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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 17, 1997
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ESS TECHNOLOGY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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CALIFORNIA 94-2928582
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
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48401 FREMONT BLVD.
FREMONT, CALIFORNIA 94538
(510) 492-1088
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
JOHN H. BARNET
VICE PRESIDENT, FINANCE AND CHIEF FINANCIAL OFFICER
ESS TECHNOLOGY, INC.
48401 FREMONT BLVD.
FREMONT, CALIFORNIA 94538
(510) 492-1088
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
TAE HEA NAHM
VENTURE LAW GROUP
A PROFESSIONAL CORPORATION
2800 SAND HILL ROAD
MENLO PARK, CALIFORNIA 94025
(415) 854-4488
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
------------------------
If the only securities being registered on this Form are to be offered
pursuant to dividend or interest reinvestment
plans, please check the following box. [ ]
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, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
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 statement 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 statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
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Common Stock, no par value..... 685,415 shares $14.5625 $9,981,356 $3,024.66
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(1) Estimated solely for the purpose of computing the amount of the registration
fee, based on the average of the high and low prices for the Company's
Common Stock as reported on The Nasdaq National Market on July 15, 1997 in
accordance with Rule 457 under the Securities Act of 1933.
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 SECTION 8(a), MAY
DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
PROSPECTUS SUBJECT TO COMPLETION JULY 17, 1997
685,415 SHARES
ESS TECHNOLOGY, INC.
COMMON STOCK
------------------------
This Prospectus covers 685,415 shares of Common Stock, no par value (the
"Common Stock" or the "Shares"), of ESS Technology, Inc. ("ESS" or the
"Company"), which may be offered from time to time by one or all of the selling
shareholders named herein (the "Selling Shareholders"). The Company will receive
no part of the proceeds of such sales.
The Shares were issued to the Selling Shareholders in connection with the
acquisition of Platform Technologies, Inc., a California corporation, by the
Company on June 11, 1997 (the "Acquisition"). For additional information
concerning the Acquisition, see "Issuance of Common Stock to Selling
Shareholders." The Selling Shareholders intend to sell the shares offered hereby
from time to time in the over-the-counter market at prices prevailing therein,
in individually negotiated transactions at such prices as may be agreed upon or
a combination of such methods of sale, during a fourteen-day period immediately
following the effective date of this Prospectus. The Company will bear all
expenses with respect to the offering of the Common Stock (estimated to be
approximately $27,025) except any underwriting discounts, selling commissions,
stock transfer taxes, or fees and disbursements of counsel for the Selling
Shareholders. To the extent required, the specific shares of Common Stock to be
sold, the names of the Selling Shareholders, the public offering price, the
names of any agent dealer or underwriter and any applicable commission or
discount with respect to any particular offer is set forth herein or will be set
forth in an accompanying Prospectus Supplement. See "Selling Shareholders" and
"Plan of Distribution." Each Selling Shareholder has advised the Company that no
sale or distribution other than as disclosed herein will be effected until after
this Prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof.
The Company's Common Stock is traded on The Nasdaq National Market under
the symbol ESST. The last reported sales price of the Common Stock on The Nasdaq
National Market on July 16, 1997 was $14.00 per share.
------------------------
SEE "RISK FACTORS," BEGINNING ON PAGE 5,
FOR INFORMATION THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
------------------------
The Selling Shareholders and any broker executing selling orders on behalf
of the Selling Shareholders may be deemed to be an "underwriter" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act").
Commissions received by any such broker may be deemed to be underwriting
commissions under the Securities Act. See "Plan of Distribution" for information
relating to indemnification of the Selling Shareholders.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
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UNDERWRITING PROCEEDS TO
DISCOUNTS AND SELLING
PRICE TO PUBLIC COMMISSION STOCKHOLDERS
- -----------------------------------------------------------------------------------------------
Per Share.............................
Total................................. See Text Above See Text Above See Text Above
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THE DATE OF THIS PROSPECTUS IS JULY , 1997
<PAGE> 3
No person is authorized in connection with any offering made hereby to give
any information or to make any representation not contained in this Prospectus,
and, if given or made, such information or representation must not be relied
upon as having been authorized by the Company or the Selling Shareholders. This
Prospectus does not constitute an offer to sell or a solicitation of an offer to
buy any security other than the shares of Common Stock offered hereby, nor does
it constitute an offer to sell or a solicitation of an offer to buy any of the
shares offered hereby to any person in any jurisdiction in which it is unlawful
to make such an offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
ADDITIONAL INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Securities and Exchange
Commission (the "Commission") under the Securities Act. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the shares
of Common Stock offered hereby, reference is hereby made to the Registration
Statement. Statements contained herein concerning the provisions of any document
are not necessarily complete, and each such statement is qualified in its
entirety by reference to the copy of such document filed with the Commission.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Commission. Such reports, proxy and information statements and other
information may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, NW, Washington, D.C. 20549,
and at the following Regional Offices of the Commission: New York Regional
Office, Seven World Trade Center, New York, New York 10048, and Chicago Regional
Office, Northwest Atrium Center, 500 West Madison Street, Chicago, Illinois
60661. Copies of such material can be obtained from the Public Reference Section
of the Commission, 450 Fifth Street, NW, Washington, D.C. 20549 upon payment of
the prescribed fees. The Company is also required to file electronic versions of
these documents with the Commission through the Commission's Electronic Data
Gathering, Analysis and Retrieval System ("EDGAR"). The Common Stock of the
Company is quoted on The Nasdaq National Market. Reports, proxy and information
statements and other information concerning the Company may be inspected at The
Nasdaq Stock Market at 1735 K Street, NW, Washington, D.C. 20006. In addition,
the Commission maintains a World Wide Web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated by reference in this Prospectus:
(1) The Company's Annual Report on Form 10-K for the year ended
December 31, 1996, filed on March 18, 1997 and amended on March
20, 1997 (Form 10-K/A);
(2) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(3) The Company's Current Report on Form 8-K filed June 24, 1997; and
(4) The description of the Company's capital stock contained in its
Registration Statement on Form 8-A as filed with the Commission
under Section 12 of the Exchange Act of 1934, as amended (the
"Exchange Act") on October 5, 1995, including any amendment
thereto or report filed for the purpose of updating such
description.
All reports and other documents subsequently filed by the Company pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of this offering shall be deemed to be
incorporated by reference herein, to the extent required, and to be a part
hereof from the date of filing of such reports and documents. Any statement
incorporated herein shall be deemed to be modified or superseded for purposes of
this Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company hereby undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has been
delivered, upon written or oral request of such person, a copy of any or all of
the foregoing documents incorporated herein by reference (other than exhibits to
such documents, unless such exhibits are specifically incorporated by reference
into such documents). Requests for such documents should be submitted in writing
to Stock Administrator, ESS Technology, Inc., 48401 Fremont Blvd., Fremont,
California 94538 or by telephone at (510) 492-1088.
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THE COMPANY
ESS Technology, Inc. ("ESS" or the "Company"), a California corporation,
designs, markets and supports highly integrated mixed-signal semiconductor and
software solutions for multimedia applications in the personal computer ("PC")
and consumer marketplaces. The Company offers comprehensive solutions for audio,
video and fax/modem applications. ESS has established itself as a leading
supplier of mixed-signal PC audio solutions that integrate all essential audio
components on a single chip. During 1996, ESS introduced a family of integrated
circuits that incorporate advanced compression technology for digital video
products and began marketing a line of highly integrated V.34bis modem
solutions.
ESS leverages a leadership position in PC audio, video and fax/modem
technology, a diverse customer base, recognized quality, and dependable on-time
delivery to provide high quality, cost effective, and highly integrated
multimedia solutions for the personal computer and consumer markets. The Company
has three major families of products: the AudioDRIVE family addressing its PC
digital audio device market; the VideoDRIVE family targeting MPEG1 and MPEG2
decompression-based consumer products such as Video Compact Disk ("VCD")
players, Digital Video Disk ("DVD") players and set-top boxes, and the TeleDRIVE
family focusing on the integrated audio-fax/modem applications, including
full-duplex speakerphone, digital simultaneous voice and data ("DVSD") and
videoconferencing.
ESS was incorporated in 1984 under the laws of California. The Company's
principal executive offices are located at 48401 Fremont Blvd., Fremont,
California 94538 and its telephone number is (510) 492-1088. As used in this
Prospectus, the "Company" and "ESS" refer to ESS Technology, Inc., a California
corporation, and its wholly-owned subsidiaries.
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RISK FACTORS
This Prospectus (including the documents incorporated by reference herein)
contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934,
including, without limitation, statements regarding the Company's expectations,
beliefs, intentions or future strategies. All forward looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward looking statements. Actual results could differ materially from those
projected in the forward-looking statements as a result of the risk factors set
forth below and in the documents incorporated by reference herein. In evaluating
the Company's business, prospective investors should carefully consider the
following risk factors in addition to the other information set forth herein or
incorporated herein by reference.
Potential Fluctuations in Operating Results. The Company's operating
results are subject to quarterly and other fluctuations due to a variety of
factors, including the gain or loss of significant customers, increased
competitive pressures, changes in pricing policies by the Company, its
competitors or its suppliers, including decreases in unit average selling prices
("ASPs") of the Company's products, the timing of new product announcements and
introductions by the Company or its competitors and market acceptance of new or
enhanced versions of the Company's and its customers' products. Other factors
include the availability of foundry capacity, fluctuations in manufacturing
yields, availability and cost of raw materials, changes in the mix of products
sold, the cyclical nature of both the semiconductor industry and the market for
PCs, seasonal customer demand, the timing of significant orders and significant
increases in expenses associated with the expansion of operations. The Company's
operating results could also be adversely affected by economic conditions
generally in various geographic areas where the Company or its customers do
business, or order cancellations or rescheduling. These factors are difficult to
forecast, and these or other factors could materially affect the Company's
quarterly or annual operating results. There can be no assurance as to the level
of sales or earnings that may be attained by the Company in any given period in
the future.
Competition; Pricing Pressures. The markets in which the Company competes
are intensely competitive and are characterized by rapid technological change,
price declines and rapid product obsolescence. The Company currently competes
with add-in card suppliers and semiconductor manufacturers. The Company expects
competition to increase in the future from existing competitors and from other
companies that may enter the Company's existing or future markets with products
that may be at lower costs or provide higher levels of integration, higher
performance or additional features. The Company is unable to predict the timing
and nature of any such competitive product offerings. The announcement and
commercial shipment of competitive products could adversely affect sales of the
Company's products and may result in increased price competition that would
adversely affect the ASPs and margins of the Company's products. In general,
product prices in the semiconductor industry have decreased over the life of a
particular product. The markets for most of the applications for the Company's
products, particularly the PC market, are characterized by intense price
competition. The willingness of prospective customers to design the Company's
products into their products depends to a significant extent upon the ability of
the Company to sell its products at a price that is cost-effective for such
customers. As the markets for the Company's products mature and competition
increases, the Company anticipates that prices for its products will continue to
decline. If the Company is unable to reduce its costs sufficiently to offset
declines in product prices or is unable to introduce more advanced products with
higher product prices, the Company's business, financial condition and results
of operations would be materially adversely affected.
The Company's existing and potential competitors consist principally of
large domestic and international companies that have substantially greater
financial, manufacturing, technical, marketing, distribution and other
resources, greater intellectual property rights, broader product lines and
longer-standing relationships with customers than the Company, as well as a
number of smaller and emerging companies. The Company's principal competitors
include C-Cube, Cirrus Logic, Creative Technology, LSI Logic, Lucent, Oak
Technology, OPTi, Rockwell, SGS Thompson, Texas Instruments, Winbond and Yamaha.
Certain of the Company's current and potential competitors maintain their own
semiconductor foundries and may therefore benefit from certain capacity, cost
and technical advantages. The Company believes that its ability to compete
successfully depends on a number of factors, both within and outside of its
control, including the price, quality and
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performance of the Company's and its competitors' products, the timing and
success of new product introductions by the Company, its customers and its
competitors, the emergence of new multimedia standards, the development of
technical innovations, the ability to obtain adequate foundry capacity and
sources of raw materials, the efficiency of production, the rate at which the
Company's customers design the Company's products into their products, the
number and nature of the Company's competitors in a given market, the assertion
of intellectual property rights and general market and economic conditions.
There can be no assurance that the Company will be able to compete successfully
in the future.
Each successive generation of microprocessors has provided increased
performance, which could in the future result in a microprocessor capable of
performing multimedia functions. In this regard, Intel Corporation has developed
native Signal Processing ("NSP") capability and an extended multimedia system
architecture ("MMX") for use in conjunction with its Pentium microprocessor, and
is promoting the processing power of the Pentium for data and signal intensive
functions such as graphics acceleration and other multimedia functions. There
can be no assurance that the increased capabilities of microprocessors will not
adversely affect demand for the Company's products.
Dependence on Single Product Line and PC Industry. In the second quarter of
1997, sales of PC audio semiconductors accounted for a substantial majority of
the Company's net revenues, and the Company expects that sales of audio
semiconductors will continue to account for a majority of its net revenues for
the foreseeable future. Any reduction in ASPs for audio products or demand for
the Company's audio semiconductors, whether because of a reduction in demand for
PCs in general or PC audio, increased competition or otherwise, would have a
material adverse effect on the Company's business, financial condition and
results of operations.
The Company is currently engaged in the development and introduction of new
PC audio products as well as new multimedia products for the PC and consumer
markets that provide capabilities such as video and fax/modem/voice
applications. There can be no assurance that the Company will be able to
identify market trends or new product opportunities, develop and market new
products, achieve design wins or respond effectively to new technological
changes or product announcements by others. A failure in any of these areas
would have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company's products are sold for incorporation into multimedia desktop
and notebook computers. ESS audio semiconductors are incorporated into
motherboards by multimedia PC original equipment manufacturers ("OEMs") or in
add-in sound cards. Therefore, the Company is heavily dependent on the continued
growth of the markets for multimedia desktop and notebook computers and
multimedia applications utilizing high quality audio. There can be no assurance
that these markets will be able to sustain continued growth. A slowing in unit
volume and a decrease in ASPs could result in a decline in revenues in the PC
industry which could result in a corresponding decline in demand for the
Company's products, which would have a material adverse effect on the Company's
business, financial condition and results of operations.
Importance of New Products and Technological Change. The markets for the
Company's products are characterized by evolving industry standards, rapid
technological change and product obsolescence. The Company's success is highly
dependent upon the successful development and timely introduction of new
products at competitive price and performance levels. The success of new
products depends on a number of factors, including timely completion of product
development, market acceptance of the Company's and its customers' new products,
securing sufficient foundry capacity for volume manufacturing of wafers,
achievement of acceptable wafer fabrication yields by the Company's independent
foundries and the Company's ability to offer new products at competitive prices.
In order to succeed in having the Company's products incorporated into new
products being designed by desktop and notebook computer manufacturers, the
Company must anticipate market trends and performance and functionality
requirements of such manufacturers and must successfully develop and manufacture
products that meet these requirements. In addition, the Company must meet the
timing and price requirements of such manufacturers and must make such products
available in sufficient quantities. Accordingly, in selling to OEMs, the Company
can often incur significant expenditures prior to volume sales of new products,
if any. In order to help accomplish these goals, the Company has in the past and
will continue to consider in the future the acquisition of other companies or
the
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products and technologies of other companies. Such acquisitions carry additional
risks such as a lack of integration with existing products and corporate
culture, the potential for large write-offs and the diversion of management
attention. The Company is currently engaged in the development of new PC audio
products as well as new multimedia products that provide telephony capabilities
such as fax/modem/voice and video applications. There can be no assurance that
the Company will be able to identify market trends or new product opportunities,
develop and market new products, achieve design wins or respond effectively to
new technological changes or product announcements by others. A failure in any
of these areas would have a material adverse effect on the Company's business,
financial condition and results of operation.
Dependence on TSMC and Other Third Parties. The Company relies on
independent foundries to manufacture all of its products. A substantial majority
of the Company's products are currently manufactured by Taiwan Semiconductor
Manufacturing Company, Ltd. ("TSMC"), which has manufactured certain of the
Company's products since 1989. The Company also has foundry arrangements with
Sharp Corporation ("Sharp"), IC Works ("ICW") and United Microelectronics
Corporation ("UMC"), which have been manufacturing certain of the Company's
products since 1986, 1991 and 1995, respectively. TSMC, in particular, provides
the Company with access to advanced process technology necessary for the
manufacture of the Company's products. These foundries fabricate products for
other companies and, with the exception of TSMC, manufacture products of their
own design. In November 1995, the Company entered into long-term agreements with
TSMC and UMC in which the Company has secured access to additional capacity and
to leading-edge technology. Subsequent to the end of the second quarter, the
Company paid approximately $16 million to TSMC in exchange for certain wafer
capacity commitments. If the Company is not able to use, assign, or sell the
additional wafer quantities, a portion of the deposits may be forfeited. In
addition, the Company may invest approximately $7.0 million in one installment
over the next four months in exchange for an equity ownership in a joint venture
with UMC to build a new foundry and for certain wafer capacity commitments.
While the Company has entered into long-term agreements with two of its
foundries, the Company's reliance on these and other independent foundries
involves a number of risks, including the absence of adequate capacity, the
unavailability of, or interruption in access to, certain process technologies
and reduced control over delivery schedules, manufacturing yields and costs, and
the international risks more fully described below. The Company expects to rely
upon TSMC and UMC to manufacture a substantial majority of the Company's
products for the foreseeable future. In the event that TSMC and UMC are unable
to continue to manufacture the Company's key products in required volumes, the
Company will have to identify and secure additional foundry capacity. In such an
event, the Company may be unable to identify or secure additional foundry
capacity from another manufacturer, particularly at the levels that the Company
currently expects TSMC and UMC to provide. Even if such capacity is available
from another manufacturer, the qualification process could take six months or
longer. The loss of any of its foundries as a supplier, the inability of the
Company to acquire additional capacity at its current suppliers or qualify other
wafer manufacturers for additional foundry capacity should additional capacity
be necessary, or any other circumstances causing a significant interruption in
the supply of semiconductors to the Company would have a material adverse effect
on the Company's business, financial condition and results of operations.
To address potential foundry capacity constraints in the future, ESS will
continue to consider and may be required to enter into additional arrangements,
including equity investments in or loans to independent wafer manufacturers in
exchange for guaranteed production capacity, joint ventures to own and operate
foundries, or "take or pay" contracts that commit the Company to purchase
specified quantities of wafers over extended periods. Any such arrangements
could require the Company to commit substantial capital and grant licenses to
its technology. The need to commit substantial capital may require the Company
to obtain additional debt or equity financing, which could result in dilution to
the Company's shareholders. There can be no assurance that such additional
financing, if required, will be available when needed or, if available, will be
obtained on terms acceptable to the Company.
All of the Company's semiconductor products are assembled and tested by
third-party vendors, primarily Amkor ANAM in Korea, Advanced Semiconductor
Engineering in Taiwan, ASAT in Hong Kong, Astra Microtronics in Indonesia and
OSE in Taiwan. The Company has internally designed and developed its own
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test software and certain test equipment which is provided to the Company's test
vendors. Shortages of raw materials or disruptions in the provision of services
by the Company's assembly vendors could lead to supply constraints or delays in
the delivery of the Company's products. Such constraints or delays might result
in the loss of customers, limitations or delays in the delivery of the Company's
revenues or other material adverse effects on the Company's business, financial
conditions and results of operations. The Company's reliance on third-party
assembly and testing vendors involves a number of other risks, including reduced
control over delivery schedules, quality assurance and costs. The inability of
such third parties to deliver products of acceptable quality and in a timely
manner could have a material adverse effect on the Company's business, financial
condition and results of operations.
Customer Concentration. A limited number of customers have accounted for a
substantial portion of the Company's net revenues. The Company has expanded its
distribution activities to better address the China market. Sales to
distributors are generally subject to agreements allowing limited rights of
return and price protection with respect to unsold products. While the Company
has not experienced returns and allowances in excess of the Company's reserves,
returns and allowances in excess of reserves could have a material adverse
impact on the Company's business, financial condition and results of operation.
In addition, the Company has decided to defer revenue recognition to
distributors who resell into the China market. The Company expects that a
limited number of customers may account for a substantial portion of its net
revenues for the foreseeable future. The Company has experienced changes from
year to year in the composition of its major customer base and believes this
pattern may continue. For example, Compaq has been a significant customer of the
Company since 1995. The Company does not have long-term purchase agreements with
any of its customers. The reduction, delay or cancellation of orders from one or
more major customers for any reason or the loss of one or more of such major
customers could materially and adversely affect the Company's business,
financial condition and results of operation. In addition, since the Company's
products are often sole sourced to its customers, the Company's operating
results could be materially and adversely affected if one or more of its major
customers were to develop other sources of supply. There can be no assurance
that the Company's current customers will continue to place orders with the
Company, that orders by existing customers will not be canceled or will continue
at the levels of previous periods or that the Company will be able to obtain
orders from new customers. The Company currently places noncancelable orders to
purchase its products from independent foundries on an approximately three-month
rolling basis, while its customers generally place purchase orders with the
Company less than four weeks prior to delivery that may be canceled without
significant penalty. Consequently, if anticipated sales and shipments in any
quarter are canceled or do not occur as quickly as expected, expense and
inventory levels could be disproportionately high and the Company's business,
financial condition and results of operations could be materially adversely
affected.
Management Growth. The Company has recently experienced significant growth
in revenues and the addition of multiple product lines that require additional
management systems and processes. To manage its future operations and growth
effectively, the Company will need to continue to improve its operational,
financial and management information systems, implement additional systems and
controls, and hire, train, motivate, manage and retain its employees. There can
be no assurance that the Company will be able to manage such growth effectively,
and the failure to do so could have a material adverse effect on the Company's
business, financial condition and results of operations.
International Operations. In the second quarter of 1997, international
sales, accounted for substantially all of the Company's net revenues.
Substantially all of the Company's international sales were to customers in
Taiwan, Hong Kong, Japan and Singapore. The Company expects that international
sales will continue to represent a significant portion of its net revenues for
the foreseeable future. In addition, substantially all of the company's products
are manufactured, assembled and tested by independent third parties in Asia. Due
to its reliance on international sales and foreign third-party manufacturing,
assembly and testing operations, the Company is subject to the risks of
conducting business outside of the Untied States. These risks include unexpected
changes in, or impositions of legislative or regulatory requirements, delays
resulting from difficulty in obtaining export licenses for certain technology,
tariffs, quotas and other trade barriers and restrictions, longer payment
cycles, greater difficulty in accounts receivable collection, potentially
adverse taxes, the burdens of complying with a variety of foreign laws and other
factors beyond the Company's control. The
8
<PAGE> 10
Company is also subject to general geopolitical risks in connection with its
international trade relationships. In particular, Hong Kong, which represents a
large market for the Company's products, has recently been returned to mainland
China. Should the transition result in instability in Hong Kong, it is possible
that sales to Hong Kong could be affected. Such instability could also lead to
disruption in the Company's ability to trade with Taiwan, which represents a
large portion of the Company's sales and is the location of its major foundries
and two test facilities. Should such disruption occur, it is possible that
purchases by Taiwanese customers will decline and semiconductor manufacturing in
Taiwan will be impeded, cutting off the Company's main supply of guaranteed
wafer production. This could lead to capacity constraints at non-Taiwanese
foundries. Although the Company has not to date experienced any material adverse
effect on its business, financial condition or results of operations as a result
of such regulatory, geopolitical and other factors, there can be no assurance
that such factors will not have a material adverse effect on the Company's
business, financial condition and results of operations in the future or require
the Company to modify its current business practices.
In addition, the laws of certain foreign countries in which the Company's
products are or may be manufactured or sold, including various countries in
Asia, may not protect the Company's products or intellectual property rights to
the same extent as do the laws of the United States and thus make the
possibility of piracy of the Company's technology and products more likely.
Currently, all of the Company's product sales and all of its arrangements with
foundries and assembly and test vendors, other than its foundry arrangement with
Sharp Corporation, provide for pricing and payment in U.S. dollars. To date,
although the effect of currency fluctuations have been insignificant, there can
be no assurance that fluctuations in currency exchange rates will not have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, to date the Company has not engaged in any
currency hedging activities, although the company may do so in the future.
Further, there can be no assurance that one or more of the foregoing factors
will not have a material adverse effect on the Company's business, financial
condition and results of operations or require the Company to modify its current
business practices.
Semiconductor Industry. The semiconductor industry has historically been
characterized by rapid technological change, cyclical market patterns,
significant price erosion, periods of over-capacity and production shortages,
variations in manufacturing costs and yields and significant expenditures for
capital equipment and product development. In addition, the industry has
experienced significant economic downturns at various times, characterized by
diminished product demand and accelerated erosion of product prices. Although
the semiconductor industry in recent periods has experienced increased demand,
it is uncertain how long these conditions will continue. The Company may
experience substantial period-to-period fluctuations in operating results due to
general semiconductor industry conditions.
Patents and Proprietary Rights. The Company relies on a combination of
patents, trademarks, copyrights, trade secret laws and confidentiality
procedures to protect its intellectual property rights. As of June 30, 1997, the
Company had 10 patents granted in the United States, which expire over time,
commencing in 1997 and ending in 2013, and 9 corresponding foreign patents. In
addition, the Company intends to seek further United States and international
patents on its technology. There can be no assurance that patents will be issued
from any of the Company's pending applications or applications in preparation or
that any claims allowed from pending applications or applications in preparation
will be of sufficient scope or strength, or be issued in all countries where the
Company's products can be sold, to provide meaningful protection or any
commercial advantage to the Company. Also, competitors of the Company may be
able to design around the Company's patents. The laws of certain foreign
countries in which the Company's products are or may be manufactured or sold,
including various countries in Asia, may not protect the Company's products or
intellectual property rights to the same extent as do the laws of the United
States and thus make the possibility of piracy of the Company's technology and
products more likely. Although the Company is not aware of the development,
distribution or sales of any illegal copies of the Company's hardware or
software, any infringements of its patents, copyrights or trademarks, or any
violation of its trade secrets, confidentiality procedures or licensing
agreements to date, there can be no assurance that the steps taken by the
Company to protect its proprietary information will be adequate to prevent
misappropriation of its technology or that the Company's competitors will not
independently develop technologies that are substantially equivalent or superior
to the Company's technology.
9
<PAGE> 11
The semiconductor industry is characterized by vigorous protection and
pursuit of intellectual property rights or positions, which have resulted in
significant and often protracted and expensive litigation. There is no pending
intellectual property litigation against the Company. However, the Company or
its foundries may from time to time receive notice of claims that the Company
has infringed patents or other intellectual property rights owned by others. The
Company may seek licenses under such patents or other intellectual property
rights. However, there can be no assurance that licenses will be offered or that
the terms of any offered licenses will be acceptable to the Company. The failure
to obtain a license from a third party for technology used by the Company could
cause the Company to incur substantial liabilities and to suspend the
manufacture of products or the use by the Company's foundries of processes
requiring the technology. Furthermore, the Company may initiate claims or
litigation against third parties for infringement of the Company's proprietary
rights or to establish the validity of the Company's proprietary rights.
Litigation by or against the Company could result in significant expense to the
Company and divert the efforts of the Company's technical and management
personnel, whether or not such litigation results in a favorable determination
for the Company. In the event of an adverse result in any such litigation, the
Company could be required to pay substantial damages, cease the manufacture, use
and sale of infringing products, expend significant resources to develop
noninfringing technology, discontinue the use of certain processes or obtain
licenses for the infringing technology. There can be no assurance that the
Company would be successful in such development or that such licenses would be
available on reasonable terms, or at all, and any such development or license
could require expenditures by the Company of substantial time and other
resources. Although patent disputes in the semiconductor industry have often
been settled through crosslicensing arrangements, there can be no assurance
that, in the event that any third party makes a successful claim against the
Company or its customers, a cross-licensing arrangement could be reached. In
such a case, if a license is not made available to the Company on commercially
reasonable, terms, the Company's business, financial condition and results of
operations could be materially adversely affected.
The Company currently licenses certain of the technology utilized by the
Company in its products, and expects to continue to do so in the future. The
Company has no current plans to grant licenses with respect to its products or
technology; however, it may become necessary for the Company to enter into
product licenses in the future in order, among other things, to secure foundry
capacity. Although the Company has in the past granted licenses to certain of
its technology, some of which have expired, such licenses have been limited and
the Company has not derived material revenues from such licenses in recent
periods.
Dependence on Key Personnel. The Company's success depends to a significant
degree upon the continued contributions of Fred S.L. Chan, the Company's
President, Chief Executive Officer and Chairman of the Board of Directors. As of
June 30, 1997, Mr. Chan, together with his spouse, Annie M.H. Chan, a director
of the Company and certain trusts for the benefit of the Chan's children and
certain charities beneficial owned, in the aggregate, approximately 39% of the
Company's Common Stock. The future success of the Company depends on its ability
to continue to attract, retain and motivate qualified senior management, sales
and technical personnel, particularly highly skilled semiconductor design
personnel and software engineers, for whom competition is intense. Recently, the
Company has hired a number of key executives and management personnel. The loss
of Mr. Chan, other key executive officers, key design personnel or software
engineers or the inability to hire and retain sufficient qualified personnel
could have a material adverse effect on the Company's business, financial
condition and results of operations. There can be no assurance that the Company
will be able to retain these employees. The Company currently does not maintain
any key man life insurance on the life of any of its key employees.
Control by Existing Shareholders. As of June 30, 1997, Fred S.L. Chan, the
Company's President, Chief Executive Officer and Chairman of the Board of
Directors, together with his spouse, Annie M.H. Chan, a director of the Company,
and certain other shareholders related to Mr. and Mrs. Chan owned, in the
aggregate, approximately 39% of the Company's outstanding Common Stock. As a
result, these shareholders, acting together, possess significant voting power
over the Company, giving them the ability among other things to influence
significantly the election of the Company's Board of Directors and approve
significant corporate transactions. Such control could delay, defer or prevent a
change in control of the Company, impede a merger,
10
<PAGE> 12
consolidation, takeover or other business combination involving the Company, or
discourage a potential acquiror from making a tender offer or otherwise
attempting to obtain control of the Company.
Possible Volatility of Stock Price. The price of the Company's Common Stock
has in the past and may continue in the future to fluctuate widely. Future
announcements concerning the Company, its competitors or its principal
customers, including quarterly operating results, changes in earnings estimates
by analysts, technological innovations, new product introductions, governmental
regulations or litigation may cause the market price of the Common Stock to
continue to fluctuate substantially. Further, in recent years the stock market
has experienced extreme price and volume fluctuations that have particularly
affected the market prices of equity securities of many high technology
companies and that often have been unrelated or disproportionate to the
operating performance of such companies. These fluctuations, as well as general
economic, political and market conditions such as recessions or international
currency fluctuations, may materially adversely affect the market price of the
Common Stock.
SELLING SHAREHOLDERS
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of July
15, 1997 by each Selling Shareholder.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO THE OFFERING(1) AFTER THE OFFERING(2)
------------------------ SHARES -----------------------
SELLING SHAREHOLDERS SHARES PERCENT(3) OFFERED SHARES PERCENT(3)
- ---------------------------------- ------- ---------- ------- ------ ----------
<S> <C> <C> <C> <C> <C>
InveStar(4)....................... 708,075(3) 1.8 631,270(6) 70,805 *
Raphael M. O'Malley............... 54,217 * 10,000 44,217 *
Man Shek Lee...................... 36,145 * 36,145 -0- *
Optima Sales, Inc................. 4,000 * 4,000 -0- *
Prohubs International Corp........ 4,000 * 4,000 -0- *
Total................... 806,437 2.0 685,415 115,022 *
</TABLE>
- ---------------
* Less than one percent of the Company's outstanding Common Stock.
(1) Information with respect to beneficial ownership is based upon information
obtained from the Company's transfer agent and certain of the Selling
Shareholders.
(2) Assumes that each Selling Shareholder will sell all of the Shares set forth
above under "Shares Offered." There can be no assurance that the Selling
Shareholders will sell all or any of the Shares offered hereunder.
(3) Based on 40,328,798 shares outstanding at July 15, 1997.
(4) Includes InveStar Burgeon Venture Capital, Inc. ("InveStar Burgeon"),
InveStar Semiconductor Development Fund, Inc. ("InveStar Semiconductor"),
and SinoStar Technologies, Inc. ("SinoStar").
(5) Includes 342,538 shares held by InveStar Burgeon, 342,538 shares held by
InveStar Semiconductor and 22,999 shares held by SinoStar.
(6) Includes 308,285 shares offered by InveStar Burgeon, 308,285 shares offered
by InveStar Semiconductor and 14,700 shares offered by SinoStar.
11
<PAGE> 13
ISSUANCE OF COMMON STOCK TO SELLING SHAREHOLDERS
On June 11, 1997, the Company acquired Platform pursuant to an Agreement
and Plan of Reorganization dated April 27, 1997 (the "Reorganization Agreement")
among the Company, Platform and a wholly-owned subsidiary of the Company (the
"Sub"). Pursuant to the Reorganization Agreement, the Sub merged with and into
Platform, and all outstanding shares of Platform capital stock and options to
purchase Platform capital stock were converted into shares of the Company's
Common Stock (the "Merger Shares") and options to purchase the Company's Common
Stock (the "Merger Options"), respectively. An aggregate of 2,540,000 Merger
Shares and Merger Options were issued pursuant to the terms of the
Reorganization Agreement. Under the terms of the Reorganization Agreement, the
Company is obligated to file a Registration Statement on Form S-3 covering the
Merger Shares once each fiscal quarter until the end of the one-year period
following the effective date of the acquisition.
PLAN OF DISTRIBUTION
Shares of Common Stock covered hereby may be offered and sold from time to
time by the Selling Shareholders. The Selling Shareholders will act
independently of the Company in making decisions with respect to the timing,
manner and size of each sale. The Selling Shareholders may sell the Shares being
offered hereby: (i) on The Nasdaq National Market, or otherwise at prices and at
terms then prevailing or at prices related to the then current market price; or
(ii) in private sales at negotiated prices directly or through a broker or
brokers, who may act as agent or as principal or by a combination of such
methods of sale. The Selling Shareholders and any underwriter, dealer or agent
who participate in the distribution of such shares may be deemed to be
"underwriters" under the Securities Act, and any discount, commission or
concession received by such persons might be deemed to be an underwriting
discount or commission under the Securities Act. The Company has agreed to
indemnify the Selling Shareholders against certain liabilities arising under the
Securities Act.
Any broker-dealer participating in such transactions as agent may receive
commissions from the Selling Shareholders (and, if acting as agent for the
purchaser of such shares, from such purchaser). Usual and customary brokerage
fees will be paid by the Selling Shareholders. Broker-dealers may agree with the
Selling Shareholders to sell a specified number of shares at a stipulated price
per share, and, to the extent such a broker-dealer is unable to do so acting as
agent for the Selling Shareholders, to purchase as principal any unsold shares
at the price required to fulfill the broker-dealer commitment to the Selling
Shareholders. Broker-dealers who acquire shares as principal may thereafter
resell such shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, in negotiated transactions or by a combination of such
methods of sale or otherwise at market prices prevailing at the time of sale or
at negotiated prices, and in connection with such resales may pay to or receive
from the purchasers of such shares commissions computed as described above.
The Company has advised the Selling Shareholders that the anti-manipulation
rules under the Exchange Act may apply to sales of Shares in the market and to
the activities of the Selling Shareholders and their affiliates. The Selling
Shareholders have advised the Company that during such time as the Selling
Shareholders may be engaged in the attempt to sell shares registered hereunder,
they will: (i) not engage in any stabilization activity in connection with any
of the Company's securities; (ii) cause to be furnished to each person to whom
Shares included herein may be offered, and to each broker-dealer, if any,
through whom Shares are offered, such copies of this Prospectus, as supplemented
or amended, as may be required by such person; (iii) not bid for or purchase any
of the Company's securities or any rights to acquire the Company's securities,
or attempt to induce any person to purchase any of the Company's securities or
rights to acquire the Company's securities other than as permitted under the
Exchange Act; and (iv) not effect any sale or distribution of the Shares until
after the Prospectus shall have been appropriately amended or supplemented, if
required, to set forth the terms thereof; and
The Selling Shareholders may indemnify any broker-dealer that participates
in transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act. Any
12
<PAGE> 14
commissions paid or any discounts or concessions allowed to any such
broker-dealers, and any profits received on the resale of such shares, may be
deemed to be underwriting discounts and commissions under the Securities Act if
any such brokerdealers purchase shares as principal.
In order to comply with the securities laws of certain states, if
applicable, the Common Stock will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states, the
Common Stock may not be sold unless such shares have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and is complied with.
The Company has agreed to maintain the effectiveness of this Registration
Statement until the earlier of the sale of all of the shares of Common Stock
offered hereunder or fourteen (14) days from the date of this Prospectus. No
sales may be made pursuant to this Prospectus after such data unless the Company
amends or supplements this Prospectus to indicate that it has agreed to extend
such period of effectiveness. There can be no assurance that the Selling
Shareholders will sell all or any of the shares of Common Stock offered
hereunder.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon by Venture Law Group, A Professional Corporation, Menlo Park, California,
counsel to the Company.
EXPERTS
The consolidated financial statements and schedule of the Company appearing
in the Company's Annual Report (Form 10-K) for the year ended December 31, 1996,
have been audited by Price Waterhouse LLP, independent auditors, as set forth in
their report thereon included therein and incorporated herein by reference. Such
consolidated financial statements and schedule are incorporated herein by
reference in reliance upon such reports given upon the authority of such firms
as experts in accounting and auditing.
13
<PAGE> 15
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The Registrant will bear no expenses in connection with any sale or other
distribution by the Selling Shareholders of the shares being registered other
than the expenses of preparation and distribution of this Registration Statement
and the Prospectus included in this Registration Statement. Such expenses are
set forth in the following table. All of the amounts shown are estimates except
the Securities and Exchange Commission ("SEC") registration fee.
<TABLE>
<S> <C>
SEC registration fee............................... $ 3,025
Legal fees and expenses............................ 15,000
Accounting fees and expenses....................... 7,000
Miscellaneous expenses............................. 2,000
-------
Total.............................................. $27,025
=======
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 317 of the California Corporations Code allows for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article III of the
Registrant's Articles of Incorporation and Article VI of the Registrant's Bylaws
provides for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
California Corporations Code. The Registrant has also entered into agreements
with its directors and officers that will require the Registrant, among other
things, to indemnify them against certain liabilities that may arise by reason
of their status or service as directors to the fullest extent not prohibited by
law.
In addition, the Registrant carries director and officer liability
insurance in the amount of $10 million.
In connection with this offering, the Selling Shareholders have agreed to
indemnify the Registrant, its directors and officers and each such person who
controls the Registrant, against any and all liability arising from inaccurate
information provided to the Registrant by the Selling Shareholders and contained
herein.
ITEM 16. EXHIBITS.
EXHIBITS.
<TABLE>
<S> <C>
2.1(1) First Amended and Restated Agreement and Plan of Reorganization, dated as of
April 27, 1997, among Registrant, EP Acquisition Corporation and Platform
Technologies, Inc.
4.1 Declaration of Registration Rights, Exhibit H to the First Amended and
Restated Agreement and Plan of Reorganization dated as of April 27, 1997
among Registrant, EP Acquisition Corporation and Platform Technologies, Inc.
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of Price Waterhouse LLP, Independent Auditors (included in Exhibit
23.1)
23.2 Consent of Venture Law Group, A Professional Corporation (included in
Exhibit 5.1)
24.1 Power of Attorney (see pages II-3; II-4)
</TABLE>
- ---------------
(1) Incorporated by reference to the identically numbered exhibit filed with the
Registrant's Form 8-K, filed on June 24, 1997.
II-1
<PAGE> 16
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act,
each post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
this offering.
(4) That, for purposes of determining any liability under the Securities Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in the
Registration Statement 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.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC 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.
II-2
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, ESS Technology,
Inc. certifies that it has reasonable grounds to believe that it meets all of
the requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fremont, State of California, on July 17, 1997.
ESS TECHNOLOGY, INC.
By: /s/ JOHN H. BARNET
------------------------------------
John H. Barnet
Vice President, Finance and Chief
Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Fred S.L. Chan and John H. Barnet,
jointly and severally, his or her true and lawful attorneys-in-fact, each with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or any
of them, or his or their substitute or substitutes, may lawfully do or cause to
be done or 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> <C> <S>
/s/ FRED S.L. CHAN President, Chief Executive Officer July 17, 1997
- ------------------------------------- and Chairman of the Board of
Fred S.L. Chan Directors (Principal Executive
Officer)
/s/ JOHN H. BARNET Vice President, Finance and July 17, 1997
- ------------------------------------- Chief Financial Officer
John H. Barnet (Principal Financial Officer)
/s/ ANNIE M.H. CHAN Director July 17, 1997
- -------------------------------------
Annie M.H. Chan
Director July , 1997
- -------------------------------------
Michael A. Aymar
/s/ ILBOK LEE Director July 17, 1997
- -------------------------------------
Ilbok Lee
/s/ PETER T. MOK Director July 17, 1997
- -------------------------------------
Peter T. Mok
</TABLE>
II-3
<PAGE> 18
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints Fred S.L. Chan and John H. Barnet,
jointly and severally, his or her true and lawful attorneys-in-fact, each with
full power of substitution, for him or her in any and all capacities, to sign
any and all amendments (including post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto and all
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact or any
of them, or his or their substitute or substitutes, may lawfully do or cause to
be done or 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> <C> <S>
/s/ HOWARD N. HIDESHIMA Controller (Principal Accounting July 17, 1997
- ------------------------------------- Officer)
Howard N. Hideshima
</TABLE>
II-4
<PAGE> 19
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------
<C> <S>
4.1 Declaration of Registration Rights, Exhibit H to the First Amended and
Restated Agreement and Plan of Reorganization, dated as of April 27, 1997
among Registrant, EP Acquisition Corporation and Platform Technologies, Inc.
5.1 Opinion of Venture Law Group, A Professional Corporation
23.1 Consent of Price Waterhouse LLP, Independent Auditors
23.2 Consent of Counsel (included in Exhibit 5.1)
24.1 Power of Attorney (see pages II-3; II-4)
</TABLE>
<PAGE> 1
EXHIBIT 4.1
EXHIBIT H
ESS TECHNOLOGY, INC.
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights ("DECLARATION") is made as of
April 27, 1997, by ESS Technology, Inc., a California corporation ("ESS"), for
the benefit of shareholders and optionholders of Platform Technologies, Inc., a
California corporation ("PLATFORM"), acquiring shares of ESS Common Stock or
options to purchase shares of ESS Common Stock pursuant to that First Amended
and Restated Agreement and Plan of Reorganization dated as of April 27, 1997
(the "MERGER AGREEMENT"), among ESS, Platform and EP Acquisition Corporation, a
California corporation ("SUB") and wholly-owned subsidiary of ESS and the
related Agreement of Merger (the "AGREEMENT OF MERGER") between Platform and Sub
and in consideration of such shareholders approving the Merger Agreement and the
transactions contemplated thereby.
1. Definitions. As used in this Declaration:
a. "EXCHANGE ACT" means the Securities Exchange Act 1934,
as amended.
b. "ACT" means the Securities Act of 1933, as amended.
c. "EFFECTIVE TIME OF THE MERGER" means the earlier of the
time of confirmation of the filing of the Agreement of Merger with the
California Secretary of State or the time that the Agreement of Merger is deemed
filed with the California Secretary of State.
d. "FORM S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Commission which similarly permits inclusion or incorporation of substantial
information by reference to other documents filed by ESS with the Commission.
e. "FORM S-8" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Commission which similarly permits inclusion or incorporation of substantial
information by reference to other documents filed by ESS with the Commission.
f. "HOLDER" means: (i) a shareholder of Platform to whom
shares of ESS Common Stock are issued pursuant to the Merger Agreement and the
Agreement of Merger, or (ii) an optionholder of Platform to whom shares of ESS
Common Stock will be issued upon exercise of the options, or (iii) the Escrow
Agent (as defined in the Merger Agreement), or (iv) a transferee of a Holder to
whom registration rights granted under this Declaration are granted pursuant to
Section 10 of this Declaration.
g. "REGISTRABLE SECURITIES" means for each Holder the
number of shares of ESS Common Stock issued to such Holder pursuant to the
Merger Agreement and the Agreement of Merger or issuable upon exercise of
options to purchase ESS Common Stock assumed by ESS pursuant to the Merger
Agreement and the Agreement of Merger (i) at the
<PAGE> 2
Effective Time of the Merger and (ii) upon release from the Escrow Fund (as
defined in the Merger Agreement), in each case rounded to the nearest integral
amount, and for all Holders the sum of the Registrable Securities held by them,
(provided such shares are vested at the time a request for registration is made
under Section 2 hereof).
h. "COMMISSION" means the Securities and Exchange
Commission.
Terms not otherwise defined herein have the meanings given to them in
the Merger Agreement.
2. Registration. For a period of one year following the Effective
Time, on the day following the first official announcement of ESS's financial
results for ESS's most recently completed fiscal quarter, ESS shall prepare and
file with the Commission and shall use its commercially reasonable efforts to
cause to become effective a registration statement on Form S-3 and, if permitted
under the Act, on Form S-8 covering the Registrable Securities; provided,
however, that each Holder shall provide all such information and materials and
take all such action as may be required in order to permit ESS to comply with
all applicable requirements of the Commission and to obtain any desired
acceleration of the effective date of such registration statement, such
provision of information and materials to be a condition precedent to the
obligations of ESS pursuant to this Declaration. ESS shall not be required to
effect more than one registration within any three month period under this
Section 2. The offerings made pursuant to such registrations shall not be
underwritten.
3. Company Registration.
(a) If (but without any obligation to do so) ESS proposes to
register (including for this purpose a registration effected by ESS for
shareholders other than the Holders) any of its Common Stock or other securities
under the Act in connection with the public offering of such securities solely
for cash (other than a registration relating either to the sale of securities to
participants in a Company stock option, stock purchase or similar plan or to a
Commission Rule 145 transaction, or a registration on any form which does not
include substantially the same information as would be required to be included
in a registration statement covering the sale of the Registrable Securities),
ESS shall, at such time, promptly give each holder of Registrable Securities
written notice of such registration. Upon the written request of any Holders
given within twenty (20) days after mailing of such notice by ESS, ESS shall,
subject to the provisions of Section 3(b), use its commercially reasonable
efforts to cause to be registered under the Act all of the Registrable
Securities that such Holder has requested to be registered.
(b) In connection with any offering involving an
underwriting of shares being issued by ESS under Section 3(a), ESS shall not be
required to include any Holder of Registrable Securities in such underwriting
unless it accepts the terms of the underwriting as agreed upon between ESS and
the underwriters selected by it, and then only in such quantity as will not, in
the opinion of the underwriters, jeopardize the success of the offering by ESS.
If the total amount of securities, including Registrable Securities, requested
by shareholders to be included in such offering exceeds the amount of securities
sold other than by ESS that the underwriters reasonably believe compatible with
the success of the offering, then ESS shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters believe will not jeopardize the success of the offering.
No other securities to be registered in such registration statement shall be
excluded unless all Registrable Securities sought to be included pursuant this
Section 3 are excluded from such registration statement.
4. Postponement of Registration. Notwithstanding Section 2 and 3
above, ESS shall be entitled to postpone the declaration of effectiveness of the
registration statement prepared and filed pursuant to Section 2 for a
<PAGE> 3
reasonable period of time, but not in excess of one two-week period after the
applicable deadline, if the Board of Directors of ESS, acting in good faith,
determines that there exists material non-public information about ESS.
5. Obligations of ESS. ESS shall (i) prepare and file with the
Commission a registration statement in accordance with Section 2 and 3 hereof
with respect to the shares of Registrable Securities and shall use its
commercially reasonable efforts to cause such registration statement to become
effective as promptly as practicable after filing and, if Form S-3 is used for a
registration under Section 2, to keep such registration statement effective for
a period of two weeks; (ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary and to comply with the provisions of
the Act with respect to the sale or other disposition of all securities proposed
to be registered in such registration statement so long as the registration
statement remains effective; (iii) furnish to each Holder such number of copies
of any prospectus (including any preliminary prospectus and any amended or
supplemented prospectus) in conformity with the requirements of the Act, and
such other documents, as each Holder may reasonably request in order to effect
the offering and sale of the shares of the Registrable Securities to be offered
and sold, but only while ESS shall be required under the provisions hereof to
cause the registration statement to remain current; (iv) use its commercially
reasonable efforts to register or qualify the shares of the Registrable
Securities covered by such registration statement under the securities or blue
sky laws of such jurisdictions as each Holder shall reasonably request (provided
that ESS shall not be required in connection therewith or as a condition thereto
to qualify to do business or file a general consent to service of process in any
such jurisdiction where it has not been qualified), and do any and all other
acts or things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition of such stock in such
jurisdictions; (v) notify each Holder upon the happening of any event as a
result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; (vi) so long
as the registration statement remains effective, promptly prepare, file and
furnish to each Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of the Registrable Securities, such prospectus shall
not include an 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 in light of the circumstances then existing; (vii) notify each
Holder, promptly after it shall receive notice thereof, of the date and time the
registration statement and each post-effective amendment thereto has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed; (viii) notify each Holder promptly of any request by
the Commission for the amending or supplementing of such registration statement
or prospectus or for additional information; and (ix) advise each Holder,
promptly after it shall receive notice or obtain knowledge thereof, of the
issuance of any stop order by the Commission suspending the effectiveness of the
registration statement or the initiation or threatening of any proceeding for
that purpose and promptly use its best efforts to prevent the issuance of any
stop order or to its withdrawal if such stop order should be issued. In
connection with any offering of shares of Registrable Securities registered
pursuant to this Declaration, ESS shall (x) furnish each Holder, at ESS's
expense, with unlegended certificates representing ownership of the shares of
Registrable Securities being sold in such denominations as each Holder shall
request and (y) instruct the transfer agent and registrar of the Registrable
Securities to release any stop transfer orders with respect to the shares of
Registrable Securities being sold.
6. Expenses. ESS shall pay all of the out-of-pocket expenses
incurred, other than underwriting discounts and commissions, in connection with
any registration of Registrable Securities pursuant to this Declaration,
including, without limitation, all Commission, NASD and blue sky registration
and filing fees, printing expenses, transfer agents' and registrars' fees, and
the reasonable fees and disbursements of ESS's outside counsel and independent
accountants.
7. Indemnification. In the event of any offering registered
pursuant to this Declaration:
a. ESS will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel and independent
accountants, and each person controlling such Holder within the meaning of
Section 15 of the Act, with respect to which
<PAGE> 4
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Act, against all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading,
or any violation by ESS of any rule or regulation promulgated under the Act, or
state securities laws, or common law, applicable to ESS in connection with any
such registration, qualification or compliance, and will reimburse each such
Holder, each of its officers, directors and partners and such Holder's legal
counsel and independent accountants, and each person controlling such Holder,
each such Underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating, preparing or defending any such claim, loss, damage, liability or
action, provided that ESS will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission, made
in reliance upon and in conformity with written information furnished to ESS and
an instrument duly executed by such Holder or underwriter or such Holder's or
underwriter's duly authorized agent or representative and stated to be
specifically for use therein.
b. Each Holder will, if Registrable Securities held by such
Holder are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify ESS, each of its
directors and officers and its legal counsel and independent accountants, each
underwriter, if any, of ESS's securities covered by such a registration
statement, each person who controls ESS or such underwriter within the meaning
of Section 15 of the Act, and each other such Holder, each of its officers and
directors and each person controlling such Holder within the meaning of Section
15 of the Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) or a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
ESS, such Holders, such directors, officers, legal counsel, independent
accountants, underwriters or control persons for any legal or any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular or other document in reliance upon and in
conformity with written information furnished to ESS by an instrument duly
executed by such Holder or such Holder's duly authorized agent or representative
and stated to be specifically for use therein; provided, however, that the
obligations of such Holders hereunder shall be limited to an amount equal to the
gross proceeds before expenses and commissions to each such Holder of
Registrable Securities sold as contemplated herein.
<PAGE> 5
c. Each party entitled to indemnification under this
Section 7 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has written notice of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, except to the
extent, but only to the extent, that the Indemnifying Party's ability to defend
against such claim or litigation is impaired as a result of such failure to give
notice. No Indemnifying Party, in the defense of any such claim or litigation,
shall, except with the consent of each Indemnified Party, consent to entry of
any judgment or enter any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
d. The obligations of ESS and each Holder under this
Section 7 shall survive the completion of any offering stock in a registration
statement under this Declaration and otherwise.
8. Reports Under Securities Exchange Act of 1934. ESS agrees to:
a. use its commercially reasonable efforts to file with the
Commission in a timely manner all reports and other documents required of ESS
under the Act and the Exchange Act; and
b. furnish to each Holder, forthwith upon request (i) a
written statement by ESS that it has complied with the reporting requirements of
the Act and the Exchange Act, or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), (ii) a copy of the most recent annual or quarterly report of ESS and
(iii) such other information as may be reasonably requested in availing each
Holder of any rule or regulation of the Commission which permits the selling of
any such securities pursuant to Form S-3.
9. Assignment of Registration Rights. The rights to cause ESS to
register Registrable Securities pursuant to this Declaration may be assigned by
a Holder to a transferee of Registrable Securities only if: (a) ESS is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee and the Registrable Securities with respect to
which such registration rights are being assigned and a copy of a duly executed
written instrument in form reasonably satisfactory to ESS by which such
transferee assumes all of the obligations and liabilities of its transferor
hereunder and agrees itself to be bound hereby; and (b) immediately following
such transfer the disposition of such Registrable Securities by the transferee
is restricted under the Act.
10. Amendment of Registration Rights. Holders of a majority of the
Registrable Securities may, with the consent of ESS, amend the registration
rights granted hereunder.
11. Termination. The registration rights set forth in this
Declaration (except for rights to require registration on Form S-8 of ESS Common
Stock issuable upon exercise of options assumed by ESS in the Merger)
<PAGE> 6
shall terminate upon the earlier of (a) one year (1) following the Effective
Time of the Merger or (b) with respect to a Holder at such time as all of the
Registrable Securities then held by such Holder can be sold by such Holder in a
3-month period in accordance with Rule 144 under the Act.
12. Third Party Beneficiaries. It is intended that the shareholders
of Platform be third party beneficiaries to this Declaration of Registration
Rights.
<PAGE> 1
EXHIBIT 5.1
July 17, 1997
ESS Technology, Inc.
48401 Fremont Blvd.
Fremont, CA 94025
REGISTRATION STATEMENT ON FORM S-3
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-3 (the
"Registration Statement") to be filed by you with the Securities and Exchange
Commission (the "Commission") in connection with the registration under the
Securities Act of 1933, as amended, of a total of 685,415 shares of your Common
Stock (the "Shares") to be sold by selling shareholders of the Company. As your
counsel in connection with this transaction, 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 Shares.
It is our opinion that, upon conclusion of the proceedings being taken
or contemplated by us, as your counsel, to be taken prior to the issuance of the
Shares, and upon completion of the proceedings being taken in order to permit
such transactions to be carried out in accordance with the securities laws of
the various states where required, the Shares, when issued and sold in the
manner described in the Registration Statement, will be legally and validly
issued, fully paid and non-assessable.
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 in any amendment thereto.
Very truly yours,
VENTURE LAW GROUP,
A Professional Corporation
THN
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of ESS Technology, Inc. on Form S-3 of our report dated January 17,
1997 incorporated by reference in the Annual Report on Form 10-K of ESS
Technology, Inc. for the year ended December 31, 1996.
We also consent to the reference to us under the heading "Experts" in
the Prospectus, which is part of this Registration Statement.
PRICE WATERHOUSE LLP
/s/ Price Waterhouse LLP
- -------------------------------
San Jose, California
July 15, 1997
