<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 10, 1999
REGISTRATION NO. 333-28833
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 4
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
QUICKLOGIC CORPORATION
(Exact name of Registrant as specified in its charter)
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<S> <C> <C>
DELAWARE 3674 77-0188504
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>
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, ESQ. GEOFFREY P. LEONARD, ESQ.
AARON J. ALTER, ESQ. SCOTT D. ELLIOTT, ESQ.
DAVID J. SAUL, ESQ. JEFF BROWN, ESQ.
WILSON SONSINI GOODRICH & ROSATI ORRICK, HERRINGTON & SUTCLIFFE LLP
PROFESSIONAL CORPORATION 1020 MARSH ROAD
650 PAGE MILL ROAD MENLO PARK, CALIFORNIA 94025
PALO ALTO, CALIFORNIA 94304 (650) 614-7400
(650) 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 this Form is a post-effective amendment filed pursuant to Rule 462(d)
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
<TABLE>
<CAPTION>
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE(2)
<S> <C> <C>
Common Stock $0.001 par value......................... $60,000,000 $16,680
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the registration
fee pursuant to Rule 457(o) under the Securities Act of 1933.
(2) Of this amount, $13,591 was previously paid by the Registrant to the
Commission.
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 said Section 8(a),
may determine.
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<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL SECURITIES AND WE ARE NOT SOLICITING OFFERS TO BUY THESE SECURITIES, IN
ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST 10, 1999
[QUICKLOGIC LOGO]
SHARES
COMMON STOCK
QuickLogic is offering shares of its common stock and the
selling stockholder is selling shares of QuickLogic common stock. This is
our initial public offering and no public market currently exists for our
shares. We have filed for approval for quotation on the Nasdaq National Market
under the symbol "QUIK." We anticipate that the initial public offering price
will be between $ and $ per share.
------------------------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
---------------------
<TABLE>
<CAPTION>
PER SHARE TOTAL
--------------- ---------------
<S> <C> <C>
Public Offering Price......................................................... $ $
Underwriting Discounts and Commissions........................................ $ $
Proceeds to QuickLogic........................................................ $ $
Proceeds to the Selling Stockholder........................................... $ $
</TABLE>
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE
NOT APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
QuickLogic and the selling stockholder have granted the underwriters a
30-day option to purchase up to an additional shares of common stock
to cover over-allotments. BancBoston Robertson Stephens Inc. expects to deliver
the shares of common stock to purchasers on , 1999.
------------------------
BANCBOSTON ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
SOUNDVIEW TECHNOLOGY GROUP
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS PROSPECTUS. WE
HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION DIFFERENT FROM THAT
CONTAINED IN THIS PROSPECTUS. WE ARE OFFERING TO SELL, AND SEEKING OFFERS TO
BUY, SHARES OF COMMON STOCK ONLY IN JURISDICTIONS WHERE OFFERS AND SALES ARE
PERMITTED. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS ACCURATE ONLY AS OF
THE DATE OF THIS PROSPECTUS, REGARDLESS OF THE TIME OF DELIVERY OF THIS
PROSPECTUS OR OF ANY SALE OF THE COMMON STOCK. IN THIS PROSPECTUS, REFERENCES TO
"QUICKLOGIC," "WE," "OUR" AND "US" REFER TO QUICKLOGIC CORPORATION.
UNTIL , 1999 (25 DAYS AFTER THE COMMENCEMENT OF THE OFFERING), ALL
DEALERS THAT EFFECT TRANSACTIONS IN THESE SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN ACTING AS AN
UNDERWRITER AND WITH RESPECT TO UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
------------------------
TABLE OF CONTENTS
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PAGE
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Prospectus Summary......................................................................................... 3
Risk Factors............................................................................................... 6
Use of Proceeds............................................................................................ 16
Dividend Policy............................................................................................ 16
Cautionary Statement Regarding Forward-Looking Statements.................................................. 16
Capitalization............................................................................................. 17
Dilution................................................................................................... 18
Selected Consolidated Financial Data....................................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 20
Business................................................................................................... 28
Management................................................................................................. 41
Certain Transactions....................................................................................... 50
Principal and Selling Stockholders......................................................................... 52
Description of Capital Stock............................................................................... 55
Shares Eligible for Future Sale............................................................................ 58
Underwriting............................................................................................... 59
Legal Matters.............................................................................................. 61
Experts.................................................................................................... 61
Where You Can Find Additional Information.................................................................. 61
Index to Financial Statements.............................................................................. F-1
</TABLE>
------------------------
We have registered the trademarks QUICKLOGIC and its logo, VIALINK, PASIC,
QUICKWORKS and DESKFAB. We have trademarks pending for QuickPCI and QuickRAM.
QuickTOOLS, QuickPRO and WebASIC are trademarks of QuickLogic Corporation. All
other trademarks or service marks appearing in this prospectus are the property
of their respective companies.
2
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY HIGHLIGHTS INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS.
THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION YOU SHOULD CONSIDER BEFORE
BUYING SHARES IN THE OFFERING. YOU SHOULD READ THE ENTIRE PROSPECTUS CAREFULLY.
EXCEPT AS OTHERWISE INDICATED, INFORMATION IN THIS PROSPECTUS ASSUMES THE
CONVERSION OF EACH OUTSTANDING SHARE OF CONVERTIBLE PREFERRED STOCK INTO ONE
SHARE OF COMMON STOCK AND ASSUMES NO EXERCISE OF THE UNDERWRITERS'
OVER-ALLOTMENT OPTION. INFORMATION CONTAINED IN THIS PROSPECTUS REFLECTS A
ONE-FOR-SIX REVERSE STOCK SPLIT EFFECTIVE UPON OUR REINCORPORATION IN THE STATE
OF DELAWARE, WHICH WILL OCCUR PRIOR TO THE CLOSING OF THIS OFFERING.
OUR COMPANY
QuickLogic develops, markets and supports advanced field programmable gate
array semiconductors, or FPGAs, and associated software tools. In addition to
our FPGAs, we have pioneered the development of embedded standard products, or
ESPs. Our ESPs combine the flexibility and time-to-market advantages of our
FPGAs with the predictability and high performance of standard semiconductor
products, thereby enabling our customers to integrate increased amounts of
functionality on a single semiconductor device. Our FPGA and ESP products target
complex, high-performance systems in rapidly changing markets, including
telecommunications and data communications; video/ audio, graphics and imaging;
instrumentation and test; high-performance computing; and military systems.
Competitive pressures are forcing manufacturers of electronic systems to
rapidly bring to market products with improved functionality, higher performance
and greater reliability, all at lower cost. Providers of systems requiring
high-speed data transmission and processing face some of the most intense
time-to-market pressures in the technology industry. These market forces have
driven the evolution of logic semiconductors which are used in complex
electronic systems to coordinate the functions of other semiconductors.
Programmable Logic Devices, or PLDs, are logic semiconductors which provide
systems designers with the flexibility to implement designs after the wafer
manufacturing process is completed. FPGAs are types of PLDs used for complex
functions. We believe that our FPGAs offer higher performance and greater
flexibility at lower overall systems cost than competing FPGA solutions.
According to Cahners In-Stat Group, the projected total market size for high-
complexity programmable logic devices in 1999 is approximately $2.1 billion, of
which FPGAs are estimated to account for $1.1 billion.
We have leveraged our unique FPGA technology, which delivers the advantages
offered by both FPGAs and application specific standard products in a single
chip solution, a "system-on-a-chip." These ESPs link blocks of user-configurable
standard functions with field programmable logic through a high-performance
interface. We believe ESPs offer the following specific advantages over chip-set
solutions:
- increased performance,
- decreased cost,
- increased reliability, and
- shorter development time.
We have introduced our first two ESP product lines, the QuickRAM and QuickPCI
families. According to Cahners In-Stat Group, the total ESP market size in 1998
was $13.8 million, and is projected to increase to $43.9 million in 1999.
3
<PAGE>
Our objective is to be the leading provider of high-speed, flexible,
cost-effective FPGAs and ESPs. We feel we can achieve this objective by offering
systems manufacturers the ability to accelerate design cycles to satisfy
demanding time-to-market requirements. We believe we will meet our objective by:
- continuing to invest in the development of FPGA and ESP technologies;
- capitalizing on cross-selling opportunities between our FPGA and ESP
products;
- broadening our ESP product lines;
- creating innovative, industry-leading customer services; and
- targeting high-performance, rapidly changing markets.
We were incorporated in California in April 1988 and changed our name in
February 1991 to QuickLogic Corporation. Prior to the closing of this offering,
we will reincorporate in the State of Delaware. The address of our corporate
headquarters is 1277 Orleans Drive, Sunnyvale, California 94089. Our telephone
number is (408) 990-4000. Our web site is located at http://www.quicklogic.com.
Information contained on our web site and web sites linked to our web site are
not a part of this prospectus.
------------------------
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by
QuickLogic...................... shares
Common stock offered by the
selling stockholder............. shares
Common stock to be outstanding
after the offering.............. shares
Use of proceeds................... For general corporate purposes, principally working
capital, and for payment of an outstanding settlement
obligation. See "Use of Proceeds."
Proposed Nasdaq National Market
symbol.......................... QUIK
</TABLE>
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue................................................... $ 23,758 $ 28,460 $ 30,007 $ 14,078 $ 18,425
Gross profit.............................................. 12,600 11,605 15,704 7,275 10,467
Contract termination and legal.......................... 4,125 28,309 -- -- --
Net operating income (loss)............................... (3,897) (33,920) 42 (305) 900
Net income (loss)......................................... (3,597) (33,648) 245 (189) 987
Net income (loss) per share:
Basic................................................... $ (4.66) $ (10.41) $ 0.06 $ (0.05) $ 0.23
Diluted................................................. $ (4.66) $ (10.41) $ 0.02 $ (0.05) $ 0.07
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 1999
----------------------
ACTUAL AS ADJUSTED
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash...................................................................................... $ 8,185
Working capital (deficit)................................................................. (2,742)
Total assets.............................................................................. 19,406
Long-term obligations..................................................................... 161
Stockholders' equity...................................................................... 302
</TABLE>
The table set forth above is based on shares of common stock outstanding as of
June 30, 1999. This table excludes:
- 2,549,000 shares issuable upon exercise of outstanding options under our
1989 stock option plan at a weighted average exercise price of $3.55 per
share;
- 5,000,000 shares reserved for issuance under our 1999 stock plan; and
- 2,000,000 shares available for issuance under our 1999 employee stock
purchase plan.
See note 2 of notes to financial statements for an explanation of the
determination of the number of shares used in computing per share data.
"As Adjusted" amounts have been adjusted to give effect to receipt of the
net proceeds from the sale of the shares of common stock offered hereby at
an assumed price of $ per share, after deducting the underwriting discount,
estimated offering expenses and payment of an outstanding settlement obligation.
See "Use of Proceeds" and "Capitalization."
5
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW BEFORE PURCHASING
THE COMMON STOCK. IF ANY OF THE FOLLOWING RISKS ACTUALLY OCCUR, OUR BUSINESS
COULD BE MATERIALLY HARMED, AND OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS COULD BE MATERIALLY AND ADVERSELY AFFECTED. AS A RESULT, THE TRADING
PRICE OF OUR COMMON STOCK COULD DECLINE, AND YOU MIGHT LOSE ALL OR PART OF YOUR
INVESTMENT.
OUR FUTURE OPERATING RESULTS ARE LIKELY TO FLUCTUATE AND THEREFORE MAY FAIL TO
MEET EXPECTATIONS WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE
Our operating results have varied widely in the past and are likely to do so
in the future. In addition, our operating results may not follow any past
trends. Our future operating results will depend on many factors and may fail to
meet our expectations for a number of reasons, including those set forth in
these risk factors. Any failure to meet expectations could cause our stock price
to significantly fluctuate or decline. Factors that could cause our operating
results to fluctuate include:
- the need for continual, rapid new product introductions;
- the timing of significant product orders, order cancellations and
reschedulings;
- intense competitive pricing pressures;
- changes in our product mix;
- the availability of production capacity and fluctuations in the
manufacturing yields at the facilities that manufacture our devices;
- the cost of raw materials and manufacturing services from our suppliers;
- our inability to adjust our fixed costs in the face of any declines in
sales;
- introductions of or enhancements to our competitors' products; and
- the cyclical nature of the semiconductor industry.
WE CANNOT ASSURE YOU THAT WE WILL REMAIN PROFITABLE BECAUSE WE HAVE A HISTORY OF
LOSSES AND HAVE ONLY RECENTLY BECOME PROFITABLE
We incurred significant losses from our inception in 1988 through 1997. Our
accumulated deficit as of June 30, 1999 was $60.2 million. We had net income of
$245,000 in 1998. We cannot assure you that we will be profitable in any future
periods and you should not rely on the historical growth of our revenue and our
recent profitability as any indication of our future operating results or
prospects.
IF WE FAIL TO SUCCESSFULLY DEVELOP, INTRODUCE AND SELL NEW PRODUCTS, OUR
BUSINESS WOULD BE MATERIALLY HARMED
We operate in a highly competitive, quickly changing environment marked by
rapid obsolescence of existing products. Our future success depends on our
ability to develop, introduce and successfully market new products, including
embedded standard products, or ESPs. We introduced our ESPs in September 1998.
To date, we have been selling our ESPs in limited quantities, and revenue from
our ESPs has been immaterial. If any of the following occur, our business will
be materially harmed:
- we fail to complete and introduce new product designs in a timely manner;
- we are unable to have these new products manufactured according to design
specifications;
- our customers do not successfully introduce new systems or products
incorporating our products;
- our sales force and independent distributors do not create adequate demand
for our products; or
6
<PAGE>
- market demand for our new products, such as ESPs, does not develop as
anticipated.
WE HAVE ONLY RECENTLY INTRODUCED OUR EMBEDDED STANDARD PRODUCTS; THEREFORE, WE
CANNOT ACCURATELY PREDICT THEIR FUTURE LEVEL OF ACCEPTANCE BY OUR CUSTOMERS,
AND WE MAY NOT BE ABLE TO GENERATE ANTICIPATED REVENUE FROM THESE PRODUCTS
We have only recently started selling embedded standard products. In the
first six months of 1999, ESPs accounted for approximately 4.7% of our revenue.
We do not know the extent to which systems manufacturers will purchase or
utilize our ESPs. Since we anticipate that ESPs will become an increasingly
larger component of our business, their failure to gain acceptance with our
customers would materially harm our business. We cannot assure you that our ESPs
will be commercially successful or that these products will result in
significant additional revenues or improved operating margins in future periods.
IF THE MARKET IN WHICH WE SELL OUR EMBEDDED STANDARD PRODUCTS DOES NOT GROW AS
WE ANTICIPATE, IT WILL MATERIALLY AND ADVERSELY AFFECT OUR ANTICIPATED REVENUE
The market for embedded standard products is relatively new and still
emerging. If this market does not grow at the rate we anticipate, our business
will be materially harmed. One of the reasons that this market might not grow as
we anticipate is that many systems manufacturers are not yet fully aware of the
benefits provided by embedded standard products, in general, or the benefits of
our ESPs, specifically. Additionally, systems manufacturers may use existing
technologies other than embedded standard products or yet to be introduced
technologies to satisfy their needs. Although we have devoted and intend to
continue to devote significant resources promoting market awareness of the
benefits of embedded standard products, our efforts may be unsuccessful or
insufficient.
WE EXPEND SUBSTANTIAL RESOURCES IN DEVELOPING AND SELLING OUR PRODUCTS, AND IF
WE DO NOT GENERATE SIGNIFICANT REVENUE AS A RESULT OF THESE EFFORTS, OUR
BUSINESS WILL BE MATERIALLY HARMED
To establish market acceptance of our products, we must dedicate significant
resources to research and development, production and sales and marketing. We
experience a long delay between the time when we expend these resources and the
time when we begin to generate revenue, if any, from these expenditures. We
record as expenses the costs related to the development of new semiconductor
products and software as these expenses are incurred. As a result, our
profitability from quarter to quarter and from year to year may be materially
and adversely affected by the number and timing of our new product introductions
in any period and the level of acceptance gained by these products.
If one of our potential customers cancels, reduces or delays product orders
from us or chooses not to release equipment that incorporates our products after
we have spent substantial time and resources in designing a product, our
business could be materially harmed. Our customers often evaluate our products
for six to twelve months or more before designing them into their systems, and
they may not commence volume shipments for up to an additional six to twelve
months, if at all. During this lengthy sales cycle, our potential customers may
also cancel or change their product plans. Even when customers incorporate one
or more of our products into their systems, they may ultimately discontinue the
shipment of their systems that incorporate our products. Customers whose
products achieve high volume production may choose to replace our products with
lower cost customized semiconductors.
IF WE FAIL TO ANTICIPATE PRODUCT OPPORTUNITIES BASED UPON EMERGING TECHNOLOGIES
AND STANDARDS AND FAIL TO DEVELOP PRODUCTS THAT INCORPORATE THESE TECHNOLOGIES
AND STANDARDS, OUR BUSINESS WILL BE MATERIALLY HARMED
We may spend significant time and money on research and development to
design and develop products around an emerging technology or industry standard.
To date, we have introduced only one
7
<PAGE>
product family, QuickPCI, that is designed to support a specific industry
standard. If an emerging technology or industry standard that we have identified
fails to achieve broad market acceptance in our target markets, we may be unable
to generate significant revenue from our research and development efforts.
Moreover, even if we are able to develop products using adopted standards, our
products may not be accepted in our target markets. As a result, our business
would be materially harmed.
We have limited experience in designing and developing products that support
industry standards. If systems manufacturers move away from the use of industry
standards that we support with our products and adopt alternative standards, we
may be unable to design and develop new products that conform to these new
standards. The expertise required is unique to each industry standard, and we
would have to either hire individuals with the required expertise or acquire
such expertise through a licensing arrangement or by other means. The demand for
individuals with the necessary expertise to develop a product relating to a
particular industry standard is generally high, and we may not be able to hire
such individuals. The cost to acquire such expertise through licensing or other
means may be high and such arrangements may not be possible in a timely manner,
if at all.
WE ENCOUNTER PERIODS OF INDUSTRY-WIDE SEMICONDUCTOR OVERSUPPLY AND UNDERSUPPLY
WHICH MAY MATERIALLY HARM OUR BUSINESS
The semiconductor industry has historically been characterized by wide
fluctuations in the demand for, and supply of, its products. These fluctuations
have resulted in circumstances when supply and demand for the industry's
products have been widely out of balance. In the past, our operating results
have been materially harmed by industry-wide semiconductor oversupply, which
resulted in severe pricing pressure and underutilization of our manufacturing
capacity. In a market with undersupply, we would have to compete with larger
foundry customers for limited manufacturing capacity. In such an environment, we
may be unable to have our products manufactured in a timely manner or in
quantities necessary to meet our requirements. Since we outsource all of our
manufacturing, we are particularly vulnerable to such supply shortages. As a
result, we may be unable to fulfill orders and may lose customers. Any future
industry-wide oversupply or undersupply of semiconductors would materially harm
our business.
IF OUR MANUFACTURERS ARE UNABLE TO SATISFY OUR MANUFACTURING REQUIREMENTS OUR
BUSINESS WILL BE MATERIALLY HARMED
We depend upon independent third parties to manufacture, assemble and test
our semiconductor products. None of our products is currently manufactured by
more than one manufacturer. If we are unable to secure adequate manufacturing
capacity from Taiwan Semiconductor Manufacturing Company, Cypress Semiconductor
Corporation or other suppliers to meet our supply requirements, our business
will be materially harmed. Processes used to manufacture our products are
complex, customized to our specifications and can only be performed by a limited
number of manufacturing facilities. If our current manufacturing suppliers are
unable to provide us with adequate manufacturing capacity, we would have to
identify and qualify one or more substitute suppliers for a substantial majority
of our products. Introducing new products or transferring existing products to a
new third party manufacturer would require significant development time to adapt
our designs to their manufacturing processes and could cause product shipment
delays. In addition, the costs associated with manufacturing our products may
increase if we are required to use a new third party manufacturer. If we fail to
satisfy our manufacturing requirements, our business would be materially harmed.
8
<PAGE>
IF WE FAIL TO ADEQUATELY FORECAST DEMAND FOR OUR PRODUCTS, WE MAY INCUR PRODUCT
SHORTAGES OR EXCESS PRODUCT INVENTORY WHICH COULD MATERIALLY HARM OUR BUSINESS
Our agreements with third-party manufacturers require us to provide
forecasts of our anticipated manufacturing orders, and place binding
manufacturing orders in advance of receiving purchase orders from our customers.
This may result in product shortages or excess product inventory because we are
not permitted to increase or decrease our rolling forecasts by more than a
specified percentage without the manufacturer's consent. Our failure to
adequately forecast demand for our products would materially harm our business.
FLUCTUATIONS IN OUR PRODUCT YIELDS, ESPECIALLY OUR NEW PRODUCTS, MAY ADD TO THE
COSTS OF OUR MANUFACTURING PROCESS AND THEREFORE MATERIALLY HARM OUR BUSINESS
Difficulties in the complex semiconductor manufacturing process can render a
substantial percentage of semiconductor wafers nonfunctional. These yield
reductions, which can occur without warning, result in substantially higher
manufacturing costs and inventory shortages. From time to time, we have
experienced yield problems, and we may experience yield problems in the future
which may materially harm our business. In addition, yield problems may take a
significant period of time to analyze and correct. Our reliance on third party
suppliers may extend the period of time required to analyze and correct these
problems. As a result, if we are unable to respond rapidly to market demand, our
business would suffer.
Yield reductions frequently occur in connection with the manufacture of
newly introduced products. Newly introduced products, such as our QuickPCI
family of ESPs, are often more complex and more difficult to produce, increasing
the risk of manufacturing-related defects. While we test our products, these
products may still contain errors or defects that we find only after we have
commenced commercial production. Our customers may not place new orders for our
products if the products have reliability problems, which would materially harm
our business.
IF THE MARKETS IN WHICH OUR CUSTOMERS SELL THEIR PRODUCTS DO NOT GROW, OUR
BUSINESS WOULD BE MATERIALLY HARMED
Our success depends in large part on the continued growth of various markets
that use our products. Any decline in the demand for our products in the
following markets could materially harm our business:
- telecommunications and data communications;
- video/audio, graphics and imaging;
- instrumentation and test;
- high-performance computing; or
- military systems.
Slower growth in any of the other markets in which our products are sold may
also materially harm our business. Many of these markets are characterized by
rapid technological change and intense competition. As a result, systems sold by
our customers that use our products may face severe price competition, become
obsolete over a short time period, or fail to gain market acceptance. Any of
these occurrences would materially harm our business.
9
<PAGE>
THE GENERAL PATTERN OF DECLINES AND FLUCTUATIONS IN THE PRICES OF OUR PRODUCTS
MAY MATERIALLY HARM OUR BUSINESS
The average selling prices of our products historically have declined during
the products' lives, and we expect this trend to continue. If we are unable to
achieve cost reductions, increase unit demand or introduce new higher-margin
products in a timely manner to offset these price declines, our business would
be materially harmed.
In addition, the selling prices for our products fluctuate significantly
with real and perceived changes in the balance of supply and demand for our
products and comparable products. The growth in the worldwide supply of field
programmable gate arrays in recent periods has added to the decrease in the
average selling prices for our products. In addition, we expect our competitors
to invest in new manufacturing process technologies and achieve significant
manufacturing yield improvements in the future. These developments could
increase the worldwide supply of field programmable gate arrays and alternate
products and create additional downward pressure on pricing. If the worldwide
supply of field programmable gate arrays grows faster than the demand for such
products in the future, the price for which we can sell such products may
decline, which would materially harm our business.
WE DEPEND UPON THIRD PARTY DISTRIBUTORS TO MARKET AND SELL OUR PRODUCTS, AND IF
A DISTRIBUTOR NO LONGER SELLS OUR PRODUCTS, DOES NOT GIVE OUR PRODUCTS
PRIORITY OR IS UNABLE TO SUCCESSFULLY MARKET, SELL AND SUPPORT OUR PRODUCTS,
OUR BUSINESS WOULD BE MATERIALLY HARMED
We employ independent, third-party distributors to market and sell a
significant portion of our products. During the six months ended June 30, 1999,
approximately 85% of our sales were made through our distributors. We rely on
four principal distributors to market and sell a substantial majority of our
products, particularly in North America. Although we have contracts with our
distributors, any of them may terminate their relationship with us on short
notice. The loss of one or more of our principal distributors, or our inability
to attract new distributors, would materially harm our business. We may lose
distributors in the future and we may be unable to recruit additional or
replacement distributors. As a result, our future performance will depend in
part on our ability to retain our existing distributors and attract new
distributors that will be able to market, sell and support our products
effectively.
Many of our distributors, including our principal distributors, market and
sell products for other companies, and many of these products may compete
directly or indirectly with our products. We generally are not one of the
principal suppliers of products to our distributors. If our distributors give
higher priority or greater attention to the products of other companies,
including products that compete with our products, our business would be
materially harmed.
WE MAY BE UNABLE TO ACCURATELY PREDICT QUARTERLY RESULTS IF DISTRIBUTORS ARE
INACCURATE OR UNTIMELY IN PROVIDING US WITH THEIR RESALE REPORTS, WHICH COULD
ADVERSELY AFFECT THE TRADING PRICE OF OUR STOCK
Since we generally recognize revenue from sales to our distributors only
when these distributors make sales to customers, we are highly dependent on the
accuracy and timeliness of their resale reports. Inaccurate resale reports
contribute to our difficulty in predicting and reporting our quarterly revenue
and results of operations, particularly in the last month of the quarter. If we
fail to accurately predict our revenue and results of operations on a quarterly
basis, our stock price could materially fluctuate. Distributors occasionally
increase their inventories of our products in anticipation of growth in the
demand for our products. If this growth does not occur, distributors will
decrease their orders for our products in subsequent periods, and our business
would be materially harmed.
10
<PAGE>
IF OUR CUSTOMERS CANCEL OR DEFER SIGNIFICANT PURCHASE ORDERS OR OUR DISTRIBUTORS
RETURN OUR PRODUCTS, OUR INVENTORIES WOULD INCREASE, WHICH WOULD MATERIALLY
HARM OUR BUSINESS
We sell our products on a purchase order basis through our distributors and
direct sales channels, and our customers may cancel purchase orders at any time
with little or no penalty. In addition, our distributor agreements generally
permit our distributors to return products to us. If our customers cancel or
defer significant purchase orders or our distributors return our products, our
inventories would increase, which would materially harm our business.
IF WE FAIL TO COMPETE EFFECTIVELY IN OUR INDUSTRY AND MARKETS, OUR BUSINESS WILL
BE MATERIALLY HARMED
The semiconductor industry is intensely competitive and characterized by:
- erosion of selling prices over product lives;
- rapid technological change;
- short product life cycles; and
- strong domestic and foreign competition.
If we are not able to compete successfully in this environment, our business
will be materially harmed. A primary cause of this highly competitive
environment is the strengths of our competitors. Our industry consists of major
domestic and international semiconductor companies, many of which have
substantially greater financial, technical, marketing, distribution and other
resources than we do. Our current direct competitors include suppliers of
complex programmable logic devices and field programmable gate arrays, such as
Xilinx, Altera, Actel, Lattice Semiconductor and Lucent. Xilinx and Altera
together have a majority share of the programmable logic market. Many systems
manufacturers may be unwilling or unable to switch to our products due to their
familiarity with competitors' products or other inhibiting factors.
We also face competition from companies that offer application specific
integrated circuits, which may be obtained at lower costs for higher volumes and
typically have greater logic capacity, additional features and higher
performance than those of our products. We may also face competition from
suppliers of products based on new or emerging technologies, including ESPs. Our
inability to successfully compete in any of the following areas could materially
harm our business:
- the development of new products and manufacturing technologies;
- the quality and price of products and devices;
- the diversity of product lines; or
- the cost effectiveness of design, development, manufacturing and marketing
efforts.
IN ORDER TO SUCCESSFULLY MANAGE OUR GROWTH, WE MUST COMPETE WITH OTHERS TO
ATTRACT AND RETAIN KEY PERSONNEL, AND ANY LOSS OF, OR INABILITY TO ATTRACT,
SUCH PERSONNEL WOULD HURT US
We believe our future success will depend upon our ability to successfully
manage our growth, including attracting and retaining engineers and other highly
skilled personnel. Our employees are at-will and not subject to employment
contracts. Hiring qualified sales and technical personnel will be difficult due
to the limited number of qualified professionals. Competition for these types of
employees is intense. We have in the past experienced difficulty in recruiting
and retaining qualified sales and technical personnel. For example, in the past
12 months, two of our executive officers resigned to pursue other opportunities.
Failure to attract and retain personnel, particularly sales and technical
personnel, would materially harm our business.
11
<PAGE>
As we seek to expand our operations, we may also significantly strain our
management and financial systems and other resources. We cannot be certain that
our systems, procedures, controls and existing space will be adequate to support
our operations.
WE MAY BE UNABLE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS, AND MAY
FACE SIGNIFICANT EXPENSES AS A RESULT OF FUTURE LITIGATION
Protection of intellectual property rights is crucial to our business, since
that is how we keep others from copying the innovations which are central to our
existing and future products. From time to time, we receive letters alleging
patent infringement or inviting us to take a license to other parties' patents.
We evaluate these letters on a case-by-case basis. Inquiries with respect to the
coverage of our intellectual property could lead to litigation. We have in the
past and may again become involved in litigation relating to alleged
infringement by us of others' patents or other intellectual property rights.
This kind of litigation is expensive to all parties and consumes large amounts
of management's time and attention. For example, we incurred substantial costs
associated with the litigation and settlement of our dispute with Actel
Corporation, which materially harmed our business. In addition, if we lose in
this kind of litigation a court could require us to pay substantial damages
and/or royalties, and prohibit us from using essential technologies. For these
and other reasons, this kind of litigation would materially harm our business.
Also, although we may seek to obtain a license under a third party's
intellectual property rights in order to bring an end to certain claims or
actions asserted against us, we may not be able to obtain such a license on
reasonable terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
We have entered into technology license agreements with third parties which
give those parties the right to use patents and other technology developed by
us, and which give us the right to use patents and other technology developed by
them. We anticipate that we will continue to enter into these kinds of licensing
arrangements in the future; however, it is possible that desirable licenses will
not be available to us on commercially reasonable terms. If we lose existing
licenses to key technology, or are unable to enter into new licenses which we
deem important, it could materially harm our business, and materially and
adversely affect our business.
Because it is critical to our success that we are able to prevent
competitors from copying our innovations, we intend to continue to seek patent
and trade secret protection for our products. The process of seeking patent
protection can be long and expensive, and we cannot be certain that any
currently pending or future applications will actually result in issued patents,
or that, even if patents are issued, they will be of sufficient scope or
strength to provide meaningful protection or any commercial advantage to us.
Furthermore, others may develop technologies that are similar or superior to our
technology or design around the patents we own. We also rely on trade secret
protection for our technology, in part through confidentiality agreements with
our employees, consultants and third parties. However, employees may breach
these agreements, and we may not have adequate remedies for any breach. In any
case, others may come to know about or determine our trade secrets through a
variety of methods. In addition, the laws of certain territories in which we
develop, manufacture or sell our products may not protect our intellectual
property rights to the same extent as do the laws of the United States.
WE MAY EXPERIENCE PROBLEMS ASSOCIATED WITH INTERNATIONAL BUSINESS OPERATIONS
WHICH MAY MATERIALLY HARM OUR BUSINESS
Most of our products are manufactured outside of the United States at
manufacturing facilities operated by our suppliers in Taiwan, South Korea and
the Philippines. As a result, our manufacturing operations are subject to risks
of political instability, including the risk of conflict between Taiwan and the
People's Republic of China and conflict between North Korea and South Korea.
Moreover, the majority of available manufacturing capacity for our products is
located in Taiwan and South Korea.
12
<PAGE>
Sales to customers located outside the United States accounted for 25%, 43%,
47% and 50% of our total sales in 1996, 1997, 1998, and the six months ended
June 30, 1999, respectively. We anticipate that sales to customers located
outside the United States will continue to represent a significant portion of
our total sales in future periods and the trend of foreign customers accounting
for an increasing portion of our total sales may continue. In addition, most of
our domestic customers sell their products outside of North America, thereby
indirectly exposing us to risks associated with foreign commerce. Asian economic
instability could also materially and adversely affect our business,
particularly to the extent that this instability impacts the sales of products
manufactured by our customers. Accordingly, our operations and revenues are
subject to a number of risks associated with foreign commerce, including the
following:
- managing foreign distributors;
- staffing and managing foreign branch offices;
- political and economic instability;
- foreign currency exchange fluctuations;
- changes in tax laws, tariffs and freight rates;
- timing and availability of export licenses;
- inadequate protection of intellectual property rights in some countries;
and
- obtaining governmental approvals for certain products.
In the past we have denominated sales of our products in foreign countries
exclusively in United States dollars. As a result, any increase in the value of
the United States dollar relative to the local currency of a foreign country
will increase the price of our products in that country so that our products
become relatively more expensive to customers in the local currency of that
foreign country. As a result, sales of our products in that foreign country may
decline. To the extent any such risks materialize, our business would be
materially harmed.
OUR OPERATIONS AND PRODUCTS MAY NOT FUNCTION PROPERLY IN THE YEAR 2000 WHICH
COULD MATERIALLY HARM OUR BUSINESS
We are highly dependent on third party computer software programs and
operating systems used in our business. We also depend on proper functioning of
computer systems of third parties, such as suppliers, distributors and
customers. Any computer programs that have date-sensitive software may
erroneously recognize a date using "00" as the year 1900 instead of the year
2000. We have completed audits of our internal systems, including our
accounting, sales and technical support automation system, and obtained
assurances from our major suppliers, distributors and customers that they have
done the same. However, we do not have the resources to verify these assurances.
Thus, there is a risk that some of our customers', distributors' and suppliers'
systems will not function adequately. If they do not, the result could be a
system failure or miscalculation causing disruptions of operations, including,
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
We have developed two products, QuickWorks and QuickTools, which are design
software tools that support our FPGA and ESP devices. QuickWorks operates on
Microsoft Windows, while QuickTools runs on UNIX platforms. We have tested these
products and found them to be Year 2000 compliant. Our software products
integrate software tools that have been developed and are maintained by third
party vendors. We have contacted these vendors and have confirmed that such
software products are Year 2000 compliant. However, any failure of Windows, UNIX
or the integrated third party software tools due to Year 2000 problems, will
adversely impact the performance of our software
13
<PAGE>
design tools, and our business could be materially harmed. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Year
2000 Readiness Disclosure."
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS
THAT MAY NOT BE IN THE BEST INTERESTS OF OUR OTHER STOCKHOLDERS
After this offering, our officers, directors and principal stockholders will
together control approximately % of our outstanding common stock. As a result,
these stockholders, if they act together, will be able to control the management
and affairs of QuickLogic and all matters requiring stockholder approval,
including the election of directors and approval of significant corporate
transactions. This concentration of ownership may have the effect of delaying or
preventing a change in control and might affect the market price of our common
stock. This concentration of ownership may not be in the best interest of our
other stockholders.
OUR CERTIFICATE OF INCORPORATION AND BYLAWS AND DELAWARE LAW CONTAIN PROVISIONS
THAT COULD DISCOURAGE A TAKEOVER
In connection with this offering, we are reincorporating in the State of
Delaware. Our basic corporate documents and Delaware law contain provisions that
might enable our management to resist a takeover. These provisions might
discourage, delay or prevent a change in the control of QuickLogic or a change
in our management. Our certificate of incorporation filed in connection with
this offering provides that when we are eligible, we will have a classified
board of directors, with each class of directors subject to re-election every
three years. This classified board when implemented will have the effect of
making it more difficult for third parties to insert their representatives on
our board of directors and gain control of QuickLogic. These provisions could
also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price that investors might be willing to pay
in the future for shares of the common stock. See "Description of Capital
Stock."
Our certificate of incorporation also provides that our board of directors
may, without further action by the stockholders, issue shares of preferred stock
in one or more series and to fix the rights, preferences, privileges and
restrictions thereof. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and the likelihood that such holders
will receive dividend payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of QuickLogic. We have no present plan to issue
any shares of preferred stock.
A SALE OF A SUBSTANTIAL NUMBER OF SHARES OF OUR COMMON STOCK MAY CAUSE THE PRICE
OF OUR COMMON STOCK TO DECLINE
If our stockholders sell substantial amounts of our common stock, including
shares issued upon the exercise of outstanding options, in the public market
following this offering, the market price of our common stock could fall. Such
sales also might make it more difficult for us to sell equity or equity-related
securities in the future at a time and price that we deem appropriate. Upon
completion of this offering, we will have outstanding shares of
common stock, based upon shares outstanding as of July 31, 1999 and assuming no
exercise of outstanding options after July 31, 1999. Of these shares, the
shares sold in this offering will be freely tradable. The remaining
shares of common stock outstanding after this offering will be available for
sale in the public market as follows:
<TABLE>
<CAPTION>
DATE OF AVAILABILITY FOR SALE NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
<S> <C>
The date of this prospectus................................................ 0
180 days after the date of this prospectus................................. 14,219,570
</TABLE>
14
<PAGE>
The above table assumes the effectiveness of certain lock-up arrangements
with the underwriters, under which the stockholders have agreed not to sell or
otherwise dispose of their shares of common stock. Most of the shares that will
be available for sale after the 180th day after the date of this prospectus will
be subject to certain volume restrictions because they are held by affiliates of
QuickLogic. In addition, we cannot assure you that some or all of these lock-up
restrictions will not be removed prior to 180 days after the offering without
prior notice by the underwriters.
The holders of an aggregate of 9,911,665 shares of our common stock,
assuming the conversion of our preferred stock into common stock, and Cypress,
with respect to any remaining shares of common stock held by it after this
offering, have certain registration rights, including the right to require us to
register the sale of their shares and the right to include their shares in
public offerings we undertake in the future. See "Description of Capital
Stock--Registration Rights."
OUR COMMON STOCK HAS NOT BEEN PUBLICLY TRADED, AND WE EXPECT THAT THE PRICE OF
OUR COMMON STOCK WILL FLUCTUATE SUBSTANTIALLY
Prior to this offering, there has been no public market for shares of our
common stock. An active public trading market may not develop following
completion of this offering or, if developed, may not be sustained. The price of
the shares of common stock sold in this offering will be determined by
negotiation between us and the underwriters. This price will not necessarily
reflect the market price of the common stock following this offering. See
"Underwriting" for a discussion of the factors to be considered in determining
the price. The market price for the common stock following this offering will be
affected by a number of factors, including:
- the announcement of new products or product enhancements by us or our
competitors;
- quarterly variations in our or our competitors' results of operations;
- changes in earnings estimates or recommendations by securities analysts;
- developments in our industry; and
- general market conditions and other factors, including factors unrelated
to our operating performance or the operating performance of our
competitors.
In addition, stock prices for many companies in the technology and emerging
growth sectors have experienced wide fluctuations that have often been unrelated
to the operating performance of such companies. Such factors and fluctuations
may materially and adversely affect the market price of our common stock.
NEW INVESTORS IN OUR COMMON STOCK WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL
DILUTION FOLLOWING THE OFFERING
If you purchase shares of our common stock in this offering, you will incur
immediate and substantial dilution in pro forma net tangible book value. If the
holders of outstanding options exercise those options, you will incur further
dilution. See "Dilution."
WE HAVE BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS OFFERING
Other than the payment of approximately $6.0 million to pay an outstanding
settlement obligation, we currently have no specific plans for using the
proceeds of this offering. As a consequence, we will have broad discretion to
allocate a large percentage of the proceeds to uses which the stockholders may
not deem desirable. See "Use of Proceeds."
15
<PAGE>
USE OF PROCEEDS
We estimate that we will receive net proceeds of $ . This assumes our
sale of shares of common stock at an at an assumed offering price of
$ per share, after deducting underwriting discounts, commissions and
estimated offering expenses. We will not receive any proceeds from the sale of
the shares to be sold by the selling stockholder, including the sale of shares
pursuant to the underwriters over-allotment option.
We expect to use approximately $ for working capital and
general corporate purposes and $6.0 million for payment of an outstanding
settlement obligation with Actel Corporation. In addition, we may use a portion
of the net proceeds to acquire complementary products, technologies or
businesses; however, we currently have no commitments or agreements and are not
involved in any negotiations to do so. See "Principal and Selling Stockholders."
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We
currently expect to retain future earnings, if any, for use in the operation and
expansion of our business and do not anticipate paying any cash dividends in the
foreseeable future.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under "Prospectus Summary," "Risk Factors,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business" and elsewhere in this prospectus constitute
forward-looking statements. These statements involve known and unknown risks,
uncertainties and other factors that may cause our actual results, levels of
activity, performance or achievements to be materially different from any future
results, levels of activity, performance, or achievements expressed or implied
by such forward-looking statements. Such factors include, among other things,
those listed under "Risk Factors" and elsewhere in this prospectus. In some
cases, you can identify forward-looking statements by terminology such as "may,"
"will," "should," "could," "expects," "plans," "intends," "anticipates,"
"believes," "estimates," "predicts," "potential" or "continue" or the negative
of such terms and other comparable terminology. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance or
achievements. Moreover, neither we nor anyone else assumes responsibility for
the accuracy and completeness of such statements. We are under no duty to update
any of the forward-looking statements after the date of this prospectus.
16
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of June 30,
1999. It also sets forth our capitalization on a pro forma basis for:
- the conversion into common stock of our preferred stock
and capitalization on a pro forma, as adjusted basis for:
- the sale of shares of common stock at an assumed price of $ per
share, less underwriting discounts and commissions and estimated offering
expenses.
<TABLE>
<CAPTION>
JUNE 30, 1999
------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Long-term obligations................................... $ 161 $ 161 $
---------- ----------- -----------
Stockholders' equity:
Preferred stock, $0.001 par value; 61,568,000 shares
authorized; 9,912,000 shares issued and outstanding,
actual; 10,000,000 shares authorized; no shares
issued and outstanding, as adjusted and pro forma as
adjusted............................................ 10 --
Common stock, $0.001 par value; 105,000,000 shares
authorized; 4,301,000 shares issued and outstanding,
actual; 100,000,000 shares authorized; 14,213,000
and issued and outstanding, as adjusted, and
pro forma, as adjusted, respectively................ 4 14
Additional paid-in capital.............................. 61,730 61,730
Stockholder note receivable............................. (121) (121)
Deferred compensation................................... (1,136) (1,136)
Accumulated deficit..................................... (60,185) (60,185)
---------- ----------- -----------
Total stockholders' equity............................ 302 302
---------- ----------- -----------
Total capitalization................................ $ 463 $ 463 $
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
The table set forth above is based on shares of common stock outstanding as
of June 30, 1999. This table excludes:
- 2,549,000 shares issuable upon exercise of outstanding options under our
1989 stock option plan at a weighted average exercise price of $3.55 per
share; and
- 5,000,000 shares reserved for issuance under our 1999 stock plan; and
- 2,000,000 shares available for issuance under our 1999 employee stock
purchase plan.
See "Management--Employee Benefit Plans" and "Description of Capital Stock."
17
<PAGE>
DILUTION
If you invest in our common stock, your interest will be diluted to the
extent of the difference between the public offering price per share of our
common stock and the pro forma as adjusted net tangible book value per share of
our common stock after this offering. The pro forma net tangible book value of
our common stock as of June 30, 1999, was $302,000, or $0.02 per share. Pro
forma net tangible book value per share represents the amount of our total
tangible assets reduced by the amount of our 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.
Dilution in net tangible book value per share represents the difference between
the amount per share paid by purchasers of shares of our common stock in this
offering and the net tangible book value per share of our common stock
immediately afterwards. After giving effect to our sale of shares of
common stock offered by this prospectus and after deducting the underwriting
discount, estimated offering expenses payable by us and payment of an
outstanding settlement obligation, our pro forma net tangible book value as of
June 30, 1999 was $ , or approximately $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution in net tangible book value of $ per
share to new investors.
<TABLE>
<S> <C> <C>
Assumed price per share................................... $
Pro forma net tangible book value per share as of June
30, 1999.............................................. $
Increase per share attributable to new investors........
---------
As adjusted pro forma net tangible book value per share
after the offering......................................
---------
Dilution per share to new investors....................... $
---------
---------
</TABLE>
The table above assumes no exercise of options after June 30, 1999. The
number of shares outstanding as of June 30, 1999 excludes 2,549,000 shares of
common stock issuable upon exercise of options outstanding as of June 30, 1999,
having a weighted average exercise price of $3.55 per share. The exercise of
outstanding options having an exercise price less than the offering price would
increase the dilutive effect to new investors.
The following table sets forth, on a pro forma basis as of June 30, 1999,
the differences between the number of shares of common stock purchased from us,
the total consideration paid and average price per share paid by existing
stockholders and by the new investors, before deducting expenses payable by us,
using an assumed price of $ per share.
<TABLE>
<CAPTION>
AVERAGE
SHARES PURCHASED TOTAL CONSIDERATION PRICE
---------------------------- ---------------------------- PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------- ------------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 14,213,000 $ 61,744,000 $ 4.34
New investors..............................
Total....................................
</TABLE>
- ---------
If the underwriters' over-allotment option is exercised in full, the
following will occur:
- the number of shares of common stock held by existing stockholders will
decrease to or approximately % of the total number of shares
of common stock outstanding; and
- the number of shares held by new investors will be increased to or
approximately % of the total number of shares of our common stock
outstanding after this offering.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of December 31, 1997
and 1998 and for the years ended December 31, 1996, 1997 and 1998, have been
derived from our audited consolidated financial statements and notes thereto,
which are included elsewhere in this prospectus. The selected consolidated
financial data as of December 31, 1994, 1995 and 1996 and for the years ended
December 31, 1994 and 1995 were derived from our audited consolidated financial
statements, which do not appear in this prospectus. The consolidated financial
data as of June 30, 1999 and for the six months ended June 30, 1998 and 1999
were derived from unaudited financial statements included elsewhere in this
prospectus. We have prepared this unaudited information on the same basis as the
audited consolidated financial statements and have included all adjustments,
consisting only of normal recurring adjustments that we consider necessary for a
fair presentation of our financial position and operating results for such
periods. When you read this selected consolidated financial data, it is
important that you also read the historical consolidated financial statements
and related notes included in this prospectus, as well as the section of this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations." Historical results are not necessarily indicative of
future results. Operating results for the six months ended June 30, 1999 are not
necessarily indicative of the results that may be expected for the full year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................................... $ 6,024 $15,148 $23,758 $ 28,460 $30,007
Cost of revenue.................................................. 4,053 7,739 11,158 16,855 14,303
------- ------- ------- -------- -------
Gross profit..................................................... 1,971 7,409 12,600 11,605 15,704
Operating expenses:
Research and development....................................... 3,172 3,599 4,642 6,235 6,294
Selling, general and administrative............................ 4,408 5,770 7,730 10,981 9,368
Contract termination and legal(1).............................. -- 2,700 4,125 28,309 --
------- ------- ------- -------- -------
Net operating income (loss).................................. (5,609) (4,660) (3,897) (33,920) 42
Interest expense................................................. (240) (200) (60) (162) (161)
Interest income and other, net................................... 21 153 360 434 364
------- ------- ------- -------- -------
Net income (loss)................................................ $(5,828) $(4,707) $(3,597) $(33,648) $ 245
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Net income (loss) per share:
Basic.......................................................... $(10.69) $ (7.59) $ (4.66) $ (10.41) $ 0.06
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Diluted........................................................ $(10.69) $ (7.59) $ (4.66) $ (10.41) $ 0.02
------- ------- ------- -------- -------
------- ------- ------- -------- -------
Weighted average shares:
Basic.......................................................... 545 620 772 3,232 4,231
Diluted........................................................ 545 620 772 3,232 14,645
Pro forma income per share:
Basic.......................................................... $ 0.02
-------
-------
Diluted........................................................ $ 0.02
-------
-------
Pro forma weighted average shares:
Basic.......................................................... 14,143
Diluted........................................................ 14,645
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------
1998 1999
------- -------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.......................................................... $14,078 $18,425
Cost of revenue.................................................. 6,803 7,958
------- -------
Gross profit..................................................... 7,275 10,467
Operating expenses:
Research and development....................................... 2,932 3,567
Selling, general and administrative............................ 4,648 6,000
Contract termination and legal(1).............................. -- --
------- -------
Net operating income (loss).................................. (305) 900
Interest expense................................................. (86) (49)
Interest income and other, net................................... 202 136
------- -------
Net income (loss)................................................ $ (189) $ 987
------- -------
------- -------
Net income (loss) per share:
Basic.......................................................... $ (0.05) $ 0.23
------- -------
------- -------
Diluted........................................................ $ (0.05) $ 0.07
------- -------
------- -------
Weighted average shares:
Basic.......................................................... 4,200 4,286
Diluted........................................................ 4,200 15,042
Pro forma income per share:
Basic.......................................................... $ 0.07
-------
-------
Diluted........................................................ $ 0.07
-------
-------
Pro forma weighted average shares:
Basic.......................................................... 14,198
Diluted........................................................ 15,042
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1999
--------- --------- --------- --------- --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash..................................................... $ 488 $ 3,856 $ 10,336 $ 7,331 $ 7,595 $ 8,185
Working capital (deficit)................................ (4,792) 7,068 10,650 2,395 (3,319) (2,742)
Total assets............................................. 2,531 12,199 22,577 19,951 16,168 19,406
Long-term obligations(2)................................. 509 137 602 7,724 591 161
Total stockholders' equity (deficit)..................... (4,848) 7,149 11,799 (1,756) (975) 302
</TABLE>
- ------------
(1) Contract termination and legal expenses include a charge of $23.0 million in
the year ended December 31, 1997 for termination of an agreement with
Cypress Semiconductor Corporation, and charges of $2.7 million, $4.1 million
and $5.3 million in the years ended December 31, 1995, 1996 and 1997,
respectively, for the legal and settlement costs associated with the Actel
Corporation litigation. See notes 8 and 12 of notes to consolidated
financial statements and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(2) Long term obligations at December 31, 1997 include obligations under the
Actel litigation settlement. At December 31, 1998 and June 30, 1999, this
obligation is classified as a current liability because under the terms of
the settlement, we will pay the remaining obligation out of the proceeds of
this offering. See notes 4 and 12 of notes to consolidated financial
statements.
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS. THIS
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES. OUR ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS FOR MANY REASONS, INCLUDING THE RISKS
DESCRIBED IN "RISK FACTORS" AND ELSEWHERE IN THIS PROSPECTUS.
OVERVIEW
We design and sell field programmable gate arrays, embedded standard
products and associated software and programming hardware. From our inception in
April 1988 through the third quarter of 1991, we were primarily engaged in
product development. In 1991, we introduced our first line of field programmable
gate array products, or FPGAs, based upon our ViaLink technology. FPGAs have
accounted for substantially all of our product revenue to date. We currently
have three FPGA product families: pASIC 1, introduced in 1991; pASIC 2,
introduced in 1996; and pASIC 3, introduced in 1997. The newer product families
generally contain greater logic capacity, but do not necessarily replace sales
of older generation products. In fact, for the first six months of 1999, pASIC 1
revenue accounted for approximately half of our total revenue.
In September 1998, we introduced QuickRAM, our first line of embedded
standard products, or ESPs. Our ESPs are based on our FPGA technology. In April
1999, we introduced QuickPCI, our second line of ESPs. Revenue for our QuickRAM
and QuickPCI products together accounted for approximately 5% of sales for the
first six months of 1999. We also license our QuickWorks and QuickTools design
software and sell our programming hardware, which together have typically
accounted for less than 5% of total revenue.
We sell our products through three channels. First, we sell the majority of
our products through distributors who have contractual rights to earn a
negotiated margin on the sale of our products and who have limited rights to
return unsold product. We refer to these distributors as point-of-sale
distributors. We defer recognition of revenue for sales to these point-of-sale
distributors until after they have sold our products to systems manufacturers.
Second, we sell our products through certain foreign distributors who have no
contractual rights to earn a negotiated margin and who may only return defective
products to us. We recognize revenue from sales to these distributors at the
time of shipment. Finally, we sell our products directly to systems
manufacturers and recognize revenue at the time of shipment to these systems
manufacturers. The percentage of sales derived through each of these three
channels in 1998 was 54%, 32% and 14%, respectively, and 61%, 24% and 15% for
the first six months of 1999, respectively. We believe that this trend of an
increasing percentage of our sales being made through our point-of-sale
distribution channel will continue as we convert more of our foreign
distributors to point-of-sale distributors.
Five of our distributors accounted for approximately 22%, 10%, 10%, 6% and
6% of sales, respectively, in 1998, and the same five distributors accounted for
18%, 9%, 9%, 8% and 6% of sales, respectively, for the six months ended June 30,
1999. No other distributor or direct customer accounted for more than 5% of
sales in 1998 or the six months ended June 30, 1999. We expect that a limited
number of distributors will continue to account for a significant portion of our
total sales.
Our international sales were 25%, 43% and 47% of our total sales for 1996,
1997 and 1998, respectively, and 50% for the six months ended June 30, 1999. We
expect that revenue derived from sales to international customers will continue
to represent a significant and growing portion of our total revenue. All of our
sales are denominated in U.S. dollars.
20
<PAGE>
Average selling prices for our products typically decline rapidly during the
first six to 12 months after their introduction, then decline less rapidly as
the products mature. We attempt to maintain gross margins even as average
selling prices decline through the introduction of new products with higher
margins and through manufacturing efficiencies and cost reductions. However, the
markets in which we operate are highly competitive, and there can be no
assurance that we will be able to successfully maintain gross margins. Any
significant decline in our gross margins will materially harm our business.
We outsource the wafer manufacturing, assembly and test of all of our
products. We rely upon TSMC and Cypress to manufacture our products, and we rely
primarily upon Amkor and ChipPAC to assemble and test our products. Under our
arrangements with these manufacturers, we are obligated to provide forecasts and
enter into binding obligations for anticipated purchases. This limits our
ability to react to fluctuations in demand for our products, which could lead to
excesses or shortages of wafers for a particular product.
We entered into an agreement with Cypress in 1992 to obtain guaranteed
fabrication capacity and to secure a second source for our FPGA products. By
1997, wafer fabrication capacity was no longer scarce and we had established a
customer base and reputation. In March 1997, our agreement with Cypress was
terminated. In exchange for the termination and the reversion to us of the
rights to the intellectual property covered by that agreement, we paid Cypress
$4.5 million in cash and agreed to issue to Cypress 3,037,786 shares of our
common stock, resulting in a charge of approximately $23.0 million in the first
quarter of 1997.
In 1996 and 1997, we recorded an accrual for legal and settlement fees of
$4.1 million and $5.3 million, respectively, associated with the settlement of
patent litigation with Actel Corporation in 1998. We have made quarterly
payments to Actel since the settlement date. The remainder of the settlement
will be paid to Actel immediately after this offering.
RESULTS OF OPERATIONS
The following table sets forth the percentage of revenue for certain items
in our statements of operations for the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS
ENDED JUNE 30,
--------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------- (UNAUDITED)
1996 1997 1998 1998 1999
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenue............................................... 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Cost of revenue....................................... 47.0 59.2 47.7 48.3 43.2
----- ------ ----- ----- -----
Gross profit.......................................... 53.0 40.8 52.3 51.7 56.8
Operating expenses:
Research and development............................ 19.5 21.9 21.0 20.8 19.4
Selling, general and administrative................. 32.5 38.6 31.2 33.0 32.6
Contract termination and legal...................... 17.4 99.5 -- -- --
----- ------ ----- ----- -----
Net operating income (loss)........................... (16.4) (119.2) 0.1 (2.1) 4.8
Interest expense...................................... (0.3) (0.6) (0.5) (0.6) (0.3)
Interest income and other, net........................ 1.6 1.6 1.2 1.4 0.9
----- ------ ----- ----- -----
Net income (loss)..................................... (15.1)% (118.2)% 0.8 % (1.3)% 5.4 %
----- ------ ----- ----- -----
----- ------ ----- ----- -----
</TABLE>
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1999
REVENUE. Revenue increased 30.9% from $14.1 million for the six months
ended June 30, 1998 to $18.4 million for the six months ended June 30, 1999. The
increase in revenue resulted from increased
21
<PAGE>
sales of our pASIC 2 and pASIC 3 products and initial sales of our QuickRAM
ESPs, offset in part by declines in sales of our pASIC 1 product family. We
expect this trend in product mix to continue.
GROSS PROFIT. Gross profit increased 43.9% from $7.3 million for the six
months ended June 30, 1998 to $10.5 million for the six months ended June 30,
1999. Gross margin improved between those periods from 51.7% to 56.8%. This
increase in gross profit was primarily due to higher revenue. The gross margin
improvement was primarily due to increased sales of our higher margin pASIC 2
and pASIC 3 products and higher revenue over relatively fixed production costs.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense includes
personnel and other costs associated with the development of product designs,
process technology, software and programming hardware. Research and development
expense increased from $2.9 million for the six months ended June 30, 1998 to
$3.6 million for the six months ended June 30, 1999. As a percentage of revenue,
research and development expense declined from 20.8% to 19.4% for the same
periods. The increase in dollars spent on research and development was primarily
due to investments in the development of our new ESP products. These efforts
required the use of consultants and the hiring of additional personnel, which
increased costs. We believe that continued investments in process technology and
product development are essential for us to remain competitive in the markets we
serve. Specifically in regard to our ESPs, we expect to continue to increase
research and development spending.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling expense consists
primarily of personnel, commissions and other costs associated with the
marketing and sale of our products. General and administrative expense consists
primarily of personnel and other costs associated with the management of our
business. Selling, general and administrative expense increased from $4.6
million for the six months ended June 30, 1998 to $6.0 million for the six
months ended June 30, 1999. Selling, general and administrative expense declined
as a percentage of revenue from 33.0% for the first six months of 1998 to 32.6%
for the first six months of 1999 due to higher revenues in the later period. The
1999 increase in dollars spent was due to increased advertising expense related
to the introduction of our ESPs and to hiring of additional sales, marketing,
finance and administrative personnel. We anticipate that selling, general and
administrative expense will continue to increase in absolute dollars as we
invest in our business and seek to find new customers for our products.
INTEREST AND OTHER INCOME, NET. Interest income, interest expense and other
income, net was $116,000 in the six months ended June 30, 1998 compared to
$87,000 for the six months ended June 30, 1999. A gain on the disposal of fixed
assets of $5,000 was recorded in 1998.
DEFERRED COMPENSATION. We grant incentive stock options to hire, motivate
and retain employees. With respect to the grant of stock options to employees,
we recorded aggregate deferred compensation of approximately $332,000 for the
six months ended June 30, 1999. We currently expect to record amortization of
deferred compensation of approximately $485,000, $499,000 and $337,000 during
the years ended December 31, 1999, 2000 and 2001, respectively. The amount of
deferred compensation is presented as a reduction of stockholders' equity and
amortized ratably over the vesting period of the applicable options, generally
four years.
PROVISION FOR INCOME TAXES. No provision for income taxes was recorded for
the six-month period ended June 30, 1998, as we incurred an operating loss
during that period. No provision for income taxes was recorded for the six-month
period ended June 30, 1999, due to our ability to utilize a portion of our state
and federal net operating loss carryforwards.
22
<PAGE>
YEARS ENDED DECEMBER 31, 1996, 1997 AND 1998
REVENUE. Our revenue for 1996, 1997 and 1998 was $23.8 million, $28.5
million and $30.0 million, respectively, representing growth of 19.8% from 1996
to 1997 and 5.4% from 1997 to 1998. The majority of the 1997 increase in revenue
was due to growth in sales of our pASIC 2 products, the second generation of our
FPGAs. The 1998 revenue growth reflected increasing sales of our pASIC 2
products as well as the initial shipments of our pASIC 3 products. The increase
in 1998 was partially offset by declines in sales of our mature pASIC 1
products. In aggregate, unit sales increased in both 1997 and 1998 and were only
partially offset by declining average selling prices of our pASIC 1 and pASIC 2
products.
GROSS PROFIT. Gross profit was $12.6 million, $11.6 million and $15.7
million in 1996, 1997 and 1998, respectively, which was 53.0%, 40.8% and 52.3%
of revenue for those periods. The decline in 1997 was primarily attributable to
inventory write-downs for obsolescence, associated with higher than desired
inventory levels due to inventory acquired from Cypress as part of the
termination of our agreement with Cypress in 1997. The increase in gross profit
in 1998 was attributable to the growth in sales, the introduction of
higher-margin pASIC 3 products, the absence of any inventory write-downs, and
the maintenance of margin levels on our pASIC 1 and pASIC 2 products.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was $4.6
million, $6.2 million, and $6.3 million in 1996, 1997 and 1998, respectively,
which was 19.5%, 21.9% and 21.0% of revenue for those periods. The increases in
research and development spending in 1997 and 1998 were primarily due to
increases in the number of employees involved in research and development as we
accelerated the introduction of new products, particularly the pASIC 3 family of
products and our first ESPs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense was $7.7 million, $11.0 million and $9.4 million in 1996,
1997 and 1998, respectively, which was 32.5%, 38.6% and 31.2% of revenue for
those periods. The increase in selling, general and administrative expense in
1997 was primarily attributable to increases in personnel and sales and
marketing efforts in support of existing and new products. The decreases in
selling, general and administrative expenses in 1998 were attributable to
reduced personnel costs due to temporary vacancies in senior management
positions.
CONTRACT TERMINATION AND LEGAL EXPENSE. We recorded an expense of $23.0
million in the first quarter of 1997 as a result of the termination of our 1992
agreement with Cypress. Legal and settlement costs associated with the Actel
litigation were $4.1 million and $5.3 million in 1996 and 1997, respectively. No
additional charges were recorded upon settlement of this litigation in 1998.
DEFERRED COMPENSATION. With respect to the grant of stock options to
employees, we recorded aggregate deferred compensation of $851,000, $1.9 million
and $204,000 in 1996, 1997 and 1998, respectively. The amount of deferred
compensation is presented as a reduction of stockholders' equity and amortized
ratably over the vesting period of the applicable options, generally four years.
We amortized $43,000, $625,000 and $426,000 in 1996, 1997 and 1998,
respectively. The amortization of deferred compensation will be recorded as
research and development and selling, general and administrative expenses in
those periods.
INTEREST AND OTHER INCOME, NET. Interest and other income, net was
$300,000, $272,000 and $203,000 in 1996, 1997 and 1998, respectively. Interest
and other income decreased in 1997 and 1998 as interest income on increased cash
balances was offset by interest expense incurred as a result of new equipment
financing arrangements.
PROVISION FOR INCOME TAXES. No provision for income taxes was recorded in
the years ended December 31, 1996 and 1997, as we incurred net operating losses
in those years. No provision for
23
<PAGE>
income taxes was recorded for the year ended December 31, 1998, as we were able
to utilize a portion of our state and federal net operating loss carryforwards.
At December 31, 1998, we had net operating loss carryforwards for federal and
state tax purposes of approximately $44.0 million and $21.0 million,
respectively. These carryforwards, if not utilized to offset future taxable
income and income taxes payable, will begin to expire in 1999 and will continue
to expire through 2013.
QUARTERLY RESULTS OF OPERATIONS
The following tables contain unaudited statement of operations data for our
six most recent quarters. The first table contains revenue and expense data
expressed in dollars, while the second table contains the same data expressed as
a percentage of our revenue for the periods indicated. The data has been derived
from unaudited financial statements that, in our opinion, include all
adjustments necessary for a fair presentation of the information. Our quarterly
results have been in the past, and in the future may be, subject to
fluctuations. As a result, we believe 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,
1998 1998 1998 1998
-------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenue........................................... $7,751 $6,327 $7,883 $8,046
Cost of revenue................................... 3,638 3,165 3,825 3,675
-------- -------- --------- --------
Gross profit...................................... 4,113 3,162 4,058 4,371
Operating expenses:
Research and development........................ 1,394 1,538 1,586 1,776
Selling, general and administrative............. 2,391 2,257 2,302 2,418
-------- -------- --------- --------
Net operating income (loss)....................... 328 (633) 170 177
Interest expense.................................. (44) (42) (46) (29)
Interest income and other, net.................... 134 68 83 79
-------- -------- --------- --------
Net income (loss)................................. $ 418 $ (607) $ 207 $ 227
-------- -------- --------- --------
-------- -------- --------- --------
AS A PERCENTAGE OF REVENUE
Revenue........................................... 100.0% 100.0% 100.0% 100.0%
Cost of revenue................................... 46.9 50.0 48.5 45.7
-------- -------- --------- --------
Gross profit...................................... 53.1 50.0 51.5 54.3
Operating expenses:
Research and development........................ 18.0 24.3 20.1 22.1
Selling, general and administrative............. 30.8 35.7 29.2 30.0
-------- -------- --------- --------
Net operating income (loss)....................... 4.3 (10.0) 2.2 2.2
Interest expense.................................. (0.6) (0.7) (0.6) (0.4)
Interest income and other, net.................... 1.7 1.1 1.0 1.0
-------- -------- --------- --------
Net income (loss)................................. 5.4% (9.6%) 2.6% 2.8%
-------- -------- --------- --------
-------- -------- --------- --------
<CAPTION>
QUARTER ENDED
--------------------
MARCH 31, JUNE 30,
1999 1999
--------- --------
<S> <C> <C>
STATEMENT OF OPERATIONS
Revenue........................................... $8,597 $9,828
Cost of revenue................................... 3,722 4,236
--------- --------
Gross profit...................................... 4,875 5,592
Operating expenses:
Research and development........................ 1,780 1,787
Selling, general and administrative............. 2,856 3,144
--------- --------
Net operating income (loss)....................... 239 661
Interest expense.................................. (26) (23)
Interest income and other, net.................... 69 67
--------- --------
Net income (loss)................................. $ 282 $ 705
--------- --------
--------- --------
AS A PERCENTAGE OF REVENUE
Revenue........................................... 100.0% 100.0%
Cost of revenue................................... 43.3 43.1
--------- --------
Gross profit...................................... 56.7 56.9
Operating expenses:
Research and development........................ 20.7 18.2
Selling, general and administrative............. 33.2 32.0
--------- --------
Net operating income (loss)....................... 2.8 6.7
Interest expense.................................. (0.3) (0.2)
Interest income and other, net.................... 0.8 0.7
--------- --------
Net income (loss)................................. 3.3% 7.2%
--------- --------
--------- --------
</TABLE>
Over the six quarters presented, our quarterly revenue grew from $7.8
million to $9.8 million. Revenues have fluctuated over this time, and were
negatively affected in the quarter ended June 30, 1998, when sales declined
18.4% primarily as a result of the Asian financial crisis which had a dramatic
effect on the global semiconductor industry. Revenue growth commencing in the
quarter ended September 30, 1998 has been a result of renewed strength in our
core FPGA business, and the introduction of our pASIC 3 product family.
Beginning in the quarter ended March 31, 1999, revenue included sales from our
QuickRAM product family, the first of our ESPs.
Gross profit declined in the quarter ended June 30, 1998, along with
revenue, for the reasons described above. Gross profit began to improve during
the third quarter of 1998 as revenue increased. Gross margins increased from
54.3% in the quarter ended December 31, 1998 to 56.9% in the quarter
24
<PAGE>
ended June 30, 1999. This recent improvement was caused by favorable product mix
shifts as newer, higher margin pASIC 2, pASIC 3 and QuickRAM products comprised
a higher percentage of our overall revenue.
Over the last six quarters, research and development expenses increased from
$1.4 million to $1.8 million. To serve the evolving needs of systems
manufacturers in our target markets, we have spent aggressively to develop new
products and technologies. Our research and development expenses over this
period have averaged 20.6% of revenues. Selling, general and administrative
expenses over this period have fluctuated between $2.3 million and $3.1 million.
We have accumulated substantial net operating loss carryforwards. As a
result, we have not paid income taxes. Although we have been increasingly
profitable over the past four quarters, we expect to have minimal tax
obligations over the next several quarters due to application of net operating
loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
We financed our operating losses in 1996 and 1997 through the issuance of
common stock, the sales of preferred stock, the deferral of litigation
settlement obligations and the incurrence of debt to finance capital equipment
purchases. We have been profitable since the third quarter of 1998. At June 30,
1999, we had $8.2 million in cash, a decrease of $2.2 million from cash held at
December 31, 1996, but an increase of $590,000 from cash held at December 31,
1998. As of June 30, 1999, we had an accumulated deficit of $60.2 million.
During 1996 and 1997, working capital increased due to growth in accounts
receivable and inventories. During 1998 and the first six months of 1999,
inventory balances have been substantially reduced.
We have an equipment financing line with a commercial bank. At June 30,
1999, we had obligations of $806,000 outstanding under this equipment line and a
remaining available balance of $137,000, which can be drawn upon through the
fourth quarter of 1999. The outstanding obligations under the equipment line are
due over the next one to three years.
Net cash provided by (used for) operating activities was $(4.6) million,
$(1.4) million, $2.3 million and $2.3 million in 1996, 1997, 1998 and the first
six months of 1999, respectively. The decreases in cash in 1996 and 1997 were
primarily attributable to increases in working capital, particularly accounts
receivable and inventory. Inventory reductions were the primary source of cash
in 1998. Net income and an increase in accounts payable were the primary sources
of cash in the first six months of 1999.
Net cash provided by (used for) investing activities was $2.5 million,
$(2.6) million, $(679,000), and $(1.0) million in 1996, 1997, 1998 and the first
six months of 1999, respectively. In 1995, we invested $4.0 million in
short-term investments which were sold in 1996. We acquired $1.5 million, $2.6
million, $679,000 and $1.0 million of property and equipment in 1996, 1997, 1998
and the first six months of 1999, respectively. The increases in property and
equipment in 1996 and 1997 were comprised primarily of furniture, leasehold
improvements and computer and networking equipment as a result of our move to
our new facility in December 1996. The majority of these acquisitions were
financed under our equipment financing line. We intend to purchase approximately
$800,000 of additional capital assets during the remainder of 1999.
Net cash provided by (used for) financing activities was $8.5 million, $1.1
million, $(1.4) million and $(664,000) in 1996, 1997, 1998 and the first six
months of 1999, respectively, and resulted primarily from the issuance of $8.9
million of preferred stock in 1996 and 1997, borrowings under equipment debt
facilities of $2.0 million in 1996 and 1997 and repayment of bank debt of
$124,000, $1.5 million, $1.5 million and $832,000 in 1996, 1997, 1998 and the
first six months of 1999, respectively.
25
<PAGE>
We require substantial working capital to fund our business, particularly to
finance inventories and accounts receivable. Our future capital requirements
will depend on many factors, including the rate of sales growth, market
acceptance of our existing and new products, the amount and timing of research
and development expenditures, the timing of the introduction of new products and
expansion of sales and marketing efforts. There can be no assurance that
additional equity or debt financing, if required, will be available on
satisfactory terms. We believe the net proceeds of this offering combined with
existing capital resources and cash generated from operations will be sufficient
to meet our needs for the next 12 months, although we could seek to raise
additional capital during that period.
INFLATION
The impact of inflation on our business has not been material for the fiscal
years ended December 31, 1996, 1997 and 1998 or for the six month period ended
June 30, 1999.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board issued Statement on
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." SFAS No. 133 establishes a new model for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing accounting standards. SFAS No. 133 requires that all derivatives be
recognized in the balance sheet at their fair market value, and the
corresponding derivative gains or losses be either reported in the statement of
operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. SFAS No. 133, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--Deferral
of Effective Date of FASB Statement No. 133," is effective for all fiscal
quarters and years beginning after June 15, 2000. We do not currently have, or
plan to enter into, forward exchange contracts to hedge exposures denominated in
foreign currencies or any other derivative financial instruments for trading or
speculative purposes.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position, or SOP, No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. We do not expect that the
adoption of SOP No. 98-1 will have material impact on our consolidated financial
statements.
YEAR 2000 READINESS DISCLOSURE
STATE OF READINESS. We utilize a number of computer software programs and
operating systems across our entire organization, including applications used in
financial business systems and various administrative functions. We have a team
of eight employees representing each of our major departments, led by our
manager of information systems, to identify and correct non-compliant systems.
To the extent that any of our software applications had source code unable to
appropriately interpret the upcoming Year 2000 and beyond, we have completed
modification or replacement of such applications. We have certain computer
hardware that we are in the process of replacing in connection with our Year
2000 readiness program and expect to have completed such efforts by September
30, 1999.
We are highly dependent on semiconductor foundry companies to produce our
FPGA and ESP products. We have contacted these suppliers and have received
assurances that Year 2000 issues will not affect their ability to deliver
product. We are also dependent upon third party software for the functioning of
our software design tools, QuickWorks and QuickTools, that support our FPGA and
ESP products. QuickWorks operates on Microsoft Windows while QuickTools runs on
UNIX platforms. Our software products integrate software tools that have been
developed and are maintained by third party
26
<PAGE>
vendors. We have contacted these vendors and have confirmed that such software
products are Year 2000 compliant. We have also tested these products and found
them to be Year 2000 compliant. However, any failure of Windows, UNIX or the
integrated third party software tools due to Year 2000 problems, will adversely
impact the performance of our software design tools, and our business could be
materially harmed.
COSTS OF ADDRESSING YEAR 2000 ISSUES. Given the information known at this
time about our non-compliant systems, coupled with our ongoing process of
monitoring our third party suppliers and vendors for Year 2000 compliance, as
well as implementing contingency plans, we do not expect Year 2000 compliance
costs to have any material adverse impact on our business. We estimate that
total costs for the Year 2000 compliance assessment and remediation will not
exceed $400,000. The costs of this assessment and remediation will be paid out
of general and administrative expenses. Through June 30, 1999, we have incurred
expenses of approximately $300,000 in addressing the year 2000 problem. We
expect to incur expenses of approximately $100,000 more for remediation, testing
and contingency planning.
RISKS OF YEAR 2000 ISSUES. In light of our assessment and remediation
efforts to date, and the planned upgrades, testing and contingency planning, we
believe that our Year 2000 risk is limited to non-critical business applications
and support hardware. No assurance can be given, however, that:
- our systems will be Year 2000 compliant;
- the manufacturers who supply semiconductors for us will be Year 2000
compliant with their internal systems; or
- other major suppliers, vendors, distributors and customers, upon whom our
business is materially dependant, will be Year 2000 compliant.
If our internal operations or those of our suppliers, vendors, distributors
or customers are adversely impacted because they are not Year 2000 compliant,
our business could be materially harmed.
CONTINGENCY PLANS. In the event any Year 2000 issues relating to key
suppliers, vendors, distributors or customers are identified and not
successfully resolved, based on information available to us at present, we
believe that the most likely worst case scenario is a temporary disruption in
infrastructure service, particularly power and telecommunications, which could
materially and adversely impact supplier deliveries or customer shipments. If
severe disruptions occur in these areas and are not corrected in a timely
manner, a revenue or profit shortfall may result in the Year 2000. We are in the
process of developing a contingency plan for all operations to address the most
reasonably likely worst case scenarios regarding Year 2000 compliance. We expect
contingency planning to be completed by September 30, 1999.
27
<PAGE>
BUSINESS
INTRODUCTION
QuickLogic develops, markets and supports advanced field programmable gate
array, or FPGA, semiconductors and the software tools needed for our customers
to use our products. In addition to our FPGA semiconductors, we have pioneered
the development of embedded standard products, or ESPs. Our ESPs combine the
flexibility and time-to-market advantages of our FPGAs with the predictable,
high performance of standard semiconductor products, thereby enabling our
customers to integrate increased amounts of functionality on a single
semiconductor device. Our FPGA and ESP products target complex, high-performance
systems in rapidly changing markets where system manufacturers seek to minimize
time-to-market and maximize product differentiation and functionality. Examples
of markets we sell to include telecommunications and data communications;
video/audio, graphics and imaging; instrumentation and test; high-performance
computing; and military systems.
The key components of our FPGA and ESP product families are our ViaLink
programmable metal technology, our pASIC architecture and the associated
software tools used for product design. Our ViaLink technology allows us to
create smaller devices than competitors' comparable products, thereby minimizing
silicon area and cost. In addition, our ViaLink technology has lower electrical
resistance and capacitance than other programmable technologies and,
consequently, supports higher signal speed. Our FPGA and ESP architectures
provide full routability and utilization of a device's logic cells, thereby
enabling greater usable device density and design flexibility. Finally, our
software enables our customers to efficiently implement their designs using our
products.
INDUSTRY BACKGROUND
Competitive pressures are forcing manufacturers of electronic systems to
rapidly bring to market products with improved functionality, higher performance
and greater reliability, all at lower cost. Providers of systems requiring
high-speed data transmission and processing such as communications equipment,
digital image products, test and instrumentation and storage subsystems face
some of the most intense time-to-market pressures in the technology industry.
These market forces have driven the evolution of logic semiconductors, which are
used in complex electronic systems to coordinate the functions of other
semiconductors, such as microprocessors, memory or I/O controllers. There are
three types of advanced logic semiconductors:
- Application Specific Integrated Circuits, or ASICs, are special purpose
devices designed for a particular manufacturer's electronic system. These
devices are customized during wafer manufacturing.
- Application Specific Standard Products, or ASSPs, are fixed-function
devices designed to comply with industry standards that can be used by a
variety of electronic systems manufacturers. Their functions are fixed
prior to wafer manufacturing.
- Programmable Logic Devices, or PLDs, are general purpose devices which can
be used by a variety of electronic systems manufacturers, and are
customized after purchase for a specific application. Field Programmable
Gate Arrays, or FPGAs, are types of PLDs used for complex functions.
Systems manufacturers have relied heavily on ASICs to implement the advanced
logic required for their products. ASICs provide high performance due to
customized circuit design. However, because ASICs are design-specific devices,
they require long development and manufacturing cycles, delaying product
introductions. In addition, because of the expense associated with the design of
ASICs, they are cost effective only if they can be manufactured in high volumes.
Finally, once ASICs are manufactured, their functionality cannot be changed to
respond to evolving market demands.
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<PAGE>
ASSPs have become widely utilized as industry standards have developed to
address increasing system complexity and the need for communication between
systems and system components. These standards include:
- Peripheral Component Interconnect, or PCI, a standard developed to provide
a high performance, reliable and cost-effective method of connecting
high-speed devices within a system.
- SONET, or Synchronous Optical NETwork, a fiber-optic transmission standard
for high-speed digital traffic, employed mainly by telephone companies and
other network service providers.
- Ethernet, a widely-used local area network, or LAN, transport standard
which controls the interconnection between servers and computers.
- Fibre Channel Interconnect Protocol, an industry networking standard for
storage area networks, or SANs, which controls the interconnection between
servers and storage devices.
Compared to ASICs, ASSPs offer the systems designer shorter development time,
lower risk and reduced development cost. However, ASSPs generally cannot be used
by systems manufacturers to differentiate their products.
To address markets where industry standards do not exist or are changing and
time-to-market is important, FPGAs are often used. FPGAs provide systems
manufacturers with the flexibility to customize and thereby differentiate their
systems, unlike ASSPs. FPGAs also enable systems manufacturers to change the
logic functionality of their systems after product introduction without the
expense and time of redesigning an ASIC. However, most FPGAs are more expensive
than ASSPs and even ASICs of equivalent functionality because they require more
silicon area. In addition, most FPGAs offer lower performance than
nonprogrammable solutions, such as ASSPs and ASICs. According to Cahners In-Stat
Group, the projected total market size for high-complexity programmable logic
devices in 1999 is approximately $2.10 billion, of which FPGAs are estimated to
account for $1.12 billion.
QUICKLOGIC'S FPGA SOLUTION
QuickLogic's FPGAs offer higher performance at lower overall systems cost
than competing FPGA solutions, in addition to offering the advantages typically
associated with FPGAs. Specifically, our products provide greater design
flexibility than standard FPGAs and enable designers of complex systems to
achieve rapid time-to-market with highly differentiated products. Our products
are based on our ViaLink technology and pASIC architectures, and our associated
QuickWorks and QuickTools design software:
- VIALINK PROGRAMMABLE METAL TECHNOLOGY. Unlike conventional SRAM-based
FPGAs, our ViaLink programmable metal technology embeds logic
interconnects between the metal layers of a chip, instead of on the
silicon substrate. As a result, we are able to provide a programmable
switch at every intersection in the wire grid, as illustrated in the graph
below. This vertical interconnect structure is more efficient and flexible
than that of conventional FPGAs, minimizing silicon area and therefore
cost. The ViaLink technology also features lower resistance and
capacitance than competing interconnect technologies, thereby optimizing
the device's performance.
- PASIC ARCHITECTURE. FPGA device architectures consist of logic cells,
routing wires and interconnect elements. Unlike conventional SRAM-based
FPGA architectures, our pASIC architectures facilitate full utilization of
a device's logic cells and I/O pins. These logic cells have been optimized
to efficiently implement a wide range of logic functions at high speed.
Our pASIC architectures use our ViaLink technology to maximize
interconnects at every routing wire
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<PAGE>
intersection as illustrated in the graph below. The abundance of
interconnect resources allows more paths between logic cells. As a
consequence, system designers are able to use QuickLogic FPGAs with
smaller gate counts than competing FPGAs to implement their designs. These
smaller gate count FPGAs require less silicon area and as a result are
able to be offered at a lower price.
[GRAPHIC DEPICTING A CONVENTIONAL SRAM-BASED
FPGA ARCHITECTURE AND QUICKLOGIC'S PASIC ARCHITECTURE]
- QUICKWORKS AND QUICKTOOLS DESIGN SOFTWARE. Our design software for
Windows and Unix operating systems provides systems manufacturers with the
ability to easily customize QuickLogic FPGAs for their specific needs.
These design tools feature 100% fully automatic place and route
capabilities, which speed design development by permitting very complex
designs to be implemented quickly. Once a design has been completed,
systems manufacturers can use the DeskFab device programmer to transfer
their design to an FGPA in minutes. Alternatively, systems manufacturers
can use our unique WebASIC program to transmit their design to QuickLogic
in order to receive a programmed device for evaluation within two business
days.
THE ADVENT OF SYSTEM-ON-A-CHIP
Over the past few years, semiconductor manufacturers have migrated to
smaller process geometries. These smaller process geometries enable more logic
elements to be incorporated in a single chip using less silicon area. More
recently, advances have been made in the integration of logic and memory on a
single chip, which had been difficult previously due to incompatible process
technologies. Advantages of the single chip approach to systems manufacturers
include:
- simplified system development,
- reduced time-to-market,
- elimination of delays associated with the transfer of data between chips,
- smaller physical size,
- lower power dissipation,
- greater reliability and
- lower cost.
However, as levels of logic integration have increased, devices have become more
specific to a particular application. This fact limits their use and potential
market size.
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<PAGE>
QUICKLOGIC'S ESP SOLUTION
QuickLogic has leveraged its unique FPGA technology to address the
limitations inherent in current system-on-a-chip approaches. The result is
embedded standard products, or ESPs, that deliver the advantages offered by both
FPGAs and ASSPs. In its simplest form, an ESP contains four basic parts: a
programmable logic array, an embedded standard function, an optional
programmable read-only memory to configure the embedded function, and an
interface that allows communication between the standard function and
programmable logic array. Our ESP products combine the system-level
functionality of ASSPs with the flexibility of FPGAs. We believe ESPs offer the
following specific advantages:
- INCREASED PERFORMANCE. In a typical design, data must travel between an
ASSP and an FPGA across a printed circuit board. The limited number of
connections available and the distance between the devices can degrade the
system's overall performance. Our ESP solution allows all data to be
processed on a single chip.
- DECREASED COST. Because our ESP is a single chip solution, it requires
less silicon area, and therefore is less expensive to produce.
Additionally, this single chip approach lowers the component, assembly and
test cost for the system manufacturer.
- INCREASED RELIABILITY. ESP designs are more reliable because single chip
solutions contain fewer components and circuit board connections that are
subject to failure.
- SHORTER DEVELOPMENT TIME. With a multiple chip design, systems designers
must solve complex routing and timing issues between devices. A single
chip ESP solution eliminates the timing issues between devices and
simplifies software simulation, leading to shorter development time.
We have introduced our first two ESP product lines, the QuickRAM and
QuickPCI families. Both families are designed for a wide range of
performance-driven applications. For example, QuickRAM products, which combine
blocks of embedded, high-performance memory with our FPGA logic, are used by
Alcatel in its Lightwave telecommunication transmission systems. QuickPCI
products combine PCI controllers with our FPGA logic. We completed development
of our first QuickPCI product in April 1999, and have shipped development
quantities to several customers.
According to Cahners In-Stat Group, the total ESP market size in 1998 was
$13.8 million, and is projected to increase to $43.9 million in 1999.
THE QUICKLOGIC STRATEGY
Our objective is to be the leading provider of high-speed, flexible,
cost-effective FPGAs and ESPs. We feel we can achieve this objective by offering
systems manufacturers the ability to accelerate design cycles to satisfy
demanding time-to-market requirements. To achieve our objective, we have adopted
the following strategies:
EXTEND TECHNOLOGY LEADERSHIP
Our ViaLink technology, pASIC architectures and proprietary software design
tools enable us to offer flexible, high-performance FPGA and ESP products. We
intend to continue to invest in the development of these technologies and to
utilize such developments in future innovations of both our FPGA and our ESP
products. We also intend to focus our resources on building critical
systems-level expertise to introduce new ESP products and enhance existing ESP
product families.
CAPITALIZE ON CROSS-SELLING OPPORTUNITIES BETWEEN OUR FPGA AND ESP PRODUCTS
Because our development tools share many of the same features for both FPGAs
and ESPs, once a manufacturer designs a system with either product, we believe
the manufacturer will recognize the
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<PAGE>
advantages of our other products. Accordingly, we intend to leverage our FPGA
and ESP design wins to pursue additional design wins on complementary products
with the same customer.
BROADEN ESP PRODUCT LINES
In addition to our QuickRAM and QuickPCI families, we intend to focus on the
needs of large, high-growth, performance-driven market segments. Our product
design approach consists of continuous solicitation of feedback from existing
and prospective customers.
CREATE INNOVATIVE, INDUSTRY-LEADING CUSTOMER SERVICES
We continue to develop and implement innovative ways to serve and
communicate with our customers. For example, we recently introduced our WebASIC
service. This service allows our customers to use our development software to
design a circuit, transmit design information over the Internet and receive a
QuickLogic FPGA or ESP device programmed with their design within one business
day in North America and Europe or within two business days in Asia. We are in
the process of deploying ProChannel, a web-based system which will allow our
customers to obtain promotional material, receive quotations, place orders for
our products and view their order status over the Internet. This system will
complement the Electronic Data Interchange systems that we have used for the
past several years with our largest customers.
TARGET HIGH-PERFORMANCE, RAPIDLY CHANGING MARKETS
We will continue to focus our design and marketing efforts on systems
manufacturers who sell complex systems that require high performance, design
flexibility, low cost and rapid time-to-market. Such applications include
telecommunications and data communications; video/audio, graphics and imaging
systems; instrumentation and test; high-performance computing; and military
systems.
MARKETS AND APPLICATIONS
Our FPGA and ESP products are targeted at high growth markets that have
demanding performance, design flexibility, cost and time-to-market requirements.
Examples of the markets and applications in which our products are used include:
TELECOMMUNICATIONS AND DATA COMMUNICATIONS
Alcatel uses our QuickRAM products in their fiber optic Lightwave
transmission equipment. For these products, Alcatel requires logic devices with
high performance, low power consumption, and design flexibility. QuickLogic's
single-chip QuickRAM devices meet this need by providing a comprehensive
solution that eliminates the need for multiple chip solutions.
VIDEO/AUDIO, GRAPHICS AND IMAGING
Honeywell uses our QuickRAM and FPGA products for their Primus Epic
commercial avionics display systems. Their applications for QuickLogic's devices
include flight data managers, back panel interfaces, flat panel display
interfaces, and PCI interfaces.
INSTRUMENTATION AND TEST
Teradyne uses our QuickRAM and FPGA devices in order to maximize performance
of their semiconductor test equipment. Instrumentation and industrial controls
manufacturers, such as Asea Brown Boveri, or ABB, also choose QuickLogic
products for their low power consumption and high reliability.
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<PAGE>
HIGH-PERFORMANCE COMPUTING
IBM uses our FPGA devices in numerous applications, including controllers
for its redundant array of independent disks, or RAID, products. Compaq Computer
also uses our FPGAs in their Alpha-based workstations and servers.
MILITARY SYSTEMS
Hamilton Standard, a division of United Technologies, uses our FPGA devices
for a flight computer in the F-117 stealth fighter. Military electronics systems
manufacturers have demanding reliability and performance requirements. Military
applications require devices that remain configured even when power is lost or
interrupted. Our ViaLink technology creates connections within the device which
are permanent, unlike reprogrammable FPGAs, which must be reconfigured after
losing power. We provide several product lines that are specially assembled and
tested to meet demanding military requirements.
CUSTOMERS
Through our ten years of business in the FPGA market, we have developed a
strong customer base. Our customers include leading systems manufacturers, such
as IBM, which recently added QuickLogic to its recommended supplier list for
high performance FPGA products. The following chart provides a representative
list by industry of our current customers:
<TABLE>
<S> <C> <C>
INDUSTRY CUSTOMER APPLICATION
Data Communications and Alcatel Fiber optic transmission equipment
Telecommunications Ericsson GSM base stations
IBM Data encryption, network servers
NEC PBX electronics, wireless base stations
Philips Data encryption
Video/Audio, Graphics and Digidesign PC-based audio editing
Imaging Eastman Kodak High-speed video motion analysis
Honeywell Aircraft navigation and flight controls
Mitsubishi Large screen displays
NEC Solid state video cameras
Sony Industrial video cameras
Texas Instruments Digital micro mirror applications
Instrumentation and Test ABB Industrial power management systems
National PC-based instrumentation boards
Instruments
Teradyne Semiconductor test equipment
Toshiba Mail sorting equipment
High-Performance Computing Compaq Computer Alpha processor motherboards
IBM RAID controller, ThinkPad display
controls
Mitsubishi Mobile PC pen-input display controllers
Military Systems B.F. Goodrich Launch vehicle for Delta Four rockets
DY-4 VME-based computer systems
Hamilton Standard Flight computers
Hughes Aircraft Helicopter motor controls and radar
McDonnell Douglas C-17 flight controllers
Raytheon Tornado missile
</TABLE>
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<PAGE>
PRODUCTS
We make field programmable gate arrays and embedded standard products based
on our ViaLink technology and pASIC architecture. Each product family includes a
range of devices to address differing performance and cost requirements. A
variety of package types are available to satisfy varying customer requirements
for physical size and the number of input and output connections to the circuit
board. We also offer most of our devices in commercial, industrial and military
temperature ranges.
FIELD PROGRAMMABLE GATE ARRAYS
Our pASIC products are general purpose FPGAs that address the
high-performance segments of the programmable logic market. Our current product
line consists of three families of FPGAs. The following tables describe these
families:
PASIC 3 FPGA FAMILY
<TABLE>
<CAPTION>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS(#) INTRODUCTION DATE
<S> <C> <C> <C>
QL3004 4,000 76 Expected Q3 1999
QL3012 12,000 118 Q2 1998
QL3025 25,000 204 Q4 1997
QL3040 40,000 252 Q3 1998
QL3060 60,000 316 Q2 1998
</TABLE>
PASIC 2 FPGA FAMILY
<TABLE>
<CAPTION>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS(#) INTRODUCTION DATE
<S> <C> <C> <C>
QL2003 6,000 118 Q1 1997
QL2005 12,000 156 Q4 1996
QL2007 18,000 174 Q4 1995
QL2009 25,000 225 Q2 1996
</TABLE>
PASIC 1 FPGA FAMILY
<TABLE>
<CAPTION>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS(#) INTRODUCTION DATE
<S> <C> <C> <C>
QL8x12B 2,000 64 Q4 1991
QL12x16B 4,000 88 Q4 1992
QL16x24B 8,000 122 Q4 1993
QL24x32B 16,000 180 Q2 1995
</TABLE>
34
<PAGE>
EMBEDDED STANDARD PRODUCTS
ESPs are single chip solutions that combine the system-level functionality
of ASSPs with the flexibility of FPGAs. ESPs link blocks of user-configurable
standard functions with field programmable logic through a high-performance
interface. We have introduced our first two lines of ESPs, the QuickRAM and
QuickPCI families.
QUICKRAM. Our QuickRAM family of products, which began shipping in June
1998, combines blocks of high-performance, embedded memory with our high-speed
programmable logic. The QuickRAM family includes four available devices and one
planned device that span a wide range of logic and memory sizes:
QUICKRAM ESP FAMILY
<TABLE>
<CAPTION>
MEMORY CAPACITY LOGIC CAPACITY MAXIMUM INPUTS INTRODUCTION
DEVICE (BITS) (GATES) AND OUTPUTS(#) DATE
<S> <C> <C> <C> <C>
QL4009 9,216 6,000 82 Expected Q3 1999
QL4016 11,520 12,000 118 Q2 1999
QL4036 16,128 25,000 204 Q4 1998
QL4058 20,736 40,000 252 Q2 1999
QL4090 25,344 60,000 316 Q2 1998
</TABLE>
QUICKPCI. We completed development of our first QuickPCI product in April
1999, and we have shipped development quantities of devices to several
customers. Our QuickPCI family of products combines high-performance embedded
PCI controllers with our high-speed programmable logic. The QuickPCI family
includes five devices that span a wide range of PCI capabilities and memory and
programmable logic capacities, with both master and target functions. The master
PCI function controls the PCI bus while the target function only operates under
the control of the PCI bus.
QUICKPCI ESP FAMILY
<TABLE>
<CAPTION>
MEMORY LOGIC
PCI BUS MAX. PCI BUS CAPACITY CAPACITY INTRODUCTION
DEVICE FUNCTION SPEED/WIDTH (BITS) (GATES) DATE
<S> <C> <C> <C> <C> <C>
QL5030 Target 33MHz/32-bits 11,500 4,500 Expected Q3 1999
QL5130 Target 33MHz/32-bits 16,000 17,500 Expected Q3 1999
QL5032 Master/Target 33MHz/32-bits 16,000 14,500 Q2 1999
QL5232 Master/Target 33MHz/32-bits 25,344 49,500 Expected Q3 1999
QL5064 Master/Target 75MHz/64-bits 25,344 30,000 Expected Q3 1999
</TABLE>
FPGA AND ESP DEVELOPMENT TOOLS
Our FPGA and ESP devices are supported by a complete range of development
tools including software and device programming hardware.
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<PAGE>
QUICKWORKS. QuickWorks is a fully integrated design solution consisting of
internally developed and licensed third-party software operating on Microsoft
Windows. QuickWorks includes industry-standard, hardware description languages,
including VHDL and Verilog, as well as schematic and mixed-mode entry for fast
and efficient logic design. Our suite provides a complete FPGA software
solution, including design entry, logic synthesis, place and route, and
simulation. A derivative product, called QuickWorks-Lite, offers basic design
entry via schematic capture along with place and route free to designers.
QUICKTOOLS. QuickTools provides optimization, place and route, timing
analysis and back-annotation support for all our devices on UNIX platforms. The
QuickTools package provides a software solution for designers who use Cadence,
Mentor, Synario Design Automation, Synopsys, Veribest, Viewlogic Systems or
other third-party software tools for design entry, synthesis or simulation.
PROGRAMMING HARDWARE. After a design has been completed using our software,
the device is configured using our line of DeskFAB programming hardware and
associated device adapters.
SALES, MARKETING AND TECHNICAL SUPPORT
We sell our products through a network of sales managers, independent sales
representatives and electronics distributors in North America, Europe and Asia.
In addition to our corporate headquarters in Sunnyvale, we have regional sales
operations in Los Angeles, Dallas, Boston, Raleigh, Chicago, London and Hong
Kong. Our direct sales organization consists of a staff of 22, including sales
managers, field application engineers and administrative personnel. In North
America, our six sales managers direct the activities of 19 independent sales
representative firms operating out of more than 40 offices totaling
approximately 180 sales representatives, as well as the activities of four
electronics distributors with more than 230 locations. Internationally, three
sales managers direct the activities of nine distributors and three independent
sales representatives in Europe and nine distributors in Asia. Our marketing
organization consists of 14 employees. All of the foregoing numbers are as of
July 31, 1999.
Our major distributors, Arrow Electronics, Bell Microproducts, Future
Electronics, Internix and Sterling Electronics accounted for approximately 54%
of our sales in 1998, and approximately 51% of our sales in the six months ended
June 30, 1999. Our international sales were 25%, 43% and 47% of our total sales
for 1996, 1997 and 1998, respectively and 50% for the six months ended June 30,
1999. We anticipate that sales to customers located outside the United States
will continue to represent a significant portion of our total sales in future
periods and the trend of foreign customers accounting for an increasing portion
of our total sales may continue. No end customer accounted for more than 5% of
sales in 1998 or the six months ended June 30, 1999.
We provide systems manufacturers with comprehensive technical support, which
we believe is critical to remaining competitive in the markets we serve. As of
July 31, 1999, our applications support organization included four direct field
application engineers and over 200 application engineers employed by our
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. In 1998, we established a design
center to develop new embedded functions for ESPs, and to provide in-depth,
system-level technical support to our customers.
Our WebASIC program allows systems manufacturers to download our design
software from our web site and create a custom design for a QuickLogic device at
their desktop. They can then transmit the design data to us via e-mail and
request configured sample devices. We also use our web site to provide product
documentation and technical support information.
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<PAGE>
RESEARCH AND DEVELOPMENT
Our future success will depend to a large extent on our ability to rapidly
develop and introduce new products and enhancements to our existing products
that meet emerging industry standards and satisfy changing customer
requirements. We have made and expect to continue to make substantial
investments in research and development and to participate in the development of
new and existing industry standards.
As of July 31, 1999, the research and development staff consisted of 39
employees. Our research and development efforts are focused on standard function
development and integration, device architecture, development tools and foundry
process development. Our standard function development and integration personnel
create circuit designs for inclusion in our ESP products. They also evaluate
circuit designs by third parties for inclusion in our ESP products and integrate
those circuit designs with our FPGA technology. Our device architecture
personnel develop new and improved architectures for our FPGA and ESP products
to better serve the needs of our customers. Our software engineering group
develops place and route tools, which fit the design into specific logic cell
elements within a device and determine the necessary interconnections. They also
develop delay modeling tools, which estimate the timing of all the circuit paths
for accurate simulation. The software group incorporates third-party software
tools into the QuickWorks design software suite, and develops the design
libraries needed for the QuickWorks and QuickTools products to integrate with
third-party design environments. Our process engineering group maintains our
proprietary wafer manufacturing processes, oversees product manufacturing and
process development with our third-party foundries, and is involved in ongoing
process improvements to increase yields and optimize device characteristics.
Our research and development expense for 1996, 1997 and 1998 and for the
first half of 1999 were $4.6 million, $6.2 million, $6.3 million and $3.6
million, respectively. We anticipate that we will continue to commit substantial
resources to research and development in the future.
MANUFACTURING
We have established close relationships with third-party manufacturers for
our wafer fabrication, package assembly, test and programming requirements to
ensure stability in the supply of our products and minimize the risk of
localized capacity constraints.
We outsource all of our wafer manufacturing to Taiwan Semiconductor
Manufacturing Company at its Taiwan facilities and Cypress Semiconductor
Corporation at its Round Rock, Texas facility. TSMC manufactures our pASIC 3,
QuickRAM and QuickPCI product families using a four-layer metal, 0.35 micron
CMOS process on eight-inch wafers. Cypress manufactures our pASIC 1 and pASIC 2
product families using a three-layer metal, 0.65 micron CMOS process on six-inch
wafers. Our foundry agreement with TSMC is effective through August 2002 with
successive automatic one-year renewal terms. We have committed to purchase
approximately $2.8 million under this agreement in 1999. Our foundry agreement
with Cypress is effective through 2001. Each of our foundry agreements guarantee
capacity availability and provide for volume commitments. We purchase all of our
pASIC 1 and pASIC 2 requirements from Cypress. TSMC's manufacturing commitment
is based upon our forecasted requirements. TSMC requires that we purchase a
minimum percentage of our total production requirements in any one year from
them.
We outsource our product packaging, test and programming to Amkor and
ChipPAC at their South Korea facilities and to Advanced Semiconductor
Engineering at its Taiwan facility.
COMPETITION
The semiconductor industry is intensely competitive and is characterized by
constant technological change, rapid rates of product obsolescence and price
erosion. Our existing competitors include
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<PAGE>
suppliers of conventional standard products, such as PLX Technology and Applied
Micro Circuits Corporation, or AMCC; suppliers of complex programmable logic
devices, or CPLDs, including Lattice Semiconductor and Altera; and suppliers of
FPGAs, particularly Xilinx and Actel. The PLD market is dominated by Xilinx and
Altera, which together control over 60% of the market, according to Cahners
In-Stat Group, a semiconductor market research firm. Xilinx dominates the FPGA
segment of the market while Altera dominates the CPLD segment of the market. We
also face 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 our products. As we introduce additional ESPs,
we will also face competition from standard product manufacturers who are
already servicing or who may decide to enter the markets addressed by these new
ESP devices. In addition, we expect significant competition in the future from
major domestic and international semiconductor suppliers. We also may face
competition from suppliers of products based on new or emerging technologies.
We believe that important competitive factors in our 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, technical service and support,
wafer fabrication capacity and sources of raw materials, and protection of
products by effective utilization of intellectual property laws.
TECHNOLOGY
We believe that our FPGA and ESP products have distinct advantages over
traditional FPGA solutions and multiple chip solutions combining FPGAs and ASSPs
with regard to speed, design flexibility, cost and time-to-market. Our key
technologies are the ViaLink programmable metal technology, pASIC architectures,
and the QuickWorks and QuickTools design software.
VIALINK PROGRAMMABLE METAL TECHNOLOGY. Our ViaLink programmable metal
technology embeds programmable switches between the metal layers of a device
without consuming silicon surface area. As a result, we are able to provide a
programmable switch at every intersection in the wire grid. The abundance of
programmable switches allows for more complex paths between logic cells and
facilitates full utilization of an FPGA's logic cells and input/output pins. As
a consequence, system designers using QuickLogic FPGAs can be assured that their
design can consume all of the logic capacity of the FPGA and will have enough
resources to route their signals in very complex designs. Changes in our
customers' designs will not move the positions of their inputs and outputs. The
programming resources of our FPGAs allow designers to select smaller, less
expensive QuickLogic FPGAs to implement their designs as opposed to customary
SRAM-based FPGAs. In addition, our ViaLink technology also features lower
resistance and capacitance than competing programming technologies, thereby
optimizing the device's performance.
PASIC ARCHITECTURE. Our FPGA device architecture consists of logic cells,
routing wires and interconnect switches. Our pASIC logic cell is optimized to
efficiently implement a wide range of logic functions at high speed. Each cell
can implement one large function, five smaller independent functions, or any
combination in-between. The logic cell has abundant inputs that allow many user
functions to be implemented with a single logic delay, resulting in high
performance. The flexibility of the pASIC architecture is especially important
for designs synthesized from hardware design languages. The pASIC architecture
gives logic synthesis tools the needed degrees of freedom for high logic
utilization without sacrificing performance.
QUICKWORKS AND QUICKTOOLS DESIGN SOFTWARE. Our comprehensive QuickWorks
design software provides high-level design entry, schematic capture, logic
synthesis, functional and timing simulation, placement and routing on the
Windows operating system. QuickWorks incorporates standard design languages,
Verilog and VHDL, and leading third-party software to integrate with all leading
third-party design environments to support our pASIC products. A derivative
product, called QuickWorks-Lite,
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offers basic design entry via schematic capture along with place and route free
to designers. QuickTools is QuickLogic's place and route software for UNIX
platforms. These tools optimize designs for device utilization and in-system
operation speed and create an output file which allows users to transfer their
designs to our programmable devices.
INTELLECTUAL PROPERTY
Our future success and competitive position depend upon our ability to
obtain and maintain the proprietary technology used in our principal products.
We hold 52 U.S. patents and have 21 pending applications for additional U.S.
patents containing claims covering various aspects of programmable integrated
circuits, programmable interconnect structures and programmable metal devices.
In addition, we have three patent applications pending in Japan. Our issued
patents expire between 2009 and 2016. We have also registered five of our
trademarks in the U.S. with applications to register an additional two
trademarks now pending.
Because it is critical to our success that we are able to prevent
competitors from copying our innovations, we intend to continue to seek patent
protection for our products. The process of seeking patent protection can be
long and expensive, and we cannot be certain that any currently pending or
future applications will actually result in issued patents, or that, even if
patents are issued, they will be of sufficient scope or strength to provide
meaningful protection or any commercial advantage to us. Furthermore, others may
develop technologies that are similar or superior to our technology or design
around the patents we own.
We also rely on trade secret protection for our technology, in part through
confidentiality agreements with our employees, consultants and third parties.
However, employees may breach these agreements, and we may not have adequate
remedies for any breach. In any case, others may come to know about or determine
our trade secrets through a variety of methods. In addition, the laws of certain
territories in which we develop, manufacture or sell our products may not
protect our intellectual property rights to the same extent as do the laws of
the United States.
In March 1997, we entered into a patent cross-license agreement with
Cypress, whereby we granted Cypress a nonexclusive license to our patents and
intellectual property rights in exchange for Cypress' nonexclusive license to
their programmable logic technology patents. In August 1998, we also entered
into a patent cross-license agreement with Actel pursuant to which we have each
granted the other a nonexclusive license to certain of our respective
programmable logic device technology patents. We anticipate that we will
continue to enter into licensing arrangements in the future; however, it is
possible that desirable licenses will not be available to us on commercially
reasonable terms. If we lose existing licenses to key technology, or are unable
to enter into new licenses which we deem important, it could materially harm our
business.
From time to time, we receive letters alleging patent infringement or
inviting us to take a license to other parties' patents. We evaluate these
letters on a case-by-case basis. Inquiries with respect to the coverage of our
intellectual property could lead to litigation.
We have entered into technology license agreements with third parties which
give those parties the right to use patents and other technology developed by
us, and which give us the right to use patents and other technology developed by
them. The failure to obtain a license from a third party for technology used by
us could cause us to incur substantial liabilities and to suspend the
manufacture or shipment of products or our use of processes requiring the
technology. Litigation could result in significant expenses to us, adversely
affect sales of the challenged product or technology and divert the efforts of
our technical and management personnel, whether or not the litigation is
determined in our favor. In the event of an adverse result in any litigation, we
could be required to pay substantial damages, cease the manufacture, use, sale
or importation of infringing products, expend significant resources to develop
or acquire non-infringing technology, and discontinue the use of processes
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<PAGE>
requiring the infringing technology or obtain licenses to the infringing
technology. We may not be successful in the development or acquisition, or the
necessary licenses may not be available under reasonable terms, and any
development, acquisition or license could require expenditures by us of
substantial time and other resources. Any of these developments would have a
material adverse effect on our business. We may be unable to adequately protect
our intellectual property rights, and may face significant expenses as a result
of future litigation.
EMPLOYEES
As of July 31, 1999, we had a total of 148 employees worldwide, with 51
people in operations, 39 people in research and development, 22 people in sales,
14 people in marketing, 19 people in administration and three people in
management information systems. We believe that our future success will depend
in part on our continued ability to attract, hire and retain qualified
personnel. None of our employees is represented by a labor union, and we believe
our employee relations are good.
FACILITIES
Our 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 2003 with an
option to renew through 2006. In addition, we lease sales offices near London
and in Hong Kong. The London office is leased through September 2004, and the
Hong Kong office is leased on a month-to-month basis. We believe that our
existing facilities are adequate for our current needs.
LITIGATION
QuickLogic is not a party to any pending litigation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning our current
executive officers and directors:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
E. Thomas Hart....................................... 57 President, Chief Executive Officer and Director
John M. Birkner...................................... 55 Vice President, Chief Technical Officer
Michael R. Brown..................................... 49 Vice President, Worldwide Sales
Andrew K. Chan....................................... 48 Vice President, Research and Development
Hua-Thye Chua........................................ 64 Vice President, Process Technology and Director
Reynold W. Simpson................................... 50 Vice President, Operations
Arthur O. Whipple.................................... 51 Vice President, Finance, Chief Financial Officer and
Secretary
Ronald D. Zimmerman.................................. 51 Vice President, Human Resources
Irwin Federman....................................... 64 Chairman of the Board of Directors
Donald P. Beadle..................................... 63 Director
Michael J. Callahan.................................. 63 Director
</TABLE>
E. THOMAS HART has served as our President, Chief Executive Officer and a
member of our board of directors since June 1994. Prior to joining QuickLogic,
Mr. Hart was Vice President and General Manager of the Advanced Networks
Division at National Semiconductor, 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 holds a B.S.E.E. from the University of Washington.
JOHN M. BIRKNER, a co-founder of QuickLogic, has served with us since April
1988, serving as Vice President, Chief Technical Officer since 1993. From
September 1975 to June 1986, Mr. Birkner was a fellow at Monolithic Memories, a
semiconductor manufacturing company. Mr. Birkner holds a B.S.E.E. from the
University of California, Berkeley and an M.S.E.E. from the University of Akron.
MICHAEL R. BROWN has served as our Vice President, Worldwide Sales since
January 1999. From 1984 until January 1999, he was employed by Hitachi America,
a semiconductor manufacturing company, in a variety of sales management
positions, most recently as the Vice President of Sales for the Americas. Mr.
Brown holds a B.A. in Kinesiology/Psychology from California State University,
Northridge and attended the U.S. Navy Aviation Electronics School. Mr. Brown
holds a certificate in Advanced Management from Stanford University.
ANDREW K. CHAN, a co-founder of QuickLogic, has served with us since April
1988, most recently as Vice President, Research and Development. Prior to
joining QuickLogic, Mr. Chan was a design engineering manager at Monolithic
Memories. Mr. Chan holds a B.S.E.E. in Electrical Engineering from Washington
State University and an M.S.E.C. in Electrical Sciences from the University of
New York, Stonybrook.
HUA-THYE CHUA, a co-founder of QuickLogic, has served as a member of our
board of directors since QuickLogic's inception in April 1988. Since December
1996, Mr. Chua has served as our Vice President, Process Technology. He served
as our Vice President of Technology Development from April 1989 to December
1996. During the prior 25 years, Mr. Chua worked at semiconductor
manufacturing companies, including Fairchild Semiconductor, Intel and Monolothic
Memories.
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Mr. Chua holds a B.S.E.E. from Ohio University and an M.S.E.E. from the
University of California, Berkeley.
REYNOLD W. SIMPSON has served as our Vice President, Operations since August
1997. From February 1996 to July 1997, Mr. Simpson was Vice President of
Manufacturing at GateField, a semiconductor manufacturing company. Prior to
joining GateField, Mr. Simpson was Operations Manager at LSI Logic, a
semiconductor manufacturing company, from March 1990 to February 1996 and
Quality Director from February 1989 to March 1990. Mr. Simpson holds a
Mechanical Engineering Certificate from the Coatbridge Polytechnic Institute in
Scotland, a degree in Technical Horology (Mechanical Engineering) from the
Barmulloch Polytechnic Institute in Scotland and studied for a degree in
Electronic Engineering at the Kingsway Polytechnic Institute in Scotland.
ARTHUR O. WHIPPLE has served as our Vice President, Finance, Chief Financial
Officer and Secretary since April 1998. From April 1994 to April 1998, Mr.
Whipple was employed by ILC Technology, a manufacturer of high performance
lighting products, as its Vice President of Engineering and by its subsidiary,
Precision Lamp, a manufacturer of high-performance lighting products, as its
Vice President of Finance and Operations. From February 1990 to April 1994, Mr.
Whipple served as the President of Aqua Design, a privately-held provider of
water treatment services and equipment. Mr. Whipple holds a B.S.E.E. from the
University of Washington and an M.B.A. from Santa Clara University.
RONALD D. ZIMMERMAN has served as our Vice President, Human Resources since
October 1996. From August 1988 to October 1996, Mr. Zimmerman was Human
Resources Director of the Analog Products Group at National Semiconductor
Corporation, as well as group human resources director of the corporate
technology and quality/reliability organizations and the human resources
director of corporate administration. Mr. Zimmerman holds a B.A. in Sociology
and Psychology and an M.A. in Psychology from San Jose State University.
IRWIN FEDERMAN has served as chairman of our board of directors 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 the following public companies: TelCom
Semiconductor, a semiconductor company; SanDisk, a semiconductor company;
Western Digital, a disk drive manufacturer; Komag, a thin film media
manufacturer; NeoMagic, a developer of multimedia accelerators; and Check Point
Software Technologies, a network security software company. Mr. Federman holds a
B.S. in Economics from Brooklyn College, is a Certified Public Accountant, and
holds an honorary Doctorate of Engineering Science from Santa Clara University.
DONALD P. BEADLE has served as a member of our board of directors since July
1997. Since June 1994, Mr. Beadle has been President of Beadle Associates, a
consulting firm. From May 1997 to July 1997, Mr. Beadle was a consultant at
Interwave Communications, a developer of microcell systems, where he served as
Acting Vice President of Sales and Sales Operations. From October 1994 to
December 1996, he was a consultant for Asian business development at National
Semiconductor. At National Semiconductor, he was Managing Director, Southeast
Asia from 1993 until June 1994, Vice President of Worldwide Marketing and Sales,
International Business Group from 1987 until 1993, and Managing Director, Europe
from 1982 to 1986. Mr. Beadle was employed by National Semiconductor in
executive sales and marketing positions for 34 years until June 1994, at which
time he was Executive Vice President, Worldwide Sales and Marketing. Mr. Beadle
serves on the board of directors of one public company, HMT Technology, a disk
media manufacturer. He received his technical education at the University of
Connecticut and the Bridgeport Institute of Engineering.
MICHAEL J. CALLAHAN has served as a member of our board of directors since
July 1997. Since March 1990, Mr. Callahan has served as Chairman of the Board,
President and Chief Executive Officer of Waferscale Integration, a producer of
peripheral integrated circuits. From 1987 to March 1990,
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Mr. Callahan was President of Monolithic Memories, or MMI, which became a
subsidiary of Advanced Micro Devices, a semiconductor manufacturing company, or
AMD. Also during this time, he was Senior Vice President of Programmable
Products at AMD. From 1978 to 1987, Mr. Callahan held a number of positions at
MMI including Vice President of Operations and Chief Operating Officer. Prior to
joining MMI, he worked at Motorola Semiconductor, a semiconductor manufacturing
company, for 16 years where he was Director of Research and Development as well
as Director of Linear Operations. Mr. Callahan holds a B.S.E.E. from the
Massachusetts Institute of Technology.
EXECUTIVE OFFICERS
Our executive officers are elected by, and serve at the discretion of, our
board of directors. There are no family relationships among our directors and
officers.
BOARD OF DIRECTORS
We currently have authorized five directors. Our directors consist of
Messrs. Beadle, Callahan, Chua, Federman and Hart. All directors hold office
until the next annual meeting of stockholders or until their successors are duly
qualified and elected. Our certificate of incorporation filed in connection with
this offering provides that, as of the first annual meeting of stockholders
following this offering, our board of directors will be divided into three
classes, each with staggered three-year terms. As a result, only one class of
directors will be elected at each annual meeting of our stockholders, with the
other classes continuing for the remainder of their respective three-year terms.
Messrs. Beadle and Callahan have been designated as Class I directors, whose
term expires at the 2000 annual meeting of stockholders; Messrs. Chua and
Federman have been designated as Class II directors, whose term expires at the
2001 annual meeting of stockholders; and Mr. Hart has been designated as a Class
III director, whose term expires at the 2002 annual meeting of stockholders.
BOARD COMMITTEES
Our board of directors has an audit committee and a compensation committee.
AUDIT COMMITTEE. The audit committee was formed in June 1995 and currently
consists of Messrs. Beadle, Callahan and Federman. The audit committee reviews
the results and scope of the annual audit and other services provided by our
independent accountants, reviews and evaluates our internal control functions
and monitors financial transactions between us and our employees, officers and
directors.
COMPENSATION COMMITTEE. The compensation committee was formed in June 1995
and currently consists of Messrs. Beadle, Callahan and Federman. The
compensation committee administers the 1989 stock option plan, 1999 stock plan
and 1999 employee stock purchase plan, and reviews the compensation and benefits
for our executive officers.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to establishing the compensation committee, the board of directors as
a whole performed the functions delegated to the compensation committee. No
member of the compensation committee or executive officer of QuickLogic has a
relationship that would constitute an interlocking relationship with executive
officers or directors of another entity.
DIRECTOR COMPENSATION
Our non-employee directors are reimbursed for their out-of-pocket expenses
incurred in connection with attending board and committee meetings but are not
compensated for their services as board members. We have in the past granted to
our non-employee directors options to purchase our
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common stock pursuant to the terms of our 1989 stock option plan. We intend to
grant to our non-employee directors options to purchase our common stock
pursuant to the terms of our 1999 stock plan. See "--Benefit Plans."
EXECUTIVE COMPENSATION
The following table sets forth certain information concerning compensation
of our chief executive officer and each of the next four most highly compensated
executive officers as of December 31, 1998, and one former executive officer,
whose aggregate cash compensation exceeded $100,000 during the year ended
December 31, 1998. We refer to these persons as the "named executive officers"
elsewhere in this prospectus.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL -------------
COMPENSATION SECURITIES
------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION SALARY OPTIONS COMPENSATION
- ------------------------------------------------------------------- ------------- ------------- -------------
<S> <C> <C> <C>
E. Thomas Hart President, ......................................... $ 269,208 166,667 $ 12,693
Chief Executive Officer and Director
Scott D. Ward ..................................................... 196,961 25,000 --
Vice President, Engineering
Michael Burger .................................................... 174,117 183,334 30,954
Former Vice President, Worldwide Sales
Reynold W. Simpson ................................................ 180,868 41,667 --
Vice President, Operations
Ronald D. Zimmerman ............................................... 177,162 -- --
Vice President, Human Resources
Andrew K. Chan .................................................... 130,999 16,667 --
Vice President, Research and Development
</TABLE>
A portion of each executive officer's salary is dependent upon their meeting
of certain sales, gross margin and other management objectives.
The amounts listed under the column captioned "All Other Compensation"
represent automobile allowances we have given to Mr. Hart and Mr. Burger and a
relocation fee for Mr. Burger. Mr. Burger terminated employment with us in
December 1998 and Mr. Ward terminated employment with us in August 1999.
Mr. Whipple, Vice President, Finance, Chief Financial Officer and Secretary,
commenced employment with us in April 1998 and received $99,007 in salary in
1998. On an annualized basis, his salary for 1998 would have been $170,000. In
addition, during the year ended December 31, 1998, Mr. Whipple received options
to purchase 108,334 shares of QuickLogic common stock. Mr. Brown, Vice
President, Worldwide Sales, joined QuickLogic in January 1999 at an annual base
salary of $225,000 and received options to purchase 166,667 shares of QuickLogic
common stock.
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OPTION GRANTS IN FISCAL YEAR 1998
The following table sets forth certain information with respect to stock
options granted to each of our named executive officers during the fiscal year
ended December 31, 1998.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE
-------------------------------------------------- AT ASSUMED ANNUAL RATES
NUMBER OF PERCENT OF OF STOCK PRICE
SECURITIES TOTAL APPRECIATION
UNDERLYING OPTIONS EXERCISE FOR OPTION TERM
OPTIONS GRANTED TO PRICE PER EXPIRATION --------------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
- ------------------------------------------ ----------- ----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart............................ 166,667 14.52% $ 4.50 8-19-08 $ 471,671 $ 1,195,307
Scott D. Ward............................. 25,000 2.18% 4.50 8-19-08 70,751 179,296
Michael Burger............................ 166,667 14.52% 4.50 1-20-08 471,671 1,195,307
16,667 1.45% 4.50 8-19-08 47,167 119,531
Reynold W. Simpson........................ 41,667 3.63% 4.50 8-19-08 117,918 298,827
Ronald D. Zimmerman....................... -- -- -- -- -- --
Andrew K. Chan............................ 16,667 1.45% 4.50 8-19-08 47,167 119,531
</TABLE>
Mr. Burger terminated employment with us in December 1998. Mr. Burger
exercised none of the options shown above and such options have since expired.
Mr. Ward terminated employment with us in August 1999. Of the shares shown
above, 4,688 shares are vested and may be exercised by Mr. Ward prior to
September 8, 1999, at which date that option will expire.
In the last fiscal year, we granted options to purchase an aggregate of
1,151,000 shares. All options are fully exercisable, subject to our 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 vest at the end of each three-month period thereafter. Options have a
term of ten years but may terminate before their expiration dates if the
optionee's status as an employee is terminated or upon the optionee's death or
disability.
The amounts disclosed in the column captioned "Exercise Price Per Share"
represent the fair market value of the underlying shares of common stock on the
dates the respective options were granted as determined by our board of
directors.
With respect to the amounts disclosed in the column captioned "Potential
Realizable Value At Assumed Annual Rates Of Stock Price Appreciation For Option
Term," the 5% and 10% assumed annual rates of compounded stock price
appreciation are mandated by rules of the Securities and Exchange Commission and
do not represent our estimate or projection of our future common stock prices.
The potential realizable values are calculated by assuming that $4.50 per share
was the fair market value of our common stock at the time of grant, that the
common stock appreciates at the indicated rate for the entire term of the option
and that the option is exercised at the exercise price and sold on the last day
of the option term at the appreciated price.
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AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES
The following table sets forth certain information concerning the number and
value of unexercised options held by each of the named executive officers on
December 31, 1998. No options were exercised by the named executive officers in
1998.
All options are fully exercisable, subject to our right to repurchase any
unvested shares at the original exercise price in the event of the optionee's
termination.
The value of "In-the-Money" stock options represents the positive spread
between the exercise price of stock options and the fair market value of the
options of $4.50 per share, as determined by our board of directors, at December
31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT DECEMBER 31, IN-THE-MONEY OPTIONS
1998 AT DECEMBER 31, 1998
-------------------------- -------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------ ----------- ------------- ------------ -----------------
<S> <C> <C> <C> <C>
E. Thomas Hart.................................. 666,667 -- $ 1,710,000 --
Scott D. Ward................................... 166,667 -- 175,000 --
Michael Burger.................................. -- -- -- --
Reynold W. Simpson.............................. 141,667 -- -- --
Ronald D. Zimmerman............................. 83,334 -- 250,000 --
Andrew K. Chan.................................. 75,000 -- 50,000 --
</TABLE>
LIMITATIONS ON LIABILITY AND INDEMNIFICATION
Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and other agents to the
fullest extent permitted by Delaware law. Our bylaws allow us to enter into
indemnification agreements with our directors and officers and to purchase
insurance for any person whom we are required or permitted to indemnify. We are
obtaining a policy of directors' and officers' liability insurance that insures
such persons against the cost of defense, settlement or payment of a judgment
under certain circumstances.
We intend to enter into agreements with our directors and executive officers
regarding indemnification. Under these agreements we will indemnify them against
amounts actually and reasonably incurred in connection with an actual, or a
threatened, proceeding if any of them may be made a party because of their role
as one of our directors or officers. We are obligated to pay these amounts only
if the officer or director acted in good faith and in a manner that he or she
reasonably believed to be in or not opposed to our best interests. With respect
to any criminal proceeding, we are obligated to pay these amounts only if the
officer or director had no reasonable cause to believe his or her conduct was
unlawful. The indemnification agreements also set forth procedures that will
apply in the event of a claim for indemnification thereunder.
In addition, our certificate of incorporation filed in connection with this
offering provides that the liability of our directors for monetary damages shall
be eliminated to the fullest extent permissible under Delaware law. This
provision does not eliminate a director's duty of care. Each director will
continue to be subject to liability for:
- breach of the director's duty of loyalty to us,
- acts or omissions not in good faith or involving intentional misconduct or
knowing violations of law,
- acts or omissions that the director believes to be contrary to our best
interests or our stockholders,
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- any transaction from which the director derived an improper personal
benefit,
- improper transactions between the director and us, and
- for improper distributions to stockholders and loans to directors and
officers. This provision also does not affect a director's
responsibilities under any other laws, such as the federal securities laws
or state or federal environmental laws.
There is no pending litigation or proceeding involving any of our directors
or officers for which indemnification is being sought, nor are we aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or officer.
BENEFIT PLANS
1989 STOCK OPTION PLAN
Our 1989 stock plan provides for the granting to employees of incentive
stock options within the meaning of Section 422 of the Internal Revenue Code and
for the granting to employees, directors and consultants of nonstatutory stock
options. As of July 31, 1999, options to purchase an aggregate of 2,636,509
shares of common stock were outstanding under our 1989 plan. Our board of
directors has determined that no further options will be granted under the 1989
plan after this offering. The 1989 plan provides that in the event of a merger
of QuickLogic with or into another corporation, each outstanding option will be
assumed or substituted for by the successor corporation. If the successor
corporation refuses to assume or substitute for the QuickLogic options, the
QuickLogic options will terminate as of the closing of the merger.
1999 STOCK PLAN
Our 1999 stock plan was adopted by our board of directors in August 1999 and
is expected to be approved by the stockholders in August 1999. As of the date of
this prospectus, no options have been granted under the 1999 stock plan.
The 1999 stock plan provides for the grant of incentive stock options to
employees, including officers and employee directors, and for the grant of
nonstatutory stock options and stock purchase rights to employees, directors and
consultants.
The total shares of common stock currently reserved for issuance from the
1999 stock plan equals:
- 5,000,000 shares of common stock;
- the shares of common stock which have been reserved but unissued under the
1989 stock option plan as of the effective date of the offering (as of
July 31, 1999, there were 1,184,080 shares reserved but unissued under the
1989 stock option plan); and
- any shares returned to the 1989 stock option plan as a result of
termination of options under such plan.
In addition, commencing on the first day of our next fiscal year, annual
increases will be added to the 1999 stock plan equal to the lesser of 5,000,000
shares, or 5% of the outstanding shares or such lesser amount as provided by the
board.
Unless terminated sooner, the 1999 stock plan will terminate automatically
ten years from its effective date.
The administrator of our 1999 stock plan has the power to determine:
- the terms of the options or stock purchase rights granted, including the
exercise price of the option or stock purchase right;
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<PAGE>
- the number of shares subject to each option or stock purchase right;
- the exercisability of each option or stock purchase right; and
- the form of consideration payable upon the exercise of each option or
stock purchase right.
In addition, the board has the authority to amend, suspend or terminate the
1999 stock plan, so long as no such action affects any shares of common stock
previously issued and sold or any option previously granted under the plan. The
maximum number of shares each optionee may be granted during a fiscal year is
1,000,000 shares. In addition, in connection with an optionee's initial
employment with us, such optionee may be granted an option covering an
additional 1,000,000 shares.
Options and stock purchase rights granted under our 1999 stock plan are
generally not transferable by the optionee, and each option and stock purchase
right is exercisable during the lifetime of the optionee and only by such
optionee. Options granted under the 1999 stock plan must generally be exercised
within three months after the end of optionee's status as an employee, director
or consultant of QuickLogic, or within twelve months after such optionee's
termination by death or disability, but in no event later than the expiration of
the option's term.
In the case of stock purchase rights, unless the administrator determines
otherwise, the restricted stock purchase agreement shall grant QuickLogic a
repurchase option exercisable after the purchaser's employment or consulting
relationship with QuickLogic has ended 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 QuickLogic.
The repurchase option shall lapse at a rate determined by the administrator.
The exercise price of all incentive stock options granted under the 1999
stock 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 stock
purchase rights granted under the 1999 stock 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, the exercise price must be at least equal to the
fair market value of our 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 our outstanding capital stock, the exercise price of any incentive
stock option granted must at least equal 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 1999 stock plan may not
exceed ten years.
The 1999 stock plan provides that in the event that we merge with or into
another corporation, or sell substantially all of our assets, each option and
stock purchase right shall be assumed or an equivalent option substituted for by
the successor corporation. If the outstanding options and stock purchase rights
are not assumed or substituted for by the successor corporation, the option
holder will 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 the
holder would not otherwise be entitled to exercise. If an option or stock
purchase right becomes exercisable in full in the event of a merger or sale of
assets, the administrator shall notify the optionee that the option or stock
purchase right shall be fully exercisable for a period of 15 days from the date
of such notice, and the option or stock purchase right will terminate upon the
expiration of such period.
1999 EMPLOYEE STOCK PURCHASE PLAN
Our 1999 employee stock purchase plan was adopted by our board of directors
in August 1999, and is expected to be approved by the stockholders in August
1999. A total of 2,000,000 shares of our common stock has been reserved for
issuance under the 1999 purchase plan, plus annual increases
48
<PAGE>
equal to the lesser of: 1,500,000 shares, or 4% of the outstanding shares on
such date or a lesser amount as provided by the board. As of the date of this
prospectus, no shares have been issued under the 1999 purchase plan.
The 1999 purchase plan, which is intended to qualify under Section 423 of
the Internal Revenue Code, contains consecutive, overlapping, twenty-four 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 April
1 and October 1 of each year, except for the first such offering period which
commences on the first trading day on or after the effective date of this
offering and ends on the last trading day on or before September 30, 2001. The
Board has the power to change the duration of the offering periods.
Employees are eligible to participate if they are in our employ for at least
20 hours per week and more than five months in any calendar year. However,
employees may not be granted an option to purchase stock under the 1999 purchase
plan if they either:
- immediately after grant, own stock possessing 5% or more of the total
combined voting power or value of all classes of our capital stock; or
- hold rights to purchase stock under all our employee stock purchase plan
which accrue at a rate which exceeds $25,000 worth of stock for each
calendar year.
The 1999 purchase plan permits participants to purchase our common stock
through payroll deductions of up to 20% of their total compensation. The maximum
number of shares a participant may purchase during a single purchase period is
20,000 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 1999 purchase plan is generally 85% of the lower of the fair
market value of the common stock either at the beginning or at the end of the
offering 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. 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 QuickLogic.
Rights granted under the 1999 purchase plan are not transferable by a
participant other than upon death or by a special determination by the plan
administrator. The 1999 purchase plan provides that if we merge with or into
another corporation or sell substantially all of our 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.
Our board of directors has the authority to amend or terminate the 1999
purchase plan, except that no such action may adversely affect any outstanding
rights to purchase stock under the 1999 purchase plan, provided that the board
of directors may terminate an offering period on any exercise date if the board
determines that the termination of the 1999 purchase plan is in the best
interests of QuickLogic and its stockholders. Notwithstanding anything to the
contrary, the board of directors may in its sole discretion amend the 1999
purchase plan to the extent necessary and desirable to avoid unfavorable
financial accounting consequences by altering the purchase price for any
offering period, shortening any offering period or allocating remaining shares
among the participants. Unless sooner terminated by our board of directors, the
1999 purchase plan will terminate automatically ten years from its effective
date.
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<PAGE>
CERTAIN TRANSACTIONS
SERIES F PREFERRED FINANCING
In November 1996 and January 1997, we sold 1,286,020 shares of our Series F
convertible preferred stock at a price of $6.96 per share. We sold the shares
pursuant to a preferred stock purchase agreement and a registration rights
agreement under which we 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 stock included the following principal
stockholders, directors and affiliated entities:
<TABLE>
<CAPTION>
COMMON
EQUIVALENT AGGREGATE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES SHARES PURCHASE PRICE
- -------------------------------------------------------------------------------------- ---------- --------------
<S> <C> <C>
Hua-Thye Chua......................................................................... 16,667 $ 116,000
Morgenthaler Venture Partners III..................................................... 92,014 640,416
New Enterprise Associates and affiliated funds........................................ 132,048 919,050
Sequoia Capital and affiliated funds.................................................. 35,920 250,000
Technology Venture Investors IV LP and affiliated funds............................... 143,679 1,000,000
U.S. Venture Partners and affiliated funds............................................ 86,207 600,000
Vertex Investments and affiliated funds............................................... 215,517 1,500,000
</TABLE>
All shares listed as held by Hua-Thye Chua are held in trust for his
children.
CYPRESS TRANSACTION
We entered into an agreement with Cypress in 1992 to obtain guaranteed
fabrication capacity and to secure a second source for our FPGA products. By
1997, wafer fabrication capacity was no longer scarce and we had established a
customer base and reputation. Accordingly, we determined that the agreement with
Cypress was no longer beneficial to us. In March 1997, we terminated the
agreement and entered into a wafer fabrication agreement and cross license
agreement. See "Business-- Manufacturing." In exchange for the termination and
the reversion of the rights to the intellectual property covered by that
agreement to us, we also paid Cypress $4.5 million in cash and agreed to issue
3,037,786 shares of our common stock to Cypress, resulting in a charge of
approximately $23.0 million in the first quarter of 1997.
In addition to the amounts paid in connection with the termination of the
1992 agreement, payments to Cypress in connection with our foundry agreements
were $7.6 million, $13.0 million, $2.7 million, and $1.4 million for 1996, 1997,
1998 and for the first six months of 1999, respectively.
Under the terms of the cross-license agreement, Cypress granted us a
royalty-free, non-exclusive, non-sublicensable license to make and sell
programmable logic products under patents that are currently issued to Cypress
or that issue prior to March 2007. We granted a reciprocal right to Cypress
under our patents, except that the license does not extend to programmable metal
FPGAs or products that are pin-compatible with our existing pASIC 1 and pASIC 2
products. In the event we are acquired, the license continues only as to those
products that were commercially available as of the acquisition or subsequently
become commercially available within one year after the acquisition. We also
licensed to each other rights to use the technology developed under the 1992
agreement. The shares we issued to Cypress in connection with the termination of
the 1992 agreement contained the same contractual rights as the shares of
preferred stock held by Cypress. We also granted the following registration
rights to Cypress that other holders of registration rights were not granted:
50
<PAGE>
- Cypress may require us to use our best efforts to file a registration
statement with respect to all of the shares held by Cypress and not sold
in this offering, 180 days following this offering.
- Cypress may not be cut-back to less than one-third of the shares of common
stock to be registered by Cypress in subsequent public offerings.
- Our other stockholders do not have the right to have their shares included
in the Cypress registration. See "Description of Capital
Stock--Registration Rights."
LOANS TO EXECUTIVE OFFICER
We have made loans to John Birkner, Vice President, Chief Technical Officer.
Mr. Birkner's current loan obligation to us totals $121,000 plus accrued
interest of approximately $76,000 at annual rates ranging from 6.7% to 8.5%.
This loan is evidenced by demand promissory notes from Mr. Birkner to us,
secured by a pledge of shares of QuickLogic stock held by Mr. Birkner. The
largest principal amount ever outstanding under these loans is $121,000. These
loans were approved by our board of directors.
51
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information known to us with respect
to beneficial ownership of our common stock as of July 31, 1999, as adjusted to
reflect the sale of shares offered by:
- each person known by us to own beneficially more than 5% of our
outstanding stock, including the selling stockholder;
- each of our directors;
- each named executive officer; and
- all current executive officers and directors as a group.
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 held by that person that are currently
exercisable or exercisable within 60 days of July 31, 1999 are deemed
outstanding. Percentage of beneficial ownership is based upon 14,219,570 shares
of common stock outstanding prior to this offering and shares of common
stock outstanding after this offering based on the number of shares outstanding
as of July 31, 1999. To our knowledge, except as set forth in the footnotes to
this table and subject to applicable community property laws, each person named
in the table has sole voting and investment power with respect to the shares set
forth opposite such person's name.
All shares shown below for Messrs. Hart, Burger, Zimmerman, Ward, Simpson,
Beadle and Callahan represent shares issuable upon exercise of stock options. Of
the shares shown below for Messrs. Chan and Chua, 75,000 shares represent shares
issuable upon exercise of stock options for Mr. Chan and 16,667 shares represent
shares issuable upon exercise of stock options for Mr. Chua.
Of the shares listed in the table below, upon the optionee's termination
with us, we have the lapsing right to repurchase 192,709 shares from Mr. Hart;
43,750 shares from Mr. Chan; 7,292 shares from Mr. Chua; 30,000 shares from Mr.
Zimmerman; 88,542 shares from Mr. Ward; 91,146 shares from Mr. Simpson; 36,750
shares from Mr. Beadle; and 29,458 shares from Mr. Callahan, based on shares
vested as of July 31, 1999.
52
<PAGE>
<TABLE>
<CAPTION>
BENEFICIALLY OWNED SHARES BENEFICIALLY
PRIOR TO OFFERING NUMBER OF OWNED AFTER OFFERING
----------------------- SHARES BEING ----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
- ---------------------------------------------------- ---------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Cypress Semiconductor Corporation .................. 3,896,415 27.41%
3901 N. First Street
San Jose, CA 95134
Technology Venture Investors (1) ................... 1,682,040 11.83% -- 1,682,040
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
U.S. Venture Partners (2) .......................... 1,406,615 9.89% -- 1,406,615
2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
Vertex Investments (3) ............................. 1,360,869 9.57% -- 1,360,869
3 Lagoon Drive, Ste. 220
Redwood City, CA 94065
Sequoia Capital (4) ................................ 1,122,446 7.90% -- 1,122,447
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
New Enterprise Associates (5) ...................... 893,953 6.29% -- 893,953
1119 St. Paul Street
Baltimore, MD 21202
Morganthaler Venture Partners ...................... 821,311 5.78% -- 821,311
2780 Sand Hill Road, Suite 280
Menlo Park, CA 94025
E. Thomas Hart...................................... 666,667 4.48% -- 666,667
Michael Burger...................................... -- -- -- --
Andrew K. Chan (6).................................. 241,667 1.69% -- 241,667
Hua-Thye Chua (7)................................... 200,000 1.41% -- 200,000
Ronald D. Zimmerman................................. 83,334 * -- 83,334
Scott D. Ward....................................... 166,667 * -- 166,667
Reynold W. Simpson.................................. 141,667 * -- 141,667
Irwin Federman (8).................................. -- -- -- --
Donald P. Beadle.................................... 57,333 * -- 57,333
Michael J. Callahan................................. 49,000 * -- 49,000
All current executive officers and directors as a
group (11 persons)................................ 1,900,669 12.17% -- 1,900,669
</TABLE>
- ---------
* Less than 1% of the outstanding common stock.
53
<PAGE>
(1) Includes 1,596,294 shares held by Technology Investors Group LLC-IV; 84,131
shares held by Technology Venture Investors IV LP-3, L.P.; and 1,615 shares
held by TVI Management-3, L.P.
(2) Includes 936,455 shares held by U.S. Venture Partners III; 359,874 shares
held by U.S.V. Entrepreneur Partners; 45,270 shares held by Second Ventures
II, L.P.; 29,264 shares held by Second Ventures Limited Partnership by BHMS
Partners III; 22,818 shares held by U.S. Venture Partners IV, L.P.; and
12,934 shares held by U.S.V.P. Entrepreneur Partners II, L.P.
(3) Includes 1,026,303 shares held by Vertex Investment International III, Inc.;
214,824 shares held by Vertex Investment (II) Limited; 95,776 shares held by
Vertex Asia Limited; and 23,965 shares held by HWH Investment Pte. Ltd.
(4) Includes 1,019,887 shares held by Sequoia Capital V; 55,800 shares held by
Sequoia Technology Partners V; 17,990 shares hold by Sequoia XXI; 12,744
shares held by Sequoia XXIV; 7,751 shares held by Sequoia Capital XXI; 5,000
shares held by Sequoia XX; and 3,275 shares held by Sequoia XXIII.
(5) Includes 858,033 shares held by New Enterprise Associates VI, Limited
Partnership and 35,920 shares held by New Venture Partners III L.P.
(6) Includes 146,667 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; 5,000 shares beneficially owned by Mr. Chan for
Michael P. Gamboa, Trustee under Erica H. Chan trust agreement dated May 14,
1992; 5,000 shares beneficially owned by Mr. Chan for Michael P. Gamboa,
Trustee under Rebecca H. Chan trust agreement dated May 14, 1992; 5,000
shares beneficially owned by Mr. Chan for Michael P. Gamboa, Trustee under
Vicki H. Chan trust agreement dated May 14, 1992; 2,500 shares beneficially
owned by Mr. Chan for Clement Chan and Susie S.J. Chan, Trustees under
Nicholas Chan trust agreement dated July 3, 1997; 2,500 shares beneficially
owned by Mr. Chan for Clement Chan and Susie S.J. Chan, Trustees under
Phillip Chan trust agreement dated July 3, 1996.
(7) Includes 64,792 shares owned by Mr. Chua; 35,209 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; 20,833 shares beneficially owned by
Mr. Chua, as custodian for The Bryan Shyang-Ming Chua Trust dated December
19, 1975; 20,833 shares beneficially owned by Mr. Chua, as custodian for
Caroline Siok-Yau Chua Trust dated December 19, 1975; 20,833 shares
beneficially owned by Mr. Chua, as custodian for Cathleen Siok-Syuan Chua
Trust dated December 19, 1975; and 20,833 shares beneficially owned by Mr.
Chua, as custodian for Christine Siok-Pee Chua Trust dated December 19,
1975.
(8) Excludes 1,406,614 shares held by U.S. Venture Partners. Mr. Federman is a
general partner of U.S. Venture Partners. See footnote 2 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.
54
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, we will be authorized to issue up to
110,000,000 shares, $0.001 par value, to be divided into two classes to be
designated, respectively, "common stock" and "preferred stock." Of such shares
authorized, 100,000,000 shares shall be designated as common stock, and
10,000,000 shares shall be designated as preferred stock.
COMMON STOCK
As of July 31, 1999, there were 14,219,570 shares of common stock
outstanding that were held of record by approximately 159 stockholders (assuming
conversion of all shares of preferred stock outstanding as of July 31, 1999 into
9,911,665 shares of common stock). There will be shares of common stock
outstanding (assuming no exercise of the underwriters' over-allotment option and
no exercise of outstanding options) after giving effect to the sale of common
stock offered in this offering. As of July 31, 1999, there are outstanding
options to purchase a total of 2,636,509 shares of our common stock under our
stock plans.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Our stockholders
do not have cumulative voting rights in the election of directors. Accordingly,
holders of a majority of the shares voting are able to elect all of the
directors. Subject to preferences that may be granted to any then outstanding
preferred stock, holders of common stock are entitled to receive ratably only
those dividends as may be declared by the board of directors out of funds
legally available therefor, as well as any distributions to the stockholders.
See "Dividend Policy." In the event of our liquidation, dissolution or winding
up, holders of common stock are entitled to share ratably in all of our assets
remaining after we pay our liabilities and distribute the liquidation preference
of any then outstanding preferred stock. Holders of common stock have no
preemptive or other subscription or conversion rights. There are no redemption
or sinking fund provisions applicable to the common stock.
PREFERRED STOCK
Our board of directors will have the authority, without further action by
the stockholders, to issue up to 10,000,000 shares of preferred stock in one or
more series and to fix the rights, preferences, privileges and restrictions
thereof. These rights, preferences and privileges include dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
sinking fund terms and the number of shares constituting any series or the
designation of such series, any or all of which may be greater than the rights
of common stock. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and the likelihood that such holders
will receive dividend payments and payments upon liquidation. In addition, the
issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of QuickLogic. We have no present plan to issue
any shares of preferred stock.
REGISTRATION RIGHTS
Following the closing of this offering, the holders of approximately
9,911,665 shares of our common stock will be entitled to certain rights with
respect to the registration of such shares under the Securities Act. In the
event that we propose to register any of our securities under the Securities
Act, either for our own account or for the account of other security holders,
these holders are entitled to notice of such registration and are entitled to
include their common stock in such registration, subject to certain marketing
and other limitations. Beginning six months after the closing of this offering,
the holders of at least 30% of these securities, or the holders of a lesser
percentage if the amount registered is greater than $5 million, have the right
to require us, 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
55
<PAGE>
common stock. We 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, these holders may require us
to register all or a portion of their shares on Form S-3, subject to certain
conditions and limitations.
In connection with our transaction with Cypress, we granted Cypress
registration rights in addition to those held by our other stockholders. See
"--Certain Transactions--Cypress Transaction."
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF OUR CERTIFICATE OF INCORPORATION AND
BYLAWS
Our certificate of incorporation provides for our board of directors to be
divided into three classes, with staggered three-year terms. When this
classification is effective, only one class of directors will be elected at each
annual meeting of our stockholders, with the other classes continuing for the
remainder of their respective three-year terms. However, until this
classification of our board of directors is effective, and because our
stockholders have no cumulative voting rights, our stockholders representing a
majority of the shares of common stock outstanding will be able to elect all of
the directors. Our certificate of incorporation and bylaws also provide that all
stockholder action must be effected at a duly called meeting of stockholders and
not by a consent in writing, and that only our board of directors, or special
committee thereof, may call a special meeting of stockholders.
The combination of the classification of our board of directors, when
effective, and lack of cumulative voting will make it more difficult for our
existing stockholders to replace our board of directors as well as for another
party to obtain control of QuickLogic by replacing our board of directors. Since
the board of directors has the power to retain and discharge our officers, these
provisions could also make it more difficult for existing stockholders or
another party to effect a change in management. In addition, the authorization
of undesignated preferred stock makes it possible for the board of directors to
issue preferred stock with voting or other rights or preferences that could
impede the success of any attempt to change control of QuickLogic.
These provisions may have the effect of deterring hostile takeovers or
delaying changes in control or management of QuickLogic. These provisions are
intended to enhance the likelihood of continued stability in the composition of
our board of directors and in the policies approved by it and to discourage
certain types of transactions that may involve an actual or threatened change of
control of QuickLogic. These provisions are designed to reduce our vulnerability
to an unsolicited acquisition proposal. The provisions also are intended to
discourage certain tactics that may be used in proxy fights. However, such
provisions could have the effect of discouraging others from making tender
offers for our shares and, as a consequence, they also may inhibit fluctuations
in the market price of our shares that could result from actual or rumored
takeover attempts. Such provisions may also have the effect of preventing
changes in our management.
SECTION 203 OF THE DELAWARE CORPORATION LAW
We are subject to Section 203 of the Delaware Corporation Law, which
prohibits a Delaware corporation from engaging in any business combination with
any interested stockholder for a period of three years following the date that
such stockholder became an interested stockholder, with the following
exceptions:
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested holder;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of
56
<PAGE>
determining the number of shares outstanding those shares owned by persons
who are directors and also officers and by certain employee stock plans;
or
- on or subsequent to such date, the business combination is approved by the
board of directors and authorized at an annual or special meeting of the
stockholders, and not by written consent, by the affirmative vote of at
least 66 2/3% of the outstanding voting stock that is not owned by the
interested stockholder.
Section 203 defines business combinations to include the following:
- any merger or consolidation involving the corporation and the interested
stockholder;
- any sale, transfer, pledge or other disposition of 10% or more of the
assets of the corporation involving the interested stockholder;
- subject to certain exceptions, any transaction that results in the
issuance or transfer by the corporation of any stock of the corporation to
the interested stockholder;
- any transaction involving the corporation that has the effect of
increasing the proportionate share of the stock or any class or series of
the corporation beneficially owned by the interested stockholder; or
- the receipt by the interested stockholder of the benefit of any losses,
advances, guarantees, pledges or other financial benefits by or through
the corporation.
In general, Section 203 defines interested stockholder as an entity or
person beneficially owning 15% or more of the outstanding voting stock of the
corporation or any entity or person affiliated with or controlling or controlled
by such entity or person.
NASDAQ NATIONAL MARKET LISTING
Application has been made for quotation of our common stock on the Nasdaq
National Market under the symbol "QUIK."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is Mellon Bank.
57
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have shares of common
stock outstanding based on shares outstanding as of July 31, 1999. Of these
shares, the shares sold in this offering will be freely transferable
without restriction under the Securities Act, unless they are held by our
"affiliates" as that term is used under the Securities Act and the regulations
promulgated thereunder.
Of these shares, the remaining 14,219,570 shares were sold by us in reliance
on exemptions from the registration requirements of the Securities Act, are
restricted securities within the meaning of Rule 144 under the Securities Act
and become eligible for sale in the public market as follows:
- beginning 90 days after the effective date, no shares will become eligible
for sale subject to the provisions of Rules 144 and 701 as a result of
lock-up agreements; and
- beginning 180 days after the date of this prospectus, 14,219,570
additional shares will become eligible for sale, subject to the provisions
of Rule 144, Rule 144(k) or Rule 701, upon the expiration of agreements
not to sell such shares entered into between the underwriters and such
stockholders.
Beginning 180 days after the date of this prospectus, 1,470,413 additional
shares subject to vested options as of the date of completion of this offering
will be available for sale subject to compliance with Rule 701 and upon the
expiration of agreements not to sell such shares entered into between the
underwriters and such stockholders. Any shares subject to lock-up agreements may
be released at any time without notice by the underwriters.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
restricted shares for at least one year is entitled to sell, within any
three-month period commencing 90 days after the date of completion of this
offering, a number of shares that does not exceed the greater of 1% of the then
outstanding shares of common stock (approximately shares immediately after
this offering), or the average weekly trading volume in the common stock during
the four calendar weeks preceding such sale, subject to the filing of a Form 144
with respect to such sale and certain other limitations and restrictions. In
addition, a person who is not deemed to have been an affiliate of QuickLogic at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, would be entitled to sell
such shares under Rule 144(k) without regard to the requirements described
above.
Any of our employees, officers, directors or consultants who purchased his
or her shares prior to the date of completion of this offering or who holds
vested options as of that date pursuant to a written compensatory plan or
contract is entitled to rely on the resale provisions of Rule 701, which permits
non-affiliates to sell their Rule 701 shares without having to comply with the
public-information, holding-period, volume-limitation or notice provisions of
Rule 144 and permits affiliates to sell their Rule 701 shares without having to
comply with Rule 144's holding-period restrictions, in each case commencing 90
days after the date of completion of this offering. However, we and certain
officers, directors and other stockholders have agreed not to sell or otherwise
dispose of any shares of our common stock for the 180-day period after the date
of this prospectus without the prior written consent of the underwriters. See
"Underwriting."
After this offering, we intend to file a registration statement on Form S-8
under the Securities Act to register outstanding options to purchase common
stock and shares of common stock reserved for issuance under the 1989 stock
option plan, 1999 stock option plan and 1999 employee stock purchase plan, thus
permitting the resale of such shares by non-affiliates in the public market
without restriction under the Securities Act. Such registration statement will
become effective immediately upon filing. As of July 31, 1999, options to
purchase a total of 2,636,509 shares were outstanding and 5,000,000 shares were
reserved for future issuance under our 1999 stock option plan; 1,184,080 shares
were reserved but unissued under our 1989 stock option plan; and 2,000,000
shares were reserved for issuance under our employee stock purchase plan. All
such options are subject to lock-up agreements.
Prior to this offering, there has been no public market for our common
stock, and any sale of substantial amounts in the open market may adversely
affect the market price of our common stock offered hereby.
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<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Bear, Stearns & Co. Inc., and SoundView
Technology Group, Inc. have severally agreed with QuickLogic, subject to the
terms and conditions set forth in the underwriting agreement, to purchase from
QuickLogic and the selling stockholder the number of shares of common stock set
forth opposite their names below. The underwriters are committed to purchase and
pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
BancBoston Robertson Stephens Inc................................................
Bear, Stearns & Co. Inc..........................................................
SoundView Technology Group, Inc..................................................
----------
Total..........................................................................
----------
----------
</TABLE>
QuickLogic and the selling stockholder have been advised by the
representatives of the underwriters that the underwriters propose to offer the
shares of common stock to the public at the initial public offering price set
forth on the cover page of this prospectus and to certain dealers at such price
less a concession of not in excess of $ per share, of which
$ may be reallowed to other dealers. After the initial public
offering, the public offering price, concession and reallowance to dealers may
be reduced by the representatives. No such reduction shall change the amount of
proceeds to be received by QuickLogic and the selling stockholder as set forth
on the cover page of this prospectus. The common stock is offered by the
underwriters as stated herein, subject to receipt and acceptance by them and
subject to their right to reject any order in whole or in part. The underwriters
do not intend to confirm sales to any accounts over which they exercise
discretionary authority.
OVER-ALLOTMENT OPTION. QuickLogic and the selling stockholder have granted
to the underwriters an option, exercisable during the 30-day period after the
date of this prospectus, to purchase up to additional shares of
common stock at the same price per share as QuickLogic and the selling
shareholder will receive for their shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise this option,
each of the underwriters will have a firm commitment to purchase approximately
the same percentage of such additional shares that the number of shares of
common stock to be purchased by it shown in the above table represents as a
percentage of the shares offered hereby. If purchased, such additional shares
will be sold by the underwriters on the same terms as those on which the
shares are being sold. QuickLogic and the selling stockholder will
be obligated, pursuant to the option, to sell shares to the extent the option is
exercised. The underwriters may exercise such option only to cover
over-allotments made in connection with the sale of the shares of common stock
offered hereby. If such option is exercised in full, the total public offering
price, underwriting discounts and commissions, and proceeds to QuickLogic and
the selling stockholder will be $ , $ , $ and
$ , respectively.
59
<PAGE>
The following table summarizes the compensation and expenses we will pay.
<TABLE>
<CAPTION>
TOTAL
------------------------------------------
WITHOUT WITH
PER SHARE OVER-ALLOTMENT OVER-ALLOTMENT
---------- -------------- --------------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by QuickLogic and the
selling stockholder................................................. $ $ $
Expenses payable by us................................................ $ $ $
</TABLE>
INDEMNITY. The underwriting agreement contains covenants of indemnity among
the underwriters, QuickLogic and the selling stockholder against certain civil
liabilities, including liabilities under the Securities Act and liabilities
arising from breaches of representations and warranties contained in the
underwriting agreement.
LOCK-UP AGREEMENTS. Each of QuickLogic's executive officers, directors, and
1% stockholders has agreed with the representatives of the underwriters, for a
period of 180 days after the date of this prospectus, subject to certain
exceptions, not to offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to any shares of common stock,
any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or thereafter acquired directly by such holders
or with respect to which they have or hereafter acquire the power of
disposition, without the prior written consent of BancBoston Robertson Stephens
Inc. However, BancBoston Robertson Stephens Inc. may, in its sole discretion and
at any time without notice, release all or any portion of the securities subject
to the lock-up agreements. There are no agreements between the representatives
and any of QuickLogic's stockholders providing consent by the representatives to
the sale of shares prior to the expiration of the lock-up period.
FUTURE SALES. In addition, we have agreed that during the lock-up period,
we will not, without the consent of BancBoston Robertson Stephens Inc., subject
to certain exceptions,
- consent to the disposition of any shares held by stockholders subject to
lock-up agreements prior to the expiration of the lock-up period or
- issue, sell, contract to sell, or otherwise dispose of, any shares of
common stock, any options to purchase any shares of common stock or any
securities convertible into, exercisable for or exchangeable for shares of
common stock other than QuickLogic's sale of shares in this offering, the
issuance of common stock upon the exercise of outstanding options, and the
issuance of options under existing stock option and incentive plans
provided such options do not vest prior to the expiration of the lock-up
period. See "Shares Eligible for Future Sale."
LISTING. Application has been made for quotation on the Nasdaq National
Market under the symbol "QUIK."
NO PRIOR PUBLIC MARKET. Prior to this offering, there has been no public
market for the common stock of QuickLogic. Consequently, the initial public
offering price for the common stock offered hereby will be determined through
negotiations between QuickLogic and the representatives of the underwriters.
Among the factors to be considered in such negotiations are prevailing market
conditions, certain financial information of QuickLogic, market valuations of
other companies that QuickLogic and the representatives believe to be comparable
to QuickLogic, estimates of the business potential of QuickLogic, the present
state of QuickLogic's development and other factors deemed relevant.
STABILIZATION. The representatives of the underwriters have advised
QuickLogic that, pursuant to Regulation M under the Securities Act, certain
persons participating in this offering may engage in transactions, including
stabilizing bids, syndicate covering transactions or the imposition of penalty
bids
60
<PAGE>
that may have the effect of stabilizing or maintaining the market price of the
common stock at a level above that which might otherwise prevail in the open
market. A "stabilizing bid" is a bid for or the purchase of the common stock on
behalf of the underwriters for the purpose of fixing or maintaining the price of
the common stock. A "syndicate covering transaction" is the bid for or the
purchase of the common stock on behalf of the underwriters to reduce a short
position incurred by the underwriters in connection with this offering. A
"penalty bid" is an arrangement permitting the representatives to reclaim the
selling concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The representatives have advised
QuickLogic that such transactions may be effected on the Nasdaq National Market
or otherwise and, if commenced, may be discontinued at any time.
DIRECTED SHARE PROGRAM. At the request of QuickLogic, the underwriters have
reserved up to shares of common stock to be issued by us and offered
hereby for sale, at the initial public offering price, to customers, sales
representatives and other business associates of QuickLogic. The number of
shares of common stock available for sale to the general public will be reduced
to the extent that such individuals purchase all or a portion of these reserved
shares. Any reserved shares which are not purchased will be offered by the
underwriters to the general public on the same basis as the shares of common
stock offered hereby.
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, Professional Corporation, Palo Alto,
California. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Orrick, Herrington & Sutcliffe LLP, Menlo
Park, California. As of the date of this prospectus, WS Investment Company, an
investment partnership composed of certain current and former members of and
persons associated with Wilson Sonsini Goodrich & Rosati, Professional
Corporation, as well as certain individual attorneys of that firm, beneficially
own an aggregate of 18,884 shares of QuickLogic common stock.
EXPERTS
The consolidated financial statements as of December 31, 1997 and 1998 and
for each of the three years in the period ended December 31, 1998 appearing in
this prospectus have been included in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including the exhibits, schedules and amendments to the
registration statement, under the Securities Act with respect to the shares of
common stock to be sold in this offering. This prospectus does not contain all
the information set forth in the registration statement. For further information
with respect to our company and the shares of common stock to be sold in this
offering, we refer you to the registration statement. Statements contained in
this prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance we refer you to
the copy of such contract, agreement or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference.
You may read and copy all or any portion of the registration statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating
61
<PAGE>
fee, by writing to the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our Securities and Exchange
Commission filings, including the registration statement, are also available to
you on the Commission's Web site at http://www.sec.gov.
As a result of this offering, we will become subject to the information and
reporting requirements of the Exchange Act, and, in accordance therewith, will
file periodic reports, proxy statements and other information with the
Securities and Exchange Commission.
We intend to furnish our stockholders with annual reports containing audited
consolidated financial statements and with quarterly reports for the first three
quarters of each year containing unaudited interim consolidated financial
information.
62
<PAGE>
QUICKLOGIC CORPORATION
INDEX TO CONSOLIDATED FINANCIAL SATEMENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheet as of December 31, 1997, 1998 and June 30, 1999 (unaudited)..................... F-3
Consolidated Statement of Operations for the Years Ended December 31, 1996, 1997 and 1998 and the Six
Months Ended June 30, 1998 (unaudited) and 1999 (unaudited).............................................. F-4
Consolidated Statement of Stockholders' Equity (Deficit) for the Years Ended December 31, 1996, 1997 and
1998 and the Six Months Ended June 30, 1999 (unaudited).................................................. F-5
Consolidated Statement of Cash Flows for the Three Years Ended December 31, 1996, 1997 and 1998 and the Six
Months Ended June 30, 1998 (unaudited) and 1999 (unaudited).............................................. F-6
Notes to Consolidated 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 13 to the financial statements has not
been consummated at June 30, 1999. When it has been consummated, we will be in a
position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, of stockholders' equity (deficit) and
of cash flows present fairly, in all material respects, the financial
position of QuickLogic Corporation and its subsidiary at December 31, 1998
and 1997, and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1998, 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 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."
PricewaterhouseCoopers LLP
San Jose, California
June 7, 1999, except as to Note
13,
which is as of , 1999
F-2
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
STOCKHOLDERS'
DECEMBER 31, EQUITY
---------------------- JUNE 30, JUNE 30,
1997 1998 1999 1999
---------- ---------- ---------- ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash................................................................ $ 7,331 $ 7,595 $ 8,185
Accounts receivable, net of allowances for doubtful accounts and
sales returns and allowances of $2,628, $3,272 and $2,340
(unaudited)....................................................... 2,892 2,031 4,505
Inventory........................................................... 5,869 2,877 2,613
Other current assets................................................ 286 730 898
---------- ---------- ----------
Total current assets.............................................. 16,378 13,233 16,201
Property and equipment, net........................................... 3,530 2,892 3,162
Other assets.......................................................... 43 43 43
---------- ---------- ----------
$ 19,951 $ 16,168 $ 19,406
---------- ---------- ----------
---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Trade payables...................................................... $ 2,801 $ 2,204 $ 4,117
Accrued liabilities................................................. 2,440 2,425 2,312
Deferred income on shipments to distributors........................ 5,996 4,737 5,617
Current portion of long-term obligations............................ 2,746 7,186 6,897
---------- ---------- ----------
Total current liabilities......................................... 13,983 16,552 18,943
Long-term obligations............................................... 7,724 591 161
---------- ---------- ----------
21,707 17,143 19,104
---------- ---------- ----------
Commitments and contingencies (Notes 11 and 12)
Stockholders' equity (deficit)
Preferred stock, $0.001 par value; 61,568 shares authorized; 9,912
shares outstanding; 10,000 authorized, none issued or outstanding
at June 30, 1999 on a pro forma basis (unaudited)................. 10 10 10 $ --
Common stock, $0.001 par value; 105,000 shares authorized; 1,159 and
4,279 and 4,301 (unaudited) shares outstanding; 100,000
authorized, 14,213 shares issued and outstanding at June 30, 1999
on a pro forma basis (unaudited).................................. 1 4 4 14
Common stock to be issued: 3,038 shares............................. 18,409 -- -- --
Additional paid-in capital.......................................... 43,435 61,388 61,730 61,730
Stockholder note receivable......................................... (121) (121) (121) (121)
Deferred compensation............................................... (2,073) (1,084) (1,136) (1,136)
Accumulated deficit................................................. (61,417) (61,172) (60,185) (60,185)
---------- ---------- ---------- ------------
Total stockholders' equity (deficit).............................. (1,756) (975) 302 $ 302
---------- ---------- ---------- ------------
------------
$ 19,951 $ 16,168 $ 19,406
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenue................................................ $ 23,758 $ 28,460 $ 30,007 $ 14,078 $ 18,425
Cost of revenue........................................ 11,158 16,855 14,303 6,803 7,958
--------- ---------- --------- --------- ---------
Gross profit........................................... 12,600 11,605 15,704 7,275 10,467
Operating expenses:
Research and development............................. 4,642 6,235 6,294 2,932 3,567
Selling, general and administrative.................. 7,730 10,981 9,368 4,648 6,000
Contract termination and legal....................... 4,125 28,309 -- -- --
--------- ---------- --------- --------- ---------
Net operating income (loss)........................ (3,897) (33,920) 42 (305) 900
Interest expense..................................... (60) (162) (161) (86) (49)
Interest income and other, net....................... 360 434 364 202 136
--------- ---------- --------- --------- ---------
Net income (loss)...................................... $ (3,597) $ (33,648) $ 245 $ (189) $ 987
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Net income (loss) per share:
Basic................................................ $ (4.66) $ (10.41) $ 0.06 $ (0.05) $ 0.23
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Diluted.............................................. $ (4.66) $ (10.41) $ 0.02 $ (0.05) $ 0.07
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Weighted average shares:
Basic................................................ 772 3,232 4,231 4,200 4,286
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Diluted.............................................. 772 3,232 14,645 4,200 15,042
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Pro forma net income per share:
Basic (unaudited).................................... $ 0.02 $ 0.07
--------- ---------
--------- ---------
Diluted (unaudited).................................. $ 0.02 $ 0.07
--------- ---------
--------- ---------
Pro forma weighted average shares:
Basic (unaudited).................................... 14,143 14,198
--------- ---------
--------- ---------
Diluted (unaudited).................................. 14,645 15,042
--------- ---------
--------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE
PREFERRED STOCK COMMON STOCK
--------------- ---------------
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 8,622 $ 9 638 $ 1
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 190 --
Issuance of Series E preferred stock in exchange for
services........................................... 4 -- -- --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 1,167 1 -- --
Deferred compensation, net of terminations........... -- -- -- --
Amortization of deferred compensation................ -- -- -- --
Net loss............................................. -- -- -- --
------ ------ ------ ------
Balance at December 31, 1996........................... 9,793 10 828 1
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 331 --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 119 -- -- --
Common stock to be issued in exchange for contract
termination........................................ -- -- -- --
Deferred compensation, net of terminations........... -- -- -- --
Amortization of deferred compensation................ -- -- -- --
Note receivable from stockholder..................... -- -- -- --
Net loss............................................. -- -- -- --
------ ------ ------ ------
Balance at December 31, 1997........................... 9,912 10 1,159 1
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 82 --
Common stock issued in exchange for contract
termination........................................ -- -- 3,038 3
Deferred compensation, net of terminations........... -- -- -- --
Amortization of deferred compensation................ -- -- -- --
Net income........................................... -- -- -- --
------ ------ ------ ------
Balance at December 31, 1998........................... 9,912 10 4,279 4
Common stock issued under stock option plan, net of
repurchases (unaudited)............................ -- -- 22 --
Deferred compensation, net of terminations
(unaudited)........................................ -- -- -- --
Amortization of deferred compensation (unaudited).... -- -- -- --
Net income (unaudited)............................... -- -- -- --
------ ------ ------ ------
Balance at June 30, 1999 (unaudited)................... 9,912 $10 4,301 $ 4
------ ------ ------ ------
------ ------ ------ ------
<CAPTION>
COMMON STOCK
TO BE ISSUED ADDITIONAL STOCKHOLDER
---------------- PAID-IN NOTE DEFERRED ACCUMULATED
SHARES AMOUNT CAPITAL RECEIVABLE COMPENSATION DEFICIT
------ -------- ---------- ----------- ------------ -----------
<S> <C>
Balance at December 31, 1995 -- $ -- $31,430 $(119) $ -- $(24,172)
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 99 -- -- --
Issuance of Series E preferred stock in exchange for
services........................................... -- -- 15 -- -- --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... -- -- 8,089 -- -- --
Deferred compensation, net of terminations........... -- -- 851 -- (851) --
Amortization of deferred compensation................ -- -- -- -- 43 --
Net loss............................................. -- -- -- -- -- (3,597)
------ -------- ---------- ----------- ------------ -----------
Balance at December 31, 1996........................... -- -- 40,484 (119) (808) (27,769)
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 280 -- -- --
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... -- -- 781 -- -- --
Common stock to be issued in exchange for contract
termination........................................ 3,038 18,409 -- -- -- --
Deferred compensation, net of terminations........... -- -- 1,890 -- (1,890) --
Amortization of deferred compensation................ -- -- -- -- 625 --
Note receivable from stockholder..................... -- -- -- (2) -- --
Net loss............................................. -- -- -- -- -- (33,648)
------ -------- ---------- ----------- ------------ -----------
Balance at December 31, 1997........................... 3,038 18,409 43,435 (121) (2,073) (61,417)
Common stock issued under stock option plan, net of
repurchases........................................ -- -- 110 -- -- --
Common stock issued in exchange for contract
termination........................................ (3,038) (18,409) 18,406 -- -- --
Deferred compensation, net of terminations........... -- -- (563) -- 563 --
Amortization of deferred compensation................ -- -- -- -- 426 --
Net income........................................... -- -- -- -- -- 245
------ -------- ---------- ----------- ------------ -----------
Balance at December 31, 1998........................... -- -- 61,388 (121) (1,084) (61,172)
Common stock issued under stock option plan, net of
repurchases (unaudited)............................ -- -- 55 -- -- --
Deferred compensation, net of terminations
(unaudited)........................................ -- -- 287 -- (287) --
Amortization of deferred compensation (unaudited).... -- -- -- -- 235 --
Net income (unaudited)............................... -- -- -- -- -- 987
------ -------- ---------- ----------- ------------ -----------
Balance at June 30, 1999 (unaudited)................... -- $ -- $61,730 $(121) $(1,136) $(60,185)
------ -------- ---------- ----------- ------------ -----------
------ -------- ---------- ----------- ------------ -----------
<CAPTION>
TOTAL
STOCKHOLDERS'
EQUITY
(DEFICIT)
-------------
Balance at December 31, 1995 $ 7,149
Common stock issued under stock option plan, net of
repurchases........................................ 99
Issuance of Series E preferred stock in exchange for
services........................................... 15
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 8,090
Deferred compensation, net of terminations........... --
Amortization of deferred compensation................ 43
Net loss............................................. (3,597)
-------------
Balance at December 31, 1996........................... 11,799
Common stock issued under stock option plan, net of
repurchases........................................ 280
Issuance of Series F preferred stock for cash, net of
issuance cost...................................... 781
Common stock to be issued in exchange for contract
termination........................................ 18,409
Deferred compensation, net of terminations........... --
Amortization of deferred compensation................ 625
Note receivable from stockholder..................... (2)
Net loss............................................. (33,648)
-------------
Balance at December 31, 1997........................... (1,756)
Common stock issued under stock option plan, net of
repurchases........................................ 110
Common stock issued in exchange for contract
termination........................................ --
Deferred compensation, net of terminations........... --
Amortization of deferred compensation................ 426
Net income........................................... 245
-------------
Balance at December 31, 1998........................... (975)
Common stock issued under stock option plan, net of
repurchases (unaudited)............................ 55
Deferred compensation, net of terminations
(unaudited)........................................ --
Amortization of deferred compensation (unaudited).... 235
Net income (unaudited)............................... 987
-------------
Balance at June 30, 1999 (unaudited)................... $ 302
-------------
-------------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................ $ (3,597) $ (33,648) $ 245 $ (189) $ 987
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and other non-cash charges................ 235 817 1,322 614 761
Provision for doubtful accounts and sales returns...... 1,102 1,015 644 1,254 (932)
Amortization of deferred compensation.................. 43 625 426 221 235
Gain on disposal of assets............................. -- -- (5) (5) --
Contract termination and other......................... 4,125 28,309 -- -- --
Changes in assets and liabilities:
Accounts receivable.................................. (1,031) (1,298) 217 410 (1,542)
Inventory............................................ (1,924) (1,225) 2,992 1,222 264
Prepaid and other assets............................. (4,555) (253) (444) (25) (168)
Accounts payable..................................... 1,434 (243) (597) (451) 1,913
Accrued liabilities and other........................ (409) 4,453 (2,477) (1,336) 767
--------- ---------- --------- --------- ---------
Net cash provided by (used for) operating
activities....................................... (4,577) (1,448) 2,323 1,715 2,285
--------- ---------- --------- --------- ---------
Cash flows from investing activities:
Capital expenditures for property and equipment, net of
dispositions........................................... (1,478) (2,639) (679) (174) (1,031)
Proceeds on sale of investments.......................... 4,000 -- -- -- --
--------- ---------- --------- --------- ---------
Net cash provided by (used for) investing
activities....................................... 2,522 (2,639) (679) (174) (1,031)
--------- ---------- --------- --------- ---------
Cash flows from financing activities:
Payment of debt obligations.............................. (124) (1,473) (1,490) (1,631) (832)
Proceeds from issuance of common stock, net.............. 99 280 110 85 55
Proceeds from issuance of preferred stock, net........... 8,090 781 -- -- --
Note receivable from stockholder......................... -- (2) -- -- --
Borrowings from bank..................................... 470 1,496 -- 83 113
--------- ---------- --------- --------- ---------
Net cash provided by (used for) financing
activities....................................... 8,535 1,082 (1,380) (1,463) (664)
--------- ---------- --------- --------- ---------
Net increase (decrease) in cash............................ 6,480 (3,005) 264 78 590
Cash at beginning of period................................ 3,856 10,336 7,331 7,331 7,595
--------- ---------- --------- --------- ---------
Cash at end of period...................................... $ 10,336 $ 7,331 $ 7,595 $ 7,409 $ 8,185
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Non-cash transactions:
Inventory acquired in exchange for note payable.......... $ -- $ 1,396 $ -- $ -- $ --
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
</TABLE>
See Notes to Consolidated Financial Statements
F-6
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED 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 operates in a single industry segment
where it designs, develops, markets and supports advanced field programmable
gate array semiconductors ("FPGAs"), embedded standard products ("ESPs") and
associated software tools.
The Company's fiscal year ends on the Sunday closest to December 31. The six
month periods end on the Sunday closest to June 30. For presentation purposes,
the financial statements and notes have been presented as ending on the last day
of the nearest calendar month.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, QuickLogic International, Inc. All significant
intercompany accounts and transactions are eliminated in consolidation.
USES 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 as of 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, and product obsolescence.
INTERIM RESULTS (UNAUDITED)
The accompanying balance sheet as of June 30, 1999, the statements of
operations and of cash flows for the six months ended June 30, 1998 and 1999 and
the statement of stockholders' equity (deficit) for the six months ended June
30, 1999 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 six months
ended June 30, 1999 are not necessarily indicative of the results that may be
expected for the full year.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
All highly-liquid investments purchased with a remaining maturity of three
months or less are considered cash equivalents. 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.
F-7
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value 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 value of all financial instruments
at December 31, 1997 and 1998, approximate the amounts presented in the balance
sheet.
INVENTORY
Inventory is stated at the lower of cost or market, cost being determined
under the first-in, first-out method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is calculated on a straight-line basis over the asset's estimated
useful life of two 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.
LONG-LIVED ASSETS
The Company reviews the impairment of long-lived assets whenever events or
changes in circumstances indicate that the carrying amount of an asset may not
be recoverable. An impairment loss would be recognized when estimated future
cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. No such impairment losses have
been identified by the Company.
REVENUE RECOGNITION
The Company sells to certain distributors under agreements which allow
certain rights of return and price adjustments on unsold inventory. Amounts
billed to such distributors for shipments are included as accounts receivable,
inventory is relieved, and the related revenue and cost of revenue are deferred
and the resultant gross profit is recorded as a current liability, deferred
income on shipments to distributors, until the inventory is resold by the
distributor. Reserves for estimated returns and distributor price adjustments
are provided against accounts receivable. Revenue to all other customers is
recognized upon shipment. Software revenue is recognized when persuasive
evidence of an agreement exists, delivery of the software has occurred, no
significant Company obligations with regard to implementation or integration
exist, the fee is fixed or determinable and collectibility is probable. Software
revenues typically amount to less than 5% of total revenues.
STOCK-BASED COMPENSATION
The Company has elected 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 Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation."
F-8
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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. Bad debt write-offs to date
have been immaterial.
At December 31, 1998, accounts receivable from two customers both of which
were distributors of the Company's products represent 18% and 15% of the
Company's accounts receivable. At December 31, 1997, accounts receivable from
the same two customers represented 24% and 29%, respectively, of the Company's
accounts receivable.
LITIGATION LIABILITIES
The Company accrues for the cost of litigation in the period that costs
become estimable and occurrence is determined to be probable. Accrued litigation
liabilities of $8,203,000 and $6,500,000 at December 31, 1997 and 1998,
respectively, include estimated settlement costs and related legal fees (see
Notes 4 and 12).
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 the insignificant development costs incurred during
the short time period between the establishment of technological feasibility and
general availability.
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 9,912,000
shares of preferred stock outstanding into 9,912,000 shares of common stock. The
pro forma effect of this transaction has been reflected in the accompanying
unaudited pro forma stockholders' equity as if such conversion had occurred as
of June 30, 1999.
NET INCOME (LOSS) PER SHARE
Basic EPS is computed by dividing net income available to common
stockholders (numerator) by the weighted average number of common shares
outstanding (denominator) during the period. Diluted EPS is computed using the
weighted average number of common shares and dilutive potential common shares
outstanding during the period. In computing diluted EPS, the average stock price
for the period is used in determining the number of share assumed to be
purchased from the exercise of stock
F-9
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
options. A reconciliation of the numerators and denominators of the basic and
diluted per share computations is as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Numerator:
Net income (loss)............................... $ (3,597) $ (33,648) $ 245 $ (189) $ 987
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Denominator:
Common stock.................................... 794 1,005 3,490 2,710 4,294
Common stock to be issued....................... -- 2,278 759 1,519 --
Less: Unvested common stock option exercises.... (22) (51) (18) (29) (8)
--------- ---------- --------- --------- ---------
Weighted average shares outstanding for basic... 772 3,232 4,231 4,200 4,286
--------- ---------- --------- --------- ---------
Convertible preferred stock..................... -- -- 9,912 -- 9,912
Stock options and warrants...................... -- -- 484 -- 836
Unvested common stock option exercises.......... -- -- 18 -- 8
--------- ---------- --------- --------- ---------
Weighted average shares outstanding for
diluted....................................... 772 3,232 14,645 4,200 15,042
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Net income (loss) per share
Basic......................................... $ (4.66) $ (10.41) $ 0.06 $ (0.05) $ 0.23
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
Diluted....................................... $ (4.66) $ (10.41) $ 0.02 $ (0.05) $ 0.07
--------- ---------- --------- --------- ---------
--------- ---------- --------- --------- ---------
</TABLE>
As a result of the net losses incurred by the Company during fiscal years
1996 and 1997 and for the six months ended June 30, 1998, all potential common
shares were anti-dilutive and have been excluded from the diluted net loss per
share calculation. For fiscal year 1998 and the six months ended June 30, 1999,
stock options with an exercise price that equals or exceeds the average fair
market value of the Company's common stock have been excluded from the
computation of diluted net income per share as they would be anti-dilutive. The
following table summarizes total securities outstanding as of each period end,
on an as-converted basis, which were not included in the calculation of diluted
net loss per share since their inclusion would have been anti-dilutive.
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1996 1997 1998 1998 1999
--------- ---------- --------- --------- ---------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Preferred stock...................................... 9,793 9,912 -- 9,912 --
Unvested common stock subject to repurchase.......... 22 51 -- 29 --
Stock options........................................ 1,284 2,006 -- 1,983 --
Preferred stock warrants............................. 22 22 -- 22 --
</TABLE>
F-10
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PRO FORMA NET INCOME PER SHARE (UNAUDITED)
Pro forma basic net income per share for the year ended December 31, 1998
and six months ended June 30, 1999 is computed using the weighted average number
of common shares outstanding, including the conversion of the Company's
Convertible Preferred Stock outstanding into shares of the Company's common
stock effective upon the closing of the Company's initial public offering as if
such conversion occurred on January 1, 1998 and January 1, 1999, respectively.
Pro forma diluted net income per share is computed using the pro forma weighted
average number of common and potential common shares outstanding. Pro forma
potential common shares consist of Common Stock subject to repurchase and stock
options and warrants using the treasury stock method.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 established a model for
accounting for derivatives and hedging activities and supercedes and amends a
number of existing accounting standards. SFAS No. 133 requires that all
derivatives be recognized in the balance sheet at their fair market value, and
the corresponding derivative gains or losses be either reported in the statement
of operations or as a deferred item depending on the type of hedge relationship
that exists with respect to such derivative. SFAS No. 133, as amended by SFAS
No. 137, "Accounting for Derivative Instruments and Hedging Activities--
Deferral of Effective Date of FASB Statement No. 133," is effective for all
fiscal quarters and years beginning after June 15, 2000. The Company does not
currently, nor does it plan to, enter into, forward exchange contracts to hedge
exposures denominated in foreign currencies or any other derivative financial
instruments for trading or speculative purposes.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-1, "Software for Internal Use," which
provides guidance on accounting for the cost of computer software developed or
obtained for internal use. SOP No. 98-1 is effective for financial statements
for fiscal years beginning after December 15, 1998. The Company does not expect
that the adoption of SOP No. 98-1 will have a material impact on its
consolidated financial statements.
INCOME TAXES
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). Under SFAS 109, deferred tax liabilities and assets are determined based
on the differences between the financial statements and tax bases of assets and
liabilities, using enacted tax rates in effect for the year in which the
differences are expected to reverse.
OTHER COMPREHENSIVE INCOME (LOSS)
Effective January 1, 1998, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income"
("SFAS 130"). SFAS 130 establishes standards for reporting comprehensive income
(loss) and its components in financial statements. Comprehensive income (loss)
as defined, includes all changes in equity (net assets) during a period from
nonowner sources. No items were included in other comprehensive income (loss)
during 1996, 1997 and 1998.
F-11
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3--BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30,
1997 1998 1999
--------- --------- -----------
(IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C>
Inventory:
Raw materials............................................. $ 441 $ 56 $ 136
Work-in-process........................................... 4,926 2,611 2,426
Finished goods............................................ 502 210 51
--------- --------- -----------
$ 5,869 $ 2,877 $ 2,613
--------- --------- -----------
--------- --------- -----------
Property and equipment:
Equipment................................................. $ 4,326 $ 4,733 $ 5,584
Software.................................................. 991 1,059 1,231
Furniture and fixtures.................................... 766 761 770
Leasehold improvements.................................... 554 564 563
--------- --------- -----------
6,637 7,117 8,148
Accumulated depreciation.................................... (3,107) (4,225) (4,986)
--------- --------- -----------
$ 3,530 $ 2,892 $ 3,162
--------- --------- -----------
--------- --------- -----------
Accrued liabilities:
Accrued employee compensation............................. $ 739 $ 935 $ 1,091
Other liabilities......................................... 1,701 1,490 1,221
--------- --------- -----------
$ 2,440 $ 2,425 $ 2,312
--------- --------- -----------
--------- --------- -----------
</TABLE>
NOTE 4--LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Installment notes payable to bank.......................... $ 1,743 $ 966
Installment notes payable to vendor........................ 295 --
Litigation accrual......................................... 8,203 6,500
Other...................................................... 229 311
--------- ---------
10,470 7,777
Current portion of long-term obligations................... (2,746) (7,186)
--------- ---------
Long-term obligations...................................... $ 7,724 $ 591
--------- ---------
--------- ---------
</TABLE>
At December 31, 1997 and 1998, the Company had outstanding bank installment
notes totaling $1,743,000 and $966,000, respectively. The notes bear interest at
prime plus 0.25% (8.0% as of December 31, 1998), 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 1999 and 2000. At December 31,
1998, the Company was in violation of its bank covenants. Subsequently, the
Company obtained a waiver for the covenants. In the quarter ended June 30, 1999,
the Company entered into an extension to borrow up to $250,000 using bank
installment notes which are secured by the specific
F-12
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--LONG-TERM OBLIGATIONS (CONTINUED)
equipment financed. At June 30, 1999, the Company had borrowed $113,000 under
this facility. These notes mature in 2002. At June 30, 1999, the Company was in
compliance with its covenants.
At December 31, 1997, the Company had a $6.0 million bank facility which
includes a $1.0 million export/import revolving line of credit and a $5.0
million domestic revolving line of credit. At December 31, 1997, no borrowings
were outstanding against the revolving lines of credit. The Company elected not
to renew the revolving lines of credit which expired in October 1998.
In March 1997, the Company entered into an agreement to purchase certain
inventory from Cypress Semiconductor Corporation payable under nine month
interest-free notes. Purchases totaled approximately $1.4 million. The notes
were fully paid by March 1998.
In August 1998, the Company settled its lawsuit with Actel Corporation. The
obligation for settlement and legal costs is payable quarterly through August
2001, subject to acceleration upon the completion of the Company's initial
public offering. Management intends to complete such an initial public offering
during 1999 and, accordingly, such obligations have been classified as current
at December 31, 1998 (see Note 12).
NOTE 5--STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------ JUNE 30,
1997 1998 1999
----- ----- ---------------
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
Series A, $0.001 par value; 418,000 shares designated, issued and
outstanding..................................................... $ -- $ -- $ --
Series B, $0.001 par value; 1,713,000 shares designated, issued
and outstanding................................................. 2 2 2
Series C, $0.001 par value; 2,018,000 shares designated, 1,996,000
issued and outstanding.......................................... 2 2 2
Series D, $0.001 par value; 520,000 shares designated, issued and
outstanding..................................................... -- -- --
Series E, $0.001 par value; 3,979,000 shares designated, issued
and outstanding................................................. 4 4 4
Series F, $0.001 par value; 1,581,000 shares designated, 1,286,000
issued and outstanding.......................................... 2 2 2
--- --- ---
$ 10 $ 10 $ 10
--- --- ---
--- --- ---
</TABLE>
The holders of the outstanding Series A, Series B, Series C, Series D,
Series E and Series F preferred stock are entitled to annual dividends of
$0.198, $0.0246, $0.384, $0.384, $0.42 and $0.696 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, 1998.
F-13
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--STOCKHOLDERS' EQUITY (CONTINUED)
In the event of liquidation, dissolution or winding up of the Company, the
holders of Series F preferred stock are entitled to receive $6.96 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 are entitled to receive $1.998, $2.478, $3.84, $3.84
and $4.20 per share, respectively, plus declared but unpaid dividends thereon,
prior to any distribution to holders of common stock. As of December 31, 1998,
the liquidation preference of Series A, Series B, Series C, Series D, Series E
and Series F preferred stock is approximately $40.4 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
million, at a per share issuance price of at least $19.98 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 at least two-thirds of the holders of such
outstanding preferred shares, voting together as a single class, 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 January 1992, in conjunction with the issue of Series C preferred stock,
the Company issued warrants to purchase 21,875 shares of Series C preferred
stock at $3.84 per share. The warrants expired unexercised in January 1999.
COMMON STOCK
In March 1997, in conjunction with the issuance of Series F preferred stock,
the Company authorized an additional 20,000,000 shares of common stock for a
total authorized amount of 105,000,000 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, 1996 and 1997 as the Company incurred operating losses
during these periods. No provision for federal or state income taxes has been
recorded for the year ended December 31, 1998 and the six-month period ended
June 30, 1999 (unaudited) as the Company had the ability to utilize federal and
state net operating loss carryforwards.
F-14
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--INCOME TAXES (CONTINUED)
Deferred tax balances are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1998
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward........................................ $ 7,252 $ 15,728
Contract termination charge............................................ 7,389 --
Accruals and reserves.................................................. 7,509 5,970
Credit carryforward.................................................... 1,951 2,351
Capitalized research and development................................... 449 633
--------- ---------
24,550 24,682
Valuation allowances..................................................... (24,550) (24,682)
--------- ---------
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, 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, 1998, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $44 million and $21
million, respectively. These carryforwards, if not utilized to offset future
taxable income and income taxes payable, will expire in the years 1999 through
2013.
F-15
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--INCOME TAXES (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. Since inception, the Company believes cumulative
changes in ownership have invoked the loss carryforward deduction limitation
under IRC Section382. However, the Company believes that such limitations will
not have a material effect on the future utilization of the losses.
NOTE 7--EMPLOYEE AND DIRECTOR BENEFIT PLANS
1989 STOCK OPTION PLAN
In July 1996, the 1989 Stock Plan (the "Plan") was amended to allow options
to be exercised prior to vesting. Unvested shares are deposited to an escrow
agent and the Company has a right to repurchase unvested shares at the original
issuance price if the employee is terminated. In April 1999, an additional
1,333,000 shares were authorized for issuance. The Plan provides for the
issuance of incentive and nonqualified options for the purchase of up to
4,617,000 shares of Common Stock. Options may be granted to employees, directors
and consultants to the Company.
The following table summarizes all of the Company's stock option activity
and related weighted average exercise price for each of the years ended December
31, 1996, 1997 and 1998 and the six month period ended June 30, 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
--------------- -----------
<S> <C> <C>
(IN THOUSANDS)
Balance at December 31, 1995....................................... 1,373 $ 0.60
Granted.......................................................... 369 0.84
Canceled......................................................... (233) 0.60
Exercised........................................................ (225) 0.54
-----
Balance at December 31, 1996....................................... 1,284 0.66
Granted.......................................................... 1,636 4.53
Canceled......................................................... (558) 5.30
Exercised........................................................ (356) 0.88
-----
Balance at December 31, 1997....................................... 2,006 2.49
Granted.......................................................... 1,151 4.50
Canceled......................................................... (703) 3.26
Exercised........................................................ (89) 1.30
-----
Balance at December 31, 1998....................................... 2,365 3.26
Granted (unaudited).............................................. 395 5.41
Canceled (unaudited)............................................. (186) 4.33
Exercised (unaudited)............................................ (25) 2.31
-----
Balance at June 30, 1999 (unaudited)............................... 2,549 3.55
-----
-----
</TABLE>
F-16
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--EMPLOYEE AND DIRECTOR BENEFIT PLANS (CONTINUED)
As of December 31, 1998, 223,000 shares were available for grant, 18,000
unvested shares had been exercised and remain subject to the Company's buyback
rights and options to purchase 1,601,000 shares were vested.
On October 20, 1997, the Company repriced options to purchase 316,000 shares
of common stock that were issued to employees at exercise prices of $6.00 to
$9.00 between April and September 1997 to an exercise price of $4.50. The
original vesting terms of these options remained unchanged.
Related weighted average exercise price and contractual life information at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
OPTIONS WITH OUTSTANDING AND REMAINING
EXERCISE PRICES OF: EXERCISABLE SHARES LIFE (YEARS)
- -------------------------------------------------------------- ------------------- ---------------
(IN THOUSANDS)
<S> <C> <C>
$0.30......................................................... 15 1.1
$0.60......................................................... 450 6.0
$0.90......................................................... 110 7.8
$1.80......................................................... 10 8.1
$3.00......................................................... 426 8.1
$4.50......................................................... 1,354 9.3
-----
2,365
-----
-----
</TABLE>
The weighted average estimated grant date fair values, as defined by SFAS
123, for options granted during 1996, 1997 and 1998 was $3.18, $2.52 and $1.02
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 1996, 1997 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Expected life (years)............................................... 5.0 5.3 5.3
Risk-free interest rate............................................. 6.05% 6.20% 4.99%
Volatility.......................................................... -- -- --
Dividend yield...................................................... -- -- --
</TABLE>
F-17
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--EMPLOYEE AND DIRECTOR BENEFIT PLANS (CONTINUED)
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
plans, the Company's pro forma net loss would have been as follows for the years
ended December 31, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1997 1998
--------- ---------- ---------
(IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
Pro forma net loss............................................ $ (3,676) $ (33,953) $ (663)
Pro forma net loss per share:
Basic....................................................... $ (4.76) $ (10.51) $ (0.16)
Diluted..................................................... $ (4.76) $ (10.51) $ (0.16)
</TABLE>
DEFERRED COMPENSATION
During the year ended December 31, 1996, 1997, 1998 and the six months ended
June 30, 1999, the Company granted options and recorded related deferred
compensation of $851,000, $1,890,000, $204,000 and $332,000 (unaudited),
respectively, net of reversals associated with unvested shares of terminated
employees. Such deferred compensation is being 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 Cypress share
processing technologies and licenses to market developed FPGA products and that
Cypress guarantees the Company certain wafer start capacity. The Company
purchased all of its wafers under this agreement during 1996 and 1997.
In March 1997, the Company and Cypress terminated the Existing Agreement,
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 3,037,786 shares of Common Stock to Cypress, resulting in a
charge of approximately $23.0 million in the first quarter of 1997. The
Company's revenue and net income were not measurably enhanced by this
transaction. The 3,037,786 shares of Common Stock were issued to Cypress on
April 1, 1998. 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 an initial public offering. The parties also entered
into a new foundry agreement and a cross-license agreement.
F-18
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES RECEIVABLE FROM STOCKHOLDER
As of December 31, 1998, the Company had $121,000 of demand promissory notes
due from a stockholder. The notes bear interest at rates ranging from 6.7% to
8.5% per annum and are secured by shares of the Company's common stock held by
the stockholder.
NOTE 9--MANUFACTURING AGREEMENT
In July 1997, the Company entered into a manufacturing agreement with Taiwan
Semiconductor Manufacturing Company, Ltd. ("TSMC") for a term of three years
renewable annually as a rolling three-year agreement. The agreement guarantees
certain capacity availability and requires that a minimum percentage of the
total number of wafers required by the Company in any one year are purchased
from TSMC (excluding wafers purchased from Cypress and certain other wafer
requirements), and requires "take or pay" volume commitments twelve months in
length based upon usage forecasts supplied by the Company. Obligations are
payable in U.S. dollars. However, the purchase price for wafers shall be
adjusted for any fluctuation in the New Taiwan Dollar exchange rate greater than
5%. The Company has committed to purchase approximately $2.8 million under this
agreement in 1999. Purchases under this agreement totaled $202,000 and $1.0
million in 1997 and 1998, respectively.
NOTE 10--INFORMATION CONCERNING BUSINESS SEGMENTS AND MAJOR CUSTOMERS
INFORMATION ABOUT GEOGRAPHIC AREAS
All of the Company's sales are originated in the United States. Shipments to
some of the Company's distributors are made to centralized purchasing and
distributing locations, which in turn sell through to other locations. As a
result of these factors, the Company believes that sales to certain geographic
locations might be higher or lower, though accurate data is difficult to obtain.
The following is a breakdown of revenues by shipment destination for the
years ended 1996, 1997 and 1998:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1997 1998
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
United States................................................ $ 17,759 $ 16,222 $ 15,784
Germany...................................................... 2,419 1,451 1,800
Other........................................................ 3,580 10,787 12,423
--------- --------- ---------
$ 23,758 $ 28,460 $ 30,007
--------- --------- ---------
--------- --------- ---------
</TABLE>
Two customers, distributors of the Company's products, accounted for
approximately 24% and 11% of revenues in 1998. Three customers, distributors of
the Company's products, accounted for approximately 20%, 15% and 13% of revenue
in 1997. Four customers, distributors of the Company's products, accounted for
19%, 14%, 12% and 12% of revenue in 1996. All sales are made from the United
States and are denominated in U.S. dollars.
Less than 10% of the Company's long-lived assets, including property and
equipment and other assets, were located outside the United States.
F-19
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--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 certificate of deposit which matures in 1999.
Rent expense for the years ended December 31, 1996, 1997 and 1998 was
approximately $358,000, $478,000 and $531,000, respectively.
The Company also leases certain equipment and leasehold improvements under
capital leases which expire in 2003. At December 31, 1998 and 1997, $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:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
----------- -----------
(IN THOUSANDS)
<S> <C> <C>
Year Ending December 31,
1999................................................................... $ 594 $ 67
2000................................................................... 632 67
2001................................................................... 638 67
2002................................................................... 664 66
2003 and thereafter.................................................... 590 47
----------- -----
$ 3,118 314
-----------
-----------
Less amount representing interest........................................ (75)
-----
Present value of capital lease obligations............................... 239
Less current portion..................................................... (40)
-----
Long term portion of capital lease obligations........................... $ 199
-----
-----
</TABLE>
NOTE 12--LITIGATION SETTLEMENT
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. The Company countersued alleging that Actel's
products infringed on the Company's patents. During 1995 and 1996, Actel's suit
was amended to include a trade misappropriation claim and additional patent
infringement claims. Actel and the Company settled their litigation in August
1998. The Company and Actel have granted each other non-exclusive, royalty free,
worldwide, perpetual cross licenses of their existing technology, excluding only
certain SRAM technology owned by Actel. The Company has made quarterly payments
to Actel since the settlement date. The remainder of the settlement will be paid
to Actel immediately after the Company's initial public offering. The agreement
also includes certain assignment and adverse monetary provisions in the event of
a change in ownership of either party. The accrual of $6.5 million at December
31, 1998 (Note 4) represents the remaining obligation under the settlement.
NOTE 13--SUBSEQUENT EVENTS
In August 1999, the Board of Directors authorized the reincorporation of the
Company in Delaware and, in conjunction with such reincorporation, a 6-for-1
reverse stock split (the "Reverse Stock Split") of the Company's preferred stock
and common stock. All references to the number of
F-20
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13--SUBSEQUENT EVENTS (CONTINUED)
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 Reverse Stock Split. The Board of Directors also approved a
recapitalization that would authorize 100 million shares of common stock and ten
million shares of undesignated preferred stock.
The 1999 Stock Plan was adopted by the Board of Directors in August 1999 and
is expected to be approved by the stockholders. The total number of shares of
common stock reserved for issuance under this plan is 5,000,000 shares of common
stock, the shares of common stock which have been reserved but unissued under
the 1989 Stock Option Plan as of the effective date of the initial public
offering (1,184,000 as of July 31, 1999) and any shares returned to the 1989
plan as a result of the termination of options under the 1989 plan. In addition,
commencing January 2000, an annual increase will be added to the 1999 stock plan
equal to the lesser of 5,000,000 shares or 5% of the outstanding shares on such
date. Unlike the 1989 Stock Plan, the 1999 Stock Plan does not allow for the
exercise of stock options prior to vesting.
The 1999 Employee Stock Purchase Plan was adopted by the Board of Directors
in August 1999 and is expected to be approved by the stockholders. The total
number of shares of common stock reserved for issuance under this plan is
2,000,000 plus annual increases equal to the lesser of 1,500,000 shares or 4% of
the outstanding shares on such date.
All of the above items will be effected prior to the date of the Initial
Public Offering.
F-21
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by QuickLogic in connection with
the sale of the Common Stock being registered hereby, other than underwriting
commissions and discounts. All amounts are estimates except the SEC Registration
Fee and the NASD filing fee.
<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 16,680
NASD Filing Fee................................................. 7,400
Nasdaq National Market Listing Fee.............................. 95,000
Blue Sky Fees and Expenses...................................... 5,000
Printing and Engraving Expenses................................. 200,000
Legal Fees and Expenses......................................... 375,000
Accounting Fees and Expenses.................................... 275,000
Transfer Agent and Registrar Fees............................... 10,000
Miscellaneous................................................... 15,920
---------
Total......................................................... $1,000,000
---------
---------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law permits a corporation to
include in its charter documents, and in agreements between the corporation and
its directors and officers, provisions expanding the scope of indemnification
beyond that specifically provided by the current law.
Article IX of the Registrant's Certificate of Incorporation provides for the
indemnification of directors to the fullest extent permissible under Delaware
law.
Article VI of the Registrant's Bylaws provides for the indemnification of
officers, directors and third parties acting on behalf of the Registrant if such
person acted in good faith and in a manner reasonably believed to be in and not
opposed to the best interest of the Registrant, and, with respect to any
criminal action or proceeding, the indemnified party had no reason to believe
his or her conduct was unlawful.
The Registrant intends to enter into indemnification agreements with its
directors and executive officers, in addition to indemnification provided for in
the Registrant's Bylaws, and intends to enter into indemnification agreements
with any new directors and executive officers in the future.
The Underwriting Agreement (Exhibit 1.1 hereto) provides for indemnification
by the Underwriters of the registrant and its executive officers and directors,
and by the registrant of the underwriters for certain liabilities, including
liabilities arising under the Securities Act, in connection with matters
specifically provided in writing by the Underwriters for inclusion in the
Registration Statement.
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 or her and incurred by him or her 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 August 1, 1996, the Registrant has issued and sold the following
securities:
1. From August 1, 1996 through July 31, 1999, the Registrant issued and
sold 544,333 shares of Common Stock to employees of the Registrant at
prices ranging from $0.90 to $6.00 per share upon exercise of stock
options pursuant to Registrant's 1989 Stock Option Plan, as amended.
2. On November 27, 1996 and January 24, 1997, the Registrant issued and
sold to 54 private investors an aggregate of 1,286,620 shares of Series F
Preferred Stock at a purchase price per share of Common Stock of $6.96.
3. On March 29, 1997, the Registrant agreed to issue an aggregate of
3,037,786 shares of Common Stock to Cypress Semiconductor Corporation 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 6 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 with respect to items 2 and 3 above in reliance on Section 4(2)
of the Securities Act, or Regulation D promulgated thereunder, and with respect
to item 1 above 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 Amended and Restated Certificate of Incorporation of the Registrant (Delaware) to
be effective upon closing of the offering.
3.2 Bylaws of the Registrant (Delaware) to be effective upon 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 1999 Stock Plan and form of Option Agreement thereunder.
10.3 1999 Employee Stock Purchase Plan.
10.4** 1989 Stock Option Plan.
10.5** Series F Preferred Stock Purchase Agreement dated November 27, 1996 and January
24, 1997 by and among the Registrant and the Purchasers named therein.
10.6+** Termination Agreement dated March 29, 1997 between the Registrant and Cypress
Semiconductor Corporation.
10.7** Cross License Agreement dated March 29, 1997 between the Registrant and Cypress
Semiconductor Corporation.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.8+** Wafer Fabrication Agreement March 29, 1997 between the Registrant and Cypress
Semiconductor Corporation.
10.9** Sixth Amended and Restated Shareholder Agreement dated March 29, 1997 by and among
the Registrant, Cypress Semiconductor Corporation and certain stockholders.
10.10** Sixth Amended and Restated Registration Rights Agreement dated March 29, 1997 by
and among the Registrant, Cypress and certain stockholders.
10.11** Technical Transfer, Joint Development License and Foundry Supply Agreement, dated
October 2, 1992, between the Registrant and Cypress.
10.12** 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.
10.13** Business Loan Agreement dated August 9, 1995 between the Registrant and Silicon
Valley Bank, as amended.
10.14** Loan and Security Agreement dated August 8, 1996 between the Registrant and
Silicon Valley Bank, as amended.
10.15** Export-Import Bank Loan and Security Agreement dated August 8, 1996 between the
Registrant and Silicon Valley Bank.
10.16** First Amended and Restated Common Stock Purchase Agreement dated June 13, 1997
between the Registrant and Cypress.
10.17+** Take or Pay Agreement dated July 21, 1997 between the Registrant and Taiwan
Semiconductor Manufacturing Company, Ltd.
10.18+ Patent Cross License Agreement, dated August 25, 1998, between the Registrant and
Actel Corporation.
16.1** Letter of Deloitte & Touche LLP, Independent Accountants, dated July 28, 1997
regarding change in certifying accountant.
23.1 Consent of Independent Accountants.
23.2* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation (See Exhibit
5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------
* Documents to be filed by amendment.
** Previously filed.
+ 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 230.406.
(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
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>
Insofar as indemnification by the Registrant 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.
(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.
II-4
<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 August, 1999.
<TABLE>
<S> <C> <C>
QUICKLOGIC CORPORATION
By: /s/ E. THOMAS HART
-----------------------------------------
E. Thomas Hart
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints E. Thomas Hart and Arthur O. Whipple, 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 the Registration Statement filed herewith and any and all
amendments to said Registration Statement (including post-effective amendments
and any related registration statements thereto filed pursuant to Rule 462 and
otherwise), 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 substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this amendment
to registration statement has been signed by the following persons in the
capacities and on the dates indicated:
SIGNATURE TITLE DATE
- ---------------------------- -------------------------- -------------------
President, Chief Executive
/s/ E. THOMAS HART Officer and Director
- ---------------------------- (Principal Executive August 9, 1999
E. Thomas Hart Officer)
Vice President, Finance,
/s/ ARTHUR O. WHIPPLE Chief Financial Officer
- ---------------------------- and Secretary (Principal August 9, 1999
Arthur O. Whipple Financial Officer)
- ---------------------------- Director
Irwin B. Federman
/s/ HUA-THYE CHUA
- ---------------------------- Director August 9, 1999
Hua-Thye Chua
/s/ DONALD P. BEADLE
- ---------------------------- Director August 9, 1999
Donald P. Beadle
/s/ MICHAEL J. CALLAHAN
- ---------------------------- Director August 9, 1999
Michael J. Callahan
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
1.1* Form of Underwriting Agreement.
3.1 Amended and Restated Certificate of Incorporation of the Registrant (Delaware) to be effective upon
closing of the offering.
3.2 Bylaws of the Registrant (Delaware) to be effective upon 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 1999 Stock Plan and form of Option Agreement thereunder.
10.3 1999 Employee Stock Purchase Plan.
10.4** 1989 Stock Option Plan.
10.5** Series F Preferred Stock Purchase Agreement dated November 27, 1996 and January 24, 1997 by and among
the Registrant and the Purchasers named therein.
10.6+** Termination Agreement dated March 29, 1997 between the Registrant and Cypress Semiconductor
Corporation.
10.7** Cross License Agreement dated March 29, 1997 between the Registrant and Cypress Semiconductor
Corporation.
10.8+** Wafer Fabrication Agreement March 29, 1997 between the Registrant and Cypress Semiconductor
Corporation.
10.9** Sixth Amended and Restated Shareholder Agreement dated March 29, 1997 by and among the Registrant,
Cypress Semiconductor Corporation and certain stockholders.
10.10** Sixth Amended and Restated Registration Rights Agreement dated March 29, 1997 by and among the
Registrant, Cypress and certain stockholders.
10.11** Technical Transfer, Joint Development License and Foundry Supply Agreement, dated October 2, 1992,
between the Registrant and Cypress.
10.12** 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.
10.13** Business Loan Agreement dated August 9, 1995 between the Registrant and Silicon Valley Bank, as
amended.
10.14** Loan and Security Agreement dated August 8, 1996 between the Registrant and Silicon Valley Bank, as
amended.
10.15** Export-Import Bank Loan and Security Agreement dated August 8, 1996 between the Registrant and Silicon
Valley Bank.
10.16** First Amended and Restated Common Stock Purchase Agreement dated June 13, 1997 between the Registrant
and Cypress.
10.17+** Take or Pay Agreement dated July 21, 1997 between the Registrant and Taiwan Semiconductor
Manufacturing Company, Ltd.
10.18+ Patent Cross License Agreement, dated August 25, 1998, between the Registrant and Actel Corporation.
16.1** Letter of Deloitte & Touche LLP, Independent Accountants, dated July 28, 1997 regarding change in
certifying accountant.
23.1 Consent of Independent Accountants.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ---------- ------------------------------------------------------------------------------------------------------
<C> <S>
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.
</TABLE>
- ---------
* Documents to be filed by amendment.
** Previously filed.
+ 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 230.406.
<PAGE>
Exhibit 3.1
THIRD AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
QUICKLOGIC CORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
E. Thomas Hart and Arthur Whipple each hereby certifies:
(1) They are the President and Secretary, respectively, of
QuickLogic Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware (the "General Corporation Law");
(2) The Amended and Restated Certificate of Incorporation of this
corporation, originally filed on August ____, 1999, is hereby amended and
restated in its entirety to read as follows:
FIRST: The name of this corporation is QuickLogic
Corporation (the "Corporation").
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street,
Wilmington, County of New Castle, Delaware 19801. The
name of its registered agent at such address is
Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be
organized under the General Corporation Law of
Delaware.
FOURTH: The Corporation is authorized to issue two classes of
stock to be designated respectively Common Stock and
Preferred Stock. The total number of shares of all
classes of stock which the Corporation has authority
to issue is one hundred ten million (110,000,000),
consisting of one hundred million (100,000,000)
shares of Common Stock, $0.001 par value (the "Common
Stock"), and ten million (10,000,000) shares of
Preferred Stock, $0.001 par value (the "Preferred
Stock").
The Preferred Stock may be issued from time to time
in one or more series. The Board of Directors is
hereby authorized subject to limitations prescribed
by law, to fix by resolution or resolutions the
designations, powers, preferences and rights, and the
qualifications, limitations or restrictions thereof,
of each such series of Preferred Stock, including
without limitation authority to fix by resolution or
resolutions, the dividend rights, dividend rate,
<PAGE>
conversion rights, voting rights, rights and terms of
redemption (including sinking fund provisions),
redemption price or prices, and liquidation
preferences of any wholly unissued series of
Preferred Stock, and the number of shares
constituting any such series and the designation
thereof, or any of the foregoing.
The Board of Directors is further authorized to
increase (but not above the total number of
authorized shares of the class) or decrease (but not
below the number of shares of any such series then
outstanding) the number of shares of any series, the
number of which was fixed by it, subsequent to the
issue of shares of such series then outstanding,
subject to the powers, preferences and rights, and
the qualifications, limitations and restrictions
thereof stated in the resolution of the Board of
Directors originally fixing the number of shares of
such series. If the number of shares of any series is
so decreased, then the shares constituting such
decrease shall resume the status which they had prior
to the adoption of the resolution originally fixing
the number of shares of such series.
FIFTH: The Corporation is to have perpetual existence.
SIXTH: The election of directors need not be by written
ballot unless the Bylaws of the Corporation shall so
provide.
SEVENTH: The number of directors which constitute the whole
Board of Directors of the Corporation shall be
designated in the Bylaws of the Corporation.
EIGHTH: In furtherance and not in limitation of the powers
conferred by the laws of the State of Delaware, the
Board of Directors is expressly authorized to adopt,
alter, amend or repeal the Bylaws of the Corporation.
NINTH: To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or may
hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its
stockholders for monetary damages for breach of
fiduciary duty as a director.
The Corporation may indemnify to the fullest extent
permitted by law any person made or threatened to be
made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by
reason of the fact that he, his testator or intestate
is or was a director, officer or employee of the
Corporation or any predecessor of the Corporation or
serves or served at any other enterprise as a
director, officer or employee at the request of the
Corporation or any predecessor to the Corporation.
-2-
<PAGE>
Neither any amendment nor repeal of this Article, nor
the adoption of any provision of this Amended and
Restated Certificate of Incorporation inconsistent
with this Article, shall eliminate or reduce the
effect of this Article in respect of any matter
occurring, or any cause of action, suit or claim
that, but for this Article, would accrue or arise,
prior to such amendment, repeal or adoption of an
inconsistent provision.
TENTH: At the election of directors of the Corporation, each
holder of stock of any class or series shall be
entitled to one vote for each share held. No
stockholder will be permitted to cumulate votes at
any election of directors.
The number of directors which constitute the whole
Board of Directors of the Corporation shall be fixed
exclusively by one or more resolution adopted from
time to time by the Board of Directors. The Board of
Directors shall be divided into three classes
designated as Class I, Class II, and Class III,
respectively. Directors shall be assigned to each
class in accordance with a resolution or resolutions
adopted by the Board of Directors. At the first
annual meeting of stockholders following the date
hereof, the term of office of the Class I directors
shall expire and Class I directors shall be elected
for a full term of three years. At the second annual
meeting of stockholders following the date hereof,
the term of office of the Class II directors shall
expire and Class II directors shall be elected for a
full term of three years. At the third annual meeting
of stockholders following the date hereof, the term
of office of the Class III directors shall expire and
Class III directors shall be elected for a full term
of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full
term of three years to succeed the directors of the
class whose terms expire at such annual meeting.
Vacancies created by newly created directorships,
created in accordance with the Bylaws of this
Corporation, may be filled by the vote of a majority,
although less than a quorum, of the directors then in
office, or by a sole remaining director.
ELEVENTH: Meetings of stockholders may be held within or
without the State of Delaware, as the Bylaws may
provide. The books of the Corporation may be kept
(subject to any provision contained in the laws of
the State of Delaware) outside of the State of
Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the
Bylaws of the Corporation.
The stockholders of the Corporation may not take any
action by written consent in lieu of a meeting, and
must take any actions at a duly called annual
-3-
<PAGE>
or special meeting of stockholders and the power of
stockholders to consent in writing without a meeting
is specifically denied.
TWELFTH: Advance notice of new business and stockholder
nominations for the election of directors shall be
given in the manner and to the extent provided in the
Bylaws of the Corporation.
THIRTEENTH: Notwithstanding any other provisions of this Restated
Certificate of Incorporation or any provision of law
which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the
holders of the capital stock required by law or this
Restated Certificate of Incorporation, the
affirmative vote of the holders of at least
two-thirds (2/3) of the combined voting power of all
of the then-outstanding shares of the Corporation
entitled to vote shall be required to alter, amend or
repeal Articles NINTH, TENTH, ELEVENTH or TWELFTH
hereof, or this Article THIRTEENTH, or any provision
thereof or hereof, unless such amendment shall be
approved by a majority of the directors of the
Corporation.
FOURTEENTH: The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this
Amended and Restated Certificate of Incorporation, in
the manner now or hereafter prescribed by the laws of
the State of Delaware, and all rights conferred
herein are granted subject to this reservation.
(3) This Amended and Restated Certificate of Incorporation has
been duly adopted by the Board of Directors of this Corporation in accordance
with Sections 242 and 245 of the General Corporation Law.
(4) This Amended and Restated Certificate of Incorporation has
been duly approved, in accordance with Section 242 of the General Corporation
Law, by vote of the holders of a majority of the outstanding stock entitled to
vote thereon.
IN WITNESS WHEREOF, the undersigned have executed this Amended and
Restated Certificate of Incorporation on this ____ day of October, 1999.
----------------------------------
E. Thomas Hart
President
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Arthur Whipple
Secretary
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<PAGE>
Exhibit 3.2
AMENDED AND RESTATED
BYLAWS
OF
QUICKLOGIC CORPORATION
A DELAWARE CORPORATION
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE I CORPORATE OFFICES ............................................................1
1.1 REGISTERED OFFICE.....................................................1
1.2 OTHER OFFICES.........................................................1
ARTICLE II MEETINGS OF STOCKHOLDERS ....................................................1
2.1 PLACE OF MEETINGS.....................................................1
2.2 ANNUAL MEETING........................................................1
2.3 SPECIAL MEETING.......................................................1
2.4 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE..........................2
2.5 QUORUM................................................................2
2.6 ADJOURNED MEETING; NOTICE.............................................2
2.7 VOTING................................................................2
2.8 WAIVER OF NOTICE......................................................3
2.9 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING............................3
2.10 NOTICE OF STOCKHOLDERS BUSINESS AND NOMINATIONS.......................4
2.11 PROXIES...............................................................6
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE.................................6
ARTICLE III DIRECTORS ..................................................................6
3.1 POWERS................................................................6
3.2 NUMBER OF DIRECTORS...................................................7
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...............7
3.4 RESIGNATION AND VACANCIES.............................................7
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..............................8
3.6 FIRST MEETINGS........................................................8
3.7 REGULAR MEETINGS......................................................9
3.8 SPECIAL MEETINGS; NOTICE..............................................9
3.9 QUORUM................................................................9
3.10 WAIVER OF NOTICE......................................................9
3.11 ADJOURNED MEETING; NOTICE............................................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 COMMITTEE MINUTES....................................................12
4.3 MEETINGS AND ACTION OF COMMITTEES....................................12
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<CAPTION>
PAGE
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<S> <C>
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 AUTHORITY AND DUTIES OF OFFICERS.....................................13
5.7 LIMITATIONS ON POWERS AND DUTIES OF OFFICERS.........................14
ARTICLE VI INDEMNITY ..................................................................14
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS............................14
6.2 INDEMNIFICATION OF OTHERS............................................14
6.3 INSURANCE............................................................14
6.4 PREPAYMENT OF EXPENSES...............................................15
6.5 CLAIMS...............................................................15
6.6 NON-EXCLUSIVITY OF RIGHTS............................................15
6.7 OTHER INDEMNIFICATION................................................15
6.8 AMENDMENT OR REPEAL..................................................15
ARTICLE VII GENERAL MATTERS ...........................................................16
7.1 CHECKS...............................................................16
7.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.....................16
7.3 STOCK CERTIFICATES; PARTLY PAID SHARES...............................16
7.4 SPECIAL DESIGNATION ON CERTIFICATES..................................17
7.5 LOST CERTIFICATES....................................................17
7.6 CONSTRUCTION; DEFINITIONS............................................17
7.7 DIVIDENDS............................................................17
7.8 FISCAL YEAR..........................................................18
7.9 SEAL.................................................................18
7.10 TRANSFER OF STOCK....................................................18
7.11 STOCK TRANSFER AGREEMENTS............................................18
7.12 REGISTERED STOCKHOLDERS..............................................18
7.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS.......................18
ARTICLE VIII AMENDMENTS ...............................................................19
</TABLE>
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<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
QUICKLOGIC CORPORATION
A DELAWARE CORPORATION
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is The Corporation Trust Company.
1.2 OTHER OFFICES
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date
and at a time designated by the Board of Directors. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 SPECIAL MEETING
Special meetings of stockholders for any purpose or purposes may be
called at any time by the Board of Directors or by a committee of the Board of
Directors which has been duly designated by the Board of Directors and whose
powers and authority, as expressly provided in a resolution of the Board of
Directors, include the power to call such meetings, but such special meetings
may not be called by any other person or persons.
<PAGE>
2.4 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein. If mailed, such notice
shall be deemed to be given when deposited in the mail, postage prepaid,
directed to the stockholder at his address as it appears on the records of the
corporation.
2.5 QUORUM
The holders of at least one-third of the stock issued and outstanding
and entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Certificate of
Incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then the stockholders entitled to vote thereat,
present in person or represented by proxy, shall have power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present or represented. At such adjourned meeting at
which a quorum is present or represented, any business may be transacted that
might have been transacted at the meeting as originally noticed.
2.6 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, notice need not be given of the adjourned meeting if
the time and place thereof are announced at the meeting at which the adjournment
is taken. At the adjourned meeting the corporation may transact any business
that might have been transacted at the original meeting. If the adjournment is
for more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
2.7 VOTING
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as provided in the last paragraph of this Section 2.8, or as may
be otherwise provided in the Certificate of Incorporation, each stockholder
shall be entitled to one vote for each share of capital stock held by such
stockholder.
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<PAGE>
2.8 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the Certificate of Incorporation or these Bylaws.
2.9 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
In order that the corporation may determine the stockholders entitled
to notice of or to vote at any meeting of stockholders or any adjournment
thereof, or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the Board of Directors does not so fix a record date:
(i) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held.
(ii) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
2.10 NOTICE OF STOCKHOLDERS BUSINESS AND NOMINATIONS
A. ANNUAL MEETINGS OF STOCKHOLDERS.
(1) Nominations of persons for election to the
Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders
(a) pursuant to the corporation's notice of meeting delivered pursuant
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<PAGE>
to Section 2.4 of these Bylaws; (b) by or at the direction of the Chairman of
the Board or the Board of Directors; or (c) by any stockholder of the
corporation who is entitled to vote at the meeting, who complied with the notice
procedures set forth in clauses (2) and (3) of this paragraph (A) of this Bylaw
and who was a stockholder of record at the time such notice is delivered to the
Secretary of the corporation.
(2) For nominations or other business to be
properly brought before an annual meeting by a stockholder pursuant to clause
(c) of paragraph (A)(1) of this Bylaw, the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation and such other
business must otherwise be a proper matter for stockholder action. To be timely,
a stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not less than seventy days nor more than
ninety days prior to the first anniversary of the preceding year's annual
meeting; provided, however, that in the event that the date of the annual
meeting is advanced by more than twenty days, or delayed by more than seventy
days from such anniversary date, notice by the stockholder to be timely must be
so delivered not earlier than the ninetieth day prior to such annual meeting and
not later than the close of business on the later of the seventieth day prior to
such annual meeting or the seventh day following the day on which public
announcement of the date of such meeting is first made. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or reelection as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder, including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected; (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the corporation's books, and of
such beneficial owner, (ii) the class and number of shares of the corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner and (iii) whether the stockholder or the beneficial owner
intends or is part of a group which intends to solicit proxies from other
stockholders in support of such nomination or proposal. In no event shall the
public announcement of an adjournment of an annual meeting commence a new time
period for the giving of a stockholder's notice as described above.
(3) Notwithstanding anything in the second
sentence of paragraph (A)(2) of this Bylaw to the contrary, in the event that
the number of directors to be elected to the Board of Directors of the
corporation is increased and there is no public announcement naming all of the
nominees for director or specifying the size of the increased Board of Directors
made by the corporation at least eighty days prior to the first anniversary of
the preceding year's annual meeting, a stockholder's notice required by this
Bylaw shall also be considered timely, but only with respect to nominees for any
new positions created by such increase, if it shall be delivered to the
Secretary
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<PAGE>
at the principal executive offices of the corporation not later than the close
of business on the tenth day following the day on which such public announcement
is first made by the corporation.
B. SPECIAL MEETINGS OF STOCKHOLDERS. Only such business
shall be conducted at a special meeting of stockholders as shall have been
brought before the meeting pursuant to the corporation's notice of meeting
pursuant to Section 2.4 of these Bylaws. Nominations of persons for election to
the Board of Directors may be made at a special meeting of stockholders at which
directors are to be elected pursuant to the corporation's notice of meeting (a)
by or at the direction of the Board of Directors or (b) by any stockholder of
the corporation who is entitled to vote at the meeting, who complies with the
notice procedures set forth in this Bylaw and who is a stockholder of record at
the time such notice is delivered to the Secretary of the corporation. In the
event the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as are specified in the corporation's Notice of Meeting, if the
stockholder's notice as required by paragraph (A)(2) of this Bylaw shall be
delivered to the Secretary at the principal executive offices of the corporation
not earlier than the ninetieth day prior to such special meeting and not later
than the close of business on the later of the seventieth day prior to such
special meeting or the tenth day following the day on which public announcement
is first made of the date of the special meeting and of the nominees proposed by
the Board of Directors to be elected at such meeting. In no event shall the
public announcement of an adjournment of a special meeting commence a new time
period for the giving of a stockholder's notice as described above.
C. GENERAL.
(1) Only persons who are nominated in accordance
with the procedures set forth in this Bylaw shall be eligible to serve as
directors and only such business shall be conducted at a meeting of stockholders
as shall have been brought before the meeting in accordance with the procedures
set forth in this Bylaw. Except as otherwise provided by law, the Certificate of
Incorporation or these Bylaws, the chairman of the meeting shall have the power
and duty to determine whether a nomination or any business proposed to be
brought before the meeting was made in accordance with the procedures set forth
in this Bylaw and, if any proposed nomination or business is not in compliance
with this Bylaw, to declare that such defective proposal or nomination shall be
disregarded.
(2) Notwithstanding the foregoing provisions of
this Bylaw, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Bylaw. Nothing in this Bylaw shall be deemed to affect
any rights of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act.
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<PAGE>
2.11 PROXIES
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for him by a written proxy, signed by
the stockholder and filed with the secretary of the corporation, but no such
proxy shall be voted or acted upon after three (3) years from its date, unless
the proxy provides for a longer period. A proxy shall be deemed signed if the
stockholder's name is placed on the proxy (whether by manual signature,
typewriting, telegraphic transmission or otherwise) by the stockholder or the
stockholder's attorney-in-fact. The revocability of a proxy that states on its
face that it is irrevocable shall be governed by the provisions of Section
212(c) of the General Corporation Law of Delaware.
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of the corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the Certificate of Incorporation or these Bylaws relating
to action required to be approved by the stockholders 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.
3.2 NUMBER OF DIRECTORS
The authorized number of directors which constitute the entire Board of
Directors shall be five (5). The number of directors constituting the entire
Board of Directors may be changed by an amendment to this Bylaw duly adopted by
resolution of the Board of Directors in accordance with these Bylaws. No
reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
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<PAGE>
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these Bylaws and unless otherwise
provided in the Certificate of Incorporation, directors shall be elected at each
annual meeting of stockholders to hold office until the next annual meeting.
Directors need not be stockholders unless so required by the Certificate of
Incorporation or these Bylaws, wherein other qualifications for directors may be
prescribed. Each director, including a director elected to fill a vacancy, shall
hold office until his successor is elected and qualified or until his earlier
resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effec tive, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
Unless otherwise provided in the Certificate of Incorporation or these
Bylaws:
(i) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
(ii) Whenever the holders of any class or classes of stock or
series thereof are entitled to elect one or more directors by the provisions of
the Certificate of Incorporation, vacancies and newly created directorships of
such class or classes or series may be filled by a majority of the directors
elected by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the Certificate of Incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole Board of Directors (as constituted immediately
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<PAGE>
prior to any such increase), then the Court of Chancery may, upon application of
any stockholder or stockholders holding at least ten (10) percent of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies or
newly created directorships, or to replace the directors chosen by the directors
then in office as aforesaid, which election shall be governed by the provisions
of Section 211 of the General Corporation Law of Delaware as far as applicable.
Any and all directors may be removed without cause if the removal is
approved by the affirmative vote of a majority of the outstanding shares of the
corporation entitled to vote. Such approval shall include the affirmative vote
of a majority of the outstanding shares of each class and series entitled to
vote as a class or series on the subject matter being voted upon and shall also
include the affirmative vote of such greater proportion (including all) of the
outstanding shares of any class or series if such greater proportion is required
by the corporation's Certificate of Incorporation or by applicable laws.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected Board of Directors shall be
held at such time and place as shall be fixed by the vote of the stockholders at
the annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected Board of Directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and place as shall be
specified in a notice given as hereinafter provided for special meetings of the
Board of Directors, or as shall be specified in a written waiver signed by all
of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
Board of Directors.
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<PAGE>
3.8 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 (2) 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
telecopy, 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 by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time 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.
3.9 QUORUM
At all meetings of the Board of Directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the Board of Directors, except as may be
otherwise specifically provided by statute or by the Certificate of
Incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the Certificate of
Incorporation or these Bylaws.
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<PAGE>
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the Board of Directors,
then the directors present thereat may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum is
present.
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board of Directors or committee, as the case may be,
consent thereto in writing and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the Certificate of Incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the Certificate of
Incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed with or without cause, by the holders of a majority of the shares
then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
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ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The Board of Directors may, by resolution passed by a majority of the
whole Board of Directors, designate one or more committees, with each committee
to consist of one or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member. Any such committee, to the extent
provided in the resolution of the Board of Directors or in the Bylaws of the
corporation, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
corporation, and may authorize the seal of the corporation to be affixed to all
papers that may require it; but no such committee shall have the power or
authority to (i) amend the Certificate of Incorporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation), (ii) adopt an agreement of merger or consolidation under Sections
251 or 252 of the General Corporation Law of Delaware, (iii) recommend to the
stockholders the sale, lease or exchange of all or substantially all of the
corporation's property and assets, (iv) recommend to the stockholders a
dissolution of the corporation or a revocation of a dissolution, or (v) amend
these Bylaws of the corporation; and, unless the Board of Directors resolution
establishing the committee, these Bylaws or the Certificate of Incorporation
expressly so provide, no such committee shall have the power or authority to
declare a dividend, to authorize the issuance of stock, or to adopt a
certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 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 and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9
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(quorum), Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice
of adjournment), and Section 3.12 (action without a 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 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 committee. The Board of Directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
Bylaws.
ARTICLE V
OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the Board of Directors, a chairman of the Board of Directors, one
or more assistant vice presidents, assistant secretaries, assistant treasurers,
and any 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.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be chosen by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The Board of Directors may appoint, or empower the president to
appoint, such other officers and agents 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.
5.4 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 an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the Board of Directors or, except in the 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.
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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.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 AUTHORITY AND DUTIES OF OFFICERS
The officers of the corporation shall have such powers and duties in
the management of the corporation as may be prescribed by the Board of Directors
and, to the extent not so provided, as generally pertain to their respective
offices, subject to the control of the Board of Directors. The Board of
Directors may require any officer, agent or employee to give security for the
faithful performance of his duties.
5.7 LIMITATIONS ON POWERS AND DUTIES OF OFFICERS
No officer shall take any action, enter into any agreement, make any
representation or, by purposeful inaction, effect any of the actions or
decisions which the Board of Directors is prohibited or restricted from enacting
pursuant to these Bylaws or the Certificate of Incorporation and their further
amendments.
ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements, and other amounts actually and reasonably incurred in
connection with any proceeding, 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 the corporation which was a predecessor corporation of
the corporation or of another enterprise at the request of such predecessor
corporation.
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6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, 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) 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 the
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of the State of Delaware.
6.4 PREPAYMENT OF EXPENSES
The corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
payment of expenses incurred by a director or officer in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the director or officer to repay all amounts advanced if it should be
ultimately determined that the director or officer is not entitled to be
indemnified under this Article or otherwise.
6.5 CLAIMS
If a claim for indemnification or payment of expenses under this
Article is not paid in full within sixty days after a written claim therefor has
been received by the corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification or payment of expenses under
applicable law.
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6.6 NON-EXCLUSIVITY OF RIGHTS
The rights conferred on any person by this Article 6 shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, these Bylaws,
agreement, vote of stockholders or disinterested directors or otherwise.
6.7 OTHER INDEMNIFICATION
The corporation's obligation, if any, to indemnify any person who was
or is serving at its request as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, enterprise or non-profit
entity shall be reduced by any amount such person may collect as indemnification
from such other corporation, partnership, joint venture, trust, enterprise or
non-profit enterprise.
6.8 AMENDMENT OR REPEAL
Any repeal or modification of the foregoing provisions of this Article
6 shall not adversely affect any right or protection hereunder of any person in
respect of any act or omission occurring prior to the time of such repeal or
modification.
ARTICLE VII
GENERAL MATTERS
7.1 CHECKS
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.
7.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
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.
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7.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of the corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply to
shares represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the Board of
Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
7.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
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7.5 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 canceled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
7.6 CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law 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 the corporation and a natural
person.
7.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained
in the Certificate of Incorporation, may declare and pay dividends upon the
shares of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
7.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
7.9 SEAL
The seal of the corporation shall be such as from time to time may be
approved by the Board of Directors.
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7.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignation or authority to transfer, it shall be the
duty of the corporation to issue a new certificate to the person entitled
thereto, cancel the old certificate, and record the transaction in its books.
7.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the General Corporation Law of Delaware.
7.12 REGISTERED STOCKHOLDERS
The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
7.13 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the Board of Directors, the president, any vice
president, the treasurer, 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 granted herein 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 VIII
AMENDMENTS
The original or other Bylaws of the corporation may be adopted, amended
or repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its Certificate of Incorporation, confer the power to adopt,
amend or repeal Bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal Bylaws.
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Exhibit 10.1
QUICKLOGIC CORPORATION
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is effective as of this
_____ day of May, 1999, by and between QuickLogic Corporation, a Delaware
corporation (the "Company" or "QuickLogic"), and E. Thomas Hart, President,
Chief Executive Officer and Director; John M. Birkner, Vice President,
Computer-Aided Engineering; Michael R. Brown, Vice President, Worldwide Sales;
Andrew K. Chan, Vice President, Product Development and Chief Technical Officer;
Hua-Thye Chua, Vice President, Process Technology and Director; Reynold W.
Simpson, Vice President, Operations; Scott D. Ward, Vice President, Engineering;
Arthur O. Whipple, Vice President, Finance and Chief Financial Officer; Ronald
D. Zimmerman, Vice President, Human Relations; Irwin B. Federman, Chairman of
the Board and Director; Donald P. Beadle, Director and Michael J. Callahan,
Director (individually the"Indemnitee" and collectively the "Indemnitees").
WHEREAS, the Company and Indemnitees recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitees further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;
WHEREAS, the Company and Indemnitees do not regard the current
protection available as adequate under the present circumstances, and each
Indemnitee and other officers and directors of the Company may not be willing to
continue to serve as officers and directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as each Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law; and
WHEREAS, in view of the considerations set forth above, the Company
desires that effective upon consummation of its merger with QuickLogic
Corporation, a California corporation, each Indemnitee shall be indemnified by
the Company as set forth herein.
NOW, THEREFORE, the Company and each Indemnitee hereby agree as
follows:
1. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify
each Indemnitee if such Indemnitee is or was a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the Company) by reason of the fact that such Indemnitee is
or was
<PAGE>
a director, officer, employee or agent of the Company, or any subsidiary
of the Company, by reason of any action or inaction on the part of Indemnitee
while an officer or director or by reason of the fact that Indemnitee is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
such Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe Indemnitee's
conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee reasonably believed to be
in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that Indemnitee's
conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The
Company shall indemnify each Indemnitee if Indemnitee was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Company or any subsidiary of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or was
a director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and amounts paid in settlement
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or suit if Indemnitee, acted in good faith and in a
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company, except that no indemnification shall be made in
respect of any claim, issue or matter as to which Indemnitee shall have been
adjudged to be liable to the Company unless and only to the extent that the
Court of Chancery of the State of Delaware or the court in which such action or
suit was brought shall determine upon application that, despite the adjudication
of liability but in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which the Court of
Chancery of the State of Delaware or such other court shall deem proper.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that
Indemnitee has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Subsections (a) and (b) of this
Section 1 or the defense of any claim, issue or matter therein, Indemnitee shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by Indemnitee in connection therewith.
2. AGREEMENT TO SERVE. In consideration of the protection
afforded by this Agreement, if Indemnitee is a director of the Company he agrees
to serve at least for the balance of the current term as a director and not to
resign voluntarily during such period without the written consent of a
<PAGE>
majority of the Board of Directors. If Indemnitee is an officer of the Company
not serving under an employment contract, he agrees to serve in such capacity at
least for the balance of the current fiscal year of the Company and not to
resign voluntarily during such period without the written consent of a majority
of the Board of Directors. Following the applicable period set forth above,
Indemnitee agrees to continue to serve in such capacity at the will of the
Company (or under separate agreement, if such agreement exists) so long as he is
duly appointed or elected and qualified in accordance with the applicable
provisions of the by-laws of the Company or any subsidiary of the Company or
until such time as he tenders his resignation in writing. Nothing contained in
this Agreement is intended to create in Indemnitee any right to continued
employment.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance
all expenses incurred by Indemnitee in connection with the investigation,
defense, settlement or appeal of any civil or criminal action, suit or
proceeding referenced in Section l(a) or (b) hereof. Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that the Indemnitee is not entitled to be
indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to the Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the Company.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall,
as a condition precedent to Indemnitee's right to be indemnified under this
Agreement, give the Company notice in writing as soon as practicable of any
Claim made against Indemnitee for which indemnification will or could be sought
under this Agreement. Notice to the Company shall be directed to the Chief
Executive Officer of the Company at the address shown on the signature page of
this Agreement (or such other address as the Company shall designate in writing
to Indemnitee). In addition, Indemnitee shall give the Company such information
and cooperation as it may reasonably require and as shall be within Indemnitee's
power.
(c) PROCEDURE. Any indemnification and advances provided
for in Section 1 and this Section 3 shall be made no later than forty-five (45)
days after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's
Certificate of Incorporation or By-laws providing for indemnification, is not
paid in full by the Company within forty-five (45) days after a written request
for payment thereof has first been received by the Company, Indemnitee may, but
need not, at any time thereafter bring an action against the Company to recover
the unpaid amount of the claim and, subject to Section 13 of this Agreement,
Indemnitee shall also be entitled to be paid for the expenses (including
attorneys' fees) of bringing such action. It shall be a defense to any such
action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final
disposition) that Indemnitee has not met the standards of conduct which make it
permissible under applicable law for the Company to indemnify Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company
and Indemnitee shall be entitled to receive interim payments of expenses
pursuant to Subsection 3(a) unless and until such defense may be finally
adjudicated by court order or judgment from which no further right of appeal
exists. It is the parties'
<PAGE>
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of Directors
or any committee or subgroup of the Board of Directors, independent legal
counsel, or its stockholders) to have made a determination that indemnification
of Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors or any committee
or subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt by
the Company of a notice of a Claim pursuant to Section 2(b) hereof, the Company
has liability insurance in effect which may cover such Claim, the Company shall
give prompt notice of the commencement of such Claim to the insurers in
accordance with the procedures set forth in the respective policies. The Company
shall thereafter take all necessary or desirable action to cause such insurers
to pay, on behalf of the Indemnitee, all amounts payable as a result of such
action, suit, proceeding, inquiry or investigation in accordance with the terms
of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall
be obligated hereunder to pay the Expenses of any Claim the Company, if
appropriate, shall be entitled to assume the defense of such Claim with counsel
approved by Indemnitee, upon the delivery to Indemnitee of written notice of its
election so to do. After delivery of such notice, approval of such counsel by
Indemnitee and the retention of such counsel by the Company, the Company will
not be liable to Indemnitee under this Agreement for any fees of counsel
subsequently incurred by Indemnitee with respect to the same Claim; provided
that, (i) Indemnitee shall have the right to employ Indemnitee's counsel in any
such Claim at Indemnitee's expense and (ii) if (A) the employment of counsel by
Indemnitee has been previously authorized by the Company, (B) Indemnitee shall
have reasonably concluded that there may be a conflict of interest between the
Company and Indemnitee in the conduct of any such defense, or (C) the Company
shall not continue to retain such counsel to defend such Claim, then the fees
and expenses of Indemnitee's counsel shall be at the expense of the Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this
Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest
extent permitted by law, notwithstanding that such indemnification is not
specifically authorized by the other provisions of this Agreement, the Company's
Certificate of Incorporation, the Company's By-laws or by statute. In the event
of any change, after the date of this Agreement, in any applicable law, statute,
or rule which expands the right of a Delaware corporation to indemnify a member
of its board of directors or an officer, such changes shall be, IPSO FACTO,
within the purview of Indemnitee's rights and Company's obligations, under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a Delaware corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be
<PAGE>
applied to this Agreement shall have no effect on this Agreement or the parties'
rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's Certificate of Incorporation, its By-laws, any
agreement, any vote of stockholders or disinterested Directors, the General
Corporation Law of the State of Delaware, or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though he may have ceased to serve in an indemnified
capacity at the time of any action, suit or other covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of Expenses incurred in connection with any Claim, but not, however, for
all of the total amount thereof, the Company shall nevertheless indemnify
Indemnitee for the portion of such Expenses to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGMENT. Both the Company and Indemnitee
acknowledge that in certain instances, Federal law or public policy may override
applicable state law and prohibit the Company from indemnifying its directors
and officers under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the Securities and Exchange Commission (the "SEC")
has taken the position that indemnification is not permissible for liabilities
arising under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken, and may be required in the future
to undertake, with the SEC to submit the question of indemnification to a court
in certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. OFFICER AND DIRECTOR LIABILITY INSURANCE. The Company shall,
from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of director and officer liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall
have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if the
premium costs for such insurance are disproportionate to the amount of coverage
provided, if the coverage provided by such insurance is limited by exclusions so
as to
<PAGE>
provide an insufficient benefit, or if Indemnitee is covered by similar
insurance maintained by a parent or subsidiary of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require
or shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this 8. If this Agreement or any portion hereof shall be invalidated on any
ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or
advance expenses to Indemnitee with respect to proceedings or claims initiated
or brought voluntarily by Indemnitee and not by way of defense, except with
respect to proceedings brought to establish or enforce a right to
indemnification under this Agreement or any other statute or law of otherwise as
required under Section 145 of the Delaware General Corporation Law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors finds it to be appropriate;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any
expenses incurred by Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by Indemnitee
in such proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses
or liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company; or
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee
for expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
10. CONSTRUCTION OF CERTAIN PHRASES.
(a) For purposes of this Agreement, references to the
"Company" shall include, in addition to the resulting corporation, any
constituent corporation (including any constituent of a
<PAGE>
constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that if Indemnitee is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, Indemnitee shall stand in the same position under the
provisions of this Agreement with respect to the resulting or surviving
corporation as Indemnitee would have with respect to such constituent
corporation if its separate existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
the Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, a court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed duly
given (i) if delivered by hand and receipt is acknowledged by the party
addressee, on the date of such receipt, or (ii) if mailed by certified or
registered mail with postage prepaid, on the third business day after the date
postmarked. Addresses for notice to either party are as shown on the signature
page of this Agreement, or as subsequently modified by written notice.
<PAGE>
15. CONSENT TO JURISDICTION. The Company and the Indemnitee each
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
Delaware.
16. CHOICE OF LAW. This Agreement shall be governed by and its
provisions construed in accordance with the laws of the State of Delaware, as
applied to contracts between Delaware residents entered into and to be performed
entirely within Delaware.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Indemnification Agreement as of the date first above written.
QUICKLOGIC CORPORATION,
a Delaware corporation
By: ------------------------------
E. Thomas Hart
President and Chief Executive
Officer
INDEMNITEE INDEMNITEE
By: By:
------------------------------------- ------------------------------
E. Thomas Hart Hua-Thye Chua
President and Chief Executive Officer Vice President, Process
Technology and Director
INDEMNITEE INDEMNITEE
By: By:
------------------------------------ ------------------------------
John M. Birkner Reynold W. Simpson
Vice President, Computer-Aided Vice President, Operations
Engineering
INDEMNITEE
By:
------------------------------------
Michael R. Brown
Vice President, Worldwide Sales
INDEMNITEE INDEMNITEE
By: By:
------------------------------------ ------------------------------
Andrew K. Chan Arthur O. Whipple
Vice President, Product Development Vice President, Finance and
and Chief Development Officer Chief Financial Officer
<PAGE>
INDEMNITEE INDEMNITEE
By: By:
------------------------------------ ------------------------------
Ronald D. Zimmerman Irwin B. Federman
Vice President, Human Relations Chairman of the Board and
Director
INDEMNITEE INDEMNITEE
By: By:
------------------------------------ ------------------------------
Donald P. Beadle Michael J. Callahan
Director Director
<PAGE>
Exhibit 10.2
QUICKLOGIC CORPORATION
1999 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 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 Delaware
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) "IPO EFFECTIVE DATE" means the date upon which the
Securities and Exchange Commission declares the initial public offering of the
Company's common stock as effective.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
<PAGE>
(q) "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.
(r) "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.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "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.
(u) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding Options are surrendered in exchange for Options with a lower
exercise price.
(v) "OPTIONED STOCK" means the Common Stock subject to an Option
or Stock Purchase Right.
(w) "OPTIONEE" means the holder of an outstanding Option or
Stock Purchase Right granted under the Plan.
(x) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(y) "PLAN" means this Quicklogic Corporation 1999 Stock Plan.
(z) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of Stock Purchase Rights under Section 11 of the Plan.
(aa) "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.
(bb) "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.
(cc) "SECTION 16(b) " means Section 16(b) of the Exchange Act.
(dd) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(ee) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 13 of the Plan.
(ff) "STOCK PURCHASE RIGHT" means the right to purchase Common
Stock pursuant to Section 11 of the Plan, as evidenced by a Notice of Grant.
<PAGE>
(gg) "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) the Shares which have been reserved but unissued under the
Company's 1989 Stock Option Plan (as amended) (the "1989 Plan") as of the IPO
Effective Date and (ii) any Shares returned to the 1989 Plan as a result of
termination of options under the 1989 Plan. In addition, an annual increase
shall be added to the Plan on the first day of the Company's fiscal year
beginning in 2000 equal to the lesser of (i) 5,000,000 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.
(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:
<PAGE>
(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 or 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;
(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;
<PAGE>
(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 1,000,000 Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
1,000,000 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
<PAGE>
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.
(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.
<PAGE>
(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.
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
<PAGE>
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 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.
<PAGE>
(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.
(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
<PAGE>
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 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
<PAGE>
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.
(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.
<PAGE>
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.
<PAGE>
QUICKLOGIC CORPORATION
1999 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 [___________], THE [TITLE] 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.
<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.
-3-
<PAGE>
(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 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
-4-
<PAGE>
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 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
- ----------------------------------- -----------------------------------
-5-
<PAGE>
Signature By
- ----------------------------------- -----------------------------------
Print Name Title
- ------------------------------------
Residence Address
- ------------------------------------
-6-
<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
-7-
<PAGE>
EXHIBIT A
1999 STOCK PLAN
EXERCISE NOTICE
Quicklogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
Attention: ____________, 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 1999 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.
<PAGE>
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 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 1999 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
Pledgeholder 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.
<PAGE>
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 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.
<PAGE>
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
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.
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<PAGE>
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<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
-5-
<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>
QUICKLOGIC CORPORATION
1999 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 1999 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
QUICKLOGIC CORPORATION
1999 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 a
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 Administrator 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
<PAGE>
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 canceling 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 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
provisions of this Agreement, other than by will or the laws of descent and
distribution.
6 ESCROW OF SHARES.
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<PAGE>
(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 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):
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<PAGE>
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 contemplated by this Agreement. The Purchaser
is relying solely on such advisors and not on any statements 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.
-4-
<PAGE>
(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 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
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<PAGE>
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
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<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
<PAGE>
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.
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.
<PAGE>
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.
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.
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<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
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<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.
<PAGE>
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 10.3
QUICKLOGIC CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
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,
overtime and incentive/variable compensation, but exclusive of 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 Trading Day of each
Offering Period.
(i) "EXERCISE DATE" shall mean the last Trading Day of each Purchase
Period.
(j) "FAIR MARKET VALUE" shall mean, as of any date, the value of
Common Stock determined as follows:
<PAGE>
(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 on the date of such determination, as reported in
THE WALL STREET JOURNAL or such other source as the Board deems reliable;
(ii) 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;
(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; or
(iv) 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 April 1 and
October 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, 2001. The duration and timing of Offering Periods may be changed
pursuant to Section 4 of this Plan.
(l) "PLAN" shall mean this 1999 Employee Stock Purchase Plan.
(m) "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.
(n) "PURCHASE PRICE" shall mean 85% of the Fair Market Value of a
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(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.
<PAGE>
(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 April 1 and October 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
September 30, 2001. 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.
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
<PAGE>
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 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
<PAGE>
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 20,000 shares of the Company's Common Stock
(subject to any adjustment pursuant to Section 19), and provided further that
such purchase shall be subject to the limitations set forth in Sections 3(b)
and 12 hereof. The Board may, for future Offering Periods, increase or
decrease, in its absolute discretion, the maximum number of shares of the
Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. 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.
(a) 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.
(b) If the Board determines that, on a given Exercise Date, the
number of shares with respect to which options are to be exercised may exceed
(i) the number of shares of Common Stock that were available for sale under the
Plan on the Enrollment Date of the applicable Offering Period, or (ii) the
number of shares available for sale under the Plan on such Exercise Date, the
Board may in its sole discretion (x) provide that the Company shall make a pro
rata allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
<PAGE>
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 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) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 2,000,000 shares, plus an annual increase to be added on each
anniversary date of the adoption of the Plan equal to the lesser of (i)
1,500,000 shares, (ii) 4% of the outstanding shares on such date or (iii) a
lesser amount determined by the Board.
<PAGE>
(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.
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.
<PAGE>
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.
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
<PAGE>
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.
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 Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as
provided in Section 19 and this Section 20 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.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period
ends on a new Exercise Date, including an Offering Period underway at the time
of the Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder approval or
the consent of any Plan participants.
<PAGE>
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.
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.
<PAGE>
EXHIBIT A
QUICKLOGIC CORPORATION
1999 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 1999 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 (up to 20%) 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)
<PAGE>
Employee's Social
Security Number:
----------------------------------------------------
Employee's Address:
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I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:
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Signature of Employee
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Spouse's Signature (If beneficiary other than spouse)
<PAGE>
EXHIBIT B
QUICKLOGIC CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Quicklogic
Corporation 1999 Employee Stock Purchase Plan which began on ____________,
______ (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:
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Date:
-------------------------------------
<PAGE>
EXHIBIT 10.18
CONFIDENTIAL TREATMENT REQUESTED
CERTAIN INFORMATION IN THIS EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
PATENT CROSS LICENSE AGREEMENT
THIS AGREEMENT is made and entered into on the 25th day of August, 1998,
by and between QuickLogic Corporation, a corporation incorporated under the laws
of California ("QuickLogic") and headquartered at 1277 Orleans Drive, Sunnyvale,
California 94089, and Actel Corporation, a corporation incorporated under the
laws of California ("Actel") and headquartered at 955 East Arques Avenue,
Sunnyvale, California 94086.
WHEREAS, QuickLogic and Actel are parties to those certain legal actions
entitled ACTEL CORPORATION V. QUICKLOGIC CORPORATION, No. C-94 20050 JW (PVT)
and ACTEL CORPORATION V. QUICKLOGIC CORPORATION, No. C-97 21107JW (EAI)
(collectively, the "Actions") currently pending before the United States
District Court for the Northern District of California, San Jose Division (the
"Court"); and
WHEREAS, QuickLogic and Actel mutually desire to settle the Actions, as
well as certain other actual or potential disputes between them, as part of such
settlement; and
WHEREAS, the Parties have entered into a settlement agreement of even
date herewith defining with particularity the terms of the settlement (the
"Settlement Agreement and Mutual Release");
NOW, THEREFORE, the Parties, in consideration of the premises and the
mutual promises of the Parties hereinafter set forth and intending to be bound
by the terms hereof, hereby agree, effective as of the Effective Date (as
defined below), as follows:
1. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1. "Actel" shall mean Actel Corporation, a California corporation,
and its successor, Actel Corporation, a Nevada corporation.
1.2. "Actel Licensed Patents" shall mean all Patents (a) that Actel
or any of its Affiliates now own or may hereafter during the term of this
Agreement own or (b) under which and to the extent that Actel or any of its
Affiliates have acquired or may hereafter during the term of this Agreement
acquire the right to grant licenses without the payment of a royalty or other
consideration to a third party (excluding consideration paid to an employee
in connection with the assignment to Actel of the employee's rights in an
invention that resulted from any work performed by the employee for Actel).
1.3. "Acquired Party" shall mean a party to this Agreement following
a Change in Ownership of such party.
1.4. "Acquiring Party" shall mean the Person(s), if any, in Control
of an Acquired Party following a Change in Ownership and the Affiliates of
such Person(s).
1.5. "Affiliate" shall mean a Person that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, a specified Person.
1.6. "Antifuse" shall mean a two-terminal switch that is open prior to
programming.
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CONFIDENTIAL TREATMENT REQUESTED
1.7. "Antifuse Programmable Logic Device" shall mean any
Programmable Logic Device in which all of the Programmable Switching Elements
are Antifuses.
1.8. "Beneficial Owner" shall be used in this Agreement as defined
in Rule 13d-3 under the Securities Exchange Act of 1934, as amended.
1.9. "Change in Ownership" shall mean the occurrence of any one of the
following:
1.9.1. Any Person is or shall have the right to become the
Beneficial Owner, directly or indirectly, of Voting Securities of
such party representing 50% or more of the Total Voting Power of
such party's Voting Securities.
1.9.2. The shareholders of a party approving a merger or
consolidation of such party with any other corporation, other than a
merger or consolidation that would result in the Voting Securities of
such party outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into Voting
Securities of the surviving corporation) 50% or more of the Total Voting
Power represented by the Voting Securities of such party or such
surviving corporation outstanding immediately after such merger or
consolidation.
1.9.3. The shareholders of a party approving a plan of dissolution
or liquidation of such party or an agreement for the sale or disposition
by such party of all or substantially all of such party's assets in one
or a series of transactions.
1.10. "Control" including the terms "controlling," "controlled by,"
and "under common control with," shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of Voting Securities,
by contract, or otherwise. A Person's Beneficial Ownership of twenty (20%)
or more of a corporation's outstanding Voting Securities shall create a
rebuttable presumption that such Person has control of such corporation.
Notwithstanding the foregoing, a Person shall not be deemed to have control
of a corporation if such Person holds Voting Securities, in good faith and
not for the purpose of circumventing this Section, as an agent, bank, broker,
nominee, custodian, or trustee for one or more Beneficial Owners who do not
individually or as a group have control of such corporation.
1.11. "Effective Date" shall mean the date on which the Stipulations
(as defined in the Settlement Agreement and Mutual Release) are filed with
the Court.
1.12. "Embedded SRAM Programmable Logic Device" shall mean an
Embedded Programmable Logic Device in which any of the Programmable Switching
Elements is controlled by SRAM.
1.13. "Embedded Programmable Logic Device" shall mean a Programmable
Logic Device in which (x) the circuitry controlled by Programmable Switching
Elements and (y) the circuitry containing User Memories contain in the
aggregate less than 80% of the total number of transistors on the die.
1.14. "Flash" shall mean electrically erasable read only memory that
can be erased more than one bit at a time.
1.15. "GateField" shall mean GateField Corporation, a Delaware
corporation.
1.16. "Incumbent Directors" shall mean directors who either (a) are
directors of a party to this Agreement as of the Effective Date (or as of the
date of a Change of Ownership, in the case of an
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
Acquiring Party) or (b) are elected, or nominated for election, to the Board of
Directors of such party with the affirmative votes of at least a majority of the
Incumbent Directors at the time of such election or nomination, but "Incumbent
Directors" shall not include any individual whose election or nomination is in
connection with an actual or threatened proxy contest relating to the election
of directors of such party.
1.17. "Internal Use" by a Person shall mean (a) use by the Person or
its Affiliates without any sale, lease, distribution, or other transfer to a
third party that is not an Affiliate of the Person or (b) incorporation in a
value-added product made by the Person or its Affiliates that is sold,
leased, distributed, or otherwise transferred to a third party that is not an
Affiliate of the Person.
1.18. "Licensee Party" shall mean either Actel or QuickLogic in its
capacity as the recipient of rights under any Patent of the other party
pursuant to this Agreement.
1.19. "Licensor Party" shall mean either Actel or QuickLogic in its
capacity as the grantor of rights under any of its Patents pursuant to this
Agreement.
1.20. "Material Terms" shall refer to the provisions of Sections 3 and
6.4 of this Agreement.
1.21. "Matsushita" shall mean Matsushita Electric Industrial Co., Ltd,
a Japan corporation, Matsushita Electronics Corporation, a Japan corporation,
and their Affiliates.
1.22. "Non-Acquired Party" shall mean the party to this Agreement that
is not the Acquired Party or an Affiliate of the Acquired Party following a
Change in Ownership.
1.23. "Non-Antifuse Programmable Logic Device" shall mean any
Programmable Logic Device that is not an Antifuse Programmable Logic Device.
1.24. "Non-Assertion Patent" shall mean (a) any patent (including any
utility patent, design patent, patent of importation, patent of addition,
certificate of addition, certificate or model of utility) granted by the
United States or any other country, (b) any reissue, continuation, parent,
division, extension, renewal, or continuation-in-part of any of the foregoing,
and (c) any counterpart anywhere in the world of any of the foregoing.
1.25. "Patent" shall mean (a) any patent (including any utility patent,
design patent, patent of importation, patent of addition, certificate of
addition, certificate or model of utility) the application for which had a first
effective filing date in any country on or before the Effective Date, (b) any
patent that may issue on any such application, (c) any reissue, continuation,
parent, division, extension, renewal, or continuation-in-part of any of the
foregoing, and (d) any counterpart anywhere in the world of any of the
foregoing.
1.26. "Person" shall be used in this Agreement as defined under Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended.
1.27. "Programmable Logic Device" shall mean any integrated circuit that
implements logic the operation of which is determined after the integrated
circuit has been manufactured.
1.28. "Programmable Switching Element" shall mean a switch controlled by
electrical voltage or electrical currents that is used to configure the logic
function of a Programmable Logic Device. Programmable Switching Elements shall
not include data registers or User Memories or switches controlled by lasers.
1.29. "QuickLogic" shall mean QuickLogic Corporation, a California
corporation.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
1.30. "QuickLogic Licensed Patents" shall all Patents (a) that
QuickLogic or any of its Affiliates now own or may hereafter during the term of
this Agreement own or (b) under which and to the extent that QuickLogic or any
of its Affiliates have acquired or may hereafter during the term of this
Agreement acquire the right to grant licenses without the payment of a royalty
or other consideration to a third party (excluding consideration paid to an
employee in connection with the assignment to QuickLogic of the employee's
rights in an invention that resulted from any work performed by the employee for
QuickLogic).
1.31. "Security Agreements" shall mean the security agreement of even
date herewith pursuant to which Actel has granted a security interest to
QuickLogic in the proceeds from the sale, assignment, or other transfer of the
Actel Licensed Patents to secure Actel's obligations under Section 6.4.4 of this
Agreement, and the security agreement of even date herewith pursuant to which
QuickLogic has granted a security interest to Actel in the proceeds from the
sale, assignment, or other transfer of the QuickLogic Licensed Patents to secure
QuickLogic's obligations under Sections 3 and 6.4.5 hereof.
1.32. "SRAM" shall mean static random access memory.
1.33. "SRAM Programmable Logic Device" shall mean a Programmable Logic
Device in which any of the Programmable Switching Elements is controlled by
SRAM.
1.34. "Termination Event" shall mean any of the following:
1.34.1. the filing by a party of a petition in Bankruptcy or
insolvency; or
1.34.2. any adjudication that a party is bankrupt or insolvent; or
1.34.3. the appointment of a receiver for all or substantially all
of the property of a party; or
1.34.4. the making by a party of any assignment or attempted
assignment for the benefit of creditors; or
1.34.5. the institution of any proceedings for the liquidation or
winding up of a party's business or for the termination of its corporate
charter; or
1.34.6. any assignment of this Agreement or any exercise of rights
under this Agreement by any successor or assign of a party, except in
accordance with Section 8.
1.35. "Total Voting Power" shall mean the total number of votes that
may be cast in the election of directors at a meeting of the shareholders of a
corporation if all Voting Securities are present and voted to the fullest extent
possible at such meeting.
1.36. "User Memory" shall mean random access memory (RAM), SRAM, read
only memory (ROM), or programmable read only memory (PROM), erasable
programmable read only memory (EPROM), electrically erasable programmable read
only memory (EEPROM), Flash, or variations thereof, used for storing data and
control bits during the logic operation of a Programmable Logic Device. The
circuitry of a Programmable Logic Device controlled by Programmable Switching
Elements and the circuitry of a Programmable Logic Device containing User
Memories are mutually exclusive.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
1.37. "Voting Securities" shall mean all securities of a corporation
entitled to vote generally in the election of directors.
2. LICENSES
2.1. Subject to Sections 2.3 and 6.4.2 hereof, QuickLogic hereby grants
to Actel a nonexclusive, royalty-free, worldwide license under the QuickLogic
Licensed Patents (a) to make, have made only for Actel, use, import, offer to
sell, sell, lease, distribute; and otherwise transfer Programmable Logic
Devices, and (b) to grant sublicenses to make, have made only for the
sublicensee, use, import, offer to sell, sell, lease, distribute, and otherwise
transfer Embedded Programmable Logic Devices.
2.2. Subject to the payment of the amounts set forth in Section 3
hereof and to Sections 2.3, 4.5, 6.4.2, and 6.4.3 hereof, Actel hereby grants to
QuickLogic a nonexclusive, royalty-free, worldwide license under the Actel
Licensed Patents (a) to make, have made only for QuickLogic, use, import, offer
to sell, sell, lease, distribute, and otherwise transfer Programmable Logic
Devices, but excluding all SRAM Programmable Logic Devices, (b) to grant
sublicenses to make, have made only for the sublicensee, use, import, offer to
sell, sell, lease, distribute, and otherwise transfer Embedded Programmable
Logic Devices, but excluding all Embedded SRAM Programmable Logic Devices, and
(c) to grant sublicenses to make, have made (but only for a sublicensee that is
a semiconductor manufacturer or foundry), and use Embedded SRAM Programmable
Logic Devices only for the Internal Use of the sublicensee.
2.3. The licenses granted in Sections 2.1 and 2.2 of this Agreement
shall not include any right in favor of a Licensee Party:
2.3.1. to grant any sublicense to any Person, including any
Affiliate of a Licensee Party other than a wholly-owned subsidiary,
except as expressly provided with respect to Embedded Programmable Logic
Devices, PROVIDED, HOWEVER, that any such sublicense may not be further
sublicensed and may not be assigned or otherwise transferred except in
connection with a Change in Ownership of the sublicensee; or
2.3.2. to offer to sell, sell, lease, distribute, or otherwise
transfer any product to any semiconductor manufacturer or foundry or
Affiliate thereof, except exclusively for the Internal Use of the
semiconductor manufacturer or foundry; PROVIDED, HOWEVER, that Actel may
sell or otherwise transfer products to Matsushita for resale by
Matsushita in accordance with the Distribution Agreement between
Matsushita and Actel dated as of June 29, 1995, and any renewal thereof;
or
2.3.3. to sell, lease, distribute, or otherwise transfer all or a
part of the Licensee Party's business or the assets comprising such
business, or transfer control of a subsidiary engaged in such business,
to the extent such part of the Licensee Party's business or such assets
or such subsidiary include the business of making and selling products
covered by any license granted to the Licensee Party in Sections 2.1 or
2.2 of this Agreement, as applicable, except as may be permitted by
Section 8; or
2.3.4. to make, have made, import, offer to sell, sell, lease,
distribute, or otherwise transfer any product that is pin interchangeable
in the final application of the product with a product then offered for
sale by the Licensor Party (excluding products having pinouts originating
with a third party that either (a) are not replicas of a pinout of
QuickLogic or Actel or GateField products or (b) reflect standards
promulgated by a standards committee sanctioned by
5
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
the IEEE, JEDEC, or an equivalent organization other than the United
States Department of Defense).
2.4 Nothing contained in this Agreement shall be construed as
conferring by implication, estoppel, or otherwise upon either party any license
or other right except the licenses and rights expressly ranted hereunder to that
party. Notwithstanding the foregoing, the Licensee Party and its customers shall
have the right to program the products covered by any license (or covenant not
to sue) granted under this Agreement to the Licensee Party.
2.5. Each party hereby accepts the licenses and rights granted to it by
a party under this Agreement subject to all of the terms and conditions of this
Agreement.
3. PAYMENTS
3.1. As consideration for the license granted to QuickLogic by Actel
under Section 2.2 of this Agreement, QuickLogic grants to Actel the rights set
forth in Section 2.1 of this Agreement and agrees to pay to Actel the sum of
[*]. [*] shall be due and payable on the Effective Date of this
Agreement, and (subject to Sections 3.2, 6.4.4, and 6.4.5 hereof) the balance
shall be due and payable in quarterly installments as follows:
<TABLE>
<S> <C>
3 months after Effective Date [*]
6 months after Effective Date [*]
9 months after Effective Date [*]
12 months after Effective Date [*]
15 months after Effective Date [*]
18 months after Effective Date [*]
21 months after Effective Date [*]
24 months after Effective Date [*]
27 months after Effective Date [*]
30 months after Effective Date [*]
33 months after Effective Date [*]
36 months after Effective Date [*]
</TABLE>
If any such payment is not made when due and is not cured within
fifteen (15) business days after written notice to QuickLogic specifying the
failure to pay, all subsequently due payments shall become immediately due and
payable.
3.2. In the event QuickLogic effects an initial public offering of its
Common Stock pursuant to a registration statement under the Securities Act of
1933, all subsequently due payments shall become immediately due and payable on
the tenth business day following the closing of such offering.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
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CONFIDENTIAL TREATMENT REQUESTED
4. NON-ASSERTION AGREEMENTS
4.1. QuickLogic agrees that QuickLogic and its Affiliates will not
assert during the term of this Agreement and thereafter, directly or indirectly,
any cause of action based, in whole or in part, upon the purported infringement
by Actel or its suppliers or customers, mediate or immediate, during the term of
this Agreement of any Non-Assertion Patent, whether granted by the United States
or another country to QuickLogic or its Affiliates or any third party, as a
result of the manufacture, use, importation, offer for sale, sale, lease,
distribution; or other transfer of (a) products first offered for sale by Actel
on or before the second anniversary of the Effective Date of this Agreement and
(b) future generations of such products reflecting the evolution of such
products in the ordinary course of business of QuickLogic's product lines as
they exist on the second anniversary of the Effective Date of this Agreement.
4.2. QuickLogic agrees that no purchaser or transferee of any
Non-Assertion Patent from QuickLogic or its Affiliate and no assignee of the
right to enforce any Non-Assertion Patent from QuickLogic or its Affiliate will
assert during the term of this Agreement or thereafter, directly or indirectly,
any cause of action based, in whole or in part, upon the purported infringement
by Actel or its suppliers or customers, mediate or immediate, during the term of
this Agreement of the Non-Assertion Patent sold, transferred, or assigned as a
result of the manufacture, use, importation, offer for sale, sale, lease,
distribution, or other transfer of (a) products first offered for sale by Actel
on or before the second anniversary of the Effective Date of this Agreement and
(b) future generations of such products reflecting the evolution in the ordinary
course of business of QuickLogic's product lines as they exist on the second
anniversary of the Effective Date of this Agreement.
4.3. Subject to Section. 4.5 hereof, Actel agrees that Actel and its
Affiliates will not assert during the term of this Agreement and thereafter,
directly or indirectly, any cause of action based, in whole or in part, upon the
purported infringement by QuickLogic or its suppliers or customers, mediate or
immediate during the term of this Agreement of any Non-Assertion Patent, whether
granted by the United States or another country Actel or its Affiliates or any
third party, as a result of the manufacture, use importation, offer for sale,
sale, lease, distribution, or other transfer of (a) products first offered for
sale by QuickLogic on or before the second anniversary of the Effective Date of
this Agreement and (b) future generations of such products reflecting the
evolution of such products in the ordinary course of business of Actel's product
lines as they exist on the second anniversary of the Effective Date of this
Agreement.
4.4. Subject to Section 4.5 hereof, Actel agrees that no purchaser or
transferee of any Non-Assertion Patent from Actel or its Affiliate and no
assignee of the right to enforce any Non-Assertion Patent from Actel or its
Affiliate will assert during the term of this Agreement or thereafter, directly
or indirectly, any cause of action based, in whole or in part, upon the
purported infringement by QuickLogic or its suppliers or customers, mediate or
immediate, during the term of this Agreement of the Non-Assertion Patent sold,
transferred, or assigned as a result of the manufacture, use, importation, offer
for sale, sale, lease, distribution, or other transfer of (a) products first
offered for sale by QuickLogic on or before the second anniversary of the
Effective Date of this Agreement and (b) future generations of such products
reflecting the evolution of such products in the ordinary course of business of
Actel's product lines as they exist on the second anniversary of the Effective
Date of this Agreement.
4.5. Notwithstanding anything in this Agreement to the contrary,
neither Actel nor its Affiliates shall be precluded or in any way restrained by
this Agreement from asserting against any Person, including QuickLogic and any
Acquiring Person, any claim of infringement of any Actel Licensed Patent or
Non-Assertion Patent as a result of the manufacture, use, importation, offer for
sale, sale, lease, distribution, or other transfer of (a) an SRAM Programmable
Logic Device prior to a Change in Ownership of QuickLogic, (b) a Non-Antifuse
Programmable Logic Device following a Change in
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CONFIDENTIAL TREATMENT REQUESTED
Ownership of QuickLogic, or (c)(i) flash products first offered for sale by
GateField on or before the second anniversary of the Effective Date of this
Agreement and future generations of such products reflecting the evolution of
such products in the ordinary course of business of GateField's product lines as
they exist on the second anniversary of the Effective Date of this Agreement or
(ii) "knockoffs" substantially similar to such products, in each case subject to
the rights of any sublicensee authorized under Sections 2.2(b) and (c) hereof.
5. REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS
5.1. Each Licensor Party represents and warrants that it has all right,
title, and interest in and to the Patents purported to be licensed by it to the
Licensee Party and all power and authority necessary to grant the licenses to
such Patents that are granted by the Licensor Party to the Licensee Party
hereunder.
5.2. Each Licensor Party represents and warrants that neither it nor
any of its Affiliates has the right or power to direct any third party to assert
against the Licensee Party any cause of action based upon the Licensee Party's
purported infringement of any patent owned or enforceable by such third party.
5.3. Nothing contained in this Agreement shall be construed as a
warranty or representation that the manufacture, sale, lease, use, or other
transfer of Programmable Logic Devices by either party or any component thereof
will be free from infringement of patents, trademarks, copyrights, mask work
rights, or other intellectual property or other rights of third parties or of
the Licensor Party, except to the extent of the rights expressly licensed
hereunder to the Licensee Party by the Licensor Party, or that the Licensee
Party will be able to manufacture or to sell or otherwise transfer any product
based upon the rights it receives hereunder from the Licensor Party. Except to
the extent, and only to the extent, expressly stated herein, neither party
makes any warranty as to the accuracy, sufficiency, or suitability of any
information contained in any Patent licensed hereunder. Each Licensee Party
assumes the risk of defects or inaccuracies in the Patent or other data or
information, if any, supplied by the Licensor Party. Neither party shall be
under any obligation by this Agreement to obtain any patent or, once having
obtained a patent, to maintain' that patent in force.
5.4. Each party acknowledges and agrees that the other party has made
no statement or representation as to the size of the market for the products
that may be made or sold utilizing the licenses granted or to be granted
hereunder or as to the amount of revenue or profits to be received by the party
obtaining such licenses. Each party acknowledges that, in entering into this
Agreement, it is relying entirely on its own estimate as to the market for the
products that may be made and sold utilizing the license granted and to be
granted hereunder.
5.5. Each party acknowledges and agrees that a Programmable Logic
Device containing SRAM is not and shall not be deemed to be an SRAM
Programmable Logic Device if all of the SRAM is User Memory; and a
Programmable Logic Device containing SRAM is and shall be deemed to be an
SRAM Programmable Logic Device only if one or more of the Programmable
Switching Elements of the Programmable Logic Device is controlled by SRAM.
6. TERM AND TERMINATION
6.1. The term of this Agreement shall commence on the Effective Date
and, subject to this Section 6 and to Section 8, shall expire when the last to
expire of the Patents licensed hereunder expires.
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<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
6.2. If either party shall fail to perform a Material Term of this
Agreement and such failure is not cured within sixty (60) days after written
notice to the defaulting party specifying the nature of the default, the
complaining party shall have the right at its option:
6.2.1. to terminate all rights and licenses granted by the
complaining party to the defaulting party under this Agreement by giving
written notice of such termination to the defaulting party, effective on
the sixtieth (60th) day after such termination notice is given if the
default has not then been cured; and/or
6.2.2. to seek any other remedies available at law or in equity as
a result of such failure.
6.3. Each party agrees that (a) this Agreement is personal to it; (b)
if it is the subject of a Termination Event described in Section 1.34.1 or
1.34.2 hereof, this Agreement shall automatically terminate; and (c) if it is
the subject of any other Termination Event, the other party shall have the right
to terminate this Agreement by giving written notice of termination to such
party, such termination to be effective on the tenth (10th) day after such
notice of termination under this Section 6.3 is given in accordance with this
Agreement. Upon termination of this Agreement under the provisions of this
Section 6.3, the rights and licenses granted to the party that was the subject
of the Termination Event shall terminate. The rights and licenses granted under
this Agreement to the other party shall survive termination in accordance with
the applicable terms hereof; PROVIDED, HOWEVER, all such licenses to a party
shall terminate no later than the last to expire of any Patents of the other
party that are licensed hereunder. Notwithstanding anything in this Agreement to
the contrary, the parties shall have the right to use, lease, sell, or otherwise
dispose of Programmable Logic Devices in the process of manufacture or in
finished goods inventory upon the termination of this Agreement.
6.4 In the event of a Change in Ownership, the rights and obligations
of the Acquired Party shall continue in full force and effect, and the Acquired
Party shall have the right to assign such rights (including the licenses and
non-assertion covenants) to the Acquiring Party, all subject to the following:
6.4.1. The Acquiring Party shall agree in writing to be fully
bound by all the terms and conditions of this Agreement.
6.4.2. All sublicenses granted by the Acquired Party to the
Acquiring Party and its Affiliates shall be limited to Internal Use.
6.4.3. If QuickLogic is the Acquired Party, the license under
Section 2.1(a) hereof shall be limited to Antifuse Programmable Logic
Devices following the Change in Ownership and any sublicense granted
under Section 2.1(b) hereof following the Change in Ownership shall be
limited to Internal Use.
6.4.4. Subject to Section 6.4.6 hereof, if Actel is the
Acquired Party, Actel shall pay to QuickLogic [*] if the Change in
Ownership occurs within one year after the Effective Date, [*] of the
Change in Ownership occurs one or more but less than two years after
the Effective Date, [*] if the Change in Ownership occurs two or more
but less than three years after the Effective Date, [*] if the Change
in Ownership occurs three or more but less than four years after the
Effective Date, and $0 if the Change in Ownership occurs four or more
years after the Effective Date (in each case, less the balance owed by
QuickLogic to Actel, if any, pursuant to Section 3 hereof).
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
9
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
6.4.5. Subject to Section 6.4.6 hereof, if QuickLogic is the
Acquired Party, QuickLogic shall pay to Actel [*] if the Change in
Ownership occurs within one year after the Effective Date, [*] of the
Change in Ownership occurs one or more but less than two years after
the Effective Date, [*] if the Change in Ownership occurs two or more
but less than three years after the Effective Date, [*] if the Change
in Ownership occurs three or more but less than four years after the
Effective Date, and $0 if the Change in Ownership occurs four or more
years after the Effective Date (in each case, plus the balance owed by
QuickLogic to Actel, if any, pursuant to Section 3 hereof).
6.4.6. The payments described in Sections 6.4.4 and 6.4.5 hereof
shall be due and payable ten (10) business days following the Change in
Ownership, PROVIDED, HOWEVER, that no payment shall be due on account of
a Change in Ownership if all Programmable Logic Devices made by or for
the Acquiring Party or its Affiliates following the Change in Ownership
are exclusively for the Internal Use of the Acquiring Party and its
Affiliates.
6.5. If, following a Change in Ownership or in anticipation thereof, an
Acquiring Party or its Affiliate asserts during the term of this Agreement or
thereafter, directly or indirectly, any cause of action based, in whole or in
part, upon the purported infringement by the Non-Acquired Party or its suppliers
or customers, mediate or immediate, during the term of this Agreement of any
Non-Assertion Patent as a result of the manufacture, use, importation, offer for
sale, sale, lease, distribution, or other transfer of (a) a Programmable Logic
Device, if Actel is the Non-Acquired Party, (b) a Programmable Logic Device
other than an SRAM Programmable Logic Device, if QuickLogic is the Non-Acquired
Party and QuickLogic had not previously been subject to a Change in Ownership,
or (c) an Antifuse Programmable Logic Device, if QuickLogic is the Non-Acquired
Party and QuickLogic had previously been subject to a Change in Ownership, then
the Non-Acquired Party may terminate all rights and licenses granted by it under
this Agreement by giving written notice of such termination to the Acquiring
Party, effective on the thirtieth (30th) day after such termination notice is
given if the claim is then still being asserted against the Non-Acquired Party,
PROVIDED, HOWEVER, that the Non-Acquired Party Shall have no right to terminate
the rights and licensed granted by it under this Agreement if, prior to the
assertion by the Acquiring Party or its Affiliate of a Non-Assertion Patent
referred to above (but following the Change in Ownership or in anticipation
thereof), the Non-Acquired Party had first asserted, directly or indirectly, a
cause of action based, in whole or in part, upon the purported infringement by
the Acquiring Party or its Affiliate of any patent as a result of the
manufacture, use, importation, offer for sale, sale, lease, distribution, or
other transfer of (i) an Antifuse Programmable Logic Device, if Actel is the
Non-Acquired Party and QuickLogic had previously been subject to a Change in
Ownership, (ii) a Programmable Logic Device other than an SRAM Programmable
Logic Device, if Actel is the Non- Acquired Party and QuickLogic had not
previously been subject to a Change in Ownership, or (iii) a Programmable Logic
Device, if QuickLogic is the Non-Acquired Party.
6.6. Neither suspension nor termination shall excuse the defaulting
party from any obligation incurred hereunder prior to the date of suspension or
termination.
6.7. The terms and conditions of Sections 1, 3, 5, 6, 7, 8, and 9 shall
survive the expiration, termination, or cancellation of this Agreement from any
cause.
7. ENFORCEMENT
7.1. The formation, effect, performance, and construction of this
Agreement shall be governed by the laws of the State of California of the United
States of America, except those pertaining to choice of laws, as though made by
two parties residing in California so as to be fully performed with the State of
California.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH RESPECT
TO THE OMITTED PORTIONS.
10
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
7.2. IN NO EVENT SHALL EITHER PARTY HAVE ANY LIABILITY TO THE OTHER FOR
INDIRECT, INCIDENTAL, OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO
LOST PROFITS, OR FOR SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES, AND EACH PARTY
COVENANTS NOT TO SEEK ANY SUCH DAMAGES WITH RESPECT TO ANY CLAIM ARISING OUT OF
OR RELATED TO THIS AGREEMENT.
8. ASSIGNMENT OF AGREEMENT
8.1. Except as expressly set forth in Section 6.4 above, neither this
Agreement nor the rights granted and obligations undertaken pursuant to this
Agreement may be assigned, sold, or otherwise transferred, in whole or in part,
PROVIDED, HOWEVER, that this Agreement may be assigned by either party in
connection with its reincorporation under the laws of a state other than
California.
8.2. For all purposes of Section 6, a reference to any license granted
by either party under this Agreement shall also be deemed to be a reference to
that party's covenants under Section 4 of this Agreement not to assert claims
under its patents.
8.3. The parties acknowledge and agree that this Agreement is an
executory contract governed by 11 U.S.C. Sections 365(c)(i), (e)(ii), and (n)
in the event of a bankruptcy case with regard to either party. As such, this
Agreement is not subject to assumption or assignment in the event of
bankruptcy without the consent of the non-debtor party.
9. MISCELLANEOUS
9.1. This Agreement, the Settlement Agreement and Mutual Release,
and the Security Agreements incorporate the entire understanding of the
parties with respect to the subject matter of this Agreement and merge all
prior agreements and understanding between the parties whether oral or
written, with respect to this subject matter. This Agreement shall be
interpreted law of California such as applied to a contract to be wholly
performed within the state of California.
9.2. Except as may be expressly set forth herein, nothing in this
Agreement shall be construed as obligating any party to manufacture or sell any
particular product hereunder or as restricting the right of either party herein
to engage in any development of, or to make, have made, use, lease, loan, sell,
or otherwise dispose of any product, other than the products with respect to
which licenses are herein granted.
9.3. All notices required permitted to be given hereunder shall be in
writing and shall be sent by facsimile, receipt to be confirmed by sender via
telephone call, or by registered or certified mail, postage prepaid, addressed
as follows:
If to QuickLogic: QuickLogic Corporation
1277 Orleans Drive
Sunnyvale, California 94089
Telecopier No.: 408-990-4040
Attention: President
11
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
If to Actel: Actel Corporation
955 East Arques Avenue
Sunnyvale, CA 94086
Telecopier No.: (408) 739-0706
Attention: President
Either party may change its address by a notice given to the other party in the
manner set forth above. Notices given as herein provided shall be construed to
have been given (a) on the day received if sent by facsimile or (b) five (5)
days after the sending thereof by registered or certified mail, unless the
receiving party proves that the notice was actually received at a later date.
9.4. The failure of any party hereunder to perform any obligation
otherwise due as a result of governmental action, laws, orders, regulations,
directions or requests, or as a result of events, such as war, acts of public
enemies, strikes or other labor disturbances, fires, floods, acts of God, or any
causes of like or different kind beyond the control of the parties is excused
for so long as said cause exists to the extent such failure is caused by such
lain, order, regulation, direction, request, or other event.
9.5. No failure or delay on the part of either party in the exercise of
any right or privilege hereunder shall operate as a waiver thereof or of the
exercise of any other right or privilege hereunder nor shall any single or
partial exercise of any such right or privilege preclude other or further
exercise thereof or of any other right or privilege.
9.6. Any title or caption included herein is for convenience only and
is not to be used in the interpretation of this Agreement.
9.7. Nothing contained herein or done pursuant to this Agreement shall
constitute the parties as entering upon a joint venture or partnership or shall
constitute either party hereto the agent of the other party for any purpose or
in any sense whatsoever.
9.8. This Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of which
together constitute one and the same Agreement.
9.9. Should any clause, sentence, or paragraph of this Agreement
judicially be declared to be invalid, unenforceable, or void, such decision
shall not invalidate or void the remainder of this Agreement, and the parties
hereby agree that the part or parts of this Agreement so held to be invalid,
unenforceable, or void shall be deemed to have been stricken, and the remainder
shall have the same force and effect as if such part or parts had never been
included herein.
12
<PAGE>
CONFIDENTIAL TREATMENT REQUESTED
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed in their respective corporate names.
<TABLE>
<CAPTION>
ACTEL CORPORATION QUICKLOGIC CORPORATION
<S> <C>
By: /s/ JOHN C. EAST By: /s/ E. THOMAS HART
-------------------------------- --------------------------------
Name: JOHN C. EAST Name: E. THOMAS HART
------------------------------ ------------------------------
Title: President & CEO Title: President & CEO
----------------------------- -----------------------------
Date: August 25, 1998 Date: 25 August 1998
------------------------------ ------------------------------
</TABLE>
13
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1 of our
report dated June 7, 1999, relating to the consolidated financial statements of
QuickLogic Corporation, which appears in such Registration Statement. We also
consent to the reference to us under the heading "Experts" in such Registration
Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
August 9, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C> <C>
<C>
<PERIOD-TYPE> YEAR YEAR YEAR 6-MOS
6-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 DEC-31-1998
DEC-31-1999
<PERIOD-END> DEC-31-1996 DEC-31-1997 DEC-31-1998 JUN-30-1998
JUN-30-1999
<CASH> 0 7331 7595 0
8185
<SECURITIES> 0 0 0 0
0
<RECEIVABLES> 0 5520 5303 0
6845
<ALLOWANCES> 0 (2628) (3272) 0
(2340)
<INVENTORY> 0 5869 2877 0
2613
<CURRENT-ASSETS> 0 16378 13233 0
16201
<PP&E> 0 6637 7117 0
8148
<DEPRECIATION> 0 (3107) (4225) 0
(4986)
<TOTAL-ASSETS> 0 19951 16168 0
19406
<CURRENT-LIABILITIES> 0 13983 16552 0
18943
<BONDS> 0 0 0 0
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0 0 0 0
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288
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<SALES> 23758 28460 30007 14078
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<TOTAL-REVENUES> 23758 28460 30007 14078
18425
<CGS> 11158 16855 14303 6803
7958
<TOTAL-COSTS> 27655 62380 29965 14383
17525
<OTHER-EXPENSES> 0 0 0 0
0
<LOSS-PROVISION> 0 0 0 0
0
<INTEREST-EXPENSE> (60) (162) (161) (86)
(49)
<INCOME-PRETAX> (3597) (33648) 245 (189)
987
<INCOME-TAX> 0 0 0 0
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<INCOME-CONTINUING> 0 0 0 0
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<DISCONTINUED> 0 0 0 0
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<EXTRAORDINARY> 0 0 0 0
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<CHANGES> 0 0 0 0
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<NET-INCOME> (3597) (33648) 245 (189)
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<EPS-BASIC> (4.66) (10.41) 0.06 (0.05)
0.23
<EPS-DILUTED> (4.66) (10.41) 0.02 (0.05)
0.07
</TABLE>
