cypress has so
<PAGE>
transferred or assigned all of the Cypress Stock, Cypress shall have no further
rights pursuant to Section 3.
Notwithstanding any transfer or assignment by Cypress
pursuant to this Section 12(c), the rights under Section 3 may be exercised only
once by all Holders of rights under Section 3 (including Cypress), collectively,
as if such Holders were Cypress. In the event the Company receives a written
request to register securities pursuant to Section 3(a), it shall promptly give
written notice of the proposed registration to all other Holders of rights under
Section 3 and shall include in such registration all or such portion of the
Registrable Securities of any such Holder or Holders joining in such request as
are specified in a written request received by the Company within twenty (20)
days after written notice by the Company to such Holder or Holders pursuant to
this paragraph is given. After the Company has effected one (1) registration
under Section 3, the Company shall not be obligated to take any action to effect
any further registration, qualification, or compliance pursuant to Section 3.
(d) The right of Cypress under Section 4 may be assigned,
prior to the Initial Public Offering, to a transferee or assignee (or, subject
to Section 12(e), transferees or assignees) of not less than an aggregate
3,000,000 shares of the Cypress Stock (as appropriately adjusted from time to
time for stock splits and the like) if such assignment or transfer may otherwise
be effected in accordance with applicable securities laws and if the Company is
given written notice by Cypress at the time of or within a reasonable time after
said transfer, stating the name and address of said transferee(s) or assignee(s)
and identifying the securities with respect to which such registration rights
are being assigned and if:
(i) such transferee(s) or assignee(s) execute(s) and
deliver(s) to the Company an agreement in form and substance
satisfactory to the Company agreeing to be bound by all terms and
provisions of this agreement applicable to Cypress and by all terms and
provisions of Cypress's confidentiality obligations under Section 5.1
of the Termination Agreement; and
(ii) such transferee(s) or assignee(s) execute(s) and
deliver(s) to the Company an agreement in form and substance
satisfactory to the Company agreeing not to sell, in any 90-day period,
more than one percent (1%) of the total outstanding shares of capital
stock of the Company outstanding, as shown by the Company's most recent
report filed with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended,
for as long as the registration statement filed by the Company under
Section 4 is effective.
(e) For purposes of clarification, the right of Cypress to
assign its rights under Section 3 or Section 4 pursuant to Section 12(c) and
Section 12(d) shall include: (i) an assignment to a group of transferees or
assignees of not less than an aggregate 3,000,000 shares, provided that (A) all
assignees or transferees in such group appoint a single attorney-in-fact for the
purpose of exercising any rights, receiving notices or taking any action under
Section 3 or Section 4 and (B) such group involves a relationship between two or
more persons who are
<PAGE>
affiliates of each other; and (ii) the right to transfer such rights to multiple
transferees or assignees provided that (A) each such transfer or assignment
involves at least 3,000,000 shares and (B) for purposes of exercising rights
under Section 3, all such transferees or assignees coordinate the exercise of
the single demand registration right provided in Section 12(c) above. As used in
the preceding sentence, an "affiliate" means any corporation or other entity
controlled by, controlling, or under common control with such person, with
"control" meaning direct or indirect beneficial ownership of fifty percent (50%)
or more of the voting stock of such corporation or a fifty percent (50%) or
greater interest in the decision-making authority of such other entity.
13. Lock-up Agreement.
-----------------
(a) General Lockup. In consideration for the Company agreeing
--------------
to its obligations under this Agreement, each Holder hereby agrees in connection
with the registration of the Company's securities whether for its own account or
under Section 2, not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Registrable Securities (other than
those included in the registration) without the prior written consent of the
Company or underwriters managing the offering, as the case may be, for such
period of time (not to exceed 180 days) from the effective date of such
registration as the Company or the underwriters may specify; provided that, (a)
-------------
nothing herein shall prevent any Holder that is a partnership from making a
distribution of Registrable Securities to the partners thereof that is otherwise
in compliance with applicable securities laws, provided that all such partners
shall remain subject to this Section 13; (b) such agreement shall not be
effective unless all executive officers, directors and holders of 1% or more of
the issued and outstanding capital stock of the Company who are not parties to
this Agreement have entered into similar agreements; (c) in the event that the
Initial Lockup Period provides for a set number of days where the Initial Lockup
Period would expire in a period where the Company's directors and officers are
prevented from trading because of the set "blackout" period between earnings
releases provided in the Company's insider trading policy, then, notwithstanding
the 180-day limit set forth above, the Initial Lockup Period shall not expire
until the date that trading can commence under the Company's insider trading
policy.
(b) Release from Lockup Any early releases of any lockup shall
-------------------
include the pro-rata release of the Cypress Stock based on the total number of
shares that are locked-up, and such early-released shares of Cypress Stock shall
not, at the time of such early release, be subject to any blackout provision on
Cypress's released Registrable Securities set forth in this Agreement.
14. Miscellaneous.
-------------
(a) Additional Actions and Documents. The parties hereto shall
--------------------------------
execute and deliver such further documents and instruments and shall take such
other further actions as may be required or appropriate to carry out the intent
and purposes of this Agreement.
<PAGE>
(b) Successors and Assigns. This Agreement shall bind and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that the Shareholders shall not make any assignment
of any of their rights hereunder except as otherwise provided herein or unless
the Company shall otherwise consent.
(c) Amendment. This Agreement shall not be changed, amended,
---------
or modified, in whole or in part, except by written agreement signed by the
Company and Holders holding in excess of fifty percent (50%) of aggregate number
of Registrable Securities (including securities exercisable for or convertible
into Registrable Securities) then held by all Holders; provided however, that
(i) this Agreement shall not be amended without the consent of the holder of
two-thirds of the outstanding Preferred Stock, ,voting together as a single
class on or an as-converted basis, if such amendment would alter or change the
preferences, rights, privileges or powers of, or restrictions provided for the
benefit of, the Preferred Stock and (ii) this Agreement may not be amended
without the consent of Cypress if such amendment would adversely alter or change
the preferences, rights, privileges or powers of, or restrictions provided for
the benefit of Cypress pursuant to Sections 2, 3, 4, 5 and 6 in a manner
different from the other Holders.
(d) Notices. All notices, requests, demands, and other
-------
communications pursuant to this Agreement shall be in writing and shall be
deemed to have been duly given upon the date of service if served personally on
the party to whom notice is to be given, or on the Sixth (6th) day after mailing
if mailed to the party to whom notice is to be given, by first class mail,
registered or certified, postage prepaid, and properly addressed, to the party
as follows: In the case of a Holder, at his or her last address shown in the
Company's records, and in the case of the Company at 1277 Orleans Drive,
Sunnyvale, California 94089-1138. Any party may change its address for the
purpose of this Section 12(d) by giving the other parties written notice of its
new address in accordance herewith.
(e) Governing Law. The rights and obligations of the parties
-------------
hereto shall be governed by, and this Agreement shall be construed in accordance
with, the laws of the State of California, excluding its conflict of laws rules
to the extent such rules would apply the law of another jurisdiction.
(f) Entire Agreement. This Agreement and the documents and
----------------
agreements contemplated herein constitute the entire agreement between the
parties with regard to the subject matter hereof and thereof. This Agreement
supersedes all prior written and oral agreements and understandings between the
parties hereto with respect to the subject matter hereof, and each of the
Holders hereby waives any and all rights under the Prior Registration Agreement,
the Fourth Amended and Restated Registration Rights Agreement dated June 1,
1995, the Third Amended and Restated Registration Rights Agreement dated October
8, 1992 among the Company and the Shareholders named therein, the Second Amended
and Restated Registration Rights Agreement date December 9, 1991 among the
Company and the Shareholders named therein, the First Amended and Restated
Registration Rights Agreement dated September 7, 1990 among the Company and the
Shareholders named therein, and the Registration Rights Agreement dated
September 6, 1989, among the Company and the Stockholders (named therein).
<PAGE>
(g) Counterparts. This Agreement may be executed in any number
------------
of counterparts, each of which may be executed by less than all of the parties
hereto, each of which shall be enforceable only against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
"COMPANY" "SHAREHOLDERS"
QUICKLOGIC CORPORATION
a California corporation /s/ Ronald L. Perkins
--------------------------------------
Ronald L. Perkins
By: /s/ E. Thomas Hart /s/ Tench Coxe
------------------------------ --------------------------------------
E. Thomas Hart, President Tench Coxe
/s/ William H. Younger, Jr.
--------------------------------------
William H. Younger, Jr.
Saunders Holdings, L.P.
By: /s/ G. Leonard Baker, Jr.
----------------------------------
G. Leonard Baker, Jr.,
General Partner
/s/ G. Leonard Baker, Jr.
--------------------------------------
G. Leonard Baker, Jr.
/s/ David L. Anderson
--------------------------------------
David L. Anderson
Anvest, L.P.
By: /s/ David L. Anderson
----------------------------------
David L. Anderson, General Partner
Paul M. & Marsha R. Wythes,
Trustees of the Wythes Living Trust
By: /s/ Paul M. Wythes
----------------------------------
Paul M. Wythes, Trustee
<PAGE>
TOW Partners, A California Limited
Partnership
By: /s/ Paul M. Wythes
----------------------------------
Paul M. Wythes, General Partner
Sutter Hill Ventures, A California
Limited Partnership
By: /s/ David L. Anderson
----------------------------------
David L. Anderson
General Partner of the General
Partner
TVI Management-3, L.P.
By: /s/
----------------------------------
General Partner
TVI Venture Investors-3, L.P.
By: TVI Management-3 General Partner
By: /s/
----------------------------------
General Partner
Technology Venture Investors-IV, as
nominee for Technology Venture
Investors-4, L.P.
TVI Partners-4, L.P. and
TVI Affiliates-4, L.P.
By: TVI Management-4, L.P. General
Partner
By: /s/
----------------------------------
General Partner
New Enterprise Associates VI, Limited
Partnership
By: NEA Partners VI, Limited Partnership
Its General Partner
By: /s/ Nancy Dorman
----------------------------------
Nancy Dorman
<PAGE>
Glynn Ventures III, L.P.
By: /s/ John W. Glynn, Jr.
----------------------------------
John W. Glynn, Jr., General Partner
U.S. Venture Partners III,
A California Limited Partnership,
By: BHMS Partners III
A California Limited partnership
Its General Partner
By: /s/ Michael P. Maher
----------------------------------
Attorney-In-Fact
Michael P. Maher
Second Ventures Limited Partnership
By: BHMS Partners III
A California Limited Partnership
Its General Partner
By: /s/ Michael P. Maher
----------------------------------
Attorney-In-Fact
Michael P. Maher
U.S.V. Entrepreneur Partners,
A California Limited Partnership
By: BHMS Partners III,
A California Limited Partnership
Its General Partner
By: /s/ Michael P. Maher
----------------------------------
Attorney-In-Fact
Michael P. Maher
Vertex Investment Pte. Ltd.
By: /s/
----------------------------------
<PAGE>
Cypress Semiconductor Corp.
By: /s/ Emmanual Hernandez
----------------------------------
Emmanuel Hernandez
V.P. of Finance, CFO
C.V. Sofinnova Partners Five
By: Sofinnova (International) Five N.V.
General Partner
By: /s/
----------------------------------
Under Power of Attorney
ALTA IV LIMITED PARTNERSHIP
By: Alta IV Management Partners, L.P.
By: /s/
----------------------------------
General Partner
Morgenthaler Venture Partners III
by Morgenthaler Management Partners III
its General Partner
By: /s/ Gary J. Morgenthaler
----------------------------------
Gary J. Morgenthaler,
General Partner
SEQUOIA CAPITAL V
SEQUOIA TECHNOLOGY PARTNERS V
SEQUOIA XXIV, SEQUOIA XXIII
By: /s/ Mark Stevens
----------------------------------
Mark Stevens, General Partner
/s/ A. Bechtolsheim
--------------------------------------
A. Bechtolsheim
<PAGE>
U.S. Venture partners IV, L.P.
By Presidio Management Group IV, L.P.,
Its General partner
By: /s/ Phil Young
----------------------------------
Phil Young, General Partner
SECOND VENTURES II, L.P.
By Presidio Management Group IV, L.P.
Its General Partner
By: /s/ Phil Young
----------------------------------
Phil Young, General Partner
USVP ENTREPRENEUR PARTNERS II, L.P.
A Delaware Limited Partnership
By Presidio Management Group IV, L.P.
Its General Partner
By: /s/ Phil Young
----------------------------------
Phil Young, General Partner
/s/ James C. Gaither
--------------------------------------
James C. Gaither
Print Individual or Entity Name
By: /s/
----------------------------------
Signature
/s/
--------------------------------------
Print Name (if Agent*)
/s/
--------------------------------------
Title of Agent*
* Agent, officer, partner, trustee, etc.
<PAGE>
EXHIBIT 10.15
LEASE
DATED June 17, 1996
BY AND BETWEEN
KAIROS, LLC, and Moffett Orchard Investors
AS LANDLORD
AND
Quicklogic Corporation
AS TENANT
AFFECTING PREMISES COMMONLY KNOWN AS
1277 Orleans Drive
Sunnyvale, Ca 95122
[12/15/95 MULTI TENANT NET INDUSTRIAL LEASE]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE:
-----
<S> <C>
ARTICLE 1 - DEFINITIONS
- -----------------------
1.1 General 1
1.2 Additional Rent 1
1.3 Address for Notices 1
1.4 Agents 1
1.5 Agreed Interest Rate 1
1.6 Base Monthly Rate 1
1.7 Building 1
1.8 Commencement Date 1
1.9 Common Area 1
1.10 Common operating Expense 1
1.11 Consumer Price Index 1
1.12 Effective Date 1
1.13 Event of Tenant's Default 1
1.14 Hazardous Materials 1
1.15 Insured and Uninsured Peril 1
1.16 Law 1
1.17 Lease 1
1.18 Lease Term 1
1.19 Lender 1
1.20 Permitted Use 2
1.21 Premises 2
1.22 Project 2
1.23 Private Restrictions 2
1.24 Real Property Taxes 2
1.25 Scheduled Commencement Date 2
1.26 Security Instrument 2
1.27 Summary 2
1.28 Tenant's Alterations 2
1.29 Tenant's Share 2
1.30 Trade Fixtures 2
ARTICLE 2 DEMISE, CONSTRUCTION, AND ACCEPTANCE 2
- -----------------------------------------------
2.1 Demise of Premises 2
2.2 Commencement Date 2
2.3 Construction of Improvements 2
2.4 Delivery and Acceptance of Possession 2
2.5 Early Occupancy 3
ARTICLE 3 - RENT 3
- -----------------
3.1 Base Monthly Rent 3
3.2 Additional Rent 3
3.3 Payment of Rent 3
3.4 Late charge and Interest on Rent in Default 3
3.5 Security Deposit 3
ARTICLE 4 - USE OF PREMISES 3
- ----------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C>
4.1 Limitation on Use 3
4.2 compliance with Regulations 4
4.3 Outside Areas 4
4.4 Signs 4
4.5 Parking 4
4.6 Rules and Regulations 4
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 5 - TRADE FIXTURES AND ALTERATIONS 4
- ------------------------------------------
5.1 Trade Fixtures 4
5.2 Tenant's Alterations 4
5.3 Alterations Required by Law 5
5.4 Amortization of Certain Capital Improvements 5
5.5 Mechanic's Liens 5
5.6 Taxes on Tenant's Property 6
ARTICLE 6 - REPAIR AND MAINTENANCE 6
- ----------------------------------
6.1 Tenant's Obligation to Maintain 6
6.2 Landlord's Obligation to Maintain 6
6.3 Control of Common Area 6
ARTICLE 7 - WASTE DISPOSAL AND UTILITIES 7
- ----------------------------------------
7.1 Waste Disposal 7
7.2 Hazardous Materials 7
7.3 Utilities
7.4 Compliance with Governmental Regulations
ARTICLE 8 - COMMON OPERATING EXPENSES
- -------------------------------------
8.1 Tenant's Obligation to Reimburse 8
8.2 Common Operating Expenses Defined 8
8.3 Real Property Taxes Defined 9
ARTICLE 9 - INSURANCE 9
- ---------------------
9.1 Tenant's Insurance 9
9.2 Landlord's Insurance 10
9.3 Tenant's Obligation to Reimburse 10
9.4 Release and Waiver of Subrogation 10
ARTICLE 10 - LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY 10
- -------------------------------------------------------------
10.1 Limitation on Landlord's Liability 10
10.2 Limitation on Tenant's Recourse 11
10.3 Indemnification of Landlord 11
ARTICLE 11 - DAMAGE TO PREMISES 11
- -------------------------------
11.1 Landlord's Duty to Restore 11
11.2 Landlord's Right to Terminate 11
11.3 Tenant's Right to Terminate 12
</TABLE>
<PAGE>
<TABLE>
<S> <C>
I1.4 Abatement of Rent 12
ARTICLE 12 - CONDEMNATION 12
- -------------------------
12.1 Landlord's Termination Right 12
12.2 Tenant's Termination Right 12
12.3 Restoration and Abatement of Rent 12
12.4 Temporary Taking 12
12.5 Division of Condemnation Award 12
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE:
-----
<S> <C>
ARTICLE 13 - DEFAULT AND REMEDIES 13
- ---------------------------------
13.1 Events of Tenant's Default 13
13.2 Landlord's Remedies 13
13.3 Waiver 14
13.4 Limitation an Exercise of Rights 14
13.5 Waiver by Tenant of Certain Remedies 14
ARTICLE 14 - ASSIGNMENT AND SUBLETTING 14
- --------------------------------------
14.1 Transfer by Tenant 14
14.2 Transfer by Landlord 16
ARTICLE 15 - GENERAL PROVISIONS 16
- -------------------------------
15.1 Landlord's Right to Enter 16
15.2 surrender of the Premises 17
15.3 Holding Over 17
15.4 Subordination 17
15.5 Mortgagee Protection and Attornment 17
15.6 Estoppel Certificates and Financial Statements 17
15.7 Reasonable consent 18
15.8 Notices 18
15.9 Attorney's Fees 18
15.10 Corporate Authority 18
15.11 Miscellaneous 18
15.12 Termination by Exercise of Right 18
15.13 Brokerage Commissions 19
15.14 Force Majeure 19
15.15 Entire Agreement 19
</TABLE>
EXHIBITS
- --------
Exhibit A - Site plan of the Project containing a description of the
Premises
Exhibit B - Improvement Agreement
Exhibit C - Approved Specifications
Exhibit D - Acceptance Agreement
Exhibit E - Description of Private Restrictions
Exhibit F - Sign Criteria
Exhibit G - Form of Subordination Agreement
Exhibit H - Hazardous Materials Questionnaire
<PAGE>
Exhibit I - New Window Construction
iii
<PAGE>
SUMMARY OF BASIC LEASE TERMS
----------------------------
<TABLE>
<CAPTION>
SECTION TERMS
(LEASE REFERENCE)
<S> <C> <C>
A. Lease Reference Date: June 17, 1996
--------------------
(Introduction)
KAIROS, LLC, and
B. Landlord: Orchard Moffett Investors,
--------
(Introduction) a California general
Partnership
C. Tenant: QuickLogic Corporation,
------
(Introduction) a California corporation
D. Premises: That area consisting of 42,624
--------
( pound 1.21) area the address of which is square feet of gross leasable
within the Building as Shown 1277 Orleans Drive, Sunnyvale.
on Exhibit A.
---------
E. Project: The land and improvements
-------
( pound 1.21) shown on Exhibit A consisting
---------
of one ( 1) buildings the
aggregate gross leasable area
of which is 42,624 square
feet.
F. Building: The Building in which the
--------
( pound 1.7) Premises are located known
as 1277 Orleans Drive,
Sunnyvale
containing 42,624 square feet
of gross leasable area.
G. Tenant's Share: 100%
--------------
( pound 1.29)
H. Tenant's Allocated Parking Stalls: 153 Stalls.
---------------------------------
(pound 4.5)
I. Scheduled Commencement Date: Upon Substantial Completion
--------------------------------------------------------
( pound 1.26) of the Interior Improvements as provided for in
-----------------------------------------------
Paragraph 2D of Exhibit B to this Lease.
---------------------------------------
J. Lease Term: 84 calendar months (plus the partial
----------
month following the Commencement
(pound 1.18) Date if such date is not the first
day of a month).
K. Base Monthly Rent:
-----------------
Months 1 - 30: $42,624.00 per Month
(pound 3.1) Months 31 - 60: $46,033.92 per Month
Months 61 - 84: $49,017.60 per Month
______________________________________
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
L. Prepaid Rent: $ 42,624.00
------------
(pound 3.3)
M. Security Deposit: 342,624.00
----------------
(pound 3.5) See First Addendum To Lease Paragraph 11
N. Permitted Use: Office, marketing, test, engineering, research,
-------------
(pound 4.1) development, design, storage, and distribution of electronic
components, and all Other related legal uses.
0. Permitted Tenant's Alterations Limit: $ 5,000.00
------------------------------------
(pound 5.2)
P. Tenant's Liability Insurance Minimum: $ 2,000,000.00
------------------------------------
(pound 9.1)
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Q. Landlord's Address: Suite 300
------------------
(pound 1.3) 2290 North First Street
San Jose, Ca 95131
R. Tenant's Add Suite 100A
------------
(pound 1.3) 2933 Bunker Hill Lane
Santa Clara, Ca 95054
S. Retained Real Estate Brokers: Cornish & Carey
----------------------------
(pound 15.13)
T. Lease: This Lease includes the summary of the Basic Lease Terms,
-----
(pound 1.17) the Lease, and the following exhibits and addenda: First
Addendum to Lease, Exhibit A (site plan of the Project
---------
containing description of the Premises), Exhibit B
--------
(Improvement Agreement), Exhibit C (Approved Specifi-
---------
cations), Exhibit D (acceptance agreement), Exhibit E
--------- ---------
(description of Private Restrictions), Exhibit F (sign
---------
criteria), Exhibit G (form of subordination agreement),
---------
Exhibit H (Hazardous Materials Questionnaire), and Exhibit I
--------- ---------
(New Window Construction)
</TABLE>
The foregoing Summary is hereby incorporated into and made a part of this
Lease. Each reference in this Lease to any term of the Summary shall mean the
respective information set forth above and shall be construed to incorporate all
of the terms provided under the particular paragraph pertaining to such
information, In the event of any conflict between the Summary and the Lease, the
Summary shall control.
LANDLORD: TENANT:
KAIROS, LLC, a California limited liability company QuickLogic Corporation
a California Corporation
By Orchard Moffett Investors, a California general
partnership,
Its authorized agent By /s/ Anthony S.S. Chan
Anthony S.S. Chan
By /s/ Michael J. Biggar VP Finance/Administration
Michael J. Biggar Chief Financial Officer
Manager
<PAGE>
ORCHARD MOFFETT INVESTORS, a California general partnership Date June 24, 1996
By /s/ Michael J. Biggar
Michael J. Biggar,
Manager
Date 6/26/96
2
<PAGE>
This Lease is dated as of the lease reference date specified in Section A
---------
of the Summary and is made by and between the party identified as Landlord in
Section B of the Summary and the party identified as Tenant in Section C of the
- --------- ---------
Summary.
ARTICLE 1
---------
DEFINITIONS
-----------
1.1 General: Any initially capitalized term that is given a special
-------
meaning by this Article 1, the Summary, or by any other provision of this Lease
(including the exhibits attached hereto) shall have such meaning when used in
this Lease or any addendum or amendment hereto unless otherwise clearly
indicated by the context.
1.2 Additional Rent: The term "Additional Rent" is defined in paragraph
---------------
32.
1.3 Address for Notices: The term Address for Notices" shall mean the
-------------------
addresses set forth in Sections Q and R of the Summary, provided, however, that
----------
after the Commencement Date. Tenant's Address for Notices shall be the address
of the Premises.
1.4 Agents: The term "Agents" shall mean the following: (i) with respect
------
to Landlord or Tenant, the agents, employees, contractors, and invitees of such
party; and (ii) in addition with respect to Tenant, Tenant's subtenants and
their respective agents, employees, contractors, and invitees.
1.5 Agreed Interest Rate: The term "Agreed Interest Rate" shall mean that
--------------------
interest rate determined as of the time it is to be applied that is equal to the
lesser of (i) 5% in excess of the discount rate established by the Federal
Reserve Bank of San Francisco as it may be adjusted from time to time, or (ii)
the maximum interest rate permitted by Law.
1.6 Base Monthly Rent: The term "Base Monthly Rent" shall mean the fixed
-----------------
monthly rent payable by Tenant pursuant to paragraph 3.1 which is specified in
Section K of the Summary.
- ---------
1.7 Building: The term "Building" shall mean the building in which the
--------
Premises are located which Building is identified in Section F of the Summary,
--------
the gross leasable area of which is referred to herein as the "Building Gross
Leasable Area."
1.8 Commencement Date: The term "Commencement Date" is the date the Lease
-----------------
Term commences, which term is defined in paragraph 2.2.
1.9 Common Area. The term "Common Area" shall mean all areas and
-----------
facilities
<PAGE>
within the Project that are not designated by Landlord for the exclusive use of
Tenant or any other lessee or other occupant of the Project, including the
parking areas. access and perimeter roads, pedestrian sidewalks, landscaped
areas, trash enclosures. recreation areas and to like.
1.10 Common Operating Expenses: The term 'Common Operating Expenses' is
-------------------------
defined in paragraph 8.2.
1.11 Consumer Price Index: The term "Consumer Price Index" shall refer to
--------------------
the Consumer Price Index, All Urban Consumers, subgroup 'All Items', for the San
Francisco-Oakland-San Jose metropolitan area (base year 1982-84 equals 100),
which is presently being published monthly by the United States Department of
Labor. Bureau of Labor Statistics. However, if this Consumer Price Index is
changed so that the base year is altered from that used as of the commencement
of the initial term of this Lease, the Consumer Price Index shall be converted
in accordance with the conversion factor published by the United States
Department of Labor, Bureau of Labor Statistics to obtain the same results that
would have been obtained had the base year not been changed. If no conversion
factor is available or if the Consumer Price Index is otherwise changed, revised
or discontinued for any reason there shall be substituted in lieu thereof and
the term "Consumer Price Index" shall thereafter refer to the most nearly
comparable official price index of the United States government in order to
obtain substantially the same result as would have been obtained had the
original Consumer Price indent not been discontinued, revised or changed, which
alternative index shall be selected by Landlord and shall be subject to Tenant's
written approval.
1.12 Effective Date: The term "Effective Date" shall mean the date the
---------------
last signatory to this Lease whose execution is required to make it binding on
the parties hereto shall have executed this Lease.
1.13 Event of Tenant's Default: The term " Event of Tenant's Default: is
------------------------
defined i in paragraph 13.1.
1.14 Hazardous Materials: The terms "Hazardous Materials" and "Hazardous
-------------------
Materials Laws" are defined in paragraph 7.2E.
1.15 Insured and Uninsured Peril: The terms "Insured Peril' and Uninsured
---------------------------
Peril" are defined in paragraph 11.2E
1.16 Law: The term "Law" shall mean any judicial decision, statute.
----
constitution, ordinance, resolution, regulation, rule, administrative order, or
other requirement of any municipal, county, state, federal or other government
agency or authority having jurisdiction over the parties to this Lease or the
Premises, or both, in effect either at the Effective Date or any time during the
Lease Term.
1.17 Lease: The term "Lease" shall mean the Summary and all elements of
-----
this Lease identified in Section T of the Summary, all of which are attached
---------
hereto and incorporated herein by this reference.
1.18 Lease Term: The term "Lease term' shall mean the term of this Lease
----------
which
<PAGE>
shall commence on the Commencement Date and continue for the period specified in
Section J of the Summary.
- ---------
1.19 Lender: The term "Lender" shall mean any beneficiary, mortgagee,
------
secured party, lessor, or other holder of any Security Instrument.
1.20 Permitted Use: The term "Permitted Use" shall mean the use specified
-------------
in Section N of the Summary.
--------
<PAGE>
1.21 Premises: The term "Premises" shall mean that building area described
--------
in Section D of the Summary that is within the Building.
---------
1.22 Project: The term "Project" shall mean that real property and the
-------
improvements thereon which are specified in Section E of the Summary, the
---------
aggregate gross leasable area of which is referred to herein as the "Project
Gross Leasable Area."
1.23 Private Restrictions: The term "Private Restrictions' shall mean all
--------------------
recorded covenants, conditions and restrictions, private agreements, reciprocal
casement agreements, and any other recorded instruments affecting the use of the
Premises which (i) exist as of the Effective Date. or (ii) are recorded after
the Effective Date and are approved by Tenant.
1.24 Real Property Taxes: The term 'Real Property Taxes' is defined in
-------------------
paragraph 8.3.
1.25 Scheduled Commencement Date: The term "Scheduled Commencement Date"
---------------------------
shall mean the date specified in Section I of the Summary.
---------
1.26 Security Instrument: The term "Security Instrument" shall mean any
--------------------
underlying lease, mortgage or deed of trust which now or hereafter affects the
Project, and any renewal, modification, consolidation, replacement or extension
thereof.
1.27 Summary: The term "Summary" shall mean the Summary of Basic Lease
--------
Terms executed by Landlord and Tenant that is part of this Lease.
1.28 Tenant's Alterations: The term Tenant's Alterations" shall mean all
--------------------
improvements, additions, alterations, and fixtures installed in the Premises by
Tenant at its expense which are not Trade Fixtures.
1.29 Tenant's Share: The term Tenant's Share" shall mean the percentage
--------------
obtained by dividing Tenant's Gross Leasable Area by the Building Gross Leasable
Area, which as of the Effective Date is the percentage identified in Section G
---------
of the Summary.
1.30 Trade Fixtures: The term "Trade Fixtures" shall mean (i) Tenant's
--------------
inventory, furniture, signs. and business equipment, and (ii) anything affixed
to the Premises by Tenant at its expense for purposes of trade, manufacture,
ornament or domestic use (except replacement of similar work or material
originally installed by Landlord) which can be removed without material injury
to the Premises unless such thing has, by the manner in which it is a affixed
become an integral part of the Premises.
ARTICLE 2
---------
DEMISE, CONSTRUCTION, AND
-------------------------
<PAGE>
ACCEPTANCE
----------
2.1 Demise of Premises: Landlord hereby leases to Tenant, and Tenant
------------------
leases from Landlord, for the Lease Term upon the terms and conditions of this
Lease. the Premises for Tenant's own use in the conduct of Tenant's business
together with (i) the non-exclusive right to use the number of Tenant's
Allocated Parking Stalls within the Common Area ( subject to the limitations set
forth in paragraph 4.5), and (ii) the non-exclusive right to use the Common Area
for including without limitations ingress to and egress from the remises.
Landlord reserves the use of the exterior walls, the roof and the area beneath
and above the Premises, together with the right to install, maintain, use, and
replace ducts, wires, conduits and pipes leading through the Premises in
locations which will not materially interfere with Tenant's use of the Premises.
2.2 Commencement Date: If Landlord is not obligated to construct
------------------
improvements prior to the Commencement Date pursuant to paragraph 2.3, then on
the Scheduled Commencement Date Landlord shall deliver possession of the
Premises to Tenant and the Lease Term shall commence, and such date shall be
referred to herein as the "Commencement Date". If Landlord is required to
construct improvements to the Premises prior to the Commencement Date, then the
Scheduled Commencement Date shall be only an estimate of the actual Commencement
Date, and the term of this Lease shall begin on the first to occur of the
following, which shall be the "Commencement Date": (i) the date Landlord offers
to deliver possession of the Premises to Tenant following substantial Completion
(as defined in Exhibit B)of all improvements to be constructed by Landlord
---------
pursuant to paragraph 2.3 except for punchlist items which do not prevent Tenant
from using the Premises for the Permitted Use and such work as Landlord is
required to perform but cannot complete until Tenant performs necessary portions
of construction work it has elected or is required to do; or (ii) the date
Tenant enters into occupancy of the Premises; provided, however, that Tenant's
access to the Premises as provided for in Paragraph 10 of Exhibit B to this
Lease shall not cause the Commencement Date to be established.
2.3 Construction of Improvements: Prior to the Commencement Date,
----------------------------
Landlord shall construct Certain improvements that shall constitute or become
part of the Premises if required by, and then in accordance with, the terms of
Exhibit B and Exhibit C and the First Addendum to this Lease
- -------- ---------
2.4 Delivery and Acceptance of Possession: If Landlord is unable to
-------------------------------------
deliver possession of the Premises to Tenant on or before such date for any
reason whatsoever, this Lease shall not be void or voidable for a period of 180
days thereafter, and Landlord shall not be liable to Tenant for any loss or
damage resulting therefrom. Tenant shall accept possession and enter into good
faith occupancy of the entire Premises and Commence on the Commencement Date.
Tenant acknowledges that it has had an opportunity to conduct, and has
conducted, such inspections of the Premises as it deems necessary to evaluate
its condition. Except as otherwise specifically provided herein, Tenant agrees
to accept possession of the Premises in its then existing condition, "as-is"
including all patent and latent defects. Tenant's taking possession of any part
of the Premises shall be deemed to be in acceptance by Tenant of any of work of
improvement done by Landlord in such part as complete and in accordance with the
terms of this Lease except for defects of which Tenant ties given Landlord
written notice prior to the time Tenant takes possession. At the time Landlord
delivers possession of the Premises to Tenant, Landlord and Tenant shall
together execute an acceptance agreement in the form attached as
<PAGE>
Exhibit D, appropriately completed. Landlord shall have no obligation to
- ---------
deliver possession, nor shall Tenant be entitled to take occupancy, of the
Premises until such acceptance agreement has been executed, and Tenant's
obligation to pay Base Monthly Rent and Additional Rent shall not be excused or
delayed because of Tenant's failure to execute such acceptance agreement. See
First Addendum to Lease paragraph 5.
2.5 Early Occupancy: If Tenant enters or permits its contractors to enter
---------------
the Premises prior to the Commencement Date with the written permission of
Landlord, it shall do so upon-all of the terms of this Lease (including its
obligations regarding indemnity and insurance) except those regarding the
obligation to pay rent, which shall commence on the Commencement Date.
ARTICLE 3
---------
RENT
----
3.1 Base Monthly Rent: Commencing on the Commencement Date and continuing
-----------------
throughout the Lease Term, Tenant shall pay to Landlord the Base Monthly Rent
set forth in Section K of the Summary.
---------
3.2 Additional Rent: Commencing on the Commencement Date and continuing
---------------
throughout the Lease Term. Tenant shall pay the following as additional rent
(the "Additional Rent"): (i) any late charges or interest due Landlord pursuant
to paragraph 3.4; (ii) Tenant's Share of Common Operating Expenses as provided
in paragraph 8.1; (iii) Landlord's share of any Subrent received by Tenant upon
certain assignments and sublettings as required by paragraph 4.1 (iv) any legal
fees and costs due Landlord pursuant to paragraph 15.9; and (v) any other
charges due Landlord pursuant to this Lease.
3.3 Payment of Rent: Concurrently with the execution of this Lease by
---------------
both parties, Tenant shall pay to Landlord the amount set forth in Section L of
---------
the Summary as prepayment of rent for credit against the first installment(s) of
Base Monthly Rent. All rent required to be paid in monthly installments shall be
paid in advance on the first day of each calendar month during the Lease Term.
If Section K of the Summary provides that the Base Monthly Rent is to be
---------
increased during the Lease Term and if the date of such increase does not fall
on the First day of a calendar month. such increase shall become effective on
the first day of the next calendar month. All rent shall be paid in lawful money
of the United States, without any abatement, deduction or offset whatsoever
(except as specifically provided in paragraph 11.4 and paragraph 12.3), and
without any prior demand therefor. Rent shrill be paid to Landlord at its
address set forth in Section P of the Summary, or at such other place as
---------
Landlord may designate from time to time. Tenant's obligation to pay Base
Monthly Rent and Tenant's Share of Common Operating Expenses shall be prorated
at the Commencement and expiration of the Lease Term.
3.4 Late Charge and Interest on Rent in Default: If any Base Monthly Rent
--------------------------------------------
or Additional Rent is not received by Landlord from Tenant within three business
days after Landlord has notified Tenant in writing that payment of such rent has
not been
<PAGE>
received by Landlord, then Tenant shall immediately pay to Landlord a late
charge equal to 5% of such delinquent rent as liquidated damages for Tenant's
failure to make timely payment. In no event shall this provision for a late
charge be deemed to grant to Tenant a grace period or extension of time within
which to pay any rent or prevent Landlord from exercising any right or remedy
available to Landlord upon Tenant's failure to pay any rent due under this Lease
in a timely fashion, including any right to terminate this Lease pursuant to
paragraph 3.2B. If any rent remains delinquent for a Period in excess of 30
days, then, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not paid when due at the Agreed Interest Rate
following the date such. amount became due until paid.
3.5 Security Deposit: On the Effective Date, Tenant shall deposit with
----------------
Landlord the amount set forth in Section M of the Summary as security for the
---------
performance by Tenant of its obligations under this Lease, and not as prepayment
of rent (the "Security Deposit"). Landlord may from time to time apply such
portion of the Security Deposit as is reasonably necessary for the following
purposes: (i) to remedy any default by Tenant in the payment of rent; (ii) to
repair damage to the Premises caused by Tenant: (iii) to clean the Premises upon
termination of the Lease; and (iv) to remedy any other default of Tenant to the
extent permitted by Law and, in this regard, Tenant hereby waives any
restriction on the uses to which the Security Deposit may be put contained in
California Civil Code Section 1950.7. In the event the Security Deposit or any
portion thereof is so used, Tenant agrees to pay to Landlord promptly upon
demand an amount in cash sufficient to restore the Security Deposit to the full
original amount. Landlord shall not be deemed a trustee of the Security Deposit,
may use the Security Deposit in business, and shall not be required to segregate
it from its general accounts. Tenant shall not be entitled to any interest on
the Security Deposit. If Landlord transfers the Premises during the Lease Term,
Landlord may pay the Security Deposit to any transferee of Landlord's interest
in conformity with the provisions of California Civil Code Section 1950.7 and/or
any successor statute, in which event the transferring Landlord will be released
from all liability for the return of the Security Deposit. See First Addendum To
Lease Paragraph 6 and 11.
ARTICLE 4
---------
USE OF PREMISES
---------------
4.1 Limitation on Use: Tenant shall use the Premises solely for the
------------------
Permitted Use specified in Section N of the Summary, Tenant shall not do
---------
anything in or about the Premises which will (i) cause structural injury to the
Building, or (ii) cause damage to any part of the Building except to the extent
reasonably necessary for the installation of Tenant's Trade Fixtures land
Tenant's Alterations, and then only in a manner which has been first approved by
Landlord in writing. Tenant shall not operate any equipment within the Premises
which will (i) materially damage the Building or the Common Area. (ii) overload
existing electrical systems or other mechanical equipment servicing the
Building, (iii) impair the efficient operation of the sprinkler system or the
heating, ventilating or air
<PAGE>
conditioning ("HVAC") equipment within or servicing the Building, or (iv)
damage, overload or corrode the sanitary sewer system. Tenant shall not attach.
hang or suspend anything from the ceiling, roof. walls or columns of the
Building or set any load on the floor in excess of the load limits for which
such items are designed nor operate hard wheel forklifts within the Premises.
Any dust, fumes, or waste products generated by Tenant's use of the Premises
shall be contained and disposed so that they do not (i) Create an unreasonable
fire or health hazards (ii) damage the Premises, or (iii) result in the
violation of any Law. Except as approved by Landlord, Tenant shall not change
the exterior of the Building or install any equipment or antennas on or make any
penetrations of the exterior or roof of the Building. Tenant shall not commit
any waste in or about the Premises, and Tenant shall keep the Premises in an
neat, clean, attractive and orderly condition, free of any nuisances. If
Landlord designates a standard window covering for use throughout the Building,
Tenant shall use this standard window covering to cover all windows in the
Premises. Tenant shall not conduct on any portion of the Premises or the
Project any sale of any kind, including any public or private auction, fire
sale, going-out-of-business sale distress sale or other liquidation sale.
4.2 Compliance with Regulations: Tenant shall not use the Premises in any
----------------------------
manner which violates any Laws or Private Restrictions which affect the
Premises. Tenant shall abide by and promptly observe and comply with all Laws
and Private Restrictions. Tenant shall not use the Premises in any manner which
will cause a cancellation of any insurance policy covering Tenant's Alternations
or any improvements installed by Landlord at its expense or which poses an
unreasonable risk of damage or injury to the Premises. Tenant shall not sell, or
permit to be kept, used, or sold in or about he Premises any article which may
be prohibited by the standard form of fire insurance policy. Tenant shall comply
with A reasonable requirements of any insurance company, insurance underwriter,
or Board of Fire Underwriters which are necessary to maintain the insurance
coverage carried by either Landlord or Tenant pursuant to this Lease.
4.3 Outside Areas: No materials, supplies, tanks or containers equipment,
--------------
finished products or semi-finished products, raw materials, inoperable vehicles
or articles of any nature shall be stored upon or permitted to remain outside of
the Premises except in fully fenced and screened areas outside the Building
which have been designed for such purpose and have been approved in writing by
Landlord for such use by Tenant.
4.4 Signs: Tenant shall not place on any portion of the Premises any
-----
sign, placard, lettering in or on windows, banner, displays or other advertising
or communicative material which is visible from the exterior of the Building
without the prior written ,approval of Landlord. All such approved signs shall
strictly conform to all Laws. Private Restrictions, and Landlord's sign criteria
attached as Exhibit F, and shall be installed at the expense of Tenant, Tenant
---------
shall maintain such signs in good condition and repair. Tenant, at Tenant's sole
cost, shall have the right, subject to Exhibit F, to place its name on the
existing street monument base, and on the glass at the entrance to the Premises.
4.5 Parking: Tenant is allocated and shall have the exclusive right to
-------
all the number of Tenant's Allocated Parking Stalls contained within the Project
described in Section H of the Summary for its use and the use of Tenant's Agents
---------
subject to Landlord's and Landlord's Agents rights and obligations this Lease.
Tenant shall not at any time use more parking spaces than the number so
allocated to Tenant or park its vehicles or the vehicles of others in any
portion of the Project not designated by Landlord as exclusive parking area.
Tenant shall have the exclusive right to use any specific parking space.
Landlord reserves the right, after having given Tenant reasonable notice, to
have any vehicles owned by Tenant or Tenant's Agents utilizing parking spaces in
excess of the
<PAGE>
parking spaces allowed for Tenant's use to be towed away at Tenant's cost. All
trucks and delivery vehicles shall be (i) parked at the rear of the Building,
(ii) In the event Landlord elects or is required by any Law to limit or control
parking in the Project, whether by validation of parking tickets or any other
method of assessment, Tenant agrees to participate in such validation or
assessment program under such reasonable rules and regulations as are from time
to time established by Landlord.
4.6 Rules and Regulations: Landlord may from time to time. promulgate
---------------------
reasonable and nondiscriminatory rules and regulations applicable to all
occupants of the Project for the care and orderly management of the Project and
the safety of its tenants and invitees. Such rules and regulations shall be
binding upon Tenant upon delivery of a copy thereof to Tenant, and Tenant agrees
to abide by such rules and regulations. If there is a conflict between the rules
and regulations and any of the provisions of these Lease, the provisions of this
Lease shall prevail. Landlord shall not be responsible for the violation by any
other tenant of the Project of any such rules regulations.
ARTICLE 5
---------
TRADE FIXTURES AND ALTERATIONS
------------------------------
5.1 Trade Fixtures: Throughout the Lease Term, Tenant may provide and
--------------
install, and shall maintain in good condition, any Trade Fixtures required in
the conduct of its business in the Premises. All, Trade Fixtures shall remain
Tenant's property.
5.2 Tenant's Alterations: Construction by Tenant of Tenant's Alterations
---------------------
shall be governed by following:
A. Tenant shall not construct any Tenant's Alterations or otherwise
alter the Premises without Landlord's prior approval, which shall not be
unreasonably withheld or delayed to make Tenant's Alterations (i) which do not
affect the structural or exterior parts or water tight character of the
Building, and (ii) the reasonably estimated cost of which, plus the original
cost of any part of
<PAGE>
the Premises removed or materially altered in connection with such Tenant's
Alterations, together do not exceed the Permitted Tenant Alterations Limit
specified in Section 0 of the Summary per work of improvement. In the event
---------
Landlord's approval for any Tenant's Alterations is required, Tenant shall not
construct the Tenant's Alterations until Landlord has approved in writing the
plans and specifications therefor, and such Tenant's Alterations shall be
constructed substantially in compliance with such approved plans and
specifications by a licences contractor first reasonably approval by Landlord.
All Tenants Alterations constructed by Tenant shall be constructed by a licensed
contractor in accordance with all Laws using new materials of good quality.
B. Tenant shall not commence construction of any Tenant's
Alterations until (i) all required governmental approvals and permits have been
obtained, (ii) all requirements regarding insurance imposed by this Lease have
been satisfied, (iii) Tenant has given Landlord at least five days' prior
written notice of its intention to commence such construction, and (iv) if
reasonably requested by Landlord, Tenant has obtained contingent liability and
broad form builders' risk insurance in an amount reasonably satisfactory to
Landlord if there are any perils relating to the proposed construction not
covered by insurance carried pursuant to Article 9.
C. All Tenant's Alterations shall remain the property of Tenant
during the Lease Term but shall not be altered or removed from the Premises. At
the expiration or sooner termination of the Lease Term, all Tenant's Alterations
shall be surrendered to Landlord as part of the realty and shall then become
Landlord's property, and Landlord shall have no obligation to reimburse Tenant
for all or any portion of the value or cost thereof; provided, however, that if
Landlord requires Tenant to remove any Tenant's Alterations, Tenant shall so
remove such Tenant's Alterations prior to the expiration or sooner termination
of the Lease Term. Notwithstanding the foregoing, Tenant shall not be obligated
to remove any Tenant's Alterations with respect to which the following is true:
(i) Tenant was required, or elected, to obtain the avotaval of Landlord to the
installation of the Tenant Alterations in question: (ii) at the time Tenant
requested Landlord's approval, Tenant requested of Landlord in writing that
Landlord inform Tenant of whether or not Landlord would require Tenant to remove
such Tenant Alterations at the expiration of the Lease Term; and (iii) at the
time Landlord granted its approval, it did not inform Tenant that it would
require Tenant to remove such Tenant Alterations at the expiration of the Lease
Term.
5.3 Alterations Required by Law: Tenant shall make any alteration,
---------------------------
addition or change of any sort to the Premises that is required by any Law
because of (i) Tenant's particular use or change of use of the Premises; (ii)
Tenant's application for any permit or governmental approval; or (iii) Tenant's
construction or installation of any Tenant's Alterations or Trade Fixtures. Any
other alteration, addition, or change required by Law which is not the
responsibility of Tenant pursuant to the foregoing shall be made by Landlord
(subject to Landlord's right to reimbursement from Tenant specified in 5.4).
5.4 Amortization of Certain Capital Improvements: Tenant shall pay
--------------------------------------------
Additional Rent in the event Landlord reasonably elects or is required by Law to
make any of the following kinds of capital improvements, as determined pursuant
to generally accepted accounting principals to the Project and the cost thereof
is not reimbursable as a Common Operating Expense: (i) capital improvements
required to be constructed in order to comply with any Law (excluding any
Harzardous Materials Law) not in effect or applicable to the Project as of the
Effective Date, (ii) modification of existing or construction of additional
capital improvements or building service equipment, for the purpose of reducing
the, consumption of utility services or Common Operating Expenses of the Project
(iii) replacement of capital improvements or building service equipment existing
as of the Effective Date when required because of normal wear and tear; and (iv)
restoration of any part of the Project that has, been damaged by any peril to
the extent the cost thereof is
<PAGE>
not covered by insurance proceeds actually recovered by Landlord up to a maximum
amount per occurrence of 10% of the then replacement cost of the Project ("Cost
not covered by insurance proceeds" shall include, for the purpose of this
Article 5.4 only, the amount of any "deductible" on Landlord's policy(ies) of
insurance for which Tenant is responsible under this Lease.) The amount of
Additional Rent Tenant is to pay with respect to each such capital improvement
shall be determined as follows:
A. All costs paid by Landlord to construct such improvements
(including reasonable financing cost) shall be amortized over the useful life of
such improvement (as reasonably determined by Landlord in accordance with
generally accepted accounting principles) with interest on the unamortized
balance at the then prevailing market rate Landlord would pay if it borrowed
funds to construct such improvements from an institutional lender, and Landlord
shall inform Tenant of the monthly amortization payment required to so amortize
such costs, and shall also provide Tenant with the information upon which such
determination is made.
B. As Additional Rent. Tenant shall pay at the same time the Base
Monthly Rent is due an amount equal to Tenant's Share of that puttion of such
monthly amortization payment fairly allocable to the Building (as reasonably
determined by Landlord) for each month after such improvements as completed
until the first to occur of (i) the expiration of the Lease Term (as it may be
extended but only if the Base Monthly Rent for the Extended term does not take
into account such expenditure.
5.5 Mechanic's Leins: Tenant shall keep the Project free form any liens
----------------
and shall pay when due all bills arising out of any work performed, materials
furnished, or obligations incurred by Tenant or Tenant's Agents relating to the
Project. If any claim of lien is recorded (except those caused by Landlord or
Landlord's Agents), Tenant shall bond against or discharge the same within 10
days after Tenant has actual knowledge that the same has been recorded against
the Project. Should any lien be filed against the Project or any action be
commenced affecting title to the Project, the party receiving notice of such
lien or action shall immediately give the other party written notice thereof.
5.6 Taxes on Tenant's Property: Tenant shall
---------------------------
<PAGE>
pay before delinquency any and all taxes, assessments, license fees and public
charges levied assessed or imposed against Tenant or Tenant's estate in this
Lease or the property of Tenant situated within the Premises which become due
during the Lease Term. If any tax or other charge is assessed by any
governmental agency because of the execution of this Lease, such tax shall be
paid by Tenant. On demand by Landlord, Tenant shall furnish Landlord with
satisfactory evidence of these payments.
ARTICLE 6
---------
REPAIR AND MAINTENANCE
----------------------
6.1 Tenant's Obligation to Maintain: Except as otherwise provided in
-------------------------------
paragraph 6.2, paragraph 11.1 and paragraph 12.3, Tenant shall be responsible
for the following during the Lease Term:
A. Tenant shall clean and maintain in good order, condition, and
repair the interiors of and replace when necessary the Premises and every part
thereof, through regular inspections and servicing, including, but not limited
to: (i) all plumbing and sewage facilities (including all sinks, toilets,
faucets and drains), and all ducts, pipes, vents or other parts of the HVAC or
plumbing system; (ii) all fixtures, interior walls, floors, carpets and
ceilings, (iii) all windows, doors, entrances, plate glass, showcases and
skylights (including cleaning both interior and exterior surfaces; (iv) all
electrical facilities and all equipment (including all lighting fixtures, lamps,
bulbs, tubes, fans, vents, exhaust equipment and systems); and (v) any automatic
fire extinguisher equipment in the Premises.
B. With respect to utility facilities serving the Premises
(including electrical wiring and conduits, gas lines, water pipes, and plumbing
and sewage fixtures and pipes), Tenant shall be responsible for the maintenance
and repair of any such facilities which serve only the Premises, including all
such facilities that are within the walls or floor, or on the roof of the
Premises, and any part of such facility that is not within the Premises, but
only up to the point where such facilities join a main or other junction (e.g.,
sewer main or electrical transformer) from which such utility services are
distributed to other parts of the Project as well as to the Premises. Tenant
shall replace any damaged or broken glass in the Premises (including all
interior and exterior doors and windows) with glass of the same kind, size and
quality. Tenant shall repair any damage to the Premises (including exterior
doors and windows) caused by vandalism or any unauthorized entry.
C. Tenant shall (i) maintain, repair and replace when necessary all
HVAC equipment which services only the Premises, and shall keep the same in good
condition through regular inspection and servicing, and (ii) maintain
continuously throughout the Lease Term a service contract for the maintenance of
all such HVAC equipment with a licensed HVAC repair and maintenance contractor
approved by Landlord, which contract provides for the periodic inspection and
servicing of the HVAC equipment at least once every 60 days during the Lease
Term. Notwithstanding the foregoing, Landlord may elect at any time to assume
responsibility for (he maintenance, repair and replacement of such HVAC
equipment which serves only the Premises. Tenant shall maintain continuously
throughout the Lease Term a service contract for the washing of all windows
(both interior and exterior services) in the Premises with a contractor approved
by Landlord, which contract provides for the periodic washing of all such
windows at least once every 60 days during the Lease Term. Tenant shall furnish
Landlord with copies of all such service contracts, which shall provide that
they may not be cancelled or changed without at least 30 days' prior written
notice to Landlord.
D. All repairs and replacements required of Tenant shall be promptly
made with new materials of like kind and quality. If the work affects the
structural parts of the Building or if the estimated cost of any item of repair
or replacement is in excess of the Permitted Tenant's Alterations Limit, then
Tenant shall first obtain Landlord's written approval of the scope of the work,
plans therefor, materials to be used, and the contractor. See first addendum to
lease paragraph 7.
6.2 Landlord's Obligation to Maintain: Landlord shall repair, maintain
---------------------------------
and operate
<PAGE>
the common Area and repair and maintain the roof, exterior and structural parts
of (the buildings located on the Project so that the same are kept in good order
and repair. If there is central HVAC or other building service equipment and/or
utility facilities serving portions of the Common Area and/or both Premises and
other parts of the Building, Landlord shall maintain and operate (and replace
when necessary) such equipment. Landlord shall not be responsible for repairs
required by an accident, fire or other Peril or for damage caused to any part of
the Project by any act or omission of Tenant or Tenant's Agents except as
otherwise required by Article 11. Landlord may engage contractors of its choice
to perform the obligations required of it by this Article, and the necessity of
any expenditure to perform such obligations shall be at the sole discretion of
Landlord. See first addendum to lease paragraph 15.
6.3 Control of Common Area. Landlord shall have the right, without the
----------------------
same constituting an actual or constructive eviction and without entitling
Tenant to any abatement of rent, to: (i) close any part of the Common Area to
whatever extent required in the opinion of Landlord's counsel to prevent a
dedication thereof or the accrual of any prescriptive rights therein; (ii)
temporarily close the Common Area to perform maintenance or for any other reason
deemed sufficient by Landlord; (iii) change the shape, size, location and extent
of the Common Area; (iv) eliminate from or add to the Project any land of
improvement, including multi-deck parking structures; (v) make changes to the
Common Area including, without limitation, changes in the location of driveways,
entrances, passageways, doors and doorways, elevators, stairs, restrooms, exits,
parking spaces, parking areas, sidewalks or the direction of the flow of traffic
and the site of the Common Area; (vi) remove unauthorized persons from the
Project; and/or (vi) change the name or address of the Building or Project.
Tenant shall keep the Common Area clear of all obstructions created or permitted
by Tenant. If in the opinion of Landlord unauthorized persons are using any of
the Common
Area by reason of the presence of Tenant in the Building, Tenant, upon demand of
Landlord, shall restrain such unauthorized use by appropriate proceedings. In
exercising any such rights regarding [The Common Area, (i) Landlord shall make a
reasonable effort to minimize any disruption to Tenant's business, and (ii)
Landlord shall not exercise its rights to control the Common Area in a manner
that would materially interfere with Tenant's use of the Premises without first
obtaining Tenant's consent. Landlord shall have no obligation to provide guard
services or other security measures for the benefit of the Project. Tenant
assumes all responsibility for the protection of Tenant and Tenant's Agents from
acts of third parties; provided, however, that nothing contained herein shall
prevent Landlord, at its sole option, from providing security measures for the
Project.
ARTICLE 7
---------
WASTE DISPOSAL AND UTILITIES
----------------------------
7.1 Waste Disposal: Tenant shall store its waste either inside the
--------------
Premises or within outside fresh enclosures that are fully fenced and screened
in compliance with all Private Restrictions. and designed for such purpose. All
entrances to such outside trash enclosures shall be kept closed, and waste shall
be stored in such manner as not to be visible from the exterior of such outside
enclosures. Tenant shall cause all of its waste to be regularly removed from the
Premises at Tenant's sole cost. Tenant shall keep all fire corridors and
mechanical equipment rooms in the Premises free and clear of all obstructions at
all times.
7.2 Hazardous Materials: Landlord and Tenant agree as follows with
-------------------
respect to the existence or use of Hazardous Materials on the Project:
A. Any handling, transportation, storage, treatment, disposal or use
of Hazardous Materials by Tenant and Tenant's Agents after the Effective Date in
or about the Project shall strictly comply with all applicable. Hazardous
facilities Laws. Tenant shall indemnify, defend upon demand with counsel
reasonably acceptable to Landlord, and hold harmless Landlord from and against
any liabilities, losses, claims, damages, lost profits, consequential damages.
interest, penalties, mines, monetary sanctions, attorneys' fees, experts, fees,
court costs, remediation costs, investigation costs, and other expenses which
result from or arise in any manner whatsoever out of the use, storage,
treatment, transportation, release, or disposal of Hazardous Materials on or
about the Project by Tenant or Tenant's Agents after the Effective Date.
B. If the presence of Hazardous Materials on the Project caused or
permitted by Tenant or Tenant's Agents after the Effective Date results in
contamination or deterioration of water or soil resulting in a level of
contamination greater than the levels established as acceptable by any
governmental agency having jurisdiction over such contamination, then Tenant
shall promptly take any and all action necessary to investigate and remediate
such contamination if required by Law or as a condition to the issuance or
continuing effectiveness of any governmental approval which relates to the use
of the Project or any part thereof. Tenant shall further be solely responsible
for, and shall defend, indemnify and hold Landlord and its agents harmless from
and against, all claims, costs and liabilities, including attorneys' fees and
costs, arising out of or in connection with any investigation and remediation
required hereunder to return the Project to its condition existing prior to the
appearance of such Hazardous Materials.
C. Landlord and Tenant shall each give written notice to the other
as soon as reasonably practicable of (i) any communication received from any
governmental authority concerning Hazardous Materials which relates to the
Project, and (ii) any contamination of the Project by Hazardous Materials which
constitutes a violation of any Hazardous Materials Law. Tenant may use small
quantities of household chemicals such as adhesives, lubricants and cleaning
fluids in order to conduct its business at the Premises and such other Hazardous
Materials as are necessary for the operation of Tenant's business of which
Landlord receives notice prior to such Hazardous Materials being brought onto
the Premises and which Landlord consents in writing may be brought onto the
Premises. At any time during the Lease Term, Tenant shall, within five (5)
business days after its receipt of written request therefor received from
Landlord, disclose in writing all Hazardous Materials that are being used by
Tenant on the project, the nature of such use, and the manner of storage and
disposal.
6
<PAGE>
D. Landlord at its sole cost, may cause testing wells to be
installed on the Project, and may cause the ground water to be tested to detect
the presence of Hazardous Material by the use of such tests as are then
customarily used for such purposes. If Tenant so requests, Landlord shall
supply Tenant with copies of such test results. The cost of such tests and of
the installation, maintenance, repair and replacement of such wells shall be
paid by Tenant if such tests disclose the existence of facts which give rise to
liability of Tenant pursuant to its indemnity given in paragraph 7.2A and/or
paragraph 7.2B.
E. As used herein, the term "Hazardous Material," means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any local governmental authority, the State of California or the United States
Government. The term "Hazardous Material," includes, without limitation,
petroleum products, asbestos, PCB's, and any material or substance which is (i)
listed under Article 9 or defined as hazardous or extremely hazardous pursuant
to Article 11 of Title 22 of the California Administrative Code, Division 4,
Chapter 20, (ii) defined is a hazardous waste pursuant to Section 1004 of the
Federal Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq. (42
U.S.C. 6903), or (iii) defined as a "hazardous substance pursuant to Section 101
of the Comprehensive Environmental Response: Compensation and Liability Act, 42
U.S.C. 9601 et seq. (42 U.S.C. 9601). As used herein, the term "Hazardous
Material Law" shall mean any statute, law, ordinance, or regulation of any
governmental body or agency (including the U.S. Environmental Protection Agency,
the California Regional Water Quality Control Board, and the California
Department of Health Services) which regulates the use, storage, release or
disposal of any Hazardous Material.
F. (See Page 7.A.)
7
<PAGE>
Insert to Paragraph 7.F.
F. Landlord's Representation Regarding Hazardous Materials.
-------------------------------------------------------
Landlord hereby makes the following representations to Tenant as of the
Effective Date without having made any investigation to verify the accuracy
thereof and subject to and qualified by all information and disclosures made to
Tenant by Landlord.
A. The soil and groundwater on or under the Project do not
contain Hazardous Materials in amounts which violate any Hazardous Materials
Laws to the extent that any governmental entity could require either Landlord or
Tenant to take any remedial action with respect to such Hazardous Materials.
B. During the time the Landlord has owned the Project, Landlord
has received no written notice of: (i) any violation, or alleged violation, of
any hazardous Materials Law with respect to the Project that has not been
remediated to the extent that no other remediation is then legally required by
applicable Law; (ii) any pending claims relating to the presence of Hazardous
Materials on the Project; or, (iii) any pending investigation by a governmental
agency concerning the Project relating to Hazardous Materials.
7.A.
<PAGE>
F. The obligations of Landlord and Tenant under this Paragraph 7.2
shall survive the expiration or earlier termination of the Lease Term. The
rights and obligations of Landlord and Tenant with respect to issues relating to
Hazardous Materials are exclusively established by this Paragraph 7.2. In the
event of any inconsistency between any other part of this Lease and this
Paragraph 7.2, the terms of this Paragraph 7.2 shall control.
7.3 Utilities: Tenant shall promptly pay, as the same become due, all
---------
charges for water, gas, electricity, telephone, sewer service, waste pick-up and
any other utilities, materials or services furnished directly to or used by
Tenant on or about the Premises during the Lease Term, including, without
limitation, (i) meter, use and/or connection fees, hook-up fees, or standby fee
(excluding any connection fees or hook-up fees which relate to making the
existing electrical, gas, and water service available to the Premises as of the
Commencement Date), and On penalties for discontinued or interrupted service.
7.4 Compliance with Governmental Regulations. Landlord and Tenant shall
----------------------------------------
comply with all rules, regulations and requirements promulgated by national,
state or local governmental agencies or utility suppliers concerning the use of
utility services, including any rationing, limitation or other control. Tenant
shall not be entitled to terminate this Lease nor to any abatement in rent by
reason of such compliance
ARTICLE 8
---------
COMMON OPERATING EXPENSES
-------------------------
8.1 Tenant's Obligation to Reimburse: As Additional Rent, Tenant shall
--------------------------------
pay Tenant's Share (specified in Section G of the Summary) of all Common
Operating Expenses. provided, however, if the Project contains more than one
building, then Tenant shall pay Tenant's Share of all Common Operating Expenses
fairly allocable to the Building, including (i) all Common Operating Expenses
paid with respect to the maintenance, repair, replacement and use of the
Building, and (ii) a proportionate share (based on the Building Gross Leasable
Area as a percentage of the Project Gross Leasable Area) of all Common Operating
Expenses which relate to the Project in general are not fairly allocable to any
one building that is part of the Project. Tenant shall pay such share of the
actual Common Operating Expense incurred or paid by Landlord but not theretofore
billed to Tenant within 30 days after receipt of a written bill therefor from
Landlord, on such periodic basis as Landlord shall designate, but in no event
more frequently than once a month. Alternatively, Landlord may from time to time
require that Tenant pay Tenant's Share of Common Operating Expenses in advance
in estimated monthly installments, in accordance with the following: (I)
Landlord shall deliver to Tenant Landlord's reasonable estimate of the Common
Operating expenses it anticipates will be paid or incurred for the Landlord's
fiscal year in question; (ii) during such Landlord's fiscal year Tenant shall
pay such share of the estimated common Operating Expenses in advance in monthly
installments as required by Landlord due with the installments of Base Monthly
Rent; and (iii) within 90 days after the end of each Landlord's fiscal year.
Landlord shall furnish to Tenant a statement in reasonable detail of the actual
Common Operating Expenses paid or incurred by Landlord during the just ended
Landlord's fiscal year and thereupon there shall be an adjustment between
Landlord and Tenant, with payment to Landlord or credit by Landlord against the
next installment of Base Monthly Rent (or payment by landlord if the lease has
terminated or expired) as the case may require, within 30 days after delivery by
Landlord to Tenant of said statement, so that Landlord shall receive the entire
amount of Tenant's Share of all Common Operating Expenses for such Landlord's
fiscal year and no more. Tenant shall have the right at its expense exercisable
upon reasonable prior written notice to Landlord, to inspect at Landlord's
office during normal business hours Landlord's books and records as they relate
to Common Operating Expenses. Such inspection must be within 90 days of Tenant's
receipt of Landlord's annual statement for the same, and shall be limited to
verification of the charges contained in such statement. Tenant may not withhold
payment of such bill pending completion of such inspection.
8.2 Common Operating Expenses Defined: The term "Common Operating
---------------------------------
Expenses" shall
<PAGE>
mean the following:
A. All costs and expenses paid or incurred by Landlord in doing the
following (including payments to independent contractors providing services
related to the performance of the following): (i) maintaining, cleaning,
repairing and resurfacing the roof (including repair of leaks) and the exterior
surfaces (including painting) of all buildings located on the Project, (ii)
maintenance of the liability, fire and property damage insurance covering the
Project carried by Landlord pursuant to Paragraph 9.2 (including the prepayment
of premiums for coverage of up to one year); (iii) maintaining, repairing,
operating and replacing when necessary HVAC equipment, utility facilities and
other building service equipment; (iv) providing utilities to the Common Area
(including lighting, trash removal and water for landscaping irrigation); (v)
complying with all applicable Laws and Private Restrictions: (vi) operating,
maintaining, repairing, cleaning, painting, restriping and resurfacing the
Common Area; (vii) replacement or installation of lighting fixtures, directional
or other signs and signals, irrigation systems, trees, shrubs, ground cover and
other plant materials, and all landscaping in the Common Area, and (viii)
providing security;
B. The following costs: (i) Real Property Taxes as defined in
paragraph 8.3; (ii) the amount of any "deductible" paid by Landlord with respect
to damage caused by any Insured Peril if the Lease is not terminated in
connection with such damage; (iii) the cost to repair damage caused by an
Uninsured Peril up to
8
<PAGE>
a maximum amount in any 12 month period equal to 2% of the replacement cost of
the buildings or other improvements damaged; and (iv) that portion of all
compensation (including benefits and premiums for workers compensation and other
insurance) paid to or on behalf of employees of Landlord but only to the extent
they are involved in the performance of the work described by Paragraph 8.2A
that is fairly allocable to the Project:
C. Fees for management services rendered by either Landlord or a
third party manager engaged by Landlord (which may be a party affiliated with
Landlord), except that the total amount charged for management services and
included in Tenant's Share of Common Operating Expenses shall not exceed the
monthly rate of 5% of the Base Monthly Rent.
D. All additional costs and expenses incurred by Landlord with
respect to the operation, protection, maintenance, repair and replacement of the
Project which would be considered a current expense (and not a capital
expenditure) pursuant to generally accepted accounting principles; provided,
however, that Common Operating Expenses shall not include any of the following:
(i) payments on any loans or ground leases affecting the Project (ii)
depreciation or amortization of reserves of any buildings or major systems of
building service equipment within the Project; (iii) leasing commissions; (iv)
the cost of tenant improvements installed for the exclusive use of other tenants
of the Project; and (v) any cost incurred in complying with Hazardous Materials
Laws, which subject is governed exclusively by Paragraph 7.2.
8.3 Real Property Taxes Defined: The term Real Property Taxes" shall mean
---------------------------
all taxes, assessments, levies, and other charges of any kind or nature
whatsoever, general and special, foreseen and unforeseen (including all
installments of principal and interest required to pay any existing or future
general or special assessments for public improvements, services or benefits,
and any increases resulting from reassessments resulting from a change in
ownership, new construction, or any other cause), now or hereafter imposed by
any governmental or quasi-governmental authority or special district having the
direct or indirect power to tax or levy assessments, which are levied or
assessed against, or with respect to the value, occupancy or use of all or any
portion of the Project (as now constructed or as may at any time hereafter be
constructed, altered, or otherwise changed) or Landlord's interest therein, the
fixtures, equipment and other property of Landlord, real or personal that are an
integral part of and located on the Project. the gross receipts, income, or
rentals from the Project, or the use of parking areas, public utilities, or
energy within the Project, or Landlord's business of leasing the Project. If at
any time during the Lease Term the method of taxation or assessment of the
Project prevailing as of the Effective Date shall be altered so that in lieu of
or in addition to any Real Property Tax described above there shall be levied,
assessed or imposed (whether by reason of a change in the method of taxation or
assessment, creation of a new tax or charge, or any other cause) an alternate or
additional tax or charge (i) on the value, use or occupancy of the Project or
Landlord's interest therein, or (ii) on or measured by the gross receipts,
income or rentals from the Project, on Landlord's business of leasing the
Project, or computed in any manner with respect to the operation of the Project,
then any such tax or charge, however designated, shall be included within the
meaning of the term "Real Property Taxes" for purposes of this Lease. If any
Real Property Taxes is based upon property or rents unrelated to the Project,
then only that part of such Real Property Tax that is fairly allocable to the
Project shall be included within the meaning of the term "Real Property taxes".
Notwithstanding the foregoing, the term "Real Property Taxes" shall not include
(i) estate, inheritance, transfer, gift or franchise taxes of Landlord, (ii) the
federal or state net income tax imposed on Landlord's income from all sources.
See First Addendum to Lease Paragraph 9
ARTICLE 9
----------
INSURANCE
----------
9.1 Tenant's Insurance: Tenant shall maintain insurance complying with
------------------
all of the
<PAGE>
following:
A. Tenant shall procure, pay for and keep in full force and effect
the following:
(1) Commercial general liability insurance including property
damage, against liability for personal injury, bodily injury, death and damage
to property occurring in or about, or resulting from an occurrence in or about,
the Premises with combined single limit coverage of not less than the amount of
Tenant's Liability I nsurance Minimum specified in Section P of the Summary,
which insurance shall contain a "contractual liability" endorsement insuring
-----------
Tenant's performance of Tenant's obligation to indemnify Landlord contained in
Paragraph 10.3.
(2) Fire and property damage insurance in so-called "all risk"
form insuring Tenant's Trade fixtures and Tenant's Alterations for the full
actual replacement cost thereof;
(3) Such other insurance that is either (i) reasonably required
by any Lender, or (ii) reasonably required by Landlord and customarily carried
by tenants of similar properly in similar businesses.
B. Where applicable and required by Landlord, each policy of
insurance required to be carried by Tenant pursuant to this paragraph 9.1: (i)
shall name Landlord and such other parties in interest as Landlord reasonably
designates as additional insured; (ii) shall be primary insurance which provides
that the insurer shall be liable for the full amount of the loss up to and
including the total amount of liability set forth in the declarations without
the right of contribution from any other insurance coverage of Landlord; (iii)
shall be in a form satisfactory to Landlord; (iv) shall be carried with
companies reasonably acceptable to Landlord; (v) shall provide that such policy
shall not be subject to cancellation, lapse or change except after at least 30
days prior written notice to Landlord so long as such provision of 30 days
notice is reasonably obtainable, but in any event not less than 10 day prior
written notice; (vi) shall not have "deductible" in excess of such amount as is
approved by Landlord; (vii) shall contain a cross liability endorsement: and
(viii) shall contain a "severability" clause. If Tenant has in full force and
effect a
9
<PAGE>
blanket policy of liability insurance with the same coverage for the Premises as
described above, as well as other coverage of other premises and properties of
Tenant, or in which Tenant has some interest, such blanket insurance shall
satisfy the requirements of this Paragraph 9.1.
C. A copy of a certificate of the insurer, certifying that such
policy has been issued, providing the coverage required by this Paragraph 9.1
and containing the provisions specified herein, shall be delivered to Landlord
prior to the time Tenant or any of its Agents enters the Premises and upon
renewal of such policies, but not less than 5 days prior to the expiration of
the term of such coverage. Landlord may, at any time, and from time to time,
inspect any and all insurance policies required to be procured by Tenant
pursuant to this Paragraph 9.1. If any Lender or insurance advisor reasonably
determines at any time that the amount of coverage required for any policy of
insurance Tenant is to obtain pursuant to this Paragraph 9.1 is not adequate,
then Tenant shall increase such coverage for such insurance to such amount as
such Lender or insurance advisor reasonably deems adequate, not to exceed the
level of coverage for such insurance commonly carried by comparable businesses
similarly situated.
9.2 Landlord's Insurance: Landlord shall have the following obligations
--------------------
and options regarding Insurance:
A. Landlord shall maintain a policy or policies of fire and property
damage insurance in so called "all risk" form insuring Landlord (and such others
as Landlord may designate) against loss of rents for a period of not less than
12 months and from physical damage to the Project with coverage of not less than
the full replacement cost thereof. Landlord may so insure the Project
separately, or may insure the Project with other property owned by Landlord
which Landlord elects to insure together under the same policy or policies.
Such fire and property damage insurance (i) may be endorsed to cover loss caused
by such additional perils against which Landlord may elect to insure, including
earthquake and/or flood, and to provide such additional coverage as Landlord
reasonably requires, and (ii) shall contain reasonable 'deductibles" which, in
the case of earthquake and flood insurance, may be up to 15% of the replacement
value of the property insured or such higher amount as is then commercially
reasonable. Landlord shall not be required to cause such insurance to cover any
Trade Fixtures or Tenant's Alterations of Tenant.
B. Landlord may maintain a policy or policies of commercial general
liability insurance insuring Landlord (and such others as are designated by
Landlord) against liability for personal injury, bodily injury, death and damage
to property occurring or resulting from an occurrence in, on or about the
Project, with combined single limit coverage in such amount as Landlord from
time to time determines is reasonably necessary for its protection.
9.3 Tenant's Obligation Reimburse: If Landlord's insurance rates for the
-----------------------------
Building are increased at any time during the Lease Term as a result of the
nature of Tenant's use of the Premises, Tenant shall reimburse Landlord for the
full amount of such increase immediately upon receipt of a bill from Landlord
therefore.
9.4 Release and Waiver of Subrogation: Notwithstanding anything to the
---------------------------------
contrary contained in this lease, the parties hereto release each other, and
their respective agents and employees, from any liability for injury to any
person or damage to property that is caused by or results from any risk insured
against under any valid and collectible insurance policy carried by either of
the parties which contains a waiver of subrogation by the insurer and is in
force at the time of such injury or damage; subject to the following
limitations: (i) the foregoing provision shall not apply to the commercial
general liability insurance described by subparagraphs Paragraph 9.1A and
Paragraph 9.2B; (ii) such release shall apply to liability resulting from any
risk insured against or covered by self-insurance maintained or provided by
Tenant to satisfy the requirements of Paragraph 9.1 to the extent permitted by
this Lease; and (iii) Tenant shall not be released from any such liability to
the extent any damages resulting from such injury or damage are not covered by
the recovery obtained by Landlord from such insurance, but only if the insurance
in question permits such partial release in connection with obtaining a waiver
of subrogation from the insurer. This release shall be in effect only so long as
the applicable insurance policy contains a clause to the effect that this
release shall not affect the right of the insured to recover under such policy.
Each party shall use
<PAGE>
reasonable efforts to cause each insurance policy obtained by it to provide that
the insurer waives all right of recovery by way of subrogation against the other
party and its agents and employees in connection with any injury or damage
covered by such policy. However, if any insurance policy cannot be obtained with
such a waiver of subrogation, or if such waiver of subrogation is only available
at additional cost and the party for whose benefit the waiver is to be obtained
does not pay such additional cost, then the party obtaining such insurance shall
notify the other party of that fact and thereupon shall be relieved of the
obligation to obtain such waiver of subrogation rights from the insurer with
respect to the particular insurance involved.
See First Addendum to Lease Paragraph 13
ARTICLE 10
----------
LIMITATION ON LANDLORD'S
------------------------
LIABILITY AND INDEMNITY
-----------------------
10.1 Limitation on Landlord's Liability: Landlord shall not be liable to
----------------------------------
Tenant, nor shall Tenant be entitled to terminate this Lease or to any abatement
of rent (except as expressly provided otherwise herein), for any injury to
Tenant or Tenant's Agents, damage to the property of Tenant or Tenant's Agents,
or loss to Tenant's business resulting from any cause, including without
limitation any: (i) failure, interruption or installation of any HVAC or other
utility system or service: (ii) failure to furnish or delay in furnishing any
utilities or services when such failure or delay is caused by fire or other
peril, the elements, labor disturbances of any character, or any other accidents
or other conditions beyond the reasonable control of
10
<PAGE>
Landlord; (iii) limitation, curtailment, rationing or restriction an the use of
water or electricity, gas or any other form of energy or any services or utility
serving the Project: (iv) vandalism or forcible entry by unauthorized persons or
the criminal act of any person; or (v) penetration of water into or onto any
portion of the Premises or the Building through roof leaks or otherwise.
Notwithstanding the foregoing but subject to Paragraph 9.4, Landlord shall be
liable for any such injury, damage or loss which is proximately caused by
Landlord's willful misconduct or gross or active negligence of Landlord
10.2 Limitation on Tenant Recourse: If Landlord is a corporation, trust,
-----------------------------
partnership, joint venture, unincorporated association or other form of business
entity: (i) the obligations of Landlord shall not constitute personal
obligations of the officers, directors, trustees, partners, joint venturers,
members, owners, stockholders, or other principals or representatives of such
business entity; and (ii) Tenant shall not have recourse to the assets of such
officers, directors, trustees, partners, joint venturers, members, owners,
stockholders, principals or representatives except to the extent of their
interest in the Project. Tenant shall have recourse only to the interest of
Landlord in the Project for the satisfaction of the obligations of Landlord and
shall not have recourse to any other Assets of Landlord for the satisfaction of
such obligations.
10.3 Indemnification of Landlord: Tenant shall hold harmless, indemnify
---------------------------
and defend Landlord, and its employees, agents and contractors, with competent
counsel reasonably satisfactory to Landlord (and Landlord agrees to accept
counsel that any insurer requires be used), from all liability, penalties,
losses, damages, costs, expenses, causes of action, claims and/or judgments
arising by reason of any death, bodily injury, personal injury or property
damage resulting from (i) any cause or causes whatsoever (other than the willful
misconduct or gross or active negligence of Landlord) occurring in or about or
resulting from an occurrence in or about the Premises during the Lease Term,
(ii) the negligence or willful misconduct of Tenant or its agents, employees and
contractors, wherever the same may occur, or (iii) an Event of Tenant's Default.
The provisions of this Paragraph 10.3 shall service the expiration or sooner
termination of this Lease.
ARTICLE 11
----------
DAMAGE TO PREMISES
------------------
11.1 Landlord's Duty to Restore: If the Premises are damaged by any peril
--------------------------
after the Effective Date, Landlord shall restore the Premises unless the Lease
is terminated by Landlord pursuant to Paragraph 11.2 or by Tenant pursuant to
Paragraph 11.3. All insurance proceeds available from the fire and property
damage insurance carried by Landlord pursuant to Paragraph 9.2 shall be paid to
and become the property of Landlord. If this Lease is terminated pursuant to
either Paragraph 11.2 or Paragraph 11.3, then all insurance proceeds available
from insurance carried by Tenant which covers loss to property that is
Landlord's property or would become Landlord's property on termination of this
Lease shall be paid to and become the property of Landlord. If this Lease is not
so terminated, then upon receipt of the insurance proceeds (if the loss is
covered by insurance) and the issuance of all necessary governmental permits.
Landlord shall commence and diligently prosecute to completion the restoration
of the Premises, to the extent then allowed by Law, to substantially the same
condition in which the Premises were immediately prior to such damage.
Landlord's obligation to restore shall be limited to the Premises and interior
improvements constructed by Landlord as they existed as of the Commencement
Date, excluding any Tenant's Alterations, Trade Fixtures and/or personal
property constructed or installed by Tenant in the Premises. Tenant shall
forthwith replace or fully repair all Tenant's Alterations and Trade Fixtures
installed by Tenant land existing at the time of such damage or destruction, and
all insurance proceeds received by Tenant from the insurance carried by it
pursuant to Paragraph 9.1A(2) shall be used for such purpose.
11.2 Landlord's Right to Terminate: Landlord shall have the right to
-----------------------------
terminate this Lease in the event any of the following occurs, which right may
be exercised only by delivery to Tenant of a written notice of election to
terminate within 30 days after the
<PAGE>
date of such damage:
A. Either the Project or the Building is damaged by an Insured Peril
to such an extent that the estimated cost to restore exceeds 33% of the then
actual replacement cost thereof;
B. Either the Project or the Building is damaged by an Uninsured
Peril to such an extent that the estimated cost to restore exceeds 2% of the
then actual replacement cost thereof; provided, however, that Landlord may not
terminate this Lease pursuant to this Paragraph 11.B1 if one or more tenants of
the Project agree in writing to pay the amount by which the cost to restore the
damage exceeds such amount and subsequently deposit such amount with Landlord
within 30 days after Landlord has notified Tenant of its election to terminate
this Lease;
C. The Premises are damaged by any peril within 12 months of the
last day of the Lease Term to such an extent that the estimated cost to restore
equals or exceeds an interim equal to six times the Base Monthly Rent when due;
provided. however, that Landlord may not terminate this Lease pursuant to this
Paragraph 11.2C if Tenant, at the time of such damage, has a then valid express
written option to extend the Lease Term and Tenant exercises such option to
extend the Lease Term within 15 days following the date of such damage; or
D. Either the Project or the Building is damaged by any peril and,
because of the Laws then in force, (i) cannot be restored at reasonable cost to
substantially the same condition in which it was prior to such damage, or (ii)
cannot be used for the same use being made thereof before such damage if
restored as required by this Article.
E. As used herein, the following terms shall have the following
meanings: (i) the term "Insured Peril" shall mean a peril actually insured
11
<PAGE>
against for which the insurance proceeds actually received by Landlord are
sufficient (except for any "deductible" amount specified by such insurance) to
restore the Project under then existing building codes to the condition existing
immediately prior to the damage; and (ii) the term "Uninsured Peril" shall mean
any peril which is not an Insured Peril. Notwithstanding the foregoing, if the
"deductible" for earthquake or flood insurance exceeds 2% of the replacement
cost of the improvements insured, such peril shall be deemed an 'Uninsured
Peril".
11.3 Tenant's Right to Terminate: If the Premises are damaged by any peril
---------------------------
and Landlord does not elect to terminate this Lease or is not entitled to
terminate this Lease pursuant to Paragraph 11.2, then as soon as reasonably
practicable, Landlord shall furnish Tenant with the written opinion of
Landlord's architect or construction consultant as to when the restoration work
required of Landlord may be completed. Tenant shall have the right to terminate
this Lease in the event any of the following occurs, which right may be
exercised only by delivery to Landlord of written notice of election to
terminate within 10 days after Tenant receives from Landlord the estimate of the
time needed to complete such restoration.
A. The Premises are damaged by any peril and, in the reasonable
opinion of Landlord's architect or construction consultant, the restoration of
the Premises cannot be substantially completed within 180 days after the date of
such damage; or
B. The Premises are damaged by any peril within 12 months of the
last day of the Lease Term and, in the reasonable opinion of Landlord's
architect or construction consultant, the restoration of the Premises cannot be
substantially completed within 90 days after the date of which damage and such
damage renders unusable more than 30% of the Premises.
11.4 Abatement of Rent: In the event of damage to the Premises which does
-----------------
not result in the termination of this Lease, the Base Monthly Rent and the
Additional Rent shall be temporarily abated during the period of restoration in
proportion to the degree to which Tenant's use of the Premises is impaired by
such damage. Tenant shall not be entitled to any compensation or damages from
Landlord for loss of Tenant's business or property or for any inconvenience or
annoyance caused by such damage or restoration. Tenant hereby waives the
provisions of California Civil Code Sections 1932(2) and 1933(4) and the
provisions of any similar law hereinafter enacted.
ARTICLE 12
----------
CONDEMNATION
------------
12.1 Landlord's Termination Right: Landlord shall have the right to
----------------------------
terminate this Lease if, as a result of a taking by means of the exercise of the
power of eminent domain (including a voluntary sale or transfer by Landlord to a
condemnor under threat of condemnation), (i) (ii) more than 10% of the Building
Leasable Area is so taken, or (iii) more than 50% of the Common Area is so
taken. Any such right to terminate by Landlord must be exercised within a
reasonable period of time, to be effective as of the date possession is taken by
the condemnor.
12.2 Tenant's Termination Right: Tenant shall have the right to terminate
--------------------------
this Lease if, as a result of any taking by means of the exercise of the power
of eminent domain (including any voluntary sale or transfer by Landlord to any
condemnor under threat of condemnation), (i) 10% or more of the Premises is so
taken and that part of the Premises that remains cannot be restored within a
reasonable period of time and thereby made reasonably suitable for the continued
operation of the Tenant's business, or (ii) there is a taking affecting the
Common Area and, as a result of such taking, Landlord cannot provide parking
spaces within reasonable walking distance of the Premises equal in number to at
least 80% of the number of Spaces allocated to Tenant by Paragraph 2.1, whether
by rearrangement of the remaining parking areas in the Common Area (including
construction of multi-deck parking structures or restriping for compact cars
where permitted by Law) or by alternative parking facilities on other land.
Tenant must
<PAGE>
exercise such right within a reasonable period of time, to be effective on the
date that possession of that portion of the Premises or Common Area that is
condemned is taken by the condemnor.
12.3 Restoration and Abatement of Rent: If any part of the Premises or the
----------------------------------
Common Area is taken by condemnation and this Lease is not terminated, then
Landlord shall restore the remaining portion of the Premises and Common Area and
interior improvements constructed by Landlord as they existed as of the
Commencement Date, excluding any Tenant's Alterations, Trade Fixtures and/or
personal property constructed or installed by Tenant. Thereafter, except in the
case of a temporary taking, as of the date possession is taken the Base Monthly
Rent shall be reduced in the same proportion that the floor area of that part of
the Premises so taken (less any addition thereto by reason of any
reconstruction) bears to the original floor area of the Premises.
12.4 Temporary Taking. If any portion of the Premises is temporarily taken
----------------
for 270 days or less this Lease shall remain in effect. If any portion of the
Premises is temporarily taken by condemnation for a period which exceeds 270
days or which extends beyond the natural expiration of the Lease Term, and such
taking materially and adversely affects Tenant's ability to use the Premises for
the Permitted Use, then Tenant shall have the right to terminate this Lease,
effective on the date possession is taken by the condemnor.
12.5 Division of Condemnation Award: Any award made as a result of any
-------------------------------
condemnation of the Premises or the Common Area shall belong to and be paid to
Landlord, and Tenant hereby assigns to Landlord all of its right, title and
interest in any such award; provided however, that Tenant Shall be entitled to
receive any condemnation award that is made directly to Tenant for the following
so long as the award made to Landlord is not thereby reduced: (i) for the taking
of personal property or Trade Fixtures belonging to Tenant, (ii) for the
interruption of Tenant's business or its moving costs, (iii) for loss of
Tenant's goodwill; or (iv) for
12
<PAGE>
any temporary taking where this Lease is not terminated as a result of such
taking. The rights of Landlord and Tenant regarding any condemnation shall be
determined as provided in this Article, and each party hereby waives the
provisions of California Code of Civil Procedure Section 1265.130 and the
provisions of any similar law hereinafter enacted allowing either party to
petition the Superior Court to terminate this Lease in the event of a partial
taking of the Premises.
ARTICLE 13
----------
DEFAULT AND REMEDIES
--------------------
13.1 Events of Tenant's Default: Tenant shall be in default of its
---------------------------
obligations under this Lease if any of the following events occurs (an "Event of
Tenant's Default"):
A. Tenant shall have failed to pay Base Monthly Rent or Additional
Rent when due, and such failure is not cured within 3 business days after
Tenant's receipt of written notice from Landlord specifying such failure to pay;
or
B. Tenant shall have failed to perform any term, covenant, or
condition of this Lease except those requiring the payment of Base Monthly Rent
or Additional Rent, and Tenant shall have failed to cure such breach within 30
days after written notice from Landlord specifying the nature of such breach
where such breach could reasonably be cured within said 30 day period, or it
such breach could not be reasonably cured within said 30 day period, Tenant
shall have failed to commence such cure within said 30 day period and thereafter
continue with due diligence to prosecute such cure to completion within such
time period as is reasonably needed or
C. Tenant shall have sublet the Premises or assigned its interest in
the Lease in violation of the provisions contained in Article 14; or
D. Tenant shall leave abandoned the Premises or
E. The occurrence of the following: (i) the making by Tenant of any
general arrangements or assignments for the benefit of creditors: (ii) Tenant
becomes a "debtor" as defined in 11 USC Section 101 or any successor statute
thereto (unless, in the case of a petition filed against Tenant, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Tenant's assets located at the Premises
or of Tenant's interest in this Lease, where possession is not restored to
Tenant within 30 days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Tenant's assets located at the Premises or of
Tenant's interest in this Lease, where such seizure is not discharged within 30
days; provided, however, in the event that any provision of this Section 13-1E
is contrary to any applicable Law, such provision shall be of no force or
effect; or
F. Tenant shall have failed to deliver documents required of it
pursuant to Paragraph 15.4 or Paragraph 15.6 within the time periods specified
therein.
13.2 Landlord's Remedies: If an Event of Tenant's Default occur, Landlord
--------------------
shall have the following remedies, in addition to all other rights and remedies
provided by any Law or otherwise provided in this Lease, to which Landlord may
resort cumulatively or in the alternative:
A. Landlord may keep this Lease in effect and enforce by an action
at law or in equity all of its rights and remedies under this Lease,
including(i) the right to recover the rent and other sums as they become due by
appropriate legal action, (ii) the right to make payments requited of Tenant or
perform Tenant's obligations and be reimbursed by Tenant for the cost thereof
with interest at the Agreed Interest Rate from the date the sum is paid by
Landlord until Landlord is reimbursed by Tenant, and (iii) the remedies of
injunctive relief and specific performance to compel Tenant to perform its
obligations under this Lease. Notwithstanding anything contained in this Lease,
in the event of a breach of an obligation by Tenant which results in a condition
which poses an imminent danger to safety of persons or damage to property, an
unsightly condition visible from the exterior of the Building, or a threat to
insurance coverage, then if Tenant does
<PAGE>
not cure such breach within 3 business days after delivery to it of written
notice from Landlord identifying the breach, Landlord may cure the breach of
Tenant and be reimbursed by Tenant for the cost thereof with interest at the
Agreed Interest Rate from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant.
B. Landlord may enter the Premises and release them to third parties
for Tenant's account for any period, whether shorter or longer than the
remaining Lease Term. Tenant shall be liable immediately to Landlord for all
costs Landlord incurs in releasing the Premises, including brokers' commissions,
expenses of altering and preparing the Premises required by the releasing.
Tenant shall pay to Landlord the rent and other sums due under this Lease on the
date the rent is due, less the rent and other sums Landlord received from any
releasing. No act by Landlord allowed by this subparagraph shall terminate this
Lease unless Landlord notifies Tenant in writing that Landlord elects to
terminate this Lease. Notwithstanding any releasing without termination.
Landlord may later elect to terminate this Lease because of the default by
Tenant.
C. Landlord may terminate this Lease by giving Tenant written notice
of termination, in which event this Lease shall terminate on the date set forth
for termination in such notice. Any termination under this Paragraph 13.2C
shall not relieve Tenant from its obligation to pay sums then due Landlord or
from any claim against Tenant for damages or rent previously accrued or then
accruing. In no event shall any one or more of the following actions by
Landlord, in the absence of a written election by Landlord to terminate this
Lease, constitute a termination of this Lease: (i) appointment of a receiver or
keeper in order to protect Landlord's interest hereunder; (ii) consent to any
subletting of the Premises or assignment of this Lease by Tenant, whether
pursuant to the provisions hereof or otherwise; or (iii) any other action by
Landlord or Landlord's Agents intended
13
<PAGE>
to mitigate the adverse effects of any breach of this Lease by Tenant, including
without limitation any action taken to maintain and preserve the Premises or any
action taken to relet the Premises or any portions thereof to the extent such
actions do not effect a termination of Tenant's right to possession of be
Premises.
D. In the event Tenant breaches this Lease and abandons the
Premises, this Lease shall not terminate unless Landlord gives Tenant written
notice of its election to so terminate this Lease. No act by or on behalf of
Landlord intended to mitigate the adverse effect of such breach, including those
described by Paragraph 13.C, shall constitute a termination of Tenant's right to
possession unless Landlord gives Tenant written notice of termination. Should
Landlord not terminate this Lease by giving Tenant .written notice, Landlord may
enforce all its rights and remedies under this Lease, including the right to
recover the rent as it becomes due under the Lease as provided in California
Civil Code Section 1951.4.
E. In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to damages in an amount as set forth in
California Civil Code Section 1951.2 as in effect on the Effective Date. For
purposes of computing damages pursuant to California Civil Code Section 1951.2,
(i) an interest rate equal to the Agreed interest Rate shall be used where
permitted, and (ii) the term "rent" includes Base Monthly Rent and Additional
Rent. Such damages shall include:
(1) The worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds the
amount of such rental loss that Tenant proves could be reasonably avoided,
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%); and
(2) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's failure to perform Tenant's obligations
under this Lease, or which in the ordinary course of things would be likely to
result therefrom, including the following: (i) expenses for cleaning, repairing
or restoring the Premises: (ii) expenses for altering, remodeling or otherwise
improving the Premises for the purpose of reletting, including installation of
leasehold improvements (whether such installation be funded by a reduction of
rent, direct payment or allowance to a new tenant, or otherwise); (iii) broker's
fees, advertising costs and other expenses of reletting the Premises; (iv) costs
of carrying the Premises, such as taxes, insurance premiums, utilities and
security precautions; (v) expenses in retaking possession of the Premises; and
(vi) attorney's fees and court costs incurred by Landlord in retaking possession
of the Premises and in releasing the Premises or otherwise incurred as a result
of Tenant's default.
F. Nothing in this Paragraph 13.2 shall limit Landlord's right to
indemnification from Tenant as provided in Paragraph 7.2 and Paragraph 10.3. Any
notice given by Landlord in order to satisfy the requirements of Paragraph 13.1A
or Paragraph 13.1B above shall also satisfy the notice requirements of
California Code of Civil Procedure Section 1161 regarding unlawful detainer
proceedings.
13.3 Waiver: One party's consent to or approval of any act by the other
-------
party requiring the first party's requiring or approval shall not be deemed to
waive or tender unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. The receipt by Landlord of any rent
or payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach unless such waiver is in writing
and signed by Landlord. No delay or omission in the exercise of any right or
remedy accruing to either party upon any breach by the other party under this
Lease shall impair such right or remedy or be construed as a waiver of any such
breach theretofore or thereafter occurring. The waiver by either party of any
breach of any provision of this Lease shall not be deemed to be a waiver of any
subsequent breach of the same or of any other provisions herein contained.
13.4 Limitation On Exercise of Rights: At any time that an Event of
---------------------------------
Tenant's Default has occurred and remains uncured, (i) it shall not be
unreasonable for Landlord to deny or withhold any consent or approval requested
of it by Tenant which Landlord would otherwise be obligated to give, and (ii)
Tenant may not exercise any option to extend, right to terminate this Lease, or
other right granted to it by this Lease which would
<PAGE>
otherwise be available to it.
13.5 Waiver by Tenant of Certain Remedies: Tenant waives the provisions of
-------------------------------------
Sections 1932(l), 1941 and 1942 of the California Civil Code and any similar or
successor law regarding Tenant's right to terminate this Lease or to make
repairs and deduct the expenses of such repairs from the rent due under this
Lease. Tenant hereby waives any right of redemption or relief from forfeiture
under the laws of the State of California, or under any other present or future
law, including the provisions of Sections 1174 and 1179 of the California Code
of Civil Procedure.
ARTICLE 14
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ASSIGNMENT AND SUBLETTING
-------------------------
14.1 Transfer By Tenant: The following provisions shall apply to any
------------------
assignment, subletting or other transfer by Tenant or any subtenant or assignee
or other successor in interest of the original Tenant (collectively referred to
if this Paragraph 14.1 as "Tenant":
A. Tenant shall not do any of the following (collectively referred
to herein as a "Transfer") whether voluntarily, involuntarily or by operation of
law, without the prior written consent of Landlord, which consent shall not be
unreasonably withheld or delayed: (i) sublet all or any party of the Premises or
allow it to be sublet, occupied or used by any person or entity other than
Tenant; (ii) assign its interest in this Lease; (iii) mortgage of encumber the
Lease (or otherwise use the Lease as a security device) in any manner; or (iv)
materially amend or modify an assignment, sublease or other transfer that has
been previously approved by Landlord. Tenant shall reimburse Landlord for all
reasonable
14
<PAGE>
cost and reasonable attorneys fees incurred by Landlord in connection with the
evaluation, processing, and/or documentation of any requested Transfer, whether
or not Landlord's consent is granted. Landlord's reasonable costs shall include
the cost of any review or investigation performed by Landlord or consultant
acting on Landlord's behalf of (i) Hazardous Materials (as defined in Section
7.2E of this Lease) used, stored, released, or disposed of by the potential
Subtenant or Assignee, and/or (ii) violations of Hazardous Materials Law (as
defined in Section 7.2E of this lease) by the Tenant or the proposed Subtenant
or Assignee. Any Transfer so approved by Landlord shall not be effective until
Tenant has delivered to Landlord an executed counterpart of the document
evidencing the Transfer which (i) is in a form reasonably approved by Landlord,
(ii) contains the same terms and conditions as stated in Tenant's notice Oven to
Landlord pursuant to Paragraph 14.1B, and (iii) in the case of an assignment of
the Lease, contains the agreement of the proposed transferee to assume all
obligations of Tenant under this Lease arising after the effective date of such
Transfer and to remain jointly and severally liable therefor with Tenant. Any
attempted Transfer without Landlord's consent shall constitute an Event of
Tenant's Default and shall be voidable at Landlord's option. Landlord's consent
to any one Transfer shall not constitute a waiver of the provisions of this
Paragraph 14.1 as to any subsequent Transfer or a consent to any subsequent
Transfer. No Transfer, even with the consent of Landlord, shall relieve Tenant
of its personal and primary obligation to pay the rent and to perform all of the
other obligations to be performed by Tenant hereunder. The acceptance of rent
by Landlord from any person shall not be deemed to be a waiver by Landlord of
any provision of this Lease nor to be a consent to any Transfer.
B. At least 30 days before a proposed Transfer is to become
effective, Tenant shall give Landlord written notice of the proposed terms of
such Transfer and request Landlord's approval, which notice shall include the
following: (i) the name and legal composition of the proposed transferee; (ii) a
current financial statement of the transferee, financial statements of the
transferee covering the preceding three years if the same exist, and (if
available) an audited financial statement of the transferee for a period ending
not more than one year prior to the proposed effective date of the Transfer, all
of which statements are prepared in accordance with generally accepted
accounting principles; (iii) the nature of the proposed transferee's business to
be carried on in the Premises; (iv) all consideration to be given on account of
the Transfer; (v) a current financial statement of Tenant; and (vi) an
accurately filled out response to Landlord's standard Hazardous Materials
Questionnaire. Tenant shall provide to Landlord such other information as may
be reasonably requested by Landlord within seven days after Landlord's receipt
of such notice from Tenant. Landlord shall respond in writing to Tenant's
request for Landlord's consent to a Transfer within the later of (i) 15 days of
receipt of such request together with the required accompanying documentation,
or (ii) seven days after Landlord's receipt of all information which Landlord
reasonably requests within seven days after it receives Tenant's first notice
regarding the Transfer in question. If landlord fails to respond in writing
within said period, Landlord will be deemed to have withheld consent to such
Transfer. Tenant shall immediately notify Landlord of any material modification
to the proposed terms of such Transfer.
C. In the event that Tenant seeks to make any Transfer with respect
to the entire Premises for the balance of the Lease Term, landlord shall have
the right to terminate this Lease or in the case of a sublease of less than all
of the Premises for the balance of the Lease Term terminate this Lease as to
that part of the Premises proposed to be so sublet, either (i) on the condition
that the proposed transferee immediately enter into a direct lease of the
Premises with Landlord (or, in the case of a partial sublease, a lease for the
portion proposed to be so sublet) on the same terms and conditions contained in
Tenant's notice, or (ii) so that Landlord is thereafter free to lease the
Premises (or, in the case of a partial sublease, the portion proposed to be so
sublet) to whomever it pleases on whatever terms are acceptable to Landlord. In
the event Landlord elects to so terminate this Lease, then (i) if such
termination is conditioned upon the execution of a lease between Landlord and
the proposed transferee, Tenant's obligations under this Lease shall not be
terminated until such transferee executes a new lease with Landlord, enters into
possession and commences the payment of rent, and (ii) if Landlord elects simply
to terminate this Lease (or, in the case of a partial sublease, terminate this
Lease as to the portion to be so sublet), the Lease shall so terminate in its
entirety (or as to the space to be so sublet) fifteen (15) days after Landlord
has notified Tenant in writing of such election. Upon such termination, Tenant
shall be released from any further obligation under this Lease if it is
terminated in its entirety, or shall be released from any further obligation
under the Lease with respect to the space proposed to be sublet in the case of a
proposed partial sublease. In the case of a partial termination of the Lease,
the Base Monthly Rent and Tenant's Share shall be
<PAGE>
reduced to an amount which bears the same relationship to the original amount
thereof as the area of that part of the Premises which remains subject to the
Lease bears to the original area of the Premises. Landlord and Tenant shall
execute a cancellation and release with respect to the Lease to effect such
termination.
D. If Landlord consents to a Transfer proposed by Tenant, Tenant may
enter into such Transfer, and if Tenant does so, the following shall apply:
(1) Tenant shall not be released of its liability for the
performance of all of its obligations under the Lease.
(2) If Tenant assigns its interest in this Lease, then Tenant
shall pay to Landlord 50% of all Subrent (as defined in Paragraph 14.1D(5))
received by Tenant over and above (i) the assignee's agreement to assume the
obligations of Tenant under this Lease, and (ii) all Permitted Transfer Costs
related to such assignment. In the case of assignment, the amount of Subrent
owed to Landlord shall be paid to Landlord on the same basis, whether periodic
or in lump sum, that such Subrent is paid to Tenant by the assignee.
(3) If Tenant sublets of any parts of the Premises, Then with
respect to the space so
15
<PAGE>
subleased, Tenant shall pay to Landlord 50% of the positive difference, if any,
between (i) all Subrent paid by the subtenant to Tenant, less (ii) the sum of
all Base Monthly Rent and Additional Rent allocable to the space sublet and all
Permitted Transfer Costs related to such sublease. Such amount shall be paid to
Landlord on the same basis, whether periodic or in lump sum, that such Subrent
is paid to Tenant by its subtenant. In calculating Landlord's share of any
periodic payments, all Permitted Transfer Costs shall be first recovered by
Tenant.
(4) Tenant's obligations under this para. 14.1D) shall survive
any Transfer, and Tenant's failure to perform its obligations hereunder shall be
an Even of Tenant's Default. At the time Tenant makes any payment to Landlord
required by this para. 14.1D, Tenant shall delivery an itemized statement of the
method by which the amount to which Landlord is entitled was calculated,
certified by Tenant as true and correct. Landlord shall have the right at
reasonable intervals to inspect Tenant's books and records relating to the
payments due hereunder. Upon request therefor, Tenant shall deliver to Landlord
copies of all bills, invoices or other documents upon which its calculations are
based. Landlord may condition its approval of any Transfer upon obtaining a
certification from both Tenant and the proposed transferee of all Subrent and
other amounts that are to be paid to Tenant in connection with such Transfer.
(5) As used in this para. 14.1D, the term "Subrent" shall mean
any consideration of any kind received, or to be received, by Tenant as a result
of the Transfer, if such sums are related to Tenant's interest in this Lease or
in the Premises, including payments from or on behalf of the transferee (in
excess of the book value thereof) for Tenant's assets, fixtures, and leasehold
improvements, As used in this paragraph 14.1D, the term "Permitted Transfer
Costs shall mean (i) all reasonable leasing commissions paid to third parties
not affiliated with Tenant in order to obtain the Transfer in question, and (ii)
all reasonable attorneys' fees incurred by and (iii) the unamortized costs of
any alterations installed in the Premises at Tenant's expense, and redecorating
and remodeling costs incurred by Tenant to effect the Transfer. Tenant with
respect to the Transfer in question.
E. If Tenant is a corporation, the following shall be deemed a
voluntary assignment of Tenant's interest in this Lease: (i) any dissolution,
merger, consolidation, or other reorganization of or affecting Tenant, whether
or not Tenant is the surviving corporation and; (ii) if the capital stock of
Tenant is not publicly traded, the sale or transfer to one person or entity (or
to any group of related persons or entities) stock possessing more than 50% of
the total combined voting power of all classes of Tenant's capital stock issued,
outstanding and entitled to vote for the election of directors. if Tenant is a
partnership, any withdrawal or substitution (whether voluntary, involuntary or
by operation of law, and whether occurring at one or over a period of time) of
any partner owning 25% or more (cumulatively) of any interest in the capital or
profits of the partnership, or the dissolution of the partnership, shall be
deemed a voluntary assignment of Tenant's interest in this Lease.
F. Notwithstanding anything contained in 114.1, so long as Tenant
otherwise complies with (he provisions of 114.1 Tenant may enter into any of the
following transfers (a 'Permitted Transfer") Without Landlord's prior written
consent, and Landlord shot] not be entitled to (terminate the Lease pursuant to
114.1C or to receive any part of any Subrent resulting therefrom that( would
otherwise be due it pursuant to 114.113:
(1) Tenant may sublease it or part of the Premises or assign its
interest in this Lease to any corporation which controls, is controlled by, or
is under common control with the original Tenant to this Lease by means of an
ownership interest of more than 50%,
(2) Tenant may assign its interest in the Lease to a corporation
which results from a merger, consolidation or other reorganization in which
Tenant is not the surviving corporation, so long as the surviving corporation
has a net worth at the time of such assignment that is equal to or greater than
the net worth of Tenant immediately prior to such transaction; and
(3) Tenant may assign this Lease to a corporation which
purchases or otherwise acquires all or substantially all of the assets of
Tenant, so long as such acquiring corporation has a net worth at the time of
such assignment that is equal to or greater than the net worth of Tenant
immediately prior to such transaction. Notwithstanding anything to the contrary
contained herein, a public or private offering of
<PAGE>
Tenants capitol stock shall also be deemed a Permitted Transfer.
14.2 Transfer By Landlord: Landlord and its successors in interest shall
---------------------
have the right to transfer their interest in this Lease and the Project it any
time and to any person or entity. In the event of any such transfer, the
Landlord originally named herein (and, in the case of any subsequent transfer,
the transferor) from the date of such transfer, shall be automatically believed,
without any further act by any person or entity, of all liability for the
performance of the obligations of the Landlord hereunder which may accrue after
the date of such transfer. After the date of any such transfer, the term
Landlord" as used herein shall mean the transferee of such interest in the
Premises.
ARTICLE 15
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GENERAL PROVISIONS
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15.1 Landlord's Right to Enter: Landlord and its agents may enter the
--------------------------
Premises at any reasonable time after giving at least 24 hours' prior notice to
Tenant (and immediately in the case of emergency) for the purpose of: (i)
inspecting the same; 01) posting notices of non-responsibility, (iii) supplying
any service to be provided by Landlord to Tenant (W) showing the Premises to
prospective purchasers, mortgagees or tenants: (v) making necessary alterations,
additions or repairs; (vi) performing Tenant's obligations when Tenant has
failed to do so after written notice from Landlord (vii) (during the last 180
days of the Lease Term only), placing, upon the Premises ordinary "for lease
signs lot sale" signs: and (viii) responding to an emergency. Landlord shall
have the right to use any and all means Landlord may deem necessary and proper
to enter the Premises in an emergency. Any entry into the Premises obtained by
Landlord in accordance with this paragraph 15.1 shall not be a forcible or
unlawful
16
<PAGE>
entry into, or a detained of, the Premises, or an eviction, actual or
constructive, of Tenant from the Premises. Any such entry by Landlord and
Landlord's agents shall comply with all reasonable security measures of Tenant
and shall not impair Tenant's operations more than reasonably necessary. During
any such entry, Landlord and Landlord's agents shall at all times be accompanied
by Tenant.
15.2 Surrender or the Premises: Upon the expiration or sooner termination
--------------------------
of the Lease, Tenant shall vacate and surrender the Promises to Landlord in the
same condition as existed at the Commencement Date, except for (i) reasonable
wear and tear, (ii) damage caused by any peril or condemnation, and (iii)
contamination by Hazardous Materials for which Tenant is not responsible
pursuant to paragraph 7.2A or paragraph 7.2B. In this regard, normal wear and
tear shall be construed to mean wear and tear caused to the Premises by the
natural aging process which occurs in spite of prudent application of the best
but reasonable standards for maintenance, repair and janitorial practices, and
does not include items of neglected or deferred maintenance. In any event,
Tenant shall cause the following to be done prior to the expiration or the
sooner termination of this Lease: (i) all interior walls shall be painted or
cleared so that they appear freshly painted; (ii) all tiled floors shall be
cleaned and waxed; (iii) all carpets shall be cleaned and shampooed; (iv) all
broken, marred, stained or nonconforming acoustical ceiling tiles shall be
replaced, (v) all windows shall be washed; (vi) the HVAC system shall be
serviced by a reputable and licensed service firm and left in good operating
condition and repair as so certified by such firm; and (vii) the plumbing and
electrical systems and lighting shall be placed in good order and repair
(including replacement of any burned out, discolored or broken light bulbs,
ballasts, or lenses). If Landlord so requests, Tenant shall, prior to the
expiration or sooner termination of this Lease, (i) remove any Tenant's
Alterations which Tenant is required to remove pursuant to paragraph 5.2 and
repair all damage caused by such removal. If the Premises are not so surrendered
at the termination of this Lease, Tenant shall be liable to Landlord for all
costs incurred by Landlord in returning the Premises to the required condition,
plus interest on all costs incurred at the Agreed Interest Rate. Tenant shall
indemnify Landlord against loss or liability resulting from delay by Tenant in
so surrendering the Premises, including, without limitation, any claims made by
any succeeding tenant or losses to Landlord due to lost opportunities to lease
to succeeding tenants.
15.3 Holding Over: This Lease shall terminate without further notice at
-------------
the expiration of the Lease Term. Any holding over by Tenant after expiration of
the Lease Term shall not constitute a renewal or extension of the Lease or give
Tenant any rights in or to the Premises except as expressly provided in this
Lease. Any holding over after such expiration with the written consent of
Landlord shall be construed to be a tenancy from month to month on the same
terms and conditions herein specified insofar as applicable except that Base
Monthly Rent shall be increased to an amount equal to 150% of the Base Monthly
Rent payable during the last full calendar month of the Lease Term.
15.4 Subordination: The following provisions shall govern the relationship
-------------
of this Lease to any Security Instrument:
A. The Lease is subject and subordinate to all Security Instruments
existing as of the Effective Date. However, if any Lender so requires, the
Lease shall become prior and superior to any such Security Instrument. See
First Addendum To Lease Paragraph 10
B. At Landlord's election, this Lease shall become subject and
subordinate to any Security Instrument created after the Effective Date.
Notwithstanding such subordination, Tenant's right to quiet possession of the
Premises shall not be disturbed so long as Tenant is not in default and performs
all of its obligations under this Lease, unless this Lease is otherwise
terminated pursuant to its terms
C. Tenant shall upon request execute any document or instrument
reasonably required by any Lender to make this Lease either prior or subordinate
to a Security Instrument, which may include such other matters as the Lender
customarily and reasonably requires in connection with such agreements,
including provisions that the Lender not be liable for (i) the return of any
security deposit unless the Lender receives it from Landlord, and (ii) any
defaults on the part of Landlord occurring prior to the time the Lender takes
possession of the Project in connection With the enforcement of its Security
<PAGE>
Instrument. Tenant's failure to execute any such document or instrument within
10 days after written demand therefor shall constitute an Event of Tenant's
Default. Tenant approves as reasonable the form of subordination agreement
attached to this Lease as Exhibit G.
15.5 Mortgage Protection and Attornment: In the even of any default on the
-----------------------------------
part of the Landlord, Tenant will use reasonable efforts to give notice by
certified mail to any Lender whose name has been provided to Tenant and shall
offer such Lender a reasonable opportunity to cure the default including time to
obtain possession of the Premises by power of sale or judicial foreclosure or
other appropriate legal proceedings, if such should prove necessary to effect a
cure. Tenant shall attorn to any purchaser of the Premises at any foreclosure
sale or private sale conducted pursuant to any Security Instrument encumbering
the Premises, or to any grantee or transferee designated in any deed given in
lieu of foreclosure.
15.6 Estoppel Certificates and Financial Statements: At all times
-----------------------------------------------
during the Lease term, each party agrees, following any request by the other
party, promptly to execute end deliver to the requesting party within 15 days
following, delivery of such request an estoppel certificate: (i) certifying that
this Lease is unmodified and in full force and effect or, if modified, stating
the nature of such modification and certifying that this lease, as so modified,
is in full force and effect, (ii) Stating the date to which the rent and other
charges are paid in advance, if any, (iii) acknowledging that there are not, to
the certifying party's knowledge, any uncured defaults on the part of any party
hereunder to, if there are uncured defaults, specifying the nature of such
defaults, and (iv) certifying such other information about the Lease as may be
reasonably required by the requesting party. A failure to
17
<PAGE>
deliver an estoppel certificate within 15 days after delivery of a request
therefor shall be a conclusive admission that, as of the date of the request for
such statement: (i) this Lease is unmodified except as may be represented by the
requesting party in said request and is in full force and effect, (ii) there are
no uncured defaults in the requesting party's performance, and (iii) no rent has
been paid more than 30 days in advance. At any time during the Lease Term Tenant
shall, upon 15 days' prior written notice from Landlord, provide Tenant's most
recent financial statement and financial statements covering the 24 month period
prior to the date of such most recent financial statement to any existing Lender
or to any potential Lender or buyer of the Premises; provided however, that
Landlord shall ensure that any such statements are held by Landlord and any
potential buyer or Lender in the strictest of confidence. Such statements shall
be prepared in accordance with generally accepted accounting principles and, it
such is the normal practice of Tenant, shall be audited by an independent
certified public accountant.
15.7 Reasonable Consent: Whenever any party's approval or consent is
-------------------
required by this Lease before an action may be taken by the other party, such
approval or consent shall not be unreasonably withheld or delayed.
15.8 Notices: Any notice required or desired to be given regarding this
--------
Lease shall be in writing and may be given by personal delivery, by facsimile
telecopy, by courier service, or by mail. A Notice shall be deemed to have been
given (i) on the third business day after mailing if such notice was deposited
in the United States mail, certified postage prepaid, addressed to the party to
be served at its Address for Notices specified in Section Q or Section R of the
--------- ---------
Summary (as applicable), (ii) when delivered if given by personal delivery, and
(iii) in all other cases when actually received at the party's Address for
Notices. Either party may change its address by giving notice of the same in
accordance with this paragraph 15.8, provided, however, that any address to
which notices may be sent must be a California address.
15.9 Attorneys' Fees: In the event either Landlord or Tenant shall bring
----------------
any action or legal proceeding for an alleged breach of any provision of this
Lease, to recover rent, to terminate this Lease or otherwise to enforce, protect
or establish any term or covenant of this Lease, the prevailing party shall be
entitled to recover as a part of such action or proceeding, or in a separate
action brought for that purpose, reasonable attorneys' fees, court costs, and
experts' fees as may be fixed by the court.
15.10 Corporate Authority: If Tenant is a corporation (or partnership),
--------------------
each individual executing this Lease on behalf of Tenant represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of such
corporation in accordance with the by-laws of such corporation (or partnership
in accordance with the partnership agreement of such partnership) and that this
Lease is binding upon such corporation (or partnership) in accordance with its
terms. Each of the persons executing this Lease on behalf of a corporation does
hereby covenant and warrant that the party for whom it is executing this Lease
is a duly authorized and existing corporation, that it is qualified to do
business in California, and that the corporation has full right and authority to
enter into this Lease.
15.11 Miscellaneous: Should any provision of this Lease prove to be
--------------
invalid or illegal, such invalidity or illegality shall in no way affect, impair
or invalidate any other provision hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. The captions lived in this Lease are for convenience only and shall not
be considered in the construction or interpretation of any provision hereof. Any
executed copy of this Lease shall be deemed an original for all purposes. This
Lease shall, subject to the provisions regarding assignment, apply to and bind
the respective heirs, successors, executors, administrators and assigns of
Landlord and Tenant. Party shall mean Landlord or Tenant, as the context
implies. If Tenant consists of more than one person or entity, then all members
of Tenant shall be jointly and severally liable hereunder. This Lease shall be
construed and enforced in accordance with the laws of the State of California.
The language in all parts of this Lease shall in all cases be construed as a
whole according to its fair meaning, and not strictly for
<PAGE>
or against either Landlord or Tenant. When the context of this Lease requires,
the neuter gender includes the masculine, the feminine, a partnership or
corporation or joint venture, and the singular includes the plural, The terms
"shall, will and agree" are mandatory, The term may is permissive. When a party
is required to do something by this Lease, it shall do so at its sole cost and
expense without right of reimbursement from the other party unless a provision
of this Lease expressly requires reimbursement. Landlord and Tenant agree that
(i) the gross leasable area of the Premises includes any atriums, depressed
loading docks, covered entrances or egresses, and covered loading areas, (ii)
each has had an opportunity to determine to its satisfaction the actual area of
the Project and the Premises, (iii) all measurements of area contained in this
Lease are conclusively agreed to be correct and binding upon the parties, even
if a subsequent measurement of any one of these areas determines that it is more
or less than the amount of area reflected in this Lease, and (iv) any such
subsequent determination that the area is more or less than shown in this Lease
shall not result in a change in any of the computations of rent, improvement
allowances, or other matters decided in this Lease where area is a factor. Where
a party hereto is obligated not to perform any act, such party is also obligated
to restrain any others within its control from performing said act, including
the Agents of such party. Landlord shall not become or be deemed a partner or a
joint venturer with Tenant by reason of the provisions of this Lease.
15.12 Termination by Exercise of Right: If this Lease is terminated
---------------------------------
pursuant to its terms by the proper exercise of a right to terminate
specifically granted to Landlord or Tenant by this Lease, then this Lease shall
terminate 30 days after the date the right to terminate is properly exercised
(unless another date is specified in that part of the Lease creating the right,
in which event the date so specified for termination shall prevail), the rent
and all other charges due hereunder shall be prorated as of the date of
Termination, and neither Landlord nor Tenant shall have any further rights or
obligations under this Lease except for those that have accrued
18
<PAGE>
prior to the date of termination or those obligations which this Lease
specifically provides we to survive termination. This paragraph 15.12 does not
apply to a termination of this Lease by Landlord as a result of an Event of
Tenant's Default.
15.13 Brokerage Commissions: Each party hereto (i) represents and
----------------------
warrants to the other that it has not had any dealings with any real estate
brokers, leasing agents or salesmen, or incurred any obligations for the payment
of real estate brokerage commissions or finder's fees which would be earned or
due and payable by reason of the execution of this Lease, other than to the
Retained Real Estate Brokers described in Section S of the Summary, and (ii)
---------
agrees to indemnify, defend, and hold harmless the other party from any claim
for any such commission of fees which result from the actions of the
indemnifying party. Landlord shall be responsible for the payment of any
commission owed to the Retained Real Estate Brokers.
15.14 Force Majeure: Any Prevention, delay or stoppage due to strikes,
--------------
lock-outs, inclement weather, labor disputes, inability to obtain labor,
materials, fuels or reasonable substitutes therefor, governmental restrictions,
regulations, controls, action or inaction, civil commotion, fire or other acts
of God, and other causes beyond the reasonable control of the party obligated to
perform (except financial inability) shall excuse the performance, for a period
equal to the period of any said prevention, delay or stoppage, of any obligation
hereunder except the obligation of Tenant to pay rent or any other sums due
hereunder.
15.15 Entire Agreement: This Lease constitutes the entire agreement
-----------------
between the parties, and there are no binding agreements or representations
between the parties except as expressed herein. Tenant acknowledges that neither
Landlord nor Landlord's Agents has made any legally binding representation or
warranty as to any matter except those expressly set forth herein, including any
warranty as to (i) whether the Premises may be used for Tenant's intended use
under existing Law, (ii) the suitability of the Premises or the Project for the
conduct of Tenant's business, or (iii) the condition of any improvements. There
are no oral agreements between Landlord and Tenant affecting this Lease, and
this Lease supersedes and cancels any and all previous negotiations,
arrangements, brochures, agreements and understandings, if any, between Landlord
and Tenant or displayed by Landlord to Tenant with respect to the subject matter
of this Lease. This instrument shall not be legally binding until it is executed
by both Landlord and Tenant. No subsequent change or addition to this Lease
shall be binding unless in writing and signed by Landlord and Tenant.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease with the
intent to be legally bound thereby, to be effective as of the as of the
Effective Date.
LANDLORD:
KAIROS, LLC, a California limited liability company
BY Orchard Moffett Investors, a California general partnership,
Its authorized agent
By /s/ Michael J. Biggar
Michael J. Biggar,
Manager
ORCHARD MOFFETT INVESTORS, a California general partnership
By /s/ Michael J. Biggar
Michael J. Biggar
Manager
Date 6/26/96
TENANT:
<PAGE>
QuickLogic Corporation,
a California corporation
By /s/ Anthony S.S. Chan
Anthony S.S. Chan
VP Finance/Administration
Chief Financial Officer
Date June 24, 1996
19
<PAGE>
FIRST ADDENDUM TO LEASE
THIS FIRST ADDENDUM is dated for reference purposes as June 17, 1996, and
is made a part of that Lease Agreement (the "Lease") dated June 17, 1996, by and
between KAIROS, LLC and Orchard Moffet Investors, a California general
partnership corporation ("Landlord") and QuickLogic Corporation, a California
corporation ("Tenant") affecting certain real property commonly known as 1277
Orleans Drive, Sunnyvale. California , with reference to the following facts:
1. Option to Extend Lease Term: Landlord hereby grants to Tenant one
----------------------------
option to extend the Lease Term for a three ( 3 ) year term on the following
terms and conditions:
A. Tenant must give Landlord notice in writing of its exercise of
the option in question no earlier than one hundred eight (180) days and no later
than one hundred twenty (120) days before the date the Lease Term would end but
for said exercise.
B. Tenant may not extend the Lease Term pursuant to any option
granted by this paragraph if Tenant is materially in default beyond any
applicable cure period as of the date of exercise of the option in question or
as of the date this Lease would have been terminated but for said exercise.
C. All terms and conditions of this Lease shall apply during the
option period, except that the Base Monthly Rent for the option period shall be
determined as provided in Paragraph D.
D. The Base Monthly Rent for the Option Period shall be the greater
of (i) one hundred percent (100%) of the Base Monthly Rent due the last month of
the previous Lease Term, or (ii) one-hundred percent ( 100% ) of the then fair
market monthly rent determined as of the commencement of the option period in
question based upon like buildings with like improvements in the Sunnyvale area.
If the parties are unable to agree upon the fair market monthly rent for the
Premises for the option period in question at least seventy-five (75) days prior
to the commencement of the option period in question, then the fair market
monthly rent shall be determined by appraisal conducted pursuant to subparagraph
E.
E. In the event it becomes necessary to determine by appraisal the
fair market rent of the Premises for the purpose of establishing the Base
Monthly Rent during the Option Period, then such fair market monthly rent shall
be determined by three (3) real estate appraisers, all of whom shall be members
of the American Institute of Real Estate Appraisers with not less than five (5)
years experience appraising real property (other than residential or
agricultural property) located in Santa Clara County, California, in accordance
with the following procedures:
(1) The party demanding an appraisal (the "Notifying Party")
shall notify the other party (the "Non-Notifying Party") thereof by delivering a
written demand for appraisal, which demand, to be effective, must give the name,
address, and qualifications of an appraiser selected by the Notifying Party.
Within ten (10) days of receipt of said demand, the Non-Notifying Party shall
select its appraiser and notify the Notifying Party, in writing, of the name,
address, and qualifications of an appraiser selected by it. Failure by the Non-
Notifying Party to select a qualified appraiser within said ten (10) day period
shall be deemed a waiver of its right to select a second appraiser on its own
behalf and the Notifying Party shall select a second appraiser on behalf of the
Non-Notifying Party within five (5) days after the expiration or said ten (10)
day period. Within ten (10) days from the date the second appraiser shall have
been appointed, the two (2) appraisers so selected shall appoint a third
appraiser. If the two appraisers fail to select a third qualified appraiser, the
third appraiser shall be selected by the American Arbitration Association or if
it shall refuse to perform this function, then at the request or either Landlord
or Tenant, such third appraiser shall be promptly appointed by the then
Presiding Judge of the Superior Court of the State of California for the County
of Santa Clara.
<PAGE>
Page Two
(2) The three (3) appraisers so selected shall meet in
Sunnyvale, California, not later than twenty (20) days following the selection
of the third appraiser. At said meeting the appraisers so selected shall attempt
to determine the fair market monthly rent of the Premises for the option period
in question (including the timing and amount of periodic increases),
(3) If the appraisers so selected are unable to complete their
determinations in one meeting, they may continue to consult at such times as
they deem necessary for a fifteen (15) day period from the date of the first
meeting, in an attempt to have at least two (2) of them agree. If, at the
initial meeting or at any time during said fifteen (15) day period, two (2) or
more of the appraisers so selected agree on the fair market rent of the Leased
Premises, such agreement shall be determinative and binding on the parties
hereto, and the agreeing appraisers shall, in simple letter form executed by the
agreeing appraisers, forthwith notify both Landlord and Tenant of the amount set
by such agreement.
(4) If two (2) or more appraisers do not so agree within said
fifteen (15) day period, then each appraiser shall, within five (5) days after
the expiration of said Fifteen (15) day period, submit his independent appraisal
in simple letter form to Landlord and Tenant stating his determination of the
fair market rent of the Premises for the option period in question. The parties
shall then determine the fair market rent for the Premises by determining the
average of the fair market rent set by each of the appraisers. However, if the
lowest appraisal is less than eighty-five percent (85%) of the middle appraisal
then such lowest appraisal shall be disregarded and/or if the highest appraisal
is greater than one hundred Fifteen percent (I 15%) of the middle appraisal then
such highest appraisal shall be disregarded. If the fair market rent set by any
appraisal is so disregarded, then the average shall be determined by computing
the average set by the other appraisals that have not been disregarded.
(5) Nothing contained herein shall prevent Landlord and Tenant
from jointly selecting a single appraiser to determine the fair market rent of
the Premises, in which event the determination of such appraisal shall be
conclusively deemed the fair market rent of the Premises.
(6) Each party shall bear the fees and expenses of the appraiser
selected by or for it, and the fees and expenses of the third appraiser (or the
joint appraiser if one joint appraiser is used) shall be borne fifty percent
(50%) by Landlord and fifty percent (50%) by Tenant.
2. Tenant Improvement Allowances:
------------------------------
A. The term "First Level Tenant Improvement Allowance" shall mean
the maximum amount Landlord is required to spend toward the payment of Interior
Improvement Costs for all Interior Improvements constructed in the Premises,
which amount is $298,368.00 (i.e., $7.00 per square foot for Tenant's Gross
Leasable Area within (The entire Premises).
B. A second level Tenant Improvement Allowance ("Second Level Tenant
Improvement Allowance") of $213,120.00 (i.e., $5.00 per square foot for Tenant's
Gross Leasable Area within the entire Premises) shall be made available for an
increase in the Base Monthly Rent as provided for in paragraph 3 of this
Addendum To Lease.
C. The First Level Tenant Improvement Allowance plus the Second
Level Tenant Improvement Allowance shall be termed the "Total Tenant Improvement
Allowance" consisting of $511,488.00 (i.e., $12.00 per square foot for Tenant's
Gross Leasable Area within the entire Premise).
D. Additionally, Landlord shall not be obligated to provide future
use of any Tenant Improvement Allowance not spent prior to the Commencement
Date. Notwithstanding the foregoing, all improvements constructed with the
First Level Tenant Improvement Allowance or the Second Level Tenant Improvement
Allowance shall be deemed to be Interior Improvements and not Tenant's
Alterations.
3. Adjustments to the Base Monthly Rent: The Base Monthly Rent as
------------------------------------
provided
<PAGE>
for in
Article 3 of the Lease shall be adjusted as follows:
<PAGE>
Page Three
A. For every increment of $42,624.00 (i.e., $1.00 per square foot of
Gross Leasable Area), or proportion thereof to the Second Level Tenant
Improvement Allowance spent for the payment of the Interior Improvement Costs as
defined in Exhibit B, "Interior Improvement Agreement", the Base Monthly Rent
shall increase $0.0177 per square foot per month. As an example, if $63,936.00
of Second Level Tenant Improvement Allowance is spent, the Base Monthly Rent
shall increase $0.02655 per square foot per month.
B. No credit in the Base Monthly Rent shall be made if a portion of
the First Level Tenant Improvement Allowance is not spent.
4. Condition of Premises: Landlord, at Landlord's sole cost, shall
---------------------
provide the following ("collectively, "Landlord's Initial Improvements"):
a. Demolition of specific interior walls resulting in a Door floor plan
as shown on the attached Exhibit A to this Lease.
b. Remove all floor carpeting and repaint and repaint the interior of the
Premises.
c. Install a new overly roofmembrane with a five-year warranty.
d. Install additional windows of a similar (but not exact) design along
body sides of the Building as shown in Exhibit I to this Lease.
e. Reslurry and stripe the parking lot.
f. The exterior of the Building has been painted.
g. Upgrade the landscaping to Landlord's standards,
h. Provide all HVAC, electrical, and plumbing systems in good working
condition as of the Commencement Date.
5. Delivery and Acceptance of Possession: Notwithstanding any provision
-------------------------------------
to the contrary contained in the Lease Landlord represents and warrants that on
the Commencement Date all mechanical, electrical, plumbing, heating, air
conditioning, ventilation systems. all other mechanical systems and the roof
system will be in good working order and condition, and Landlord shall remain
liable for such representation and warranty if it is incorrect, except to the
extent Such representation becomes incorrect as a result of the acts or
omissions of Tenant or its employees, contractors or invitees. Notwithstanding
anything to the contrary in this Lease, Tenant's acceptance of the Premises
shall not be deemed (I) a waiver of Tenant's fights (a) to have defects in the
construction of the new Interior Improvements as provided for in Exhibit B to
this Lease of which Tenant notifies Landlord within one (1) year after the
Commencement Date repaired at Landlord's sole expense or (b) with respect to
matters and items covered by an express representation and warranty of Landlord
set forth herein, or (ii) a waiver of Landlord's maintenance and repair
obligations hereunder. Tenant shall give notice to Landlord whenever any such
defect becomes reasonably apparent, and Landlord shall repair such defect as
soon as practicable. Tenant shall have the benefit of all warranties with
respect to the Premises which would reduce Tenant's maintenance obligations
hereunder and shall cooperate with Tenant to enforce all such warranties.
6. Security Deposit: Within 30 days of be expiration or sooner
-----------------
termination of the Lease, Landlord shall promptly return to Tenant the balance
of the Security Deposit held by Landlord on such date of expiration or
termination, less any amounts used by Landlord in accordance with this Paragraph
6, plus any amounts received by Landlord after such date of expiration or
termination to restore the Security Deposit.
7. Tenant's Obligation to Maintain: Notwithstanding anything to the
--------------------------------
contrary contained Article 6.1, Tenant shall have no responsibility to perform
or construct, any repair, maintenance or improvement to the Premises (I)
necessitated by the acts or omissions of Landlord, or its Agents, (ii)
occasioned by fire, acts of God or other casualty or by (he exercise of the
power of eminent domain, (iii) required as a consequence of any violation of Law
or construction defect in the Premises or the Project as of the Commencement
Date, except as otherwise provided in this Lease, (iv) for which Landlord has a
right of reimbursement from others, and (v) which is treated as a "capital
expenditure" under generally accepted accounting principals in accordance with
Article 5.4.
<PAGE>
8. Common Operating Expenses Defined: Additional exclusions to Common
----------------------------------
Operating Expenses shall include: (vi) costs occasioned by the act, emission or
violation of Law by Landlord, or any of its Agents; (vii) costs occasioned by
fire, acts of God, or other casualties or by the exercise of the power of
eminent domain, except as provided elsewhere in this Lease; (viii)
<PAGE>
Page Four
cost (a) for which Landlord has a right of reimbursement from others, or (b)
which Tenant reimburses Landlord directly or which Tenant pays directly to a
third person, and (ix) insurance costs for coverage not customarily paid by
tenants of similar projects in the vicinity of the Premises or co-insurance
payments, unless required by law, or reasonably required by Landlord's Lender
Tenant acknowledges that insurance costs at commercially reasonable rates
relating to earthquake coverage shall not be excluded from the definition of
Common Operating Expenses.
9. Real Property Taxes Defined: The following are additional exclusions to
---------------------------
the term Real Property Taxes: Taxes, assessments or any other governmental
levies, or any increases in the foregoing occasioned by or relating to (a) land
and improvements not reserved for Tenant's exclusive or nonexclusive use, (b)
assessments and other fees for improvements and services which in Landlord's
sole but reasonable opinion do not benefit the Premises or (c) Hazardous
Materials, Notwithstanding any provision to contrary contained herein, if
Landlord elects to pay any tax, assessment or levy in total which landlord could
have elected to pay in installments, but Landlord does not make such election.
Tenant shall be required to pay only Tenant's Share of each installment payable
with respect to the period of time covered by the Lease Term, as each such
installment would have become due.
10. Subordination: Landlord shall use every reasonable effort to obtain a
--------------
Nondisturbance, Recognition and Attornment Agreement from the holder of such
Security Interest on such holder's standard form. Tenant shall pay the cost, if
any, in obtaining such Agreement.
11. Letter of Credit Portion of Security Deposit:
---------------------------------------------
A. Tenant shall provide to Landlord a Security Deposit tooling
$342,624.00, of which $300,000.00 can be, at Tenant's sole cost, an irrevocable
letter of credit which (i) is for an initial term of at least twelve (12)
months; (ii) is drawn upon a local commercial bank reasonably acceptable to
Landlord, (iii) is in the amount of $300,000.00; (iv) is in a form satisfactory
to Landlord; and (v) may be drawn on by Landlord solely upon submission of a
written certification of Landlord that there exists an Event of Tenant's Default
(as defined in Paragraph 13.1 of this Lease or in this Paragraph), that Tenant
has not cured such Event of Default, and that the amount drawn on the letter of
credit is the net amount due Landlord after first applying any cash Security
Deposit then being held by Landlord. Tenant's failure to replenish any cash
Security Deposit which is applied by Landlord, within ten (10) days after notice
that it has been applied, shall be an immediate Event of Tenant's Default,
without further notice or opportunity to cure, which shall entitle Landlord to
resort to the letter of credit to replenish its cash Security Deposit. Except as
provided in Subparagraph B herein, Tenant shall keep the letter of credit in
effect during the entire Lease term plus a period of four (4) weeks thereafter,
and Tenant's failure to renew a letter of credit at least thirty (30) days prior
to its expiration for additional periods of at least twelve (12) months and to
furnish written evidence thereof to Landlord shall be deemed an Event of
Tenant's Default under this Lease upon the expiration of the thirtieth (30th)
day prior to the date of expiration of the then-current letter of credit if
Landlord gives five (5) calendar days written notice that Tenant has failed to
renew, and Tenant does not renew within such five day period. If Tenant provides
Landlord with a letter of credit meeting the foregoing requirements, any cash
Security Deposit previously provided to Landlord in excess of $42,624.00 shall
be returned to Tenant. Any proceeds received by Landlord by drawing upon the
letter of credit shall be applied in accordance with the provisions of Paragraph
3.5 of the Lease. If Landlord draws upon the letter of credit, thereafter Tenant
shall once again have the right to post a letter or credit in place of a cash
Security Deposit so long as there exits no Event of Tenant's Default under the
Lease. If Landlord transfers the Premises during the Lease Term, and if a letter
of credit is still posted as part of the Security Deposit, Tenant agrees to take
such actions as are necessary to have the letter of credit redrawn in favor of
the new owner of the Premises, at Tenant's sole cost and expense.
B. Notwithstanding the foregoing, the letter of credit and any cash
Security Deposit held by Landlord in excess of $42,624.00 shall be released by
Landlord upon the achievement by Tenant of the following financial goals:
<PAGE>
1. Tenant shall have achieved four (4) consecutive quarters of
positive net operating income (which is defined as net operating income derived
from continuing operations, as disclosed in Tenant's audited financial
statements, and
2. The Tenant's net operating income over the four (4) consecutive
quarters described in subsection 1 above, shall equal a minimum of
$2,000,000.00.
<PAGE>
Page Five
12. Existing Incinerator: Landlord will remove the incinerator and all ash
--------------------
residue presently located on the Property, in accordance with all applicable
laws.
13. Release and Waiver of Subrogation: Notwithstanding any provision of this
----------------------------------
Lease to the contrary, the parties hereto release each other, and their
respective agents and employees, from any liability for injury to any person or
damage to property that is caused by or results from any risk insured against
under any valid and collectible insurance policy carried by either of the
parties which contains a waiver of subrogation by the insurer and is in force at
the time of such injury or damage (or which is required by this lease to be so
carried); subject to the following limitations: (i) the foregoing provision
shall not apply to the commercial general liability insurance described by
subparagraphs para. 9.1A and para. 9.2B; (ii) such release shall apply to
liability resulting from any risk insured against or covered by self-insurance
maintained or provided by Tenant to satisfy the requirements of para. 9.1 to the
extent permitted by this Lease; and (iii) Tenant shall not be released from such
liability to the extent any damages resulting from such injury or damage are not
covered by the recovery obtained by Landlord from such insurance(or any recovery
that the Landlord would have obtained had it purchased the insurance which it is
obligated to carry under this Lease), but only if the insurance in question
permits such partial release in connection with obtaining a waiver of
subrogation from the insurer.
14. Force Majeure: Any prevention, delay or stoppage due to strikes, lock-
--------------
outs, inclement weather, labor disputes, inability to obtain labor, material,
fuels or reasonable substitutes thereof, governmental restrictions, regulations,
controls, action or inaction, civil commotion, fire or other acts of God, and
other causes beyond the reasonable control of the party obligated to perform
(except financial inability) shall excuse the performance, for a period equal to
the period of any said prevention, delay or stoppage, of any obligation
hereunder except the obligation of Tenant to pay rent or any other sums dues
hereunder, provided, however, that the foregoing shall not affect provisions for
abatement of rent or termination of the Lease pursuant to the provisions of
Articles 11 (Damage to Premises) and 12 (Condemnation) of this Lease.
15. Landlord's Obligation To Maintain: If Landlord fails to perform any
---------------------------------
repairs required of Landlord under Para. 6.2 of the Lease, and if the lack of
such repairs is materially and substantially interfering with Tenant's use and
enjoyment of the Premises, and Landlord thereafter fails to make such repairs
within forty five (45) days after written notice from Tenant specifying the
nature of the repairs and the basis on which they are required, where such
repairs could reasonably be cured in forty five (45) day period, or if such
breach could not reasonably secured in forty five (45), Landlord fails to
commence work on such repairs with said forty five (45) day period or thereafter
fails to prosecute the making of such repairs with due diligence within such
time period as is reasonably needed, then Tenant may make such repairs under the
conditions set forth in the Paragraph. If Tenant proposes to make such repairs,
Tenant shall first notify Landlord in writing of its intent to make such
repairs, including in such notice a copy of the plans and specifications for the
repairs and the identity of the licensed contractor through which Tenant
proposes to conduct repairs. Landlord shall have ten (10) days following such
notice to commence the repairs, and if Landlord does so, Tenant shall have no
right to make the repairs, unless Landlord fails to pursue the repairs with due
diligence to completion (and, in the event of a failure to pursue repairs to
completion, Tenant gives Landlord a new ten (10) day notice under the procedures
set forth above and Landlord still fails to diligently pursue the repairs to
completion). If Landlord does not do so, Tenant may make the repairs under the
following conditions: (i) the repairs shall be constructed substantially in
compliance with the plans and specifications of which Landlord has received
notice; (ii) the repairs shall be performed by the licensed contractor
identified in the notice; (iii) the repairs shall be conducted in compliance
with all Laws; and (iv) the repairs shall begin only after (1) all required
governmental permits and approvals have been granted and (2) Tenant has
obtained, and has provided Landlord with a certificate of, contingent liability
and broad form builder's risk insurance relating to the performance of the
repairs in a commercially reasonable amount to cover the risks of the job.
Repairs performed by Tenant under this Paragraph shall fully comply with all
building, electrical,
<PAGE>
Page Six
plumbing, mechanical, structural, and other codes, and in a good and workmanlike
manner, using only new materials of first quality. In the event that Tenant
makes any such repairs, Tenant shall hue no right to any rent abatement nor
termination of the Lease, but shall have the right to pursue whatever other
remedies are allowed by law.
LANDLORD: TENANT:
KAIROS, LLC, a California limited liability company QuickLogic Corporation
a California corporation
By Orchard Moffett Investors, a California general
partnership Its Authorized agent By /s/ Anthony S.S. Chan
Anthony S.S. Chan
By /s/ Michael J. Biggar VP Finance/Administration
Michael J. Biggar, Chief Financial Officer
Manager
ORCHARD MOFFETT INVESTORS, a California general
partnership Date June 24, 1996
By /s/ Michael J. Biggar
Michael J. Biggar,
Manager
Date 6/26/96
<PAGE>
SITE PLAN
(IMAGE OMITTED)
EXHIBIT A
<PAGE>
EXHIBIT B
INTERIOR IMPROVEMENT AGREEMENT
------------------------------
THE IMPROVEMENT AGREEMENT is made part of that Lease dated June 17, 1996,
(the "Lease") by and between KAIROS, LLC, and Orchard Moffett Investors
("Landlord"), and Quick-Logic Corporation ("Tenant"). Landlord and Tenant agree
that the following terms are part of the Lease:
1. Purpose of Improvement Agreement: The purpose of this Improvement
---------------------------------
Agreement is to set forth the rights and obligations of Landlord and Tenant with
respect to the construction of Interior Improvements with the Premises prior to
the Commencement Date.
2. Definitions: As used in this Improvement Agreement, the following
-----------
terms shall have the following meanings, and terms which are not defined below,
but which are defined in the Lease and which are used in this Interior
Improvement Agreement, shall have the meanings ascribed to them by the Lease:
A. Approved Specifications: The term "Approved Specifications"
-----------------------
shall mean those specifications for the Interior Improvements to be constructed
by Landlord which are described by Exhibit "C" to the Lease.
-----------
B. Interior Improvements: The term "Interior Improvements"
----------------------
shall mean all interior improvements to be constructed by Landlord in accordance
with the Approved Specifications (e.g., HVAC equipment and distribution,
transformer and power distribution, partitions, floor, wall, and window
covering, lighting fixtures).
C. Interior Improvement Costs: The term "Interior Improvement
---------------------------
Costs" shall mean the following (i) the total amount due pursuant to the general
construction contract entered into by Landlord to construct the Interior
Improvements; (ii) the cost of all governmental approvals required as a
condition to the construction of the Interior Improvements (including all
construction taxes imposed by the City of Sunnyvale) in connection with the
issuance of a building permit for the Interior Improvements; (iii) all utility
connection or use fees; (iv) fees of architects or engineers for services
rendered in connection with the design and construction of the Interior
Improvements; and (v) the cost of payment and performance bonds obtained by
Landlord or Prime Contractor to assure completion of the Interior Improvement.
Notwithstanding the foregoing, Interior Improvement Costs shall not mean the
following: (I) costs resulting from the negligence or willful misconduct of
Landlord or Landlord's Agents, occurring after the Effective Date hereof, (ii)
costs resulting from the breach of contract by landlord or any other person or
entity with which Landlord contracts to perform work to construct the Interior
Improvements (iii) costs arising from or in connection with the presence of
Hazardous Materials on the Project except fro any costs for which Tenant or
Tenant's Agents are liable pursuant to Paragraph 7.2 of this Lease; (iv) costs
resulting from a casualty or act of God and (vi) costs for overtime and premium
time, unless otherwise approved by Tenant.
D. Substantial Completion and Substantially Complete: The
-------------------------------------------------
terms "Substantial Completion" and "Substantially Complete" shall each mean the
date when all of the following have occurred with respect to the Interior
Improvements in question: (i) the construction of the Interior Improvements in
question has been substantially completed in accordance with the requirements of
this lease; (ii) the architect responsible of preparing the plans shall have
executed a certificate or statement representing that the Interior Improvements
in question have been substantially completed in accordance with the plans and
specifications therefor; and (iii) the Building Department of the City of
Sunnyvale has completed its final inspection such improvements and has "signed
off" the building inspection card approving such work as complete.
<PAGE>
EXHIBIT B
<PAGE>
Page Two
3. Schedule of Performance: Set forth in this paragraph is a
----------------------
schedule of certain critical dates relating to Landlord's and Tenant's
respective obligations regarding the construction of the Interior Improvements
(the "Schedule of Performance"). Landlord and Tenant shall each be obligated to
use reasonable efforts to perform their respective obligations within the time
periods set forth in the Schedule of Performance and elsewhere in this Interior
Improvement Agreement. The Schedule of Performance is as follows:
Action Responsible
Items Due Date Party
----- -------- -----------
A. Delivery to Two weeks from Tenant
Landlord of June 24, 1996
Tenants
Interior
Requirements
B. Delivery to Within ten (10) business days Landlord
Tenant of after the later of (i) full Lease
Preliminary signature, or (ii) the delivery
Interior to Landlord of Tenant's Interior
Improvement Requirements.
Plans
C. Approval by Within five (5) business Tenant
Tenant of days after Tenant receives
Preliminary Preliminary Interior Plans.
Interior
Plans
D. Delivery to Within ten( 10 )business Landlord
Tenant of days after approval of the
Final Preliminary Interior Plans
Interior
Plans
E. Approval by Within five (5) days after Tenant Tenant
Tenant of receives Final Interior Plans
Final
Interior
Plans
F. Commence- Within five (5) days after Landlord
ment of issuance of all necessary
construction governmental approvals
of Interior
Improvement
G. Substantial Within forty-two (42) days after Landlord
Completion issuance of building permit for
of Interior the Interior Improvements
Improvements
4. Construction of Interior Improvements: Landlord shall, at its sole
--------------------------------------
cost and expense, construct the Interior Improvements in accordance with the
following:
A. Development and Approval of Preliminary Interior Plans: On or before the
------------------------------------------------------
due date specified in the Schedule of Performance, Tenant shall deliver to
Landlord a proposed floor plan identifying its requirements for the Interior
Improvements that is consistent with the Approved Specifications ("Tenant's
Interior Requirements"). On or before the due
<PAGE>
date specified in the Schedule of Performance, Landlord shall and deliver to
Tenant for its review and approval preliminary plans for the Interior
Improvements which are consistent with and conform to Tenant's Interior
Requirements and the Approved Specifications (the "Preliminary Interior
<PAGE>
Page Three
Plans"). On or before the due date specified in the Schedule of Performance,
Tenant shall either approve such plans or notify Landlord in writing of its
specific objections to the Preliminary Interior Plans. If Tenant so objects,
Landlord shall revise the Preliminary Interior Plans to address such objections
in a manner consistent with the parameters for the Interior Improvements set
forth in this Improvement Agreement and the Approved Specifications and shall
resubmit such revised Preliminary Interior Plans as soon as reasonably
practicable to Tenant for its approval. When such revised Preliminary Interior
Plans are resubmitted to Tenant, it shall either approve such plans or notify
Landlord of any further objections in writing within two (2) business days after
receipt thereof. If Tenant has further objections to the revised Preliminary
Interior Plans, the parties shall meet and confer to develop Preliminary
Interior Plans that are acceptable to both Landlord and Tenant within five (5)
business days after Tenant has notified Landlord of its second set of
objections. In the event Tenant and Landlord do not resolve all of Tenant's
objections within such five (5) business day period, Landlord and Tenant shall
immediately cause Landlord's architect to meet and confer with Tenant's
architect or construction consultant, who shall apply the standards set forth in
this Improvement Agreement to resolve Tenant's objections and incorporate such
resolution into the Preliminary Interior Plans, which process Landlord and
Tenant shall cause to be completed within rive (5) business days after the
conclusion of the five (5) business day period referred to in the immediately
preceding sentence.
B. Development and Approval of Final Interior Plans: Once the
-------------------------------------------------
Preliminary Interior Plans have been approved by Landlord and Tenant (including
all changes made to resolve Tenant's objections approved by Landlord's architect
and Tenant's architect or construction consultant pursuant to subparagraph 4A),
Landlord shall complete and submit to Tenant for its approval final working
drawings for the Interior Improvements by the due date specified in the Schedule
of Performance. Tenant shall approve the final plans for the Interior
Improvements or notify Landlord in writing of its specific objections by the due
date specified in the Schedule of Performance. If Tenant so objects, the parties
shall confer and reach agreement upon final working drawings for the Interior
Improvements within five (5) business days after Tenant has notified Landlord of
its objections. In the event Tenant and Landlord do not resolve all of Tenant's
objections within such five (5) business day period, Landlord and Tenant shall
immediately cause Landlord's architect to meet and confer with Tenants architect
or construction consultant, who shall apply with standards set forth in the
Improvement Agreement to resolve Tenant's objections and incorporate such
resolution into the Final Interior Plans, which process Landlord and Tenant
shall cause to be completed within five (5) business days after the conclusion
of the five (5) business day period referred to in the immediately preceding
sentence. The final working drawings so approved by Landlord and Tenant
(including all changes made to resolve Tenant's objections approved by
Landlord's architect and Tenant's architect or construction consultant) are
referred to herein as the "Final Interior Plans".
C. Building Permit: As soon as the Final Interior Plans have been
---------------
approved by Landlord and Tenant, Landlord shall apply for a building permit for
the Interior Improvements, and shall diligently prosecute to completion such
approval process.
D. Construction Contract: Landlord and Tenant shall cooperate to
----------------------
cause the Interior Improvements to be constructed by a general contractor who is
engaged by Landlord in accordance with the procedures set forth in subparagraph
4D (1) hereof.
(1) The job of constructing the Interior Improvements shall be
offered for "competitive bid", on a fixed price basis, to three (3) general
contractors selected by Landlord and approved by Tenant. The construction
contract shall be awarded to the bidder submitting the lowest responsive bid for
the job. Landlord shall submit to Tenant a list of general contractors
acceptable to Landlord to whom the job may be bid, and Tenant shall notify
Landlord within three (3) business days after receipt of such list of its
objection to any proposed contractor. Tenant's failure to object within such
period of time shall be deemed to be its approval of all bidders on the list so
submitted by Landlord. If the lowest responsive bid resulting from such
competitive bidding process indicates that the Interior Improvement Costs will
exceed $511,488.00 Dollars ($12.00 per gross leasable square foot of the
Premises), Landlord shall promptly notify Tenant, in writing, to that effect,
and Tenant shall have the right to propose modifications to the
<PAGE>
Final Interior Plans within five (5) business days after Tenant's receipt of
Landlord's notice, subject to Landlord's approval of such changes, for the
purpose of reducing the Interior Improvement costs. Such revision of the final
Interior Plans shall be completed as expeditiously as possible; provided,
however, that (i) the job shall nonetheless be awarded to the lowest responsive
bidder whose price shall be adjusted based upon the changes requested by
<PAGE>
Page Four
Tenant and approved by Landlord made to the Final Interior Plans; and (ii) if
Tenant should choose to exercise its right to modify the final Interior Plans
for the purpose of reducing the Interior Improvement costs, any delay resulting
from the failure by Tenant to timely exercise its right to do so shall be a
delay caused by Tenant for purposes of paragraph 7 hereof.
(2) Landlord and Tenant shall use their best efforts to approve
the general contractor and all subcontractors so that the construction contract
may be executed as soon as possible.
E. Commencement of Interior Improvements: On or before the due date
--------------------------------------
specified in the Schedule of Performance, Landlord shall commence construction
for the Interior Improvements and shall diligently prosecute such construction
to completion, using all reasonable efforts to achieve Substantial Completion of
the Interior Improvements by the due date specified in the Schedule of
Performance.
5. Payment of Interior Improvement Costs: Landlord and Tenant shall have
--------------------------------------
the following obligations with respect to the payment of Interior Improvement
Costs:
A. Landlord shall be obligated to pay an amount equal to the Tenant
Improvement Allowance as provided for in Paragraph 2 of the First Addendum To
Lease for the Payment of Interior Improvement costs. If the total of Interior
Improvement Costs exceeds the amount of Landlord's required contribution, Tenant
shall be obligated to pay the entire amount of such excess. To the extent the
total of Interior Improvement Costs exceeds the First Level Tenant Improvement
Allowance but is less than the Total Tenant Improvement Allowance, Landlord
shall pay the amount of such excess, in which event the Base Monthly Rent shall
be increased as provided for in Paragraph 3 of the First Addendum To Lease. In
no event shall Landlord be obligated to pay for Interior Improvement Costs in
excess of the allowances provided for in Paragraph 2 or the First Addendum To
Lease. If Tenant becomes obligated to contribute toward paying Interior
Improvement Costs pursuant to this subparagraph 5A, then Landlord shall estimate
the amount of such excess prior to commencing construction of the Interior
Improvements and Tenant shall pay to Landlord a proportionate share of each
progress payment due to the general contractor which bears the same relationship
to the total amount of the progress payment in question as the amount Tenant is
obligated to contribute to the payment of Interior Improvement Costs bears to
the total estimated Interior Improvement Costs. Tenant shall pay Tenant's share
of any progress payment to Landlord within ten (10) business days after receipt
of a statement therefor from landlord. At the time the final accounting is
rendered by Landlord pursuant to subparagraph 5C hereof, there shall be an
adjustment between Landlord and Tenant such that each shall only be required to
contribute to the payment of Interior Improvement Costs in accordance with the
obligations set forth in this subparagraph 5A, which adjustment shall be made
within ten (10) days after Landlord notifies Tenant of the required adjustment.
If Tenant is required to make a payment to Landlord, Tenant shall make such
payment even if Tenant elects to audit the statement submitted by Landlord
pursuant to subparagraph 5C. In the event Tenant's audit discloses that an
overpayment or underpayment was made by Tenant, there shall be an adjustment
between Landlord and Tenant as soon as reasonably practicable such that each
shall only be required to contribute to the payment of costs in accordance with
the obligations set forth in this subparagraph 5A.
B. If Tenant fails to pay any amount when due pursuant to this
paragraph 5, then (i) Landlord may (but without the obligation to do so) advance
such funds on Tenants behalf, and Tenant shall be obligated to reimburse
Landlord for the amount of funds so advanced on its behalf, and (ii) Tenant
shall be liable for the payment of a late charge and interest in the same manner
as if Tenant had failed to pay Base Monthly Rent when due as described in
paragraph 3.4 of the Lease. Any amounts paid to Landlord by Tenant pursuant to
this subparagraph shall be held by Landlord as Tenant's agent, for disbursal to
the general contractor in payment for work costing in excess of Landlord's
required contribution.
C. When the Interior Improvements are Substantially Completed,
Landlord shall submit to Tenant a Final and detailed accounting of all Interior
Improvement Costs paid by Landlord, certified as true and correct by Landlord's
financial officers. Tenant shall have the right to audit the books, records,
and supporting documents of Landlord to
<PAGE>
the extent necessary to determine the accuracy of such accounting during normal
business hours after giving Landlord at least two (2) days prior written notice.
Tenant shall bear the cost of such audit, unless such audit discloses that
Landlord has overstated the total of such costs by more than two percent
<PAGE>
Page Five
(2%) of the actual amount of such costs, in which event Landlord shall pay the
cost of Tenant's audit. Any such audit must be conducted, if at all, within
ninety (90) days after Landlord delivers such accounting to Tenant.
6. Changes to Approved Plans: Once the Final Interior Plans have been
--------------------------
approved by Landlord and Tenant, neither shall have the right to order extra
work or change orders with respect to the construction of the Interior
Improvements without the prior written consent of the other. Landlord and Tenant
shall be required to approve change orders necessary to address errors and
omissions of the architect or any other design professionals, changes required
to comply with Laws, and changes required because of unanticipated conditions
encountered in the field. All extra work or change orders requested by either
Landlord or Tenant shall be made in writing, shall specify any added or reduced
cost and/or construction time resulting therefrom, and shall become effective
and a part of the Final Interior Plans once approved in writing by both parties.
If a change order requested by Tenant results in an increase in the cost of
constructing the Interior Improvements, Tenant shall pay the amount of such
increase caused by the change order requested by Tenant at the time the change
order is approved by both Landlord and Tenant if and to the extent such change
order causes the Interior Improvement Costs to exceed Landlord's required
contribution thereto described in subparagraph 5A. If a change order results in
an increase in the amount of construction time needed by Landlord to complete
the Interior Improvements, paragraph 7 hereof may apply.
7. Delay in Completion Caused by Tenant: The parties hereto acknowledge
---------------------------------------
that the date on which Tenant's obligation to pay the Base Monthly Rent and the
Additional Rent would otherwise commence may be delayed because of (i) Tenant's
failure to submit necessary information to Landlord when required, (ii) Tenant's
failure to promptly review and approve the plans for the Interior Improvements
in accordance with the Schedule for Performance, (iii) ally act by Tenant which
interferes with or delays the completion of the plans for the Interior
Improvements or Landlord's construction work, (iv) change orders requested by
Tenant and approved by Landlord, or (v) special materials or equipment ordered
or specified by Tenant that cannot be obtained by Landlord at normal cost within
a reasonable period of time because of limited availability. It is the intent of
the parties hereto that the commencement of Tenant's obligation to pay the Base
Monthly Rent and all Additional Rent not be delayed by any of such causes or by
any other act of Tenant, and in the event it is so delayed, Tenant's obligation
to pay the Base Monthly Rent and all Additional Rent shall commence as of the
date it would otherwise have commenced absent delay caused by Tenant, provided
that within a reasonable period of time after learning of the occurrence of the
cause of any such delay, Landlord notifies Tenant in writing of the fact that
such delay has occurred and the known or anticipated extent of any such delay.
8. Delivery of Possession, Punch List, and Acceptance Agreement: As soon
-------------------------------------------------------------
as the Interior Improvements are Substantially Completed, Landlord and Tenant
shall together walk through the Premises and inspect all Interior Improvements
so completed, using reasonable efforts to discover all uncompleted or defective
construction in the Interior Improvements. After such inspection has been
completed, each party shall sign an acceptance agreement in the form attached to
the Lease as Exhibit "D" which shall (i) include a list of all "punch list"
items which the parties agree are to be corrected by Landlord and (ii) shall
state the Commencement Date and the initial Base Monthly Rent. As soon as such
inspection has been completed and such acceptance agreement executed, Landlord
shall deliver possession of the Premises to Tenant. Landlord shall use
reasonable efforts to complete and/or repair such "punch list" items within
thirty (30) days after executing the acceptance agreement. Landlord shall have
no obligation to deliver possession of the Premises to Tenant until such
procedures regarding the preparation of a punch list and the execution of the
acceptance agreement have been completed. Tenant's taking possession of any
part of the Premises shall be deemed to be an acceptance by Tenant of Landlord's
work of improvement in such part as complete and in accordance with the terms of
the Lease except for the punch list items noted and latent defects that could
not reasonable have been discovered by Tenant during its inspection of the
Interior Improvements prior to completion of the acceptance agreement, which
Landlord upon written receipt to notice of any such latent defect is required
promptly to repair at its sole cost and expense. Not withstanding anything
contained herein, Tenant's
<PAGE>
obligation to pay the Base Monthly Rent and Additional Rent shall commence as
provided in the Lease, regardless of whether Tenant completes such inspection or
executes such acceptance agreement.
<PAGE>
Page Six
9. Standard of Construction and Warranty: Landlord here by warrants that
--------------------------------------
the Interior Improvements shall be constructed substantially in accordance with
the Final Interior Plans (as modified by change orders approved by Landlord and
Tenant), all Private Restrictions and all Laws, in a good and workmanlike
manner, and all materials and equipment furnished shall conform to such final
plans and shall be new and otherwise of good quality. The foregoing warranty
shall be subject to, and limited by, the following:
A. Once Landlord is notified in writing of any breach of the above-
described warranty, Landlord shall promptly commence the cure of such breach and
complete such cure with diligence at Landlord's sole cost and expense.
B. Landlord's liability pursuant to such warranty shall be limited
to the cost of correcting the defect or other matter in question. In no event
shall Landlord be liable to Tenant for any damages or liability incurred by
Tenant as a result or such defect or other matter, including without limitation
damages resulting from any loss of business by Tenant or other consequential
damages.
C. Notwithstanding anything contained herein, Landlord shall not be
liable for any defect in design, construction, or equipment furnished which is
discovered and of which Landlord receives written notice from Tenant after the
First (1st) anniversary of the recordation of a notice of completion for the
work of improvement affected by the defect.
D. With respect to defects for which Landlord is not responsible
pursuant to subparagraph 9C; Tenant shall have the benefit of any construction
or equipment warranties existing in favor of Landlord that would assist Tenant
in correcting such defect and in discharging its obligations regarding the
repair and maintenance of the Premises. Upon request by Tenant, Landlord shall
inform Tenant of all written construction and equipment warranties existing in
favor of Landlord which affect the Interior Improvements. Landlord shall
cooperate with Tenant in enforcing such warranties and in bringing any suit that
may be necessary to enforce liability with regard to any defect for which
Landlord is not responsible pursuant to this paragraph so long as Tenant pays
all costs reasonably incurred by Landlord in so acting. Additionally, during
the period of time during which Landlord is soliciting bids from general
contractors, Tenant shall have the right to request that Landlord provide to
Tenant a list of the general contractor bids that landlord is considering and
the warranties that each such contractor is willing to make. Tenant shall have
the right to submit to landlord written comments on and suggested changes to
such warranties which comments and changes Landlord shall consider.
E. Landlord makes no other express or implied warranty with respect
to the design, construction or operation of the Interior Improvements except as
set that forth in this paragraph.
10. Tenant's Right to Install Trade Fixtures: When the construction of
-----------------------------------------
the Interior Improvements has proceeded to the point where Tenant's work of
installing its fixtures and equipment in the Premises can be commenced in
accordance with good construction practices, Landlord shall notify Tenant to
that effect and shall permit Tenant, and its authorized representatives and
contractors, to have access to the Premises for the purpose of installing
Tenant's trade fixtures and equipment. any such installation work by Tenant, or
its authorized representatives and contractors, shall be undertaken at their
sole risk, free from rent, and upon the following conditions:
A. If the entry into the Premises by Tenant, or its representatives
or contractors, interferes with or delays Landlord's construction work, after
twenty-four (24) hours notice of such fact to Tenant (i) Tenant shall cause the
party responsible for such interference or delay to leave the Premises, or (ii)
Tenant shall cause to be taken such steps as may be reasonably necessary in the
opinion of the general contractor to alleviate such interference or delay;
B. Any contractor used by Tenant in connection with such entry and
installation shall be subject to Landlord's approval, which approval shall not
be unreasonably withheld;
<PAGE>
Page Seven
C. Tenant's access to the Premises shall be subject to all of the
terms and conditions of the Lease except for the obligation to pay Base Rent
and Additional Rent.
11. Approvals: Except where otherwise expressly provided herein, wherever
---------
this Agreement requires a party to give an approval, consent, designation,
selection, determination or judgment, such approval, consent, designation,
selection, determination or judgment shall not be unreasonably withheld or
delayed.
12. Condition to Landlord's Performance: Landlord's obligations under the
------------------------------------
Lease are subject to the satisfaction or waiver of the condition that Landlord
obtain all building permits and other governmental approvals required in order
to commence construction of the Interior Improvements by the due dates specified
in the Schedule of Performance. If such condition is not satisfied or waived
within the applicable time period, Landlord shall have the option of terminating
the Lease; provided, however, that Landlord shall have the option to extend the
time period for the satisfaction of such condition for a period of up to sixty
(60) days to enable Landlord to continue its efforts to cause such condition to
be satisfied. If any such option to extend the time for satisfaction of this
condition is exercised, (i) Landlord shall continue to use reasonable efforts to
cause the condition to be satisfied; (ii) all other time periods contained in
the Schedule of Performance which are impacted by such extension shall be
appropriately adjusted; and (iii) such extension shall not constitute a delay
caused by Tenant pursuant to paragraph 7 hereof, nor shall Landlord in any way
be penalized for exercising such option to obtain additional time to cause the
condition to be satisfied. If Landlord becomes entitled to and elects to so
terminate the Lease, the Lease shall terminate on (he dated notice is so given
to Tenant. Landlord shall be under an obligation of good faith to use all
reasonable efforts to cause the condition to be satisfied.
13. Effect of Agreement: In the event of any inconsistency between this
--------------------
Improvement Agreement and the Lease, the terms of this Improvement Agreement
shall prevail.
LANDLORD: TENANT:
KAIROS, LLC, a California limited liability company QuickLogic Corporation
a California corporation
By Orchard Moffett Investors, a California general
partnership Its Authorized agent By /s/ Anthony S.S. Chan
Anthony S.S. Chan
By: /s/ Michael J. Biggar VP Finance/Administration
Manager Chief Financial Officer
ORCHARD MOFFETT INVESTORS, a California general
partnership Date June 24, 1996
By /s/ Michael J. Biggar
Michael J. Biggar,
Manager
Date 6/26/96
<PAGE>
Exhibit "C"
-----------
APPROVED SPECIFICATIONS
(To be added at a later date)
A
EXHIBIT C
<PAGE>
ACCEPTANCE AGREEMENT
THIS ACCEPTANCE AGREEMENT is made as of June 17, 1996 by and between the
parties hereto with regard to that Lease dated June 17, 1996 by and between
KAIROS, LLC, and Orchard Moffet Investors, a California general partnership
corporation ("Landlord") and QuickLogic Corporation, a California corporation
("Tenant"), affecting those Premises commonly known as 1277 Orleans Drive,
Sunnyvale, California. The parties hereto agree as follows:
1. All improvements required to be constructed by Landlord by the Lease
have been completed in accordance with the terms of the Lease and are hereby
accepted by Tenant, subject to the completion of punchlist items identified on
Exhibit "A" attached hereto.
2. Possession of the Premises has been delivered to Tenant and Tenant has
accepted and taken Possession of the Premises.
3. The Commencement Date of the Lease Term is _____________ and the Lease
Term shall expire on __________ unless sooner terminated according to the terms
of the Lease or by mutual agreement.
4. The Base Monthly Rent initially due pursuant to the Lease is Forty Two
Thousand and Six Hundred Twenty Four Dollars/100 ($42,624.00) per month, subject
to any subsequent adjustments required by the Lease.
5. Landlord has received a Security Deposit in the amount of Three
Hundred and Forty Two Thousand and Six Hundred Twenty Four Dollars/100
($342,624.00). In addition, Tenant has prepaid rent in the amount of Forty Two
Thousand and Six Hundred Twenty Four Dollars/100 ($42,624.00), which shall be
applied to the first installment of Base Monthly Rent.
6. The Lease is in full force and effect, neither party is in default of
its obligations under the Lease, and Tenant has no setoffs. claims, or defenses
to the enforcement of the Lease.
7. Tenant has received three (3) mailbox keys for Tenants assigned
mailbox. Tenant understands that lost keys are Tenant's responsibility and are
to be replaced by Tenant at its own expense, and that unreturned keys are
subject to a $50.00 per key charge as per the First Addendum to Lease.
LANDLORD: TENANT:
KAIROS, LLC, a California limited liability company QuickLogic Corporation
a California corporation
By Orchard Moffett Investors, a California general
partnership Its Authorized agent By: ____________________
Anthony S.S. Chan
By: __________________________ VP Finance/Administration
Michael J. Biggar, Chief Financial Officer
Manager
ORCHARD MOFFETT INVESTORS, a California general
partnership Date June 24, 1996
By: ______________________
Michael J. Biggar,
Manager
Date: _________________
EXHIBIT D
<PAGE>
Recording Requested By:
TITLE INSURANCE & TRUST COMPANY
TS-425904-1
When Recorded, Mail To:
PRUDENTIAL INSURANCE COMPANY
155 Moffett Park Drive
Building A, Suite 101
Sunnyvale, CA 94086
ATTN Lee Cashion
DECLARATION OF PROTECTIVE COVENANTS
-----------------------------------
MOFFETT INDUSTRIAL PARK NO. 11
------------------------------
THIS DECLARATION, made this 5th day of April, 1980 by THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA (hereinafter called Prudential), a New Jersey
corporation,
WITNESSETH:
WHEREAS Prudential is the Owner of that certain real property located in
the City of Sunnyvale, County of Santa Clara, State of California, described in
Exhibit A (hereinafter called Moffett Industrial Park No. 11, and
WHEREAS Prudential proposes to subdivide Moffett Industrial Park No. 11 and
to subject it to the following restrictions:
NOW, THEREFORE, Prudential hereby declares that Moffett Industrial Park No.
11 is and shall be held, conveyed, encumbered, leased and used subject to the
following uniform restrictions, covenants and equitable servitudes in
furtherance of a plan for the subdivision, improvement and sale thereof and to
enhance the value, desirability and attractiveness of Moffett Industrial Park
No. 11, the restrictions set forth herein shall run with the real property
included within Moffett Industrial Park No. 11 shall be binding upon all persons
having or acquiring any interest in such real property or any part thereof,
shall inure to the benefit
<PAGE>
of every portion of Moffett Industrial Park No. 11 and any interest therein and
shall inure to the benefit of and be binding upon each successor in interest of
Prudential and may be enforced by Prudential or its successors in interest or by
any Owner (as defined in Article I below) or his successors in interest.
I. GENERAL PROVISIONS
---------------------
A. Definitions
1. Architectural Control Committee means Prudential. or any committee which
Prudential may appoint by an appropriate instrument recorded with the
Santa Clara County Recorder.
2. Lot means each lot shown on the parcel or subdivision map or maps for
Moffett Industrial Park No. 11.
3. Site means a parcel consisting either of a Lot, a portion of a Lot,
contiguous Lots, or portions of contiguous Lots.
4. "Improvements" means all improvements to a Site including, but without
limitations, buildings loading areas, trackage, parking areas, pavement,
poles, fences, landscaping, signs and structures of any type.
5. Building means the main portion of any building or similar structure and
all projections or extensions thereof, including garages, outside
platforms and docks.
6. Owner" means the person or persons, partnership or corporation in whom
title to a Site is vested, as shown by the official records of the
office of the County Recorder of Santa Clara County. Owner does not
mean mortgagees,
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trustees and beneficiaries of deeds of trust or holders of any
indebtedness secured by a mortgage or deed of trust.
B. Purposes of Restrictions.
The purpose of these covenants, conditions and restrictions is to insure
proper development and use of Moffett Industrial Park No. 11, to protect
the Owner of each Site against such improper development and use of other
Sites as will depreciate the value of his Site, to prevent the erection of
structures of unsuitable or inharmonious design or construction, to secure
and maintain sufficient setbacks from streets and between structures, to
maintain Common Landscaping (as defined in Article V) and in general to
provide for a high quality of improvement of Moffett Industrial Park No. 11
in accordance with a general plan.
II. REGULATION OF IMPROVEMENTS
------------------------------
A. Minimum Setback Lines.
No improvement shall be constructed upon any Site within thirty-five (35)
feet of the right-of-way line of any public street. No improvement other
than landscaping, paving and fences shall be constructed upon any Site
within twenty (20) feet of any other Site. The Architectural Control
Committee may approve lesser setback lines if in its opinion a variation
would be compatible with the general development of Moffett Industrial Park
No. 11.
B. Ground Coverage.
No more than fifty percent (50%) of the surface of any Site shall be
covered with a building or buildings for warehouse use or thirty-five
percent (35%) for all other uses.
C. Construction Operations.
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Construction of all improvements shall be expedited so that none shall
remain in a partially finished condition any longer than reasonably
necessary for the completion thereof.
D. Excavation.
No excavation shall be made on, and no sand, gravel or soil shall be
removed from, any Site, except in connection with the construction of
Improvements, and upon completion thereof, exposed openings shall be
backfilled, and disturbed ground shall be graded, leveled and paved or
landscaped.
E. Landscaping.
Within ninety (90) days of the occupancy or completion of any Building on a
Site, whichever occurs first, such Site shall be landscaped in accordance
with plans approved by the Architectural Control Committee. The Owner of
the Site shall maintain such landscaping in good order and condition.
F. Signs
No billboard or advertising signs shall be permitted on any Site other than
those approved by the Architectural Control Committee which identify the
name, business and products of the person or firm occupying the Site or
offer the Site for sale or lease.
G. Parking Areas.
Each Site shall have facilities for parking sufficient to serve the
business conducted thereon without using adjacent streets thereof, and no
use shall be made of any Site which would require parking in excess of the
parking spaces on the Site. In any event, the number and size of the
parking spaces on each
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F 309 page 45
Site shall conform with all ordinances of the City of Sunnyvale applicable
with respect thereto. Parking areas shall be laid out and constructed
according to plans approved by the Architectural Control Committee and
shall be maintained thereafter in good condition. Except with the approval
of the Architectural Control Committee, no parking shall be permitted
within thirty-five (35) feet of the right-of-way line of any street.
H. Loading Areas.
All vehicle loading and unloading in connection with an Owner's business
shall be conducted upon his Site, and sufficient space shall be provided
therefore. Loading Areas shall be screened from view from streets and
adjoining properties by a visual barrier not less than six (6) feet in
height. Except with the prior written approval of the Architectural
Control Committee, loading areas shall not be located between any building
and any street or any closer than seventy-five (75) feet to the right-of-
way line of any street.
I. Storage Areas.
No materials, supplies. equipment or trash containers shall be stored on a
Site except inside a building or behind a visual barrier no less than six
(6) feet in height or rising two (2) feet above the stored materials,
supplies or equipment, whichever is higher, screening such storage areas
from view from streets and adjoining Sites. Except with the prior written
approval of the Architectural Control Committee, storage areas shall not be
located between any building and any street.
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F 309 page 46
J. Building Regulations.
All Buildings shall be constructed and maintained in accordance with the
following standards unless an exception is approved in writing by the
Architectural Control Committee:
1. Exterior walls shall be of masonry, concrete or approved equal
material.
2. Exterior walls shall be painted or otherwise finished in a manner
acceptable to the Architectural Control Committee. Exterior walls
shall not be repainted or refinished unless and until the
Architectural Control Committee shall have approved the color or
refinishing materials to be used.
3. All buildings shall be maintained in good order and repair and
condition. All exterior painted surfaces shall be maintained in
first-class condition and shall be repainted at least once every five
(5) years.
4. All electrical, telephone and other utility lines shall be underground
and shall not be exposed on the exterior of any Building.
5. All electrical and mechanical apparatus, equipment, fixtures (other
than lighting fixtures) conduit, ducts, vents, flues and pipes located
on the exterior of any Building shall be concealed from view and shall
be architecturally treated in a manner acceptable to the Architectural
Control Committee.
III. APPROVAL OF PLANS
-----------------------
No Improvement shall be erected, placed, altered, maintained or permitted
to remain on any Site until plans and specifications showing plot layout and all
exterior elevations, with materials and
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F 309 page 47
colors therefore and structural designs, signs and landscaping shall have been
submitted to and approved in writing by the Architectural Control Committee.
Such plans and specifications shall be submitted in writing over the signature
of the Owner of the Site or his authorized agent. Approval shall be based,
among other things, on adquacy of Site dimensions; adquacy of structural design;
effect of location and use of improvements on neighboring Sites; improvement
operations, and uses; relation of topography, grade, and finished ground
elevation of the Site being improved to that of neighboring Sites; proper facing
of main elevation with respect to nearby streets; and conformity of the plans
and specifications to the purpose and general plan and intent of this
Declaration. The Architectural Control Committee shall not arbitrarily or
unreasonably withhold its approval of such plans and specifications. If the
Architectural Control Committee fails either to approve or disapprove such plans
and specifications within thirty (30) days after the same have been submitted to
it, it shall be conclusively presumed that the Architectural Control Committee
has approved said plans and specifications, subject, however, to the
restrictions contained in Articles II and IV hereof.
Neither the Architectural Control Committee nor its successors or assigns
shall be liable in damages to anyone submitting plans to them for approval, or
to any Owner by reason of mistake in judgment, negligence, or nonfeasance
arising out of or in connection with the approval or disapproval or failure to
approve any such plans. Every person who submits plans to the Architectural
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F 309 page 48
Control Committee for approval agrees, by submission of such plans, and every
Owner agrees, by acquiring title to a Site, that he will not bring any action or
suit against the Architectural Control Committee to recover any such damages.
IV. REGULATION OF OPERATIONS AND USES
--------------------------------------
A. Permitted Operations and Uses.
Except as provided in paragraphs B and C below, any industrial use will be
permitted on a Site including, but without limitation, manufacturing,
processing, storage, wholesale, office, laboratory, professional and
research and development. Such retail uses as may be required for the
convenience of Owners and their employees shall be permitted and such
retail uses may include, but without limitation, restaurants, drug stores,
barber and beauty shops, shoe repair shops, cleaners, motels, post offices,
banks and automobile service stations. Such municipal, governmental and
public utility uses as may be necessary or appropriate shall be permitted.
B. Prohibited Operations and Uses.
No Site shall be used as a junk yard, stock yard, or slaughter yard or for
commercial excavation of building or construction materials, fat rendering
or distillation of bones, dumping, disposal, incineration or reduction of
garbage, sewage, offal, dead animals or refuse, or the smelting of iron,
tin, zinc or other ores or the prospecting or drilling for natural gas, oil
or like substances, except with the prior written permission of the
Architectural Control Committee, and then only in such manner as will not
materially inconvenience other Owners or materially
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F 309 PAGE 49
depreciate the value of adjacent property.
C. Nuisance.
No noxious or offensive activity shall be carried on nor shall anything be
done on any Site which may be or become an annoyance or nuisance to the
Owners or occupants of other Sites or which will be offensive by reason of
odor, fumes, dust, dirt, fly-ash, smoke, noise, glare or which will be
hazardous by reason of danger of fire or explosion.
V. COMMON LANDSCAPING
---------------------
The Owner of each Site shall maintain landscaping existing thereon at the
time of purchase ("Common Landscaping") in a condition that meets the approval
of the Architectural Control Committee. In the event that the Owner of any Site
does not maintain Common Landscaping in such condition or the landscaping
described in Article II E as therein provided, Prudential or its agents shall
have the right to maintain such landscaping in such condition. Prudential or its
agents shall have the right at any reasonable time to enter into any Site for
the purpose of such maintenance and for such other purposes as are reasonably
related thereto. Prudential shall use due diligente and reasonable care in
repairing, maintaining and installing Common Landscaping to see that such
repair, maintenance and installation does not interfere with the Owner's use of
its Site. In the event that Prudential or its agents should undertake any such
maintenance on any Site, the Owner thereof shall reimburse Prudential for all of
Prudential's costs incurred in such maintenance. In any
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legal proceeding brought by Prudential to recover such costs, the Owner shall be
obligated to pay for the costs and expenses of such proceeding, including
reasonable attorneys' fees.
VI. ENFORCEMENT
----------------
A. Interpretation.
In case of uncertainty as to the meaning of any article , section,
subsection, paragraph, sentence, clause, phrase or word of this Declaration
the interpretation of Prudential shall be final, conclusive and binding upon
all interested parties.
B. Abatement and Suit.
Violation or breach of any restriction herein contained shall give to
Prudential and every Owner the right to enter the property upon or as to
which said violation or breach exists and to summarily abate and remove at
the expense of the Owner thereof, any structure, thing or condition that
may be or exist thereon contrary to the intent and meaning of the
provisions hereof, or to prosecute a proceeding at law or in equity against
the person or persons who have violated or are attempting to violate any of
these restrictions to enjoin or prevent them from doing so, to cause said
violation to be remedied or to remover damages for said violation.
In any legal or equitable proceeding for the enforcement of this
Declaration the losing party or parties shall pay the attorneys' fees of
the prevailing party or parties, in such amount as may be fixed by the
court in such proceedings. All remedies
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F 309 page 51
provided herein or at law or in equity shall be cumulative and not
exclusive.
C. Inspection.
Prudential may from time to time at any reasonable hour or hours, enter and
inspect any property subject to these restrictions to ascertain compliance
therewith.
D. Failure to Enforce Not a Waiver of Rights.
Except as provided in the last paragraph of Article III hereof, the failure
of Prudential or any Owner to enforce any restriction contained herein
shall in no event be deemed to be a waiver of the right to do so thereafter
nor of the right to enforce any other restriction contained herein.
VII. EXTINGUISHMENT, CONTINUATION AND MODIFICATION
----------------------------------------------------
This Declaration, every provision hereof and every covenant, condition and
restriction contained herein shall continue in full force and effect for a
period of forty (40) years from the date hereof; provided, however, that this
Declaration, or any provision hereof, or any covenant, condition or restriction
contained herein, may be terminated, extended, modified, or amended with the
written consent of the Owners of sixty-five percent (65%) of the land in Moffett
Industrial Park No. 11 (exclusive of portions thereof now or hereafter dedicated
to public use); provided, further, that so long as Prudential owns at least
twenty percent ((20%) of Moffett Industrial Park No. 11, no such termination,
extension, modification or amendment shall be effective without the written
consent of Prudential. No such termination, extension, modification or
amendment shall be effective until a proper instrument in
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F 309 page 52
Writing has been executed and acknowledged and recorded in the Office of the
Recorder of Santa Clara County, California.
VIII. MOFFETT INDUSTRIAL PARK NO. 11 OWNERS ASSOCIATION
-------------------------------------------------------
A. Membership.
Each Owner shall be a member of the Moffett Industrial Park No. 11 Owners
Association, an unincorporated association (hereinafter called the
Association).
B. Transfer of Rights and Duties.
The rights and duties of Prudential under this Declaration shall be
transferred to and automatically assumed by the Association upon the
earliest of the following to occur:
1. The sale of ninety percent (90%) of Moffett industrial Park No. 11 by
Prudential to Owners as evidenced by the official records of the Santa
Clara County Recorder; or
2. The recordation by Prudential of an appropriate instrument with the
Santa Clara County Recorder transferring the rights and duties of
Prudential under this Declaration to the Association.
C. Organization.
The members of the Association may at any time meet and adopt by-laws or
rules of procedure to govern the operation of the Association. Until such
by-laws or rules of procedure are adopted, meetings of the Association may
be called by any member thereof upon seven (7) days written notice to each
member setting forth the time and place thereof, provided that
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notice may be waived in writing at any time by any member of members not so
notified; twenty-five percent (25%) of the members of the Association shall
constitute a quorum; and the Association may by a vote of a majority of its
members present at a meeting, duly called, at which a quorum is present or
without a meeting by unanimous written consent of its members.
IX. ASSIGNABLILITY OF PRUDENTIALS RIGHTS AND DUTIES
----------------------------------------------------
Any and all of the rights, powers and reservations or Prudential herein
contained may be assigned to any person, corporation or entity which assumes in
writing the duties of Prudential pertaining to the particular rights, powers and
reservations assigned, and thereafter to the extent of such assignment, such
person, corporation or entity shall have the same rights and powers and be
subject to the same obligations and duties as are herein given to and assumed by
Prudential.
X. CONSTRUCTIVE NOTICE AND ACCEPTANCE
-------------------------------------
Every Owner is and shall he conclusively deemed to have consented and
agreed to every covenant, condition and restriction contained herein. whether or
not any reference to this Declaration is contained in the instrument by which
such Owner acquired an interest in any portion of Moffett Industrial Park No. 11
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F 309 page 54
IN WITNESS WHEREOF, Prudential, the declarant herein, has caused its name
to be hereunto subscribed as of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
BY: /s/ Lee Cashion
Lee Cashion, General Manager, REO
STATE OF CALIFORNIA 55.
COUNTY OF SANTA CLARA
On April 24, 1980 before me, the undersigned, a Notary Public in and for said
State, personally appeared Lee Cashion Known to me to be the President, and
General Manager, R.E.O. known to me to be Blankline Secretary of the corporation
that executed the within Instrument, known to me to be the persons who executed
the within Instrument on behalf of the corporation therein named, and
acknowledged to me that such corporation executed the within instrument pursuant
to its by-laws or a resolution of its board of directors.
WITNESS my hand and official seal. [SEAL OMITTED]
Signature /s/ Judith L. Vedda
Judith L. Vedda
<PAGE>
F 309 page 55
EXHIBIT "A"
ALL THAT CERTAIN REAL PROPERTY IN THE CITY OF SUNNYVALE, COUNTY OF SANTA CLARA,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
PARCEL ONE
All of Parcels B and C, as shown upon that certain map entitled, "Parcel Map
being a resubdivision of Parcel 2 as shown on that certain map recorded March 1,
1978, in Book 413 of Maps at Page 54 - Santa Clara County Records", which map
was filed for record in the office of the recorder of the County of Santa Clara,
State of California, on October 29, 1979, in Book 452 of Maps, at page 32.
PARCEL TWO
All of Parcel A, as shown upon that certain map entitled, "Parcel Map being a
resubdivision of Parcel 3 as shown on map recorded in Book 413 of Maps at page
54 - Santa Clara County Records", which map was filed for record in the office
of the recorder of the County of Santa Clara, State of California, on February
23, 1979, in Book 435 of Maps, at page 56.
PARCEL THREE
All of Parcel 4 and 5, as shown upon that certain map entitled Parcel Map being
a resubdivision of Parcel 7 as shown on map recorded in Book 214 of Maps at page
23 - Santa Clara County Records", which map was filed for record in the office
of the recorder of the County of Santa Clara, State of California, on March 1,
1978, in Book 413 of Maps, at page 54
PARCEL FOUR
All of Parcel A, as shown upon that certain map entitled "Parcel Map being a
resubdivision of Parcel 3 as shown on Map recorded in Book 413 of Maps at page
54 - Santa Clara County Records", which map was filed for record in the office
of the recorder of the County of Santa Clara, State of California, on February
23, 1978, in Book 435 of maps at page 56: Certificate of Correction dated
October 22, 1979, which was filed for record in the office of the recorder of
the County of Santa Clara, State of California on October 22, 1979, in Book E891
of maps at page 700.
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F 309 page 56
THE UNDERSIGNED BEING FEE OWNER TO THAT PROPERTY DESCRIBED IN EXHIBIT B
HEREBY ACCEPTS THE ENCUMBRANCE ON SAID PROPERTY CREATED BY THE WITHIN
DECLARATION OF PROTECTIVE COVENANTS - MOFFETT INDUSTRIAL PARK NO. 11, DATED
APRIL 5, 1980 AND EXECUTED BY PRUDENTIAL INSURANCE COMPANY OF AMERICA.
DATE: April 22, 1980 /s/ William L. Marocco
William L. Marocco
State of California
County of SANTA CLARA SS.
on APRIL 22, 1980 before me, the undersigned, a Notary Public in and for said
State, personally appeared WILLIAM L. MAROCCO known to me to be the person
whose name subscribed to the within instrument and acknowledged that HE executed
the same. WITNESS my hand and official seal.
Signature /s/Janyce M. Webb [SEAL OMITTED]
Janyce M. Webb
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F 309 page 57
EXHIBIT B
ALL THAT CERTAIN REAL PROPERTY IN THE CITY OF SUNNYVALE, COUNTY OF SANTA CLARA,
STATE OF CALIFORNIA, DESCRIBED AS FOLLOWS:
All of Parcel A, as shown upon that certain map entitled, Parcel Map being a
resubdivision of Parcel 2 as shown on that certain map recorded March 1, 1978,
in Book 413 of Maps at Page 54 - Santa Clara County Records, which map was filed
for record in the office of the recorder of the County of Santa Clara, State of
California, on October 29, 1979, in Book 452 of Maps, at Page 32.
<PAGE>
ORCHARD INVESTMENT COMPANIES SIGN CRITERIA
------------------------------------------
These criteria have been established for the purpose of assuring an outstanding
business complex and for the mutual benefits of all tenants. Conformance will
be strictly enforced. and any installed non-conforming or unapproved signs must
be brought into conformance at the expense of the tenant.
A. GENERAL REQUIREMENTS
1. The Lessee shall submit a sketch of his proposed utilization of the
Orchard Properties designated sign to Orchard Properties for written
approval.
2. Lessee's sign base and frame shall be constructed by Orchard
Properties' agent. The sign base shall be installed by Orchard
Properties agent at Lessee's expense. All tenant lettering shall be
done by the agent at Lessee's expense.
3. Lessee shall be responsible for the fulfillment of all requirements of
these criteria.
B. GENERAL SPECIFICATIONS
1 . No electrical or audible signs will be permitted. Internally
illuminated signs may be installed by modification of the existing or
designated sign base. Final details for modification and installation
must be given written approval by the Lessor.
2. If the sign is lighted, the light source for the illumination of the
sign shall be concealed from view, and the light source shall not
travel from such light source straight to the viewer's eye. Instead,
it shall be visible only from a reflecting or diffusing surface. No
part of the sign's light shall revolve, rotate, move or create the
illusion of same.
3. The sign's dimensions will be in accordance with the established sign
program for the building.
4. Placement of the sign and method of attachment will be directed by
Orchard Properties. Sign copy will be restricted to company name,
logo and address numbers. The style, color and size of the individual
company's name may vary
5. Upon the removal of any sign, any damage to the building or sign base
must be repaired by the Lessee.
6. Tenants may place gold leaf lettering on the interior window area, not
to exceed more than 144 square inches (gross area). The letters are
not to exceed 3 inches in height.
7. Except as provided herein. no advertising placards, banners, pennants,
names, insignia, trademarks or other description material shall be
affixed or maintained upon the glass panes or exterior walls of the
building.
EXHIBIT F
<PAGE>
]
SAN JOSE ORCHARD BUSINESS PARK STANDARD DIRECTIONAL SIGN (SHIPPING/RECEIVING) -
Alternate
[IMAGE OMITTED
<PAGE>
SAN JOSE ORCHARD BUSINESS PARK STANDARD DIRECTIONAL SIGN
[IMAGE OMITTED]
<PAGE>
ORCHARD PROPERTIES
VISITOR PARKING SPACE DESIGNATION
Signs designating visitor parking spaces are allowed in parking areas of single
user buildings only, and conform to the following criteria:
1. A maximum of 3 inches high and consisting of only the word "Visitor"
2. Painted with a flat white exterior paint.
3. Applied to either the curb or bumpers of the approved designated
spaces.
4. Painted by the tenant at tenant's expense but with the prior written
approval of Orchard Properties.
5. Repainted a minimum of every three years.
6. Upon request from Orchard Properties, removed at the termination of
the lease.
No other designated parking signs are acceptable.
<PAGE>
ORCHARD PROPERTIES
REAR MAN DOORS
In order to insure uniformity in the printing of company names or receiving and
shipping signs on real man doors, we have made the following specifications:
1. The business name is to be the same as the name used on the tenant
identification sign. In addition to the names, the words "shipping"
and "receiving" and the tenant's logo may be used.
2. The letters will be 2 inches high, black or white and in a specified,
uniform style.
3. The proposed sign is to be approved by Orchard Properties prior to
installation to insure conformance.
<PAGE>
SPECIFICATIONS FOR ADDRESS NUMBER ON BUILDINGS
1. Height: 8
2. Color: Contrasting to background of building and matching accent
trim on building.
3. Location: Viewable from the street upper corner of building.
4. Example: Orchard building at the corner of Brokaw Road and Zanker
Road.
5. Composition: Metal
6. Paint: Primer plus two coats of finish paint.
7. Approval: By Orchard Properties in writing prior to installation.
<PAGE>
EXHIBIT G
---------
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
THIS AGREEMENT is entered into as of the_____day of____________, ______,by and
between ______________________________, a _______________ (the
Beneficiary),________________, a ______________________ (the Tenant) and
______________, a _________________ (the Landlord).
WITNESSETH
A. Tenant has entered into a certain lease dated ________, ____,(the "Lease)
with Landlord covering certain space (the "Premises") located in and upon the
real property described in Schedule 1 attached hereto (the Property);
B. Beneficiary is the holder of a mortgage loan (the "Loan") to Landlord in
the amount of ___________________Dollars ($__________) which is secured by a
________________________ (the "Deed of Trust) covering the Property;
C. The parties hereto desire expressly to confirm the subordination of the
Lease to the lien of the Deed of Trust, it being a requirement by Beneficiary
that the lien and charge of the Deed of Trust be unconditionally and at all
times prior and superior to the leasehold interests and estates created by the
Lease; and
D. Tenant has requested that Beneficiary agree not to disturb Tenant's
possessory rights in the Premises in the event Beneficiary should foreclose the
Deed of Trust, provided that Tenant is not in default under the Lease unit
provided that Tenant attorns to Beneficiary or the purchaser at any foreclosure
or Trustee's sale of the Property.
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
of other good and valuable consideration the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:
1. Notwithstanding anything to the contrary set forth in the Lease, the Lease
and the leasehold estate created thereby and all of Tenant's rights thereunder
shall be and shall at all times remain subject, subordinate in the Deed of Trust
and the lien thereof and all rights of Beneficiary thereunder and to any and all
renewals, modifications, consolidations, replacements and extensions thereof.
2. Tenant hereby declares, agrees and acknowledges that:
A. Beneficiary would not have agreed to recognize the Lease without this
Agreement; and
B. Beneficiary, in making disbursements pursuant to the agreements
evidencing and securing the Loan, is under no obligation or duty to oversee or
direct the application of the proceeds of such disbursements and such proceeds
may be used by Landlord for purposes other than improvement of the Premises.
3. In the event of foreclosure of the Deed of Trust, or upon a sale of the
Property pursuant to the Trustee's power of sale contained therein, or upon a
transfer of the Property by deed in lieu of foreclosure, then so long as Tenant
is not in default under any of the terms, covenants, or conditions of the Lease,
the Lease shall continue in full force and effect as a direct lease between the
succeeding owner of the Property and Tenant, upon and subject to all of the
terms, covenants and conditions of the Lease for the balance of the term of the
Lease. Tenant hereby agrees to attorn to and accept any such successor owner as
landlord under the Lease, and to be bound by and perform all of the obligations
imposed by the Lease, and Beneficiary or any such successor owner of the
Property will not disturb the possession of Tenant, and will be bound by all of
the obligations imposed by the Lease upon the landlord thereunder; provided,
however, that the Beneficiary, or any purchaser at a trustees or sheriffs sale
or any successor owner of the Property shall not be:
A. liable for any act or omission of a prior landlord (including
Landlord), or
B. subject to any offsets or defenses which the Tenant might have against
any
<PAGE>
prior landlord (including Landlord); or
EXHIBIT G
<PAGE>
C. bound by any rent or additional rent which the Tenant might have paid in
advance to any prior landlord (including Landlord) for a period in excess of one
month; or
D. bound by any agreement or modification of the Lease made without the
written consent of the Beneficiary; or
E. liable or responsible for or with respect to the retention, application
and/or return to Tenant of any security deposit paid to any prior lessor
(including Landlord), whether or not still held by such prior lessor, unless and
until Beneficiary or such other purchaser has actually received for its own
account as lessor the full amount of such security deposit; or
F. bound by or liable under any representations, warranties, covenants or
indemnities made to Tenant by any prior landlord (including Landlord) regarding
Hazardous Materials (as defined in the Lease); or
G. obligated to construct the building in which the Premises are located or
any improvements for Tenant's use.
4. Upon the written request of Beneficiary at the time of a foreclosure,
Trustee's sale or deed in lieu thereof or at any time thereafter, the parties
agree to execute a lease of the Premises upon the same terms and conditions as
the Lease between Landlord and Tenant, which lease shall cover any unexpired
term of the Lease existing prior to such foreclosure, Trustee's sale or
conveyance in lieu of foreclosure.
5. Tenant agrees to give to Beneficiary, by registered mail, a copy of any
notice or statement served upon Landlord. Tenant agrees not to exercise any
rights of termination available by virtue of a default unless (i) Landlord shall
have failed to cure such default, and (ii) following expiration of the
applicable period under the Lease for cure by Landlord of such default. Tenant
shall have furnished to Beneficiary notice of Landlord's failure to cure such
default and afforded Beneficiary an additional thirty (30) days following
receipt of such notice within which to cure such default, or if such default
cannot be cured within that time, then such additional time as may be necessary
if within such thirty (30) days Beneficiary has commenced and is diligently
pursuing the remedies necessary to cure such default (including, but not limited
to, commencement of foreclosure proceedings if necessary to effect such cure),
in which event such right, if any, as Tenant might otherwise have to terminate
the Lease shall not be exercised while such remedies are being so diligently
pursued.
6. Landlord, as landlord under the Lease and trustor under the Deed of Trust,
agrees for itself and its heirs, successors and assigns, that: (i) this
Agreement does not constitute a waiver by Beneficiary of any of its rights under
the Deed of Trust, or in any way release Landlord from its obligation to comply
with the terms, provisions, conditions, covenants, agreements and clauses of the
Deed of Trust; and (ii) the provisions of the Deed of Trust remain in full force
and effect and must be complied with by Landlord, if Beneficiary so requires.
7. Tenant acknowledges that it has notice that the Lease and the rent and all
other sums due thereunder have been assigned or are to be assigned to
Beneficiary as security for the Loan secured by the Deed of Trust. In the event
that Beneficiary notifies Tenant of a default under the Deed of Trust and
demands that Tenant pay its rent and all other sums due under the Lease to
Beneficiary, Tenant agrees that it will honor such demand and pay its rent and
all other sums due under the Lease directly to the Beneficiary or as otherwise
required pursuant to such notice.
8. All notices hereunder shall be deemed to have been duly given if mailed by
United States registered or certified mail, with return receipt requested,
postage prepaid, to Beneficiary at the following address (or at such other
address as shall be given in writing by Beneficiary to the Tenant) and shall be
deemed complete upon any such mailing:
____________________________
____________________________
____________________________
____________________________
Attention:__________________
<PAGE>
with a copy to:__________________________
__________________________
__________________________
__________________________
9. This Agreement supersedes any inconsistent provisions of the Lease.
-2-
<PAGE>
10. This Agreement shall inure to the benefit of the parties hereto, their
successors and permitted assigns; provided however, that in the event of the
assignment or transfer of the interest of Beneficiary, all obligations and
liabilities of Beneficiary under this Agreement shall terminate, and thereupon
all such obligations and liabilities shall be the responsibility of the party to
whom Beneficiary's interest is assigned or transferred.
11. Tenant agrees that this Agreement satisfies any condition or requirement
in the Lease relating to the granting of a non-disturbance agreement.
12. This Agreement shall be governed by and construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date and
year first set forth above.
"Beneficiary: Landlord:
____________________________ _______________________
____________________________a a _______________________
By:_________________________
By:_______________________
Printed Printed
Name:_______________________ Name:____________________
Title:______________________ Title:___________________
"Tenant":
____________________________
a __________________________
By:_________________________
Printed
Name:_______________________
Title:______________________
<PAGE>
Orchard Plaza
2290 North First Street, Suite 300
San Jose, California 95131
(408) 922-0400
FAX (408) 922-0157
[ORCHARD PROPERTIES LETTERHEAD]
TO: PROSPECTIVE TENANT
FROM: ORCHARD PROPERTIES
SUBJECT: HAZARDOUS MATERIALS QUESTIONNAIRE AS IT RELATES
CALIFORNIA HEALTH AND SA DE
SECTIONS 25503,5 AND 25503.6
California Health and Safety Code Section 25503.5 requires any business which
handles Hazardous Materials in excess of certain limits to establish a
business plans for emergency response to a release or threatened release of
Hazardous Materials. Health and Safety Code Section 25503.6 specifies that any
business which is required under Section 25503.5 to establish and implement a
business plan and is located on leased property is required to notify the owner
in writing that the business is subject to Section 25503.5 and to provide a copy
of the business plan to the owner within five working days after receiving a
request from the owner or owners agent for a copy.
The purpose of this letter is to request that you either verify that not subject
to Health and Safety Code Sections 25503.5 and 25503.6 or that you provide the
information required to be provided by those Sections by:
1. Completing the attached acknowledgment;
2. Completing the attached questionnaire;
3. If you are a reporting company, attaching a copy of your
hazardous materials management plan.
If you have questions as to your own specific requirements, please contact the
local fire department to assess your use.
Sincerely,
ORCHARD PROPERTIES
/s/ R. Byron Woodworth
R. Byron Woodworth
Vice President
Marketing
EXHIBIT H
<PAGE>
ACKNOWLEDGMENT
THE UNDERSIGNED HEREBY ACKNOWLEDGES THAT IT (Mark One):
_____ Does not use any hazardous materials other than minor amounts of
reproduction and janitorial chemicals consistent with routine office
uses.
( No need to fill out the attached Hazardous Materials Questionnaire.)
_____ Does not use hazardous materials in a manner or in a quantity
requiring the preparation of a hazardous material management plan or
any other documents under California Health and Safety Code Section
25503.5.
(Please rill out the attached Hazardous Materials Questionnaire.)
_____ Uses only those chemicals identified in the attached questionnaire in
accordance with the provisions of the attached hazardous materials
management plan, which and has been approved by the Fire Department of
the City of _________________ and is in full force and effect.
(Please fill out the attached Hazardous Materials Questionnaire and
attach copy of your Hazardous Materials Management Plan.)
THE UNDERSIGNED FURTHER ACKNOWLEDGES THAT IT HAS COMPLIED IN ALL RESPECTS TO THE
PROVISIONS OF LOCAL, STATE AND FEDERAL LAW AND THE HAZARDOUS MATERIALS
MANAGEMENT PLAN ATTACHED HERETO IN CONNECTION WITH ITS STORAGE, USE AND DISPOSAL
OF HAZARDOUS MATERIALS AND THAT IT HAS DISPOSED OF HAZARDOUS MATERIALS ONLY BY
(1) DISCHARGE TO APPROPRIATELY TREATED WASTE TO A PUBLICLY OWNED TREATMENT WORK
IN ACCORDANCE WITH A VALID AND ENFORCEABLE WASTE DISCHARGE PERMIT AND (2)
DELIVERY OF HAZARDOUS WASTES TO A PROPERLY LICENSED WASTE DISPOSAL AGENT.
IN WITNESS WHEREOF, the undersigned, an authorized officer of the aforementioned
company has executed this acknowledgment as of the date written below.
QuickLogic Corporation
(Company Name)
a California Corporation
By: /s/ Anthony S.S. Chan
Anthony S.S. Chan, CFO
(Print Name and Title)
<PAGE>
Date 5-16-95
EPA ID # CAL 000162813
QUICKLOGIC Location Address:
2933 BUNKER HILL LN #100 SAME
SANTA CLARA, CA 95054
PERMANENT RECORD - DO NOT DESTROY
CALIFORNIA EPA IDENTIFICATION NUMBER
This is to acknowledge that a permanent California Environmental Protection
Agency Identification (EPA ID) Number has been assigned to your place of
business. (Please note EPA ID Number above the location address.)
- --------------------------------------------------------------------
An EPA ID Number is assigned to a person or business at a specific site. It is
only valid for the location and person or business to which it was assigned. If
your business has multiple generation sites, each site must have a number. If
you stop handling hazardous waste, change the type or amount of waste you
handle, move your business, or change ownership you must notify the Department
of Toxic Substances Control immediately. If your business has moved, your EPA
ED Number must be canceled. A new number must be obtained for your new location
if you continue to produce hazardous waste.
This EPA ID Number must be used for all manifesting, recordkeeping, and
reporting requirements. Please retain this notice in your files.
Department of Toxic Substances Control
Hazardous Waste Management Program
Generator Information Services Section
Telephone (916) 324-1781
California Only Toll-free Number: (800) 618-6942
Operator's Initials fk
<PAGE>
IMPORTANT INFORMATION CONCERNING
HAZARDOUS WASTE TAXES AND FEES
Persons required to obtain a federal or state Environmental Protection Agency
(EPA) hazardous waste identification number may be responsible for certain taxes
and fees imposed by the State of California.
If you dispose of on-site or submit for disposal off-site more than 500 lbs. of
hazardous waste, you should contact the State Board of Equalization to acquire a
hazardous waste tax identification number. If you generate or produce five (5)
tons or more of hazardous waste, regardless of the final disposition of the
waste you should contact the State Board of Equalization to acquire a hazardous
waste tax identification number.
The telephone number of the State Board of Equalization Environmental Fees
Division is (916) 323-9555. Any correspondence should be mailed to:
STATE BOARD OF EQUALIZATION
ENVIRONMENTAL FEES DIVISION
P.O. BOX 942754
SACRAMENTO, CA 94291-2754
Failure to acquire a hazardous waste tax identification number may result in
penalties being assessed against you.
Utilization of a waste hauler or a hazardous waste contractor to remove your
hazardous waste does not relieve you of a liability for the taxes and fees which
result from the generation and/or disposal of your hazardous waste.
The taxes and fees referenced above are the Hazardous Substances (Superfund)
Tax; Section 25345; the Disposal Fee, Section 25174.6; and the Facility and
Generator Fees, Section 25205.2 and 25205.5 of the Health and Safety Code.
<PAGE>
Federal EPA identification numbers are assigned by the U.S. EPA located in San
Francisco, California. Each county has been assigned a different CAS number.
This number should be used by all agencies (city, county, and state) with a
county that respond to emergencies where there is not an identified
generator/responsible party. Appropriate uses of a CAS number by a governmental
agency would include response to spills and the discovery of clandestine labs
and illegally disposed wastes.
To obtain a provisional or permanent state ID number, CAH, CAI, or your counts
CAS number, contact DTSCs Telephone Information Center at (916) 324-1781 or, for
long distance California callers, (800) 618-6942 between 8:15 and 4:45 Monday
through Friday.
TYPES OF FEDERAL ID NUMBERS
Like California, U.S. EPA issues different types of ID numbers as a means of
distinguishing between several broad categories of hazardous waste activities.
Following is a brief summary of the categories and prefixes currently used by
U.S. EPA:
CA/CAD/CAT- Permanent number prefixes, assigned to handlers of 100 kg or more
per calendar month of a RCRA HW and/or more than 1 kg per calendar month of
acute HW, and any amount of non-RCRA HW.
An provisional number assigned to generators that will produce, one-time only,
100 kg or more of a RCRA HW and/or more than 1 kg of acute HW, and any amount of
non-RCRA HW. A CAP number is valid for 90 days and may be used more than once
during that time period.
To obtain a provisional or permanent RCRA ID number, an application must be
submitted to U.S. EPA. You may contact U.S. EPA. at (415) 495-1895 to acquire
Form 8700-12 (EPA Notification of Regulated Waste Activity) and a set of
instructions. Completed applications should be sent to the following address:
U.S. EPA Region 9
RCRA Notifications
75 Hawthorne St. (H3-4/PRC)
San Francisco, CA 94105
U.S. EPA issues Emergency ID numbers (CAP) over the telephone for situations
that pose an imminent threat to public health or the environment. These numbers
are obtained by calling the Emergency After-Hours-Hotline at (415) 744-2000.
SUMMARY OF ID NUMBERS IN STATE/FEDERAL SYSTEM
CAL - State permanent number
CAC - State provisional or emergency number
<PAGE>
4. Contact the State Board of Equalization at (916) 323-9555 to determine if
registration is necessary. (Section 43101 Revenue and Taxation Code.)
5. Inform your County Environmental Health Agency that you are a small
quantity generator of hazardous waste.
6. Hazardous waste may be accumulated on-site in containers or tanks for no
more than 90 days. THE 90 DAYS BEGINS ON THE DATE THAT THE WASTE FIRST
BEGINS TO ACCUMULATE, IF
--------------------------------------------------
YOU GENERATE MORE THAN 100 KG IN A CALENDAR MONTH.
-------------------------------------------------
NOTE:If you generate 100 KG OR LESS IN A CALENDAR MONTH hazardous waste may be
----------------------------------
accumulated on-site in containers or tanks until a total of 100 kg of
hazardous waste or 1 kg of extremely hazardous waste (100 kg = 27 gallons
and 1 kg = 1 quart, both based on the density of water) has been
accumulated. Once the 100 kg or 1 kg limit is reached, the hazardous waste
may be kept on-site for no more than 90 calendar days. THE 90 DAYS BEGINS
------------------
ON THE DATE THE 100 KG OR 1 KG LIMIT REACHED.
---------------------------------------------
If hazardous waste is accumulated in containers, a generator must comply
with Chapter 15, Article 9 as it applies to interim status facilities. If
hazardous waste is accumulated in tanks, a generator must comply with
Chapter 15, article 10 as it applies to interim status facilities except
for Section 66265.197(c) & 66265.200.. (Chapter 12, Section 66262.34(a)(1),
Title 22, CCR)
a. The date upon which each period of accumulation begins must be clearly
marked and visible for inspection on each container and portable tank. The
date the 90-day period begins must be clearly marked and visible for
inspection on each container and tank. (Chapter 12, Section 66262.34 (f)(1)
& (2), Title 22, CCR)
b. While being accumulated on site, each container and tank must be labeled or
marked clearly with the words, "Hazardous Waste. (Chapter 12, Section
66262.34 (f)(3), Title 22, CCR)
A label must be maintained on all non-stationary containers in which hazardous
wastes are stored. Labels must include the following information:
1. Composition and physical state of the waste.
2. Statement or statements which call attention to the particular hazardous
properties of the waste (e.g. flammable, reactive, etc.)
3. Name and address of person producing the waste. (Chapter 12. Section
66262.34(f) (1), (2), (3), (A), (B) & (C), Title 22, CCR)
<PAGE>
b. Comply with DOT requirements for packaging, labeling and marking. (Chapter
12, Section 66262.30, 66262.31, 66262.32 and 66262.33, Title 22, CCR)
c. Use the California Hazardous Waste Manifest. Contact the Department of
General Services at (916) 574-2200 for information on ordering manifests.
(Chapter 12, Section 66262.20(a), Title 22, CCR)
d. Ship waste only to hazardous waste facilities approved for your waste type.
(Chapter 12, Section 66262.20(b) & (c), Tittle 22 CCR)
e. Keep the generator copy of each manifest until a completed copy is returned
by the designated facility. Keep each completed manifest received from the
designated facility for three (3) years. (Chapter 12, Section 66262-40(a),
Title 22, CCR)
f Submit to DTSC within 30 days of each shipment, a copy of each manifest
used (Chapter 12, Section 66262.23, Title 22, CCR)
g. File an Exception Report with DTSC if a copy of the manifest signed by the
facility operator is not received within 45 days of the date the waste was
accepted by the initial transporter. These reports must be retained for a
period of three (3) years. (Chapter 12, Section 66262.42(b), Title 22,
CCR)
NOTE:For generators of less than 100 kg per month there are certain
transportation allowances. Please refer to Section 25163(c) of the Health
and Safety Code.
9. Submit a Biennial Report of your hazardous waste activities during odd-
numbered years. These reports are due March 1st of even numbered years and
must be retained for three (3) years. Even though facilities that generate
more than 100 kg per month but less the 1,000 kg per month of a RCRA
regulated waste are federally regulated, in some cases they may be exempt
from the federal requirement to submit a Biennial Report, but not from
state requirements. Waste minimization information must be included in
each report. (Chapter 12, Section 66262.41 (a), Title 22, CCR), Section
25244.4 Health and Safest Code.)
<PAGE>
To: Austin, Ong
From: Ann Marie Jones @ QuickLogic
Subject: List of chemicals
Date: 5/05/95 Time: 2:45p
Below is the list of all the chemical based products used in house:
Flux-off (liquid)
Xerox- Yellow toner premix )
Xerox- Versatec clear dispersant ) US EPA #
Xerox- Cyan toner premix/premix plus ) CAL000162813
Xerox- Magenta toner premix )
Xerox- Process black type the type V80 toner premix )
Liquid crystal A
Liquid crystal B
Markem- 6993 Red 611-C
Markem- 4481 White
Markem- 4461 Black
Markem- ZR Thinner
Markem- 500 Cleaner
Markem- ZY Thinner
Markem- 320 Cleaner
Tech Spray- Envi-ro-tech freezer 1672
Rite Off - generation 2'000 Flux clean
I need to get one or two MSDS; otherwise, what I have is being reviewed by Sue
Swenson with Zee Medical. The SB-198 injury protection plan is current, but
training and implementation are the key factors that we are lacking.
Ann Marie
<PAGE>
GENERIC MATERIAL SURVEY
SK Customer No. 7-178-02-9428 SK Survey No.
681185
NAME OF BUSINESS: Quicklogic
NATURE OF BUSINESS: Manufacturer
X Conditionally exempt small quantity generator (CESQG)
State CA EPA ID # CAL000162813
MANIFEST ADDRESS
Quicklogic
2933 Bunker Hill Ln
Santa Clara, CA 95054
8H 85301 Toner W/Isoporaffiric Solvent
Generation Amount: 16 gallons per year
Name: Ann Marie Jones Title
Manufacturing Engineer
Signature: /s/ Ann Marie Jones Date 5/16/95 PHONE (408) 787-2000
REP NUMBER 1251 BRANCH NUMBER 7-178-02
<PAGE>
CERTIFICATION OF HAZARDOUS WASTE DETERMINATION
BY GENERATOR OF HAZARDOUS WASTE
California Nonrestricted Wastes
213. Hydrocarbon solvents (benzene, hexane, Stoddard, Etc.)
214. Unspecified solvent mixture
Business Name: QuickLogic
Print Name: ANN MARIE JONES Title: MANUFACTURING ENGINEER
Signature: /s/ Ann Marie Jones Date 5-16-95
Phone: 408-987-2000
<PAGE>
EXHIBIT I
New Window Construction
[GRAPHIC IMAGE OMITTED]
<PAGE>
[ORCHARD PROPERTIES LETTERHEAD OMITTED]
December 10, 1996
Mr. Phil Ong
Vice President of Operations
QuickLogic Corporation
1277 Orleans Drive
Sunnyvale, Ca 95122
RE: Paragraphs 2 and 3 of the First Addendum To Lease dated June 17, 1996
to the Lease dated June 17, 1996 By and Between KAIROS, LLC AND
MOFFETT ORCHARD INVESTORS ("Landlord"') and QUICKLOGIC CORPORATION
("Tenant") Affecting Certain Real Property Commonly Known as 1277
Orleans Drive, Sunnyvale, California 95122.
Dear Phil:
As provided by the above-referenced paragraphs, the Base Monthly Rent for Tenant
shall be as follows:
Months 1 - 30: $46,396.22
Months 31 - 60: $49,806.14
Months 61 - 84: $52,789.82
This is caused by Tenant's expenditure of $213,120.00 ($5.00 per rentable square
foot) in excess of the First Level Tenant Improvement Allowance of $7.00 per
rentable square foot.
Expenditure of the Second Level TI Allowance of $5.00 per rentable square foot:
- ------------------------------------------------------------------------------
$5.00 PSF x $0.0177 increase in rent X 42,624 SF = $3,772.22
per TI Allowance increase in rent
Dollar over 84 months
<TABLE>
<CAPTION>
Payment Period Original Base plus Monthly equals New Base
Monthly Rent Increase = Monthly Rent
<S> <C> <C> <C> <C> <C>
Months 1 - 30 $42,624.00 + $3,772.22 = $46,396.22
Months 31 - 60 $46,033.92 + $3,772.22 = $49,806.14
Months 61 - 84 $49,017.60 + $3,772.22 = $52,789.82
</TABLE>
<PAGE>
Page Two
Please acknowledge this change in Base Monthly Rent with an authorized signature
below and on the attached Acceptance Agreements. Return one copy of this
executed letter and all copies of the Acceptance Agreements (to be signed by us)
to me as soon as possible. Again, Orchard Properties welcomes you to our family
of Tenants!
Sincerely,
ORCHARD PROPERTIES
/s/ R. Byron Woodworth
R. Byron Woodworth
Vice President
Marketing
<PAGE>
TENANT'S ACCEPTANCE
-------------------
ACCEPTED AND APPROVED this 11th day of December, 1996
QUICKLOGIC CORPORATION - TENANT
By: /s/ Signature Unreadable
Title: V.P., CFO
<PAGE>
ACCEPTANCE AGREEMENT
THIS ACCEPTANCE AGREEMENT is made as of December 10, 1996 by and between
the parties hereto with regard to that Lease dated June 17, 1996 by and between
KAIROS, LLC, AND ORCHARD MOFFET INVESTORS, , a California general partnership
corporation ("Landlord") and QUICKLOGIC CORPORATION, a California corporation
("Tenant"), affecting those Premises commonly known as 1277 Orleans Drive,
Sunnyvale, California. The parties hereto agree as follows:
1. All improvements required to be constructed by Landlord by the Lease
have been completed in accordance with the terms of the Lease, and are hereby
accepted by Tenant, subject to the completion of punchlist items identified on
Exhibit "A" attached hereto.
2. Possession of the Premises has been delivered to Tenant and Tenant has
accepted and taken possession of the Premises.
3. The Commencement Date of the Lease Term is November 27, 1996 and the
Lease Term shall expire on November 31, 2003 unless sooner terminated according
to the terms of the Lease or by mutual agreement.
4. The Base Monthly Rent initially due pursuant to the Lease is Forty Six
Thousand Three Hundred Ninety Six Dollars and 22/100 ($46,396.22) per month,
subject to any subsequent adjustments required by the Lease.
5. Landlord has received a Security Deposit in the amount of Three
Hundred and Forty Two Thousand and Six Hundred Twenty Four Dollars/100
($342,624.00). In addition, Tenant has prepaid rent in the amount of Forty Two
Thousand and Six Hundred Twenty Four Dollars/100 ($42,624.00), which shall be
applied to the first installment of Base Monthly Rent.
6. The Lease is in full force and effect, neither party is in default of
its obligations under the Lease, and Tenant has no setoffs, claims, or defenses
to the enforcement of the LeasE.
LANDLORD: TENANT:
KAIROS, LLC, a California limited liability company QuickLogic Corporation
a California Corporation
By Orchard Moffett Investors, a California
general partnership,
Its authorized agent By: /s/ Vincent McCord
[Provide Name]
By: /s/
__________________
Michael J. Biggar, Title: Vincent McCord
Manager CFO, Vice
President
ORCHARD MOFFETT INVESTORS, a California
general partnership Date December 11, 1996
By /s/
_________________
Michael J. Biggar,
Manager
Date _______________
<PAGE>
EXHIBIT 10.16
BUSINESS LOAN AGREEMENT
================================================================================
Borrower: QUICKLOGIC CORPORATION Lender: Silicon Valley Bank
2933 Bunker Hill Lane 3000 Lakeside Drive
Santa Clara, CA 95054 Santa Clara, CA 95054
===============================================================================
THIS BUSINESS LOAN AGREEMENT between QUICKLOGIC CORPORATION ("Borrower") and
Silicon Valley Bank ("Lender") is made and executed on the following terms and
conditions. Borrower has received prior commercial loans from Lender or has
applied to Lender for a commercial loan or loans and other financial
accommodations, including those which may be described on any exhibit or
schedule attached to this Agreement. All such loans and financial
accommodations, together with all future loans and financial accommodations from
Lender to Borrower, are referred to in this Agreement individually as the "Loan"
and collectively as the "Loans." Borrower understands and agrees that: (a) in
granting, renewing, or extending any Loan, Lender is relying upon Borrower's
representations, warranties, and agreements, as set forth in this Agreement;
(b) the granting, renewing, or extending of any Loan by Lender at all times
shall be subject to Lender's sole judgment and discretion; and (c) all such
Loans shall be and shall remain subject to the following terms and conditions of
this Agreement.
TERM. This Agreement shall be effective as of August 9, 1995, and shall
continue thereafter until all Indebtedness of Borrower to Lender has been
performed in full and the parties terminate this Agreement in writing.
DEFINITIONS. The following words shall have the following meanings when used in
this Agreement. Terms not otherwise defined in this Agreement shall have the
meanings attributed to such terms in the Uniform Commercial Code. All
references to dollar amounts shall mean amounts in lawful money of the United
States of America.
Agreement. The word "Agreement" means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time,
together with all exhibits and schedules attached to this Business Loan
Agreement from time to time.
Borrower. The word "Borrower" means QUICKLOGIC CORPORATION. The word
"Borrower" also includes, as applicable, all subsidiaries and affiliates of
Borrower as provided below in the paragraph titled "Subsidiaries and
Affiliates."
CERCLA. The word "CERCLA" means the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended.
Cash Flow. The words "Cash Flow" mean net income after taxes, and exclusive
of extraordinary gains and income, plus depreciation and amortization.
Collateral. The word "Collateral" means and includes without limitation all
property and assets granted as collateral security for a Loan, whether real
or personal property, whether granted directly or indirectly, whether granted
now or in the future, and whether granted in the form of a security interest,
mortgage, deed of trust, assignment, pledge, chattel mortgage, chattel trust,
factor's lien, equipment trust, conditional sale, trust receipt, lien,
charge, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
Debt. The word "Debt" means all of Borrower's liabilities excluding
Subordinated Debt.
Equipment Loans. The words "Equipment Loans" shall mean and refer to those
certain loans estabished the the purpose of financing equipment or
refinancing equipment leases, evidenced by two Promissory Notes of even date
herewith.
ERISA. The word "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Event of Default. The words "Event of Default" mean and include without
limitation any of the Events of Default set forth below in the section titled
"EVENTS OF DEFAULT."
Grantor. The word "Grantor" means and includes without limitation each and
all of the persons or entities granting a Security Interest in any Collateral
for the Indebtedness, including without limitation all Borrowers granting
such a Security Interest.
Guarantor. The word "Guarantor" means and includes without limitation each
and all of the guarantors, sureties, and accommodation parties in connection
with any Indebtedness.
Indebtedness. The word "Indebtedness" means and includes without limitation
all Loans, together with all other obligations, debts and liabilities of
Borrower to Lender, or any one or more of them, as well as all claims by
Lender against Borrower, or any one or more of them; whether now or hereafter
existing, voluntary or involuntary, due or not due, absolute or contingent,
liquidated or unliquidated; whether Borrower may be liable individually or
jointly with others; whether Borrower may be obligated as a guarantor,
surety, or otherwise; whether recovery upon such Indebtedness may be or
hereafter may become barred by any statute of limitations; and whether such
Indebtedness may be or hereafter may become otherwise unenforceable.
Lender. The word "Lender" means Silicon Valley Bank, its successors and
assigns.
Line of Credit. The words "Line of Credit" shall mean and refer to that
certain revolving loan evidenced by a Promissory Note dated August 9, 1995,
in the original principal amount of One Million Dollars ($1,000,000.00).
Liquid Assets. The words "Liquid Assets" mean Borrower's cash on hand plus
Borrower's receivables.
Loan. The word "Loan" or "Loans" means and includes without limitation any
and all commercial loans and financial accommodations from Lender to
Borrower, whether now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations described herein
or described on any exhibit or schedule attached to this Agreement from time
to time.
<PAGE>
Business Loan Agreement
Continued
---------
Note. The word "Note" means and includes without limitation Borrower's
promissory note or notes, if any, evidencing Borrower's Loan obligations in
favor of Lender, as well as any substitute, replacement or refinancing note
or notes therefor.
Permitted Liens. The words "Permitted Liens" mean: (a) liens and security
interests securing Indebtedness owed by Borrower to Lender; (b) liens for
taxes, assessments, or similar charges either not yet due or being contested
in good faith; (c) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (d) purchase money liens
or purchase money security interests upon or in any property acquired or held
by Borrower in the ordinary course of business to secure indebtedness
outstanding on the date of this Agreement or permitted to be incurred under
the paragraph of this Agreement titled "Indebtedness and Liens"; (e) liens
and security interests which, as of the date of this Agreement, have been
disclosed to and approved by the Lender in writing; and (f) those liens and
security interests which in the aggregate constitute an immaterial and
insignificant monetary amount with respect to the net value of Borrower's
assets.
Related Documents. The words "Related Documents" mean and include without
limitation all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds
of trust, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.
Security Agreement. The words "Security Agreement" mean and include without
limitation any agreements, promises, covenants, arrangements, understandings
or other agreements, whether created by law, contract, or otherwise,
evidencing, governing, representing, or creating a Security Interest.
Security Interest. The words "Security Interest" mean and include without
limitation any type of collateral security, whether in the form of a lien,
charge, mortgage, deed of trust, assignment, pledge, chattel mortgage,
chattel trust, factor's lien, equipment trust, conditional sale, trust
receipt, lien or title retention contract, lease or consignment intended as a
security device, or any other security or lien interest whatsoever, whether
created by law, contract, or otherwise.
SARA. The word "SARA" means the Superfund Amendments and Reauthorization Act
of 1986 as now or hereafter amended.
Subordinated Debt. The words "Subordinated Debt" mean indebtedness and
liabilities of Borrower which have been subordinated by written agreement to
indebtedness owed by Borrower to Lender in form and substance acceptable to
Lender.
Tangible Net Worth. The words "Tangible Net Worth" mean Borrower's total
assets excluding all intangible assets (i.e., goodwill, trademarks, patents,
copyrights, organizational expenses, and similar intangible items, but
including leaseholds and leasehold improvements) less total Debt.
Working Capital. The words "Working Capital" mean Borrower's current assets,
excluding prepaid expenses, less Borrower's current liabilities.
CONDITIONS PRECEDENT TO EACH ADVANCE. Lender's obligation to make the initial
Loan Advance and each subsequent Loan Advance under this Agreement shall be
subject to the fulfillment to Lender's satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents.
Loan Documents. Borrower shall provide to Lender in form satisfactory to
Lender the following documents for the Loan: (a) the Note, (b) Security
Agreements granting to Lender security interests in the Collateral, (c)
Financing Statements perfecting Lender's Security Interests; (d) evidence of
insurance as required below; and (e) any other documents required under this
Agreement or by Lender or its counsel.
Borrower's Authorization. Borrower shall have provided in form and substance
satisfactory to Lender properly certified resolutions, duly authorizing the
execution and delivery of this Agreement, the Note and the Related Documents,
and such other authorizations and other documents and instruments as Lender
or its counsel, in their sole discretion, may require.
Payment of Fees and Expenses. Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.
Representations and Warranties. The representations and warranties set forth
in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.
No Event of Default. There shall not exist at the time of any advance a
condition which would constitute an Event of Default under this Agreement.
REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of Loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:
Organization. Borrower is a corporation which is duly organized, validly
existing, and in good standing under the laws of the state of Borrower's
incorporation and is validly existing and in good standing in all states in
which Borrower is doing business. Borrower has the full power and authority
to own its properties and to transact the businesses in which it is presently
engaged or presently proposes to engage. Borrower also is duly qualified as a
foreign corporation and is in good standing in all states in which the
failure to so qualify would have a material adverse effect on its businesses
or financial condition.
Authorization. The execution, delivery, and performance of this Agreement and
all Related Documents by Borrower, to the extent to be executed, delivered or
performed by Borrower, have been duly authorized by all necessary action by
Borrower; do not require the consent or approval of any other person,
regulatory authority or governmental body; and do not conflict with, result
in a violation of, or constitute a default under (a) any provision of its
articles of incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (b) any law, governmental
regulation, court decree, or order applicable to Borrower.
Financial Information. Each financial statement of Borrower supplied to
Lender truly and completely disclosed Borrower's financial condition as of
the date of the statement, and there has been no material adverse change in
Borrower's financial condition subsequent to the date of the most recent
financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.
2
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Business Loan Agreement
Continued
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Legal Effect. This Agreement constitutes, and any instrument or agreement
required hereunder to be given by Borrower when delivered will constitute,
legal, valid and binding obligations of Borrower enforceable against Borrower
in accordance with their respective terms.
Properties. Except as contemplated by this Agreement or as previously
disclosed in Borrower's financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not presently
due and payable, Borrower owns and has good title to all of Borrower's
properties free and clear of all Security Interests, and has not executed any
security documents or financing statements relating to such properties. All
of Borrower's properties are titled in Borrower's legal name, and Borrower
has not used, or filed a financing statement under, any other name for at
least the last five (5) years.
Hazardous Substances. The terms "hazardous waste," "hazardous substance,"
"disposal," "release," and "threatened release," as used in this Agreement,
shall have the same meanings as set forth in the "CERCLA," "SARA," the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 49 U.S.C. Section 6901, et seq.,
Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state or Federal laws,
rules, or regulations adopted pursuant to any of the foregoing. Except as
disclosed to and acknowledged by Lender in writing, Borrower represents and
warrants that: (a) During the period of Borrower's ownership of the
properties, there has been no use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any hazardous waste or
substance by any person on, under, about or from any of the properties. (b)
Borrower has no knowledge of, or reason to believe that there has been (i)
any use, generation, manufacture, storage, treatment, disposal, release, or
threatened release of any hazardous waste or substance on, under, about or
from the properties by any prior owners or occupants of any of the
properties, or (ii) any actual or threatened litigation or claims of any kind
by any person relating to such matters. (c) Neither Borrower nor any tenant,
contractor, agent or other authorized user of any of the properties shall
use, generate, manufacture, store, treat, dispose of, or release any
hazardous waste or substance on, under, about or from any of the properties;
and any such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances, including
without limitation those laws, regulations and ordinances described above.
Borrower authorizes Lender and its agents to enter upon the properties to
make such inspections and tests as Lender may deem appropriate to determine
compliance of the properties with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower's expense and for
Lender's purposes only and shall not be construed to create any
responsibility or liability on the part of Lender to Borrower or to any other
person. The representations and warranties contained herein are based on
Borrower's due diligence in investigating the properties for hazardous waste
and hazardous substances. Borrower hereby (a) releases and waives any future
claims against Lender for indemnity or contribution in the event Borrower
becomes liable for cleanup or other costs under any such laws, and (b) agrees
to indemnify and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release occurring prior to Borrower's
ownership or interest in the properties, whether or not the same was or
should have been known to Borrower. The provisions of this section of the
Agreement, including the obligation to indemnify, shall survive the payment
of the Indebtedness and the termination or expiration of this Agreement and
shall not be affected by Lender's acquisition of any interest in any of the
properties, whether by foreclosure or otherwise.
Litigation and Claims. No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which may
materially adversely affect Borrower's financial condition or properties,
other than litigation, claims, or other events, if any, that have been
disclosed to and acknowledged by Lender in writing.
Taxes. To the best of Borrower's knowledge, all tax returns and reports of
Borrower that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith in
the ordinary course of business and for which adequate reserves have been
provided.
Lien Priority. Unless otherwise previously disclosed to Lender in writing,
Borrower has not entered into or granted any Security Agreements, or
permitted the filing or attachment of any Security Interests on or affecting
any of the Collateral directly or indirectly securing repayment of Borrower's
Loan and Note, that would be prior or that may in any way be superior to
Lender's Security Interests and rights in and to such Collateral.
Binding Effect. This Agreement, the Note, all Security Agreements directly or
indirectly securing repayment of Borrower's Loan and Note and all of the
Related Documents are binding upon Borrower as well as upon Borrower's
successors, representatives and assigns, and are legally enforceable in
accordance with their respective terms.
Commercial Purposes. Borrower intends to use the Loan proceeds solely for
business or commercial related purposes.
Employee Benefit Plans. Each employee benefit plan as to which Borrower may
have any liability complies in all material respects with all applicable
requirements of law and regulations, and (i) no Reportable Event nor
Prohibited Transaction (as defined in ERISA) has occurred with respect to any
such plan, (ii) Borrower has not withdrawn from any such plan or initiated
steps to do so, and (iii) no steps have been taken to terminate any such
plan.
Location of Borrower's Offices and Records. Borrower's place of business, or
Borrower's Chief executive office, if Borrower has more than one place of
business, is located at 2933 Bunker Hill Lane, Santa Clara, CA 95054. Unless
Borrower has designated otherwise in writing this location is also the office
or offices where Borrower keeps its records concerning the Collateral.
Information. All information heretofore or contemporaneously herewith
furnished by Borrower to Lender for the purposes of or in connection with
this Agreement or any transaction contemplated hereby is, and all information
hereafter furnished by or on behalf of Borrower to Lender will be, true and
accurate in every material respect on the date as of which such information
is dated or certified; and none of such information is or will be incomplete
by omitting to state any material fact necessary to make such information not
misleading.
Survival of Representations and Warranties. Borrower understands and agrees
that Lender, without independent investigation, is relying upon the above
representations and warranties in extending Loan Advances to Borrower.
Borrower further agrees that the foregoing representations and warranties
shall be continuing in nature and shall remain in full force and effect until
such time as Borrower's Indebtedness shall be paid in full, or until this
Agreement shall be terminated in the manner provided above, whichever is the
last to occur.
AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, while
this Agreement is in effect, Borrower will:
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Business Loan Agreement
Continued
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Litigation. Promptly inform Lender in writing of (a) all material adverse
changes in Borrower's financial condition, and (b) all existing and all
threatened litigation, claims, investigations, administrative proceedings or
similar actions affecting Borrower or any Guarantor which could materially
affect the financial condition of Borrower or the financial condition of any
Guarantor.
Financial Records. Maintain its books and records in accordance with
generally accepted accounting principles, applied on a consistent basis, and
permit Lender to examine and audit Borrower's books and records at all
reasonable times.
Financial Statements. Furnish Lender with, as soon as available, but in no
event later than ninety (90) days after the end of each fiscal year,
Borrower's balance sheet and income statement for the year ended, audited by
a certified public accountant satisfactory to Lender, and, as soon as
available, but in no event later than thirty (30) days after the end of each
month, Borrower's balance sheet and profit and loss statement for the period
ended, prepared and certified as correct to the best knowledge and belief by
Borrower's chief financial officer or other officer or person acceptable to
Lender. All financial reports required to be provided under this Agreement
shall be prepared in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as being
true and correct.
Additional Information. Furnish such additional information and statements,
lists of assets and liabilities, agings of receivables and payables,
inventory schedules, budgets, forecasts, tax returns, and other reports with
respect to Borrower's financial condition and business operations as Lender
may request from time to time.
Financial Covenants and Ratios. Borrower shall maintain, on a monthly basis,
a minimum quick ratio of 2.50 to 1.00; a minimum tangible net worth of
$7,000,000.00; a maximum total debt minus subordinated debt to tangible net
worth plus subordinated debt ratio of 1.00 to 1.00; and a minimum liquidity
ratio of 2.00 to 1.00 until such time as Borrower achieves two consecutive
quarters of a minimum rolling debt service coverage of 1.50 to 1.00.
Furthermore, Borrower shall achieve profitability on a quarterly basis;
provided, however, Borrower may incur one loss for the quarter ended June 30,
1995, provided such loss shall not have exceeded $1,250,000.00.
For purposes of the foregoing, liquidity covenant shall apply to the
Equipment Loans only and shall be defined as cash plus cash equivalents plus
availability under the Line of Credit. Aditionally, the quick ratio and debt
to worth covenants shall exclude deferred revenue. Except as provided above,
all computations made to determine compliance with the requirements contained
in this paragraph shall be made in accordance with generally accepted
accounting principles, applied on a consistent basis, and certified by
Borrower as being true and correct. Except as provided above, all
computations made to determine compliance with the requirements contained in
this paragraph shall be made in accordance with generally accepted accounting
principles, applied on a consistent basis, and certified by Borrower as being
true and correct.
Insurance. Maintain fire and other risk insurance, public liability
insurance, and such other insurance as Lender may require with respect to
Borrower's properties and operations, in form, amounts, coverages and with
insurance companies reasonably acceptable to Lender. Borrower, upon request
of Lender, will deliver to Lender from time to time the policies or
certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days' prior written notice to Lender. Each insurance policy
also shall include an endorsement providing that coverage in favor of Lender
will not be impaired in any way by any act, omission or default of Borrower
or any other person. In connection with all policies covering assets in which
Lender holds or is offered a security interest for the Loans, Borrower will
provide Lender with such loss payable or other endorsements as Lender may
require.
Insurance Reports. Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (a) the name of the
insurer; (b) the risks insured; (c) the amount of the policy; (d) the
properties insured; (e) the then current property values on the basis of
which insurance has been obtained, and the manner of determining those
values; and (f) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an
independent appraiser satisfactory to Lender determine, as applicable, the
actual cash value or replacement cost of any Collateral. The cost of such
appraisal shall be paid by Borrower.
Other Agreements. Comply with all terms and conditions of all other
agreements, whether now or hereafter existing, between Borrower and any other
party and notify Lender immediately in writing of any default in connection
with any other such agreements.
Loan Proceeds. Use all Loan proceeds solely for Borrower's business
operations, unless specifically consented to the contrary by Lender in
writing.
Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed
upon Borrower or its properties, income, or profits, prior to the date on
which penalties would attach, and all lawful claims that, if unpaid, might
become a lien or charge upon any of Borrower's properties, income, or
profits. Provided however, Borrower will not be required to pay and discharge
any such assessment, tax, charge, levy, lien or claim so long as (a) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (b) Borrower shall have established on its books adequate
reserves with respect to such contested assessment, tax, charge, levy, lien,
or claim in accordance with generally accepted accounting practices.
Borrower, upon demand of Lender, will furnish to Lender evidence of payment
of the assessments, taxes, charges, levies, liens and claims and will
authorize the appropriate governmental official to deliver to Lender at any
time a written statement of any assessments, taxes, charges, levies, liens
and claims against Borrower's properties, income, or profits.
Performance. Perform and comply with all terms, conditions, and provisions
set forth in this Agreement and in the Related Documents in a timely manner,
and promptly notify Lender if Borrower learns of the occurrence of any event
which constitutes an Event of Default under this Agreement or under any of
the Related Documents.
Operations. Maintain executive and management personnel with substantially
the same qualifications and experience as the present executive and
management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner and in compliance with all applicable federal,
state and municipal laws, ordinances, rules and regulations respecting its
properties, charters, businesses and operations, including without
limitation, compliance with the Americans With Disabilities Act and with all
minimum funding standards and other requirements of ERISA and other laws
applicable to Borrower's employee benefit plans.
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Business Loan Agreement
Continued
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Inspection. Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrower's other
properties and to examine or audit Borrower's books, accounts, and records
and to make copies and memoranda of Borrower's books, accounts, and records.
If Borrower now or at any time hereafter maintains any records (including
without limitation computer generated records and computer software programs
for the generation of such records) in the possession of a third party,
Borrower, upon request of Lender, shall notify such party to permit Lender
free access to such records at all reasonable times and to provide Lender
with copies of any records it may request, all at Borrower's expense.
Compliance Certificate. Unless waived in writing by Lender, provide Lender
monthly within thirty (30) days and at the time of each disbursement of Loan
proceeds with a certificate executed by Borrower's chief financial officer,
or other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and
correct as of the date of the certificate and further certifying that, as of
the date of the certificate, no Event of Default exists under this Agreement.
Environmental Compliance and Reports. Borrower shall comply in all respects
with all environmental protection federal, state and local laws, statutes,
regulations and ordinances; not cause or permit to exist, as a result of an
intentional or unintentional action or omission on its part or on the part of
any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the
conditions of a permit issued by the appropriate federal, state or local
governmental authorities; shall furnish to Lender promptly and in any event
within thirty (30) days after receipt thereof a copy of any notice, summons,
lien, citation, directive, letter or other communication from any
governmental agency or instrumentality concerning any intentional or
unintentional action or omission on Borrower's part in connection with any
environmental activity whether or not there is damage to the environment
and/or other natural resources.
Additional Assurances. Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, financing statements,
instruments, documents and other agreements as Lender or its attorneys may
reasonably request to evidence and secure the Loans and to perfect all
Security Interests.
NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent of
Lender:
Indebtedness and Liens. (a) Except for trade debt incurred in the normal
course of business and indebtedness to Lender contemplated by this Agreement,
create, incur or assume indebtedness for borrowed money, including capital
leases, (b) except as allowed as a Permitted Lien, sell, transfer, mortgage,
assign, pledge, lease, grant a security interest in, or encumber any of
Borrower's assets, or (c) sell with recourse any of Borrower's accounts,
except to Lender.
Continuity of Operations. (a) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (b) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change ownership, change its name, dissolve or transfer or sell
Collateral out of the ordinary course of business, (c) pay any dividends on
Borrower's stock (other than dividends payable in its stock), provided,
however that notwithstanding the foregoing, but only so long as no Event of
Default has occurred and is continuing or would result from the payment of
dividends, if Borrower is a "Subchapter S Corporation" (as defined in the
Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends
on its stock to its shareholders from time to time in amounts necessary to
enable the shareholders to pay income taxes and make estimated income tax
payments to satisfy their liabilities under federal and state law which arise
solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of stock of Borrower, or (d) purchase or
retire any of Borrower's outstanding shares or alter or amend Borrower's
capital structure.
Loans, Acquisitions and Guaranties. (a) Loan, invest in or advance money or
assets, (b) purchase, create or acquire any interest in any other enterprise
or entity, or (c) incur any obligation as surety or guarantor other than in
the ordinary course of business.
CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(a) Borrower or any Guarantor is in default under the terms of this Agreement or
any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (b) Borrower or any Guarantor becomes insolvent,
files a petition in bankruptcy or similar proceedings, or is adjudged a
bankrupt; (c) there occurs a material adverse change in Borrower's financial
condition, in the financial condition of any Guarantor, or in the value of any
Collateral securing any Loan; or (d) any Guarantor seeks, claims or otherwise
attempts to limit, modify or revoke such Guarantor's guaranty of the Loan or any
other loan with Lender.
LOAN ADVANCES. Lender, in its discretion, will make loans to Borrower, in
amounts determined by Lender, up to the amounts as defined and permitted in this
Agreement and Related Documents, including but not limited to any Promissory
Notes, executed by Borrower (the "Credit Limit"). Borrower is responsible for
monitoring the total amount of Loans and Indebtedness outstanding from time to
time, and Borrower shall not permit the same, at any time to exceed the Credit
Limit. If at any time the total of all outstanding Loans and Indebtedness
exceeds the Credit Limit, Borrower shall immediately pay the amount of the
excess to Lender, without notice or demand.
DEFAULT RATE. Upon default, including failure to pay upon final maturity,
Lender, at its option, may do one or both of the following: (a) increase the
variable interest rate on this Note to five percentage points (5.000%) over the
Interest Rate otherwise payable thereunder, and (b) add any unpaid accrued
interest to principal and such sum will bear interest therefrom until paid at
the rate provided in the Note.
BORROWING BASE FORMULA. Funds shall be advanced under the Line of Credit
according to a borrowing base formula, as determined by Lender, defined as
follows: the lesser of (i) $1,000,000.00 or (ii) Seventy percent (70%) of
eligible accounts receivable. Eligible accounts receivable shall include, but
not be limited to, those accounts outstanding less than 90 days from the date of
invoice, excluding foreign, government, contra, and intercompany accounts; and
exclude accounts wherein 50% or more of the account is outstanding more than 90
days from the date of invoice. Any account which alone exceeds 25% of total
accounts will be ineligible to the extent said account exceeds 25% of total
accounts. Also exclude any credit balances which are aged past 90 days. Also
ineligible are any accounts which Lender in its sole judgement excludes for
valid credit reasons.
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Business Loan Agreement
Continued
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ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE. Provide to Lender not later than
fifteen (15) days after and as of the end of each month, with a Borrowing Base
Certificate and aged lists of accounts receivable and accounts payable. Initial
and semi-annual accounts receivable audits to be performed by Lender's agent.
Borrower's deposit account will be debited for the audit expense and a
notification will be mailed to Borrower.
EVENTS OF DEFAULT. Each of the following shall constitute an Event of Default
under this Agreement:
Default on Indebtedness. Failure of Borrower to make any payment when due on
the Loans.
Other Defaults. Failure of Borrower or any Grantor to comply with or to
perform when due any other term, obligation, covenant or condition contained
in this Agreement or in any of the Related Documents, or failure of Borrower
to comply with or to perform any other term, obligation, covenant or
condition contained in any other agreement between Lender and Borrower.
Default in Favor of Third Parties. Should Borrower or any Grantor default
under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower's property or Borrower's or any
Grantor's ability to repay the Loans or perform their respective obligations
under this Agreement or any of the Related Documents.
False Statements. Any warranty, representation or statement made or furnished
to Lender by or on behalf of Borrower or any Grantor under this Agreement or
the Related Documents is false or misleading in any material respect at the
time made or furnished, or becomes false or misleading at any time
thereafter.
Defective Collateralization. This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any Security
Agreement to create a valid and perfected Security Interest) at any time and
for any reason.
Insolvency. The dissolution or termination of Borrower's existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any
part of Borrower's property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.
Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower, any creditor of any Grantor
against any collateral securing the Indebtedness, or by any governmental
agency. This includes a garnishment, attachment, or levy on or of any of
Borrower's deposit accounts with Lender.
Events Affecting Guarantor. Any of the preceding events occurs with respect
to any Guarantor of any of the Indebtedness or any Guarantor dies or becomes
incompetent, or revokes or disputes the validity of, or liability under, any
Guaranty of the Indebtedness.
Change In Ownership. Any change in ownership of twenty-five percent (25%) or
more of the common stock of Borrower.
Adverse Change. A material adverse change occurs in Borrower's financial
condition, or Lender believes the prospect of payment or performance of the
Indebtedness is impaired.
EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make Loan Advances or disbursements), and, at Lender's option, all
Indebtedness immediately will become due and payable, all without notice of any
kind to Borrower, except that in the case of an Event of Default of the type
described in the "Insolvency" subsection above, such acceleration shall be
automatic and not optional. In addition, Lender shall have all the rights and
remedies provided in the Related Documents or available at law, in equity, or
otherwise. Except as may be prohibited by applicable law, all of Lender's
rights and remedies shall be cumulative and may be exercised singularly or
concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to
perform an obligation of Borrower or of any Grantor shall not affect Lender's
right to declare a default and to exercise its rights and remedies.
MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:
Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement
shall be effective unless given in writing and signed by the party or parties
sought to be charged or bound by the alteration or amendment.
Applicable Law. This Agreement has been delivered to Lender and accepted by
Lender in the State of California. If there is a lawsuit, Borrower agrees
upon Lender's request to submit to the jurisdiction of the courts of Santa
Clara County, the State of California. Lender and Borrower hereby waive the
right to any jury trial in any action, proceeding, or counterclaim brought by
either Lender or Borrower against the other. (Initial Here TA ) This
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Agreement shall be governed by and construed in accordance with the laws of
the State of California.
Caption Headings. Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.
Consent to Loan Participation. Borrower agrees and consents to Lender's sale
or transfer, whether now or later, of one or more participation interests in
the Loans to one or more purchasers, whether related or unrelated to Lender.
Lender may provide, without any limitation whatsoever, to any one or more
purchasers, or potential purchasers, any information or knowledge Lender may
have about Borrower or about any other matter relating to the Loan, and
Borrower hereby waives any rights to privacy it may have with respect to such
matters. Borrower additionally waives any and all notices of sale of
participation interests, as well as all notices of any repurchase of such
participation interests. Borrower also agrees that the purchasers of any such
participation interests will be considered as the absolute owners of such
interests in the Loans and will have all the rights granted under the
participation agreement or agreements governing the sale of such
participation interests. Borrower further waives all rights of offset or
counterclaim that it may have now or later against Lender or against any
purchaser of such a participation interest and unconditionally agrees that
either Lender or such purchaser may enforce Borrower's obligation under the
Loans irrespective of the failure or insolvency of any holder of any interest
6
<PAGE>
Business Loan Agreement
Continued
---------
in the Loans. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any
personal claims or defenses that Borrower may have against Lender.
Costs and Expenses. Borrower agrees to pay upon demand all of Lender's
expenses, including without limitation attorneys' fees, incurred in
connection with the preparation, execution, enforcement, modification and
collection of this Agreement or in connection with the Loans made pursuant to
this Agreement. Lender may pay someone else to help collect the Loans and to
enforce this Agreement, and Borrower will pay that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses, whether or not there is a lawsuit, including
attorneys' fees for bankruptcy proceedings (including efforts to modify or
vacate any automatic stay or injunction), appeals, and any anticipated post-
judgment collection services. Borrower also will pay any court costs, in
addition to all other sums provided by law.
Notices. All notices required to be given under this Agreement shall be given
in writing, may be sent by telefacsimile, and shall be effective when
actually delivered or when deposited with a nationally recognized overnight
courier or deposited in the United States mail, first class, postage prepaid,
addressed to the party to whom the notice is to be given at the address shown
above. Any party may change its address for notices under this Agreement by
giving formal written notice to the other parties, specifying that the
purpose of the notice is to change the party's address. To the extent
permitted by applicable law, if there is more than one Borrower, notice to
any Borrower will constitute notice to all Borrowers. For notice purposes,
Borrower agrees to keep Lender informed at all times of Borrower's current
address(es).
Severability. If a court of competent jurisdiction finds any provision of
this Agreement to be invalid or unenforceable as to any person or
circumstance, such finding shall not render that provision invalid or
unenforceable as to any other persons or circumstances. If feasible, any such
offending provision shall be deemed to be modified to be within the limits of
enforceability or validity; however, if the offending provision cannot be so
modified, it shall be stricken and all other provisions of this Agreement in
all other respects shall remain valid and enforceable.
Subsidiaries and Affiliates of Borrower. To the extent the context of any
provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word "Borrower" as
used herein shall include all subsidiaries and affiliates of Borrower.
Notwithstanding the foregoing however, under no circumstances shall this
Agreement be construed to require Lender to make any Loan or other financial
accommodation to any subsidiary or affiliate of Borrower.
Successors and Assigns. All covenants and agreements contained by or on
behalf of Borrower shall bind its successors and assigns and shall inure to
the benefit of Lender, its successors and assigns. Borrower shall not,
however, have the right to assign its rights under this Agreement or any
interest therein, without the prior written consent of Lender.
Survival. All warranties, representations, and covenants made by Borrower in
this Agreement or in any certificate or other instrument delivered by
Borrower to Lender under this Agreement shall be considered to have been
relied upon by Lender and will survive the making of the Loan and delivery to
Lender of the Related Documents, regardless of any investigation made by
Lender or on Lender's behalf.
Time Is of the Essence. Time is of the essence in the performance of this
Agreement.
Waiver. Lender shall not be deemed to have waived any rights under this
Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a
provision of this Agreement shall not prejudice or constitute a waiver of
Lender's right otherwise to demand strict compliance with that provision or
any other provision of this Agreement. No prior waiver by Lender, nor any
course of dealing between Lender and Borrower, or between Lender and any
Grantor, shall constitute a waiver of any of Lender's rights or of any
obligations of Borrower or of any Grantor as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting
of such consent by Lender in any instance shall not constitute continuing
consent in subsequent instances where such consent is required, and in all
cases such consent may be granted or withheld in the sole discretion of
Lender.
BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT, AND BORROWER AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AS OF
AUGUST 9, 1995.
BORROWER:
QUICKLOGIC CORPORATION
By: /s/ TESSY ALBIN
------------------------------
Name: TESSY ALBIN
------------------------------
Title: Director of Finance
------------------------------
LENDER:
Silicon Valley Bank
By: /s/ D. QUON
------------------------------
Name: D. QUON
------------------------------
Title: V.P./Mgr.
------------------------------
7
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 20, 1996, by and
between QuickLogic Corporation ("Borrower") whose address is 2933 Bunker Hill
Lane, Santa Clara, CA 95054, and Silicon Valley Bank ("Lender') whose address is
3003 Tasman Drive Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
------------------------------------
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated August 9, 1995, in the original
principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the "Note").
The Note, together with other promissory notes from Borrower to Lender, is
governed by the terms of a Business Loan Agreement, dated August 9, 1995, as
such agreement may be amended from time to time, between Borrower and Lender
(the "Loan Agreement"). Defined terms used but not otherwise defined herein
shall have the same meanings as in the Loan Agreement
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by a Commercial Security Agreement, dated August 9,1995, and a
Collateral Assignment, Patent Mortgage and Security Agreement dated August
9,1995, concurrently being released herein.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents"
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Waiver of Covenant Default.
------ -- ----------------
1. Lender hereby waives Borrowers existing default under the Loan
Agreement by virtue of Borrowers failure to comply with the quick
ratio covenant as of the months ended January 31,1996, February
29, 1996 and March 31, 1996. Lenders waiver of Borrowers
compliance of this covenant shall apply only to the foregoing
period. Accordingly, for the month ended April 30, 1996, Borrower
shall be in compliance with this covenant, as amended herein.
Lenders agreement to waive the above-described default (1) in no
way shall be deemed an agreement by the Lender to waive Borrowers
compliance with the above-described covenant as of all other
dates and (2) shall not limit or impair the Lenders right to
demand strict performance of this covenant as of all other dates
and (3) shall not limit or impair the Lenders right to demand
strict performance of all other covenants as of any date.
B. Modification(s) to Loan Agreement.
---------------------------------
1. The first paragraph of the section entitled "Financial Covenants
and Ratios" is hereby amended in its entirety, to read as
follows:
Borrower shall maintain, on a monthly basis, beginning with the
month ended April 30, 1996, a minimum quick ratio of 1.50 to
1.00; a minimum tangible net worth of $7,000,000.00; a maximum
total debt minus subordinated debt to tangible net worth plus
subordinated debt ratio of 1.00 to 1.00; and a minimum
1
<PAGE>
liquidity ratio of 2.00 to 1.00 until such time as Borrower
achieves two consecutive quarters of a minimum rolling debt
service coverage of 150 to 1.00. Furthermore, Borrower shall
achieve profitability on a quarterly basis.
2. Notwithstanding anything to the contrary contained in the
paragraph entitled Financial Statements", Borrower may submit its
CPA audited balance sheet and income statement for the fiscal
year ended December 31, 1995, by May 31, 1996.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby
------------------
amended wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
-----------------------
signing below) agrees that it has no defenses against the obligations
to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor
-------------------
signing below) understands and agrees that in modifying the existing
Indebtedness, Lender is relying upon Borrowers representations,
warranties, and agreements, as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect Lenders agreement to
modifications to the existing Indebtedness pursuant to this Loan
Modification Agreement in no way shall obligate Lender to make any
future modifications to the Indebtedness. Nothing in this Loan
Modification Agreement shall constitute a satisfaction of the
Indebtedness. It is the intention of Lender and Borrower to retain as
liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan
Modification Agreement The terms of this paragraph apply not only to
this Loan Modification Agreement, but also to all subsequent loan
modification agreements.
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: LENDER:
QUICKLOGIC CORPORATION SILICON VALLEY BANK
By: /s/ By: /s/
____________________________ ____________________________
Name: Name:
__________________________ __________________________
Title: Title:
_________________________ _________________________
2
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of June 24, 1996, by
and between QuickLogic Corporation ("Borrower') whose address is 2933 Bunker
Hill Lane, Santa Clara, CA 95054, and Silicon Valley Bank ("Lender") whose
address is 3003 Tasman Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may be
------------------------------------
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Promissory Note, dated August 9, 1995, in the original
principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the "Note").
The Note, together with other promissory notes from Borrower to Lender, is
governed by the terms of a Business Loan Agreement, dated August 9,1995, as such
agreement may be amended from time to time, between Borrower and Lender (the
"Loan Agreement'). Defined terms used but not otherwise defined herein shall
have the same meanings as in the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
-------------- ---------- --- ----------
secured by a Commercial Security Agreement, dated August 9,1995.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, The Security' Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------------
A. Modification(s) to Loan Agreement
---------------------------------
1. The following paragraph is he hereby incorporated into the Loan
Agreement
Letter of Credit Sublimit Subject to the terms and conditions of
-------------------------
this Agreement, as may be amended from time to time, Lender
agrees to issue or cause to be issued under the line of credit
standby and commercial letters of credit for the account of
Borrower in an aggregate face amount not to exceed $1,000,000.00
minus (i) the then outstanding principal balance of the line of
credit (including drawn but unreimbursed letters of credit) and
(ii) the face amount of outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit). Each such letter of
credit shall have an expiry date of no later than ninety (90)
days after the maturity date of the line of credit (as described
therein); provided that Borrower's letter of credit reimbursement
obligation shall be secured by cash on terms acceptable to Lender
at any time after the maturity date if the term of this Agreement
is not extended by Lender. All such letters of credit shall be,
in form and substance, acceptable to Lender in its sole
discretion and shall be. subject to the terms and conditions of
Lender's form of application and letter of credit agreement
2. Notwithstanding anything to the contrary contained in the
paragraph entitled "Financial Statements', Borrower shall be
allowed to provide Lender with its audited balance sheet and
income statement for the fiscal year ended December 31, 1995, not
later than June 30, 1996.
1
<PAGE>
3. The paragraph entitled "Accounts Receivable and Accounts Payable"
is hereby amended in part, to read as follows:
An annual accounts receivable audit to be performed by Lenders
agent Borrower's deposit account will be debited for the audit
expense and a notification will be mailed to Borrower.
4. The paragraph entitled "Borrowing Base Formula" is hereby amended
in its entirety. to read as follows:
Funds shall be advanced under me line of credit according to a
borrowing base formula, as determined by Lender on a monthly
basis, defined as follows: the lesser of (a) $1,000,000.00 minus
the face amount of outstanding Letters of Credit (including drawn
but unreimbursed Letters of Credit) or (b) the sum of (i) seventy
percent (70%) of eligible accounts receivable minus (ii) the face
amount of outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit). Eligible accounts receivable
shall include, but not be limited to, those accounts outstanding
less than 90 days from the date of invoice, excluding foreign,
government, contra, and intercompany accounts; and exclude
accounts wherein 50% or more of the account is outstanding more
than 90 days from the date of invoice. My account which alone
exceeds 25% of total accounts will be ineligible to the extent
said account exceeds 25% of total accounts. Also exclude any
credit balances which are aged past 90 days Also ineligible are
any accounts which Lender in its sole judgment excludes for valid
credit reasons.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby
------------------
amended wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor
-----------------------
signing below) agrees that ft has no defenses against the obligations
to pay any amounts under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor
-------------------
signing below) understands and agrees that in modifying the existing
Indebtedness, Lender is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan
Documents. Except as expressly modified pursuant to this Loan
Modification Agreement, the terms of the Existing Loan Documents remain
unchanged and in full force and effect Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan
Modification Agreement in no way shall obligate Lender to make any
future modifications to the Indebtedness. Nothing in this Loan
Modification Agreement shall constitute a satisfaction of the
Indebtedness. It is the intention of Lender and Borrower to retain as
liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan
Modification Agreement The terms of this paragraph apply not only to
this Loan Modification Agreement but also to all subsequent loan
modification agreements.
2
<PAGE>
This Loan Modification Agreement is executed as of the date first written above.
BORROWER: LENDER:
QUICKLOGIC CORPORATION SILICON VALLEY BANK
By: /s/ By: /s/
____________________________ ____________________________
Name: Name
__________________________ ____________________________
Title: Title:
_________________________ __________________________
3
<PAGE>
EXHIBIT 10.17
QUICKLOGIC CORPORATION
LOAN AND SECURITY AGREEMENT
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. DEFINITIONS AND CONSTRUCTION......................................... 1
1.1 Definitions.................................................... 1
1.2 Accounting Terms............................................... 6
2. LOAN AND TERMS OF PAYMENT............................................ 6
2.1 Advances....................................................... 6
2.2 Overadvances................................................... 8
2.3 Interest Rates, Payments, and Calculations..................... 8
2.4 Crediting Payments............................................. 8
2.5 Fees........................................................... 9
2.6 Additional Costs............................................... 9
2.7 Term........................................................... 9
3. CONDITIONS OF LOANS.................................................. 10
3.1 Conditions Precedent to Initial Advance........................ 10
3.2 Conditions Precedent to all Advances........................... 10
4. CREATION OF SECURITY INTEREST........................................ 10
4.1 Grant of Security Interest..................................... 10
4.2 Delivery of Additional Documentation Required.................. 10
4.3 Right to Inspect............................................... 11
5. REPRESENTATIONS AND WARRANTIES........................................ 11
5.1 Due Organization and Qualification.............................. 11
5.2 Due Authorization; No Conflict.................................. 11
5.3 No Prior Encumbrances........................................... 11
5.4 Bona Fide Eligible Accounts..................................... 11
5.5 Merchantable Inventory.......................................... 11
5.6 Name; Location of Chief Executive Office........................ 11
5.7 Litigation...................................................... 11
5.8 No Material Adverse Change in Financial Statements.............. 11
5.9 Solvency........................................................ 11
5.10 Regulatory Compliance........................................... 12
5.12 Taxes........................................................... 12
5.13 Subsidiaries.................................................... 12
5.14 Government Consents.............................................. 12
5.15 Full Disclosure.................................................. 12
6. AFFIRMATIVE COVENANTS................................................ 12
6.1 Good Standing.................................................. 12
6.2 Government Compliance.......................................... 13
6.3 Financial Statements, Reports, Certificates.................... 13
6.4 Inventory; Returns............................................. 13
6.5 Taxes.......................................................... 13
6.6 Insurance...................................................... 14
6.7 Principal Depository........................................... 14
6.8 Quick Ratio.................................................... 14
6.9 Minimum Liquidity and Debt Service Coverage.................... 14
6.10 Debt-Net Worth Ratio........................................... 14
6.11 Tangible Net Worth............................................. 14
6.12 Profitability.................................................. 15
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
6.13 Further Assurances............................................ 15
7. NEGATIVE COVENANTS................................................... 15
7.1 Dispositions.................................................. 15
7.2 Change in Business............................................ 15
7.3 Mergers or Acquisitions....................................... 15
7.4 Indebtedness.................................................. 15
7.5 Encumbrances.................................................. 15
7.6 Distributions................................................. 15
7.7 Investments................................................... 15
7.8 Transactions with Affiliates.................................. 15
7.9 Subordinated Debt............................................. 15
7.10 Inventory..................................................... 16
7.11 Compliance.................................................... 16
8. EVENTS OF DEFAULT.................................................... 16
8.1 Payment Default............................................... 16
8.2 Covenant Default.............................................. 16
8.3 Material Adverse Change....................................... 16
8.4 Attachment.................................................... 16
8.5 Insolvency.................................................... 17
8.6 Other Agreements.............................................. 17
8.7 Subordinated Debt............................................. 17
8.8 Judgments..................................................... 17
8.9 Misrepresentations............................................ 17
9. BANK'S RIGHTS AND REMEDIES........................................... 17
9.1 Rights and Remedies........................................... 17
9.2 Power of Attorney............................................. 18
9.3 Accounts Collection........................................... 18
9.4 Bank Expenses................................................. 19
9.5 Bank's Liability for Collateral............................... 19
9.6 Remedies Cumulative........................................... 19
9.7 Demand; Protest............................................... 19
10. NOTICES............................................................. 19
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......................... 20
12. GENERAL PROVISIONS.................................................. 20
12.1 Successors and Assigns........................................ 20
12.2 Indemnification............................................... 20
12.3 Time of Essence............................................... 20
12.4 Severability of Provisions.................................... 20
12.5 Amendments in Writing, Integration............................ 20
12.6 Counterparts.................................................. 21
12.7 Survival...................................................... 21
12.8 Confidentiality............................................... 21
</TABLE>
3
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of August 8, 1996, by and
between SILICON VALLEY BANK ("Bank") and QUICKLOGIC CORPORATION ("Borrower").
RECITALS
--------
Borrower wishes to obtain credit from time to time from Bank, and Bank
desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts
owing to Bank.
AGREEMENT
---------
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contract rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means an advance under the Revolving
Facility.
"Affiliate" means, with respect to any Person, any Person that owns
or controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, and partners.
"Bank Expenses" means all: reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys' fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), whether or not suit is brought.
"Borrower's Books" means all of Borrower's books and records
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Business Day" means any day that is not a Saturday, Sunday, or
other day on which banks in the State of California are authorized or required
to close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
---------
hereto.
"Committed Line" means Five Million Dollars ($5,000,000), except
the Committed Line shall be $3,000,000 until Borrower delivers notice to Bank
increasing the Committed Line to $5,000,000. Upon the Initial Public Offering,
the Committed Line shall be Six Million Dollars ($6,000,000).
"Contingent Obligation" means, as applied to any Person, any direct
or indirect liability, contingent or otherwise, of that Person with respect to
(i) any indebtedness, lease, dividend, letter of credit or other obligation of
another, including,
4
<PAGE>
without limitation, any such obligation directly or indirectly guaranteed,
endorsed, co-made or discounted or sold with recourse by that Person, or in
respect of which that Person is otherwise directly or indirectly liable; (ii)
any obligations with respect to undrawn letters of credit issued for the account
of that Person; and (iii) all obligations arising under any interest rate,
currency or commodity swap agreement, interest rate cap agreement, interest rate
collar agreement, or other agreement or arrangement designated to protect a
Person against fluctuation in interest rates, currency exchange rates or
commodity prices; provided, however, that the term "Contingent Obligation" shall
not include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Advances made
under this Agreement, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any Subsidiary to a date
more than one year from the date of determination, but excluding Subordinated
Debt.
"Daily Balance" means the amount of the Obligations owed at the end
of a given day.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
--------
eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon fifteen (15) days written notification thereof to
Borrower in accordance with the provisions hereof. Unless otherwise agreed to by
Bank, Eligible Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety (90)
days of invoice date;
(c) Accounts with respect to which the account debtor is an
officer, employee, or agent of Borrower;
(d) Accounts with respect to which goods are placed on
consignment, guaranteed sale, sale or return, sale on approval, bill and hold,
or other terms by reason of which the payment by the account debtor may be
conditional;
(e) Accounts with respect to which the account debtor is an
Affiliate of Borrower;
(f) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(g) Accounts with respect to which the account debtor is the
United States or any department, agency, or instrumentality of the United
States;
(h) Accounts with respect to which Borrower is liable to the
account debtor for goods sold or services rendered by the account debtor to
Borrower, but only to the extent of any amounts owing to the account debtor
against amounts owed to Borrower;
(i) Accounts with respect to an account debtor, including
Subsidiaries and Affiliates, whose total obligations to Borrower exceed twenty-
five percent (25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank, it being
acknowledged that the concentration limit for Accounts owing by Solectron
Corporation shall be forty percent (40%);
(j) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank believes, in
its reasonable judgment, that there may be a reasonable basis for dispute (but
only to the extent of the amount subject to such dispute or claim), or is
subject to any Insolvency Proceeding, or becomes insolvent, or goes out of
business; and
5
<PAGE>
(k) Accounts the collection of which Bank reasonably determines to
be doubtful.
"Equipment" means all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA" means the Employment Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect
from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Initial Public Offering" means a sale of Borrower of its equity
securities pursuant to a registration statement filed under the Securities Act
of 1933, as amended, in which Borrower receives net proceeds of not less than
Twenty Million Dollars ($20,000,000).
"Insolvency Proceeding" means any proceeding commenced by or
against any person or entity under any provision of the United States Bankruptcy
Code, as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.
"Inventory" means all present and future inventory in which
Borrower has any interest, including merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished products
intended for sale or lease or to be furnished under a contract of service, of
every kind and description now or at any time hereafter owned by or in the
custody or possession, actual or constructive, of Borrower, including such
inventory as is temporarily out of its custody or possession or in transit and
including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower's Books relating
to any of the foregoing.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other agreement entered into between
Borrower and Bank in connection with this Agreement, all as amended or extended
from time to time.
"Material Adverse Effect" means a material adverse effect on (i)
the business operations or condition (financial or otherwise) of Borrower and
its Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
"Maturity Date" means May 7, 2000.
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper, and Borrower's Books relating
to any of the foregoing.
6
<PAGE>
"Obligations" means all debt, principal, interest, Bank Expenses
and other amounts owed to Bank by Borrower pursuant to this Agreement or any
other agreement, whether absolute or contingent, due or to become due, now
existing or hereafter arising, including any interest that accrues after the
commencement of an Insolvency Proceeding and including any debt, liability, or
obligation owing from Borrower to others that Bank may have obtained by
assignment or otherwise.
"Periodic Payments" means all installments or similar recurring
payments that Borrower may now or hereafter become obligated to pay to Bank
pursuant to the terms and provisions of any instrument, or agreement now or
hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in the
Schedule;
(c) Subordinated Debt; and
(d) Indebtedness to trade creditors incurred in the ordinary course
of business.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii)
commercial paper maturing no more than one (1) year from the date of creation
thereof and currently having the highest rating obtainable from either Standard
& Poor's Corporation or Moody's Investors Service, Inc., and (iii) certificates
of deposit maturing no more than one (1) year from the date of investment
therein issued by Bank.
"Permitted Liens" means the following:
(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no priority over any of Bank's
--------
security interests;
(c) Liens (i) upon or in any equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such equipment, or (ii) existing on such equipment at the time of
its acquisition, provided that the Lien is confined solely to the property so
--------
acquired and improvements thereon, and the proceeds of such equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
--------
replacement Lien shall be limited to the property encumbered by the existing
Lien and the principal amount of the indebtedness being extended, renewed or
refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
7
<PAGE>
"Quick Assets" means, at any date as of which the amount thereof
shall be determined, the consolidated cash, cash-equivalents, accounts
receivable and investments, with maturities not to exceed 90 days, of Borrower
determined in accordance with GAAP.
"Responsible Officer" means each of the Chief Executive Officer,
the Chief Financial Officer and the Controller of Borrower.
"Revolving Facility" means the facility under which Borrower may
request Bank to issue cash advances, as specified in Section 2.1 hereof.
"Revolving Maturity Date" means August 7, 1997.
"Schedule" means the schedule of exceptions attached hereto.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank).
"Subsidiary" means any corporation or partnership in which (i) any
general partnership interest or (ii) more than 50% of the stock of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers or
trustees of the entity shall, at the time as of which any determination is being
made, be owned by Borrower, either directly or through an Affiliate.
"Tangible Net Worth" means at any date as of which the amount
thereof shall be determined, the consolidated total assets of Borrower and its
Subsidiaries minus, without duplication, (i) the sum of any amounts attributable
-----
to (a) goodwill, (b) intangible items such as unamortized debt discount and
expense, patents, trade and service marks and names, copyrights and research and
development expenses except prepaid expenses, and (c) all reserves not already
deducted from assets, and (ii) Total Liabilities.
"Total Liabilities" means at any date as of which the amount
thereof shall be determined, all obligations that should, in accordance with
GAAP be classified as liabilities on the consolidated balance sheet of Borrower,
including in any event all Indebtedness, but specifically excluding Subordinated
Debt.
1.2 Accounting Terms. All accounting terms not specifically defined
----------------
herein shall be construed in accordance with GAAP and all calculations made
hereunder shall be made in accordance with GAAP. When used herein, the terms
"financial statements" shall include the notes and schedules thereto.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Advances. Subject to and upon the terms and conditions of this
--------
Agreement, Bank agrees to make Advances to Borrower in an aggregate amount not
to exceed the lesser of the Committed Line minus the face amount of all
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit) or the Borrowing Base minus the face amount of all outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit). For purposes of
this Agreement, "Borrowing Base" shall mean an amount equal to eighty percent
(80%) of Eligible Accounts of account debtors who are not distributors plus
seventy percent (70%) of account debtors who are distributors. Subject to the
terms and conditions of this Agreement, amounts borrowed pursuant to this
Section 2.1 may be repaid and reborrowed at any time prior to the Maturity Date.
After the Initial Public Offering, Borrower may request Advances in an aggregate
amount not to exceed the Committed Line minus the face amount of all outstanding
Letters of Credit (including drawn but reimbursed Letters of Credit).
Whenever Borrower desires an Advance, Borrower will notify Bank by
facsimile transmission or telephone no later than 3:00 p.m. California time, on
the Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit B hereto. Bank is authorized to make Advances under this Agreement,
- ---------
based upon instructions received from a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled to
rely on any telephonic notice given by a person who Bank reasonably believes to
be a Responsible Officer, and Borrower shall indemnify and hold Bank harmless
for any damages or loss suffered by Bank as a result of such reliance. Bank will
credit the amount of Advances made under this Section 2.1 to Borrower's deposit
account.
8
<PAGE>
The Revolving Facility shall terminate on the Revolving Maturity Date, at
which time all Advances under this Section 2.1 shall be immediately due and
payable.
2.1.1 Letters of Credit.
-----------------
(a) Subject to the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued letters of credit for the account of
Borrower in an aggregate face amount not to exceed (i) the lesser of the
Committed Line or the Borrowing Base minus (ii) the then outstanding principal
balance of the Advances. Notwithstanding the foregoing, after the Initial Public
Offering, subject to and upon the terms and conditions of this Agreement, Bank
agrees to issue or cause to be issued letters of credit for the account of
Borrower in an aggregate face amount not to exceed the Committed Line minus the
outstanding principal balance of the Advances. Each such letter of credit shall
have an expiry date no later than the Revolving Maturity Date, provided that
Borrower's letter of credit reimbursement obligation shall be secured by cash on
terms acceptable to Bank at any time after the Revolving Maturity Date if the
term of the Revolving Facility is not extended by Bank. All such letters of
credit shall be, in form and substance, acceptable to Bank in its sole
discretion and shall be subject to the terms and conditions of Bank's form of
application and letter of credit agreement. All amounts actually paid by Bank in
respect of a letter of credit shall, when paid, constitute an Advance under this
Agreement.
(b) The obligation of Borrower to immediately reimburse Bank for
drawings made under Letters of Credit shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend and hold Bank harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys' fees,
arising out of or in connection with any letters of credit.
2.1.2 Letter of Credit Reimbursement; Reserve.
---------------------------------------
(a) Borrower may request that Bank issue a letter of credit
payable in a currency other than United States Dollars. If a demand for payment
is made under any such letter of credit, Bank shall treat such demand as an
advance to Borrower of the equivalent of the amount thereof (plus cable charges)
in United States currency at the then prevailing rate of exchange in San
Francisco, California, for sales of that other currency for cable transfer to
the country of which it is the currency.
(b) Upon the issuance of any letter of credit payable in a
currency other than United States Dollars, Bank shall create a reserve under the
Committed Line for letters of credit against fluctuations in currency exchange
rates, in an amount equal to twenty percent (20%) of the face amount of such
letter of credit. The amount of such reserve may be amended by Bank from time to
time to account for fluctuations in the exchange rate. The availability of funds
under the Committed Line shall be reduced by the amount of such reserve for so
long as such letter of credit remains outstanding.
2.1.3 Equipment Advances.
-------------------
(a) At any time from the date hereof through May 8, 1997, Borrower
may from time to time request advances (each an "Equipment Advance" and,
collectively, the "Equipment Advances") from Bank in an aggregate principal
amount of up to One Million Dollars ($1,000,000). The Equipment Advances shall
be used to purchase Equipment approved from time to time by Bank and shall not
exceed one hundred percent (100%) of the cost of such Equipment, including
installation expense, freight discounts, warranty charges and taxes. Not more
than thirty percent (30%) of any Equipment Advance shall be used to purchase or
finance software, custom equipment and tenant improvements.
(b) Interest shall accrue from the date of each Equipment Advance
at the rate specified in Section 2.3(a), and shall be payable monthly on the
seventh calendar day of each month for each month through May 8, 1997. The
Equipment Advance or Equipment Advances that are outstanding on May 8, 1997 will
be payable monthly on the seventh calendar day of each month in thirty-six (36)
equal installments of principal, plus accrued interest, beginning on June 7,
1997, and continuing through the Maturity Date, when the entire principal amount
and all unpaid interest shall be due and payable.
(c) When Borrower desires to obtain an Equipment Advance, Borrower
shall notify Bank (which notice shall be irrevocable) by facsimile transmission
received no later than 3:00 p.m. California time one (1) Business Day before the
day on which the Equipment Advance is to be made. Such notice shall be in
substantially the form of Exhibit B. The notice shall be signed by a Responsible
---------
Officer and include a copy of the invoice for the Equipment to be financed.
9
<PAGE>
2.2 Overadvances. If, at any time or for any reason prior to the
------------
Initial Public Offering, the amount of Obligations owed by Borrower to Bank
pursuant to Section 2.1 of this Agreement is greater than the lesser of (i)
the Committed Line or (ii) the Borrowing Base, Borrower shall immediately
pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as set forth in Section 2.3(b), any
-------------
Advances shall bear interest, on the average Daily Balance, at a rate equal to
the Prime Rate, and any Equipment Advances shall bear interest at a rate equal
to one quarter of one (0.25) percentage point above the Prime Rate; provided
that, upon the Initial Public Offering Borrower may request LIBOR Rate Advances
pursuant to the terms of the LIBOR Supplement to Agreement.
(b) Default Rate. All Obligations shall bear interest, from and
------------
after the occurrence of an Event of Default, at a rate equal to five (5)
percentage points above the interest rate applicable immediately prior to the
occurrence of the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
--------
eleventh calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments
against any of Borrower's deposit accounts or against the Committed Line, in
which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time
-----------
to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by
an amount equal to such change in the Prime Rate. All interest chargeable under
the Loan Documents shall be computed on the basis of a three hundred sixty (360)
day year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
------------------
Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment shall be immediately applied to conditionally
reduce Obligations, but shall not be considered a payment on account unless such
payment is of immediately available federal funds or unless and until such check
or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received
by Bank after 12:00 noon California time shall be deemed to have been received
by Bank as of the opening of business on the immediately following Business Day.
Whenever any payment to Bank under the Loan Documents would otherwise be due
(except by reason of acceleration) on a date that is not a Business Day, such
payment shall instead be due on the next Business Day, and additional fees or
interest, as the case may be, shall accrue and be payable for the period of such
extension.
2.5 Fees. Borrower shall pay to Bank the following:
----
(a) Facility Fee. A Facility Fee equal to One-Quarter of One
------------
Percent of the Committed Line, on a prorated basis, which fee shall be due on
the Closing Date and shall be fully earned and nonrefundable; provided Borrower
shall pay Bank a Facility Fee equal to One Quarter of One Percent (0.25%), on a
prorated basis, of the Committed Line upon the Initial Public Offering.
(b) Financial Examination and Appraisal Fees. Bank's customary fees
----------------------------------------
and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents;
(c) Bank Expenses. Upon the date hereof, all Bank Expenses incurred
-------------
through the Closing Date, including reasonable attorneys' fees and expenses,
and, after the date hereof, all Bank Expenses, including reasonable attorneys'
fees and expenses, as and when they become due.
2.6 Additional Costs. In case any change in any law, regulation, treaty
----------------
or official directive or the interpretation or application thereof by any court
or any governmental authority charged with the administration thereof or the
compliance with any guideline or request of any central bank or other
governmental authority (whether or not having the force of law), in each case
after the date of this Agreement:
10
<PAGE>
(a) subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement, and the result of any of the foregoing is to
increase the cost to Bank, reduce the income receivable by Bank or impose any
expense upon Bank with respect to any loans, Bank shall notify Borrower thereof.
Borrower agrees to pay to Bank the amount of such increase in cost, reduction in
income or additional expense as and when such cost, reduction or expense is
incurred or determined, upon presentation by Bank of a statement of the amount
and setting forth Bank's calculation thereof, all in reasonable detail, which
statement shall be deemed true and correct absent manifest error.
2.7 Term. This Agreement shall become effective on the Closing Date
----
and, subject to Section 12.7, shall continue in full force and effect for a term
ending on the Maturity Date. Notwithstanding the foregoing, Bank shall have the
right to terminate its obligation to make Advances under this Agreement
immediately and without notice upon the occurrence and during the continuance of
an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral
shall remain in effect for so long as any Obligations are outstanding.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank to
---------------------------------------
make the initial Advance is subject to the condition precedent that Bank shall
have received, in form and substance satisfactory to Bank, the following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this
Agreement;
(c) financing statement (Forms UCC-1);
(d) insurance certificate;
(e) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof; and
(f) such other documents, and completion of such other matters,
as Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
------------------------------------
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1; and
(b) the representations and warranties contained in Section 5 shall
be true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Advance as though made at
and as of each such date, and no Event of Default shall have occurred and be
continuing, or would result from such Advance. The making of each Advance shall
be deemed to be a representation and warranty by Borrower on the date of such
Advance as to the accuracy of the facts referred to in this Section 3.2(b).
11
<PAGE>
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank
--------------------------
a continuing security interest in all presently existing and hereafter acquired
or arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Loan Documents. Such security interest
constitutes a valid, first priority security interest in the presently existing
Collateral, and will constitute a valid, first priority security interest in
Collateral acquired after the date hereof; provided that after the Initial
Public Offering, Bank shall release all of the Collateral except Equipment
financed with the Equipment Advances and the proceeds thereof.
4.2 Delivery of Additional Documentation Required. Borrower shall
---------------------------------------------
from time to time execute and deliver to Bank, at the request of Bank, all
Negotiable Collateral, all financing statements and other documents that Bank
may reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees,
----------------
or agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary
----------------------------------
is a corporation duly existing and in good standing under the laws of its state
of incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified.
5.2 Due Authorization; No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title
---------------------
to the Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The property giving rise to such Eligible Accounts has
been delivered to the account debtor or to the account debtor's agent for
immediate shipment to and unconditional acceptance by the account debtor.
Borrower has not received notice of actual or imminent Insolvency Proceeding of
any account debtor that is included in any Borrowing Base Certificate as an
Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects
----------------------
of good and marketable quality, free from all material defects.
5.6 Name; Location of Chief Executive Office. Borrower has not done
----------------------------------------
business under any name other than that specified on the signature page hereof.
The chief executive office of Borrower is located at the address indicated in
Section 10 hereof.
5.7 Litigation. Except for the pending patent litigation with Actel
----------
Corporation, there are no actions or proceedings pending by or against Borrower
or any Subsidiary before any court or administrative agency in which an adverse
decision could have a Material Adverse Effect or a material adverse effect on
Borrower's interest or Bank's security interest in the Collateral. Borrower
does not have knowledge of any such pending or threatened actions or
proceedings.
5.8 No Material Adverse Change in Financial Statements. All
--------------------------------------------------
consolidated financial statements related to Borrower and any Subsidiary that
have been delivered by Borrower to Bank fairly present in all material respects
Borrower's consolidated financial condition as of the date thereof and
Borrower's consolidated results of operations for the period then ended.
12
<PAGE>
There has not been a material adverse change in the consolidated financial
condition of Borrower since the date of the most recent of such financial
statements submitted to Bank.
5.9 Solvency. Borrower is solvent and able to pay its debts
--------
(including trade debts) as they mature.
5.10 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company" within
the meaning of the Investment Company Act of 1940. Borrower is not engaged
principally, or as one of the important activities, in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.11 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the releasing, or otherwise
disposing of hazardous waste or hazardous substances into the environment.
5.12 Taxes. Borrower and each Subsidiary has filed or caused to be
-----
filed all tax returns required to be filed, and has paid, or has made adequate
provision for the payment of, all taxes reflected therein.
5.13 Subsidiaries. Borrower does not own any stock, partnership
------------
interest or other equity securities of any Person, except for Permitted
Investments.
5.14 Government Consents. Borrower and each Subsidiary has obtained
-------------------
all consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
5.15 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any certificate or written statement furnished to Bank
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
an Advance hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
13
<PAGE>
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each month, a company prepared consolidated balance sheet
and income statement covering Borrower's consolidated operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited consolidated financial statements of Borrower prepared in
accordance with GAAP, consistently applied, together with an unqualified opinion
on such financial statements of an independent certified public accounting firm
reasonably acceptable to Bank; (c) within five (5) days upon becoming available,
copies of all statements, reports and notices sent or made available generally
by Borrower to its security holders or to any holders of Subordinated Debt and
all reports on Form 10-K and 10-Q filed with the Securities and Exchange
Commission; (d) promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary that could
result in damages or costs to Borrower or any Subsidiary of One Hundred Thousand
Dollars ($100,000) or more; and (e) such budgets, sales projections, operating
plans or other financial information as Bank may reasonably request from time to
time.
Through the date of the Initial Public Offering, within twenty (20) days
after the last day of each month in which an Advance is outstanding (and as a
condition to Borrower requesting and Advance), Borrower shall deliver to Bank a
Borrowing Base Certificate signed by a Responsible Officer in substantially the
form of Exhibit C hereto, together with aged listings of accounts receivable
---------
and accounts payable.
Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in substantially the form
of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, every twelve (12) months, and at such times as
Bank deems appropriate after an Event of Default has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects. Returns and allowances,
if any, as between Borrower and its account debtors shall be on the same basis
and in accordance with the usual customary practices of Borrower, as they exist
at the time of the execution and delivery of this Agreement. Borrower shall
promptly notify Bank of all returns and recoveries and of all disputes and
claims, where the return, recovery, dispute or claim involves more than Fifty
Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to
-----
make, due and timely payment or deposit of all material federal, state, and
local taxes, assessments, or contributions required of it by law, and will
execute and deliver to Bank, on demand, appropriate certificates attesting to
the payment or deposit thereof; and Borrower will make, and will cause each
Subsidiary to make, timely payment or deposit of all material tax payments and
withholding taxes required of it by applicable laws, including, but not limited
to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local,
state, and federal income taxes, and will, upon request, furnish Bank with proof
satisfactory to Bank indicating that Borrower or a Subsidiary has made such
payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings and is reserved against (to the extent required by GAAP)
by Borrower.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with
such companies, and in such amounts as reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. Upon Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal
--------------------
depository and operating accounts with Bank.
14
<PAGE>
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities, excluding
deferred revenue, of at least 1.0 to 1.0, and a ratio of Quick Assets to Current
Liabilities of at least 2.0 to 1.0 after the Initial Public Offering.
6.9 Minimum Liquidity and Debt Service Coverage. Subject to the
-------------------------------------------
remainder of this Section, Borrower shall maintain, as of the last day of each
of Borrower's fiscal quarters, a minimum Liquidity of two (2) times the amount
of outstanding Equipment Advances. "Liquidity" means the sum of (i) cash and
cash-equivalents plus (ii) the Borrowing Base minus (iii) the aggregate
outstanding Advances as of the measurement date. Notwithstanding the foregoing,
from and after the time Borrower achieves a rolling 3-month Debt Service
Coverage for two consecutive fiscal quarters of at least 1.50 to 1.00, and for
so long as Borrower maintains as of the last day of each fiscal quarter
thereafter, a Debt Service Coverage of at least 1.50 to 1.00, Borrower shall not
be subject to the minimum required Liquidity set forth above. Debt Service
Coverage means, as measured quarterly as of the last day of each fiscal quarter
of Borrower, on a consolidated basis determined in accordance with GAAP, the
ratio of (a) an amount equal to the sum of (i) net income, plus (ii)
depreciation, amortization of intangible assets and other non-cash charges to
income, plus (iii) interest to (b) an amount equal to the sum of all scheduled
repayments for such quarter (or month, as applicable) and mandatory prepayments
of principal on account of long-term debt plus interest.
6.10 Debt-Net Worth Ratio. Borrower shall maintain, as of the last day
--------------------
of each calendar month, a ratio of Total Liabilities, excluding deferred
revenue, less Subordinated Debt to Tangible Net Worth plus Subordinated Debt of
not more than 1.0 to 1.0, and a ratio of Total Liabilities less Subordinated
Debt to Tangible Net Worth plus Subordinated Debt of not more than 0.75 to 1.0
after the Initial Public Offering.
6.11 Tangible Net Worth. Borrower shall maintain, as of the last day
------------------
of each calendar month, a Tangible Net Worth of not less than Six Million, Five
Hundred Thousand Dollars ($6,500,000) and, after the Initial Public Offering,
not less than Twenty Million Dollars ($20,000,000).
6.12 Profitability. Borrower shall have a minimum net profit of One
-------------
Dollar ($1.00) for each fiscal quarter, except that, after the Initial Public
Offering, Borrower may suffer a loss in one fiscal quarter, not to exceed One
Million Dollars ($1,000,000).
6.13 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any credit hereunder
shall be available and until payment in full of the outstanding Obligations or
for so long as Bank may have any commitment to make any Advances, Borrower will
not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose
-------------
of (collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, other than: (i) Transfers of
Inventory in the ordinary course of business; (ii) Transfers of non-exclusive
licenses and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (iii) Transfers of worn-out
or obsolete Equipment.
7.2 Change in Business. Engage in any business, or permit any of its
------------------
Subsidiaries to engage in any business, other than the businesses currently
engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto), or suffer a material change in Borrower's ownership.
Borrower will not, without thirty (30) days prior written notification to Bank,
relocate its chief executive office.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of
-----------------------
its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
15
<PAGE>
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien
------------
with respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution
-------------
or payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments. Directly or indirectly acquire or own, or make any
-----------
Investment in or to any Person, or permit any of its Subsidiaries so to do,
other than Permitted Investments.
7.8 Transactions with Affiliates. Directly or indirectly enter into
----------------------------
or permit to exist any material transaction with any Affiliate of Borrower
except for transactions that are in the ordinary course of Borrower's business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Subordinated Debt. Make any payment in respect of any
-----------------
Subordinated Debt, or permit any of its Subsidiaries to make any such payment,
except in compliance with the terms of such Subordinated Debt, or amend any
provision contained in any documentation relating to the Subordinated Debt
without Bank's prior written consent.
7.10 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of the warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.11 Compliance. Become an "investment company" controlled by an
----------
"investment company," within the meaning of the Investment Company Act of 1940,
or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Advance for such purpose.
Fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or Prohibited Transaction, as defined in ERISA, to occur, fail to comply
with the Federal Fair Labor Standards Act or violate any law or regulation,
which violation could have a Material Adverse Effect or a material adverse
effect on the Collateral or the priority of Bank's Lien on the Collateral, or
permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or
---------------
any interest on, any Advances when due and payable; or fails to pay any portion
of any other Obligations not constituting such principal or interest, including
without limitation Bank Expenses, within thirty (30) days of receipt by Borrower
of an invoice for such other Obligations;
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Sections 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the
covenants contained in Article 7 of this Agreement, or fails or neglects to
perform, keep, or observe any other material term, provision, condition,
covenant, or agreement contained in this Agreement, in any of the Loan
Documents, or in any other present or future agreement between Borrower and Bank
and as to any default under such other term, provision, condition, covenant or
agreement that can be cured, has failed to cure such default within ten (10)
days after Borrower receives notice thereof or any officer of Borrower becomes
aware thereof; provided, however, that if the default cannot by its nature be
cured within the ten (10) day period or cannot after diligent attempts by
Borrower be cured within such ten (10) day period, and such default is likely to
be cured within a reasonable time, then Borrower shall have an additional
reasonable period (which shall not in any case exceed thirty (30) days) to
attempt to cure such default, and within such reasonable time period the failure
to have cured such default shall not be deemed an Event of Default (provided
that no Advances will be required to be made during such cure period);
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business or financial condition, or if there is a material
impairment of the prospect of repayment of any portion of the Obligations or a
material impairment of the value or priority of Bank's security interests in the
Collateral;
16
<PAGE>
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Advances will be required to be made during such cure period);
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within ten (10) days (provided
that no Advances will be made prior to the dismissal of such Insolvency
Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money
---------
in an amount, individually or in the aggregate, of at least One Hundred Fifty
Thousand Dollars ($150,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists now or hereafter in any warranty or representation set forth
herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or any
other Loan Document.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence and during the
-------------------
continuance of an Event of Default, Bank may, at its election, without notice of
its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this
Agreement, by any of the that upon the occurrence of an Event of Default
described in Section 8.5 other Loan Documents, or otherwise, immediately due and
payable (provided all Obligations shall become immediately due and payable
without any action by Bank);
(b) Cease advancing money or extending credit to or for the
benefit of Borrower under this Agreement or under any other agreement between
Borrower and Bank;
(c) Demand that Borrower (i) deposit cash with Bank in an amount
equal to the amount of any Letters of Credit remaining undrawn, as collateral
security for the repayment of any future drawings under such Letters of Credit,
and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in
advance all Letters of Credit fees scheduled to be paid or payable over the
remaining term of the Letters of Credit;
(d) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(e) Without notice to or demand upon Borrower, make such
payments and do such acts as Bank considers necessary or reasonable to protect
its security interest in the Collateral. Borrower agrees to assemble the
Collateral if Bank so requires, and to make the Collateral available to Bank as
Bank may designate. Borrower authorizes Bank to enter the premises where the
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or
17
<PAGE>
compromise any encumbrance, charge, or lien which in Bank's determination
appears to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower's owned
premises, Borrower hereby grants Bank a license to enter into possession of such
premises and to occupy the same, without charge, in order to exercise any of
Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(f) Without notice to Borrower set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely
pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank's exercise of its rights under this Section 9.1, Borrower's
rights under all licenses and all franchise agreements shall inure to Bank's
benefit;
(h) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Bank
determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(i) Bank may credit bid and purchase at any public sale; and
(j) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Power of Attorney. Effective only upon the occurrence and during
-----------------
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank's designated officers, or employees) as Borrower's true
and lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; provided Bank may
exercise such power of attorney to sign the name of Borrower on any of the
documents described in Section 4.2 regardless of whether an Event of Default has
occurred. The appointment of Bank as Borrower's attorney in fact, and each and
every one of Bank's rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations have been fully repaid and performed
and Bank's obligation to provide advances hereunder is terminated.
9.3 Accounts Collection. At any time from the date of this
-------------------
Agreement, Bank may notify any Person owing funds to Borrower of Bank's security
interest in such funds and verify the amount of such Account. Borrower shall
collect all amounts owing to Borrower for Bank, receive in trust all payments as
Bank's trustee, and immediately deliver such payments to Bank in their original
form as received from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish
-------------
any required proof of payment due to third persons or entities, as required
under the terms of this Agreement, then Bank may do any or all of the following:
(a) make payment of the same or any part thereof; (b) set up such reserves under
the Revolving Facility as Bank deems necessary to protect Bank from the exposure
created by such failure; or (c) obtain and maintain insurance policies of the
type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
18
<PAGE>
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk
of loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Bank of one right
or remedy shall be deemed an election, and no waiver by Bank of any Event of
Default on Borrower's part shall be deemed a continuing waiver. No delay by Bank
shall constitute a waiver, election, or acquiescence by it. No waiver by Bank
shall be effective unless made in a written document signed on behalf of Bank
and then shall be effective only in the specific instance and for the specific
purpose for which it was given.
9.7 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands
by any party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing and (except for financial statements and
other informational documents which may be sent by first-class mail, postage
prepaid) shall be personally delivered or sent by a recognized overnight
delivery service, certified mail, postage prepaid, return receipt requested, or
by telefacsimile to Borrower or to Bank, as the case may be, at its addresses
set forth below:
If to Borrower: QuickLogic Corporation
2933 Bunker Hill Lane 100A
Santa Clara, CA 95054
Attn: Chief Financial Officer
FAX: (408) 987-2012
If to Bank: Silicon Valley Bank
3003 Tasman Drive
Santa Clara, CA 95054
Attn:
FAX:
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
11. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and
----------------------
inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights
-------- -------
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion Bank shall
19
<PAGE>
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Agreement; and
(b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank
as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under this Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance
---------------
of all obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.5 Amendments in Writing, Integration. This Agreement cannot be
----------------------------------
amended or terminated orally. All prior agreements, understandings,
representations, warranties, and negotiations between the parties hereto with
respect to the subject matter of this Agreement, if any, are merged into this
Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number
------------
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the same Agreement.
12.7 Survival. All covenants, representations and warranties made
--------
in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 12.2 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
12.8 Confidentiality. In handling any confidential information
---------------
Bank shall exercise the same degree of care that it exercises with respect to
its own proprietary information of the same types to maintain the
confidentiality of any non-public information thereby received or received
pursuant to this Agreement except that disclosure of such information may be
made (i) to the subsidiaries or affiliates of Bank in connection with their
present or prospective business relations with Borrower, (ii) to prospective
transferees or purchasers of any interest in the Loans, provided that they have
entered into a comparable confidentiality agreement in favor of Borrower and
have delivered a copy to Borrower, (iii) as required by law, regulations, rule
or order, subpoena, judicial order or similar order, (iv) as may be required in
connection with the examination, audit or similar investigation of Bank and (v)
as Bank may determine in connection with the enforcement of any remedies
hereunder. Confidential information hereunder shall not include information that
either: (a) is in the public domain or in the knowledge or possession of Bank
when disclosed to Bank, or becomes part of the public domain after disclosure to
Bank through no fault of Bank; or (b) is disclosed to Bank by a third party,
provided Bank does not have actual knowledge that such third party is prohibited
from disclosing such information.
20
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
QUICKLOGIC CORPORATION
By: /s/
----------------------------------
Title:
-------------------------------
SILICON VALLEY BANK
By: /s/
----------------------------------
Title:
-------------------------------
21
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EXHIBIT A
---------
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
13. All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
14. All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
15. All contract rights and general intangibles now owned or hereafter
acquired;
16. All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
17. All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing; and
18. Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not include trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions, know-
how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing.
22
<PAGE>
EXHIBIT B
---------
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (408) 496-2426 TIME:
- --------------------------------------------------------------------------------
FROM:
________________________________________________________________________
CLIENT NAME (BORROWER)
REQUESTED BY:
________________________________________________________________
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
________________________________________________________
PHONE NUMBER:
________________________________________________________________
FROM ACCOUNT # TO ACCOUNT #
____________________ ____________________________
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $____________________
PRINCIPAL PAYMENT (ONLY) $____________________
INTEREST PAYMENT (ONLY) $____________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________
OTHER INSTRUCTIONS:
__________________________________________________________
_____________________________________________________________________________
All representations and warranties of Borrower stated in the Loan Agreement
are true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
- --------------------------------------------------------------------------------
BANK USE ONLY
TELEPHONE REQUEST:
- ------------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
___________________________ ____________________________
Authorized Requester Phone #
____________________________ ____________________________
Received By (Bank) Phone #
_____________________________________
Authorized Signature (Bank)
- --------------------------------------------------------------------------------
23
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE
(Pre-Initial Public Offering)
Borrower: QuickLogic Corporation Lender: Silicon Valley Bank
Commitment Amount: $5,000,000 (capped at $3,000,000 pending notice)
<TABLE>
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of ____ $___________
2. Additions (please explain on reverse) $___________
3. TOTAL ACCOUNTS RECEIVABLE $___________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_____________
5. Balance of 50% over 90 day accounts $___________
6. Concentration Limits $___________
7. Foreign Accounts $_____________
8. Governmental Accounts $_____________
9. Contra Accounts $_____________
10. Promotion or Demo Accounts $___________
11. Intercompany/Employee Accounts $_____________
12. Other (please explain on reverse) $_____________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $___________
14. Eligible Accounts (#3 minus #13) $___________
15. LOAN VALUE OF NON-DISTRIBUTOR ACCOUNTS (80% of #14) $___________
16. Eligible Distributor Accounts $___________
17. LOAN VALUE OF DISTRIBUTOR ACCOUNTS (70% of #16) $___________
18. LOAN VALUE OF ACCOUNTS (#15 plus #17) $___________
BALANCES
19. Maximum Loan Amount $__________
20. Total Funds Available [Lesser of #18 or #19)] $___________
21. Present balance owing on Line of Credit $___________
22. Outstanding under Sublimits ( ) $__________
23. RESERVE POSITION (#20 minus #21 and #22) $___________
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
QuickLogic Corporation
By:
Authorized Signer
24
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM: QUICKLOGIC CORPORATION
The undersigned authorized officer of QuickLogic Corporation hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"), (i) Borrower is
in complete compliance for the period ending with all required
-----------
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all material respects
as of the date hereof. Attached herewith are the required documents supporting
the above certification. The Officer further certifies that these are prepared
in accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes.
Please indicate compliance status by circling Yes/No under "Complies" column.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
- ------------------ -------- --------
<S> <C> <C>
Monthly financial statements Monthly within 30 days Yes No
Annual (CPA Audited) FYE within 120 days Yes No
A/R & A/P Agings Monthly within 20 days when borrowing Yes No
A/R Audit Initial and Annual Yes No
<CAPTION>
Financial Covenant Required Actual Complies
- ------------------ -------- ------ --------
<S> <C> <C> <C>
Maintain on a Monthly Basis:
Minimum Quick Ratio 1.0:1.0/2.0:1.01/1/ _____:1.0 Yes No
Minimum Tangible Net Worth $6,500,000/$20,000,000/1/ $________ Yes No
Maximum Debt/Tangible Net Worth 1:0:1.0/0:75:1.0/1/ _____:1.0 Yes No
Minimum Liquidity 2.0:1.0/2/ _____:1.0 Yes No
Minimum Debt Service Coverage 1.5:1.0/3/ _____:1.0 Yes No
Profitability: Quarterly $1.00/4/ $________ Yes No
</TABLE>
/1/ After IPO (does not exclude deferred revenue)
/2/ Applies until 2 consecutive DSC quarters of 1.5:1.0
/3/ Effective upon termination of liquidity covenant
/4/ One loss quarter less than $1,000,000 permitted after IPO
Comments Regarding Exceptions: See Attached
BANK USE ONLY
Received by:
------------------
AUTHORIZED SIGNER
Sincerely,
Date:
-------------------------
SIGNATURE Verified:
---------------------
AUTHORIZED SIGNER
TITLE
Date:
-------------------------
DATE
Compliance Status: Yes No
25
<PAGE>
DISBURSEMENT REQUEST AND AUTHORIZATION
Borrower: QuickLogic Corporation Bank: Silicon Valley Bank
LOAN TYPE. This is a Variable Rate, Revolving Line of Credit of a principal
amount up to $3,000,000, a Variable Rate, EXIM Revolving Line of Credit of a
principal amount up to $1,000,000, and a Variable Rate Equipment Term Loan of a
principal amount of up to $1,000,000.
PRIMARY PURPOSE OF LOAN. The primary purpose of this loan is for business.
SPECIFIC PURPOSE. The specific purpose of this loan is: Short Term Working
Capital and Equipment Acquisition.
DISBURSEMENT INSTRUCTIONS. Borrower understands that no loan proceeds will be
disbursed until all of Bank's conditions for making the loan have been
satisfied. Please disburse the loan proceeds as follows:
<TABLE>
<CAPTION>
Revolving Line Equipment Line
-------------- --------------
<S> <C> <C>
Amount paid to Borrower directly: $_____ $____
Undisbursed Funds $____ _____
Principal $3,000,000 $1,000,000
</TABLE>
CHARGES PAID IN CASH. Borrower has paid or will pay in cash as agreed the
following charges:
Prepaid Finance Charges Paid in Cash:
$12,500 Loan Fee
$100 UCC Search Fees
$15,000 Exim Fee
$___ Outside Counsel Fees and Expenses (Estimate)
Total Charges Paid in Cash $____
AUTOMATIC PAYMENTS. Borrower hereby authorizes Bank automatically to deduct
from Borrower's account numbered the amount of any loan payment.
----------
If the funds in the account are insufficient to cover any payment, Bank shall
not be obligated to advance funds to cover the payment.
FINANCIAL CONDITION. BY SIGNING THIS AUTHORIZATION, BORROWER REPRESENTS AND
WARRANTS TO BANK THAT THE INFORMATION PROVIDED ABOVE IS TRUE AND CORRECT AND
THAT THERE HAS BEEN NO ADVERSE CHANGE IN BORROWER'S FINANCIAL CONDITION AS
DISCLOSED IN BORROWER'S MOST RECENT FINANCIAL STATEMENT TO BANK. THIS
AUTHORIZATION IS DATED AS OF , 19 .
------------------ ---
BORROWER:
QuickLogic Corporation
Authorized Officer
AGREEMENT TO PROVIDE INSURANCE
Grantor: QuickLogic Corporation Bank: Silicon Valley Bank
26
<PAGE>
INSURANCE REQUIREMENTS. QuickLogic Corporation ("Grantor") understands
that insurance coverage is required in connection with the extending of a loan
or the providing of other financial accommodations to Grantor by Bank. These
requirements are set forth in the Loan Documents. The following minimum
insurance coverages must be provided on the following described collateral (the
"Collateral"):
Collateral: All Inventory, Equipment and Fixtures.
Type: All risks, including fire, theft and liability.
Amount: Full insurable value.
Basis: Replacement value.
Endorsements: Loss payable clause to Bank with stipulation that
coverage will not be cancelled or diminished without a
minimum of twenty (20) days' prior written notice
to Bank.
INSURANCE COMPANY. Grantor may obtain insurance from any insurance company
Grantor may choose that is reasonably acceptable to Bank. Grantor understands
that credit may not be denied solely because insurance was not purchased through
Bank.
FAILURE TO PROVIDE INSURANCE. Grantor agrees to deliver to Bank, on or
before closing, evidence of the required insurance as provided above, with an
effective date of August 8, 1996, or earlier. Grantor acknowledges and agrees
that if Grantor fails to provide any required insurance or fails to continue
such insurance in force, Bank may do so at Grantor's expense as provided in the
Loan and Security Agreement. The cost of such insurance, at the option of Bank,
shall be payable on demand or shall be added to the indebtedness as provided in
the security document. GRANTOR ACKNOWLEDGES THAT IF BANK SO PURCHASES ANY SUCH
INSURANCE, THE INSURANCE WILL PROVIDE LIMITED PROTECTION AGAINST PHYSICAL DAMAGE
TO THE COLLATERAL, UP TO THE BALANCE OF THE LOAN; HOWEVER, GRANTOR'S EQUITY IN
THE COLLATERAL MAY NOT BE INSURED. IN ADDITION, THE INSURANCE MAY NOT PROVIDE
ANY PUBLIC LIABILITY OR PROPERTY DAMAGE INDEMNIFICATION AND MAY NOT MEET THE
REQUIREMENTS OF ANY FINANCIAL RESPONSIBILITY LAWS.
AUTHORIZATION. For purposes of insurance coverage on the Collateral,
Grantor authorizes Bank to provide to any person (including any insurance agent
or company) all information Bank deems appropriate, whether regarding the
Collateral, the loan or other financial accommodations, or both.
GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS AGREEMENT TO
PROVIDE INSURANCE AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 8,
1996.
GRANTOR:
QuickLogic Corporation
x
Authorized Officer
============================================================================
FOR BANK USE ONLY
INSURANCE VERIFICATION
DATE: PHONE:
AGENT'S NAME:
INSURANCE COMPANY:
POLICY NUMBER:
EFFECTIVE DATES:
COMMENTS:
============================================================================
27
<PAGE>
CORPORATE RESOLUTIONS TO BORROW
Borrower: QuickLogic Corporation
I, the undersigned Secretary or Assistant Secretary of QuickLogic
Corporation (the "Corporation"), HEREBY CERTIFY that the Corporation is
organized and existing under and by virtue of the laws of the State of
California.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and
complete copies of the Articles of Incorporation and Bylaws of the Corporation,
each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation,
duly called and held, at which a quorum was present and voting (or by other duly
authorized corporate action in lieu of a meeting), the following resolutions
were adopted.
BE IT RESOLVED, that any one (1) of the following named officers,
employees, or agents of this Corporation, whose actual signatures are shown
below:
<TABLE>
<CAPTION>
NAMES POSITIONS ACTUAL SIGNATURES
----- --------- -----------------
<S> <C> <C>
</TABLE>
acting for an on behalf of this Corporation and as its act and deed be, and they
hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Silicon Valley Bank
("Bank"), on such terms as may be agreed upon between the officers, employees,
or agents and Bank, such sum or sums of money as in their judgment should be
borrowed, without limitation, including such sums as are specified in that
certain Loan and Security Agreement dated as of August 8, 1996 (the "Loan
Agreement").
Execute Notes. To execute and deliver to Bank the promissory note or notes
of the Corporation, on Lender's forms, at such rates of interest and on such
terms as may be agreed upon, evidencing the sums of money so borrowed or any
indebtedness of the Corporation to Bank, and also to execute and deliver to
Lender one or more renewals, extensions, modifications, refinancings,
consolidations, or substitutions for one or more of the notes, or any portion of
the notes.
Grant Security. To grant a security interest to Bank in the Collateral
described in the Loan Agreement, which security interest shall secure all of the
Corporation's Obligations, as described in the Loan Agreement.
Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade
acceptances, promissory notes, or other evidences of indebtedness payable to or
belonging to the Corporation or in which the Corporation may have an interest,
and either to receive cash for the same or to cause such proceeds to be credited
to the account of the Corporation with Bank, or to cause such other disposition
of the proceeds derived therefrom as they may deem advisable.
28
<PAGE>
Letters of Credit; Foreign Exchange. To execute letters of credit
applications, foreign exchange agreements and other related documents pertaining
to Bank's issuance of letters of credit and foreign exchange contracts.
Further Acts. In the case of lines of credit, to designate additional or
alternate individuals as being authorized to request advances thereunder, and in
all cases, to do and perform such other acts and things, to pay any and all fees
and costs, and to execute and deliver such other documents and agreements as
they may in their discretion deem reasonably necessary or proper in order to
carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these
resolutions and performed prior to the passage of these resolutions are hereby
ratified and approved, that these Resolutions shall remain in full force and
effect and Bank may rely on these Resolutions until written notice of their
revocation shall have been delivered to and received by Bank. Any such notice
shall not affect any of the Corporation's agreements or commitments in effect at
the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are
duly elected, appointed, or employed by or for the Corporation, as the case may
be, and occupy the positions set forth opposite their respective names; that the
foregoing Resolutions now stand of record on the books of the Corporation; and
that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on _______________, 19___ and
attest that the signatures set opposite the names listed above are their genuine
signatures.
CERTIFIED TO AND ATTESTED BY:
X
29
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of October 8, 1996, by
and between QuickLogic Corporation ("Borrower") whose address is 2933 Bunker
Hilt Lane 100A, Santa Clara, CA 95054, and Silicon Valley Bark ("Bank and
sometimes referred to as "Lender") whose address is 3003 Tasman Drive, Santa
Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS. Among other indebtedness which may be
------------------------------------
owing by Borrower to Lender, Borrower is indebted to Lender pursuant to, among
other documents, a Loan and Security Agreement, dated August 8,1996, together
with all schedules thereto (the "Loan Agreement"), as amended. The Loan
Agreement provided for, among other things, an Equipment Advance Facility in the
original principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the
"Equipment Advance Facility"). In addition, Borrower is indebted to Lender,
pursuant to, among other documents, a Promissory Note dated August 9, 1995, in
the original principal amount of Five Hundred Thousand and 00/100 Dollars
($500,000.00) (the "Term Note 1") and a Promissory Note dated October 6,1995, in
the original principal amount of Two Hundred Twenty Five Thousand Forty Eight
and 00/100 Dollars ($225,048.00) (the "Term Note 2") (collectively, referred to
herein as the "Notes"). The Notes, together with other promissory' notes from
Borrower to Lender, are governed by the terms of a Business Loan Agreement,
dated August 9, 1995, as such agreement may be amended from time to time,
between Borrower and Lender (the "Business Loan Agreement'). Defined terms used
but not otherwise defined herein shall have the same meanings as in the Loan
Agreement and the Business Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Lender shall be referred to
as the "Indebtedness"
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as defined in the Loan Agreement and Commercial
Security Agreement dated August 9, 1995.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as The "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
------------------------ -----
A. Modification(s) to the Notes.
----------------------------
1. The interest rate to be applied to the unpaid principal balance
of each Note, effective as of August 8, 1996, will be at a rate
equal to one-quarter of one percentage point (.250%) over
Lender's current Index (as defined therein).
B. Modification(s) to Loan Agreement
---------------------------------
1. Notwithstanding anything to the contrary contained in Section
2.1.3 entitled "Equipment Advances" Borrower shall now be allowed
to use up to Five Hundred thousand and 001100 Dollars
($500,000.00) (rather than 30% of any Equipment Advance) to
purchase or finance software, custom equipment and fixtures.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
------------------
wherever necessary to reflect the changes described above.
1
<PAGE>
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
-----------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
-------------------
below) understands and agrees that in modifying the existing Indebtedness,
Lender is relying upon Borrower's representations, warranties, and agreements,
as set forth in the Existing Loan Documents. Except as expressly modified
pursuant to this Loan Modification Agreement, the terms of the Existing Loan
Documents remain unchanged and in full force and effect. Lender's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Lender to make any future modifications to
the Indebtedness. Nothing in this Loan Modification Agreement shall constitute
a satisfaction of the Indebtedness. It is the intention of Lender and Borrower
to retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Lender in writing. No maker,
endorser, or guarantor will be released by virtue of this Loan Modification
Agreement. The terms of this paragraph apply not only to this Loan Modification
Agreement, but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: LENDER:
QUICKLOGIC CORPORATION SILICON VALLEY BANK
By: /s/ By: /s/
__________________________ ____________________________
Name: Name
________________________ ____________________________
Title: Title:
_______________________ __________________________
2
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of November 13, 1996,
by and between QuickLogic Corporation ("Borrower") whose address is 2933 Bunker
Hill Lane 100A, Santa Clara, CA 95054, and Silicon Valley Bank ("Bank" and
sometimes referred to as "Lender") whose address is 3003 Tasman Drive, Santa
Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
-------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 8, 1996, together
with all schedules thereto (the "Loan Agreement"), as amended. The Loan
Agreement provided for, among other things, an Equipment Advance Facility in the
original principal amount of One Million and 00/100 Dollars ($1,000,000.00) (the
"Equipment Advance Facility"). In addition, Borrower is indebted to Bank,
pursuant to, among other documents, a Promissory Note dated August 9, 1995, in
the original principal amount of Five Hundred Thousand and 00/100 Dollars
($500,000.00) (the "Term Note 1") and a Promissory Note dated October 6, 1995,
in the original principal amount of Two Hundred Twenty Five Thousand Forty Eight
and 00/100 Dollars ($225,048.00) (the "Term Note 2") (collectively, referred to
herein as the "Notes"), as such Notes may be amended from time to time. The
Notes, together with other promissory notes from Borrower to Bank, are governed
by the terms of a Business Loan Agreement, dated August 9, 1995, as such
agreement may be amended from time to time, between Borrower and Bank (the
"Business Loan Agreement"). Defined terms used but not otherwise defined herein
shall have the same meanings as in the Loan Agreement and the Business Loan
Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
----------------------------------------
secured by the Collateral as defined in the Loan Agreement and a Commercial
Security Agreement dated August 9, 1995.
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
-------------------------------
A. Modification(s) to Loan Agreement.
----------------------------------
1. Paragraphs (a) and (b) of Section 2.1.3 entitled "Equipment
Advances" are hereby amended in their entirety, to read as
follows:
(a) At any time from the date hereof through June 30, 1997,
Borrower may from time to time request advances (each an
"Equipment Advance" and, collectively, the "Equipment
Advances") from Bank in an aggregate principal amount of up
to Two Million and 00/100 Dollars ($2,000,000.00), however
capped at One Million Five Hundred Thousand and 00/100
Dollars ($1,500,000.00) (the "Cap Amount"). Any Equipment
Advance in excess of the Cap Amount shall be subject to
Borrower's payment of the Increase Fee, as described
herein.
1
<PAGE>
The Equipment Advances shall be used to purchase Equipment
only, approved from time to time by Bank, and shall not
exceed (i) one hundred percent (100%) of the cost of new
Equipment and (ii) the lesser of seventy-five percent (75%)
of the cost of used Equipment or (iii) Six Hundred Thousand
and 00/100 Dollars ($600,000.00), including installation
expense, freight discounts, warranty charges and taxes. Not
more than One Million and 00/100 Dollars ($1,000,000.00) of
any Equipment Advance shall be used to purchase or finance
software, custom equipment and tenant improvements.
(b) Interest shall accrue from the date of each Equipment
Advance at the rate specified in Section 2.3(a), and shall
be payable monthly on the last day of each calendar month
for each month through June 30, 1997. The Equipment Advance
or Equipment Advances that are outstanding on June 30, 1997
will be payable monthly on the last calendar day of each
month in thirty-six (36) equal installments of principal,
plus accrued, unpaid interest, beginning on July 31, 1997,
and continuing through the Maturity Date, when the entire
principal amount and all accrued, unpaid interest shall be
due and payable.
2. The defined term "Maturity Date" means June 30, 2000.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
-------------------
wherever necessary to reflect the changes described above.
5. PAYMENT OF LOAN FEE AND INCREASE FEE. Borrower shall pay to Bank a fee in
the amount of Two Thousand Five Hundred and 00/100 Dollars ($2,500.00) (the
"Loan Fee") plus all out-of-pocket expenses. Additionally, upon Borrower's
election to advance under the Equipment Advance Facility in excess of the Cap
Amount, Borrower shall pay to Bank a fee in the amount of Two Thousand Five
Hundred and 00/100 Dollars ($2,500.00) (the "Increase Fee").
6. NO DEFENSES OF BORROWER. Borrower agrees that, as of this date, it has no
------------------------
defenses against the obligations to pay any amounts under the Indebtedness.
7. CONTINUING VALIDITY. Borrower understands and agrees that in modifying the
--------------------
existing Indebtedness, Bank is relying upon Borrower's representations,
warranties, and agreements, as set forth in the Existing Loan Documents. Except
as expressly modified pursuant to this Loan Modification Agreement, the terms of
the Existing Loan Documents remain unchanged and in full force and effect.
Bank's agreement to modifications to the existing Indebtedness pursuant to this
Loan Modification Agreement in no way shall obligate Bank to make any future
modifications to the Indebtedness. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Indebtedness. It is the intention of
Bank and Borrower to retain as liable parties all makers and endorsers of
Existing Loan Documents, unless the party is expressly released by Bank in
writing. No maker, endorser, or guarantor will be released by virtue of this
Loan Modification Agreement. The terms of this Paragraph apply not only to this
Loan Modification Agreement, but also to all subsequent loan modification
agreements.
8. JURISDICTION/VENUE. Borrower accepts for itself and in connection with its
-------------------
properties, unconditionally, the non-exclusive jurisdiction of any state or
federal court of competent jurisdiction in the Commonwealth of Massachusetts in
any action, suit, or proceeding of any kind against it which arises out of or by
reason of this Loan Modification Agreement; provided, however, that if for any
reason Bank cannot avail itself of the courts of the Commonwealth of
Massachusetts, then venue shall lie in Santa Clara County, California.
2
<PAGE>
9. COUNTERSIGNATURE. This Loan Modification Agreement shall become effective
-----------------
only when it shall have been executed by Borrower and Bank (provided, however,
in no event shall this Loan Modification Agreement become effective until signed
by an officer of Bank in California).
10. CONDITIONS. The effectiveness of this Loan Modification Agreement is
-----------
conditioned upon payment of the Loan Fee.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
QUICKLOGIC CORPORATION SILICON VALLEY BANK
By: /s/ VINCENT A. MCCORD By: /s/ ELLEN CHAO
--------------------------- ------------------------
Name: Vincent A. McCord Name: ELLEN CHAO
--------------------------- ------------------------
Title: V.P., CFO Title: VP
--------------------------- ------------------------
<PAGE>
LOAN MODIFICATION AGREEMENT
This Loan Modification Agreement is entered into as of May 27, 1997, by and
between QuickLogic Corporation, a California corporation ("Borrower") whose
address is 1277 Orleans Drive, Sunnyvale, CA 94089, and Silicon Valley Bank
("Bank" and sometimes referred to as "Lender") whose address is 3003 Tasman
Drive, Santa Clara, CA 95054.
1. DESCRIPTION OF EXISTING INDEBTEDNESS: Among other indebtedness which may
-------------------------------------
be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among
other documents, a Loan and Security Agreement, dated August 8, 1996, together
with all schedules thereto (the "Domestic Loan Agreement"), as amended. The
Domestic Loan Agreement provided for, among other things, a Committed Line in
the original principal amount of Five Million and 00/100 Dollars ($5,000,000.00)
(however, limited to $3,000,000.00 until Borrower delivers notice to Bank
increasing the Committed Line to $5,000,000.00) (the "Revolving Facility"), an
Equipment Advance Facility in the original principal amount of One Million and
00/100 Dollars ($1,000,000.00) (the "Equipment Advance Facility"). The Domestic
Loan Agreement has been modified pursuant to, among other documents, a Loan
Modification Agreement dated November 13, 1996, pursuant to which, among other
things, the principal amount of the Equipment Advance Facility was increased to
Two Million and 00/100 Dollars ($2,000,000.00). In addition, Borrower is
indebted to Bank, pursuant to, among other documents, a Promissory Note dated
August 9, 1995, in the original principal amount of Five Hundred Thousand and
00/100 Dollars ($500,000.00) (the "Term Note 1"), a Promissory Note dated
October 6, 1995, in the original principal amount of Two Hundred Twenty Five
Thousand Forty Eight and 00/100 Dollars ($225,048.00) (the "Term Note 2")
(collectively, referred to herein as the "Notes"), as such Notes may be amended
from time to time. The Notes, together with other promissory notes from
Borrower to Bank, are governed by the terms of the Business Loan Agreement dated
August 9, 1995, as amended (the "Business Loan Agreement"). Furthermore,
Borrower is indebted to Bank, pursuant to, among other documents, an Export-
Import Bank Loan and Security Agreement, dated August 8, 1996, as amended (the
"EXIM Loan Agreement"), which provided for, among other things, an Exim
Committed Line in the original principal amount of One Million and 00/100
Dollars ($1,000,000.00) (the "EXIM Revolving Promissory Note"). Hereinafter,
the Domestic Loan Agreement, the Business Loan Agreement and the EXIM Loan
Agreement shall be referred to collectively as the "Loan Agreement". Defined
terms used but not otherwise defined herein shall have the same meanings as in
the Loan Agreement.
Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as
the "Indebtedness".
2. DESCRIPTION OF COLLATERAL AND GUARANTIES. Repayment of the Indebtedness is
-----------------------------------------
secured by the Collateral as defined in the Domestic Loan Agreement and a
Commercial Security Agreement dated August 9, 1995. Additionally, repayment of
the Export Committed Line is guaranteed by the Export-Import Bank of the United
States (the "Guarantor") pursuant to a Guarantee Agreement (the "Guaranty").
Hereinafter, the above-described security documents and guaranties, together
with all other documents securing repayment of the Indebtedness shall be
referred to as the "Security Documents". Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Indebtedness shall
be referred to as the "Existing Loan Documents".
3. DESCRIPTION OF CHANGE IN TERMS.
-------------------------------
A. Waiver of Financial Covenant Default.
-------------------------------------
Lender hereby waives Borrower's existing default under the Domestic
Loan Agreement by virtue of Borrower's failure to comply with the Debt
Service Coverage ratio as of quarter ended March 31, 1997. Lender's
waiver of Borrower's compliance of this covenant shall apply only to
the foregoing period.
1
<PAGE>
Lender's agreement to waive the above-described default shall not
limit or impair the Lender's right to demand strict performance of all
other covenants as of any date.
B. Governing Loan Agreement.
-------------------------
The Notes shall now be governed by the terms of the Existing Loan
Documents.
C. Modification(s) to Existing Loan Documents.
-------------------------------------------
1. "Permitted Indebtedness", as defined in section 1.1 entitled
"Definitions" is hereby amended to include the following:
(e) Capital lease obligations to Borrower's landlord.
2. "Permitted Investment", as defined in section 1.1 entitled
"Definitions" is hereby amended to include the following:
(c) Acquisition of Cypress Semiconductor's FPGA business and a
to-be-formed international subsidiary.
3. Section 6.3 entitled "Financial Statements, Reports,
Certificates" is hereby amended in its entirety to read as
follows:
Borrower shall deliver to Bank: (a) as soon as available, but in
any event within thirty (30) days after the end of each month
(except for month ended February, 1997 and any and all months
after Borrower's Initial Public Offering), a company prepared
consolidated balance sheet and income statement covering
Borrower's consolidated operations during such period, certified
by an officer of Borrower reasonably acceptable to Bank; (b) as
soon as available, but in any event within one hundred twenty
(120) days after the end of Borrowers' fiscal year (except for
fiscal year end 1996 which shall be due no later than July 15,
1997), audited consolidated financial statements of Borrower
prepared in accordance with GAAP, consistently applied, together
with an unqualified opinion on such financial statements of an
independent certified public accounting firm reasonably
acceptable to Bank; (c) within five (5) days upon becoming
available, copies of all statements, reports and notices sent or
made available generally by Borrower to its security holders or
to any holders of Subordinated Debt and all reports on Form 10-K
and 10-Q filed with the Securities and Exchange Commission; (d)
promptly upon receipt of notice thereof, a report of any legal
actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any
Subsidiary of One Hundred Thousand Dollars ($100,000.00) or more;
and (e) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to
time.
Through the date of Borrower's Initial Public Offering, within
twenty (20) days after the last day of each month in which an
Advance is outstanding (and as a condition to Borrower requesting
an Advance), Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer, together with aged
listings of accounts receivable and accounts payable. Following
the Initial Public Offering, such agings and Borrowing Base
Certificate are not required.
2
<PAGE>
Borrower shall deliver to Bank with the monthly financial
statements (or with Borrower's Form 10-K and 10-Q after
Borrower's Initial Public Offering) a Compliance Certificate
signed by a Responsible Officer.
Bank shall have a right from time to time hereafter to audit
Borrower's Accounts at Borrower's expense, provided that such
audits will be conducted no more often than every twelve (12)
months unless an Event of Default has occurred and is continuing.
After Borrower's Initial Public Offering, such audits shall not
be required.
4. Section 6.8 entitled "Quick Ratio" is hereby amended in its
entirety to read as follows:
Prior to the Initial Public Offering, Borrower shall maintain, as
of the last day of each calendar month, a ratio of Quick Assets
to Current Liabilities, excluding deferred revenue, of at least
1.00 to 1.00; and after the Initial Public Offering, as of the
last day of each fiscal quarter, a ratio of Quick Assets to
Current Liabilities of at least 2.00 to 1.00.
5. The minimum Liquidity ratio, as described in section 6.9 entitled
"Minimum Liquidity and Debt Service Coverage" is hereby re-
instated as of quarter ended March 31, 1997 and shall be replaced
by the Debt Service Coverage ratio subject to the terms and
conditions as described in said section.
6. Section 6.10 entitled "Debt-Net Worth Ratio" is hereby amended in
its entirety to read as follows:
Prior to the Initial Public Offering, Borrower shall maintain, as
of the last day of each calendar month, beginning with month
ended March 31, 1997, a ratio of Total Liabilities, excluding
deferred revenue, less Subordinated Debt to Tangible Net Worth
plus Subordinated Debt of not more than 1.25 to 1.00, and, after
the Initial Public Offering, as of the last day of each fiscal
quarter, a ratio of Total Liabilities less Subordinated Debt to
Tangible Net Worth plus Subordinated Debt of not more than 0.75
to 1.00.
7. Section 6.11 entitled "Tangible Net Worth" is hereby amended in
its entirety to read as follows:
Prior to the Initial Public Offering, Borrower shall maintain, as
of the last day of each calendar month, beginning with month
ended March 31, 1997, a Tangible Net Worth of not less than Nine
Million and 00/100 Dollars ($9,000,000.00), and, after the
Initial Public Offering, as of the last day of each fiscal
quarter, not less than Twenty Million and 00/100 Dollars
($20,000,000.00).
8. Section 6.12 entitled "Profitability" is hereby amended in its
entirety to read as follows:
Borrower shall have a minimum net profit of One and 00/100 Dollar
($1.00) for each fiscal quarter, except that, Borrower may suffer
a maximum net loss, excluding contract termination expense, of
Two Million Five Hundred Thousand and 00/100 Dollars
($2,500,000.00) for quarter ended March 31, 1997, and One Million
and 00/100 Dollars ($1,000,000.00) for quarter ending June 30,
1997.
3
<PAGE>
9. Section 7.3 entitled "Mergers or Acquisitions" is hereby amended
to allow Borrower, a California C-corporation, to merge with and
into a new entity, which such entity shall be a Delaware C-
corporation, provided that, upon such merger, Borrower agrees to
execute any and all documents required by Bank in order for Bank
to acknowledge such merger and to maintain its security interests
in Borrower's assets, including, without limitation, an
assumption agreement.
4. CONSISTENT CHANGES. The Existing Loan Documents are hereby amended
-------------------
wherever necessary to reflect the changes described above.
5. NO DEFENSES OF BORROWER. Borrower (and each guarantor and pledgor signing
------------------------
below) agrees that it has no defenses against the obligations to pay any amounts
under the Indebtedness.
6. CONTINUING VALIDITY. Borrower (and each guarantor and pledgor signing
--------------------
below) understands and agrees that in modifying the existing Indebtedness, Bank
is relying upon Borrower's representations, warranties, and agreements, as set
forth in the Existing Loan Documents. Except as expressly modified pursuant to
this Loan Modification Agreement, the terms of the Existing Loan Documents
remain unchanged and in full force and effect. Bank's agreement to
modifications to the existing Indebtedness pursuant to this Loan Modification
Agreement in no way shall obligate Bank to make any future modifications to the
Indebtedness. Nothing in this Loan Modification Agreement shall constitute a
satisfaction of the Indebtedness. It is the intention of Bank and Borrower to
retain as liable parties all makers and endorsers of Existing Loan Documents,
unless the party is expressly released by Bank in writing. No maker, endorser,
or guarantor will be released by virtue of this Loan Modification Agreement.
The terms of this paragraph apply not only to this Loan Modification Agreement,
but also to all subsequent loan modification agreements.
This Loan Modification Agreement is executed as of the date first written
above.
BORROWER: BANK:
QUICKLOGIC CORPORATION SILICON VALLEY BANK
By: VINCENT A. MCCORD By: ELLEN CHAO
---------------------- ----------------------
Name: VINCENT A. MCCORD Name: ELLEN CHAO
---------------------- ----------------------
Title: V.P., CFO Title: VP
---------------------- ----------------------
4
<PAGE>
LIBOR SUPPLEMENT TO AGREEMENT
This LIBOR Supplement to Agreement (the "Supplement") is a supplement to
the Loan and Security Agreement (the "Agreement") dated as of August 8, 1996,
between Silicon Valley Bank ("Bank") and Quicklogic Corporation ("Borrower"),
and forms a part of and is incorporated into the Agreement. Except as otherwise
defined in this Supplement, capitalized terms shall have the meanings assigned
in the Agreement.
1. Definitions.
------------
"Business Day" means a day of the year (a) that is not a Saturday,
Sunday or other day on which banks in the State of California or the City of
London are authorized or required to close and (b) on which dealings are carried
on in the interbank market in which Bank customarily participates.
"Interest Period" means for each LIBOR Rate Advance, a period of
approximately one, two or three months as the Borrower may elect, provided that
--------
the last day of an Interest Period for a LIBOR Rate Advance shall be
determined in accordance with the practices of the LIBOR interbank market as
from time to time in effect, provided, further, in all cases such period shall
--------- --------
expire not later than the applicable Maturity Date.
"Interest Rate" shall mean as to: (a) Prime Rate Advances, a rate equal
to the Prime Rate; and (b) LIBOR Rate Advances, a rate of 2.5% per annum in
excess of the LIBOR Rate (based on the LIBOR Rate applicable for the Interest
Period selected by the Borrower).
"LIBOR Base Rate" means, for any Interest Period for a LIBOR Rate
Advance, the rate of interest per annum determined by Bank to be the per annum
rate of interest at which deposits in United States Dollars are offered to Bank
in the London interbank market in which Bank customarily participates at 11:00
A.M. (local time in such interbank market) two (2) Business Days before the
first day of such Interest Period for a period approximately equal to such
Interest Period and in an amount approximately equal to the amount of such
Advance.
"LIBOR Rate" shall mean, for any Interest Period for a LIBOR Rate
Advance, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of
1%) equal to (i) the LIBOR Base Rate for such Interest Period divided by (ii) 1
minus the Reserve Requirement for such Interest Period.
"LIBOR Rate Advances" means any Advances made or a portion thereof on
which interest is payable based on the LIBOR Rate in accordance with the terms
hereof.
"Prime Rate Advances" means any Advances made or a portion thereof on
which interest is payable based on the Prime Rate in accordance with the terms
hereof.
"Regulatory Change" means, with respect to Bank, any change on or after
the date of this Agreement in United States federal, state or foreign laws or
regulations, including Regulation D, or the adoption or making on or after such
date of any interpretations, directives or requests applying to a class of
lenders including Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reserve Requirement" means, for any Interest Period, the average
maximum rate at which reserves (including any marginal, supplemental or
emergency reserves) are required to be maintained during such Interest Period
under Regulation D against "Eurocurrency liabilities" (as such term is used in
Regulation D) by member banks of the Federal Reserve System. Without limiting
the effect of the foregoing, the Reserve Requirement shall reflect any other
reserves required to be maintained by Bank by reason of any Regulatory Change
against (i) any category of liabilities which includes deposits by reference to
which the LIBOR Rate is to be determined as provided in the definition of "LIBOR
Base Rate" or (ii) any category of extensions of credit or other assets which
include Advances.
2. Requests for Advances; Confirmation of Initial Advances. Each LIBOR
--------------------------------------------------------
Rate Advance shall be made upon the irrevocable written request of Borrower by
Bank not later than 11:00 a.m. (Santa Clara,
1
<PAGE>
California time) on the Business "Business Day" means a day of the year (a) that
is not a Saturday, Sunday or Day three (3) Business Days prior to the date such
Advance is to be made. Each such notice shall specify the date such Advance is
to be made, which day shall be a Business Day; the amount of such Advance, the
Interest Period for such Advance, and comply with such other requirements as
Bank determines are reasonable or desirable in connection therewith.
Each written request for a LIBOR Rate Advance shall be in the form of a
LIBOR Rate Advance Form as set forth on Exhibit A, which shall be duly executed
by a Responsible Officer.
3. Conversion/Continuation of Advances.
------------------------------------
(a) Borrower may from time to time submit in writing a request
that Prime Rate Advances be converted to LIBOR Rate Advances or that any
existing LIBOR Rate Advances continue for an additional Interest Period. Such
request shall specify the amount of the Prime Rate Advances which will
constitute LIBOR Rate Advances (subject to the limits set forth below) and the
Interest Period to be applicable to such LIBOR Rate Advances. Each written
request for a conversion to a LIBOR Rate Advance or a continuation of a LIBOR
Rate Advance shall be substantially in the form of a LIBOR Rate
Conversion/Continuation Certificate as set forth on Exhibit B, which shall be
duly executed by a Responsible Officer. Subject to the terms and conditions
contained herein, three (3) Business Days after Bank's receipt of such a request
from Borrower, such Prime Rate Advances shall be converted to LIBOR Rate
Advances or such LIBOR Rate Advances shall continue, as the case may be provided
that:
(i) no Event of Default or event which with notice or
passage of time or both would constitute an Event of Default exists;
(ii) no party hereto shall have sent any notice of
termination of this Supplement or of the Agreement.
(iii) Borrower shall have complied with such customary
procedures as Bank has established from time to time for Borrower's requests for
LIBOR Rate Advances;
(iv) the amount of a LIBOR Rate Advance shall be $500,000
or such greater amount which is an integral multiple of $50,000; and
(v) Bank shall have determined that the Interest Period
or LIBOR Rate is available to Bank which can be readily determined as of the
date of the request for such LIBOR Rate Advance .
Any request by Borrower to convert Prime Rate Advances to LIBOR Rate
Advances or continue any existing LIBOR Rate Advances shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Bank shall not be
required to purchase United States Dollar deposits in the London interbank
market or other applicable LIBOR Rate market to fund any LIBOR Rate Advances,
but the provisions hereof shall be deemed to apply as if Bank had purchased such
deposits to fund the LIBOR Rate Advances.
(b) Any LIBOR Rate Advances shall automatically convert to Prime Rate
Advances upon the last day of the applicable Interest Period, unless Bank has
received and approved a complete and proper request to continue such LIBOR Rate
Advance at least three (3) Business Days prior to such last day in accordance
with the terms hereof. Any LIBOR Rate Advances shall, at Bank's option, convert
to Prime Rate Advances in the event that (i) an Event of Default, or event which
with the notice or passage of time or both would constitute an Event of Default,
shall exist, (ii) this Supplement or the Agreement shall terminate, or (iii) the
aggregate principal amount of the Prime Rate Advances which have previously been
converted to LIBOR Rate Advances, or the aggregate principal amount of existing
LIBOR Rate Advances continued, as the case may be, at the beginning of an
Interest Period shall at any time during such Interest Period exceeds the
Committed Line. Borrower agrees to pay to Bank, upon demand by Bank (or Bank
may, at its option, charge Borrower's deposit account) any amounts required to
compensate Bank for any loss (including loss of anticipated profits), cost or
expense incurred by such person, as a result of the conversion of LIBOR Rate
Advances to Prime Rate Advances pursuant to any of the foregoing.
2
<PAGE>
(c) On all Advances, Interest shall be payable by Borrower to Bank
monthly in arrears not later than the seventh (7th) day of each calendar month
at the applicable Interest Rate.
4. Additional Requirements/Provisions Regarding LIBOR Rate Advances;
-----------------------------------------------------------------
Etc.
- ----
(a) If for any reason (including voluntary or mandatory prepayment
or acceleration), Bank receives all or part of the principal amount of a LIBOR
Rate Advance prior to the last day of the Interest Period for such Advance,
Borrower shall immediately notify Borrower's account officer at Bank and, on
demand by Bank, pay Bank the amount (if any) by which (i) the additional
interest which would have been payable on the amount so received had it not been
received until the last day of such Interest Period exceeds (ii) the interest
which would have been recoverable by Bank by placing the amount so received on
deposit in the certificate of deposit markets or the offshore currency interbank
markets or United States Treasury investment products, as the case may be, for a
period starting on the date on which it was so received and ending on the last
day of such Interest Period at the interest rate determined by Bank in its
reasonable discretion. Bank's determination as to such amount shall be
conclusive absent manifest error.
(b) Borrower shall pay to Bank, upon demand by Bank, from time to
time such amounts as Bank may determine to be necessary to compensate it for any
costs incurred by Bank that Bank determines are attributable to its making or
maintaining of any amount receivable by Bank hereunder in respect of any
Advances relating thereto (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), in each case resulting from
any Regulatory Change which:
(i) changes the basis of taxation of any amounts payable
to Bank under this Supplement in respect of any Advances (other than changes
which affect taxes measured by or imposed on the overall net income of Bank by
the jurisdiction in which such Bank has its principal office); or
(ii) imposes or modifies any reserve, special deposit or
similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of Bank (including any Advances or any
deposits referred to in the definition of "LIBOR Base Rate"); or
(iii) imposes any other condition affecting this
Supplement (or any of such extensions of credit or liabilities).
Bank will notify Borrower of any event occurring after the date of the Agreement
which will entitle Bank to compensation pursuant to this section as promptly as
practicable after it obtains knowledge thereof and determines to request such
compensation. Bank will furnish Borrower with a statement setting forth the
basis and amount of each request by Bank for compensation under this Section 4.
Determinations and allocations by Bank for purposes of this Section 4 of the
effect of any Regulatory Change on its costs of maintaining its obligations to
make Advances or of making or maintaining Advances or on amounts receivable by
it in respect of Advances, and of the additional amounts required to compensate
Bank in respect of any Additional Costs, shall be conclusive absent manifest
error.
(c) Borrower shall pay to Bank, upon the request of Bank, such amount or
amounts as shall be sufficient (in the sole good faith opinion of such Bank) to
compensate it for any loss, costs or expense incurred by it as a result of any
failure by Borrower to borrow a LIBOR Rate Advance on the date for such
borrowing specified in the relevant notice of borrowing hereunder.
(d) If Bank shall determine that the adoption or implementation of any
applicable law, rule, regulation or treaty regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by
any governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any respect or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank or comparable agency, has or would have the effect of reducing the rate of
return on capital of Bank or any person or entity controlling Bank (a "Parent")
as a consequence of its obligations hereunder to a level below that which Bank
(or its Parent) could have achieved but for such adoption, change or compliance
(taking into consideration its policies with respect to capital adequacy) by an
amount deemed by Bank to be material, then from time to time,
3
<PAGE>
within 15 days after demand by Bank, Borrower shall pay to Bank such additional
amount or amounts as will compensate Bank for such reduction. A statement of
Bank claiming compensation under this Section and setting forth the additional
amount or amounts to be paid to it hereunder shall be conclusive absent manifest
error.
(e) If at any time Bank, in its sole and absolute discretion, determines
that: (i) the amount of the LIBOR Rate Advances for periods equal to the
corresponding Interest Periods are not available to Bank in the offshore
currency interbank markets, or (ii) the LIBOR Rate does not accurately reflect
the cost to Bank of lending the LIBOR Rate Advance, then Bank shall promptly
give notice thereof to Borrower, and upon the giving of such notice Bank's
obligation to make the LIBOR Rate Advances shall terminate, unless Bank and the
Borrower agree in writing to a different interest rate Advances shall terminate,
unless Bank and the Borrower agree in writing to a different interest rate
applicable to LIBOR Rate Advances. If it shall become unlawful for Bank to
continue to fund or maintain any Advances, or to perform its obligations
hereunder, upon demand by Bank, Borrower shall prepay the Advances in full with
accrued interest thereon and all other amounts payable by Borrower hereunder
(including, without limitation, any amount payable in connection with such
prepayment pursuant to Section 4(a)).
IN WITNESS WHEREOF, the undersigned have executed this LIBOR Supplement
to Agreement as of the first date above written.
QUICKLOGIC CORPORATION
By: /s/
-----------------------------------
Title:
--------------------------------
SILICON VALLEY BANK
By: /s/
-----------------------------------
Title:
--------------------------------
4
<PAGE>
EXHIBIT A
---------
LIBOR RATE ADVANCE FORM
The undersigned hereby certifies as follows:
I, , am the duly elected and acting
----------------------------
of Quicklogic Corporation ("Borrower").
- -----------------------
This certificate is delivered pursuant to Section 2 of that certain LIBOR
Supplement to Agreement together with the Loan and Security Agreement by and
between Borrower and Silicon Valley Bank ("Bank") (the "Agreement"). The terms
used in this Borrowing Certificate which are defined in the Agreement have the
same meaning herein as ascribed to them therein.
Borrower hereby requests on , 19 a LIBOR Rate Advance (the "Advance")
----- --
as follows:
(a) The date on which the Advance is to be made is , 19 .
------------- --
(b) The amount of the Advance is to be ($ ), for
----------------------------
an Interest Period of month(s).
All representations and warranties of Borrower stated in the Agreement are
true, correct and complete in all material respects as of the date of this
request for a loan; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
IN WITNESS WHEREOF, this LIBOR Rate Advance Form is executed by the
undersigned as of this day of , 19 .
--------------- ------------------------- ---
QUICKLOGIC CORPORATION
By:
---------------------------------
Title:
------------------------------
For Internal Bank Use Only
<TABLE>
<CAPTION>
LIBOR Pricing Date LIBOR Rate LIBOR Rate Variance Maturity Date
- -------------------------------------------------------------------------
<S> <C> <C> <C>
%
---
=========================================================================
</TABLE>
5
<PAGE>
EXHIBIT B
---------
LIBOR RATE CONVERSION/CONTINUATION CERTIFICATE
The undersigned hereby certifies as follows:
I, , am the duly elected and acting
---------------------------- -----------
of Quicklogic Corporation ("Borrower").
This certificate is delivered pursuant to Section 2 of that certain LIBOR
Supplement to Agreement together with the Loan Agreement by and between Borrower
and Silicon Valley Bank ("Bank") (the "Agreement"). The terms used in this
LIBOR Rate Conversion/Continuation Certificate which are defined in the
Agreement have the same meaning herein as ascribed to them therein.
Borrower hereby requests on , 19 a LIBOR Rate Advance
---------------- --
as follows:
(a) (i) A rate conversion of an existing Prime Rate Advance
----
to a LIBOR Rate Advance; or
(ii) A continuation of an existing LIBOR Rate Advance as a
----
LIBOR Rate Advance;
[Check (i) or (ii) above]
(b) The date on which the Advance is to be made is , 19 .
---------------- --
(c) The amount of the Advance is to be ($ )
----------------------- -------,
for an Interest Period of month(s)
--------
All representations and warranties of Borrower stated in the Agreement
are true, correct and complete in all material respects as of the date of this
request for a loan; provided, however, that those representations and warranties
expressly referring to another date shall be true, correct and complete in all
material respects as of such date.
IN WITNESS WHEREOF, this LIBOR Rate Conversion/Continuation Certificate
is executed by the undersigned as of this day of , 19 .
------- ----------------- --
QUICKLOGIC CORPORATION
By:
________________________________________
Title:
______________________________________
For Internal Bank Use Only
<TABLE>
<CAPTION>
LIBOR Pricing Date LIBOR Rate LIBOR Rate Variance Maturity Date
- -------------------------------------------------------------------------
<S> <C> <C> <C>
%
----
=========================================================================
</TABLE>
6
<PAGE>
EXHIBIT 10.18
QUICKLOGIC CORPORATION
EXPORT-IMPORT BANK
LOAN AND SECURITY AGREEMENT
1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. DEFINITIONS AND CONSTRUCTION................................... 1
1.1 Definitions............................................... 1
2. LOAN AND TERMS OF PAYMENT...................................... 3
2.1 Revolving Advances........................................ 3
2.2 Overadvances.............................................. 3
2.3 Interest Rates, Payments, and Calculations................ 3
2.4 Crediting Payments........................................ 4
2.5 Fees...................................................... 4
2.6 Increased Costs........................................... 4
2.7 Term...................................................... 5
2.8 Use of Proceeds........................................... 5
3. CONDITIONS OF LOANS............................................ 5
3.1 Conditions Precedent to Initial Advance................... 5
3.2 Conditions Precedent to all Advances...................... 5
4. CREATION OF SECURITY INTEREST.................................. 6
4.1 Grant of Security Interest................................ 6
4.2 Delivery of Additional Documentation Required............. 6
4.3 Power of Attorney......................................... 6
4.4 Right to Inspect.......................................... 6
5. REPRESENTATIONS AND WARRANTIES................................. 6
5.1 Domestic Loan Documents................................... 7
6. AFFIRMATIVE COVENANTS.......................................... 7
6.1 Domestic Loan Documents................................... 7
6.2 Terms of Sale............................................. 7
6.3 Borrower Agreement........................................ 7
6.4 Notice in Event of Filing of Action for Debtor's Relief... 7
6.5 Payment in Dollars........................................ 7
6.6 Further Assurances........................................ 7
7. NEGATIVE COVENANTS............................................. 7
7.1 Domestic Loan Documents................................... 7
7.2 Loans to Shareholders or Affiliates....................... 8
7.3 Borrower Agreement........................................ 8
7.4 Exim Guarantee............................................ 8
8. EVENTS OF DEFAULT.............................................. 8
8.1 Payment Default........................................... 8
8.2 Covenant Default; Cross Default........................... 8
8.3 Exim Guarantee............................................ 8
9. BANK'S RIGHTS AND REMEDIES..................................... 8
9.1 Rights and Remedies....................................... 8
9.2 Exim Direction............................................ 9
9.3 Exim Notification......................................... 9
9.4 Remedies Cumulative....................................... 9
10. WAIVERS; INDEMNIFICATION....................................... 10
10.1 Demand; Protest......................................... 10
</TABLE>
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<PAGE>
<TABLE>
<S> <C>
10.2 Bank's Liability for Inventory............... 10
10.3 Indemnification.............................. 10
11. NOTICES............................................. 10
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.......... 10
13. GENERAL PROVISIONS.................................. 10
13.1 Successors and Assigns....................... 10
13.2 Time of Essence.............................. 11
13.3 Severability of Provisions................... 11
13.4 Amendments in Writing........................ 11
13.5 Counterparts................................. 11
13.6 Survival..................................... 11
</TABLE>
3
<PAGE>
This EXPORT-IMPORT BANK LOAN AND SECURITY AGREEMENT (the "Exim Agreement") is
entered into as of August 8, 1996, by and between SILICON VALLEY BANK ("Bank")
and QuickLogic Corporation ("Borrower").
RECITALS
A. Borrower and Bank are parties to that certain Loan and Security
Agreement of even date herewith (the "Domestic Agreement"), together with
related documents.
B. Borrower and Bank desire in this Exim Agreement to set forth their
agreement with respect to a working capital sub-facility to be guaranteed by
Export-Import Bank of the United States.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
----------------------------
1.1 Definitions. Except as otherwise defined, terms that are
-----------
capitalized in this Exim Agreement shall have the meaning assigned in the
Domestic Loan Documents. As used in this Exim Agreement, the following terms
shall have the following definitions:
"Borrower Agreement" means the Export-Import Bank of the United
States Working Capital Guarantee Program Borrower Agreement between Borrower and
Bank.
"Borrowing Base" has the meaning set forth in Section 2.1 hereof.
"Domestic Agreement" has the meaning set forth in recital
paragraph A.
"Domestic Loan Documents" means the Domestic Agreement and the
instruments and documents executed in connection with that Agreement.
"Exim Bank" means Export-Import Bank of the United States.
"Exim Bank Expenses" means all: reasonable costs or expenses
(including reasonable attorneys' fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents, including any costs incurred in relation to opposing or seeking to
obtain relief from any stay or restructuring order prohibiting Bank from
exercising its rights as a secured creditor, foreclosing upon or disposing of
Collateral, or such related matters; fees that Bank pays to Exim Bank in
consideration of the issuance of the Exim Guarantee; and Bank's reasonable
attorneys' fees and expenses incurred in amending, enforcing or defending the
Loan Documents, whether or not suit is brought.
"Exim Committed Line" means One Million Dollars ($1,000,000).
"Exim Eligible Foreign Accounts" means those Accounts payable in
United States Dollars that arise in the ordinary course of Borrower's business
from Borrower's sale of Eligible Foreign Inventory (i) with respect to which the
account debtor is not a resident of the United States; and (ii) that have been
validly assigned and comply with all of Borrower's representations and
warranties to Bank; standards of eligibility may be fixed and revised from time
to time by Bank in Bank's reasonable judgment and upon notification thereof to
the Borrower in accordance with the provisions hereof. Exim Eligible Foreign
Accounts shall not include the following:
(a) Accounts with a term in excess of ninety (90) days, except
for Accounts of up to 120 days as approved by Bank in writing;
(b) Accounts that the account debtor has failed to pay within
sixty (60) calendar days of the original due date of the invoice unless such
Accounts are insured through Exim Bank export credit insurance for comprehensive
commercial
4
<PAGE>
and political risk, or through Exim Bank approved private insurers for
comparable coverage, in which case ninety (90) calendar days shall apply;
(c) Accounts with respect to an account debtor, fifty percent (50%) of
whose Accounts the account debtor has failed to pay within ninety (90) days of
the original date of invoice;
(d) Accounts evidenced by a letter of credit until the date of shipment of
the items covered by the subject letter of credit;
(e) Accounts with respect to which the account debtor is an Affiliate of
Borrower;
(f) Accounts with respect to which the account debtor is located in a
country in which Exim Bank is legally prohibited from doing business;
(g) Accounts with respect to which the account debtor is located in a
country in which Exim Bank coverage is not available for commercial reasons;
(h) Accounts with respect to which Borrower is liable to the account
debtor for goods sold or services rendered by the account debtor to Borrower,
but only to the extent of Borrower's liability to such account debtor;
(i) Accounts with respect to which the account debtor disputes liability
or makes any claim with respect thereto (but only to the extent of the amount
subject to such dispute or claim), or is subject to any Insolvency Proceeding,
or becomes insolvent, or goes out of business;
(j) Accounts with respect to an account debtor, including Subsidiaries and
Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%)
of all Accounts, to the extent such obligations exceed such percentage, except
as approved in writing by Bank;
(k) Accounts generated by the sale of products purchased for military
purposes;
(l) Accounts generated by sales of Inventory which constitutes defense
articles or defense services;
(m) Accounts payable in currency other than Dollars;
(n) Accounts which are due and owing and the collection of which must be
made outside the United States;
(o) Accounts the collection of which Bank or Exim Bank determines in its
reasonable judgment to be doubtful; and
(p) Accounts that are excluded from the Borrowing Base under the Borrower
Agreement.
"Exim Eligible Foreign Inventory" means Inventory purchased or
manufactured by Borrower for resale located in the United States, other than
Inventory that is excluded under the Borrower Agreement and this Exim Agreement.
Eligible Foreign Inventory shall not include the following:
(a) any Inventory which is not located in the United States;
(b) any demonstration Inventory or Inventory sold on consignment;
(c) any Inventory consisting of proprietary software;
(d) any Inventory which is damaged, obsolete, returned, defective,
recalled or unfit for further processing;
5
<PAGE>
(e) any Inventory which has been previously exported from the United
States;
(f) any Inventory which constitutes defense articles or defense services;
(g) any Inventory which is to be incorporated into items destined for
shipment to a country in which Exim Bank is legally prohibited from doing
business;
(h) any Inventory which is to be incorporated into items destined for
shipment to a country in which Exim Bank coverage is not available for
commercial reasons, except to the extent such items are sold to such country on
terms of a letter of credit confirmed by a bank acceptable to Exim Bank; and
(i) any Inventory which is to be incorporated into items whose sale would
result in an ineligible Account Receivable.
"Exim Guarantee" means that certain Master Guarantee Agreement or other
agreement, as amended from time to time, the terms of which are incorporated by
reference into this Exim Agreement, pursuant to which Exim Bank guarantees
Borrower's obligations under this Exim Agreement.
"Exim Loan Documents" means, collectively, this Exim Agreement, the
Domestic Loan Documents, any note or notes executed by Borrower, and any other
agreement entered into between Borrower and Bank in connection with this Exim
Agreement, all as amended or extended from time to time.
"Exim Maturity Date" means the earliest of (i) the Maturity Date under the
Domestic Loan Documents, (ii) August 7, 1997 or (iii) the Initial Public
Offering.
2. LOAN AND TERMS OF PAYMENT
-------------------------
2.1 Revolving Advances. Subject to the terms and conditions of this Exim
------------------
Agreement, Bank agrees to make Advances to Borrower in an amount not to exceed
the lesser of the Exim Committed Line or the Borrowing Base. For purposes of
this Exim Agreement "Borrowing Base" shall mean an amount equal to the sum of
(i) eighty percent (80%) of the Exim Eligible Foreign Accounts plus (ii) forty
percent (40%) of the Exim Eligible Foreign Inventory.
To evidence the Advances, Borrower shall execute and deliver to Bank on the
date hereof a promissory note (the "Note") in substantially the form attached
hereto as Exhibit B.
Whenever Borrower desires an Advance, Borrower will notify Bank by facsimile
transmission or telephone no later than 3:00 p.m. California time, on the
Business Day that the Advance is to be made. Each such notification shall be
promptly confirmed by a Payment/Advance Form in substantially the form of
Exhibit C hereto. In addition to the procedure set forth in the preceding
sentence, Bank is authorized to make Advances under this Exim Agreement, based
upon written instructions received from a Responsible Officer or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank will credit the
amount of Advances made under this Section 2.1 to Borrower's deposit account.
Amounts borrowed pursuant to this Section 2.1 may be repaid and re-borrowed at
any time during the term of this Exim Agreement so long as no Event of Default
has occurred and is continuing.
2.2 Overadvances. If, at any time or for any reason, the amount of
------------
Obligations pursuant to this Exim Agreement owed by Borrower to Bank pursuant to
Section 2.1 of this Exim Agreement is greater than the lesser of (i) the
Borrowing Base or (ii) the Exim Committed Line, at the option of Bank, Borrower
shall immediately pay to Bank, in cash, the amount of such excess.
2.3 Interest Rates, Payments, and Calculations.
------------------------------------------
(a) Interest Rate. Except as specified to the contrary in any Loan
-------------
Document, any Advances under this Exim Agreement shall bear interest, on the
average Daily Balance, at a rate equal to the Prime Rate.
6
<PAGE>
(b) Default Rate. All Obligations shall bear interest, from and after
------------
the occurrence of an Event of Default, at a rate equal to five (5) percentage
points above the rate that applied immediately prior to the occurrence of the
Event of Default.
(c) Payments. Interest hereunder shall be due and payable on the
--------
seventh calendar day of each calendar month during the term hereof. Bank shall,
at its option, charge such interest, all Exim Bank Expenses, and all Periodic
Payments against Borrower's deposit account or against the Exim Committed Line,
in which case those amounts shall thereafter accrue interest at the rate then
applicable hereunder. Any interest not paid when due shall be compounded by
becoming a part of the Obligations, and such interest shall thereafter accrue
interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
-----------
time hereafter, the applicable rate of interest hereunder shall be increased or
decreased contemporaneously with such change by an amount equal to such change
in the Prime Rate. All interest chargeable under the Exim Loan Documents shall
be computed on the basis of a three hundred sixty (360) day year for the actual
number of days elapsed.
2.4 Crediting Payments. The receipt by Bank of any wire transfer of
------------------
funds, check, or other item of payment shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment on
account unless such wire transfer is of immediately available federal funds and
is made to the appropriate deposit account of Bank or unless and until such
check or other item of payment is honored when presented for payment.
Notwithstanding anything to the contrary contained herein, any payment (other
than a wire transfer of immediately available funds) received by Bank after
12:00 noon California time shall be deemed to have been received by Bank as of
the opening of business on the immediately following Business Day.
2.5 Fees. Borrower shall pay to Bank the following fees:
----
(a) Financial Examination and Appraisal Fees. Bank's reasonable
----------------------------------------
fees and reasonable out-of-pocket expenses for Bank's initial audit of
Borrower's Accounts and Inventory, and for each subsequent appraisal of
Collateral and financial analysis and examination of Borrower performed from
time to time by Bank or its agents;
(b) Exim Fee. A facility fee equal to Fifteen Thousand Dollars
--------
($15,000), which fee shall be due and fully earned upon the Closing Date; and
(c) Exim Bank Expenses. On the Closing Date, Exim Bank Expenses
------------------
incurred through the Closing Date and, after the Closing Date, all Exim Bank
Expenses as they become due.
2.6 Increased Costs. In case any law, regulation, treaty or official
---------------
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal
or interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof); or
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to their
performance under this Exim Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof. Borrower agrees to pay to Bank
the amount of such increase in cost, reduction in income or additional expense
as and when such cost, reduction or expense is incurred or determined, upon
presentation all in reasonable detail by Bank of a statement in the amount and
setting forth Bank's calculation thereof, which statement shall be deemed true
and correct absent manifest error.
2.7 Term. This Exim Agreement shall become effective once duly executed
----
and authorized by Borrower and Bank and shall continue in full force and effect
for a term ending on the Exim Maturity Date, on which date all Obligations shall
7
<PAGE>
become immediately due and payable. Notwithstanding the foregoing, Bank shall
have the right to terminate this Exim Agreement immediately and without notice
upon the occurrence of an Event of Default and Borrower shall have the right to
terminate this Exim Agreement immediately upon payment in full of its
Obligations then outstanding hereunder. Notwithstanding any termination of this
Exim Agreement, all of Bank's security interest in all of the Collateral and all
of the terms and provisions of this Exim Agreement shall continue in full force
and effect until all Obligations have been paid and performed in full, and no
termination shall impair any right or remedy of Bank, nor shall any such
termination relieve Borrower of any Obligation to Bank until all of the
Obligations have been paid and performed in full.
2.8 Use of Proceeds. Borrower will use the proceeds of Advances only for
---------------
the purposes specified in the Borrower Agreement. Borrower shall not use the
proceeds of the Advances for any purpose prohibited by the Borrower Agreement.
3. CONDITIONS OF LOANS
-------------------
3.1 Conditions Precedent to Initial Advance. The obligation of Bank to
---------------------------------------
make the initial Advance is subject to the condition precedent that Bank shall
have received, in form and substance satisfactory to Bank, the following:
(a) this Exim Agreement, the Borrower Agreement and the Note, each
duly executed by Borrower;
(b) a certificate of the secretary of Borrower with respect to
incumbency and resolutions authorizing the execution and delivery of this Exim
Agreement;
(c) the Exim Guarantee;
(d) payment of the fees and Exim Bank Expenses then due and
specified in Section 2.5 hereof;
(e) documents and agreements as specified in Section 3.1 of the
Domestic Agreement; and
(f) such other documents, and completion of such other matters, as
Bank may deem reasonably necessary or appropriate.
3.2 Conditions Precedent to all Advances. The obligation of Bank to
------------------------------------
make each Advance, including the initial Advance, is further subject to the
following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided
in Section 2.1;
(b) timely receipt by Bank of a copy of the executed firm written
export purchase order relating to the requested Advance, the payment terms of
which shall be acceptable to Bank;
(c) timely receipt by Bank of an Export Order and Borrowing Base
Certificate as defined in the Borrower Agreement;
(d) the Exim Guarantee shall be in full force and effect; and
(e) the representations and warranties contained in Section 5
hereof shall be true and accurate in all material respects on and as of the date
of such Payment/Advance Form and on the effective date of each Advance as though
made at and as of each such date (except to the extent they relate specifically
to an earlier date, in which case such representations and warranties shall
continue to have been true and accurate as of such date), and no Potential Event
of Default or Event of Default shall have occurred and be continuing, or would
result from such Advance.
The making of each Advance shall be deemed to be a representation and
warranty by Borrower on the date of such Advance as to the accuracy of the facts
referred to in subsection (e) of this Section 3.2.
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower hereby grants to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt repayment of any and all
Obligations and in order to secure prompt performance by Borrower of each of its
covenants and duties under the Exim Loan Documents.
8
<PAGE>
4.2 Delivery of Additional Documentation Required. Borrower shall
---------------------------------------------
from time to time execute and deliver to Bank, at the request of Bank, all
financing statements and other documents that Bank may reasonably request, in
form satisfactory to Bank, to perfect and continue perfected Bank's security
interests in the Collateral and in order to fully consummate all of the
transactions contemplated under the Exim Loan Documents.
4.3 Power of Attorney. Effective only upon the occurrence and
-----------------
during the continuance of an Event of Default, Borrower hereby irrevocably
appoints Bank (and any of Bank's designated officers, or employees) as
Borrower's true and lawful attorney, with power to: (a) send requests for
verification of Accounts; (b) endorse Borrower's name on any checks or other
forms of payment or security that may come into Bank's possession; (c) sign the
name of Borrower on any of the documents described in Section 4.2 (regardless of
whether an Event of Default has occurred); (d) sign Borrower's name on any
invoice or bill of lading relating to any Account, drafts against account
debtors, schedules and assignments of Accounts, verifications of Accounts, and
notices to account debtors; (e) make, settle, and adjust all claims under and
decisions with respect to Borrower's policies of insurance; and (f) settle and
adjust disputes and claims respecting the accounts directly with account
debtors, for amounts and upon terms which Bank determines to be reasonable. The
appointment of Bank as Borrower's attorney-in-fact, and each of Bank's rights
and powers, being coupled with an interest, is irrevocable until all of the
Obligations have been fully repaid and Bank's obligation to provide Advances
hereunder is terminated.
4.4 Right to Inspect. Each of Bank and Exim Bank (through any of
----------------
their respective officers, employees, or agents) shall have the right, upon
reasonable prior notice, from time to time during Borrower's usual business
hours, to inspect Borrower's Books, facilities and activities, and to check,
test, and appraise the Collateral in order to verify Borrower's financial
condition or the amount, condition of, or any other matter relating to, the
Collateral. Bank shall conduct semi-annual accounts receivable audits and
physical inspections of the Inventory, the results of which audits shall be
satisfactory to Bank. Borrower will cause its officers and employees to give
their full cooperation and assistance in connection therewith.
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents, warrants and covenants as follows:
5.1 Domestic Loan Documents. The representations and warranties
-----------------------
contained in the Domestic Loan Documents, which are incorporated into this Exim
Agreement, are true and correct.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of the
Obligations, Borrower shall do all of the following:
6.1 Domestic Loan Documents. Borrower shall comply in all respects
-----------------------
with the provisions of the Domestic Loan Documents, which provisions are
incorporated into this Exim Agreement.
6.2 Terms of Sale. Borrower shall cause all sales of products upon
-------------
which Advances are based either to be (i) supported by one or more irrevocable
letters of credit in an amount and of a tenor, naming a beneficiary and issued
by a financial institution acceptable to Bank or (ii) on open account to
creditworthy buyers that have been preapproved in writing by Bank and Exim Bank.
6.3 Borrower Agreement. Borrower shall comply with all of the terms
------------------
of the Borrower Agreement. In the event of any conflict or inconsistency between
any provision contained in the Borrower Agreement with any provision contained
in this Exim Agreement, the more strict provision, with respect to Borrower,
shall control.
6.4 Notice in Event of Filing of Action for Debtor's Relief.
-------------------------------------------------------
Borrower shall notify Bank in writing within five (5) days of the occurrence of
any of the following: (1) Borrower begins or consents in any manner to any
proceeding or arrangement for its liquidation in whole or in part or to any
other proceeding or arrangement whereby any of its assets are subject generally
to the payment of its liabilities or whereby any receiver, trustee, liquidator
or the like is appointed for it or any substantial part of its assets (including
without limitation the filing by Borrower of a petition for appointment as a
debtor-in-possession under Title 11 of the U.S. Code); (2) Borrower fails to
obtain the dismissal or stay on appeal within thirty (30) calendar days of the
commencement of any proceeding arrangement referred to in (1) above; (3)
Borrower begins any other procedure for the relief of financially distressed or
insolvent debtors, or such procedure has been commenced against it, whether
voluntarily or involuntarily, and such procedure has not
9
<PAGE>
been effectively terminated, dismissed or stayed within thirty (30) calendar
days after the commencement thereof, or (4) Borrower begins any procedure for
its dissolution, or a procedure therefor has been commenced against it.
6.5 Payment in Dollars. Borrower shall require payment in United States
------------------
Dollars for the products, unless Exim Bank otherwise agrees in writing.
6.6 Further Assurances. At any time and from time to time Borrower shall
------------------
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Exim Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that so long as any credit hereunder shall
be available and until payment in full of the Obligations, Borrower will not do
any of the following, or enter into any agreement to do any of the following:
7.1 Domestic Loan Documents. Violate or otherwise fail to comply with any
-----------------------
provisions of the Domestic Loan Documents, which provisions are incorporated
into this Exim Agreement.
7.2 Loans to Shareholders or Affiliates. Without Exim Bank's prior written
-----------------------------------
consent, make any loans to any shareholder or entity affiliated with Borrower.
As used in this Section 7.2, the term "loan" does not include salary, rent paid
to an affiliated entity owned by the shareholders, or to other expenses incurred
in the ordinary course of Borrower's business.
7.3 Borrower Agreement. Violate or otherwise fail to comply with any
------------------
provision of the Borrower Agreement.
7.4 Exim Guarantee. Take any action, or permit any action to be taken,
--------------
that causes or, with the passage of time, could reasonably be expected to cause,
the Exim Guarantee to cease to be in full force and effect.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Exim Agreement:
8.1 Payment Default. If Borrower fails to pay the principal of, or any
---------------
interest on, any Advances when due and payable; or fails to pay any portion of
any other Obligations not constituting such principal or interest, including
without limitation Exim Bank Expenses (or any interest but for the provisions of
the United States Bankruptcy Code, would have occurred on any accounts), within
thirty (30) days of receipt by Borrower of an invoice therefor;
8.2 Covenant Default; Cross Default. If Borrower fails or neglects to
-------------------------------
perform, keep, or observe any material term, provision, condition, covenant, or
agreement contained in this Exim Agreement, in any of the Domestic Loan
Documents, the Borrower Agreement or the Exim Loan Documents, or an Event of
Default occurs under any of the Domestic Loan Documents or the Borrower
Agreement; or
8.3 Exim Guarantee. If the Exim Guarantee ceases for any reason to be in
--------------
full force and effect, or if the Exim Bank declares the Exim Guarantee void or
revokes or purports to revoke any obligations under the Exim Guarantee.
9. BANK'S RIGHTS AND REMEDIES
--------------------------
9.1 Rights and Remedies. Upon the occurrence of an Event of Default, Bank
-------------------
may, at is election, without notice and without demand, do any one or more of
the following:
(a) Declare all Obligations, whether evidenced by this Exim
Agreement, by any of the other Exim Loan Documents, or otherwise, immediately
due and payable;
(b) Cease advancing money or extending credit to or for the benefit
of Borrower under this Exim Agreement or under any other agreement between
Borrower and Bank;
10
<PAGE>
(c) Settle or adjust disputes and claims directly with account
debtors for amounts, upon terms and in whatever order that Bank reasonably
considers advisable;
(d) Notify customers of Borrower or other third parties to pay any
amounts owing to Borrower directly to Bank;
(e) Without notice to or demand upon Borrower, make such payments and
do such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral. Borrower agrees to assemble the Collateral if Bank
so requires, and to make the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the Collateral is located,
to take and maintain possession of the Collateral, or any part of it, and to
pay, purchase, contest, or compromise any encumbrance, charge, or lien which in
Bank's determination appears to be prior or superior to its security interest
and to pay all expenses incurred in connection therewith. With respect to any of
Borrower's owned premises, Borrower hereby grants Bank a license to enter into
possession of such premises and to occupy the same, without charge, in order to
exercise any of Bank's rights or remedies provided herein, at law, in equity, or
otherwise;
(f) Set off and apply to the Obligations any and all (i) balances and
deposits of Borrower held by Bank, or (ii) indebtedness at any time owing to or
for the credit or the account of Borrower held by Bank;
(g) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a license or other right, solely pursuant to
the provisions of this section 9.1, to use, without charge, Borrower's labels,
patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar
nature, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and, in connection with Bank's
exercise of its rights under this section 9.1, Borrower's rights under all
licenses and all franchise agreements shall inure to Bank's benefit;
(h) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Bank determines is
commercially reasonable;
(i) Bank may credit bid and purchase at any public sale; and
(j) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
9.2 Exim Direction. Upon the occurrence of an Event of Default, Exim Bank
--------------
shall have a right to: (i) direct Bank to exercise the remedies specified in
section 9.1 and (ii) request that Bank accelerate the maturity of any other
loans to Borrower as to which Bank has a right to accelerate.
9.3 Exim Notification. Bank shall have the right to immediately notify
-----------------
Exim Bank in writing if it has knowledge of the occurrence of any of the
following events: (1) any failure to pay any amount due under this Loan Exim
Agreement or the Note; (2) the Borrowing Base is less than the sum of
outstanding Advances hereunder; (3) any failure to pay when due any amount
payable to Bank by the Borrower under any loan(s) extended by Bank to Borrower;
(4) the filing of an action for debtor's relief by, against, or on behalf of
Borrower; or (5) any threatened or pending material litigation against Borrower,
or any material dispute involving Borrower.
In the event that it sends such a notification to Exim Bank, Bank shall have
the right to thereafter send Exim Bank a written report on the status of the
events covered by said notification on each Business Day which occurs every
thirty (30) calendar days after the date of said notification, until such time
as Bank files a claim with Exim Bank or said default or other events have been
cured. Bank shall not have any obligation to make any Advances following said
notification to Exim Bank, unless Exim Bank gives its written approval thereto.
If directed to do so by Exim Bank, Bank shall have a right promptly to exercise
any rights it may have against Borrower to demand the immediate repayment of all
amounts outstanding under the Exim Loan Documents.
9.4 Remedies Cumulative. Bank's rights and remedies under this Exim
-------------------
Agreement, the Exim Loan Documents, the Domestic Loan Documents and all other
agreements shall be cumulative. Bank shall have all other rights and remedies
not inconsistent herewith as provided under the Code, by law, or in equity. No
exercise by Bank of one right or remedy
11
<PAGE>
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it.
10. WAIVERS; INDEMNIFICATION
------------------------
10.1 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10.2 Bank's Liability for Inventory. Bank shall not in any way or
------------------------------
manner be liable or responsible for: (a) the safekeeping of the Collateral; (b)
any loss or damage thereto occurring or arising in any manner or fashion from
any cause; (c) any diminution in the value thereof; or (d) any act or default of
any carrier, warehouseman, bailee, forwarding agency, or other person
whomsoever. All risk of loss, damage or destruction of the Collateral shall be
borne by Borrower.
10.3 Indemnification. Borrower agrees to defend, indemnify and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by this Exim Agreement,
and (b) all losses or Exim Bank Expenses in any way suffered, incurred, or paid
by Bank as a result of or in any way arising out of, following, or consequential
to transactions between Bank and Borrower whether under this Exim Agreement, or
otherwise (including without limitation reasonable attorneys fees and expenses),
except for losses caused by Bank's gross negligence or willful misconduct.
11. NOTICES
-------
Unless otherwise provided in this Exim Agreement, all notices or
demands by any party relating to this Exim Agreement or any other agreement
entered into in connection herewith shall be in writing and (except for
financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, or by telefacsimile
to Borrower or to Bank, as the case may be, at the address set forth in the
Domestic Loan Documents. The parties hereto may change the address at which they
are to receive notices hereunder, by notice in writing in the foregoing manner
given to the other.
12. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER
------------------------------------------
This Exim Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of California, without regard to principles
of conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of Santa
Clara, State of California. BORROWER AND BANK HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE EXIM LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED
THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL
OTHER COMMON LAW OR STATUTORY CLAIMS.
13. GENERAL PROVISIONS
------------------
13.1 Successors and Assigns. This Exim Agreement shall bind and inure
----------------------
to the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Exim Agreement nor any rights
hereunder may be assigned by Borrower without Bank's prior written consent,
which consent may be granted or withheld in Bank's sole discretion. Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participations in all or any part of, or any interest in
Bank's rights and benefits hereunder.
13.2 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Exim Agreement.
13.3 Severability of Provisions. Each provision of this Exim Agreement
--------------------------
shall be severable from every other provision of this Exim Agreement for the
purpose of determining the legal enforceability of any specific provision.
12
<PAGE>
13.4 Amendments in Writing. This Exim Agreement cannot be changed or
---------------------
terminated orally. Without the prior written consent of Exim Bank, no material
amendment of or deviation from the terms of this Exim Agreement or the Note
shall be made that would adversely affect the interests of Exim Bank under the
Exim Guarantee, including without limitation the rescheduling of any payment
terms provided for in this Exim Agreement. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties hereto with respect to the subject matter of this Exim Agreement, if
any, are merged into this Exim Agreement.
13.5 Counterparts. This Exim Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Exim
Agreement.
13.6 Survival. All covenants, representations and warranties made in
--------
this Exim Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Bank
with respect to the expenses, damages, losses, costs and liabilities described
in Section 10.3 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Bank have run.
IN WITNESS WHEREOF, the parties hereto have caused this Exim Agreement
to be executed as of the date first above written .
QUICKLOGIC CORPORATION
By: /s/
------------------------------------
Title:
---------------------------------
SILICON VALLEY BANK
By: /s/
------------------------------------
Title:
---------------------------------
13
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower
in and to the following:
14. All goods and equipment now owned or hereafter acquired, including,
without limitation, all machinery, fixtures, vehicles (including motor vehicles
and trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
15. All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above, and
Borrower's Books relating to any of the foregoing;
16. All contract rights and general intangibles now owned or hereafter
acquired;
17. All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower and Borrower's Books
relating to any of the foregoing;
18. All documents, cash, deposit accounts, securities, letters of
credit, certificates of deposit, instruments and chattel paper now owned or
hereafter acquired and Borrower's Books relating to the foregoing; and
19. Any and all claims, rights and interests in any of the above and all
substitutions for, additions and accessions to and proceeds thereof.
Notwithstanding the foregoing, the Collateral shall not include trademarks,
servicemarks, trade styles, trade names, patents, patent applications, leases,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative
work thereof, whether published or unpublished, now owned or hereafter acquired;
all trade secret rights, including all rights to unpatented inventions, know-
how, operating manuals, license rights and agreements and confidential
information, now owned or hereafter acquired; all mask work or similar rights
available for the protection of semiconductor chips, now owned or hereafter
acquired; all claims for damages by way of any past, present and future
infringement of any of the foregoing.
14
<PAGE>
EXHIBIT B
Revolving Promissory Note
(Export-Import Line)
$1,000,000 Santa Clara, California
August 8, 1996
FOR VALUE RECEIVED, the undersigned, QuickLogic Corporation (the
"Borrower"), promises to pay to the order of Silicon Valley Bank ("Bank"), at
such place as the holder hereof may designate, in lawful money of the United
States of America, the aggregate unpaid principal amount of all advances
("Advances") made by Bank to Borrower under the terms of this Note, up to a
maximum principal amount of One Million Dollars ($1,000,000). Borrower shall
also pay interest on the aggregate unpaid principal amount of such Advances at
the rates and in accordance with the terms of the Export-Import Bank Loan and
Security Agreement between Borrower and Bank of even date herewith, as amended
from time to time (the "Loan Agreement") on the seventh calendar day of each
month after an Advance has been made. The entire principal amount and all
accrued interest shall be due and payable on August 7, 1997, or on such earlier
date, as provided for in the Loan Agreement.
Borrower irrevocably waives the right to direct the application of any and
all payments at any time hereafter received by Bank from or on behalf of
Borrower, and Borrower irrevocably agrees that Bank shall have the continuing
exclusive right to apply any and all such payments against the then due and
owing obligations of Borrower as Bank may deem advisable. In the absence of a
specific determination by Bank with respect thereto, all payments shall be
applied in the following order: (a) then due and payable fees and expenses; (b)
then due and payable interest payments and mandatory prepayments; and (c) then
due and payable principal payments and optional prepayments.
Bank is hereby authorized by Borrower to endorse on Bank's books and
records each Advance made by Bank under this Note and the amount of each payment
or prepayment of principal of each such Advance received by Bank; it being
understood, however, that failure to make any such endorsement (or any errors in
notation) shall not affect the obligations of Borrower with respect to Advances
made hereunder, and payments of principal by Borrower shall be credited to
Borrower notwithstanding the failure to make a notation (or any errors in
notation) thereof on such books and records.
Borrower promises to pay Bank all reasonable costs and reasonable expenses
of collection of this Note and to pay all reasonable attorneys' fees incurred in
such collection or in any suit or action to collect this Note or in any appeal
thereof. Borrower waives presentment, demand, protest, notice of protest,
notice of dishonor, notice of nonpayment, and any and all other notices and
demands in connection with the delivery, acceptance, performance, default or
enforcement of this Note, as well as any applicable statute of limitations. No
delay by Bank in exercising any power or right hereunder shall operate as a
waiver of any power or right. Time is of the essence as to all obligations
hereunder.
This Note is issued pursuant to the Loan Agreement, which shall govern the
rights and obligations of Borrower with respect to all obligations hereunder.
This Note shall be deemed to be made under, and shall be construed in
accordance with and governed by, the laws of the State of California, excluding
conflicts of laws principles.
QUICKLOGIC CORPORATION
By:
Title:
15
<PAGE>
EXHIBIT C
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE:
FAX#: (408) 432-3249 TIME:
FROM: QuickLogic, Inc.
--------------------------------------------------------------------
CLIENT NAME (BORROWER)
REQUESTED BY:
--------------------------------------------------------------
AUTHORIZED SIGNER'S NAME
AUTHORIZED SIGNATURE:
------------------------------------------------------
PHONE NUMBER:
--------------------------------------------------------------
FROM ACCOUNT # TO ACCOUNT #
--------------------------------- ------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
- -------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $-----------------------------------------
PRINCIPAL PAYMENT (ONLY) $-----------------------------------------
INTEREST PAYMENT (ONLY) $-----------------------------------------
PRINCIPAL AND INTEREST (PAYMENT) $-----------------------------------------
OTHER INSTRUCTIONS:
-----------------------------------------------------------
- ------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and Advance confirmed by this Borrowing Certificate;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
BANK USE ONLY
TELEPHONE REQUEST:
- -----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
- ----------------------------- ------------------
Authorized Requester Phone #
- ----------------------------- ------------------
Received By (Bank) Phone #
---------------------------------
Authorized Signature (Bank)
16
<PAGE>
Exhibit D
BORROWING BASE CERTIFICATE
COLLATERAL SCHEDULE
(FOREIGN A/R LINE OF CREDIT)
Borrower: QuickLogic Corporation Lender: Silicon Valley Bank
2933 Bunker Hill Lane 100A 3003 Tasman Drive
Santa Clara, CA 95054 Santa Clara, CA 95054
Commitment Amount: $1,000,000
<TABLE>
<S> <C>
FOREIGN ACCOUNTS RECEIVABLE FROM EXPORT ACTIVITIES
1. Foreign Accounts Receivable Book Value as of_____ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL FOREIGN ACCOUNTS RECEIVABLE $_________
ACCOUNTS RECEIVABLE DEDUCTIONS
20. Term in excess of 90 days $________
21. Amounts over 90 days (unless insured, then 90 days) $_________
_6. Balance of 50% over 90 day accounts $_________
1. Excess 25% concentration $________
2. Credit Balances over 120 days
_9. Accounts not payable in the U.S. Dollars or
payable in other than U.S. Dollars $_______
3. Government and Military Accounts $_______
_11. Contra Accounts $_______
_12. Promotion, Demo or Consignment Accounts $_________
_13. Intercompany/Employee and Affiliate Accounts $_________
_14. Accounts in the form of L/Cs, if subject items
have not yet been shipped by Borrower $_________
_15. Accounts arising from Inventory not originally
located in and shipped from the U.S. $_________
_16. Accounts arising from the sale of defense articles
or items $_________
4. Accounts of buyers located in or from countries
in which shipment is prohibited or no coverage
available $_________
5. Amounts due and collectable outside U.S. $_________
6. Other exclusions $_________
7. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_________
8. Eligible Accounts (No. 3 - No. 20)
9. Loan Value of Accounts (80%-Advance) $_________
FOREIGN INVENTORY
1. Foreign Inventory Value as of _________ $_________
2. Additions (please explain on reverse) $_________
3. TOTAL FOREIGN INVENTORY $_________
FOREIGN INVENTORY DEDUCTIONS
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
1. Outside U.S. $______
2. Consignment $______
3. Proprietary Software $______
4. Damaged/Defective $______
5. Previously Exported $______
6. Defense Articles/Services $_______
7. Prohibited County $______
8. No Coverage County $______
9. Ineligible A/R $______
10. TOTAL DEDUCTIONS $_______
11. Eligible Inventory (No. 23 - No. 35) $______
12. Loan Value of Inventory (40% - No. 35) $______
BALANCES
13. Maximum Loan Amount $_______
14. Total Available (Lesser of (No. 22 plus No. 37) $______
15. Present balance owing on Line of Credit $______
16. Outstanding under Sublimits $______
17. RESERVE POSITION (No. 39 - (No. 40 + No. 41)) $______
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Collateral Schedule complies
with the representations and warranties set forth in the Borrower Agreement,
executed by Borrower and acknowledged by Lender, and the Export-Import Bank Loan
and Security Agreement, executed by Borrower and acknowledged by Lender dated
August 9, 1996, as may be amended from time to time, as if all representations
and warranties were made as of the date hereof, and that Borrower is, and shall
remain, in full compliance with its agreements, covenants, and obligations under
such agreement. Such representations and warranties include, without
limitation, the following: Borrower is using disbursements only for the purpose
of enabling Borrower to finance the cost of manufacturing, producing, purchasing
or selling items intended for export. Borrower is not using disbursements for
the purpose of: (a) servicing any of Borrower's unrelated pre-existing or
future indebtedness; (b) acquiring fixed assets or capital goods for the use of
Borrower's business; (c) acquiring, equipping, equipping or renting commercial
space outside the United States; (d) supporting research and development, (e)
paying salaries of non-U.S. citizens or non-U.S. permanent residents who are
located in the offices of the United States, or (f) serving as a retainage or
warranty bond. Additionally, disbursements are not being used to finance the
manufacture, purchase or sale of any of the following: (a) Items to be sold to
a buyer located in a country in which the Export Import Bank of the United
States is legally prohibited from doing business; (b) that part of the cost of
the items which is not U.S. Content unless such part is not greater than fifty
percent (50%) of the cost of the items and is incorporated into the items in the
United States; (c) defense articles or defense services or items directly or
indirectly destined for use by military organizations designed primarily for
military use (regardless of the nature or actual use of the items); or (d) any
items to be used in the construction, alteration, operation or maintenance of
nuclear power, enrichment, reprocessing, research or heavy water production
facilities.
Sincerely,
QuickLogic Corporation
By:
---------------------------
Name:
-------------------------
Chief Financial Officer
Date:
-------------------------
18
<PAGE>
EXHIBIT 11.1
QUICKLOGIC CORPORATION
SCHEDULE OF COMPUTATION OF PRO FORMA EARNINGS (LOSS) PER SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED -----------------------------
DECEMBER 31, 1996 MARCH 31, 1996 MARCH 31, 1997
----------------- -------------- --------------
<S> <C> <C> <C>
Net income (loss).............. $(3,597) $ 21 $(23,103)
------- ------- --------
Weighted average common shares
outstanding................... 3,388 3,156 3,388
Weighted average common
equivalent shares relating to
convertible preferred stock
(using the as if-converted
method)....................... 8,496 8,496 8,496
Common equivalent shares
relating to stock options and
warrants (using the treasury
stock method)................. 728 786 728
Common shares and common
equivalent shares relating to
stock options issued
subsequent to May 1996........ -- -- --
------- ------- --------
Shares used in pro forma net
income (loss) per share
calculation................... 12,612 12,438 12,612
Pro Forma net income (loss) per
share......................... $ (0.29) $ -- $ (1.83)
</TABLE>
