<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 20, 2000
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
QUICKLOGIC CORPORATION
(Exact name of Registrant as specified in its charter)
<TABLE>
<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.
MARK D. BEARIAULT, ESQ. JEFF BROWN, ESQ.
ROBERT DAWSON, ESQ. ORRICK, HERRINGTON & SUTCLIFFE LLP
JAMIE W. STEWART, ESQ. 1020 MARSH ROAD
WILSON SONSINI GOODRICH & ROSATI MENLO PARK, CALIFORNIA 94025
PROFESSIONAL CORPORATION (650) 614-7400
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(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>
PROPOSED MAXIMUM
AGGREGATE
OFFERING PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO PRICE PER AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock $0.001 par value............. 5,253,267 shares $32.00 $168,104,544 $44,380
</TABLE>
(1) Includes 685,208 shares which the Underwriters have the option to purchase
to cover over-allotments, if any.
(2) The price is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) promulgated under the Securities
Act of 1933, as amended, and represents the average of the high and low
market prices of a share of the Company's Common Stock on March 15, 2000 as
reported on The Nasdaq Stock Market's National Market.
--------------------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to such Section 8(a)
may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED MARCH 20, 2000
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
[LOGO]
4,568,059 SHARES
COMMON STOCK
We are offering 1,500,000 shares of our common stock and the selling
stockholders are selling 3,068,059 shares of our common stock. We will not
receive any of the proceeds from shares of common stock sold by the selling
stockholders. Our common stock is listed on The Nasdaq Stock Market's National
Market under the symbol "QUIK". On March 15, 2000, the last reported sale price
of the common stock was $30.25 per share.
------------------------
INVESTING IN OUR COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.
---------------------
<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 OF THESE SECURITIES, OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
QuickLogic has granted the underwriters a 30-day option to purchase up to an
additional 685,208 shares of common stock to cover over-allotments. FleetBoston
Robertson Stephens Inc. expects to deliver the shares of common stock to
purchasers on , 2000.
------------------------
ROBERTSON STEPHENS
BEAR, STEARNS & CO. INC.
J.P. MORGAN & CO.
WIT SOUNDVIEW
THE DATE OF THIS PROSPECTUS IS , 2000.
<PAGE>
EDGAR
ARTWORK DESCRIPTIONS
------------------------
INSIDE FRONT COVER
[Images of QuickLogic products]
[QuickLogic logo]
BEYOND PROGRAMMABLE LOGIC
QuickLogic's user-configurable FPGA and ESP semiconductors are used to implement
logic in complex, high-performance electronic systems in data and
telecommunications, video, graphics, and imaging, instrumentation and test,
computing and military applications.
Our technology enables the manufacturers of these systems to get to market
quickly with products that have the best possible features and performance.
EDGAR GRAPHIC DESCRIPTION
INSIDE BACK COVER
[Image of QuickLogic ESP device, projecting to a circuit board]
QUICKLOGIC--PROGRAMMABLE LOGIC WITH THE POWER TO REPLACE MANY DEVICES
QuickLogic's ESP devices integrate standard functions along with high
performance embedded memory and programmable logic. This "system-on-a-chip"
approach allows a single ESP device to replace the function of many different
devices--reducing the cost and development time of a system and increasing its
performance, functionality and reliability.
[QUICKLOGIC LOGO]
EMBEDDED STANDARDS PRODUCTS....A GENERATION AHEAD
WWW.QUICKLOGIC.COM
EDGAR GRAPHIC DESCRIPTION
OBC
[QuickLogic LOGO]
<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.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----------
<S> <C>
Prospectus Summary......................................................................................... 4
Risk Factors............................................................................................... 7
Cautionary Statement Regarding Forward-Looking Statements.................................................. 17
Use of Proceeds............................................................................................ 17
Dividend Policy............................................................................................ 17
Price Range of Common Stock................................................................................ 17
Capitalization............................................................................................. 18
Selected Consolidated Financial Data....................................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of Operations...................... 20
Business................................................................................................... 27
Management................................................................................................. 41
Certain Transactions....................................................................................... 50
Principal and Selling Stockholders......................................................................... 51
Description of Capital Stock............................................................................... 54
Shares Eligible for Future Sale............................................................................ 57
Underwriting............................................................................................... 58
Legal Matters.............................................................................................. 60
Experts.................................................................................................... 60
Where You Can Find Additional Information.................................................................. 60
Index to Consolidated 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.
3
<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 NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION.
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 inSearch Research, the projected total market size for
high-complexity programmable logic devices in 2000 is approximately
$3.0 billion, of which FPGAs are estimated to account for $1.8 billion. Our FPGA
sales totaled approximately $39.8 million in 1999.
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. We have announced a new product family, QuickDSP, which will
be introduced in the second quarter of 2000. According to inSearch Research, the
total ESP market size in 1999 was $8.0 million, and is projected to increase to
$32.0 million in 2000. Our ESP sales totaled approximately $2.5 million in 1999.
Our objective is to be the leading provider of high-speed, flexible,
cost-effective FPGAs and ESPs. We believe we can achieve this objective by
offering systems manufacturers the ability to accelerate
4
<PAGE>
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. We reincorporated into the State of
Delaware in October 1999. 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 does
not constitute a part of this prospectus.
------------------------
THE OFFERING
<TABLE>
<S> <C>
Common stock offered by
QuickLogic.............................. 1,500,000 shares
Common stock offered by the selling
stockholders............................ 3,068,059 shares
Common stock to be outstanding after the
offering................................ 19,608,357 shares
Use of proceeds........................... For general corporate purposes, including working
capital and capital expenditures. See "Use of Proceeds."
Nasdaq National Market symbol............. QUIK
</TABLE>
The table set forth above is based on shares of common stock outstanding as
of March 10, 2000. This table excludes:
- 2,769,476 shares issuable upon exercise of outstanding options under our
1989 stock option plan at a weighted average exercise price of $4.14 per
share;
- 533,333 shares issuable upon exercise of outstanding options under our
1999 stock option plan at a weighted average exercise price of $13.62 per
share;
- 8,678,496 shares reserved for issuance under our stock option plans; and
- 2,000,000 shares reserved for issuance under our 1999 employee stock
purchase plan.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $ 28,460 $30,007 $39,785
Gross profit................................................ 11,605 15,704 22,682
Contract termination and legal............................ 28,309 -- --
Net operating income (loss)................................. (33,920) 42 2,709
Net income (loss)........................................... (33,648) 245 3,161
Net income (loss) per share:
Basic..................................................... $ (10.41) $ 0.06 $ 0.42
Diluted................................................... $ (10.41) $ 0.02 $ 0.19
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1999
----------------------
ACTUAL AS ADJUSTED
-------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................... $34,558 $76,603
Working capital............................................. 32,568 74,613
Total assets................................................ 50,482 92,527
Long-term obligations....................................... 128 128
Stockholders' equity........................................ 37,005 79,050
</TABLE>
See note 3 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 1,500,000 shares of common stock offered by us
at an assumed public offering price of $30.25 per share, after deducting the
underwriting discount and estimated offering expenses. See "Use of Proceeds" and
"Capitalization."
6
<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 that relate to
our internal operations include:
- the need for continual, rapid new product introductions;
- changes in our product mix; and
- our inability to adjust our fixed costs in the face of any declines in
sales.
Factors that could cause our operating results to fluctuate that depend upon
our suppliers and customers include:
- the timing of significant product orders, order cancellations and
reschedulings;
- the availability of production capacity and fluctuations in the
manufacturing yields at the facilities that manufacture our devices; and
- the cost of raw materials and manufacturing services from our suppliers.
Factors that could cause our operating results to fluctuate that are
industry risks include:
- intense competitive pricing pressures;
- introductions of or enhancements to our competitors' products; and
- the cyclical nature of the semiconductor industry.
Our day-to-day business decisions are made with these factors in mind.
Although certain of these factors are out of our immediate control, unless we
can anticipate, and be prepared with contingency plans that respond to these
factors, we will be unsuccessful in carrying out our business plan.
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 December 31, 1999 was $58.0 million. We had net income
of $3.2 million in 1999. 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.
7
<PAGE>
IF WE FAIL TO SUCCESSFULLY DEVELOP, INTRODUCE AND SELL NEW PRODUCTS, WE MAY BE
UNABLE TO COMPETE EFFECTIVELY IN THE FUTURE
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 very small. 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
- 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 1999,
ESPs accounted for approximately 6.3% 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 WE
MAY BE UNABLE TO GENERATE SIGNIFICANT REVENUE AS A RESULT OF THESE EFFORTS
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.
Typically, this delay is one year or more. 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.
8
<PAGE>
OUR CUSTOMERS MAY CANCEL OR CHANGE THEIR PRODUCT PLANS AFTER WE HAVE EXPENDED
SUBSTANTIAL TIME AND RESOURCES IN THE DESIGN OF THEIR 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.
WE WILL BE UNABLE TO COMPETE EFFECTIVELY IF WE FAIL TO ANTICIPATE PRODUCT
OPPORTUNITIES BASED UPON EMERGING TECHNOLOGIES AND STANDARDS AND FAIL TO
DEVELOP PRODUCTS THAT INCORPORATE THESE TECHNOLOGIES AND STANDARDS
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 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 MAY ENCOUNTER PERIODS OF INDUSTRY-WIDE SEMICONDUCTOR OVERSUPPLY, RESULTING IN
PRICING PRESSURE AND UNDERUTILIZATION OF MANUFACTURING CAPACITY, AS WELL AS
UNDERSUPPLY, RESULTING IN A RISK THAT WE COULD BE UNABLE TO FULFILL OUR
CUSTOMERS' REQUIREMENTS
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. Our operating results may be
materially harmed by industry-wide semiconductor oversupply, which could result
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.
9
<PAGE>
NONE OF OUR PRODUCTS IS CURRENTLY MANUFACTURED BY MORE THAN ONE MANUFACTURER,
WHICH EXPOSES US TO THE RISK OF HAVING TO IDENTIFY AND QUALIFY ONE OR MORE
SUBSTITUTE SUPPLIERS
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. We have contractual arrangements with our two
foundry manufacturers of semiconductors, Taiwan Semiconductor Manufacturing
Company and Cypress Semiconductor Corporation, to provide us with specified
manufacturing capacity. Our assembly and test work is done on a purchase order
basis. If we are unable to secure adequate manufacturing capacity from TSMC,
Cypress 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. Our manufacturers may experience unanticipated events, like the
September 1999 Taiwan earthquake, that could inhibit their abilities to provide
us with adequate manufacturing capacity on a timely basis, or at all.
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.
IF WE FAIL TO ADEQUATELY FORECAST DEMAND FOR OUR PRODUCTS, WE MAY INCUR PRODUCT
SHORTAGES OR EXCESS PRODUCT INVENTORY
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 under such
agreements. Obtaining additional supply in the face of product shortages may be
costly or not possible, especially in the short term. Our failure to adequately
forecast demand for our products would materially harm our business.
FLUCTUATIONS IN OUR PRODUCT YIELDS, ESPECIALLY OUR NEW PRODUCTS, MAY INCREASE
THE COSTS OF OUR MANUFACTURING PROCESS
Difficulties in the complex semiconductor manufacturing process can render a
substantial percentage of semiconductor wafers nonfunctional. We have, in the
past, experienced manufacturing runs that have contained substantially reduced
or no functioning devices. Varying degrees of these yield reductions occur
frequently in our manufacturing process. These yield reductions, which can occur
without warning, may result in substantially higher manufacturing costs and
inventory shortages to us. 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.
10
<PAGE>
WE MAY BE UNABLE TO GROW OUR BUSINESS IF THE MARKETS IN WHICH OUR CUSTOMERS SELL
THEIR PRODUCTS DO NOT GROW
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.
IN ORDER TO REMAIN PROFITABLE, WE WILL NEED TO OFFSET THE GENERAL PATTERN OF
DECLINES AND FLUCTUATIONS IN THE PRICES OF OUR PRODUCTS
The average selling prices of our products historically have declined during
the products' lives by, on average, approximately 7% per year, 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
THEY MAY DISCONTINUE SALE OF OUR PRODUCTS, FAIL TO GIVE OUR PRODUCTS PRIORITY
OR BE UNABLE TO SUCCESSFULLY MARKET, SELL AND SUPPORT OUR PRODUCTS
We employ independent, third-party distributors to market and sell a
significant portion of our products. During 1999, approximately 80% of our sales
were made through our distributors. We rely on four principal distributors to
market and sell a 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.
11
<PAGE>
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.
CUSTOMERS MAY CANCEL OR DEFER SIGNIFICANT PURCHASE ORDERS OR OUR DISTRIBUTORS
MAY RETURN OUR PRODUCTS, WHICH WOULD CAUSE OUR INVENTORY LEVELS TO INCREASE
AND OUR REVENUES TO DECLINE
We sell our products on a purchase order basis through our distributors and
direct sales channels, and our distributors or customers may cancel purchase
orders at any time with little or no penalty. In addition, our distributor
agreements generally permit our distributors to return unprogrammed products to
us. Contractually, our distributors are permitted to return up to 10%, by value,
of the products they purchase from us every six months. In early 1998, for
example, a distributor cancelled a significant purchase order as a result of a
customer switching from a product we supply to a competitor's product. The
distributor also returned a significant amount of inventory of the product to
us, which took approximately 18 months for us to resell. 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.
MANY SYSTEMS MANUFACTURERS MAY BE UNWILLING TO SWITCH TO OUR PRODUCTS BECAUSE OF
THEIR FAMILIARITY WITH THE PRODUCTS OFFERED BY OUR DIRECT COMPETITORS SUCH AS
XILINX AND ALTERA, WHICH DOMINATE THE PROGRAMMABLE LOGIC MARKET
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.
12
<PAGE>
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.
WE MAY BE UNABLE TO SUCCESSFULLY MANAGE OUR GROWTH IF WE FAIL TO COMPETE
EFFECTIVELY WITH OTHERS TO ATTRACT AND RETAIN KEY PERSONNEL
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
18 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.
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. In September 1999, we
received an offer to license a patent related to field programmable gate array
architecture. We have not yet determined whether this license would be necessary
or useful, or whether a license would be obtainable at a reasonable price.
Offers such as these may lead to litigation if we reject the opportunity to
obtain the license. 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 the September 1999 letter or other similar matters
result in litigation that we lose, a court could order us to pay substantial
damages and/or royalties, and prohibit us from making, using, selling or
importing 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.
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
13
<PAGE>
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.
PROBLEMS ASSOCIATED WITH INTERNATIONAL BUSINESS OPERATIONS COULD AFFECT OUR
ABILITY TO MANUFACTURE AND SELL OUR PRODUCTS
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.
Sales to customers located outside the United States accounted for 43%, 47%
and 48% of our total sales in 1997, 1998 and 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 U.S. dollars. As a result, any increase in the value of the U.S.
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
14
<PAGE>
of our products in that foreign country may decline. To the extent any such
risks materialize, our business would be materially harmed.
OUR PRINCIPAL STOCKHOLDERS HAVE SIGNIFICANT VOTING POWER AND MAY VOTE FOR
ACTIONS THAT MAY NOT BE IN THE BEST INTERESTS OF OUR STOCKHOLDERS
After this offering, our officers, directors and principal stockholders will
together control approximately 23% of our outstanding common stock. As a result,
these stockholders, if they act together, will be able to significantly
influence 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
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 provides that 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 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 19,608,357 shares of
common stock, based upon shares outstanding as of March 15, 2000 and assuming no
exercise of outstanding options after March 10, 2000. Of these shares,
approximately 12,167,050 shares, including the 4,568,059 shares sold in this
offering, will be
15
<PAGE>
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>
NUMBER OF
DATE OF AVAILABILITY FOR SALE SHARES
- ----------------------------- ---------
<S> <C>
The date of this prospectus................................. 0
April 12, 2000.............................................. 1,047,657
90 days after the date of this prospectus................... 6,393,650
</TABLE>
The above table assumes the effectiveness of certain lock-up arrangements
with the underwriters, both in connection with this offering and with our
initial public offering, 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 90th 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 90 days after the offering without
prior notice by the underwriters.
Following the closing of this offering, the holders of an aggregate of
5,957,432 shares of our common stock will 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 MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY FAIL TO USE SUCH FUNDS EFFECTIVELY TO ACHIEVE OUR OTHER
BUSINESS GOALS
We currently have no specific plans for using the proceeds of this offering.
As a consequence, our management will have broad discretion to allocate a large
percentage of the proceeds to uses which the stockholders may not deem desirable
or to uses that fail to achieve our business goals effectively. See "Use of
Proceeds."
16
<PAGE>
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.
USE OF PROCEEDS
The net proceeds to us from the sale of the 1,500,000 shares of common stock
offered by us are estimated to be $42.0 million, or approximately $61.7 million
if the underwriters' over-allotment option is exercised in full, at an assumed
public offering price of $30.25 per share, after deducting underwriting
discounts and commissions and the estimated offering expenses. We will not
receive any proceeds from the sale of shares by the selling stockholders.
We intend to use the net proceeds of this offering primarily for general
corporate purposes including working capital and sales and marketing efforts. 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.
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.
PRICE RANGE OF COMMON STOCK
Our Common Stock began trading on The Nasdaq Stock Market's National Market
under the symbol "QUIK" effective October 15, 1999. Prior to that date, there
was no public market for our Common Stock. The following table sets forth for
the periods indicated the high and low closing prices for the Common Stock, as
reported on The Nasdaq Stock Market's National Market:
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
FISCAL YEAR ENDING DECEMBER 31, 1999
Fourth Quarter (from October 15, 1999).................. $19.563 $12.938
FISCAL YEAR ENDING DECEMBER 31, 2000
First Quarter (through March 15, 2000).................. $37.375 $13.750
</TABLE>
The last reported sale price for our common stock on The Nasdaq Stock
Market's National Market was $30.25 per share on March 15, 2000. As of March 15,
2000, there were approximately 310 holders of record of our common stock.
17
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization as of December 31,
1999. It also sets forth our capitalization on an as adjusted basis for the sale
of 1,500,000 shares of common stock by us at an assumed public offering price of
$30.25 per share, less underwriting discounts and commissions and estimated
offering expenses.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------
ACTUAL AS ADJUSTED
---------- -------------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C>
Long-term obligations.................................. $ 128 $ 128
-------- --------
Stockholders' equity:
Preferred stock, $0.001 par value; 10,000,000 shares
authorized; no shares issued and outstanding,
actual
and as adjusted.................................... -- --
Common stock, $0.001 par value; 100,000,000 shares
authorized; 18,102,000 and 19,602,000 issued and
outstanding, actual and as adjusted,
respectively....................................... 18 20
Additional paid-in capital............................. 96,599 138,642
Stockholder note receivable............................ (121) (121)
Deferred compensation.................................. (1,480) (1,480)
Accumulated deficit.................................... (58,011) (58,011)
-------- --------
Total stockholders' equity........................... 37,005 79,050
-------- --------
Total capitalization............................... $ 37,133 $ 79,178
======== ========
</TABLE>
The table set forth above is based on shares of common stock outstanding as
of December 31, 1999. This table excludes:
- 2,833,698 shares issuable upon exercise of outstanding options under our
1989 stock option plan at a weighted average exercise price of $4.11 per
share;
- 530,833 shares issuable upon exercise of outstanding options under our
1999 stock option plan at a weighted average exercise price of $13.63 per
share;
- 9,293,339 shares reserved for issuance under our stock option plans; and
- 2,000,000 shares reserved for issuance under our 1999 employee stock
purchase plan.
See "Management--Employee Benefit Plans" and "Description of Capital Stock."
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data as of December 31, 1998
and 1999 and for the years ended December 31, 1997 through 1999, 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, 1995, 1996 and 1997, and for the years ended
December 31, 1995 and 1996 were derived from our audited consolidated financial
statements, which do not appear in this prospectus. 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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue..................................................... $15,148 $23,758 $ 28,460 $30,007 $39,785
Cost of revenue............................................. 7,739 11,158 16,855 14,303 17,103
------- ------- -------- ------- -------
Gross profit................................................ 7,409 12,600 11,605 15,704 22,682
Operating expenses:
Research and development.................................. 3,599 4,642 6,235 6,294 7,355
Selling, general and administrative....................... 5,770 7,730 10,981 9,368 12,618
Contract termination and legal(1)......................... 2,700 4,125 28,309 -- --
------- ------- -------- ------- -------
Net operating income (loss)............................. (4,660) (3,897) (33,920) 42 2,709
Interest expense............................................ (200) (60) (162) (161) (97)
Interest income and other, net.............................. 153 360 434 364 549
------- ------- -------- ------- -------
Net income (loss)........................................... $(4,707) $(3,597) $(33,648) $ 245 3,161
======= ======= ======== ======= =======
Net income (loss) per share:
Basic..................................................... $ (7.59) $ (4.66) $ (10.41) $ 0.06 $ 0.42
======= ======= ======== ======= =======
Diluted................................................... $ (7.59) $ (4.66) $ (10.41) $ 0.02 $ 0.19
======= ======= ======== ======= =======
Weighted average shares:
Basic..................................................... 620 772 3,232 4,231 7,615
Diluted................................................... 620 772 3,232 14,645 16,400
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 3,856 $10,336 $ 7,331 $ 7,595 $34,558
Working capital (deficit)................................... 7,068 10,650 2,395 (3,319) 32,568
Total assets................................................ 12,199 22,577 19,951 16,168 50,482
Long-term obligations(2).................................... 137 602 7,724 591 128
Total stockholders' equity (deficit)........................ 7,149 11,799 (1,756) (975) 37,005
</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, this obligation is
classified as a current liability. We paid all of our remaining obligations
under the settlement on November 3, 1999. See notes 5 and 12 of notes to
consolidated financial statements.
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<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, in 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 6% of our
total revenue in 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, unprogrammed products. 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. As many as half of our products are programmed by us and are not
returnable by these point-of-sale distributors. We recognize revenue on these
products at the time of shipment. 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
59%, 21% and 20% in 1999, respectively. During the fourth quarter of 1999, we
completed the transition of our remaining foreign distributors to point-of-sale
distributors.
Four distributors accounted for 27%, 10%, 10% and 6% of sales, respectively,
in 1998 and the same four distributors accounted for approximately 24%, 11%, 10%
and 6% of sales, respectively, in 1999. We believe that no other distributor or
direct customer accounted for more than 5% of sales in 1998 or 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 43%, 47% and 48% of our total sales for 1997,
1998 and 1999, respectively. 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 1997, we recorded an accrual for legal and settlement fees of
$5.3 million, associated with the settlement of patent litigation with Actel
Corporation in 1998. We have made quarterly payments to Actel since the
settlement date. We paid our remaining obligation under the settlement on
November 3, 1999.
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>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0%
Cost of revenue............................................. 59.2% 47.7% 43.0%
------ ----- -----
Gross profit................................................ 40.8% 52.3% 57.0%
Operating Expenses:
Research and development.................................. 21.9% 21.0% 18.5%
Selling, general and administrative....................... 38.6% 31.2% 31.7%
Contract termination and legal............................ 99.5% -- --
------ ----- -----
Net operating income (loss)................................. (119.2)% 0.1% 6.8%
Interest expense............................................ (0.6)% (0.5)% (0.2)%
Interest income and other, net.............................. 1.6% 1.2% 1.4%
------ ----- -----
Net income (loss)........................................... (118.2)% 0.8% 8.0%
====== ===== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
REVENUE. Our revenue for 1997, 1998 and 1999 was $28.5 million,
$30.0 million and $39.8 million, respectively, representing growth of 5.4% from
1997 to 1998 and 32.6% from 1998 to 1999. The 1998 revenue growth, as compared
with 1997, 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
21
<PAGE>
sales of our mature pASIC 1 products. In 1998, our pASIC 2 and pASIC 3 revenues
together increased by approximately $3.8 million, while our pASIC 1 and other
revenue declined by approximately $1.7 million and $0.6 million, respectively.
The majority of the 1999 increase in revenue, as compared with 1998, was due to
growth in sales of our pASIC 3 products, the third generation of our FPGAs. Our
pASIC 3 revenue increased in 1999 by approximately $4.6 million. In 1999, our
pASIC 1 and pASIC 2 revenues together increased by approximately $3.0 million
and revenue from our QuickRAM products, introduced in September 1998, increased
by approximately $2.4 million. In aggregate, unit sales increased in both 1998
and 1999. The 1998 increase was partially offset by declining average selling
prices of our pASIC 1 and pASIC 2 products. The 1999 increase was the result of
higher unit sales and slightly higher average selling prices.
GROSS PROFIT. Gross profit was $11.6 million, $15.7 million and
$22.7 million in 1997, 1998 and 1999, respectively, which was 40.8%, 52.3% and
57.0% of revenue for those periods. The increase in gross profit in 1998, as
compared with 1997, 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. The
increase in 1999, as compared with 1998, was primarily due to the continued
growth in sales and the introduction of higher-margin QuickRAM products. The
1999 increase was partially offset by a slight decrease in the average selling
price of the older pASIC 1 and pASIC 2 product families.
RESEARCH AND DEVELOPMENT EXPENSE. Research and development expense was
$6.2 million, $6.3 million, and $7.4 million in 1997, 1998 and 1999,
respectively, which was 21.9%, 21.0% and 18.5% of revenue for those periods. The
increase in research and development spending in 1999, as compared with 1998,
was primarily due to an increase in the number of employees involved in research
and development as we accelerated the introduction of new products, particularly
our first ESPs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling, general and
administrative expense was $11.0 million, $9.4 million and $12.6 million in
1997, 1998 and 1999, respectively, which was 38.6%, 31.2% and 31.7% of revenue
for those periods The decrease in selling, general and administrative expenses
in 1998, as compared with 1997, was attributable to reduced personnel costs due
to temporary vacancies in senior management positions. The increase in 1999, as
compared with 1998, was primarily due to increased personnel costs.
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 $5.3 million in 1997. 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 $1.9 million, $204,000
and $908,000 in 1997, 1998 and 1999, 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 $625,000, $426,000 and $512,000 in 1997, 1998 and 1999,
respectively. The amortization of deferred compensation is recorded as research
and development and selling, general and administrative expenses, depending on
the related employees' activities.
INTEREST AND OTHER INCOME, NET. Interest and other income, net of expense,
was $272,000, $203,000 and $452,000 in 1997, 1998 and 1999, respectively.
Interest and other income decreased in 1998 as interest income on increased cash
balances was offset by interest expense incurred as a result of new equipment
financing arrangements. The increase in 1999 interest income was due mainly to
our investment of proceeds from the October 1999 initial public offering
22
<PAGE>
PROVISION FOR INCOME TAXES
No provision for income taxes was recorded for the year ended December 31,
1997 as the Company incurred an operating loss. No provision for income taxes
was recorded for the years ended December 31, 1998 and 1999, as we were able to
utilize a portion of our state and federal net operating loss carryforwards and
other tax attributes. At December 31, 1999, we had net operating loss
carryforwards for federal and state tax purposes of approximately $42.0 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 2000 and
will continue to expire through 2017.
QUARTERLY RESULTS OF OPERATIONS
The following tables contain unaudited statement of operations data for our
eight 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, MARCH 31, JUNE 30, SEPT. 30, DEC. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- --------- -------- --------- -------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
Revenue................................ $7,751 $6,327 $7,883 $8,046 $8,597 $9,828 $10,278 $11,082
Cost of revenue........................ 3,638 3,165 3,825 3,675 3,722 4,236 4,378 4,767
------ ------ ------ ------ ------ ------ ------- -------
Gross profit........................... 4,113 3,162 4,058 4,371 4,875 5,592 5,900 6,315
Operating expenses:
Research and development............. 1,394 1,538 1,586 1,776 1,780 1,787 1,849 1,939
Selling, general and
administrative..................... 2,391 2,257 2,302 2,418 2,856 3,144 3,222 3,396
------ ------ ------ ------ ------ ------ ------- -------
Net operating income (loss)............ 328 (633) 170 177 239 661 829 980
Interest expense....................... (44) (42) (46) (29) (26) (23) (27) (21)
Interest income and other, net......... 134 68 83 79 69 67 48 365
------ ------ ------ ------ ------ ------ ------- -------
Net income (loss)...................... $ 418 $ (607) $ 207 $ 227 $ 282 $ 705 $ 850 $ 1,324
====== ====== ====== ====== ====== ====== ======= =======
AS A PERCENTAGE OF REVENUE
Revenue................................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue........................ 46.9 50.0 48.5 45.7 43.3 43.1 42.6 43.0
------ ------ ------ ------ ------ ------ ------- -------
Gross profit........................... 53.1 50.0 51.5 54.3 56.7 56.9 57.4 57.0
Operating expenses:
Research and development............. 18.0 24.3 20.1 22.1 20.7 18.2 18.0 17.5
Selling, general and
administrative..................... 30.8 35.7 29.2 30.0 33.2 32.0 31.3 30.6
------ ------ ------ ------ ------ ------ ------- -------
Net operating income (loss)............ 4.3 (10.0) 2.2 2.2 2.8 6.7 8.1 8.9
Interest expense....................... (0.6) (0.7) (0.6) (0.4) (0.3) (0.2) (0.3) (0.2)
Interest income and other, net......... 1.7 1.1 1.0 1.0 0.8 0.7 0.5 3.3
------ ------ ------ ------ ------ ------ ------- -------
Net income (loss)...................... 5.4% (9.6)% 2.6% 2.8% 3.3% 7.2% 8.3% 12.0%
====== ====== ====== ====== ====== ====== ======= =======
</TABLE>
Over the eight quarters presented, our quarterly revenue grew from
$7.8 million to $11.1 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.
23
<PAGE>
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 57.0% in the quarter ended
December 31, 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 eight quarters, research and development expenses increased
from $1.4 million to $1.9 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 19.9% of revenues. Selling, general and administrative
expenses over this period have fluctuated between $2.4 million and
$3.4 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 six 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 loss in 1997 primarily through the issuance of
common stock and the incurrence of debt to finance capital equipment purchases.
We have been profitable since the third quarter of 1998. On October 15, 1999, we
completed an initial public offering of our common stock in which we sold a
total of 3,770,635 shares at $10.00 per share for total proceeds of
$33.9 million, net of underwriting discounts, commissions and issuance costs. At
December 31, 1999, we had $34.6 million in cash, an increase of $27.0 million
from cash held at December 31, 1998. This increase was due primarily to money
received as part of our initial public offering. As of December 31, 1999, we had
an accumulated deficit of $58.0 million.
We have an equipment financing line with a commercial bank. At December 31,
1999, we had obligations of $561,000 outstanding under this equipment line with
no remaining available balance. The outstanding obligations under the equipment
line are due over the next one to three years. The interest rate on these
borrowings is at the bank's prime interest rate plus 0.25%.
Net cash provided by (used for) operating activities was $(1.4) million,
$2.3 million and $(3.2) million in 1997, 1998 and 1999, respectively. The
decrease in cash in 1997 was primarily attributable to increases in working
capital, particularly accounts receivable and inventory. Inventory reductions
were the primary source of cash in 1998. In 1999, we paid our remaining
obligations to Actel per the August 1998 settlement agreement. Net income and an
increase in accounts payable were the primary sources of cash in 1999. Our
operating cash flow activities are affected by changes in our accounts
receivable and related allowances. At December 31, 1997, 1998 and 1999 we had
allowances for doubtful accounts totaling $245,000, $245,000 and $194,000,
respectively. We have not had any material collection issues to date. At
December 31, 1997, 1998 and 1999 we had sales returns and allowance reserves
totaling $2.4 million, $3.0 million and $1.1 million, respectively, offsetting
accounts receivable balances for contractual obligations for potential product
returns and discounts. The change in the amount of sales returns and allowance
reserves is due to the amount of credits earned but not yet taken by
distributors.
Net cash used for investing activities was $2.6 million, $679,000 and
$3.3 million in 1997, 1998 and 1999, respectively. All of this cash was used for
the acquisition of property and equipment. The majority of the acquisitions in
1997 were financed under our equipment financing line. We intend to purchase
approximately $5.0 million of additional capital assets during 2000.
24
<PAGE>
Net cash provided by (used for) financing activities was $1.1 million,
$(1.4) million, and $33.4 million in 1997, 1998 and 1999, respectively. The
primary source of cash in 1997 was $1.5 million of borrowings from a bank which
were used to acquire property and equipment. In 1999 the primary source of cash
was the $33.9 million raised in the October 15, 1999 initial public offering.
Cash was used to repay bank debt of $1.5 million, $1.5 million and $1.2 million
in 1997, 1998 and 1999, respectively.
Our relationship with TSMC requires that we provide a forecast of the
minimum level of our wafer requirements for the following year. This creates a
minimum wafer purchase commitment to TSMC for such year. For 2000, our committed
purchases from TSMC are $9.4 million. Our agreement with Cypress does not have
similar minimum purchase commitments.
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. After the next 12 months, our capital and
operating requirements will depend on many factors, including the levels at
which we maintain inventory and accounts receivable, costs of securing access to
adequate manufacturing capacity and increases in our operating expenses.
INFLATION
The impact of inflation on our business has not been material for the fiscal
years ended December 31, 1997, 1998 and 1999.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 summarizes certain of the SEC's views in applying generally
accepted accounting principles to revenue recognition in financial statements.
We are required to adopt SAB 101 in the first quarter of fiscal year 2000 and
are currently studying the impact of SAB 101 on our financial statements. We do
not believe that SAB 101 will have a material impact on our financial
statements.
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.
25
<PAGE>
YEAR 2000 COMPLIANCE
We are aware of the issues surrounding the year 2000 and problems relating
to computers and computer software incorrectly distinguishing between 21st and
20th century dates. As a result, beginning on January 1, 2000, computer systems
and software used by many companies and organizations in a wide variety of
industries, including technology, transportation, utilities, finance and
telecommunications, may have produced erroneous results or failed unless they
had been modified or upgraded to process date information correctly. We have
modified or replaced any software applications that had source code unable to
process data information correctly. We addressed the Year 2000 preparedness of
our critical suppliers and third party software providers. As of the date of
this prospectus, we have not experienced any Year 2000 problems with our
products, facilities, critical suppliers or vendors. We use software, computer
technology and other services internally developed and provided by third-party
vendors that may fail due to the Year 2000 phenomenon even after January 1,
2000. This failure may involve significant time and expense, and uncorrected
problems could seriously harm our business. In addition, the potential failure
of our customers to ensure that their operations are Year 2000 compliant could
have an adverse effect on them, which in turn could limit their ability to use
our products and services or process our invoices in a timely manner.
Through December 31, 1999, we have incurred expenses of approximately
$400,000 in addressing Year 2000 problems. We do not anticipate that we will
incur any additional expenses relating to Year 2000 problems.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE RISK
We do not use derivative financial instruments in our investment portfolio.
Our investment portfolio is generally comprised of commercial paper. We place
investments in instruments that meet high credit quality standards. These
securities are subject to interest rate risk, and could decline in value if
interest rates fluctuate. Due to the short duration and conservative nature of
our investment portfolio, we do not expect any material loss with respect to our
investment portfolio. A 10% move in interest rates as of December 31, 1999 would
have an immaterial effect on our pretax earnings and the carrying value of its
investments over the next fiscal year.
FOREIGN CURRENCY EXCHANGE RATE RISK
All of the Company's sales, cost of manufacturing and marketing are
transacted in U.S. dollars. Accordingly, our results of operations are not
subject to foreign exchange rate fluctuations.
26
<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 or memory. 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.
27
<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 inSearch
Research, the projected total market size for high-complexity programmable logic
devices in 2000 is approximately $3.0 billion, of which FPGAs are estimated to
account for $1.8 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.
28
<PAGE>
[LOGO]
- 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 Input/Output 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 intersection. 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.
- 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.
29
<PAGE>
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.
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. We have announced a new product family, QuickDSP, which will
be introduced in the second quarter of 2000. All three 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 made shipments
to several customers. QuickDSP products use mathematical functions to modify
digital signals in desirable ways.
According to inSearch Research, the total ESP market size in 1999 was
$8.0 million, and is projected to increase to $32.0 million in 2000.
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
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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 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 ESP product 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
Telecommunications and data communications companies require logic devices
with high performance, low power consumption and design flexibility.
QuickLogic's single-chip QuickRAM devices meet this need by providing
comprehensive solutions that eliminate the need for multiple chip solutions.
Alcatel uses our QuickRAM products in their fiber optic Lightwave transmission
equipment.
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.
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<PAGE>
INSTRUMENTATION AND TEST
Instrumentation and industrial controls manufacturers require logic devices
with low power consumption, high reliability and, often, high performance.
Teradyne uses our QuickRAM and FPGA devices in their semiconductor test
equipment.
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
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. Hamilton Standard, a division of United Technologies, uses our
FPGA devices for a flight computer in the F-117 stealth fighter.
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
LTX Semiconductor test equipment
National Instruments PC-based instrumentation boards
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. Each of these product families include
devices with a range of logic capacities and number of input and output pins.
Having such a range of devices is important to design engineers whose device
requirements can vary broadly from one application to another. Smaller devices
address simpler applications at lower cost, while larger devices cost more but
can support larger and more complex applications. The following tables describe
these families:
PASIC 3 FPGA FAMILY
<TABLE>
LOGIC CAPACITY MAXIMUM INPUTS AND
DEVICE (GATES) OUTPUTS (#) INTRODUCTION DATE
<S> <C> <C> <C>
QL3004 4,000 76 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>
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>
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>
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<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 five devices that
span a range of logic and memory sizes, allowing design engineers to choose the
optimal part for a particular application. Larger devices feature more memory
and logic supporting more complex designs, while smaller devices offer lower
cost. 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>
MEMORY CAPACITY LOGIC CAPACITY MAXIMUM INPUTS INTRODUCTION
DEVICE (BITS) (GATES) AND OUTPUTS (#) DATE
<S> <C> <C> <C> <C>
QL4009 9,216 6,000 82 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. The PCI bus, or Peripheral Component Interconnect, is a standard
hardware architecture that manages the transfer of data among major components
in an electronic system at high speed. The master PCI bus function controls the
PCI bus while the target function only operates under the control of the PCI
bus. The QuickPCI family includes five devices that span a range of PCI bus
capabilities and memory and programmable logic capacities, with both master and
target functions. Our QuickPCI family of products combines high-performance
embedded PCI bus controllers with our high-speed programmable logic. We
completed development of our first QuickPCI product in April 1999, and we have
shipped development quantities of devices to several customers.
The PCI bus is available in two basic configurations: 32 bits wide and 64
bits wide. Clock speeds for the PCI bus range from 33MHz to 75MHz. Devices which
support the smaller, slower PCI configurations cost less than devices which
support the wider, faster configurations. While many semiconductor vendors offer
devices that address one particular PCI configuration, very few offer a full
range of devices to meet all of the possible configurations.
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<PAGE>
QUICKPCI ESP FAMILY
<TABLE>
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 Q3 1999
QL5130 Target 33MHz/32-bits 16,000 17,500 Q4 1999
QL5032 Master/Target 33MHz/32-bits 16,000 14,500 Q2 1999
QL5232 Master/Target 33MHz/32-bits 25,344 49,500 Q3 1999
QL5064 Master/Target 75MHz/64-bits 25,344 30,000 Q3 1999
</TABLE>
QUICKDSP. Digital Signal Processing, or DSP, is the use of mathematical
functions to modify digital signals in desirable ways. For example, using DSP
techniques, engineers can design systems for such diverse purposes as
eliminating echoes from telephone conversations, increasing data transmission
rates for Internet access, or reducing the file size of electronic medical
images.
The QuickDSP family combines a set of Embedded Computational Units, or ECUs,
with high-performance programmable logic and memory. These ECUs have been
optimized to implement the mathematical operations inherent in DSP applications
with high speed and efficiency. The QuickDSP family includes four devices, each
with differing amounts of ECUs, programmable logic, and memory--allowing design
engineers to choose the optimal device for their application.
QUICKDSP ESP FAMILY
<TABLE>
MEMORY MAXIMUM
ECU BLOCKS CAPACITY LOGIC CAPACITY INPUTS AND INTRODUCTION
DEVICE (#) (BITS) (GATES) OUTPUTS (#) DATE
<S> <C> <C> <C> <C> <C>
QL7100 10 46,100 292,000 256 Expected Q3 2000
QL7120 12 55,300 373,000 320 Expected Q3 2000
QL7160 16 73,700 558,000 448 Expected Q2 2000
QL7180 18 82,900 662,000 512 Expected Q2 2000
</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.
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.
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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, Tokyo,
Munich, Shanghai and Hong Kong. Our direct sales organization consists of a
staff of 24, 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 two independent sales representatives in Europe and nine distributors in
Asia. Our marketing organization consists of 17 employees. All of the foregoing
numbers are as of February 29, 2000.
Four major distributors, Arrow Electronics, Bell Microproducts, Future
Electronics and Sterling Electronics accounted for approximately 51% of our
sales in 1999. Our international sales were 43%, 47% and 48% of our total sales
for 1997, 1998 and 1999, respectively. 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. 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. We believe that no end customer
accounted for more than 5% of sales in 1999.
We sell our products on a purchase order basis through our distributors and
direct sales channels, and our distributors or customers may cancel purchase
orders at any time with little or no penalty. In addition, our distributor
agreements generally permit our distributors to return unprogrammed products to
us. Contractually, our distributors are permitted to return up to 10%, by value,
of the products they purchase from us every six months.
We provide systems manufacturers with comprehensive technical support, which
we believe is critical to remaining competitive in the markets we serve. As of
February 29, 2000, 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 six
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.
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
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<PAGE>
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 February 29, 2000, the research and development staff consisted of 42
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 1997, 1998 and 1999 were
$6.2 million, $6.3 million and $7.4 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 $9.4 million under this agreement in 2000. We recently amended our
foundry agreement with Cypress to extend the term through 2005. 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 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 InSearch
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Research & Co., 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, 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.
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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 67 U.S. patents and have 22 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 2018. We have also registered six 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. In September 1999, we received an offer to
license a patent related to field programmable gate array architecture. It is
too early for us to determine whether this license would be necessary or useful
and obtainable at a reasonable price. Offers such as these may lead to
litigation if we reject the opportunity to obtain the license.
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
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
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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 February 29, 2000, we had a total of 155 employees worldwide, with 43
people in operations, 42 people in research and development, 25 people in sales,
17 people in marketing, 24 people in administration and four 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 and an engineering office in Hillsborough, Oregon. The London
office is leased through September 2004, and the Hong Kong office is leased on a
month-to-month basis. The Hillsborough office is leased through December 31,
2000. We believe that our existing facilities are adequate for our current
needs.
LITIGATION
QuickLogic is not a party to any pending material litigation.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information concerning our current
executive officers and directors as of March 15, 2000:
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ---- -------- -----------
<S> <C> <C>
E. Thomas Hart............................ 58 President, Chief Executive Officer and
Director
John M. Birkner........................... 56 Vice President, Chief Technical Officer
Michael R. Brown.......................... 50 Vice President, Worldwide Sales
Andrew K. Chan............................ 49 Vice President, Research and Development
Hua-Thye Chua............................. 64 Vice President, Process Technology and
Director
Reynold W. Simpson........................ 51 Vice President, Operations
Bill J. Smithson.......................... 57 Vice President, Engineering
Arthur O. Whipple......................... 52 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.......................... 64 Director
Michael J. Callahan....................... 64 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 Monolithic
Memories.
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<PAGE>
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.
BILL J. SMITHSON has served as our Vice President, Engineering since
September 1999. From April 1991 to September 1999, Mr. Smithson was Vice
President, Semiconductor Technology at Adaptec Inc., a developer and
manufacturer of input/output technology products. From 1987 to 1990,
Mr. Smithson was Division Director, Integrated Circuit Research and Development
at Data General Corporation, a semiconductor corporation. Mr. Smithson has also
held senior management positions at other semiconductor companies, including
VLSI Technology, Inc., National Semiconductor Corporation, and Motorola, Inc.
Mr. Smithson holds a B.S.E.E. from the University of Missouri at Rolla, an
M.S.E.E. from Arizona State University and an M.B.A. from Santa Clara
University.
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. Whittle served as the President of Aqua Design, a privately-held provider of
water treatment services and equipment. Mr. Whittle holds a B.S.E.E. from the
University of Washington and an M.B.A. from Santa Clara University.
In May 1990, Mr. Whipple reached a settlement with the SEC in connection
with an action brought by the SEC concerning the accounting treatment for
certain revenue reflected in the financial statements of URS Corporation, then
known as Thortec, in 1986 and 1987. Mr. Whipple was Vice President and Treasurer
at URS Corporation during that period. Mr. Whipple consented to the entry of an
injunction with the SEC without admitting or denying any of the SEC's
allegations, and there was no adjudication or findings of fact. The injunction
bars Mr. Whipple from aiding and abetting the filing of any report with the SEC
that contains an untrue statement of material fact and aiding and abetting the
failure to keep accurate and fair books and records. Our Audit Committee
conducted a detailed investigation into Mr. Whipple's involvement in the matter,
and concluded that nothing concerning that matter affects Mr. Whipple's
integrity or ability to serve as our Chief Financial Officer.
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
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<PAGE>
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, 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 provides that, as of the
first annual meeting of stockholders following our initial public 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
43
<PAGE>
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 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 the compensation earned for services rendered
to us in all capacities for the fiscal years ended December 31, 1998 and 1999 by
our chief executive officer and each of the next four most highly compensated
executive officers whose aggregate cash compensation exceeded $100,000 during
the year ended December 31, 1999. 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 FISCAL YEAR SALARY OPTIONS COMPENSATION
- --------------------------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
E. Thomas Hart.............................. 1999 $298,014 233,333 $13,198
President, Chief Executive Officer and 1998 269,208 166,667 12,693
Director
Arthur O. Whipple........................... 1999 168,795 108,333 --
Vice President, Finance, Chief Financial 1998 99,007 50,000 --
Officer and Secretary
Michael R. Brown............................ 1999 200,000 216,667 8,250
Vice President, Worldwide Sales 1998 -- -- --
Reynold W. Simpson.......................... 1999 200,043 100,000 --
Vice President, Operations 1998 180,868 41,667 --
Ronald D. Zimmerman......................... 1999 191,375 150,000 --
Vice President, Human Resources 1998 177,162 -- --
</TABLE>
A portion of each executive officer's salary is dependent upon their meeting
of certain sales, gross margin and other management objectives.
44
<PAGE>
Mr. Brown commenced employment with us on January 26, 1999. His salary in
1999, on an annualized basis, was $225,000.
The amounts listed under the column captioned "All Other Compensation"
represent automobile allowances we have given to Mr. Hart and Mr. Brown.
OPTION GRANTS IN FISCAL YEAR 1999
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, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE VALUE
PERCENT OF AT ASSUMED ANNUAL RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR OPTION
UNDERLYING GRANTED EXERCISE TERM
OPTIONS TO PRICE PER EXPIRATION ---------------------------
NAME GRANTED EMPLOYEES SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
E. Thomas Hart........................ 233,333 14.36% $13.62 10/19/09 $1,999,664 $5,065,659
Arthur O. Whipple..................... 50,000 3.08 13.62 10/19/09 428,500 1,085,500
Michael R. Brown...................... 166,667 10.26 4.86 1/26/09 510,001 1,291,669
50,000 3.08 13.62 10/19/09 428,500 1,085,500
Reynold W. Simpson.................... 100,000 6.16 13.62 10/19/09 857,000 2,171,000
Ronald D. Zimmerman................... 15,000 0.92 13.62 10/19/09 128,550 325,650
</TABLE>
In the last fiscal year, we granted options to purchase an aggregate of
1,624,000 shares. Options to purchase shares generally vest at the rate of 12.5%
after six months of service from the date of grant, and 6.25% 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 the exercise
price 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.
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, 1999. No options were exercised by the named executive officers in
1999.
Options generally vest at the rate of 12.5% after six months of service from
the date of grant, and 6.25% at the end of each three-month period thereafter.
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<PAGE>
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
underlying shares of $16.50 per share on December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING IN-THE-MONEY
UNEXERCISED OPTIONS AT OPTIONS AT
DECEMBER 31, 1999 DECEMBER 31, 1999
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
E. Thomas Hart................................ 520,833 379,166 $7,913,125 $2,468,874
Arthur O. Whipple............................. 39,063 119,271 468,750 975,250
Michael R. Brown.............................. 31,250 185,417 363,750 1,720,250
Reynold W. Simpson............................ 68,229 173,438 818,750 1,169,250
Ronald D. Zimmerman........................... 59,583 38,750 901,875 391,325
</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 have
obtained 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 have entered 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,
- 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.
46
<PAGE>
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 March 10, 2000, options to purchase an aggregate of 2,769,476
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. 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
was approved by the stockholders in September 1999. As of March 10, 2000,
options to purchase an aggregate of 533,333 shares of common stock were
outstanding under our 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 under the
1999 stock plan equals:
- 5,000,000 shares of common stock; and
- any shares returned to the 1989 stock option plan as a result of
termination of options under such plan.
In addition, 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 of directors.
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;
- 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.
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<PAGE>
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 was approved by the stockholders in September 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 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 commenced on the first trading day on or after the effective date of this
offering and ends on the last
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<PAGE>
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 "Description of Capital Stock--Registration Rights." The purchasers
of the Series F preferred stock included the following principal stockholders,
directors and affiliated entities:
<TABLE>
<CAPTION>
COMMON AGGREGATE
EQUIVALENT PURCHASE
STOCKHOLDERS, DIRECTORS AND AFFILIATED ENTITIES SHARES 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 $13.0 million, $2.7 million and $6.0 million for 1997, 1998 and 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.
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 $79,521 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 outstanding under these loans during 1997, 1998 and
1999 was $125,000. These loans were approved by our board of directors.
50
<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 March 10, 2000, 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;
- each of our directors;
- each named executive officer;
- all current executive officers and directors as a group; and
- all other selling stockholders.
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 March 10, 2000 are deemed
outstanding. Percentage of beneficial ownership is based upon 18,108,357 shares
of common stock outstanding prior to this offering and 19,608,357 shares of
common stock outstanding after this offering based on the number of shares
outstanding as of March 10, 2000. 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, Whipple, Brown, Simpson, Zimmerman,
Beadle and Callahan represent shares issuable upon exercise of stock options. Of
the shares shown below for Messrs. Chan and Chua, 45,313 shares represent shares
issuable upon exercise of stock options for Mr. Chan and 12,500 shares represent
shares issuable upon exercise of stock options for Mr. Chua.
51
<PAGE>
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED PRIOR TO OWNED AFTER
OFFERING NUMBER OF OFFERING
-------------------- SHARES BEING --------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT OFFERED NUMBER PERCENT
------------------------ --------- -------- ------------ --------- --------
<S> <C> <C> <C> <C> <C>
Technology Venture Investors (1)........................ 1,682,040 9.29% 400,000 1,282,040 6.54%
3000 Sand Hill Road
Bldg. 4, Suite 280
Menlo Park, CA 94025
U.S. Venture Partners (2)............................... 1,406,615 7.77% 500,000 906,615 4.62%
2180 Sand Hill Road
Suite 300
Menlo Park, CA 94025
Vertex Investments (3).................................. 1,360,869 7.52% 650,000 710,869 3.63%
3 Lagoon Drive, Ste. 220
Redwood City, CA 94065
Sequoia Capital (4)..................................... 1,122,446 6.20% 400,000 722,446 3.68%
2480 Sand Hill Road, Suite 110
Menlo Park, CA 94025
Morganthaler Venture Partners (6)....................... 821,311 4.54% 300,000 521,311 2.66%
2780 Sand Hill Road, Suite 280
Menlo Park, CA 94025
Sutter Hill Ventures.................................... 457,998 2.53% 9,209 448,789 2.29%
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Alta IV Limited Partnership............................. 342,815 2.28% 342,815 -- --
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
C.V. Sofinnova Partners Five............................ 62,545 * 62,545 -- --
One Embarcadero Center, Suite 4050
San Francisco, CA 94111
UST Private Equity Investors Fund, Inc.................. 431,035 2.38% 431,035 -- --
114 W. 47th Street
New York, NY 10036
E. Thomas Hart.......................................... 537,500 2.97% -- 537,500 2.74%
Arthur O. Whipple....................................... 51,042 * -- 51,042 *
Michael R. Brown........................................ 52,083 * -- 52,083 *
Andrew K. Chan (7)...................................... 211,979 1.17% 15,000 196,979 1.00%
Hua-Thye Chua (8)....................................... 195,834 1.08% -- 195,834 *
Reynold W. Simpson...................................... 77,083 * -- 77,083 *
Ronald D. Zimmerman..................................... 68,958 * -- 68,958 *
Donald P. Beadle........................................ 37,646 * -- 37,646 *
Michael J. Callahan..................................... 29,313 * -- 29,313 *
Irwin Federman (9)...................................... -- -- -- -- --
John Birkner............................................ 186,979 1.03% 20,000 166,979 *
All current executive officers and directors as a group
(12 persons).......................................... 1,479,667 8.17% 35,000 1,444,667 7.37%
</TABLE>
- ----------
* Less than 1% of the outstanding common stock.
(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. The general partners of Technology Investors
Group LLC--IV, Technology Venture Investors IV LP-3, L.P. and TVI
Management-3, L.P. are Burton McMurty, David Marquardt, John Johnston,
Robert Kagle and Mark Wilson, who share voting and investment power of the
shares. The general partners disclaim beneficial ownership of the shares,
except to the extent of their direct pecuniary interest in the shares.
52
<PAGE>
(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. The general
partner of U.S. Venture Partners III, U.S.V. Entrepreneur Partners, Second
Ventures II, L.P. and Second Ventures Limited Partnership by BHMS Partners
III is BHMS Partners III, whose general partners consist of William K.
Bowes, Jr., Irwin Federman, Steve Krausz and Phil Young. The general partner
of U.S. Venture Partners IV, L.P. and U.S.V.P. Entrepreneur Partners II,
L.P. is Presidio Management Group IV, L.P., whose general partners consist
of William K. Bowes, Jr., Irwin Federman, Steve Krausz and Phil Young. These
general partners share voting and investment power of the shares and
disclaim beneficial ownership of the shares, except to the extent of their
direct pecuniary interest in the shares.
(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. The general partners of Vertex Investment International
III, Inc., Vertex Investment (II) Limited, Vertex Asia Limited and HWH
Investment Pte. Ltd. are Joo Hock Chua, Joanna Chin, Frank Lee, Christina
Lim, Karl Ma, Robert Tsao and Henry Yong, who share voting and investment
power of the shares and disclaim beneficial ownership of the shares, except
to the extent of their direct pecuniary interest in the shares.
(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. The
general partners of Sequoia Capital V, Sequoia Technology Partners V,
Sequoia XXI, Sequoia XXIV, Sequoia Capital XXI, Sequoia Capital XX and
Sequoia XXIII are Pierre Lamond, Gordon Russell, Don Valentine, Michael
Moritz and Tom Stephenson, who share voting and investment power of the
shares and disclaim beneficial ownership of the shares, except to the extent
of their direct pecuniary interest in the shares.
(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. The
general partner of New Enterprise Associates VI, Limited Partnership and New
Venture Partners III L.P. is NA Partners VI, whose general partners consist
of nine individuals who share voting and investment power of the shares and
disclaim beneficial ownership of the shares, except to the extent of their
direct pecuniary interest in the shares.
(6) The general partners of Morganthaler Venture Partners are fourteen
individuals who share voting and investment power of the shares and disclaim
beneficial ownership of the shares, except to the extent of their direct
pecuniary interest in the shares.
(7) 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.
(8) 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.
(9) Excludes 1,406,615 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.
53
<PAGE>
DESCRIPTION OF CAPITAL STOCK
We are authorized to issue up to 110,000,000 shares, $0.001 par value,
divided into two classes designated, respectively, "common stock" and "preferred
stock." Of such shares authorized, 100,000,000 shares are designated as common
stock, and 10,000,000 shares are designated as preferred stock.
COMMON STOCK
As of March 10, 2000, there were 18,108,357 shares of common stock
outstanding that were held of record by approximately 310 stockholders. There
will be 19,608,357 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
March 10, 2000, there are outstanding options to purchase a total of 3,302,809
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 has 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
5,957,432 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 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.
54
<PAGE>
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.
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 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,
55
<PAGE>
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
Our common stock is listed on The Nasdaq Stock Market's National Market
under the symbol "QUIK."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for our common stock is American Stock
Transfer & Trust Company.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 19,608,357 shares of common
stock outstanding based on shares outstanding as of March 10, 2000. Of these
shares, approximately 12,167,050 shares including the 4,568,059 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 7,441,307 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 April 12, 2000, 1,047,657 additional shares will become eligible
for sale, subject to the provisions of Rule 144, Rule 144(k) or Rule 701,
upon the expiration of lock-up agreements entered into in connection with
our initial public offering in October 1999; and
- beginning 90 days after the effective date of this prospectus, 6,393,650
shares will become eligible for sale subject to the provisions of
Rule 144, Rule 144(k) or Rule 701, upon the expiration of lock-up
agreements entered into with the underwriters in connection with this
offering.
The underwriters have agreed to release the shares held by selling
stockholders to be sold in this offering which are subject to lock-up agreements
entered into in connection with our initial public offering in October 1999 in
consideration for such selling stockholders entering into new lock-up agreements
with respect to their remaining shares for a period of 90 days after the
effective date of this prospectus.
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, a number of shares that does not exceed the greater of 1% of
the then outstanding shares of common stock (approximately 196,100 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.
After this offering, we will file three separate registration statements 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 became
effective immediately upon filing. As of March 10, 2000, options to purchase a
total of 533,333 shares were outstanding and 4,666,667 shares were reserved for
future issuance under our 1999 stock option plan; options to purchase a total of
2,769,476 shares were outstanding and no shares were reserved for future
issuance 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.
Upon completion of this offering, the holders of 5,957,432 shares of our
common stock or their transferees, will be entitled to various rights with
respect to the registration of such shares under the Securities Act. See
"Description of Capital Stock--Registration Rights."
57
<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
FleetBoston Robertson Stephens Inc., Bear, Stearns & Co., Inc., J.P. Morgan
Securities Inc. and SoundView Technology Group, Inc., have severally agreed with
us and the selling stockholders, subject to the terms and conditions of the
underwriting agreement, to purchase from us and the selling stockholders the
number of shares of common stock set forth below opposite their respective
names. The underwriters are committed to purchase and pay for all shares if any
are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------------------------
<S> <C>
FleetBoston Robertson Stephens Inc..........................
Bear, Stearns & Co. Inc.....................................
J.P. Morgan Securities Inc..................................
SoundView Technology Group, Inc.............................
---------------------------
4,568,059
===========================
</TABLE>
The representatives have advised us and the selling stockholders that the
underwriters propose to offer the shares of common stock to the public at the
public offering price set forth on the cover page of this prospectus and to
certain dealers at that price less a concession of not in excess of $ per
share, of which $ may be reallowed to other dealers. After this
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 us or the selling stockholders 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 representatives have advised us that the underwriters do not expect
sales to discretionary accounts to exceed 5% of the total number of shares
offered.
OVER-ALLOTMENT OPTION
We have granted to the underwriters an option, exercisable during the 30-day
period after the date of this prospectus, to purchase up to 685,208 additional
shares of common stock at the same price per share as we and the selling
stockholders will receive for the 4,568,059 shares that the underwriters have
agreed to purchase. To the extent that the underwriters exercise their
over-allotment option, the underwriters have severally agreed, subject to
certain conditions, to purchase approximately the same percentage thereof as the
number of shares to be purchased by each of them bears to the total number of
shares of common stock offered in this offering. If purchased, these additional
shares will be sold by the underwriters on the same terms as those on which the
shares offered hereby are being sold. We will be obligated, pursuant to the
over-allotment option, to sell shares to the underwriters to the extent the
over-allotment option is exercised. The underwriters may exercise the
over-allotment option only to cover over-allotments made in connection with the
sale of the shares of common stock offered in this offering.
The following table summarizes the total compensation to be paid to the
underwriters by us and the selling stockholders who have granted us this option:
<TABLE>
<CAPTION>
WITHOUT OVER- WITH OVER-
PER SHARE ALLOTMENT ALLOTMENT
--------- ------------- -----------
<S> <C> <C> <C>
Underwriting discounts and commissions paid by us........
Underwriting discounts and commissions paid by the
selling stockholders...................................
</TABLE>
58
<PAGE>
We estimate expenses payable by us in connection with this offering, other
than the underwriting discounts and commissions referred to above, will be
approximately $1,000,000.
INDEMNITY
The underwriting agreement contains covenants of indemnity among the
underwriters, us and the selling stockholders against various 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 executive officer and director and certain other holders of our common
stock have agreed, during the period of 90 days after the effective date of this
prospectus, subject to specified exceptions including pursuant to our 1999
employee stock purchase plan, 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 or 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 these holders or with respect to which they have the power of
disposition, without the prior written consent of FleetBoston Robertson
Stephens Inc. However, FleetBoston Robertson Stephens Inc. may, in its sole
discretion, at any time or from time to time, without notice, release all or any
portion of securities subject to the lock-up agreements.
In addition, we have agreed that during the lock-up period we will not,
without the prior written consent of FleetBoston Robertson Stephens Inc.,
subject to various 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 our sale of shares in this offering, the issuance of our
common stock upon the exercise of outstanding options and the issuance of
options under existing stock option and incentive plans provided that those
options do not vest prior to the expiration of the lock-up period. See "Shares
Eligible for Future Sale."
LISTING
The common stock is currently quoted on The Nasdaq Stock Market's National
Market under the trading symbol "QUIK."
STABILIZATION
The representatives of the underwriters have advised us that pursuant to
Regulation M under the Securities Act of 1933, some persons participating in
this offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the shares of 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 shares of 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 purchase
of common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with the offering. A "penalty bid" is
an arrangement permitting the underwriters to reclaim the selling concession
otherwise accruing to an underwriter or syndicate member in connection with the
offering if the common stock originally sold by such underwriter or syndicate
member is purchased by the underwriters in a syndicate covering transaction and
has therefore not been effectively placed by such underwriter or syndicate
member. The representatives have advised us that such transactions may
59
<PAGE>
be effected on The Nasdaq Stock Market's National Market or otherwise and, if
commenced, may be discontinued at any time.
ELECTRONIC PROSPECTUS
A prospectus in electronic format is being made available on an Internet web
site maintained by Wit Capital Corporation, an affiliate of SoundView Technology
Group, Inc. Other than the prospectus in electronic format, the information on
this web site and any information contained on any other web site maintained by
Wit Capital Corporation is not part of the prospectus or the registration
statement of which this prospectus forms a part, has not been approved and/or
endorsed by us or any underwriter and should not be relied upon by investors.
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 19,596 shares of QuickLogic common stock.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 included in
this Prospectus have been so 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.
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. 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 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.
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.
60
<PAGE>
QUICKLOGIC CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Report of Independent Accountants........................... F-2
Consolidated Balance Sheet as of December 31, 1998 and
1999...................................................... F-3
Consolidated Statement of Operations for the Years Ended
December 31, 1997, 1998 and 1999.......................... F-4
Consolidated Statement of Stockholders' Equity (Deficit) for
the Years Ended December 31, 1997, 1998 and 1999.......... F-5
Consolidated Statement of Cash Flows for the Years Ended
December 31, 1997, 1998 and 1999.......................... 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
In our opinion, the accompanying consolidated balance sheets 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. In addition, in our opinion, the
consolidated financial statement schedules listed in the index appearing under
item 16(b) on page II-3 present fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements. These financial statements and financial statement
schedules are the responsibility of the Company's management; our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
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
January 25, 2000
F-2
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 7,595 $34,558
Accounts receivable, net of allowances for doubtful
accounts and sales returns and allowances of $3,272 and
$1,305.................................................. 2,031 5,543
Inventory................................................. 2,877 4,349
Other current assets...................................... 730 1,467
------- -------
Total current assets.................................... 13,233 45,917
Property and equipment, net................................. 2,892 4,510
Other assets................................................ 43 55
------- -------
16,168 $$50,482
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Trade payables............................................ $ 2,204 $ 5,202
Accrued liabilities....................................... 2,425 2,405
Deferred income on shipments to distributors.............. 4,737 5,026
Current portion of long-term obligations.................. 7,186 716
------- -------
Total current liabilities............................... 16,552 13,349
Long-term obligations..................................... 591 128
------- -------
17,143 13,477
Commitments and contingencies (Notes 11 and 12).............
Stockholders' equity (deficit)
Preferred stock, $0.001 par value; 61,568 and 10,000
shares authorized; 9,912 and no shares issued and
outstanding............................................. 10 --
Common stock, $0.001 par value; 105,000 and 100,000 shares
authorized, 4,279 and 18,102 shares outstanding......... 4 18
Additional paid-in capital................................ 61,388 96,599
Stockholder note receivable............................... (121) (121)
Deferred compensation..................................... (1,084) (1,480)
Accumulated deficit....................................... (61,172) (58,011)
------- -------
Total stockholders' equity (deficit).................... (975) 37,005
------- -------
$16,168 $50,482
======= =======
</TABLE>
The accompanying notes form an integral part of these Consolidated Financial
Statements
F-3
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Revenue..................................................... $28,460 $30,007 $ 39,785
Cost of revenue............................................. 16,855 14,303 17,103
------- ------- --------
Gross profit................................................ 11,605 15,704 22,682
Operating expenses:
Research and development.................................. 6,235 6,294 7,355
Selling, general and administrative....................... 10,981 9,368 12,618
Contract termination and legal............................ 28,309 -- --
------- ------- --------
Net operating income (loss)............................. (33,920) 42 2,709
Interest expense.......................................... (162) (161) (97)
Interest income and other, net............................ 434 364 549
------- ------- --------
Net income (loss)........................................... $(33,648) $ 245 $ 3,161
======= ======= ========
Net income (loss) per share:
Basic..................................................... $(10.41) $ 0.06 $ 0.42
Diluted................................................... $(10.41) $ 0.02 $ 0.19
Weighted average shares:
Basic..................................................... 3,232 4,231 7,615
Diluted................................................... 3,232 14,645 16,400
</TABLE>
The accompanying notes form an integral part of these Consolidated Financial
Statements
F-4
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS)
<TABLE>
<CAPTION>
CONVERTIBLE COMMON STOCK
PREFERRED STOCK COMMON STOCK TO BE ISSUED ADDITIONAL STOCKHOLDER
------------------- ------------------- ------------------- PAID-IN NOTE
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE
-------- -------- -------- -------- -------- -------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996....... 9,793 $ 10 828 $ 1 -- $ -- $40,484 $ (119)
Common stock issued under stock
option plan, net of
repurchases.................... -- -- 331 -- -- -- 280 --
Issuance of Series F preferred
stock for cash, net of issuance
cost........................... 119 -- -- -- -- -- 781 --
Common stock to be issued in
exchange for contract
termination.................... -- -- -- -- 3,038 18,409 -- --
Deferred compensation, net of
terminations................... -- -- -- -- -- -- 1,890 --
Amortization of deferred
compensation................... -- -- -- -- -- -- -- --
Note receivable from
stockholder.................... -- -- -- -- -- -- -- (2)
Net loss......................... -- -- -- -- -- -- -- --
------ ---- ------ ------ ------ -------- ------- -------
Balance at December 1997........... 9,912 10 1,159 1 3,038 18,409 43,435 (121)
Common stock issued under stock
option plan, net of
repurchases.................... -- -- 82 -- -- -- 110 --
Common stock issued in exchange
for contract termination....... -- -- 3,038 3 (3,038) (18,409) 18,406 --
Deferred compensation, net of
terminations................... -- -- -- -- -- -- (563) --
Amortization of deferred
compensation................... -- -- -- -- -- -- -- --
Net income....................... -- -- -- -- -- -- -- --
------ ---- ------ ------ ------ -------- ------- -------
Balance at December 31, 1998....... 9,912 10 4,279 4 -- -- 61,388 (121)
Common stock issued under stock
option plan, net of
repurchases.................... -- -- 140 -- -- -- 431 --
Deferred compensation, net of
terminations................... -- -- -- -- -- -- 908 --
Amortization of deferred
compensation................... -- -- -- -- -- -- -- --
Conversion from preferred stock
to common stock................ (9,912) (10) 9,912 10 -- -- -- --
Issuance of shares in connection
with initial public offering,
net of expenses of $1,190...... -- -- 3,771 4 -- -- 33,872 --
Net income....................... -- -- -- -- -- -- -- --
------ ---- ------ ------ ------ -------- ------- -------
Balance at December 31, 1999....... -- $ -- 18,102 $ 18 -- $ -- $96,599 $ (121)
====== ==== ====== ====== ====== ======== ======= =======
<CAPTION>
TOTAL
STOCKHOLDERS'
DEFERRED ACCUMULATED EQUITY
COMPENSATION DEFICIT (DEFICIT)
------------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1996....... $ (808) $(27,769) $ 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................... (1,890) -- --
Amortization of deferred
compensation................... 625 -- 625
Note receivable from
stockholder.................... -- -- (2)
Net loss......................... -- (33,648) (33,648)
------- -------- --------
Balance at December 1997........... (2,073) (61,417) (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................... 563 -- --
Amortization of deferred
compensation................... 426 -- 426
Net income....................... -- 245 245
------- -------- --------
Balance at December 31, 1998....... (1,084) (61,172) (975)
Common stock issued under stock
option plan, net of
repurchases.................... -- -- 431
Deferred compensation, net of
terminations................... (908) -- --
Amortization of deferred
compensation................... 512 -- 512
Conversion from preferred stock
to common stock................ -- -- --
Issuance of shares in connection
with initial public offering,
net of expenses of $1,190...... -- -- 33,876
Net income....................... -- 3,161 3,161
------- -------- --------
Balance at December 31, 1999....... $(1,480) $(58,011) $ 37,005
======= ======== ========
</TABLE>
The accompanying notes form an integral part of these Consolidated Financial
Statements
F-5
<PAGE>
QUICKLOGIC CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $(33,648) $ 245 $ 3,161
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and other non-cash charges................. 817 1,322 1,636
Provision for doubtful accounts and sales returns....... 6,001 5,031 7,099
Amortization of deferred compensation................... 625 426 512
Gain on disposal of assets.............................. -- (5) --
Contract termination and other.......................... 28,309 -- --
Changes in assets and liabilities:
Accounts receivable................................... (6,284) (4,170) (10,611)
Inventory............................................. (1,225) 2,992 (1,472)
Other assets.......................................... (253) (444) (749)
Accounts payable...................................... (243) (597) 2,998
Accrued liabilities and other obligations............. 4,453 (2,477) (5,731)
-------- ------- --------
Net cash provided by (used for) operating
activities........................................ (1,448) 2,323 (3,157)
-------- ------- --------
Cash flows from investing activities:
Capital expenditures for property and equipment, net of
dispositions............................................ (2,639) (679) (3,254)
-------- ------- --------
Cash flows from financing activities:
Payment of long-term obligations.......................... (1,473) (1,490) (1,183)
Proceeds from issuance of common stock, net............... 280 110 34,307
Proceeds from issuance of preferred stock, net............ 781 -- --
Note receivable from stockholder.......................... (2) -- --
Proceeds from bank borrowings............................. 1,496 -- 250
-------- ------- --------
Net cash provided by (used for) financing
activities.......................................... 1,082 (1,380) 33,374
-------- ------- --------
Net increase (decrease) in cash............................. (3,005) 264 26,963
Cash at beginning of period................................. 10,336 7,331 7,595
-------- ------- --------
Cash at end of period....................................... $ 7,331 $ 7,595 $ 34,558
======== ======= ========
Non-cash transactions:
Inventory acquired in exchange for note payable........... $ 1,396 $ -- $ --
======== ======= ========
</TABLE>
The accompanying notes form an integral part of these 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"), founded in 1988,
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.
Our fiscal year ends on the Sunday closest to December 31. 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 QuickLogic
Corporation 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.
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair value of financial instruments are determined by 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 we would realize in a current market exchange. The estimated fair
value of all financial instruments at December 31, 1997, 1998 and 1999,
approximate the amounts presented in the balance sheets, due primarily to the
short-term nature of these instruments.
FOREIGN CURRENCY TRANSACTIONS
We exclusively use the U.S. dollar as our functional currency. Foreign
currency transaction gains and losses are included in income as they occur. The
effect of foreign currency exchange rate fluctuations has not been significant
to date. We do not use derivative financial instruments.
INVENTORY
Inventory is stated at the lower of cost or market, cost being determined
under the first-in, first-out method.
F-7
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
We review 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.
REVENUE RECOGNITION
Our FPGAs and ESPs may be programmed by the Company, the distributor or the
end customer. We sell to certain distributors under agreements which, in the
case of unprogrammed parts, 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
for progammed parts, which do not have similar return rights, as well as for all
non-distributor 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
We have 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."
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject us to concentrations of
credit risk consist principally of cash and cash equivalents and accounts
receivable. Cash and cash equivalents are maintained with high quality
institutions. Our accounts receivable are derived primarily from sales to
customers located in North America, Europe, Japan and Korea. We perform ongoing
credit evaluations of our customers and generally do not require collateral. Bad
debt write-offs to date have been immaterial.
At December 31, 1999, accounts receivable from two customers, both of which
were distributors of our products, represent 21% and 16% of accounts receivable.
At December 31, 1998, accounts receivable from the same two customers
represented 15% and 18%, respectively, of accounts receivable.
F-8
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LITIGATION LIABILITIES
We accrue for the cost of litigation in the period that costs become
estimable and occurrence is determined to be probable. Accrued litigation
liabilities of $6,500,000 at December 31, 1998 included estimated settlement
costs and related legal fees (see Note 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.
INCOME TAXES
We account 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, we 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 1997, 1998 and 1999.
NEW ACCOUNTING PRONOUNCEMENTS
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin No. 101 (SAB101), "Revenue Recognition in Financial
Statements." SAB101 summarizes certain of the SEC's views in applying generally
accepted accounting principles (GAAP) to revenue recognition in financial
statements. We are required to adopt SAB101 in the first quarter of fiscal 2000
and are currently studying the impact of SAB 101 on our financial statements. We
do not believe that SAB101 will have a material impact on our financial
statements.
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
F-9
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
beginning after June 15, 2000. We do not currently, nor do we 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.
NOTE 3--NET INCOME (LOSS) PER SHARE
Basic earnings per share (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 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>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Numerator:
Net income (loss)............................. $(33,648) $ 245 $ 3,161
Denominator:
Common stock.................................. 1,005 3,490 7,618
Common stock to be issued..................... 2,278 759 --
Less: Unvested common stock option
exercises................................... (51) (18) (3)
-------- ------- -------
Weighted average shares outstanding for
basic....................................... 3,232 4,231 7,615
-------- ------- -------
Convertible preferred stock................... -- 9,912 7,434
Stock options and warrants.................... -- 484 1,348
Unvested common stock option exercises........ -- 18 3
-------- ------- -------
Weighted average shares outstanding for
diluted..................................... 3,232 14,645 16,400
======== ======= =======
Net income (loss) per share
Basic....................................... $ (10.41) $ 0.06 $ 0.42
======== ======= =======
Diluted..................................... $ (10.41) $ 0.02 $ 0.19
======== ======= =======
</TABLE>
As a result of the net losses incurred by us during fiscal year 1997, all
potential common shares, amounting to 11,991,000 shares, were anti-dilutive and
have been excluded from the diluted net loss per share calculation. For fiscal
years 1998 and 1999, all potential common shares have been included in the
calculation of diluted EPS.
F-10
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4--BALANCE SHEET COMPONENTS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Inventory:
Raw materials........................................... $ 56 $ 183
Work-in-process......................................... 2,611 3,642
Finished goods.......................................... 210 524
------- -------
$ 2,877 $ 4,349
======= =======
Property and equipment:
Equipment............................................... $ 4,733 $ 6,271
Software................................................ 1,059 1,795
Furniture and fixtures.................................. 761 757
Leasehold improvements.................................. 564 563
------- -------
7,117 9,386
Accumulated depreciation.................................. (4,225) (4,876)
------- -------
$ 2,892 $ 4,510
======= =======
Accrued liabilities:
Accrued employee compensation........................... $ 935 $ 1,356
Other liabilities....................................... 1,490 1,049
------- -------
$ 2,425 $ 2,405
======= =======
</TABLE>
NOTE 5--LONG-TERM OBLIGATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Installment notes payable to bank........................... $ 966 $ 561
Installment notes payable to vendor......................... -- --
Litigation accrual.......................................... 6,500 --
Other....................................................... 311 283
------- -----
7,777 844
Current portion of long-term obligations.................... (7,186) (716)
------- -----
Long-term obligations....................................... $ 591 $ 128
======= =====
</TABLE>
At December 31, 1998 and 1999, we had outstanding bank installment notes
totaling $966,000 and $561,000, respectively. The notes bear interest at prime
plus 0.25% (8.75% as of December 31, 1999), and are secured by the specific
equipment financed. Principal payments are due in equal monthly installments
over the term of the notes which mature in 2000 and 2002. At December 31, 1998,
we were in violation of the bank covenants. Subsequently, we obtained a waiver
for the covenants. In the quarter ended June 30, 1999 we entered into an
extension to borrow up to $250,000 using bank
F-11
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM OBLIGATIONS (CONTINUED)
installment notes which are secured by the specific equipment financed. At
December 31, 1999, we had borrowed $250,000 under this facility. These notes
mature in 2002. At December 31, 1999, we were in compliance with its covenants.
In August 1998, we settled our lawsuit with Actel Corporation. The
obligation for settlement and legal cost was payable quarterly through
August 2001, subject to acceleration upon the completion of our initial public
offering. We paid our remaining obligation of $5.75 million on November 3, 1999.
(see Note 12).
NOTE 6--INCOME TAXES
No provision for federal or state income taxes has been recorded for the
year ended December 31, 1997 as the Company incurred an operating loss. No
provision for federal or state income taxes has been recorded for the years
ended December 31, 1998 and 1999 as the Company had the ability to utilize
federal and state net operating loss carryforwards.
A rate reconciliation between income tax provisions at the US federal
statutory rate and the effective rate reflected in the Consolidated Statement of
Operations is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Provision at statutory rate................................. (34)% 34 34
Utilization of operating loss and credit carryforwards...... -- (34) (34)
Future benefit of deferred tax assets not recognized........ 34 -- --
----- ----- -----
--% --% --%
===== ===== =====
</TABLE>
The Company did not have any significant foreign tax liability during the
periods presented.
Deferred tax balances are comprised of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1998 1999
-------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforward....................... $ 15,728 $ 15,396
Accruals and reserves................................. 5,970 4,725
Credit carryforward................................... 2,351 3,245
Capitalized research and development.................. 633 559
-------- --------
24,682 23,925
Valuation allowances.................................... (24,682) (23,925)
-------- --------
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
F-12
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--INCOME TAXES (CONTINUED)
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, 1999, the Company had net operating loss carryforwards for
federal and state income tax purposes of approximately $42 million and
$21 million, respectively. These carryforwards, if not utilized to offset future
taxable income and income taxes payable, will expire in the years 2000 through
2017.
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 the 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--STOCKHOLDERS' EQUITY
CONVERTIBLE PREFERRED STOCK
At December 31, 1998, the Company had 9,912,000 shares of Series A, B, C, D,
E and F preferred stock outstanding. The holders of the outstanding Series A, B,
C, D, E and F preferred stock were entitled to certain dividend and liquidation
preference rights. No dividends were declared or paid related to preferred
stock. Each share of preferred stock was convertible at the option of the
holder, or upon the Company's completion of a qualifying public offering of
common stock. Upon completion of the Company's initial public offering on
October 15, 1999, each share of Series A, B, C, D, E and F preferred stock was
converted into one share of the Company's common stock.
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.
The Company was originally incorporated in California in April 1988. In
October 1999 the Company reincorporated in Delaware and, in conjunction with
that reincorporation, effected a 1-for-6 stock split (the "Reverse Stock Split")
of its preferred stock and common stock. All references to the number of shares
of preferred stock, common stock and per share amounts have been retroactively
restated in the accompanying financial statements to reflect the effect of the
Reverse Stock Split. The Board of Directors also approved a recapitalization
that authorized 100 million shares of common stock and ten million shares of
undesignated preferred stock.
The Company completed an initial public offering of its common stock on
October 15, 1999. The underwriters' over-allotment option was exercised and
QuickLogic sold a total of 3,770,635 common shares at $10.00. Proceeds, net of
underwriting discounts and commissions and related offering expenses, of
$33.9 million were received.
F-13
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
EMPLOYEE STOCK OPTION PLANS
1989 STOCK OPTION PLAN
In July 1996, the 1989 Stock Plan (the "1989 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 1989 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 fair value of the Company's common stock was
determined by the Board of Directors considering operating results, current
legal developments, product life cycle, general market conditions, independent
valuations and other relevant factors. Options granted under the 1989 Plan may
have a term of up to 10 years. Options typically vest at a rate of 25% of the
total grant per year over a four-year period. However, the Company may, at its
discretion implement a different vesting schedule with respect to any new stock
option grant. In September 1999, the Company adopted the 1999 Stock Option Plan
and all subsequent stock option grants are made under this later plan.
1999 STOCK OPTION PLAN
The 1999 Stock Plan (the "1999 Plan") was adopted by the Board of Directors
in August 1999 and was approved by the stockholders in September 1999. The total
number of shares of common stock reserved for issuance under this plan is
5,000,000 shares of common stock. 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. Options granted
under the 1999 Plan may have a term of up to 10 years. Options typically vest at
a rate of 25% of total grants per year over a four-year period. However, the
Company may, at its discretion implement a different vesting schedule with
respect to any new stock option grant.
F-14
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
The following table summarizes all of our stock option activity under the
1989 Plan and the 1999 Plan and related weighted average exercise price for the
years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTIONS EXERCISE
OUTSTANDING PRICE
-------------- --------
(IN THOUSANDS)
<S> <C> <C>
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............................................. 1,624 8.60
Canceled............................................ (482) 5.10
Exercised........................................... (142) 3.06
-----
Balance at December 31, 1999.......................... 3,365 $5.64
=====
</TABLE>
As of December 31, 1999, 5,345,000 shares were available for grant, 3,000
unvested shares had been exercised and remain subject to our buyback rights and
options to purchase 2,834,000 shares were vested. At December 31, 1998 and 1997,
options to purchase 1,601,000 and 1,936,000 shares, respectively, were vested.
On October 20, 1997, we 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, 1999 are as follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS VESTED
RANGE OF AS OF WEIGHTED AVERAGE AND EXERCISABLE
EXERCISE DECEMBER 31, REMAINING WEIGHTED AVERAGE AS OF WEIGHTED AVERAGE
PRICES 1999 CONTRACTUAL LIFE EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
- -------------- ------------------- ----------------- ---------------- ------------------ ----------------
(IN THOUSANDS) (IN YEARS)
<S> <C> <C> <C> <C> <C>
$0.30 -
$ 0.60........ 448 4.8 $ 0.59 448 $0.59
2.40 -
4.50........ 1,490 8.0 3.97 1,490 3.97
4.86 -
6.00........ 472 9.3 5.53 472 5.53
$6.78 -
$15.24........ 955 9.8 10.59 424 6.78
----- --- -----
3,365 8.3 2,834
===== === =====
</TABLE>
F-15
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCKHOLDERS' EQUITY (CONTINUED)
The weighted average estimated grant date fair values, as defined by
SFAS 123, for options granted during 1997, 1998 and 1999 was $2.52, $1.02 and
$3.80 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 our stock option awards.
The following weighted average assumptions are included in the estimated
grant date fair value calculations for stock option grants in 1997, 1998 and
1999:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Expected life (years)..................................... 5.3 5.3 5.3
Risk-free interest rate................................... 6.20% 4.99% 4.99%
Volatility................................................ -- -- 65%
Dividend yield............................................ -- -- --
</TABLE>
EMPLOYEE STOCK PURCHASE PLAN
The 1999 Employee Stock Purchase Plan ("ESPP") was also adopted by the Board
of Directors in August 1999 and was approved by the stockholders in
September 1999. 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. The ESPP contains
consecutive, overlapping, twenty-four month offering periods. Each offering
period includes four six-month purchase periods. The ESPP permits participants
to purchase shares through payroll deductions of up to 20% of an employee's
total compensation (maximum of 20,000 shares) at 85% of the lower of the fair
market value of the common stock at the beginning or end of a purchase period.
The following weighted average assumptions are included in the estimated
grant date fair value calculations for rights to purchase stock under ESPP:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1999
-------------
<S> <C>
Expected life............................................... 6 months
Risk-free interest rate..................................... 5.00%
Volatility.................................................. 65%
Dividend yield.............................................. --
</TABLE>
The weighted average estimated grant date fair value of rights to
purchase common stock under the ESPP was $4.03.
F-16
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7--STOCKHOLDERS' EQUITY (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
and employee stock purchase plans, its pro forma net loss would have been as
follows for the years ended December 31, 1997, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE AMOUNTS)
<S> <C> <C> <C>
Pro forma net income (loss)....................... $(33,953) $ (663) $1,650
Pro forma net income (loss) per share:
Basic........................................... $ (10.51) $(0.16) $ 0.22
Diluted......................................... $ (10.51) $(0.16) $ 0.11
</TABLE>
DEFERRED COMPENSATION
During the year ended December 31, 1997, 1998, 1999 the Company granted
options to purchase 833,000, 139,000 and 866,000 shares of common stock,
respectively, at a price less than the fair market value of its common stock at
the time of the grant and recorded related deferred compensation of $1,890,000,
$204,000 and $908,000, 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
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 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 the termination
of the Existing Agreement nor the reversion of the related rights to the
Company-developed intellectual property. 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-17
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8--RELATED PARTY TRANSACTIONS (CONTINUED)
NOTES RECEIVABLE FROM STOCKHOLDER
As of December 31, 1998 and 1999, we 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 our 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 $9.4 million under this
agreement in 2000. Purchases under this agreement totaled $202,000,
$1.0 million and $2.1 million in 1997, 1998 and 1999, respectively.
NOTE 10--INFORMATION CONCERNING BUSINESS SEGMENTS AND MAJOR CUSTOMERS
INFORMATION ABOUT GEOGRAPHIC AREAS
All of our sales originate in the United States. Shipments to some of our
distributors are made to centralized purchasing and distributing locations,
which in turn sell through to other locations. As a result of these factors, we
believe 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 1997, 1998 and 1999:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1997 1998 1999
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
United States.................................... $16,222 $15,784 $20,681
Japan............................................ 3,357 3,162 5,033
Europe........................................... 3,886 4,752 4,871
Rest of world.................................... 4,995 6,309 9,200
------- ------- -------
$28,460 $30,007 $39,785
======= ======= =======
</TABLE>
The countries comprising "Rest of world" category include Canada, the UK,
Korea and other countries in Asia, none of which individually comprise more than
10% of our sales.
Three customers, distributors of our products, accounted for approximately
24%, 11% and 10% of revenues in 1999. Three customers, distributors of our
products, accounted for approximately 27%, 10% and 10% of revenues in 1998.
Three customers, distributors of our products, accounted for
F-18
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10--INFORMATION CONCERNING BUSINESS SEGMENTS AND MAJOR CUSTOMERS
(CONTINUED)
approximately 20%, 15% and 13% of revenue in 1997. All sales are made from the
United States and are denominated in U.S. dollars.
Less than 10% of our long-lived assets, including property and equipment and
other assets, were located outside the United States.
NOTE 11--COMMITMENTS
We lease our 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 that matures in 2000. Rent expense
for the years ended December 31, 1997, 1998 and 1999 was approximately $478,000,
$531,000, and $628,000 respectively.
We also lease certain equipment and leasehold improvements under capital
leases, which expire in 2003. Assets acquired under capital leases and included
in plant and equipment at December 31, 1997, 1998, and 1999, were $232,000,
$232,000 and $198,000 respectively.
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,
2000...................................................... $ 584 $ 67
2001...................................................... 680 67
2002...................................................... 710 67
2003...................................................... 630 46
2004 and thereafter....................................... 50 --
------ ----
$2,654 247
======
Less amount representing interest........................... (49)
----
Present value of capital lease obligations.................. 198
Less current portions....................................... (70)
----
Long-term portion of capital lease obligations.............. $128
====
</TABLE>
NOTE 12--LITIGATION
In September 1999, we received an offer to license a patent related to field
programmable gate array architecture. It is too early for us to determine
whether this license would be necessary or useful, or whether a license would be
obtainable at a reasonable price. Offers such as this may lead to litigation if
we reject the opportunity to obtain the license. We believe that the resolution
of this matter will not have a material adverse effect on our financial
condition or results of operations.
The semiconductor industry has experienced a substantial amount of
litigation regarding patent and other intellectual property rights. From time to
time, we have has received and may receive in the future, communications
alleging that our products or our processes may infringe on product or process
F-19
<PAGE>
QUICKLOGIC CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--LITIGATION (CONTINUED)
technology rights held by others. We may in the future be involved in litigation
with respect to alleged infringement by us of another party's patents. In the
future, we may be involved with litigation to:
Enforce our patents or other intellectual property rights.
Protect our trade secrets and know-how.
Determine the validity or scope of the proprietary rights of others.
Defend against claims of infringement or invalidity.
Such litigation has in the past and could in the future result in
substantial costs and diversion of management resources. Such litigation could
also result in payment of substantial damages and/or royalties or prohibitions
against utilization of essential technologies, and could have a material adverse
effect on our business, financial condition and results of operations.
LITIGATION SETTLEMENT
During 1994, Actel Corporation ("Actel"), a competitor of the Company, filed
a lawsuit seeking unspecified damages and alleging that our products infringe
upon its patents. We countersued alleging that Actel's products infringed on our
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. We have made quarterly payments to Actel since the settlement
date. The remainder of the settlement was paid to Actel immediately after our
initial public offering. We paid all of our remaining obligation under the
settlement on November 3, 1999.
F-20
<PAGE>
[LOGO]
<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, the NASD Filing Fee and the Nasdaq National Market Listing Fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................ $ 44,380
NASD Filing Fee............................................. 17,500
Nasdaq National Market Listing Fee.......................... 17,500
Printing and Engraving Expenses............................. 100,000
Legal Fees and Expenses..................................... 400,000
Accounting Fees and Expenses................................ 85,000
Transfer Agent and Registrar Fees........................... 10,000
Blue Sky Fees and Expenses.................................. 5,000
Miscellaneous............................................... 320,620
----------
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 has entered 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 has purchased and intends to 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 October 1, 1996, the Registrant has issued and sold the following
securities:
1. From October 1, 1996 through September 30, 1999, the Registrant issued
and sold 595,945 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 65 private investors an aggregate of 1,286,020 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
effected upon the reincorporation of the Company in Delaware in October 1999.
The sales of the above securities were deemed to be exempt from registration
under the Securities Act, with respect to item 2 above in reliance on
Regulation D promulgated under Section 4(2) of the Securities Act, with respect
to item 3 above in reliance on Section 4(2) of the Securities Act, 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(1) Amended and Restated Certificate of Incorporation of the
Registrant.
3.2(1) Bylaws of the Registrant
4.1(1) Specimen Common Stock certificate of the Registrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Form of Indemnification Agreement for directors and
executive officers.
10.2(1) 1999 Stock Plan and form of Option Agreement thereunder.
10.3(1) 1999 Employee Stock Purchase Plan.
10.4(1) 1989 Stock Option Plan.
10.5(1) 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(1) Termination Agreement dated March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation.
10.7(1) Cross License Agreement dated March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.8(1) Wafer Fabrication Agreement March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation.
10.9(1) Sixth Amended and Restated Shareholder Agreement dated March
29, 1997 by and among the Registrant, Cypress
Semiconductor Corporation and certain stockholders.
10.10(1) Sixth Amended and Restated Registration Rights Agreement
dated March 29, 1997 by and among the Registrant, Cypress
and certain stockholders.
10.11(1) Technical Transfer, Joint Development License and Foundry
Supply Agreement, dated October 2, 1992, between the
Registrant and Cypress.
10.12(1) 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(1) Business Loan Agreement dated August 9, 1995 between the
Registrant and Silicon Valley Bank, as amended.
10.14(1) Loan and Security Agreement dated August 8, 1996 between the
Registrant and Silicon Valley Bank, as amended.
10.15(1) export-import Bank Loan and Security Agreement dated August
8, 1996 between the Registrant and Silicon Valley Bank.
10.16(1) First Amended and Restated Common Stock Purchase Agreement
dated June 13, 1997 between the Registrant and Cypress.
10.17(1) Take or Pay Agreement dated July 21, 1997 between the
Registrant and Taiwan Semiconductor Manufacturing Company,
Ltd.
10.18(1) Patent Cross License Agreement, dated August 25, 1998,
between the Registrant and Actel Corporation.
16.1(1) Letter of Deloitte & Touche LLP, Independent Accountants,
dated July 28, 1997 regarding change in certifying
accountant.
21.1(1) Subsidiary of the Registrant
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>
- ---------
(1) Incorporated by reference to Registrant's Registration Statement on
Form S-1 declared effective October 14, 2000 (Commission File
No. 333-28833).
(b) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
INDEX
-----
<S> <C>
Schedule II--Valuation and Qualifying Accounts.............. S-1
</TABLE>
All other 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.
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
II-3
<PAGE>
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 20th day of March, 2000.
<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 any and all amendments to this Registration Statement
(including post-effective amendments or any abbreviated registration statement
and any amendments thereto filed pursuant to Rule 462(b) increasing the number
of securities for which registration is sought), and file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, with full power of each to act alone, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
President, Chief Executive
/s/ E. THOMAS HART Officer and Director
------------------------------------------- (Principal Executive March 17, 2000
E. Thomas Hart Officer)
Vice President, Finance,
/s/ ARTHUR O. WHIPPLE Chief Financial Officer
------------------------------------------- and Secretary (Principal March 17, 2000
Arthur O. Whipple Financial Officer)
/s/ IRWIN B. FEDERMAN
------------------------------------------- Director March 17, 2000
Irwin B. Federman
/s/ HUA-THYE CHUA
------------------------------------------- Director March 17, 2000
Hua-Thye Chua
/s/ DONALD P. BEADLE
------------------------------------------- Director March 17, 2000
Donald P. Beadle
/s/ MICHAEL J. CALLAHAN
------------------------------------------- Director March 17, 2000
Michael J. Callahan
</TABLE>
II-5
<PAGE>
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
QUICKLOGIC CORPORATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- END OF
DESCRIPTION OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
- ----------------------------------------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Allowance for Doubtful Accounts
Year ended December 31, 1999........... $ 245 -- -- (51) $ 194
Year ended December 31, 1998........... $ 226 29 -- (10) $ 245
Year ended December 31, 1997........... $ 105 121 -- -- $ 226
Sales Returns and Allowance Reserve
Year ended December 31, 1999........... $3,027 7,099 -- (9,015) $1,111
Year ended December 31, 1998........... $2,402 5,002 -- (4,377) $3,027
Year ended December 31, 1997........... $1,979 5,880 -- (5,457) $2,402
</TABLE>
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1(1) Amended and Restated Certificate of Incorporation of the
Registrant.
3.2(1) Bylaws of the Registrant
4.1(1) Specimen Common Stock certificate of the Registrant.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation.
10.1(1) Form of Indemnification Agreement for directors and
executive officers.
10.2(1) 1999 Stock Plan and form of Option Agreement thereunder.
10.3(1) 1999 Employee Stock Purchase Plan.
10.4(1) 1989 Stock Option Plan.
10.5(1) 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(1) Termination Agreement dated March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation.
10.7(1) Cross License Agreement dated March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation.
10.8(1) Wafer Fabrication Agreement March 29, 1997 between the
Registrant and Cypress Semiconductor Corporation.
10.9(1) Sixth Amended and Restated Shareholder Agreement dated
March 29, 1997 by and among the Registrant, Cypress
Semiconductor Corporation and certain stockholders.
10.10(1) Sixth Amended and Restated Registration Rights Agreement
dated March 29, 1997 by and among the Registrant, Cypress
and certain stockholders.
10.11(1) Technical Transfer, Joint Development License and Foundry
Supply Agreement, dated October 2, 1992, between the
Registrant and Cypress.
10.12(1) 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(1) Business Loan Agreement dated August 9, 1995 between the
Registrant and Silicon Valley Bank, as amended.
10.14(1) Loan and Security Agreement dated August 8, 1996 between the
Registrant and Silicon Valley Bank, as amended.
10.15(1) Export-import Bank Loan and Security Agreement dated
August 8, 1996 between the Registrant and Silicon Valley
Bank.
10.16(1) First Amended and Restated Common Stock Purchase Agreement
dated June 13, 1997 between the Registrant and Cypress.
10.17(1) Take or Pay Agreement dated July 21, 1997 between the
Registrant and Taiwan Semiconductor Manufacturing Company,
Ltd.
10.18(1) Patent Cross License Agreement, dated August 25, 1998,
between the Registrant and Actel Corporation.
16.1(1) Letter of Deloitte & Touche LLP, Independent Accountants,
dated July 28, 1997 regarding change in certifying
accountant.
21.1(1) Subsidiary of the Registrant
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- --------------------- ------------------------------------------------------------
<C> <S>
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>
- ---------
(1) Incorporated by reference to Registrant's Registration Statement on
Form S-1 declared effective October 14, 2000 (Commission File
No. 333-28833).
<PAGE>
EXHIBIT 1.1
UNDERWRITING AGREEMENT
_______________, 2000
FleetBoston Robertson Stephens Inc.
Bear, Stearns & Co., Inc.
J.P. Morgan Securities, Inc.
Soundview Technology Group, Inc.
As Representatives of the several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
Ladies and Gentlemen:
INTRODUCTORY. QuickLogic Corporation, a Delaware corporation (the
"Company"), proposes to issue and sell to the several underwriters named in
SCHEDULE A (the "Underwriters") an aggregate of _________ shares of its Common
Stock, par value $0.001 per share (the "Common Shares"); and the stockholders of
the Company named in SCHEDULE B (the "Selling Stockholders") propose to sell to
the Underwriters an aggregate of _______ Common Shares. The ______ Common
Shares to be sold by the Company and the _________ shares of Common Shares to be
sold by the Selling Stockholders are collectively called the "Firm Shares". In
addition, the Company has granted to the Underwriters an option to purchase up
to an additional ________ Common Shares as provided in Section 2. The _______
additional Common Shares to be sold by the Company pursuant to such option are
called the "Option Shares". The Firm Shares and, if and to the extent such
option is exercised, the Option Shares are collectively called the "Shares".
FleetBoston Robertson Stephens Inc.("Robertson Stephens"), Bear, Stearns & Co.
Inc., J.P. Morgan Securities, Inc., and SoundView Technology Group, Inc. have
agreed to act as representatives of the several Underwriters (in such capacity,
the "Representatives") in connection with the offering and sale of the Common
Shares.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-1
(File No. 333-_____), which contains a form of prospectus, subject to
completion, to be used in connection with the public offering and sale of the
Shares. Each such prospectus, subject to completion, used in connection with
such public offering is called a "preliminary prospectus". Such registration
statement, as amended,
<PAGE>
including the financial statements, exhibits and schedules thereto, in the
form in which it was declared effective by the Commission under the
Securities Act of 1933 and the rules and regulations promulgated thereunder
(collectively, the "Securities Act"), including any information deemed to be
a part thereof at the time of effectiveness pursuant to Rule 430A under the
Securities Act, is called the "Registration Statement". Any registration
statement filed by the Company pursuant to Rule 462(b) under the Securities
Act is called the "Rule 462(b) Registration Statement", and from and after
the date and time of filing of the Rule 462(b) Registration Statement the
term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus". All references in
this Agreement to the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus, or any amendments or
supplements to any of the foregoing, shall include any copy thereof filed
with the Commission pursuant to its Electronic Data Gathering, Analysis and
Retrieval System ("EDGAR").
The Company and the Selling Stockholders hereby confirm their
respective agreements with the Underwriters as follows:
SECTION 1. REPRESENTATIONS AND WARRANTIES.
A. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents, warrants and covenants to each Underwriter as follows:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The Registration
Statement and any Rule 462(b) Registration Statement have been declared
effective by the Commission under the Securities Act. The Company has complied
to the Commission's satisfaction with all requests of the Commission for
additional or supplemental information. No stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement is in effect and no proceedings for such purpose have been instituted
or are pending or, to the best knowledge of the Company, are contemplated or
threatened by the Commission.
Each preliminary prospectus and the Prospectus when filed complied
in all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements
2
<PAGE>
therein not misleading. Each preliminary prospectus, as of its date and the
Prospectus, as amended or supplemented, as of its date and at all subsequent
times through the 30th day after the date hereof, did not and will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties set forth in the two immediately preceding
sentences do not apply to statements in or omissions from the Registration
Statement, any Rule 462(b) Registration Statement, or any post-effective
amendment thereto, or the Prospectus, or any amendments or supplements
thereto, made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by the Representatives
expressly for use therein. There are no contracts or other documents
required to be described in the Prospectus or to be filed as exhibits to the
Registration Statement which have not been described or filed as required.
3
<PAGE>
(b) OFFERING MATERIALS FURNISHED TO UNDERWRITERS. The Company has
delivered to the Representatives four complete conformed copies of the
Registration Statement and of each consent and certificate of experts filed
as a part thereof, and conformed copies of the Registration Statement
(without exhibits) and preliminary prospectuses and the Prospectus, as
amended or supplemented, in such quantities and at such places as the
Representatives have reasonably requested for each of the Underwriters.
(c) DISTRIBUTION OF OFFERING MATERIAL BY THE COMPANY. The Company
has not distributed and will not distribute, prior to the later of the Second
Closing Date (as defined below) and the completion of the Underwriters'
distribution of the Shares, any offering material in connection with the
offering and sale of the Shares other than a preliminary prospectus, the
Prospectus or the Registration Statement.
(d) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by, and is a valid and binding agreement
of, the Company, enforceable in accordance with its terms, except as rights
to indemnification hereunder may be limited by applicable law and except as
the enforcement hereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting the
rights and remedies of creditors or by general equitable principles.
(e) AUTHORIZATION OF THE SHARES TO BE SOLD BY THE COMPANY. The
Shares to be purchased by the Underwriters from the Company have been duly
authorized for issuance and sale pursuant to this Agreement and, when issued
and delivered by the Company pursuant to this Agreement, will be validly
issued, fully paid and nonassessable.
(f) AUTHORIZATION OF THE SHARES TO BE SOLD BY THE SELLING
STOCKHOLDERS. The Common Shares to be purchased by the Underwriters from the
Selling Stockholders, when issued, were validly issued, fully paid and
nonassessable.
(g) NO APPLICABLE REGISTRATION OR OTHER SIMILAR RIGHTS. There are
no persons with registration or other similar rights to have any equity or
debt securities registered for sale under the Registration Statement or
included in the offering contemplated by this Agreement, other than the
Selling Stockholders with respect to the Shares included in the Registration
Statement, except for such rights as have been duly waived.
(h) NO MATERIAL ADVERSE CHANGE. Subsequent to the respective dates
as of which information is given in the Prospectus: (i) there has been no
material adverse change, or any development that could reasonably be expected
to result in a material adverse change, in the condition, financial or
otherwise, or in the earnings, business, operations or prospects, whether or
not arising from transactions in the ordinary course of business, of the
Company and its
4
<PAGE>
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect,
direct or contingent, not in the ordinary course of business nor entered into
any material transaction or agreement not in the ordinary course of business;
and (iii) there has been no dividend or distribution of any kind declared,
paid or made by the Company or, except for dividends paid to the Company or
other subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any
class of capital stock.
(i) INDEPENDENT ACCOUNTANTS. PricewaterhouseCoopers LLP, who have
expressed their opinion with respect to the financial statements (which term
as used in this Agreement includes the related notes thereto) filed with the
Commission as a part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants as
required by the Securities Act and the Securities and Exchange Act of 1934
(the "Exchange Act").
(j) PREPARATION OF THE FINANCIAL STATEMENTS. The financial
statements filed with the Commission as a part of the Registration Statement
and included in the Prospectus present fairly the consolidated financial
position of the Company and its subsidiaries as of and at the dates indicated
and the results of their operations and cash flows for the periods specified.
Such financial statements have been prepared in conformity with generally
accepted accounting principles as applied in the United States, applied on a
consistent basis throughout the periods involved, except as may be expressly
stated in the related notes thereto. No other financial statements or
supporting schedules are required to be included in the Registration
Statement. The financial data set forth in the Prospectus under the captions
"Prospectus Summary--Summary Consolidated Financial Data", "Selected
Consolidated Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement.
(k) COMPANY'S ACCOUNTING SYSTEM. The Company and each of its
subsidiaries maintain a system of accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorization; (ii) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with generally accepted accounting principles as applied in the
United States and to maintain accountability for assets; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared
with existing assets at reasonable intervals and appropriate action is taken
with respect to any differences.
5
<PAGE>
(l) SUBSIDIARIES OF THE COMPANY. The Company does not own or
control, directly or indirectly, any corporation, association or other entity
other than the subsidiaries listed in Exhibit 21 to the Registration
Statement.
(m) INCORPORATION AND GOOD STANDING OF THE COMPANY AND ITS
SUBSIDIARIES. Each of the Company and its subsidiaries has been duly
organized and is validly existing as a corporation or limited liability
company, as the case may be, in good standing under the laws of the
jurisdiction in which it is organized with full corporate power and authority
to own its properties and conduct its business as described in the
prospectus, and is duly qualified to do business as a foreign corporation and
is in good standing under the laws of each jurisdiction which requires such
qualification.
(n) CAPITALIZATION OF THE SUBSIDIARIES. All the outstanding shares
of capital stock of each subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise set
forth in the Prospectus, all outstanding shares of capital stock of the
subsidiaries are owned by the Company either directly or through wholly owned
subsidiaries free and clear of any security interests, claims, liens or
encumbrances.
(o) NO PROHIBITION ON SUBSIDIARIES FROM PAYING DIVIDENDS OR MAKING
OTHER DISTRIBUTIONS. No subsidiary of the Company is currently prohibited,
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from repaying to
the Company any loans or advances to such subsidiary from the Company or from
transferring any of such subsidiary's property or assets to the Company or
any other subsidiary of the Company, except as described in or contemplated
by the Prospectus.
(p) CAPITALIZATION AND OTHER CAPITAL STOCK MATTERS. The
authorized, issued and outstanding capital stock of the Company is as set
forth in the Prospectus under the caption "Capitalization" (other than for
subsequent issuances, if any, pursuant to employee benefit plans described in
the Prospectus or upon exercise of outstanding options described in the
Prospectus). The Common Shares (including the Shares) conform in all material
respects to the description thereof contained in the Prospectus. All of the
issued and outstanding Common Shares have been duly authorized and validly
issued, are fully paid and nonassessable and have been issued in compliance
with federal and state securities laws. None of the outstanding Common
Shares were issued in violation of any preemptive rights, rights of first
refusal or other similar rights to subscribe for or purchase securities of
the Company. There are no authorized or outstanding options, warrants,
preemptive rights, rights of first refusal or other rights to purchase, or
equity or debt securities convertible into or exchangeable or exercisable
for, any capital stock of the Company or any of its subsidiaries other than
those accurately described in the Prospectus. The description of the
Company's stock option and other stock plans or arrangements, and the options
or other rights granted thereunder, set forth
6
<PAGE>
in the Prospectus accurately and fairly presents the information required to
be shown with respect to such plans, arrangements, options and rights.
(q) STOCK EXCHANGE LISTING. The Common Shares are registered
pursuant to Section 12(g) of the Exchange Act and have been approved for
listing on the Nasdaq National Market subject only to official notice of
issuance and the Company has taken no action designed to, or likely to have
the effect of, terminating the registration of the Common Shares under the
Exchange Act or delisting the Common Shares from the Nasdaq National Market,
nor has the Company received any notification that the Commission or the
National Association of Securities Dealers, LLC (the "NASD") is contemplating
terminating such registration or listing.
(r) .NO CONSENTS, APPROVALS OR AUTHORIZATIONS REQUIRED. No
consent, approval, authorization, filing with or order of any court or
governmental agency or regulatory body is required in connection with the
transactions contemplated herein, except such as have been obtained or made
under the Securities Act and such as may be required (i) under the blue sky
laws of any jurisdiction in connection with the purchase and distribution of
the Shares by the Underwriters in the manner contemplated here and in the
Prospectus, (ii) by the National Association of Securities Dealers, LLC and
(iii) by the federal and provincial laws of Canada.
(s) NON-CONTRAVENTION OF EXISTING INSTRUMENTS AGREEMENTS. Neither
the issue and sale of the Shares nor the consummation of any other of the
transactions herein contemplated nor the fulfillment of the terms hereof will
conflict with, result in a breach or violation or imposition of any lien,
charge or encumbrance upon any property or assets of the Company or any of
its subsidiaries pursuant to, (i) the charter or by-laws of the Company or
any of its subsidiaries, (ii) the terms of any indenture, contract, lease,
mortgage, deed of trust, note agreement, loan agreement or other agreement,
obligation, condition, covenant or instrument to which the Company or any of
its subsidiaries is a party or bound or to which its or their property is
subject or (iii) any statute, law, rule, regulation, judgment, order or
decree applicable to the Company or any of its subsidiaries of any court,
regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or any of its
subsidiaries or any of its or their properties.
(t) NO DEFAULTS OR VIOLATIONS. Neither the Company nor any
subsidiary is in violation or default of (i) any provision of its charter or
by-laws, (ii) the terms of any indenture, contract, lease, mortgage, deed of
trust, note agreement, loan agreement or other agreement, obligation,
condition, covenant or instrument to which it is a party or bound or to which
its property is subject or (iii) any statute, law, rule, regulation,
judgment, order or decree of any court, regulatory body, administrative
agency, governmental body, arbitrator or other authority having jurisdiction
over the Company or such subsidiary or any of its properties, as
7
<PAGE>
applicable, except any such violation or default which would not, singly or
in the aggregate, result in a Material Adverse Change except as otherwise
disclosed in the Prospectus.
(u) NO ACTIONS, SUITS OR PROCEEDINGS. No action, suit or
proceeding by or before any court or governmental agency, authority or body
or any arbitrator involving the Company or any of its subsidiaries or its or
their property is pending or, to the best knowledge of the Company,
threatened that (i) could reasonably be expected to have a Material Adverse
Effect on the performance of this Agreement or the consummation of any of the
transactions contemplated hereby or (ii) could reasonably be expected to
result in a Material Adverse Effect.
(v) ALL NECESSARY PERMITS, ETC. The Company and each subsidiary
possess such valid and current certificates, authorizations or permits issued
by the appropriate state, federal or foreign regulatory agencies or bodies
necessary to conduct their respective businesses, and neither the Company nor
any subsidiary has received any notice of proceedings relating to the
revocation or modification of, or non-compliance with, any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, could result in a Material
Adverse Change.
(w) TITLE TO PROPERTIES. Except as otherwise disclosed in the
Registration Statement (including the financial statements attached thereto),
the Company and each of its subsidiaries has good and marketable title to all
the properties and assets reflected as owned in the financial statements
referred to in Section 1(A) (i) above, in each case free and clear of any
security interests, mortgages, liens, encumbrances, equities, claims and
other defects, except such as do not materially and adversely affect the
value of such property and do not materially interfere with the use made or
proposed to be made of such property by the Company or such subsidiary. The
real property, improvements, equipment and personal property held under lease
by the Company or any subsidiary are held under valid and enforceable leases,
with such exceptions as are not material and do not materially interfere with
the use made or proposed to be made of such real property, improvements,
equipment or personal property by the Company or such subsidiary.
(x) TAX LAW COMPLIANCE. The Company and its consolidated
subsidiaries have filed all necessary federal, state and foreign income and
franchise tax returns and have paid all taxes required to be paid by any of
them and, if due and payable, any related or similar assessment, fine or
penalty levied against any of them. The Company has made adequate charges,
accruals and reserves in the applicable financial statements referred to in
Section 1(A)(i) above in respect of all federal, state and foreign income and
franchise taxes for all periods as to which the tax liability of the Company
or any of its consolidated subsidiaries has not been finally determined. The
Company is not aware of any tax deficiency that has been or
8
<PAGE>
might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(y) INTELLECTUAL PROPERTY RIGHTS. Each of the Company and its
subsidiaries owns or possesses adequate rights to use all patents, patent
rights or licenses, inventions, collaborative research agreements, trade
secrets, know-how, trademarks, service marks, trade names and copyrights
which are necessary to conduct its businesses as described in the
Registration Statement and Prospectus; the expiration of any patents, patent
rights, trade secrets, trademarks, service marks, trade names or copyrights
would not result in a Material Adverse Change that is not otherwise disclosed
in the Prospectus; the Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of the
Company by others with respect to any patent, patent rights, inventions,
trade secrets, know-how, trademarks, service marks, trade names or
copyrights, except for those that are disclosed in the Registration Statement
and Prospectus, or that the Company believes would not, if the subject of any
unfavorable decision, ruling or finding, result in a Material Adverse Change;
and the Company has not received any notice of, and has no knowledge of, any
infringement of or conflict with asserted rights of others with respect to
any patent, patent rights, inventions, trade secrets, know-how, trademarks,
service marks, trade names or copyrights which, singly or in the aggregate,
if the subject of an unfavorable decision, ruling or finding, might have a
Material Adverse Change. There is no claim being made against the Company
regarding patents, patent rights or licenses, inventions, collaborative
research, trade secrets, know-how, trademarks, service marks, trade names or
copyrights, except for those that are disclosed in the Registration Statement
and Prospectus, or that the Company believes would not, if the subject of any
unfavorable decision, ruling or finding, result in a Material Adverse Change.
The Company and its subsidiaries do not in the conduct of their business as
now or proposed to be conducted as described in the Prospectus infringe or
conflict with any right or patent of any third party, or any discovery,
invention, product or process which is the subject of a patent application
filed by any third party, known to the Company or any of its subsidiaries,
which such infringement or conflict is reasonably likely to result in a
Material Adverse Change.
(z) Y2K. There are no Y2K issues related to the Company, or any of
its subsidiaries, that (i) are of a character required to be described or
referred to in the Registration Statement or Prospectus by the Securities Act
or by the Exchange Act or the rules and regulations of the Commission
thereunder which have not been accurately described in the Registration
Statement or Prospectus or (ii) might reasonably be expected to result in any
Material Adverse Change or that might materially affect their properties,
assets or rights.
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(aa) NO TRANSFER TAXES OR OTHER FEES. There are no transfer taxes
or other similar fees or charges under Federal law or the laws of any state,
or any political subdivision thereof, required to be paid in connection with
the execution and delivery of this Agreement or the issuance and sale by the
Company of the shares.
(bb) COMPANY NOT AN "INVESTMENT COMPANY". The Company has been
advised of the rules and requirements under the Investment Company Act of
1940, as amended (the "Investment Company Act"). The Company is not, and
after receipt of payment for the Shares will not be, an "investment company"
or an entity "controlled" by an "investment company" within the meaning of
the Investment Company Act and will conduct its business in a manner so that
it will not become subject to the Investment Company Act.
(cc) INSURANCE. Each of the Company and its subsidiaries are
insured by recognized, financially sound and reputable institutions with
policies in such amounts and with such deductibles and covering such risks as
are generally deemed adequate and customary for their businesses including,
but not limited to, policies covering real and personal property owned or
leased by the Company and its subsidiaries against theft, damage,
destruction, acts of vandalism, general liability and Directors and Officers
liability. The Company has no reason to believe that it or any subsidiary
will not be able (i) to renew its existing insurance coverage as and when
such policies expire or (ii) to obtain comparable coverage from similar
institutions as may be necessary or appropriate to conduct its business as
now conducted and at a cost that would not result in a Material Adverse
Change. Neither of the Company nor any subsidiary has been denied any
insurance coverage which it has sought or for which it has applied.
(dd) LABOR MATTERS. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists
or is imminent; and the Company is not aware of any existing or imminent
labor disturbance by the employees of any of its principal suppliers,
subassemblers, value added resellers, subcontractors, original equipment
manufacturers, authorized dealers or international distributors that might be
expected to result in a Material Adverse Change.
(ee) NO PRICE STABILIZATION OR MANIPULATION. The Company has not
taken and will not take, directly or indirectly, any action designed to or
that might be reasonably expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or
resale of the Shares.
(ff) LOCK-UP AGREEMENTS. Each officer and director of the Company,
each Selling Stockholder and each beneficial owner of one or more percent of
the outstanding issued share capital of the Company has agreed to sign an
agreement substantially in the form attached hereto as EXHIBIT A (the
"Lock-up Agreements"). The Company has provided to counsel for the
Underwriters a complete and
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accurate list of all securityholders of the Company and the number and type
of securities held by each securityholder. The Company has provided to
counsel for the Underwriters true, accurate and complete copies of all of the
Lock-up Agreements presently in effect or effected hereby. The Company
hereby represents and warrants that it will not release any of its officers,
directors or other stockholders from any Lock-up Agreements currently
existing or hereafter effected without the prior written consent of Robertson
Stephens.
(gg) RELATED PARTY TRANSACTIONS. There are no business
relationships or related-party transactions involving the Company or any
subsidiary or any other person required to be described in the Prospectus
which have not been described as required.
(hh) ENVIRONMENTAL LAWS. (i) The Company is in compliance with all
rules, laws and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its business, except where the
failure to comply would not result in a Material Adverse Change, (ii) the
Company has received no notice from any governmental authority or third party
of an asserted claim under Environmental Laws, which claim is required to be
disclosed in the Registration Statement and the Prospectus, (iii) the Company
will not be required to make future material capital expenditures to comply
with Environmental Laws and (iv) no property which is owned, leased or
occupied by the Company has been designated as a Superfund site pursuant to
the Comprehensive Response, Compensation, and Liability Act of 1980, as
amended (42 U.S.C. Section 9601, ET SEQ.), or otherwise designated as a
contaminated site under applicable state or local law.
(ii) PERIODIC REVIEW OF COSTS OF ENVIRONMENTAL COMPLIANCE. In the
ordinary course of its business, the Company conducts a periodic review of
the effect of Environmental Laws on the business, operations and properties
of the Company and its subsidiaries, in the course of which it identifies and
evaluates associated costs and liabilities (including, without limitation,
any capital or operating expenditures required for clean-up, closure of
properties or compliance with Environmental Laws or any permit, license or
approval, any related constraints on operating activities and any potential
liabilities to third parties). On the basis of such review and the amount of
its established reserves, the Company has reasonably concluded that such
associated costs and liabilities would not, individually or in the aggregate,
result in a Material Adverse Change.
(jj) ERISA COMPLIANCE. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as amended, and the regulations and published
interpretations thereunder (collectively, "ERISA")) established or maintained
by the Company, its subsidiaries or their "ERISA Affiliates" (as defined
below) are in compliance in all material respects with ERISA. "ERISA
Affiliate" means, with
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respect to the Company or a subsidiary, any member of any group of
organizations described in Sections 414(b),(c),(m) or (o) of the Internal
Revenue Code of 1986, as amended, and the regulations and published
interpretations thereunder (the "Code") of which the Company or such
subsidiary is a member. No "reportable event" (as defined under ERISA) has
occurred or is reasonably expected to occur with respect to any "employee
benefit plan" established or maintained by the Company, its subsidiaries or
any of their ERISA Affiliates. No "employee benefit plan" established or
maintained by the Company, its subsidiaries or any of their ERISA Affiliates,
if such "employee benefit plan" were terminated, would have any "amount of
unfounded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit
plan" established or maintained by the Company, its subsidiaries or any of
their ERISA Affiliates that is intended to be qualified under Section 401(a)
of the Code is so qualified and nothing has occurred, whether by action or
failure to act, which would cause the loss of such qualification.
Any certificate signed by an officer of the Company and
delivered to the Underwriters or to counsel for the Underwriters shall be
deemed to be a representation and warranty by the Company to each Underwriter
as to the matters set forth therein.
B. REPRESENTATIONS AND WARRANTIES OF THE SELLING STOCKHOLDERS. Each
Selling Stockholder represents, warrants and covenants to each Underwriter as
follows:
(a) THE UNDERWRITING AGREEMENT. This Agreement has been duly
authorized, executed and delivered by or on behalf of such Selling
Stockholder and is a valid and binding agreement of such Selling Stockholder,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement
hereof may be limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting the rights and remedies of
creditors or by general equitable principles.
(b) THE CUSTODY AGREEMENT AND POWER OF ATTORNEY. Each of the (i)
Custody Agreement signed by such Selling Stockholder and American Stock
Transfer Trust Company, as custodian (the "Custodian"), relating to the
deposit of the Shares to be sold by such Selling Stockholder (the "Custody
Agreement") and (ii) Power of Attorney appointing certain individuals named
therein as such Selling Stockholder's attorneys-in-fact (each, an
"Attorney-in-Fact") to the extent set forth therein relating to the
transactions contemplated hereby and by the Prospectus (the "Power of
Attorney"), of such Selling Stockholder has been duly authorized, executed
and delivered by such Selling Stockholder and is a valid and binding
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agreement of such Selling Stockholder, enforceable in accordance with its
terms, except as rights to indemnification thereunder may be limited by
applicable law and except as the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting the rights and remedies of creditors or by general
equitable principles. Each Selling Stockholder agrees that the Shares to be
sold by such Selling Stockholder on deposit with the Custodian is subject to
the interests of the Underwriters, that the arrangements made for such
custody are to that extent irrevocable until May 15, 2000, and that the
obligations of such Selling Stockholder hereunder shall not be terminated,
except as provided in this Agreement or in the Custody Agreement, by any act
of the Selling Stockholder, by operation of law, by death or incapacity of
such Selling Stockholder or by the occurrence of any other event. If such
Selling Stockholder should die or become incapacitated, or in any other event
should occur, before the delivery of the Shares to be sold by such Selling
Stockholder hereunder, the documents evidencing the Shares to be sold by such
Selling Stockholder then on deposit with the Custodian shall be delivered by
the Custodian in accordance with the terms and conditions of this Agreement
as if such death, incapacity or other event had not occurred, regardless of
whether or not the Custodian shall have received notice thereof.
(c) TITLE TO SHARES TO BE SOLD. Such Selling Stockholder is the
lawful owner of the Shares to be sold by such Selling Stockholder hereunder
and upon sale and delivery of, and payment for, such Shares, as provided
herein, such Selling Stockholder will convey good and marketable title to
such Shares, free and clear of all liens, encumbrances, equities and claims
whatsoever.
(d) ALL AUTHORIZATIONS OBTAINED. Such Selling Stockholder has, and
on the First Closing Date and the Second Closing Date (as defined below) will
have, good and valid title to all of the Shares which may be sold by such
Selling Stockholder pursuant to this Agreement on such date and the legal
right and power, and all authorizations and approvals required by law and
under its charter or by-laws, to enter into this Agreement and its Custody
Agreement and Power of Attorney, to sell, transfer and deliver all of the
Shares which may be sold by such Selling Stockholder pursuant to this
Agreement and to comply with its other obligations hereunder and thereunder.
(e) NO FURTHER CONSENTS, AUTHORIZATION OR APPROVALS. No consent,
approval, authorization or order of any court or governmental agency or body
is required for the consummation by such Selling Stockholder of the
transactions contemplated herein, except such as may have been obtained under
the Securities Act and such as may be required under the federal and
provincial securities laws of Canada or the blue sky laws or any jurisdiction
in connection with the purchase and distribution of the Shares by the
Underwriters and such other approvals as have been obtained.
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(f) NON-CONTRAVENTION. Neither the sale of the Securities being
sold by such Selling Stockholder nor the consummation of any other of the
transactions herein contemplated by such Selling Stockholder or the
fulfillment of the terms hereof by such Selling Stockholder will conflict
with, result in a breach or violation of, or constitute a default under any
law or the terms of any indenture or other agreement or instrument to which
such Selling Stockholder is party or bound, any judgment, order or decree
applicable to such Selling Stockholder or any court or regulatory body,
administrative agency, governmental body or arbitrator having jurisdiction
over such Selling Stockholder.
(g) NO REGISTRATION OR OTHER SIMILAR RIGHTS. Such Selling
Stockholder does not have any registration or other similar rights to have
any equity or debt securities registered for sale by the Company under the
Registration Statement or included in the offering contemplated by this
Agreement, except for such rights as are described in the Prospectus under
"Shares Eligible for Future Sale".
(h) NO PREEMPTIVE, CO-SALE OR OTHER RIGHTS. Such Selling
Stockholder does not have, or has waived prior to the date hereof, any
preemptive right, co-sale right or right of first refusal or other similar
right to purchase any of the Shares that are to be sold by the Company or any
of the other Selling Stockholders to the Underwriters pursuant to this
Agreement; and such Selling Stockholder does not own any warrants, options or
similar rights to acquire, and does not have any right or arrangement to
acquire, any capital stock, right, warrants, options or other securities from
the Company, other than those described in the Registration Statement and the
Prospectus.
(i) DISCLOSURE MADE BY SUCH SELLING STOCKHOLDER IN THE PROSPECTUS.
All information furnished by or on behalf of such Selling Stockholder in
writing expressly for use in the Registration Statement and Prospectus is,
and on the First Closing Date and the Second Closing Date (as defined below)
will be, true, correct, and complete in all material respects, and does not,
and on the First Closing Date and the Second Closing Date will not, contain
any untrue statement of a material fact or omit to state any material fact
necessary to make such information not misleading. Such Selling Stockholder
confirms as accurate the number of shares of Shares set forth opposite such
Selling Stockholder's name in the Prospectus under the caption "Principal and
Selling Stockholders" (both prior to and after giving effect to the sale of
the Shares).
(j) NO PRICE STABILIZATION OR MANIPULATION. Such Selling
Stockholder has not taken and will not take, directly or indirectly, any
action designed to or that might be reasonably expected to cause or result in
stabilization or manipulation of the price of the Common Stock to facilitate
the sale or resale of the Shares.
(k) NO TRANSFER TAXES OR OTHER FEES. There are no transfer taxes or
other similar fees or charges under Federal law or the laws of any state, or any
political
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subdivision thereof, required to be paid in connection with the execution and
delivery of this Agreement or the sale by the Selling Stockholders of the
Shares.
(l) DISTRIBUTION OF OFFERING MATERIALS BY THE SELLING STOCKHOLDERS.
The Selling Stockholders have not distributed and will not distribute, prior
to the later of the Second Closing Date (as defined below) and the completion
of the Underwriters' distribution of the Shares, any offering material in
connection with the offering and sale of the Shares by such Selling
Stockholder other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(m) COMPANY REPRESENTATIONS AND WARRANTIES. In the case of ____ and
____, such Selling Stockholder has no reason to believe that the
representations and warranties of the Company contained in Section 1(A)
hereof are not true and correct, is familiar with the Registration Statement
and the Prospectus and has no knowledge of any material fact, condition or
information not disclosed in the Registration Statement or the Prospectus
which has had or may result in a Material Adverse Change on the condition,
financial or otherwise, or on the earnings, business, operation or prospects,
whether or not arising from transactions in the ordinary course of business
of the Company and its subsidiaries, considered as one entity, and is not
prompted to sell the Shares to be sold by such Selling Stockholder by any
information concerning the Company which is not set forth in the Registration
Statement and the Prospectus.
Any certificate signed by or on behalf of any Selling Stockholder and
delivered to the Representatives or to counsel for the Underwriters shall be
deemed to be a representation and warranty by such Selling Stockholder to
each Underwriter as to the matters covered thereby.
SECTION 2. PURCHASE, SALE AND DELIVERY OF THE SHARES.
(a) THE FIRM SHARES. Upon the terms herein set forth, (i) the
Company agrees to issue and sell to the several Underwriters an aggregate of
_________ Firm Shares and (ii) the Selling Stockholders agree to sell to the
several Underwriters an aggregate of _________ Firm Shares. On the basis of
the representations, warranties and agreements herein contained, and upon the
terms but subject to the conditions herein set forth, the Underwriters agree,
severally and not jointly, to purchase from the Company and the Selling
Stockholders the respective number of Firm Shares set forth opposite their
names on SCHEDULE A. The purchase price per Firm Share to be paid by the
several Underwriters to the Company and the Selling Stockholders shall be
$____ per share.
(b) THE FIRST CLOSING DATE. Delivery of the Firm Shares to be
purchased by the Underwriters and payment therefor shall be made by the
Company and the Representatives at 6:00 a.m. San Francisco time, at the
offices of Wilson Sonsini
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Goodrich & Rosati, Professional Corporation, 650 Page Mill Road, Palo Alto,
California (or at such other place as may be agreed upon among the
Representatives and the Company), (i) on the third (3rd) full business day
following the first day that Shares are traded, (ii) if this Agreement is
executed and delivered after 1:30 P.M., San Francisco time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (iii) at such other time and date not later that seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to
which payment and delivery shall have been postponed pursuant to Section 8
hereof), such time and date of payment and delivery being herein called the
"Closing Date;" provided, however, that if the Company has not made available
to the Representatives copies of the Prospectus within the time provided in
Section 2(g) hereof, the Representatives may, in its sole discretion,
postpone the Closing Date until no later that two (2) full business days
following delivery of copies of the Prospectus to the Representatives.
(c) THE OPTION SHARES; THE SECOND CLOSING DATE. In addition, on
the basis of the representations, warranties and agreements herein contained,
and upon the terms but subject to the conditions herein set forth, the
Company hereby grants an option to the several Underwriters to purchase,
severally and not jointly, up to an aggregate of _________ Option Shares from
the Company at the purchase price per share to be paid by the Underwriters
for the Firm Shares. The option granted hereunder is for use by the
Underwriters solely in covering any over-allotments in connection with the
sale and distribution of the Firm Shares. The option granted hereunder may
be exercised at any time upon notice by the Representatives to the Company,
which notice may be given at any time within 30 days from the date of this
Agreement. The time and date of delivery of the Option Shares, if subsequent
to the First Closing Date, is called the "Second Closing Date" and shall be
determined by the Representatives and shall not be earlier than three nor
later than five full business days after delivery of such notice of exercise.
If any Option Shares are to be purchased, (i) each Underwriter agrees,
severally and not jointly, to purchase the number of Option Shares (subject
to such adjustments to eliminate fractional shares as the Representatives may
determine) that bears the same proportion to the total number of Option
Shares to be purchased as the number of Firm Shares set forth on SCHEDULE A
opposite the name of the Underwriter bears to the total number of Firm Shares
and (ii) the Company agrees to sell the Option Shares. The Representatives
may cancel the option at any time prior to its expiration by giving written
notice of such cancellation to the Company.
(d) PUBLIC OFFERING OF THE SHARES. The Representatives hereby
advise the Company and the Selling Stockholders that the Underwriters intend
to offer for sale to the public, as described in the Prospectus, their
respective portions of the Shares as soon after this Agreement has been
executed and the Registration
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Statement has been declared effective as the Representatives, in its sole
judgment, has determined is advisable and practicable.
(e) PAYMENT FOR THE SHARES. Payment for the Shares to be sold by
the Company shall be made at the First Closing Date (and, if applicable, at
the Second Closing Date) by wire transfer of immediately available funds to
the order of the Company. Payment for the Shares to be sold by the Selling
Stockholders shall be made at the First Closing Date by wire transfer of
immediately available funds to the order of the Custodian.
It is understood that the Representatives have been authorized,
for their own account and the accounts of the several Underwriters, to accept
delivery of and receipt for, and make payment of the purchase price for, the
Firm Shares and any Option Shares the Underwriters have agreed to purchase.
Robertson Stephens, individually and not as Representative of the
Underwriters, may (but shall not be obligated to) make payment for any Shares
to be purchased by any Underwriter whose funds shall not have been received
by the First Closing Date or the Second Closing Date, as the case may be, for
the account of such Underwriter, but any such payment shall not relieve such
Underwriter from any of its obligations under this Agreement.
Each Selling Stockholder hereby agrees that (i) it will pay all
stock transfer taxes, stamp duties and other similar taxes, if any, payable
upon the sale or delivery of the Shares to be sold by such Selling
Stockholder to the several Underwriters, or otherwise in connection with the
performance of such Selling Stockholder's obligations hereunder and (ii) the
Custodian is authorized to deduct for such payment any such amounts from the
proceeds to such Selling Stockholder hereunder and to hold such amounts for
the account of such Selling Stockholder with the Custodian under the Custody
Agreement.
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(f) DELIVERY OF THE SHARES. The Company and the Selling
Stockholders shall deliver, or cause to be delivered a credit representing
the Firm Shares to an account or accounts at The Depository Trust Company as
designated by the Representatives for the accounts of the Representatives and
the several Underwriters at the First Closing Date, against the irrevocable
release of a wire transfer of immediately available funds for the amount of
the purchase price therefor. The Company shall also deliver, or cause to be
delivered a credit representing the Option Shares to an account or accounts
at The Depository Trust Company as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date or the Second Closing Date, as the case may be, against the
irrevocable release of a wire transfer of immediately available funds for the
amount of the purchase price therefor. Time shall be of the essence, and
delivery at the time and place specified in this Agreement is a further
condition to the obligations of the Underwriters.
(g) DELIVERY OF PROSPECTUS TO THE UNDERWRITERS. Not later than
12:00 noon on the second business day following the date the Shares are
released by the Underwriters for sale to the public, the Company shall
deliver or cause to be delivered copies of the Prospectus in such quantities
and at such places as the Representatives shall request.
SECTION 3. Covenants of the Company and the Selling Stockholders.
A. COVENANTS OF THE COMPANY. The Company further covenants and
agrees with each Underwriter as follows:
(a) REGISTRATION STATEMENT MATTERS. The Company will, (i) use its
best efforts to cause the Registration Statement to become effective or, if
the procedure in Rule 430A of the Securities Act is followed, to prepare and
timely file with the Commission under Rule 424(b) under the Securities Act a
Prospectus in a form approved by the Representatives containing information
previously omitted at the time of effectiveness of the Registration Statement
in reliance on Rule 430A of the Securities Act and (ii) not file any
amendment to the Registration Statement or supplement to the Prospectus of
which the Representatives shall not previously have been advised and
furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the
Company shall file a Rule 462(b) Registration Statement with the Commission
in compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
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(b) SECURITIES ACT COMPLIANCE. The Company will advise the
Representatives promptly (i) when the Registration Statement or any
post-effective amendment thereto shall have become effective, (ii) of receipt
of any comments from the Commission, (iii) of any request of the Commission
for amendment of the Registration Statement or for supplement to the
Prospectus or for any additional information and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or the use of the Prospectus or of the institution of any
proceedings for that purpose. The Company will use its best efforts to
prevent the issuance of any such stop order preventing or suspending the use
of the Prospectus and to obtain as soon as possible the lifting thereof, if
issued.
(c) BLUE SKY COMPLIANCE. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify
the Shares for sale under the securities laws of such jurisdictions (both
national and foreign) as the Representatives may reasonably have designated
in writing and will make such applications, file such documents, and furnish
such information as may be reasonably required for that purpose, provided the
Company shall not be required to qualify as a foreign corporation or to file
a general consent to service of process in any jurisdiction where it is not
now so qualified or required to file such a consent. The Company will, from
time to time, prepare and file such statements, reports and other documents,
as are or may be required to continue such qualifications in effect for so
long a period as the Representatives may reasonably request for distribution
of the Shares.
(d) AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS AND OTHER
SECURITIES ACT MATTERS. The Company will comply with the Securities Act and
the Exchange Act, and the rules and regulations of the Commission thereunder,
so as to permit the completion of the distribution of the Shares as
contemplated in this Agreement and the Prospectus. If during the period in
which a prospectus is required by law to be delivered by an Underwriter or
dealer, any event shall occur as a result of which, in the judgment of the
Company or in the reasonable opinion of the Representatives or counsel for
the Underwriters, it becomes necessary to amend or supplement the Prospectus
in order to make the statements therein, in the light of the circumstances
existing at the time the Prospectus is delivered to a purchaser, not
misleading, or, if it is necessary at any time to amend or supplement the
Prospectus to comply with any law, the Company promptly will prepare and file
with the Commission, and furnish at its own expense to the Underwriters and
to dealers, an appropriate amendment to the Registration Statement or
supplement to the Prospectus so that the Prospectus as so amended or
supplemented will not, in the light of the circumstances when it is so
delivered, be misleading, or so that the Prospectus will comply with the law.
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(e) COPIES OF ANY AMENDMENTS AND SUPPLEMENTS TO THE PROSPECTUS.
The Company agrees to furnish the Representatives, without charge, during the
period beginning on the date hereof and ending on the later of the First
Closing Date or such date, as in the opinion of counsel for the Underwriters,
the Prospectus is no longer required by law to be delivered in connection
with sales by an Underwriter or dealer (the "Prospectus Delivery Period"), as
many copies of the Prospectus and any amendments and supplements thereto
(including any documents incorporated or deemed incorporated by reference
therein) as the Representatives may request.
(f) INSURANCE. The Company shall maitain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby.
(g) NOTICE OF SUBSEQUENT EVENTS. If at any time during the ninety
(90) day period after the Registration Statement becomes effective, any
rumor, publication or event relating to or affecting the Company shall occur
as a result of which in Robertson Stephens' opinion the market price of the
Shares has been or is likely to be materially affected (regardless of whether
such rumor, publication or event necessitates a supplement to or amendment of
the Prospectus), the Company will, after written notice from Robertson
Stephens advising the Company to the effect set forth above, forthwith
prepare, consult with Robertson Stephens concerning the substance of and
disseminate a press release or other public statement, reasonably
satisfactory to Robertson Stephens, responding to or commenting on such
rumor, publication or event.
(h) USE OF PROCEEDS. The Company shall apply the net proceeds from
the sale of the Shares sold by it in the manner described under the caption
"Use of Proceeds" in the Prospectus.
(i) TRANSFER AGENT. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Shares.
(j) EARNINGS STATEMENT. The Company shall make generally available
to its security holders as soon as practicable, but in any event not later
than eighteen months after the effective date of the Registration Statement
(as defined in Rule 158(c) under the Securities Act), an earnings statement
of the Company (which need not be audited) complying with Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder
(including, at the option of the Company, Rule 158).
(k) PERIODIC REPORTING OBLIGATIONS. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under
the Exchange Act.
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(l) AGREEMENT NOT TO OFFER OR SELL ADDITIONAL SECURITIES. The
Company will not offer, sell or contract to sell, or otherwise dispose of or
enter into any transaction which is designed to, or could be expected to,
result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise by the Company or
any affiliate of the Company or any person in privity with the Company or any
affiliate of the Company) directly or indirectly, or announce the offering
of, any other Common Shares or any securities convertible into, or
exchangeable for, Common Shares; provided, however, that the Company may (i)
issue and sell Common Shares pursuant to any director or employee stock
option plan, stock ownership plan or dividend reinvestment plan of the
Company in effect at the date of the Prospectus and described in the
Prospectus so long as none of those shares may be transferred and the Company
shall enter stop transfer instructions with its transfer agent and registrar
against the transfer of any such Common Shares and (ii) the Company may issue
Common Shares issuable upon the conversion of securities or the exercise of
warrants outstanding at the date of the Prospectus and described in the
Prospectus. These restrictions terminate after the close of trading of the
Shares on the 90th day of (and including) the day the Shares commenced
trading on the Nasdaq National Market (the "Lock Up Period").
(m) FUTURE REPORTS TO THE REPRESENTATIVES. During the period of
five years hereafter the Company will furnish to the Representatives (i) as
soon as practicable after the end of each fiscal year, copies of the Annual
Report of the Company containing the balance sheet of the Company as of the
close of such fiscal year and statements of income, stockholders' equity and
cash flows for the year then ended and the opinion thereon of the Company's
independent public or certified public accountants; (ii) as soon as
practicable after the filing thereof, copies of each proxy statement, Annual
Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form
8-K or other report filed by the Company with the Commission, the National
Association of Securities Dealers, LLC or any securities exchange; and (iii)
as soon as available, copies of any report or communication of the Company
mailed generally to holders of its capital stock.
(n) EXCHANGE ACT COMPLIANCE. During the Prospectus Delivery
Period, the Company will file all documents required to be filed with the
Commission pursuant to Section 13, 14 or 15 of the Exchange Act in the manner
and within the time periods required by the Exchange Act.
B. COVENANTS OF THE SELLING STOCKHOLDERS. Each Selling
Stockholder further covenants and agrees with each Underwriter:
(a) NOT TO OFFER OR SELL ADDITIONAL SECURITIES. Such Selling
Stockholder will not, during the Lock-Up Period, make a disposition of
Securities (as defined in EXHIBIT A hereto) now owned or hereafter acquired
directly by such person or with respect to which such person has or hereafter
acquires the power of disposition,
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otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or shareholders of such person, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction, (iii) with respect to dispositions of Common Shares acquired on
the open market, (iv) pursuant to the Company's Employee Stock Purchase Plan,
provided such disposition is effected as provided in such Selling
Stockholder's Lock-Up Agreement with the Representatives; or (v) pursuant to
this Agreement or with the prior written consent of Robertson Stephens. The
foregoing restriction has been expressly agreed to preclude the holder of the
Securities from engaging in any hedging or other transaction which is
designed to or reasonably expected to lead to or result in a disposition of
Securities during the Lock-Up Period, even if such Securities would be
disposed of by someone other than such holder. Such prohibited hedging or
other transactions would include, without limitation, any short sale (whether
or not against the box) or any purchase, sale or grant of any right
(including, without limitation, any put or call option) with respect to any
Securities or with respect to any security (other than a broad-based market
basket or index) that includes, relates to or derives any significant part of
its value from Securities. Furthermore, such person has also agreed and
consented to the entry of stop transfer instructions with the Company's
transfer agent against the transfer of the Securities held by such person
except in compliance with this restriction.
(b) DELIVERY OF FORMS W-9. To deliver to the Representatives prior
to the First Closing Date a properly completed and executed United States
Treasury Form W-9.
(c) NOTIFICATION OF UNTRUE STATEMENTS, ETC. If, at any time prior
to the date on which the distribution of the Common Shares as contemplated
herein and in the Prospectus has been completed, as determined by the
Representatives, such Selling Stockholder has knowledge of the occurrence of
any event as a result of which the Prospectus or the Registration Statement,
in each case as then amended or supplemented, would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, such Selling Stockholder will promptly notify the
Company and the Representatives.
SECTION 4. CONDITIONS OF THE OBLIGATIONS OF THE UNDERWRITERS. The
obligations of the several Underwriters to purchase and pay for the Firm
Shares as provided herein on the First Closing Date and, with respect to the
Option Shares, the Second Closing Date, shall be subject to the accuracy of
the representations and warranties on the part of the Company and the Selling
Stockholders set forth in Section 1 Sections 1(A) and 1(B) hereof as of the
date hereof and as of the First Closing Date as though then made and, with
respect to the Option Shares, as of the Second Closing Date as though then
made, to the timely performance by the
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Company and the Selling Stockholders of their respective covenants and other
obligations hereunder, and to each of the following additional conditions:
(a) COMPLIANCE WITH REGISTRATION REQUIREMENTS; NO STOP ORDER; NO
OBJECTION FROM THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, LLC. The
Registration Statement shall have become effective prior to the execution of
this Agreement, or at such later date as shall be consented to in writing by
Robertson Stephens; and no stop order suspending the effectiveness thereof
shall have been issued and no proceedings for that purpose shall have been
initiated or, to the knowledge of the Company, any Selling Stockholders or
any Underwriter, threatened by the Commission, and any request of the
Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to
the satisfaction of Underwriters' Counsel; and the National Association of
Securities Dealers, LLC shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) CORPORATE PROCEEDINGS. All corporate proceedings and other
legal matters in connection with this Agreement, the form of Registration
Statement and the Prospectus, and the registration, authorization, issue,
sale and delivery of the Shares, shall have been reasonably satisfactory to
Underwriters' Counsel, and such counsel shall have been furnished with such
papers and information as they may reasonably have requested to enable them
to pass upon the matters referred to in this Section.
(c) NO MATERIAL ADVERSE CHANGE. Subsequent to the execution and
delivery of this Agreement and prior to the First Closing Date, or the Second
Closing Date, as the case may be, there shall not have been any Material
Adverse Change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise from that set forth in the
Registration Statement or Prospectus, which, in Robertson Stephens' sole
judgment, is material and adverse and that makes it, in Robertson Stephens'
sole judgment, impracticable or inadvisable to proceed with the public
offering of the Shares as contemplated by the Prospectus.
(d) OPINION OF COUNSEL FOR THE COMPANY. Robertson Stephens shall
have received on the First Closing Date, or the Second Closing Date, as the
case may be, an opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation counsel for the Company substantially in the form of EXHIBIT B
attached hereto, dated the First Closing Date, or the Second Closing Date,
addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters.
Counsel rendering the opinion contained in EXHIBIT B may rely as to
questions of law not involving the laws of the United States or the State of
California and
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Delaware upon opinions of local counsel, and as to questions of fact upon
representations or certificates of officers of the Company, the Selling
Stockholders or officers of the Selling Stockholders (when the Selling
Stockholder is not a natural person), and of government officials, in which
case their opinion is to state that they are so relying and that they have no
knowledge of any material misstatement or inaccuracy in any such opinion,
representation or certificate. Copies of any opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of
the Underwriters, and to Underwriters' Counsel.
(e) OPINION OF INTELLECTUAL PROPERTY COUNSEL FOR THE COMPANY.
Robertson Stephens shall have received on the First Closing Date, or the
Second Closing Date, as the case may be, an opinion of Skjerven, Morrill,
MacPherson, Franklin & Friel LLP, intellectual property counsel for the
Company in form reasonably satisfactory to Robertson Stephens
(f) OPINION OF COUNSEL FOR THE UNDERWRITERS. Robertson Stephens
shall have received on the First Closing Date or the Second Closing Date, as
the case may be, an opinion of Orrick, Herrington & Sutcliffe LLP,
substantially in the form of EXHIBIT C hereto. The Company shall have
furnished to such counsel such documents as they may have requested for the
purpose of enabling them to pass upon such matters.
(g) ACCOUNTANTS' COMFORT LETTER. Robertson Stephens shall have
received on the First Closing Date and on the Second Closing Date, as the
case may be, a letter from PricewaterhouseCoopers LLP addressed to the
Underwriters, dated the First Closing Date or the Second Closing Date, as the
case may be, confirming that they are independent certified public
accountants with respect to the Company within the meaning of the Securities
Act and the applicable published Rules and Regulations and based upon the
procedures described in such letter delivered to Robertson Stephens
concurrently with the execution of this Agreement (herein called the
"Original Letter"), but carried out to a date not more than four (4) business
days prior to the First Closing Date or the Second Closing Date, as the case
may be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the First
Closing Date or the Second Closing Date, as the case may be, and (ii) setting
forth any revisions and additions to the statements and conclusions set forth
in the Original Letter which are necessary to reflect any changes in the
facts described in the Original Letter since the date of such letter, or to
reflect the availability of more recent financial statements, data or
information. The letter shall not disclose any change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise
from that set forth in the Registration Statement or Prospectus, which, in
Robertson Stephens' sole judgment, is material and adverse and that makes it,
in Robertson Stephens' sole judgment, impracticable or inadvisable to proceed
with the public
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offering of the Shares as contemplated by the Prospectus. The Original
Letter from PricewaterhouseCoopers LLP shall be addressed to or for the use
of the Underwriters in form and substance satisfactory to the Underwriters
and shall (i) represent, to the extent true, that they are independent
certified public accountants with respect to the Company within the meaning
of the Securities Act and the applicable published Rules and Regulations,
(ii) set forth their opinion with respect to their examination of the
consolidated balance sheet of the Company as of December 31, 1999, 1998 and
1997 and related consolidated statements of operations, stockholders' equity,
and cash flows for the twelve (12) months ended December 31, 1999, 1998, and
1997, and (iii) address other matters agreed upon by PricewaterhouseCoopers
LLP and you. In addition, Robertson Stephens shall have received from
PricewaterhouseCoopers LLP a letter addressed to the Company and made
available to Robertson Stephens for the use of the Underwriters stating that
their review of the Company's system of internal accounting controls, to the
extent they deemed necessary in establishing the scope of their examination
of the Company's consolidated financial statements as of December 31, 1999,
did not disclose any weaknesses in internal controls that they considered to
be material weaknesses.
(h) OFFICERS' CERTIFICATE. Robertson Stephens shall have received
on the First Closing Date and the Second Closing Date, as the case may be, a
certificate of the Company, dated the First Closing Date or the Second
Closing Date, as the case may be, signed by the Chief Executive Officer and
Chief Financial Officer of the Company, to the effect that, and Robertson
Stephens shall be satisfied that:
(i) The representations and warranties of the Company in this
Agreement are true and correct, as if made on and as of the First Closing
Date or the Second Closing Date, as the case may be, and the Company has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the First Closing Date
or the Second Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or
supplements thereto contained all material information required to be
included therein by the Securities Act and the applicable rules and
regulations of the Commission thereunder, and in all material respects
conformed to the requirements of the Securities Act and the applicable
rules and regulations of the Commission thereunder, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
did not and does not include any
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untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; and, since the effective date of the
Registration Statement, there has occurred no event required to be set
forth in an amended or supplemented Prospectus which has not been so
set forth; and
(iv) Subsequent to the respective dates as of which information is
given in the Registration Statement and Prospectus, there has not been
(a) any material adverse change in the condition (financial or
otherwise), earnings, operations, business or business prospects of the
Company and its subsidiaries considered as one enterprise, (b) any
transaction that is material to the Company and its subsidiaries
considered as one enterprise, except transactions entered into in the
ordinary course of business, (c) any obligation, direct or contingent,
that is material to the Company and its subsidiaries considered as one
enterprise, incurred by the Company or its subsidiaries, except
obligations incurred in the ordinary course of business, (d) any change
in the capital stock or outstanding indebtedness of the Company or any of
its subsidiaries that is material to the Company and its subsidiaries
considered as one enterprise, (e) any dividend or distribution of any
kind declared, paid or made on the capital stock of the Company or any of
its subsidiaries, or (f) any loss or damage (whether or not insured) to
the property of the Company or any of its subsidiaries which has been
sustained or will have been sustained which has a material adverse effect
on the condition (financial or otherwise), earnings, operations, business
or business prospects of the Company and its subsidiaries considered as
one enterprise.
(i) LOCK-UP AGREEMENT FROM CERTAIN STOCKHOLDERS OF THE COMPANY. The
Company shall have obtained and delivered to Robertson Stephens an agreement
substantially in the form of EXHIBIT A attached hereto from each officer and
director of the Company, each Selling Stockholder, [and each beneficial owner of
one or more percent of the outstanding issued share capital of the Company.]
(j) OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS. Robertson
Stephens shall have received on the First Closing Date and the Second Closing
Date, as the case may be, the opinion of Wilson Sonsini Goodrich & Rosati,
Professional Corporation, counsel for the Selling Stockholders substantially in
the form of EXHIBIT D attached hereto, dated as of such Closing Date, addressed
to the Underwriters and with reproduced copies or signed counterparts thereof
for each of the Underwriters.
In rendering such opinion, such counsel may rely as to questions of law
not involving the laws of the United States or State of Delaware upon opinions
of local counsel and as to questions of fact upon representations or
certificates of the Selling Stockholders or officers of the Selling Stockholders
and of governmental officials, in which case their opinion is to state that they
are so relying and that
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they have no knowledge of any material misstatement or inaccuracy of any
material misstatement or inaccuracy in any such opinion, representation or
certificate so relied upon shall be delivered to you, as Representatives of
the Underwriters, and to Underwriters' Counsel.
(k) SELLING STOCKHOLDERS' CERTIFICATE. On each of the First Closing
Date and the Second Closing Date, as the case may be, the Representatives shall
received a written certificate executed by the Attorney-in-Fact of each Selling
Stockholder, dated as of such Closing Date, to the effect that:
(i) the representations, warranties and covenants of such Selling
Stockholder set forth in Section 1(B) of this Agreement are true and
correct with the same force and effect as though expressly made by such
Selling Stockholder on and as of such Closing Date; and
(ii) such Selling Stockholder has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at
or prior to such Closing Date.
(l) SELLING STOCKHOLDERS' DOCUMENTS. At least three business days
prior to the date hereof, the Company and the Selling Stockholders shall have
furnished for review by the Representatives copies of the Powers of Attorney and
Custody Agreement executed by each of the Selling Stockholders and such further
information, certificates and documents as the Representatives may reasonably
request.
(m) STOCK EXCHANGE LISTING. The Shares shall have been approved for
inclusion on the Nasdaq National Market, subject only to official notice of
issuance.
(n) COMPLIANCE WITH PROSPECTUS DELIVERY REQUIREMENTS. The Company
shall have complied with the provisions of Sections 2(g) and 3(e) hereof with
respect to the furnishing of Prospectuses.
(o) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company and the Selling Stockholders at any
time on or prior to the First Closing Date and, with respect to the Option
Shares, at any time prior to
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the Second Closing Date, which termination shall be without liability on the
part of any party to any other party, except that Section 5 (Payment of
Expenses), Section 6 (Reimbursement of Underwriters' Expenses), Section 7
(Indemnification and Contribution) and Section 10 (Representations and
Indemnities to Survive Delivery) shall at all times be effective and shall
survive such termination.
SECTION 5. PAYMENT OF EXPENSES. The Company agrees to pay all
costs, fees and expenses incurred in connection with the performance of its
obligations hereunder and in connection with the transactions contemplated
hereby, including without limitation (i) all expenses incident to the
issuance and delivery of the Common Shares (including all printing and
engraving costs), (ii) all fees and expenses of the registrar and transfer
agent of the Common Stock, (iii) all necessary issue, transfer and other
stamp taxes in connection with the issuance and sale of the Shares to the
Underwriters, (iv) all fees and expenses of the Company's counsel,
independent public or certified public accountants and other advisors, (v)
all costs and expenses incurred in connection with the preparation, printing,
filing, shipping and distribution of the Registration Statement (including
financial statements, exhibits, schedules, consents and certificates of
experts), each preliminary prospectus and the Prospectus, and all amendments
and supplements thereto, and this Agreement, (vi) all filing fees, attorneys'
fees and expenses incurred by the Company or the Underwriters in connection
with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Shares for offer and
sale under the state securities or blue sky laws or the provincial securities
laws of Canada or any other country, and, if requested by the Underwriters,
preparing and printing a "Blue Sky Survey", an "International Blue Sky
Survey" or other memorandum, and any supplements thereto, advising the
Underwriters of such qualifications, registrations and exemptions, (vii) the
filing fees incident to, and the reasonable fees and expenses of counsel for
the Underwriters in connection with, the National Association of Securities
Dealers, LLC review and approval of the Underwriters' participation in the
offering and distribution of the Common Shares, (viii) the fees and expenses
associated with including the Common Shares on the Nasdaq National Market,
(ix) all costs and expenses incident to the travel and accommodation of the
Company's employees on the "roadshow" (x) all other fees, costs and expenses
referred to in Item 13 of Part II of the Registration Statement and (xi) fees
and expenses of the Custodian. Except as provided in this Section 5, Section
6, and Section 7 hereof, the Underwriters shall pay their own expenses,
including the fees and disbursements of their counsel.
Each Selling Stockholder further agrees with each Underwriter to
pay (directly or by reimbursement) all fees and expenses incident to the
performance of its obligations under this Agreement which are not otherwise
specifically provided for herein, including but not limited to (i) fees and
expenses of counsel and other
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advisors for such Selling Stockholder, and (ii) taxes incident to the sale
and delivery of the Common Shares to be sold by such Selling Stockholder to
the Underwriters hereunder (which taxes, if any, may be deducted by the
Custodian under the provisions of Section 2 of this Agreement).
This Section 5 shall not affect or modify any separate, valid
agreement relating to the allocation of payment of expenses between the
Company, on the one hand, and the Selling Stockholders, on the other hand.
SECTION 6. REIMBURSEMENT OF UNDERWRITERS' EXPENSES. If this
Agreement is terminated by the Representatives pursuant to Section 4, Section
9 or Section 15 or if the sale to the Underwriters of the Shares on the First
Closing Date is not consummated because of any refusal, inability or failure
on the part of the Company or the Selling Stockholders to perform any
material agreement herein or to comply with any material provision hereof,
the Company agrees to reimburse the Representatives and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the offering and
sale of the Shares, including but not limited to fees and disbursements of
counsel, printing expenses, travel and accommodation expenses, postage,
facsimile and telephone charges.
SECTION 7. INDEMNIFICATION AND CONTRIBUTION.
(a) INDEMNIFICATION OF THE UNDERWRITERS.
(1) The Company agrees to indemnify and hold harmless each
Underwriter, its officers and employees, and each person, if any, who
controls any Underwriter within the meaning of the Securities Act and the
Exchange Act against any loss, claim, damage, liability or expense, as
incurred, to which such Underwriter or such controlling person may become
subject, under the Securities Act, the Exchange Act or other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such loss, claim, damage, liability or expense (or actions in
respect thereof as contemplated below) arises out of or is based (i) upon any
untrue statement or alleged untrue statement of a material fact contained in
the Registration Statement, or any amendment thereto, including any
information deemed to be a part thereof pursuant to Rule 430A under the
Securities Act, or the omission or alleged omission therefrom of a material
fact required to be stated therein or necessary to make the statements
therein not misleading; or (ii) upon any untrue statement or alleged untrue
statement of a
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material fact contained in any preliminary prospectus or the Prospectus (or
any amendment or supplement thereto), or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; or (iii) in whole or in part upon any inaccuracy in the
representations and warranties of the Company contained herein; or (iv) in
whole or in part upon any failure of the Company to perform its obligations
hereunder or under law; (v) any untrue statement or alleged untrue statement
of any material fact contained in any audio or visual materials provided by
the Company or based upon written information furnished by or on behalf of
the Company including, without limitation, slides, videos, films or tape
recordings, used in connection with the marketing of the Shares, including
without limitation, statements communicated to securities analysts employed
by the Underwriters; or (vi) any act or failure to act or any alleged act or
failure to act by any Underwriter in connection with, or relating in any
manner to, the Shares or the offering contemplated hereby, and which is
included as part of or referred to in any loss, claim, damage, liability or
action arising out of or based upon any matter covered by clause (i), (ii),
(iii) (iv), or (v) above, provided that the Company shall not be liable under
this clause (vi) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage, liability
or action resulted directly from any such acts or failures to act undertaken
or omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling
person for any and all expenses (including the fees and disbursements of
counsel chosen by Robertson Stephens) as such expenses are reasonably
incurred by such Underwriter or such controlling person in connection with
investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the
foregoing indemnity agreement shall not apply to any loss, claim, damage,
liability or expense to the extent, but only to the extent, arising out of or
based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in reliance upon and in conformity with written
information furnished to the Company by the Representatives expressly for use
in the Registration Statement, any preliminary prospecus or the Prospectus
(or any amendment or supplement thereto); and provided, further, that with
respect to any preliminary prospectus, the foregoing indemnity agreement
shall not inure to the benefit of any Underwriter from whom the person
asserting any loss, claim, damage, liability or expense purchased Shares, or
any person controlling such Underwriter, if copies of the Prospectus were
timely delivered to the Underwriters pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or
on behalf of such Underwriter to such person, if required by law so to have
been delivered, and if the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise
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have.
(2) Each of the Selling Stockholders, severally and not
jointly, agree to indemnify and hold harmless each Underwriter, its officers
and employees, and each person, if any, who controls any Underwriter within
the meaning of the Securities Act and the Exchange Act against any loss,
claim, damage, liability or expense, as incurred, to which such Underwriter
or such controlling person may become subject, under the Securities Act, the
Exchange Act or other federal or state statutory law or regulation, or at
common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of the Company, which consent
shall not be unreasonably withheld), insofar as such loss, claim, damage,
liability or expense (or actions in respect thereof as contemplated below)
arises out of or is based (i) upon any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement, or any
amendment thereto, including any information deemed to be a part thereof
pursuant to Rule 430A under the Securities Act, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading; or (ii) upon any
untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, in the case of
subparagraphs (i) and (ii) of this Section 7(a)(2) to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company or such Underwriter by such
Selling Stockholder, directly or through such Selling Stockholder'
representatives, specifically for use in the preparation thereof; or (iii) in
whole or in part upon any inaccuracy in the representations and warranties of
such Selling Stockholder contained herein; or (iv) in whole or in part upon
any failure of such Selling Stockholder to perform their respective
obligations hereunder or under law; or (v) any act or failure to act or any
alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby,
and which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by clause
(i), (ii), (iii) or (iv) above, provided that such Selling Stockholder shall
not be liable under this clause (v) to the extent that a court of competent
jurisdiction shall have determined by a final judgment that such loss, claim,
damage, liability or action resulted directly from any such acts or failures
to act undertaken or omitted to be taken by such Underwriter through its bad
faith or willful misconduct; and to reimburse each Underwriter and each such
controlling person for any and all expenses (including the fees and
disbursements of counsel chosen by Robertson Stephens) as such expenses are
reasonably incurred by such Underwriter or such controlling person in
connection with investigating, defending,
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settling, compromising or paying any such loss, claim, damage, liability,
expense or action; provided, however, that the foregoing indemnity agreement
shall not apply to any loss, claim, damage, liability or expense to the
extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in conformity with written information furnished to such
Selling Stockholder by the Representatives expressly for use in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto); and provided, further, tht with respect to
any preliminary prospectus, the foregoing indemnity agreement shall not inure
to the benefit of any Underwriter from whom the person asserting any loss,
claim, damage, liability or expense purchased Shares, or any person
controlling such Underwriter, if copies of the Prospectus were timely
delivered to the Underwriter pursuant to Section 2 and a copy of the
Prospectus (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or
on behalf of such Underwriter to such person, if required by law so to have
been delivered, and if the Prospectus (as so amended or supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that such Selling Stockholder may otherwise have;
and PROVIDED, FURTHER, that the liability of each Selling Stockholder under
the foregoing indemnity agreement shall be limited to an amount equal to the
initial public offering price of the Shares sold by such Selling Stockholder,
less the underwriting discount, as set forth on the front cover page of the
Prospectus.
(b) INDEMNIFICATION OF THE COMPANY, ITS DIRECTORS, OFFICERS AND
SELLING STOCKHOLDERS. Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, each of its directors, each of its
officers who signed the Registration Statement, the Selling Stockholders and
each person, if any, who controls the Company or any Selling Stockholder within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer, Selling Stockholder or controlling person may become subject,
under the Securities Act, the Exchange Act, or other federal or state statutory
law or regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of such
Underwriter), insofar as such loss, claim, damage, liability or expense (or
actions in respect thereof as contemplated below) arises out of or is based upon
any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto), or arises out of or is based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or
32
<PAGE>
alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in
reliance upon and in conformity with written information furnished to the
Company and the Selling Stockholders by the Representatives expressly for use
therein; and to reimburse the Company, or any such director, officer, Selling
Stockholder or controlling person for any legal and other expense reasonably
incurred by the Company, or any such director, officer, the Selling
Stockholder or controlling person in connection with investigating,
defending, settling, compromising or paing any such loss, claim, damage,
liability, expense or action. The indemnity agreement set forth in this
Section 7(b) shall be in addition to any liabilities that each Underwriter
may otherwise have.
(c) INFORMATION PROVIDED BY THE UNDERWRITERS. Each of the Company
and the Selling Stockholders and each person, if any, who controls the
Company within the meaning of the Securities Act or the Exchange Act, hereby
acknowledges that the only information that the Underwriters have furnished
to the Company expressly for use in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto) are the statements set forth in the table in the first paragraph and
the second paragraph under the caption "Underwriting" in the Prospectus; and
the Underwriters confirm that such statements are correct.
(d) NOTIFICATIONS AND OTHER INDEMNIFICATION PROCEDURES. Promptly
after receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 7, notify the indemnifying party in writing of the commencement
thereof, but the omission so to notify the indemnifying party will not
relieve it from any liability which it may have to any indemnified party for
contribution or otherwise than under the indemnity agreement contained in
this Section 7 or to the extent it is not prejudiced as a proximate result of
such failure. In case any such action is brought against any indemnified
party and such indemnified party seeks or intends to seek indemnity from an
indemnifying party, the indemnifying party will be entitled to participate
in, and, to the extent that it shall elect, jointly with all other
indemnifying parties similarly notified, by written notice delivered to the
indemnified party promptly after receiving the aforesaid notice from such
indemnified party, to assume the defense thereof with counsel reasonably
satisfactory to such indemnified party; provided, however, if the defendants
in any such action include both the indemnified party and the indemnifying
party and the indemnified party shall have reasonably concluded that a
conflict may arise between the positions of the indemnifying party and the
indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the indemnifying
party, the indemnified party or parties shall have the right to select
separate counsel to
33
<PAGE>
assume such legal defenses and to otherwise participate in the defense of
such action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of such
indemnifying party's election so to assume the defense of such action and
approval by the indemnified party of counsel, the indemnifying party will not
be liable to such indemnified party under this Section 7 for any legal or
other expenses subsequently incurred by such indemnified party in connection
with the defense thereof unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding
sentence (it being understood, however, that the indemnifying party shall not
be liable for the expenses of more than one separate counsel (together with
local counsel), approved by the indemnifying party (Robertson Stephens in the
case of Section 7(b) and Section 8), representing the indemnified parties who
are parties to such action), (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of
the action, or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party,
in each of which cases the fees and expenses of counsel shall be at the
expense of the indemnifying party.
(e) SETTLEMENTS. The indemnifying party under this Section 7 shall
not be liable for any settlement of any proceeding effected without its
written consent, which consent shall not be unreasonably withheld, but if
settled with such consent or if there be a final judgment for the plaintiff,
the indemnifying party agrees to indemnify the indemnified party against any
loss, claim, damage, liability or expense by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by Section
7(d) hereof, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such
request prior to the date of such settlement. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified
party is or could have been a party and indemnity was or could have been
sought hereunder by such indemnified party, unless such settlement,
compromise or consent includes (i) an unconditional release of such
indemnified party from all liability on claims that are the subject matter of
such action, suit or proceeding and (ii) does not include a statement as to
or an admission of fault, culpability or a failure to act by or on behalf of
any indemnified party.
34
<PAGE>
(f) CONTRIBUTION. If the indemnification provided for in this
Section 7 is unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) then
each indemnifying party shall contribute to the aggregate amount paid or
payable by such indemnified party in such proportion as is appropriate to
reflect the relative benefits received by such party on the one hand and the
Underwriters on the other from the offering of the Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the relative
fault of such party on the one hand and the Underwriters on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities, (or actions or proceedings in respect
thereof), as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Underwriters on the other and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
The Company and Underwriters agree that it would not be just and
equitable if contributions pursuant to this Section 7(f) were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section
7(f). The amount paid or payable by an indemnified party as a result of the
losses, claims, damages or liabilities (or actions or proceedings in respect
thereof) referred to above in this Section 7(f) shall be deemed to include
any legal or other expenses reasonably incurred by such indemnified party in
connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subsection (f), (i) no Underwriter
shall be required to contribute any amount in excess of the underwriting
discounts and commissions applicable to the Shares purchased by such
Underwriter and (ii) no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this Section 7(f) to
contribute are several in proportion to their respective underwriting
obligations and not joint.
(g) TIMING OF ANY PAYMENTS OF INDEMNIFICATION. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled
to indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
35
<PAGE>
liabilities or expenses are incurred, but in all cases, no later than
forty-five (45) days of invoice to the indemnifying party.
(h) SURVIVAL. The indemnity and contribution agreements contained
in this Section 7 and the representation and warranties set forth in this
Agreement shall remain operative and in full force and effect, regardless of
(i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor
to any Underwriter, or to the Company, its directors or officers, any Selling
Stockholder or any person controlling the Company, shall be entitled to the
benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
(i) ACKNOWLEDGEMENTS OF PARTIES. The parties to this Agreement
hereby acknowledge that they are sophisticated business persons who were
represented by counsel during the negotiations regarding the provisions
hereof including, without limitation, the provisions of this Section 7, and
are fully informed regarding said provisions. They further acknowledge that
the provisions of this Section 7 fairly allocate the risks in light of the
ability of the parties to investigate the Company and its business in order
to assure that adequate disclosure is made in the Registration Statement and
Prospectus as required by the Securities Act and the Exchange Act.
SECTION 8. DEFAULT OF ONE OR MORE OF THE SEVERAL UNDERWRITERS. If,
on the First Closing Date or the Second Closing Date, as the case may be, any
one or more of the several Underwriters shall fail or refuse to purchase
Shares that it or they have agreed to purchase hereunder on such date, and
the aggregate number of Common Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase does not exceed 10% of
the aggregate number of the Shares to be purchased on such date, the other
Underwriters shall be obligated, severally, in the proportions that the
number of Firm Shares set forth opposite their respective names on SCHEDULE A
bears to the aggregate number of Firm Shares set forth opposite the names of
all such non-defaulting Underwriters, or in such other proportions as may be
specified by the Representatives with the consent of the non-defaulting
Underwriters, to purchase the Shares which such defaulting Underwriter or
Underwriters agreed but failed or refused to purchase on such date. If, on
the First Closing Date or the Second Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares and
the aggregate number of Shares with respect to which such default occurs
exceeds 10% of the aggregate number of Shares to be purchased on such date,
and arrangements satisfactory to the Representatives and the Company for the
purchase of such Shares are not made within 48 hours after such default, this
Agreement shall terminate without liability of any party to any other party
except
36
<PAGE>
that the provisions of Section 5, and Section 7 shall at all times be
effective and shall survive such termination. In any such case either the
Representatives or the Company shall have the right to postpone the First
Closing Date or the Second Closing Date, as the case may be, but in no event
for longer than seven days in order that the required changes, if any, to the
Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be
deemed to include any person substituted for a defaulting Underwriter under
this Section 8. Any action taken under this Section 8 shall not relieve any
defaulting Underwriter from liability in respect of any default of such
Underwriter under this Agreement.
SECTION 9. TERMINATION OF THIS AGREEMENT. Prior to the First
Closing Date, this Agreement may be terminated by the Representatives by
notice given to the Company and the Selling Stockholders if (a) at any time
after the execution and delivery of this Agreement and prior to the First
Closing Date (i) trading or quotation in any of the Company's securities
shall have been suspended or limited by the Commission or by the Nasdaq Stock
Market, or trading in securities generally on either the Nasdaq Stock Market
or the New York Stock Exchange shall have been suspended or limited, or
minimum or maximum prices shall have been generally established on any of
such stock exchanges by the Commission or the National Association of
Securities Dealers, LLC; (ii) a general banking moratorium shall have been
declared by any of federal, New York, Delaware or California authorities;
(iii) there shall have occurred any outbreak or escalation of national or
international hostilities or any crisis or calamity, or any change in the
United States or international financial markets, or any substantial change
or development involving a prospective change in United States' or
international political, financial or economic conditions, as in the judgment
of the Representatives is material and adverse and makes it impracticable or
inadvisable to market the Common Shares in the manner and on the terms
contemplated in the Prospectus or to enforce contracts for the sale of
securities; (iv) in the judgment of the Representatives there shall have
occurred any Material Adverse Change; or (v) the Company shall have sustained
a loss by strike, fire, flood, earthquake, accident or other calamity of such
character as in the judgment of the Representatives may interfere materially
with the conduct of the business and operations of the Company regardless of
whether or not such loss shall have been insured or (b) in the case of any of
the events specified 9(a)(i)(v), such event singly or together with any other
event, makes it, in the judgement of Robertson Stephens, impracticable or
inadvisable to market the Common Shares in the manner and on the terms
contemplated in the Prospectus. Any termination pursuant to this Section 9
shall be without liability on the part of (x) the Company or the Selling
Stockholders to any Underwriter, except that the Company and the Selling
Stockholders shall be obligated to reimburse the expenses of the
Representatives and the Underwriters
37
<PAGE>
pursuant to Sections 5 and 6 hereof, (y) any Underwriter to the Company or
any person controlling the Company or the Selling Stockholders, or (z) of any
party hereto to any other party except that the provisions of Section 7 shall
at all times be effective and shall survive such termination.
SECTION 10. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY.
The respective indemnities, agreements, representations, warranties and other
statements of the Company or any person controlling the Company, of its
officers, of the Selling Stockholders and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any
Underwriter or the Company or any of its or their partners, officers or
directors or any controlling person, or the Selling Stockholders, as the case
may be, and will survive delivery of and payment for the Shares sold
hereunder and any termination of this Agreement.
SECTION 11. NOTICES. All communications hereunder shall be in
writing and shall be mailed, hand delivered or telecopied and confirmed to
the parties hereto as follows:
If to the Representatives:
c/o FLEETBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company:
QuickLogic Corporation
1277 Orleans Avenue
Sunnyvale, California 94089
Facsimile: (408) 990-4040
Attention: E. Thomas Hart
With a copy to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304
Facsimile: (650) 493-6811
Attention: Aaron Alter
38
<PAGE>
If to the Selling Stockholders:
[ ]
Any party hereto may change the address for receipt of communications by
giving written notice to the others.
SECTION 12. SUCCESSORS. This Agreement will inure to the benefit of
and be binding upon the parties hereto, including any substitute Underwriters
pursuant to Section 8 hereof, and to the benefit of the employees, officers
and directors and controlling persons referred to in Section 7, and to their
respective successors, and no other person will have any right or obligation
hereunder. The term "successors" shall not include any purchaser of the
Shares as such from any of the Underwriters merely by reason of such purchase.
SECTION 13. PARTIAL UNENFORCEABILITY. The invalidity or
unenforceability of any Section, paragraph or provision of this Agreement
shall not affect the validity or enforceability of any other Section,
paragraph or provision hereof. If any Section, paragraph or provision of
this Agreement is for any reason determined to be invalid or unenforceable,
there shall be deemed to be made such minor changes (and only such minor
changes) as are necessary to make it valid and enforceable.
SECTION 14. GOVERNING LAW PROVISIONS.
(a) GOVERNING LAW. This agreement shall be governed by and
construed in accordance with the internal laws of the state of New York
applicable to agreements made and to be performed in such state.
(b) CONSENT TO JURISDICTION. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or
the courts of the State of California in each case located in the City and
County of San Francisco (collectively, the "Specified Courts"), and each
party irrevocably submits to the exclusive jurisdiction (except for
proceedings instituted in regard to the enforcement of a judgment of any such
court (a "Related Judgment"), as to which such jurisdiction is non-exclusive)
of such courts in any such suit, action or proceeding. Service of any
process, summons, notice or document by mail to such party's address set
forth above shall be effective service of process for any suit, action or
other proceeding brought in any such court. The parties irrevocably and
unconditionally waive any objection to the laying of venue of any suit,
action or other proceeding in the Specified Courts and irrevocably and
unconditionally waive and agree not to plead or claim in any such court that
any such suit, action or other
39
<PAGE>
proceeding brought in any such court has been brought in an inconvenient
forum. Each party not located in the United States irrevocably appoints CT
Corporation System, which currently maintains a San Francisco office at 49
Stevenson Street, San Francisco, California 94105, United States of America,
as its agent to receive service of process or other legal summons for
purposes of any such suit, action or proceeding that may be instituted in any
state or federal court in the City and County of San Francisco.
(c) WAIVER OF IMMUNITY. With respect to any Related Proceeding,
each party irrevocably waives, to the fullest extent permitted by applicable
law, all immunity (whether on the basis of sovereignty or otherwise) from
jurisdiction, service of process, attachment (both before and after judgment)
and execution to which it might otherwise be entitled in the Specified
Courts, and with respect to any Related Judgment, each party waives any such
immunity in the Specified Courts or any other court of competent
jurisdiction, and will not raise or claim or cause to be pleaded any such
immunity at or in respect of any such Related Proceeding or Related Judgment,
including, without limitation, any immunity pursuant to the United States
Foreign Sovereign Immunities Act of 1976, as amended.
SECTION 15. FAILURE OF ONE OR MORE OF THE SELLING STOCKHOLDERS TO
SELL AND DELIVER COMMON SHARES. If one or more of the Selling Stockholders
shall fail to sell and deliver to the Underwriters the Shares to be sold and
delivered by such Selling Stockholders at the First Closing Date pursuant to
this Agreement, then the Underwriters may at their option, by written notice
from the Representatives to the Company and such Selling Stockholders, either
(i) terminate this Agreement without any liability on the part of any
Underwriter or, except as provided in Sections 5, 6, and 7 hereof, the
Company or the Selling Stockholders, or (ii) purchase the shares which the
Company and the other Selling Shareholders have agreed to sell and deliver in
accordance with the terms hereof. If the Selling Stockholders shall fail to
sell and deliver to the Underwriters the Shares to be sold and delivered by
such Selling Stockholders pursuant to this Agreement at the First Closing
Date, then the Underwriters shall have the right, by written notice to the
Company and the Selling Stockholders, to postpone the First Closing Date, but
in no event for longer than seven days in order that the required changes, if
any, to the Registration Statement and the Prospectus or any other documents
or arrangements may be effected.
SECTION 16. GENERAL PROVISIONS. This Agreement constitutes the
entire agreement of the parties to this Agreement and supersedes all prior
written or oral and all contemporaneous oral agreements, understandings and
negotiations with respect to the subject matter hereof. This Agreement may
be executed in two or more counterparts, each one of which shall be an
original, with the same effect as
40
<PAGE>
if the signatures thereto and hereto were upon the same instrument. This
Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to
benefit. The Section headings herein are for the convenience of the parties
only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
41
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Custodian the enclosed
copies hereof, whereupon this instrument, along with all counterparts hereof,
shall become a binding agreement in accordance with its terms.
Very truly yours,
QUICKLOGIC CORPORATION
By: ___________________________________
[Title]
_________________
By: ___________________________________
Attorney-in-fact for the Selling
Stockholders named in SCHEDULE B hereto
The foregoing Underwriting Agreement is hereby confirmed and accepted by
the Representatives as of the date first above written.
FLEETBOSTON ROBERTSON STEPHENS INC.
BEAR, STEARNS & CO. INC.
J.P. MORGAN SECURITIES INC.
SOUNDVIEW TECHNOLOGY GROUP, INC.
On their behalf and on behalf of each of the several underwriters named in
SCHEDULE A hereto.
BY FLEETBOSTON ROBERTSON STEPHENS INC.
By:_________________________________
Authorized Signatory
42
<PAGE>
SCHEDULE A
Number of Firm
Shares To be
Underwriters Purchased
------------ ---------
Total...........................
S-A
<PAGE>
SCHEDULE B
Number of Maximum
Firm Shares Number
to be Sold of Option Shares
Selling Stockholders to be Sold
....................................
S-B
<PAGE>
Exhibit A
EMPLOYEE
90-DAY LOCK-UP AGREEMENT
QUICKLOGIC CORPORATION
1277 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
March 14, 2000
FleetBoston Robertson Stephens Inc.
Adams, Harkness & Hill, Inc.
Bear, Stearns & Co., Inc.
Soundview Technology Group, Inc.
As representatives of the Several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
Re: QuickLogic Corporation, a Delaware corporation (the "Company")
Ladies and Gentlemen:
The undersigned is an owner of record or beneficially of
certain shares of Common Stock of the Company ("Common Stock") or securities
convertible into or exchangeable or exercisable for Common Stock. The
Company proposes to carry out a public offering of Common Stock (the
"Offering") for which you will act as the representatives (the
"Representatives") of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company
by, among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on
the representations and agreements of the undersigned contained in this
letter in carrying out the Offering and in entering into underwriting
arrangements (the "Underwriting Arrangements") with the Company with respect
to the Offering.
In consideration of the foregoing, the undersigned hereby
agrees that the undersigned will not offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") 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 (collectively, "Securities")
now owned or hereafter acquired directly by such person or with respect to
which such person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or shareholders of such person, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction, (iii) with respect to sales or purchases of Common Stock
acquired on the open market, (iv) with respect to sales or purchases of
Common Stock acquired pursuant to the Company's 1999 Employee Stock Purchase
Plan, provided that such sale or purchase is
<PAGE>
effected throught FleetBoston Robertson Stephens Inc.or (v) with the prior
written consent of FleetBoston Robertson Stephens Inc. The foregoing
restrictions will terminate after the close of trading of the Common Stock on
the 90th day of (and including) the day the Common Stock commenced trading on
the Nasdaq National Market (the "Lock-Up Period"). The foregoing restriction
has been expressly agreed to preclude the holder of the Securities from
engaging in any hedging or other transaction which is designed to or
reasonably expected to lead to or result in a Disposition of Securities
during the Lock-up Period, even if such Securities would be disposed of by
someone other than such holder. Such prohibited hedging or other transactions
would include, without limitation, any short sale (whether or not against the
box) or any purchase, sale or grant of any right (including, without
limitation, any put or call option) with respect to any Securities or with
respect to any security (other than a broad-based market basket or index)
that included, relates to or derives any significant part of its value from
Securities. The undersigned also agrees and consents to the entry of stop
transfer instructions with the Company's transfer agent and registrar against
the transfer of shares of Common Stock or Securities held by the undersigned
except in compliance with the foregoing restrictions.
This Employee Lock-Up Agreement is irrevocable and will be
binding on the undersigned and the respective successors, heirs, personal
representatives, and assigns of the undersigned. In the event the Offering
has not occurred on or before May 15, 2000 this Employee Lock-Up Agreement
shall be of no further force or effect.
Dated ________________________________
PRINT OR TYPE NAME
- - OF STOCKHOLDER
_____________________________
SIGNATURE(S)
_____________________________
_____________________________ (1)
Signature(s)
_________________________________________
Title (if signing as agent or fiduciary)
PRINT NAME(S) AND ADDRESS:
_________________________________________
_________________________________________
_________________________________________
- --------------------------
(1) To be signed in EXACTLY the same manner as the shares are registered.
<PAGE>
NON-EMPLOYEE
90-DAY LOCK-UP AGREEMENT
QUICKLOGIC CORPORATION
1277 ORLEANS DRIVE
SUNNYVALE, CALIFORNIA 94089
March 14, 2000
FleetBoston Robertson Stephens Inc.
Adams, Harkness & Hill, Inc.
Bear, Stearns & Co., Inc.
Soundview Technology Group, Inc.
As representatives of the Several Underwriters
c/o FleetBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
Re: QuickLogic Corporation, a Delaware corporation (the "Company")
Ladies and Gentlemen:
The undersigned is an owner of record or beneficially of
certain shares of Common Stock of the Company ("Common Stock") or securities
convertible into or exchangeable or exercisable for Common Stock. The
Company proposes to carry out a public offering of Common Stock (the
"Offering") for which you will act as the representatives (the
"Representatives") of the underwriters. The undersigned recognizes that the
Offering will be of benefit to the undersigned and will benefit the Company
by, among other things, raising additional capital for its operations. The
undersigned acknowledges that you and the other underwriters are relying on
the representations and agreements of the undersigned contained in this
letter in carrying out the Offering and in entering into underwriting
arrangements (the "Underwriting Arrangements") with the Company with respect
to the Offering.
In consideration of the foregoing, the undersigned hereby
agrees that the undersigned will not offer to sell, contract to sell, or
otherwise sell, dispose of, loan, pledge or grant any rights with respect to
(collectively, a "Disposition") 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 (collectively, "Securities")
now owned or hereafter acquired directly by such person or with respect to
which such person has or hereafter acquires the power of disposition,
otherwise than (i) as a bona fide gift or gifts, provided the donee or donees
thereof agree in writing to be bound by this restriction, (ii) as a
distribution to partners or shareholders of such person, provided that the
distributees thereof agree in writing to be bound by the terms of this
restriction, (iii) with respect to sales or purchases of Common Stock
acquired on the open market, (iv) with respect to sales or purchases of
Common Stock acquired with respect to sales of Common Stock in the Offering
pursuant to the Underwriting Arrangements or (v) with the prior written
consent of FleetBoston Robertson Stephens Inc. The foregoing restrictions
will terminate after the close of trading of the Common Stock on the 90th day
of (and including) the day the Common Stock commenced trading on the Nasdaq
National Market
A-1
<PAGE>
(the "Lock-Up Period"). The foregoing restriction has been expressly agreed
to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation,
any short sale (whether or not against the box) or any purchase, sale or
grant of any right (including, without limitation, any put or call option)
with respect to any Securities or with respect to any security (other than a
broad-based market basket or index) that included, relates to or derives any
significant part of its value from Securities. The undersigned also agrees
and consents to the entry of stop transfer instructions with the Company's
transfer agent and registrar against the transfer of shares of Common Stock
or Securities held by the undersigned except in compliance with the foregoing
restrictions.
This Non-Employee Lock-Up Agreement is irrevocable and will be
binding on the undersigned and the respective successors, heirs, personal
representatives, and assigns of the undersigned. In the event the Offering has
not occurred on or before May 15, 2000 this Non-Employee Lock-Up Agreement shall
be of no further force or effect.
Dated ________________________________
PRINT OR TYPE NAME
- - OF STOCKHOLDER
_____________________________
SIGNATURE(S)
_____________________________
_____________________________ 2
Signature(s)
_________________________________________
Title (if signing as agent or fiduciary)
PRINT NAME(S) AND ADDRESS:
_________________________________________
_________________________________________
_________________________________________
- --------------------------
(2) To be signed in EXACTLY the same manner as the shares are registered.
2
<PAGE>
EXHIBIT B
MATTERS TO BE COVERED IN THE OPINION OF COMPANY COUNSEL
(i) The Company and each Significant Subsidiary (as that term
is defined in Regulation S-X of the Securities Act) has been duly
incorporated and is validly existing as a corporation in good
standing under the laws of the jurisdiction of its incorporation;
(ii) The Company and each Significant Subsidiary has the
corporate power and authority to own, lease and operate its
properties and to conduct its business as described in the
Prospectus;
(iii) The Company and each Significant Subsidiary is duly
qualified to do business as a foreign corporation and is in good
standing in each jurisdiction, if any, in which the ownership or
leasing of its properties or the conduct of its business requires
such qualification, except where the failure to be so qualified or
be in good standing would not have a Material Adverse Effect. To
such counsel's knowledge, the Company does not own or control,
directly or indirectly, any corporation, association or other
entity other than QuickLogic International, Inc., a wholly-owned
subsidiary;
(iv) The authorized, issued and outstanding capital stock of the
Company is as set forth in the Prospectus as of the dates stated
therein, the issued and outstanding shares of capital stock of the
Company (including the Selling Stockholders Shares) outstanding
prior to the issuance of the Shares have been duly and validly
issued and are fully paid and nonassessable, and, to such
counsel's knowledge, will not have been issued in violation of or
subject to any preemptive right arising under the Certificate of
Incorporation or Delaware General Corporation Law, right of first
refusal or other similar right other than any registration rights
described in Opinion (xix) hereof;
(v) All issued and outstanding shares of capital stock of each
Significant Subsidiary of the Company have been duly authorized
and validly issued and are fully paid and nonassessable, and, to
such counsel's knowledge, have not been issued in violation of or
subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right other similar
right other than any registration rights described in Opinion
(xix) hereof;
(vi) The Firm Shares or the Option Shares, as the case may be,
to be issued by the Company pursuant to the terms of the
Underwriting Agreement have been duly authorized and, upon
issuance and delivery
C-1
<PAGE>
against payment therefor in accordance with the terms of the
Underwriting Agreement, will be duly and validly issued and fully
paid and nonassessable, and, to such counsel's knowledge, will not
have been issued in violation of or subject to any preemptive
right, co-sale right, registration right, right of first refusal or
other similar right other than any registration rights described in
Opinion (xix) hereof.
(vii) The Company has the corporate power and authority to enter
into the Underwriting Agreement and to issue, sell and deliver to
the Underwriters the Shares to be issued and sold by it
thereunder;
(viii) The Underwriting Agreement has been duly authorized
by all necessary corporate action on the part of the Company and
has been duly executed and delivered by the Company and, assuming
due authorization, execution and delivery by the Underwriters, is
a valid and binding agreement of the Company, enforceable in
accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally or by general equitable
principles whether relief is sought in a proceeding at law or in
equity;
(ix) The Registration Statement has become effective under the
Securities Act and, to such counsel's knowledge, no stop order
suspending the effectiveness of the Registration Statement has
been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Securities Act;
(x) The Firm Shares or the Option Shares have been validly
registered under the Securities Act and the Rules and Regulations
of the Exchange Act and the applicable rules and regulations of
the Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial
statements (including supporting schedules) and financial data
derived therefrom as to which such counsel need express no
opinion), as of the effective date of the Registration Statement,
complied as to form in all material respects with the requirements
of the Securities Act and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the caption
"Description of Capital Stock," to the extent that it constitutes
matters of law or legal conclusions, has been reviewed by such
2
<PAGE>
counsel and is a fair summary of such matters and conclusions; and
the form of certificate evidencing the Common Stock and filed as
an exhibit to the Registration Statement complied in all material
respects with Delaware law;
(xiii) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of
statutes are accurate and fairly present the information required
to be presented by the Securities Act;
(xiv) To such counsel's knowledge, there are no agreements,
contracts, leases or documents to which the Company is a party of
a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit
to the Registration Statement which are not described or referred
to therein or filed as required;
(xv) The performance of the Underwriting Agreement and the
consummation of the transactions herein contemplated (other than
performance of the Company's indemnification obligations
hereunder, concerning which no opinion need be expressed) will not
(a) result in any violation of the Company's charter or bylaws or
(b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a
default under, any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or
instrument known to such counsel to which the Company is a party
or by which its properties are bound, or of any applicable
statute, rule or regulation known to such counsel or, to such
counsel's knowledge, of any order, writ or decree of any court,
government or governmental agency or body having jurisdiction over
the Company or any of its subsidiaries, or over any of their
properties or operations;
(xvi) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or
body having jurisdiction over the Company or any of its
subsidiaries, or over any of their properties or operations is
necessary in connection with the consummation by the Company of
the transactions herein contemplated, except (i) such as have been
obtained under the Securities Act, (ii) such as may be required
under state or other securities or Blue Sky laws in connection
with the purchase and the distribution of the Shares by the
Underwriters, (iii) such as may be required by the National
Association of Securities Dealers, LLC and (iv)
3
<PAGE>
such as may be required under the federal or provincial laws of Canada
or other countries or territories outside the United States;
(xvii) To such counsel's knowledge, there are no legal or
governmental proceedings pending or threatened against the Company
or any of its subsidiaries of a character required to be disclosed
in the Registration Statement or the Prospectus by the Securities
Act, other than those described therein;
(xviii) To such counsel's knowledge, neither the Company nor any
of its subsidiaries is presently (a) in material violation of its
respective charter or bylaws, or (b) in material breach of any
applicable statute, rule or regulation known to such counsel or,
to such counsel's knowledge, any order, writ or decree of any
court or governmental agency or body having jurisdiction over the
Company or any of its subsidiaries, or over any of their
properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the
Registration Statement and Prospectus, no holders of Common Stock
or other securities of the Company have registration rights with
respect to securities of the Company and, except as set forth in
the Registration Statement and Prospectus, all holders of
securities of the Company having rights known to such counsel to
registration of such shares of Common Stock or other securities,
because of the filing of the Registration Statement by the Company
have, with respect to the offering contemplated thereby, waived
such rights, had such rights waived, or such rights have expired
by reason of lapse of time following notification of the Company's
intent to file the Registration Statement or have included
securities in the Registration Statement pursuant to the exercise
of and in full satisfaction of such rights.
(xx) The Company is not and, after giving effect to the offering
and the sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be, an
"investment company" as such term is defined in the Investment
Company Act of 1940, as amended.
In addition, such counsel shall state that such counsel has
participated in conferences with officials and other representatives of the
Company, the Underwriters, Underwriters' Counsel and the independent
certified public accountants of the Company, at which such conferences the
contents of the Registration Statement and Prospectus and related matters
were discussed, and although they have not verified the accuracy or
completeness of the statements contained in the Registration Statement or the
Prospectus, nothing has come to the attention of such counsel which leads
them to believe that, at the time the
4
<PAGE>
Registration Statement became effective and at all times subsequent thereto
up to and on the First Closing Date or Second Closing Date, as the case may
be, the Registration Statement and any amendment or supplement thereto (other
than the financial statements including supporting schedules and other
financial and statistical information derived therefrom, as to which such
counsel need express no comment) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or at the First
Closing Date or the Second Closing Date, as the case may be, the Registration
Statement, the Prospectus and any amendment or supplement thereto (except as
aforesaid) contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
5
<PAGE>
EXHIBIT C
MATTERS TO BE COVERED IN THE OPINION OF UNDERWRITERS' COUNSEL
(i) The Shares to be issued by the Company have been duly
authorized and, upon issuance and delivery and payment therefor in
accordance with the terms of the Underwriting Agreement, will be
validly issued, fully paid and non-assessable.
(ii) The Registration Statement complied as to form in all
material respects with the requirements of the Securities Act; the
Registration Statement has become effective under the Securities
Act and, to such counsel's knowledge, no stop order proceedings
with respect thereto have been instituted or threatened or are
pending under the Act.
(iii) The 8-A Registration Statement complied as to form in all
material respects with the requirements of the Exchange Act; the
8-A Registration Statement has become effective under the Exchange
Act; and the Shares have been validly registered under the
Securities Act and the Rules and Regulations of the Exchange Act
and the applicable rules and regulations of the Commission
thereunder;
(iv) The Underwriting Agreement has been duly authorized,
executed and delivered by the Company.
Such counsel shall state that such counsel has reviewed the opinions
addressed to the Underwriters from
[list each set of counsel that has provided an opinion], each dated the date
hereof, and furnished to Robertson Stephens in accordance with the provisions
of the Underwriting Agreement. Such opinions appear on their face to be
appropriately responsive to the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has participated
in conferences with officials and other representatives of the Company, the
Underwriters, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the
statements contained in the Registration Statement or the Prospectus, nothing
has come to the attention of such counsel which leads them to believe that,
at the time the Registration Statement became effective and at all times
subsequent thereto up to and on the First Closing Date or Second Closing
Date, as the case may be, the Registration Statement and any amendment or
supplement thereto (other than the financial statements including supporting
schedules and other financial and statistical information derived therefrom,
as to which such counsel need express no comment) contained any untrue
statement of a material fact or omitted to state a
D-1
<PAGE>
material fact required to be stated therein or necessary to make the
statements therein not misleading, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus
and any amendment or supplement thereto (except as aforesaid) contained any
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
2
<PAGE>
EXHIBIT D
MATTERS TO BE COVERED IN THE OPINION OF SELLING STOCKHOLDERS COUNSEL
(i) The Underwriting Agreement has been duly authorized,
executed and delivered by or on behalf of, and is a valid and
binding agreement of, such Selling Stockholder, enforceable in
accordance with its terms, except as rights to indemnification
thereunder may be limited by applicable law and except as the
enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or
affecting creditors' rights generally or by general equitable
principles.
(ii) The execution and delivery by such Selling Stockholder of,
and the performance by such Selling Stockholder of its obligations
under, the Underwriting Agreement and its Custody Agreement and
its Power of Attorney will not contravene or conflict with, result
in a breach of, or constitute a default under, the charter or by-
laws of such Selling Stockholder, or, to such counsel's knowledge,
violate, result in a breach of or constitute a default under the
terms of any other agreement or instrument to which such Selling
Stockholder is a party or by which it is bound, or any judgement,
order or decree applicable to such Selling Stockholder of any
court, regulatory body, administrative agency, governmental body
or arbitrator having jurisdiction over such Selling Stockholder.
(iii) The Selling Stockholders has good and valid title to all of
the Common Shares which may be sold by such Selling Stockholder
under the Underwriting Agreement and has the legal right and
power, and all authorization and approvals required under its
charter and by-laws, to enter into the Underwriting Agreement and
its Custody Agreement and its Power of Attorney, to sell, transfer
and deliver all of the Common Shares which may be sold by such
Selling Stockholder under the Underwriting Agreement and to comply
with its other obligations under the Underwriting Agreement, its
Custody Agreement and its Power of Attorney.
(iv) Each of the Custody Agreement and Power of Attorney of such
Selling Stockholder has been duly authorized, executed and
delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder, enforceable in accordance
with its terms, except as rights to indemnification thereunder may
be limited by applicable law and except as the enforcement thereof
may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar
<PAGE>
laws relating to or affecting creditors' rights generally or by general
equitable principles.
(v) Assuming that the Underwriters purchase the Shares which
are sold by the Selling Stockholders pursuant to the Underwriting
Agreement for value, in good faith and without notice of any
adverse claims, the delivery of such Shares pursuant to the
Underwriting Agreement will pass good and valid title to such
Shares, free and clear of any security interest, mortgage, pledge,
lieu encumbrance or other claim.
(vi) To such counsel's knowledge, no consent, approval,
authorization or other order of, or registration or filing with,
any court or governmental authority or agency, is required for the
consummation by the Selling Stockholders of the transactions
contemplated in the Underwriting Agreement, except as required
under the Securities Act, applicable state securities or blue sky
laws, and from the National Association of Securities Dealers,
LLC.
2
<PAGE>
EXHIBIT 5.1
[WILSON SONSINI GOODRICH & ROSATI LETTERHEAD]
March 20, 2000
QuickLogic Corporation
1277 Orleans Drive
Sunnyvale, CA 94089
RE: REGISTRATION STATEMENT ON FORM S-1
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-1 filed by you with
the Securities and Exchange Commission (the "SEC") on March 20, 2000 (the
"Registration Statement"), in connection with registration under the Securities
Act of 1933, as amended, of up to 4,568,059 shares of your Common Stock and an
over-allotment option granted to the underwriters of the offering to purchase up
to 685,208 shares from you (collectively, the "Shares"). Of the Shares, we
understand that up to 2,185,200 shares (including up to 685,208 shares that may
be issued to cover the underwriters overallotment option) will be issued by you
(the "Company Shares"), and the remaining shares will be sold by certain persons
holding previously issued shares of your common stock (the "Selling Stockholder
Shares").
We understand that the Shares are to be sold to the underwriters of the
offering for resale to the public as described in the Registration Statement. As
your legal counsel, we have examined the proceedings taken, and are familiar
with the proceedings proposed to be taken, by you in connection with the sale
and issuance of the Company Shares. We have also examined the actions taken in
connection with the original issuance of the Selling Stockholder Shares.
It is our opinion that, (1) the Company Shares, when issued and sold in the
manner described in the Registration Statement, will be legally issued, fully
paid and nonassessable and (2) the Selling Stockholder Shares have been legally
issued and are fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement, including the Prospectus constituting a part thereof,
and any amendments thereto.
Very truly yours,
/s/ WILSON SONSINI GOODRICH & ROSATI
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
<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 January 25, 2000 relating to the consolidated financial
statements and consolidated financial statement schedules 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
March 16, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS 12-MOS
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<PERIOD-END> DEC-31-1997 DEC-31-1998 DEC-31-1999
<CASH> 7331 7595 34558
<SECURITIES> 0 0 0
<RECEIVABLES> 5520 5303 6848
<ALLOWANCES> (2628) (3272) (1305)
<INVENTORY> 5869 2877 4349
<CURRENT-ASSETS> 16378 13233 45917
<PP&E> 6637 7117 9386
<DEPRECIATION> (3107) (4225) (4876)
<TOTAL-ASSETS> 19951 16168 50482
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0 0 0
10 10 0
<COMMON> 1 4 18
<OTHER-SE> (1767) (989) 36987
<TOTAL-LIABILITY-AND-EQUITY> 19951 16168 50482
<SALES> 28460 30007 39785
<TOTAL-REVENUES> 28460 30007 39785
<CGS> 16855 14303 17103
<TOTAL-COSTS> 62380 29965 37076
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> (162) (161) (97)
<INCOME-PRETAX> (33648) 245 3161
<INCOME-TAX> 0 0 0
<INCOME-CONTINUING> 0 0 0
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<NET-INCOME> (33648) 245 3161
<EPS-BASIC> (10.41) 0.06 0.42
<EPS-DILUTED> (10.41) 0.02 0.19
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