UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 29, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 0-21970
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ACTEL CORPORATION
(Exact name of Registrant as specified in its charter)
California 77-0097724
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
955 East Arques Avenue
Sunnyvale, California 94086-4533
(Address of principal executive offices) (Zip Code)
(408) 739-1010
(Registrant's telephone number, including area code)
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Securities registered pursuant to Section 12 (b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value
(Title of class)
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Annual Report on Form 10-K or any
amendment to this Annual Report on Form 10-K.
The aggregate market value of the voting stock held by non-affiliates of
the Registrant, based upon the closing price for shares of the Registrant's
Common Stock on March 27, 1997, as reported by the National Market System of the
National Association of Securities Dealers Automated Quotation System, was
approximately $281,810,000. In calculating such aggregate market value, shares
of Common Stock owned of record or beneficially by all officers, directors, and
persons known to the Registrant to own more than five percent of any class of
the Registrant's voting securities were excluded because such persons may be
deemed to be affiliates. The Registrant disclaims the existence of control or
any admission thereof for any other purpose.
Number of shares of Common Stock outstanding as of March 30, 1997:
20,814,611.
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DOCUMENTS INCORPORATED BY REFERENCE
The following documents are incorporated by reference in Parts II, III, and
IV of this Annual Report on Form 10-K: (i) portions of Registrant's annual
report to security holders for the fiscal year ended December 29, 1996 (Parts II
and IV), and (ii) portions of Registrant's proxy statement for its annual
meeting of shareholders to be held on May 2, 1997 (Part III).
PART I
ITEM 1. BUSINESS
Overview
Actel designs, develops, and markets field programmable gate arrays
("FPGAs") and associated development system software and programming hardware.
FPGAs are used by designers of communications, computer, industrial,
military/aerospace, and other electronic systems to differentiate their products
and get them to market faster. The Company is the leading supplier of FPGAs
based on antifuse switching elements, which are smaller than alternative
switching elements (such as static random access memories ("SRAMs") or erasable
programmable read only memories ("EPROMs")), permitting reduced circuit size and
cost and increased design efficiencies. Actel shipped its first products in 1988
and has sold more than 7,500 development systems to customers, including Allen
Bradley/Rockwell, AST Computer, Alcatel, Bay Networks, Cabletron, DSC
Communications, Hughes Aircraft, Lockheed-Martin, Lucent Technologies, and
Siemens. The Company has foundry relationships with Chartered Semiconductor
Manufacturing Pte Ltd ("Chartered Semiconductor") in Singapore, Lockheed-Martin
Federal Systems Company ("Lockheed-Martin FSC") in the United States, Matsushita
Electronics Company and Matsushita Electrical Industry Company Ltd.
(collectively, "Matsushita") in Japan, Texas Instruments Incorporated ("TI") in
the United States, and Winbond Electronics Corp. ("Winbond") in Taiwan,
permitting Actel to focus its resources on its core strengths of designing,
developing, and marketing FPGAs.
The Company's FPGAs are based on two proprietary technologies: the Actel
antifuse and a circuit architecture that takes advantage of the Company's
antifuse. The principal advantages of the antifuse over alternative switching
elements are smaller size and lower electrical resistance. The smaller size of
the antifuse generally permits Actel to make programmable circuits that are
smaller, and hence less costly, than circuits of comparable performance and
capacity made under comparable design rules using alternative switch
technologies. Similarly, for circuits of comparable size and capacity
manufactured under comparable design rules, the antifuse facilitates the design
of circuits with a greater number of switches, which, in combination with the
lower electrical resistance of the antifuse, tends to enhance flexibility and/or
performance. In addition, the Company believes that its antifuse-based
architecture is better suited for the high-level tools generally employed to
design higher capacity devices than existing architectures using other types of
switching elements. Actel believes that the advantages of its antifuse and
architecture become more pronounced in higher capacity devices and that the
demand for higher capacity devices will increase faster than that for
programmable devices as a whole. Accordingly, the Company is focusing its
attention on the transition to higher capacity devices and the associated
high-level design methodologies. Actel's strategy is to provide the best FPGA
solutions by giving logic designers the capability to move up to higher capacity
designs with confidence and be successful.
The Company's product line currently consists of six families of FPGAs,
Designer Series Development System and CoreHDL software, Activator Device
Programmers, and a family of mask-programmed gate arrays ("MPGAs"). To meet the
diverse customer requirements in the broad FPGA market, each member of a product
family generally is offered in a variety of speed grades, package types,
reliability screenings, and ambient temperature tolerances. Designers typically
use popular third-party software for circuit design and then translate the
design into a programmed FPGA using Actel's proprietary, highly automated
software (Designer Series Development System) and hardware (Activator Device
Programmers). Customers with high-volume Actel FPGA designs may choose to
convert to lower-cost MPGAs.
In 1996, Actel introduced its CorePCI models, which are Peripheral
Component Interface (PCI) compliant blocks or "cores" that can be used to save
development time by being "dropped into" designs for ACT 3 PCI devices, which
were also introduced in 1996. In addition, the Company announced agreements with
two core providers to offer Actel-optimized cores, the first six of which were
immediately available. In 1996, Actel also announced an alliance with Synopsys
Inc. ("Synopsys") to produce a new category of logic devices called system
programmable gate arrays ("SPGAs"), which will permit designers to combine
complex system elements with traditional programmable logic to implement
programmable "systems-on-a-chip." In addition, the Company announced that its
first SPGA offering will be an "ES" product family that permits designers to
target system functional cores into Actel's new ES reprogrammable architecture.
The Company believes the ES product family will eventually include devices
containing embedded mask-programmed functional blocks for improved performance,
efficiency, and cost.
Actel markets its products through a worldwide, multi-tiered sales and
distribution network. The North American network includes 11 sales management
offices, 21 manufacturers' representative firms, and three distributors. The
European network includes sales management offices in England, France, and
Germany, as well as 23 distributors and two manufacturers' representatives. In
Japan, the Company markets its products through three distributors. Nine
additional distributors serve the remaining international markets in which Actel
offers its products.
The Company was incorporated in California in 1985. Actel's principal
facilities and executive offices are located at 955 East Arques Avenue,
Sunnyvale, California 94086-4533, and its telephone number at that address is
(408) 739-1010. The Company's World Wide Web address is http://www.actel.com. As
used in this Annual Report on Form 10-K, "Actel" and the "Company" mean Actel
Corporation and its consolidated subsidiaries. "Actel" and the Actel logo are
registered trademarks of the Company. This Annual Report on Form 10-K also
includes unregistered trademarks of the Company and trademarks of companies
other than Actel.
Industry Background
The three principal types of integrated circuits used in most digital
electronic systems are microprocessor, memory, and logic circuits.
Microprocessors are used for control and computing tasks; memory devices are
used to store program instructions and data; and logic devices are used to adapt
these processing and storage capabilities to a specific application. Logic
circuits are found in virtually every electronic system.
The logic design of competing electronic systems is often a principal area
of differentiation. Unlike the microprocessor and memory markets, which are
dominated by a relatively few standard designs, the logic market is highly
fragmented and includes, among many other segments, low-density standard
transistor-transistor logic circuits ("TTLs") and custom-designed application
specific integrated circuits ("ASICs"). TTLs are standard logic circuits that
can be purchased "off the shelf" and interconnected on a printed circuit board,
but they tend to limit system performance and increase system size and cost
compared with logic functions integrated at the circuit (rather than the board)
level. ASICs are customized circuits that offer electronic system manufacturers
the benefits of higher levels of circuit integration: improved system
performance, reduced system size, and lower system cost.
ASICs include conventional gate arrays and programmable logic circuits.
Conventional gate arrays are customized to perform desired logical functions at
the time the device is manufactured. Since they are "hard wired" at the wafer
foundry, conventional gate arrays are subject to the time and expense risks
associated with any development cycle involving a foundry. Typically,
conventional gate arrays are first delivered in production volumes months after
the successful production of acceptable prototypes. In addition, conventional
gate arrays cannot be modified after they are manufactured, which subjects them
to the risk of inventory obsolescence and constrains the system manufacturer's
ability to change the logic design. Programmable logic circuits, on the other
hand, are manufactured as standard devices and customized "in the field" by
electronic system manufacturers using computer-aided engineering ("CAE") design
and programming systems. Programmable logic circuits are being used by a growing
number of electronic system manufacturers as a solution to their increasing
demands for differentiation, rapid time to market, and manufacturing
flexibility. While conventional gate array designs are generally more complex
than programmable logic circuit designs, the average capacity (or "gates" per
circuit) of both conventional gate arrays and programmable logic circuits has
increased over time. This indicates that long-term growth in sales within each
market segment has increased faster for circuits with higher capacities.
Programmable logic circuits include programmable logic devices ("PLDs") and
FPGAs. The market for complex PLDs ("CPLDs") and FPGAs has grown rapidly because
they generally offer greater capacity, lower total cost, and lower power
consumption than TTLs and simple PLDs, and faster time to market and lower
development costs than conventional gate arrays. For many electronic system
manufacturers, the time-to-market and manufacturing-flexibility benefits of
CPLDs and FPGAs outweigh their price premium over conventional gate arrays of
comparable capacity. This is particularly true with respect to communications
applications.
Electronic system manufacturers customize programmable logic circuits to
perform the desired logical functions by using CAE systems to change the state
of the device's programming elements (such as fuses, antifuses, or transistors)
through the application of an electrical signal. Most CPLDs currently are
programmed with EPROM or other "floating gate" technologies. Many FPGAs
currently are programmed with SRAM technology. The principal limitation on the
wider use of CPLDs and FPGAs has been the difficulty in developing devices with
price and performance factors approaching those of conventional gate arrays. On
current architectures, programming elements based on EPROM or SRAM technologies
occupy relatively large amounts of area within a circuit, which tends to
increase the overall size and, in turn, the cost of each circuit. In addition,
on current architectures the size of the EPROM and SRAM programming elements
tends to limit the number of interconnect points in a circuit, which, in
combination with the relatively high electrical resistance of EPROM and SRAM
programming elements, tends to limit performance.
Before an FPGA can be programmed there are various steps that must be
accomplished by a designer using CAE design software. These steps include
defining the function of the FPGA, verifying the design, and laying out the
circuit. Traditionally, logic functions have been defined using schematic
capture tools, which essentially permit the designer to construct a circuit
diagram on the computer. As FPGA designers have begun to design higher capacity
circuits, the time required to create schematic diagrams using schematic capture
tools has become prohibitive. To address this problem, designers are
increasingly turning to hardware description languages ("HDLs), also known as
high-level description ("HLD"). VHDL and Verilog are the most common HDLs, which
permit the designer to describe the circuit functions at an abstract level and
to verify the performance of logic functions at that level. The HDL can then be
fed into logic synthesis software that automatically converts the abstract or
high-level description to a gate-level representation equivalent to that
produced by schematic capture tools. After a gate-level representation of the
logic function has been created and verified, it must be translated or "laid
out" onto the generic logic modules of the FPGA. This is achieved by placing the
logic gates and routing their interconnections, a process referred to as "place
and route." As designers have begun to design higher capacity circuits, the need
for automatic (instead of manual) place and route capability has become
increasingly important. This transition to the use of HDLs presents a challenge
to the designer to learn new design methods and to use new design tools. In
addition, not all programmable logic circuit architectures are equally well
suited for use with logic synthesis and place and route tools.
Technology
Actel's FPGAs are based on two proprietary technologies: the Actel antifuse
and a circuit architecture that takes advantage of the Company's antifuse. The
antifuse is a two-terminal switch that is open before being programmed. In
contrast to a conventional fuse, the application of sufficient voltage to an
antifuse causes the switch to close permanently, allowing current to pass. Actel
is the leading supplier of FPGAs based on antifuses.
Antifuse
Actel believes that it was first to achieve volume production of
antifuse-based FPGAs. The patented antifuse structure used by Actel in its
current product families consists of a "sandwich" of silicon oxide, silicon
nitride, and silicon oxide ("ONO"). This structure is similar to that of ONO
capacitors employed in the volume manufacture of many dynamic random access
memory (DRAM) circuits. The Company believes that the benefits of the antifuse
include the following:
Small Size
Antifuses are smaller than alternative switching elements (such as
SRAMs and EPROMs), so antifuse-based circuits tend to be smaller, and hence
less costly, than circuits of comparable performance and capacity
manufactured under comparable design rules with alternative switching
elements. This is particularly true of higher capacity circuits. Similarly,
for circuits of comparable size and capacity manufactured under comparable
design rules, the antifuse facilitates the design of circuits with a
greater number of switches, which tends to enhance flexibility and/or
performance.
Low Resistance
Antifuses typically exhibit lower electrical resistance than
alternative switching elements. Lower electrical resistance also tends to
enhances circuit performance.
High Reliability
The Company has performed extensive reliability testing on its
antifuses over many years with excellent results. The negligible rate of
individual antifuse failure permits antifuses to be used in substantial
numbers without degrading overall circuit reliability, which in turn
permits the small size and low resistance attributes of the antifuse to be
fully exploited.
Nonvolatility
After an antifuse-based FPGA is programmed, it retains its circuit
configuration permanently, even in the absence of electrical power. This is
not true of SRAM-based FPGAs. Although the reprogrammability of SRAM and
EPROM switches is desirable in some applications, nonvolatility is
necessary in certain military, aerospace, and communications applications.
Circuit Architecture
The Company believes that the principal advantages of its proprietary
circuit architecture include the following:
Synthesisizability
All of Actel's FPGAs are "synthesis friendly" by virtue of their use
of many, relatively simple logic building blocks (referred to as "fine
granularity") made possible by the antifuse. The Company believes that this
characteristic will become increasingly important to designers as circuit
capacities increase.
Few Programming Elements in Interconnect Path
Actel's circuit architecture usually provides for the minimum number
of antifuses in an interconnect path (two), and never permits more than
four antifuses in any interconnect path. In general, the fewer the number
of switches in an interconnect path, the faster the connection. Many
competing FPGAs include interconnect paths with more than four programming
elements, which increase resistance and therefore impede circuit
performance.
Routability
The plentiful number of antifuses and the patented segmented routing
tracks of different lengths in Actel's products provide numerous routing
alternatives and generally facilitate efficient results with automatic
place and route software, even when a high percentage of the FPGA's
potential gate capacity is used. Actel believes that these features make
its circuits easier to design with than most competing FPGAs.
Flexibility and Utilization
A key competitive factor in the programmable logic market is
utilization, or the extent to which a particular design can use the
potential number of gates available on the circuit. In the case of
SRAM-based FPGAs and EPROM-based CPLDs, utilization can vary substantially
from design to design, so that a "8,000-gate" circuit may in practice use
only a fraction of that number. By contrast, Actel's circuit architecture
permits its products to have a more predictable capacity over a broad range
of applications. This permits Actel's customers to select with a relatively
high degree of confidence the product that is most economical for a desired
application. Actel's circuit architecture also provides significant
flexibility in utilizing the logic capacity of the circuit to boost
performance.
The Company believes that the advantages of its antifuse and architecture
described above generally increase as circuit capacity increases, and that the
greatest growth in the programmable logic market will occur in higher capacity
devices. Accordingly, Actel is focusing its attention on the transition to
higher capacity devices and associated high-level design methodologies. The
Company's strategy is to provide the best FPGA solutions by giving logic
designers the capability to move up to higher capacity designs with confidence
and be successful.
Products
Actel's product line currently consists of six families of FPGAs, Designer
Series Development System and Core HDL software, Activator Device Programmers,
and a family of MPGAs. In 1996, the first member of the RadHard FPGA family was
shipped for revenue and an important software update was released.
FPGAs
Currently, all six of the Company's FPGA families are in production. To
meet the diverse customer requirements in the broad high-capacity programmable
logic market, each member of a family (except RadHard) is offered in a variety
of speed grades, package types, reliability screenings, and ambient temperature
tolerances. The five members of the ACT 1 and ACT 2 families, for example, can
be ordered in more than 100 speed, packaging, screening, and tolerance
variations.
ACT 1
The ACT 1 family consists of two products: the 1,200-gate A1010, which
was first shipped for revenue in 1988; and the 2,000-gate A1020, which was
first shipped for revenue in 1989. The A1020 is capable of integrating the
equivalent of 60 TTLs into a single package. This family of circuits was
introduced at 2.0 micron and currently is manufactured under 1.0 and 0.9
micron design rules. The Company offers 3.3-volt versions of its ACT 1
products.
ACT 2
The ACT 2 family consists of three products: the 4,000-gate A1240 and
the 8,000-gate A1280, which were first shipped for revenue in 1991; and the
2,500-gate A1225, which was first shipped for revenue in 1992. The A1280 is
capable of integrating the equivalent of 240 TTLs into a single package.
This family of circuits was introduced at 1.2 micron and currently is
manufactured under 1.0 micron design rules.
ACT 3
The ACT 3 family consists of five products: the 2,500-gate A1425 and
the 6,000-gate A1460, which were first shipped for revenue in 1993; and the
1,500-gate A1415, the 4,000-gate A1440, and the 10,000-gate A14100, which
were first shipped for revenue in 1994. The ACT 3 family was designed for
applications requiring high speed and a high number of inputs and outputs
("I/Os"). The five members of the ACT 3 family can be ordered in more than
70 speed, packaging, screening, and tolerance variations. The Company
offers 3.3-volt and, beginning in 1996, PCI-compliant versions of its ACT 3
products. The ACT 3 family was introduced at 0.8 micron and currently is
manufactured under 0.6 micron design rules.
1200XL
The 1200XL family, which was first shipped for revenue in 1995,
consists of three members ranging from 2,500 to 8,000 gates that can be
ordered in more than 50 speed, packaging, screening, and tolerance
variations. Taking advantage of 0.6 micron design rules and redesigned I/O
modules and clock distribution networks, 1200XL products offer system
performance significantly in excess of that offered by pin-compatible ACT 2
devices, which the 1200XL family will eventually replace. In 1996, Actel
began offering the 8,000-gate A1280XL in a 208-pin plastic quad flat pack
("PQFP") and the 4,000-gate A1240XL in a 100-pin PQFP. Designers using the
new packages will be able to migrate to higher density devices without
changing packages.
3200DX
The 3200DX family currently consists of the 6,500-gate A3265DX, which
was first shipped for revenue in 1995; and the 14,000-gate A32140DX and the
20,000-gate A32200DX, which were first shipped for revenue in 1996. The
3200DX family, which may range up to 40,000 gates, permits designers to
integrate the register-intensive datapath functions of FPGAs, the control
and decode modules commonly implemented in CPLDs, and the fast dual-port
SRAM typically used for high-speed buffering. Supported by the Company's
extensive selection of automated design tools, the 3200DX family is
optimized for synthesis design methodologies to yield predictable
performance for system logic integration. To further assist designers, most
members of the family offer JTAG boundary scan logic, which permits testing
of the design during manufacture. In 1996, Actel began offering the
A32140DX in a 176-pin thin quad flat pack (TQ176), which will enable
designers to easily migrate from smaller TQ176 devices. The 3200DX family
is based on 0.6 micron design rules.
RadHard
The RadHard family currently consists of the 8,000-gate RH1280, which
was first shipped for revenue in 1996 and ramped more quickly than any
other product in the Company's history. Actel and Lockheed-Martin FSC are
jointly developing the RadHard family to meet the demands of applications
requiring guaranteed levels of performance and radiation immunity,
including the growing commercial satellite market. The RadHard family is
based on 0.8 micron design rules.
Software
A key element of the Company's strategy is to support users' electronic
design automation ("EDA") tools of choice by establishing and maintaining
relationships with leading synthesis software vendors for the purpose of
permitting such tools to be used as a "front end" to Actel's proprietary
Designer Series Development System. Rather than developing this capability
alone, the Company has established the Actel Industry Alliance, which Actel uses
to establish relationships with EDA vendors for the purpose of developing
interfaces between such vendors' EDA tools and Actel's proprietary software.
Under the Alliance program, Actel provides members with, among other things,
access to its proprietary software specifications, early access to software
revisions, verification services, and participation in joint marketing efforts.
The Alliance currently has more than 20 members, including all major EDA vendors
supporting HLD for both VHDL and Verilog. The Company provides comprehensive HDL
solutions for the EDA environments of Cadence Design Systems, Mentor Graphics,
Synopsys, and Viewlogic.
Designer Series Development System
In 1996, the Company began to offer, and distributed as a free upgrade
to Actel customers who subscribe to the Company's support program, an
important software release, Designer Series 3.1, which supports all Actel
FPGA families. Designer Series 3.1 includes improvements to ACTmap, the
VHDL synthesis and optimization tool shipped with all versions of Actel's
Designer Series Development System, and ACTgen, an automatic VHDL macro
builder. In Designer Series 3.1, ACTmap handles the industry-standard array
of VHDL constructs. ACTgen enhancements include multipliers for improved
generation of digital signal processing ("DSP") functions and enhanced
synthesis of the SRAM and control and decode blocks available in the newer
members of the 3200DX family, including the A32200DX. By combining ACTmap's
VHDL behavioral language features with ACTgen's reusable functional
modules, Designer Series 3.1 permits designers to more quickly and easily
design and verify complex, high-capacity designs for applications such as
networking and telecommunications.
CoreHDL Intellectual Property
As integrated circuits move to ever higher levels of capacity and
integration, the use of intellectual property ("IP"), in the form of cores,
becomes more important. In offering CoreHDL IP, the Company is targeting
high-density FPGA designers who are interested in combining customized
logic with predefined functions optimized for high performance
applications. By using predefined cores, designers save engineering
resources for the value-added portions of their designs while shortening
the design cycle. In addition, the portable nature of cores enables design
reuse across multiple product versions.
Actel's CoreHDL IP portfolio currently consists of CorePCI, three
telecommunications cores, and three industrial cores, all of which were
introduced in 1996, and a Universal Serial Bus (USB) Interface. The Company
offers seven CorePCI models, which were developed internally, in both VHDL
and Verilog-HDL. The remaining cores were developed by Inicore AG, a Swiss
IP provider. The telecommunications cores include an ISDN G704-EI Framer,
an Asynchronous Transfer Mode (ATM) UTOPIA receiver interface, and an ATM
UTOPIA transmitter interface. The cores targeted to industrial control
applications are a Universal Asynchronous Receiver/Transmitter (UART), a
Controller Area Network (CAN) Interface, and a Serial Control Bus
Interface.
Activator Device Programmers
The Company's Activator Device Programmers are used to program Actel's
FPGAs. The Activator accepts data from Designer Series Development System
software, converts the data to the proper protocol, and applies the appropriate
electrical signals to the device so as to permanently imprint the user's circuit
design on the device. There are currently two Activator Device Programmers,
Activator 2 and Activator 2S, both of which execute all programming,
verification, and debugging functions. Customized programming adapters for each
device type permit different packages to be programmed by switching adapters.
Activator 2 programs up to four FPGAs at a time; Activator 2S programs one at a
time.
Actel also supports programmers manufactured by third parties, including
Data I/O, the leading supplier of third-party programmers. In 1996, BP
Microsystems Inc. became the first vendor to successfully receive support
certification for all of the Company's FPGAs.
MPGAs
The Company offers a family of MPGAs, which provides high-volume users of
Actel FPGA designs with a fast, convenient, low-cost alternative to traditional
gate array conversions.
Market and Applications
FPGAs can be used in a broad range of applications across nearly all
electronic system market segments. Most customers use the Company's FPGAs in
low- to medium-volumes in the final production form of their products. Some
high-volume electronic system manufacturers use Actel's FPGAs as a prototyping
vehicle and convert production to lower-cost conventional gate arrays, while
others with time-to-market constraints use the Company's FPGAs in the initial
production and then convert to conventional gate arrays. As product life cycles
continue to shorten, some high-volume electronic system manufacturers are
electing to retain FPGAs in volume production because conversion to conventional
gate arrays may not yield sufficiently attractive savings before the electronic
system reaches the end of its life.
Communications
The high capacity, high performance, and low power consumption of FPGAs
make them well suited for use in communications equipment. Increasingly complex
equipment must frequently be designed to fit in the space occupied by previous
product generations. The rapidly changing communications environment rewards
short development times and early market entry.
Representative Actel customers in the communications market include: 3Com,
ADC Kentrox, Advanced Fibre Communications, Alcatel, Ascend Communications, Bay
Networks, Cabletron, Cascade, Cisco Systems, Chipcom, DSC Communications, Hughes
Network Systems, Lucent Technologies, Motorola, and Nortel.
Computer Systems and Peripherals
The computer systems markets are intensely competitive, placing a premium
on early market entry for new products. FPGAs decrease the time to market and
facilitate early completion of production models so that development of hardware
and software can occur in parallel.
Representative Actel customers in the computer market include: AST
Computer, Hewlett-Packard, IBM, Olivetti, Sky Computer, and Tandem Computer.
Industrial Control Equipment
Industrial Control Equipment
Industrial control and instrumentation applications often require complex
electronic functions tailored to specific needs. FPGAs offer programmability and
high capacity, making them attractive to this segment of the electronic
equipment market.
Representative Actel customers in the industrial market include: Allen
Bradley/Rockwell, Eastman Kodak, General Electric, Hewlett-Packard, Marquette,
and Siemens.
Military and Aerospace
Rigorous quality and reliability standards, stringent volume requirements,
and the need for design security are characteristics of the military and
aerospace market. The Company's FPGAs have high quality, reliability, and
capacity, and are virtually impossible to reverse engineer, making them suitable
for many military and aerospace applications. Actel's FPGAs are especially well
suited for space applications, due to the high radiation tolerance of the
Company's antifuse, and for many aircraft and missile flight applications, due
to the high density and performance of Actel's FPGAs.
Representative Actel customers in the military market include: Alliant
Technology, Boeing, E-Systems, Harris, Honeywell, Hughes Aircraft, Jet
Propulsion Labs (JPL), Lockheed-Martin, Loral, National Aeronautics Space
Administration (NASA), Northrup, Olin Corporation, Raytheon, SCI Systems, TI,
and TRW.
Sales and Distribution
The Company maintains a worldwide, multi-tiered selling organization that
includes a direct sales force, independent manufacturers' representatives, and
electronics distributors.
Actel's domestic sales force currently consists of 48 sales and
administrative personnel and field application engineers ("FAEs") operating from
11 sales offices located in major metropolitan areas. Direct sales personnel
call on target accounts and support direct original equipment manufacturers
("OEMs"). Besides overseeing the activities of direct sales personnel, the
Company's sales managers also oversee the activities of 21 manufacturers'
representative firms that operate from approximately 43 office locations. The
manufacturers' representatives concentrate on selling to major industrial
companies in North America. To service smaller, geographically dispersed
accounts in North America, Actel has distributor agreements with
Pioneer-Standard Electronics, Inc. ("Pioneer"), Arrow Electronics, Inc. and Zeus
Electronics (collectively, "Arrow"), and Wyle Laboratories ("Wyle"). Arrow has
approximately 50 branch offices in North America; Pioneer and Wyle have a total
of approximately 60 branch locations in North America.
The Company generates a significant portion of its revenues from
international sales. Sales to customers outside the United States accounted for
approximately 33%, 38%, and 32% of net revenues in 1996, 1995, and 1994,
respectively. Actel's European sales organization currently consists of 23
distributors (including Arrow, which has 10 subsidiary companies in Europe)
having approximately 52 branch offices. The activities of these distributors are
supervised from sales management offices in Basingstoke (England), Paris
(France), and Munich (Germany), where a total of 17 people are employed.
Matsushita, which is a foundry and strategic partner of the Company, markets
Actel's products in Japan under the Company's brand name. The Company has two
additional distributors in Japan, including Innotech Corporation. Actel also has
distributors in Australia, China, Egypt, Hong Kong, India, Korea, Malaysia,
Singapore, South Africa, and Taiwan. In 1996, the Company added Dae Jin
Semiconductor Company as a new distributor. Dae Jin is a dominant distributor in
Korea's telecommunications market.
After the Company's sales representatives and distributors evaluate a
customer's logic design requirements and determine if there is an application
suitable for Actel's FPGAs, the next step typically is a visit to the qualified
customer by a regional sales manager or the FAE from the Company or its
distributor. The sales manager or FAE may then determine that additional
analysis is required by engineers based at Actel's headquarters. The Company's
sales cycle for the initial sale of a design system is generally lengthy and
requires the continued participation of salespersons, FAEs, engineers, and
management.
In 1996, more than half of Actel's sales in the United States and virtually
all of the Company's sales outside the United States were made through
distributors. As is common in the semiconductor industry, Actel generally grants
price protection to distributors. Under this policy, distributors are granted a
credit upon a price reduction for the difference between their original purchase
price for products in inventory and the reduced price. From time to time,
distributors are also granted credit on an individual basis for Company-approved
price reductions on specific transactions to meet competition. The Company also
generally grants distributors limited rights to return products. To date,
product returns under this policy have not been material. Actel maintains
reserves against which these credits and returns are charged. Because of its
price protection and return policies, the Company generally does not recognize
revenue on products sold to distributors until the products are resold to end
customers.
Backlog
At December 31, 1996, Actel's backlog was approximately $27.0 million,
compared with approximately $34.4 million at December 31, 1995. The Company
includes in its backlog all OEM orders scheduled for delivery over the next nine
months and all distributor orders scheduled for delivery over the next six
months. Actel produces standard products that may be shipped from inventory
within a short time after receipt of an order. The Company's business, and to a
large extent that of the entire semiconductor industry, is characterized by
short-term order and shipment schedules, rather than volume purchase contracts.
In accordance with industry practice, Actel's backlog may be cancelled or
rescheduled by the customer on short notice without significant penalty. As a
result, the Company's backlog may not be indicative of actual sales and
therefore should not be used as a measure of future revenue.
Customer Service and Support
Actel believes that superior customer service and technical support are
essential for success in the FPGA market. The Company facilitates service and
support through service team meetings that address particular aspects of the
overall service strategy and support. The most significant areas of customer
service and technical support are regularly measured. Actel's customer service
organization emphasizes prompt, accurate responses to questions about product
delivery and order status.
The Company's FAEs provide technical support to customers in the United
States and Europe. This network of experts is augmented by FAEs working for
Actel's sales representatives and distributors throughout the world. Customers
in any stage of design can also obtain assistance from the Company's technical
support hotline. In addition, Actel offers technical seminars on its products
and comprehensive training classes on its software.
The Company generally warrants its products against defects in material and
workmanship for one year. Actel also warrants that its automatic place and route
software will achieve gate utilization at not less than the rates advertised.
The Company has not experienced significant warranty returns to date.
Manufacturing and Assembly
Actel's current strategy is to utilize third-party manufacturers for its
wafer requirements, which permits the Company to allocate its resources to
product design, development, and marketing. Wafers used in Actel's FPGAs are
manufactured by Chartered Semiconductor in Singapore, by Lockheed-Martin FSC in
the United States, by Matsushita in Japan, by TI in the United States, and by
Winbond in Taiwan. The Company historically purchased wafers from Matsushita and
TI. Chartered Semiconductor, Lockheed-Martin FSC, and Winbond were added in
1994. Actel's FPGAs are currently manufactured by Chartered Semiconductor using
0.6 micron design rules; by Lockheed-Martin FSC using 0.8 micron design rules;
by Matsushita using 0.8, 0.9, and 1.0 micron design rules; by TI using 1.0
micron design rules; and by Winbond using 0.6 and 0.8 micron design rules.
Wafers purchased by the Company from its suppliers are assembled, tested,
marked, and inspected by Actel and/or a subcontractor of the Company before
shipment to customers. Actel assembles most of its plastic commercial products
in Hong Kong and Korea. Ceramic package assembly, which is generally required
for military applications, currently is performed at one or more subcontractor
manufacturing facilities, some of which are in the United States.
Research and Development
In 1996, 1995, and 1994, the Company spent $23.9 million, $20.6 million,
and $14.4 million, respectively, on research and development, which represented
approximately 16%, 19%, and 19%, of net revenues, respectively, for such
periods. Actel's research and development expenditures are currently divided
among circuit design, software development, and process technology activities.
In the areas of circuit design and process technology, the Company's research
and development activities include continuing efforts to reduce the cost and
improve the performance of current products, principally by reducing the design
rules under which such products are manufactured, and to develop new families of
FPGA products based on existing or emerging technologies. Actel's software
research and development activities are dedicated to providing customers with
access to a wide variety of CAE tools and HDL cores in a complete and automated
desktop design environment on popular personal computer and workstation
platforms, with the objective of giving logic designers the capability to move
up to higher complexity designs with confidence and be successful.
The research and development projects that the Company announced in 1996
are summarized below.
ES Architecture and ES Reprogrammable SPGA Products
On March 6, 1995, Actel and BTR, Inc. ("BTR") entered into a License
Agreement pursuant to which BTR licensed its proprietary technology to the
Company for development and use in FPGAs and certain multichip modules. As
partial consideration for the grant of the license, the Company is paying to BTR
non-refundable advance royalties. Actel has also employed the principals of BTR
to assist the Company in its development and implementation of the licensed
technology.
The ES architecture combines a new, fine-grained cell structure with a
routing-centric architecture. The expected result is logic cells that are more
readily synthesized and more efficient than current programmable architectures.
The key to the architectural efficiencies is a technology Actel calls MutliDrive
active routing. Separate transistors are used to implement logic and to drive
the interconnects. By separating these functions, Actel believes that more
transistors can be included per chip, which should translate to smaller die size
and more efficient and lower-cost designs. In addition, the interconnect drivers
are tailored to routing length, which should provide high performance even for
cross-chip routing. The ES architecture also makes greater use of hierarchy than
current programmable architectures. A constant, maximum routing delay is
associated with each level of hierarchy, which should provide the device with
fanout independent delays. This means that, regardless of the number of logic
elements being driven, the delay should always be constant, making the chip's
performance predictable.
The ES architecture is switch-technology independent, so products can
utilize SRAM, antifuse, flash, or any other basic programming element. The
Company currently intends to introduce the initial ES family based on
reprogrammable, three-layer metal SRAM technology manufactured using 0.35 micron
design rules. Actel envisions further products based on antifuse or flash
technologies in the future.
Embedded SPGA Products
On June 1, 1996, Actel and the Silicon Architects Group of Synopsys entered
into a Technology License and Services Agreement pursuant to which Synopsys
licensed its cell-based array ("CBA") architecture to Actel. The two companies
will jointly adapt CBA technology specifically to support SPGAs and jointly
develop Synopsys' synthesis technology to support the new device class. Embedded
SPGAs will combine the performance, efficiency, and cost advantages of
conventional gate arrays with the time-to-market and flexibility advantages of
the ES architecture by embedding mask-programmed elements within the device. The
programmable portion of the Embedded SPGA will provide all the features and
functionality of the Reprogrammable SPGA described above. The embedded
mask-programmed portion of the device will be based on CBA technology, which is
a gate array architecture with cell-based efficiencies. CBA supports the
implementation of multiple industry-standard or proprietary functions, including
DPS filters, datapaths, memories, and preconfigured kits of specific functional
blocks.
The Company believes that the Embedded SPGA will enable two fundamentally
different business models. In the first, the Actel Embedded SPGA is an
application-specific device available to multiple customers as an off-the-shelf,
field-programmable technology that is sold and supported like an FPGA. An
application-specific core (such as a PCI core, for example) is already embedded
in the device, creating significant value for customers who desire such cores
but cannot or do not wish to design them from scratch. In the second business
model, the Actel Embedded SPGA is a customer-specific device in which
proprietary functions are embedded and field-programmability is available for
later design variations. Under this scenario, the device is sold and supported
like a conventional gate array, and the customer uses the field-programmability
of the device to support varying industry standards or to offer differentiated
product derivatives.
Competition
The FPGA market is highly competitive, and the Company expects that
competition will continue to increase as the market grows. Actel's competitors
include suppliers of TTLs and ASICs, including conventional gate arrays, PLDs,
and FPGAs. Of these, the Company competes principally with suppliers of
conventional gate arrays, CPLDs, and FPGAs.
The primary advantages of conventional gate arrays are high capacity, high
speed, and low production cost in high volume. Actel competes with conventional
gate array suppliers by offering lower design costs, shorter design cycles, and
reduced inventory risks. However, some customers elect to design and prototype
with the Company's products and then convert to conventional gate arrays to
achieve lower costs for volume production. For this reason, Actel faces
competition from companies that specialize in converting CPLDs and FPGAs,
including the Company's products, into conventional gate arrays. Actel's MPGA
family offers designers a fast, convenient, low-cost alternative to traditional
gate array conversions.
The Company also competes with suppliers of CPLDs. Suppliers of these
devices include Altera Corporation ("Altera"), Advanced Micro Devices, and
Lattice Semiconductor. The circuit architecture of CPLDs gives them a
performance advantage in certain lower capacity applications, but Actel believes
that its products are better suited for higher capacity designs. Altera,
however, has a larger installed base of development systems than the Company. In
addition, CPLDs are reprogrammable, which permits customers to reuse a circuit
multiple times during the design process (unlike antifuse-based FPGAs, which
permanently retain the programmed configuration). No assurance can be given that
Actel will be able to overcome these competitive disadvantages.
The Company competes most directly with established FPGA suppliers, such as
Xilinx, Inc. ("Xilinx") and Lucent Technologies (which is a licensed second
source of some Xilinx products). While Actel believes its products and
technology are superior to those of Xilinx in many applications requiring
greater speed, lower cost, or nonvolatility, Xilinx came to market with its
FPGAs approximately three years before the Company, has a larger installed base
of development systems, and its SRAM-based products are reprogrammable. No
assurance can be given that Actel will be able to overcome these competitive
disadvantages.
Several companies have either already marketed antifuse-based FPGAs,
including QuickLogic Corporation ("QuickLogic"), or announced their intention to
do so. See "Legal." On March 31, 1995, the Company completed its acquisition of
the antifuse FPGA business of TI, which was the only second-source supplier of
the Company's products. Xilinx, which is a licensee of certain of the Company's
patents, introduced antifuse-based FPGAs in 1995 and terminated its antifuse
FPGA business in 1996. Cypress Semiconductor Corporation, which was a licensed
second source of QuickLogic, sold its antifuse FPGA business to QuickLogic in
the first quarter of 1997.
Actel expects significant additional competition from major domestic and
international semiconductor suppliers, such as Motorola, which has announced its
intention to enter the FPGA market. All such companies are larger, offer broader
product lines, and have substantially greater financial and other resources than
the Company, including the capability to manufacture their own wafers.
Additional competition could adversely affect Actel's business, financial
condition, or results of operations.
The Company may also face competition from suppliers of logic products
based on new or emerging technologies. For example, there are other known
techniques for manufacturing antifuses that offer certain advantages over
Actel's current fuse. The Company seeks to monitor developments in existing and
emerging technologies. No assurance can be given that Actel will be able to
compete successfully with suppliers offering products based on new or emerging
technologies.
Patents and Licenses
The Company currently has 107 United States patents and applications
pending for an additional 48 United States patents. Actel has one European
patent and has applications pending for an additional 40 patents outside the
United States. The Company's patents cover, among other things, Actel's basic
circuit architecture, antifuse structure, and programming method. The Company
expects to continue filing patent applications when appropriate to protect its
proprietary technologies. Actel believes that patents, along with such factors
as innovation, technological expertise, and experienced personnel, will become
increasingly important.
The Company attempts to protect its circuit designs, software, trade
secrets, and other proprietary information through patent and copyright
protection, agreements with customers and suppliers, proprietary information
agreements with employees, and other security measures. No assurance can be
given that the steps taken by Actel will be adequate to protect its proprietary
rights.
See "Business -- Research and Development" for summaries of certain
licensing agreements to which the Company is a party.
Employees
At the end of 1996, the Company had 356 full-time employees, including 113
in marketing, sales, and customer support; 122 in research and development; 94
in operations; and 27 in administration and finance. None of the Company's
employees is represented by a labor union nor does Actel have employment
agreements with any of its employees. The Company has not experienced any work
stoppages, and believes that its employee relations are satisfactory.
Risk Factors
Shareholders and prospective shareholders of Actel should carefully
consider, along with the other information in this Annual Report on Form 10-K,
the following risk factors:
Fluctuations In Operating Results
The Company's quarterly and annual operating results are subject to general
economic conditions and a variety of risks specific to Actel or characteristic
of the semiconductor industry, including booking and shipment uncertainties,
supply problems, and price erosion.
Booking and Shipment Uncertainties
Actel typically generates a large percentage of its quarterly revenues
from orders received during the quarter and shipped in the final weeks of
the quarter, making it difficult to accurately estimate quarterly revenues.
The Company's backlog (which may be cancelled or deferred by customers on
short notice without significant penalty) at the beginning of a quarter
accounts for only a fraction of Actel's revenues during the quarter. This
means that the Company generates the rest of its quarterly revenues from
orders received during the quarter and "turned" for shipment within the
quarter, and that any shortfall in "turns" orders will have an immediate
and adverse impact on quarterly revenues. There are many factors that could
cause a shortfall in "turns" orders, including but not limited to a decline
in general economic conditions or the businesses of end users, excess
inventory in the channel, conversion to conventional (or non-programmable)
grate arrays, or the loss of business to other competitors for price or
other reasons.
Historically, Actel has shipped a disproportionately large percentage
of its quarterly revenues in the final weeks of the quarter. Any failure by
the Company to effect scheduled shipments by the end of the quarter,
therefore, could have a materially adverse effect on revenues for such
quarter. Since Actel generally does not recognize revenue on the sale of a
product to a distributor until the distributor resells the product, the
Company's quarterly revenues are also dependent on, and subject to
fluctuations in, shipments by Actel's distributors. When there is a
shortfall in revenues, operating results are likely to be adversely
affected because most of the Company's expenses do not vary with revenues.
Supply Problems
In a typical semiconductor manufacturing process, silicon wafers
produced by a foundry are sorted and cut into individual die, which are
then assembled into individual packages and tested for performance. The
manufacture, assembly, and testing of semiconductor products is highly
complex and subject to a wide variety of risks, including defects in masks,
impurities in the materials used, contaminants in the environment, and
performance failures by personnel and equipment. Semiconductor products
intended for military and aerospace applications are particularly
susceptible to these conditions, any of which could have a materially
adverse effect on Actel's business, financial condition, or results of
operations.
As is common in the semiconductor industry, Actel's independent wafer
suppliers from time to time experience lower than anticipated yields of
usable die. For example, the Company experienced a yield problem at one of
its foundries in the fourth quarter of 1993 that was severe enough to have
a materially adverse effect on Actel's results of operations. To the extent
yields of usable die decrease, the average cost to the Company of each
usable die increases, which reduces gross margin. Wafer yields can decline
without warning and may take substantial time to analyze and correct,
particularly for a company such as Actel that does not operate its own
manufacturing facility, but instead utilizes independent facilities, most
of which are offshore. Yield problems may also increase the time to market
for the Company's products and create inventory shortages and dissatisfied
customers. In addition, Actel typically experiences difficulties or delays
in achieving satisfactory, sustainable yields on new processes or at new
foundries. Although the Company has been able eventually to overcome these
difficulties in the past, no assurance can be given that it will be able to
do so with respect to its current or future new processes and/or new
foundries. No assurance can be given that the Company will not experience
wafer supply problems in the future, or that any such problem would not
have a materially adverse effect on Actel's business, financial condition,
or results of operations.
Price Erosion
The semiconductor industry is characterized by intense competition.
Historically, average selling prices in the semiconductor industry
generally, and for the Company's products in particular, have declined
significantly over the life of each product. While Actel expects to reduce
the average selling prices of its products over time as the Company
achieves manufacturing cost reductions, Actel is sometimes required by
competitive pressures to reduce the prices of its products more quickly
than such cost reductions can be achieved. In addition, the Company
sometimes approves price reductions on specific sales to meet competition.
If not offset by reductions in manufacturing costs or by a shift in the mix
of products sold toward higher-margin products, declines in the average
selling prices of Actel's products will reduce gross margins and could have
a materially adverse effect on the Company's business, financial condition,
or results of operations.
Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
The Company's fiscal year ends on the Sunday closest to December 31.
Fiscal 1996, 1995, and 1994 ended on December 29, 1996, December 31, 1995,
and January 1, 1995, respectively. For ease of presentation, December 31
has been utilized as the fiscal year-end, and March 31, June 30, and
September 30 have been utilized as the end of the first, second, and third
fiscal quarters, respectively, in this Annual Report on Form 10-K and the
portions of the Company's 1996 Annual Report to security holders
incorporated herein by reference.
The results of operations for fiscal 1996 or any other year are not
necessarily indicative of results that may be expected for any ensuing
year.
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements. Actual results could differ materially from those estimates.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or
market (net realizable value). Given the volatility of the market for the
Company's products, the Company makes inventory provisions for potentially
excess and obsolete inventory based on backlog and forecast demand.
However, such backlog demand is subject to revisions, cancellations, and
rescheduling. Actual demand will inevitably differ from such backlog and
forecast demand, and such differences may be material to the financial
statements. Excess inventory increases handling costs and the risk of
obsolescence, is a non-productive use of capital resources, and delays
realization of the price and performance benefits associated with more
advanced manufacturing processes.
Dependence on Independent Wafer Manufacturers
Actel does not manufacture any of the wafers used in the production of its
FPGAs. Currently, such wafers are manufactured by Chartered Semiconductor in
Singapore, Lockheed-Martin FSC in the United States, Matsushita in Japan, TI in
the United States, and Winbond in Taiwan. The Company's reliance on independent
wafer manufacturers to fabricate its wafers involves significant risks,
including the risk of events limiting production and reducing yields, such as
technical difficulties or damage to production facilities, lack of control over
capacity allocation and delivery schedules, and potential lack of adequate
capacity. These risks are particularly pronounced with respect to wafers
intended for use in military and aerospace applications.
Actel has from time to time experienced delays in obtaining wafers from its
foundries, and there can be no assurance that the Company will not experience
similar or more severe delays in the future. In addition, although Actel has
supply agreements with most of its wafer manufacturers, a shortage of raw
materials or production capacity could lead any of the Company's wafer suppliers
to allocate available capacity to customers other than Actel, or to internal
uses, which could interrupt the Company's capability to meet its product
delivery obligations. These risks are particularly pronounced with respect to
wafers intended for use in military and aerospace applications. Any inability or
unwillingness of Actel's wafer suppliers to provide adequate quantities of
finished wafers to satisfy the Company's needs in a timely manner would delay
production and product shipments and could have a materially adverse effect on
Actel's business, financial condition, or results of operations.
If the Company's current independent wafer manufacturers were unable or
unwilling to manufacture Actel's products as required, the Company would have to
identify and qualify additional foundries. The qualification process typically
takes one year or longer. No assurance can be given that any additional wafer
foundries would become available or be able to satisfy Actel's requirements on a
timely basis or that qualification would be successful. In addition, the
semiconductor industry has from time to time experienced shortages of
manufacturing capacity. To secure an adequate supply of wafers, the Company has
considered, and continues to consider, various possible transactions, including
the use of substantial nonrefundable deposits to secure commitments from
foundries for specified levels of manufacturing capacity over extended periods,
equity investments (such as Actel's investment in Chartered Semiconductor) in
exchange for guaranteed production, and the formation of joint ventures to own
foundries. No assurance can be given as to the effect of any such transaction on
the Company's business, financial condition, or results of operations.
Dependence on Customized Manufacturing Process
Actel's FPGAs are manufactured using customized steps that are added to
otherwise standard manufacturing processes of its independent wafer suppliers.
There is considerably less operating history for the Company's customized
process steps than for the foundries' standard manufacturing processes. The
dependence of Actel on customized processing steps means that, in contrast with
competitors using standard manufacturing processes, the Company has more
difficulty establishing relationships with independent wafer manufacturers,
takes longer to qualify a new wafer manufacturer, takes longer to achieve
satisfactory, sustainable wafer yields on new processes, may experience a higher
incidence of production yield problems, must pay more for wafers, and generally
will not obtain early access to the most advanced processes. These risks are
particularly pronounced with respect to wafers intended for use in military and
aerospace applications. Any of the above factors could be a material
disadvantage against the competing non-antifuse products of Actel's competitors,
which use standard manufacturing processes. As a result of these factors, the
Company's products typically have been fabricated using processes one or two
generations behind the processes used on competing products. As a consequence,
Actel to date has not fully realized the price and performance benefits of its
antifuse technology. The Company is attempting to accelerate the rate at which
its products are reduced to finer geometries and is working with its wafer
suppliers to obtain earlier access to advanced processes, but no assurance can
be given that such efforts with be successful.
Technological Change and Dependence on New Product Development
The market for Actel's products is characterized by rapidly changing
technology, frequent new product introductions, and declining average selling
prices over product life cycles, each of which makes the timely introduction of
new products a critical objective of the Company. Actel's future success is
highly dependent upon the timely completion and introduction of new products at
competitive price and performance levels. In evaluating new product decisions,
Actel must anticipate well in advance both the future demand and the technology
that will be available to supply such demand. Failure to anticipate customer
demand, delays in developing new products with anticipated technological
advances, and failure to coordinate the design and development of silicon and
associated software products each could have a materially adverse effect on
Actel's business, financial condition, or results of operation.
In addition, there are greater technological and operational risks
associated with new products. The inability of the Company's wafer suppliers to
produce advanced products, delays in commencing or maintaining volume shipments
of new products, the discovery of product, process, software, or programming
failures, and any related product returns could each have a materially adverse
effect on Actel's business, financial condition, or results of operation.
Actel is currently scheduled to introduce new members of the 3200DX and
RadHard families in 1997. In addition, a new family of FPGAs, based on a
"metal-to-metal" antifuse and a "sea of gates" architecture, is being brought
into production and is currently scheduled for introduction late in 1997. No
assurance can be given that the Company's design and introduction schedules for
such products or the supporting software will be met or that such products will
be well-received by customers. No assurance can be given that any other new
products will gain market acceptance or that the Company will respond
effectively to new technological changes or new product announcements by others.
Any failure of Actel to successfully define, develop, market, manufacture,
assemble, or test competitive new products could have a materially adverse
effect on its business, financial condition, or results of operations.
The Company must also continue to make significant investments in research
and development to develop new products and achieve market acceptance for such
products. Actel currently conducts most of its research and development
activities at facilities operated by Matsushita in Japan and Extel
Semiconductor, Inc. in the United States. Although the Company has not to date
experienced any significant difficulty in obtaining access to its current
facilities, no assurance can be given that access will not be limited or that
such facilities will be adequate to meet Actel's needs in the future.
Dependence on Independent Software Developers
Actel is dependent upon independent software developers for the
development, maintenance, and support of certain elements of its Designer Series
Development Systems software. The Company's reliance on independent software
developers involves certain risks, including lack of control over development
and delivery schedules and the availability of customer support. Actel is aware
that certain of its independent developers are currently experiencing severe
financial difficulties. No assurance can be given that the Company's independent
developers will be able to complete software currently under development, or
provide updates, or customer support in a timely manner, which could delay
future releases and disrupt Actel's ability to provide customer support
services. Any significant delays in the availability of the Company's software
would be detrimental to the capability of the Company's new families of products
to win designs, which could have a materially adverse effect on Actel's
business, financial condition, or results of operations.
Dependence on Design Wins
In order for the Company to sell an FPGA to a customer, the customer must
incorporate the FPGA into the customer's product in the design phase. Actel
therefore devotes substantial resources, which it may not recover through
product sales, in support of potential customer design efforts (including, among
other things, providing development system software) and to persuade potential
customers to incorporate the Company's FPGAs into new or updated products. These
efforts usually precede by many months (and sometimes a year or more) the
generation of volume FPGA sales, if any, by Actel. The value of any design win,
moreover, will depend in large part upon the ultimate success of the customer's
product. No assurance can be given that the Company will win sufficient designs
or that any design win will result in significant revenues.
Dependence on Military and Aerospace Customers
Although Actel is unable to determine with certainty the ultimate uses of
its products, the Company estimates that sales of its products to customers in
the military and aerospace industries, which sometimes carry higher profit
margins than sales of products to commercial customers, accounted for
approximately 10% to 15% of net revenues from 1992 through the first half of
1996. The Company believes that the military and aerospace industries accounted
for a significantly greater percentage of the Company's net revenues in the
second half of 1996, following the introduction of the RH1280. No assurance can
be given that future sales to customers in the military and aerospace industries
will continue at current volume or margin levels. Orders from the military and
aerospace customers tend to be large and irregular, which creates operational
challenges and contributes to fluctuations in Actel's net revenues and gross
margins. These sales are also subject to more extensive governmental
regulations, including greater import and export restrictions. In addition,
products for military and aerospace applications require processing and testing
that is more lengthy and stringent than for commercial applications, increasing
the risk of failure. It is often not possible to determine before the end of
processing and testing whether products intended for military or aerospace
applications will fail and, if they do fail, a significant period of time is
often required to process and test replacements, each of which makes it
difficult to accurately estimate quarterly revenues and could have a materially
adverse effect on Actel's business, financial condition, or results of
operations.
Semiconductor Industry Risks
The semiconductor industry has historically been cyclical and periodically
subject to significant economic downturns, which are characterized by diminished
product demand, accelerated price erosion, and overcapacity. The Company may in
the future experience substantial period-to-period fluctuations in business and
results of operations due to general semiconductor industry conditions, overall
economic conditions, or other factors, including legislation and regulations
governing the import or export of semiconductor products.
Dependence on International Operations
Actel buys a majority of its wafers from foreign foundries and has most of
its commercial products assembled by subcontractors located outside the United
States. These activities are subject to the uncertainties associated with
international business operations, including trade barriers and other
restrictions, changes in trade policies, foreign governmental regulations,
currency exchange fluctuations, reduced protection for intellectual property,
war and other military activities, terrorism, changes in political or economic
conditions, and other disruptions or delays in production or shipments, any of
which could have a materially adverse effect on the Company's business,
financial condition, or results of operations.
Competition
The semiconductor industry is intensely competitive and is characterized by
rapid rates of technological change, product obsolescence, and price erosion.
Actel's existing competitors include suppliers of conventional gate arrays,
CPLDs, and FPGAs. The Company's two principle competitors are Xilinx, a supplier
of FPGAs based on SRAM technology, and Altera, a supplier principally of CPLDs.
In connection with the settlement of patent litigation in 1993, Actel granted
Xilinx a license under certain of Actel's patents that permits Xilinx to
manufacture and market antifuse-based products. Xilinx announced in 1996 that it
had discontinued its antifuse-based FPGA product line. The Company also faces
competition from companies that specialize in converting FPGAs, including
Actel's products, into conventional gate arrays. In addition, the Company
expects significant competition in the future from major domestic and
international semiconductor suppliers, and Actel's patents may not bar
competitors to which it has not granted a license from manufacturing other
antifuse-based products. The Company may also face competition from suppliers of
logic products based on new or emerging technologies. Given the intensity of the
competition and the research and development being done, no assurance can be
given that Actel's antifuse and architecture technology will remain competitive.
The Company believes that important competitive factors in its market are
price, performance, number of usable gates, ease of use and functionality of
development system software, installed base of development systems, adaptability
of products to specific applications, length of development cycle (including
reductions to finer micron design rules), number of I/Os, reliability, adequate
wafer fabrication capacity and sources of raw materials, protection of products
by effective utilization of intellectual property laws, and technical service
and support. Failure of Actel to compete successfully in any of these or other
areas could have a materially adverse effect on its business, financial
condition, or results of operations. In addition, all existing FPGAs and CPLDs
not based on antifuse technology are reprogrammable, a feature that makes them
more attractive to many designers. The Company also believes that, if there were
a downturn in the market for CPLDs and FPGAs, companies that have broader
product lines and longer standing customer relationships may be in a stronger
competitive position than Actel. Many of the Company's current and potential
competitors offer broader product lines and have significantly greater
financial, technical, manufacturing, and marketing resources than Actel.
Patent Infringement
As is typical in the semiconductor industry, the Company has been and
expects to be from time to time notified of claims that it may be infringing
patents owned by others. No assurance can be given that such claims against
Actel will not result in litigation. In January 1994, the Company brought a
patent infringement lawsuit against QuickLogic, which in turn brought a patent
infringement counterclaim against Actel in May 1995. Management of the Company
believes that Actel has meritorious claims and defenses in this matter, and that
its resolution will not have a materially adverse effect on the Company's
business, financial condition, or results of operations, but no assurance can be
given to that effect. All litigation, whether or not determined in favor of
Actel, can result in significant expense to the Company and can divert the
efforts of Actel's technical and management personnel from productive tasks.
Although the Company has obtained patents covering aspects of its FPGA
architecture logic modules and certain techniques for manufacturing its
antifuse, no assurance can be given that Actel's patents will be determined to
be valid or that the claims of QuickLogic or any assertions of infringement or
invalidity by other parties (or claims for indemnity from customers resulting
from any infringement claims) will not be successful. In the event of an adverse
ruling in the QuickLogic case or any other litigation involving intellectual
property, the Company could suffer significant (and possibly treble) monetary
damages, which could have a materially adverse effect on Actel's business,
financial condition, and results of operations. The Company may also be required
to discontinue the use of infringing processes; cease the manufacture, use, and
sale of infringing products; expend significant resources to develop
non-infringing technology; or obtain licenses under patents that it is
infringing. Although patent holders commonly offer licenses to alleged
infringers, no assurance can be given that licenses will be offered or that the
terms of any offered licenses will be acceptable to Actel. In the event of a
successful claim against the Company, Actel's failure to develop or license a
substitute technology on commercially reasonable terms would have a materially
adverse effect on the Company's business, financial condition, or results of
operations.
Protection of Intellectual Property
Actel has historically devoted significant resources to research and
development and believes that the intellectual property derived from such
research and development is a valuable asset that has been and will continue to
be important to the success of the Company's business. Actel relies primarily on
a combination of nondisclosure agreements, other contractual provisions, and
patent and copyright protection to protect its proprietary rights. No assurance
can be given that the steps taken by the Company will be adequate to protect its
proprietary rights. In addition, the laws of certain territories in which
Actel's products are or may be developed, manufactured, or sold, including Asia
and Europe, may not protect the Company's products and intellectual property
rights to the same extent as the laws of the United States. Failure of Actel to
enforce its patents or copyrights or to protect its trade secrets could have a
materially adverse effect on the Company's business, financial condition, or
results of operations.
Reliance on Distributors
In 1996, more than half of Actel's sales in the United States and virtually
all of the Company's sales outside the United States were made through
distributors. Three of Actel's distributors, Wyle, Arrow, and Pioneer, accounted
for approximately 14%, 14%, and 11%, respectively, of the Company's net revenues
in 1996. No assurance can be given that future sales by these or other
distributors will continue at current levels or that the Company will be able to
retain its current distributors on terms that are acceptable to Actel.
The Company's distributors generally offer products of several different
companies, including products that are competitive with Actel's products.
Accordingly, there is a risk that these distributors may give higher priority to
products of other suppliers, thus reducing their efforts to sell the Company's
products. In addition, Actel's agreements with its distributors are generally
terminable at the distributor's option. A reduction in sales efforts by one or
more of the Company's current distributors or a termination of any distributor's
relationship with Actel could have a materially adverse effect on the Company's
business, financial condition, or results of operations.
Actel generally defers recognition of revenue on shipments to distributors
until the product is resold by the distributor to the end user. The Company's
distributors have on occasion built inventories in anticipation of substantial
growth in sales and, when such growth did not occur as rapidly as anticipated,
substantially decreased the amount of product ordered from Actel in subsequent
quarters. Such a slowdown in orders would generally reduce the Company's profit
margins on future sales of higher cost products because Actel would be unable to
take advantage of any manufacturing cost reductions while the distributor
depleted its inventory at lower average selling prices. In addition, while the
Company believes that its major distributors are currently adequately
capitalized, no assurance can be given that one or more of Actel's distributors
will not experience financial difficulties. The failure of one or more of the
Company's distributors to pay for products ordered from Actel or to continue
operations because of financial difficulties or for other reasons could have a
materially adverse effect on the Company's business, financial condition, or
results of operations.
Reliance on International Sales
Sales to customers located outside the United States accounted for
approximately 33%, 38%, and 32%, of net revenues for 1996, 1995, and 1994,
respectively. Actel expects that revenues derived from international sales will
continue to represent a significant portion of its total revenues. International
sales are subject to a variety of risks, including those arising from currency
restrictions, tariffs, trade barriers, taxes, and export license requirements.
All of the Company's foreign sales are denominated in U.S. dollars, so Actel's
products become less price competitive in countries with currencies that are
declining in value against the dollar. In addition, since virtually all of the
Company's foreign sales are made through distributors, such sales are subject to
the risks described above in "Reliance on Distributors."
Dependence on Independent Assembly Subcontractors
Actel relies primarily on foreign subcontractors for the assembly and
packaging of its products and, to a lesser extent, for the testing of its
finished products. The Company generally relies on one or two subcontractors to
provide particular services and has from time to time experienced difficulties
with the timeliness and quality of product deliveries. Actel has no long-term
contracts with its subcontractors and certain of those subcontractors are
currently operating at or near full capacity. There can be no assurance that
these subcontractors will continue to be able and willing to meet the Company's
requirements for such components or services. Any significant disruption in
supplies from, or degradation in the quality of components or services supplied
by, these subcontractors could delay shipments and result in the loss of
customers or revenues or otherwise have a materially adverse effect on Actel's
business, financial condition, or results of operations.
Dependence on Key Personnel
The success of the Company is dependent in large part on the continued
service of its key management, engineering, marketing, sales, and support
employees. Competition for qualified personnel is intense in the semiconductor
industry, and the loss of Actel's current key employees, or the inability of the
Company to attract other qualified personnel, could have a materially adverse
effect on Actel. The Company does not have employment agreements with any of its
key employees.
Management of Growth
Actel has recently experienced and expects to continue to experience growth
in the number of its employees and the scope of its operations, resulting in
increased responsibilities for management personnel. To manage recent and
potential future growth effectively, the Company will need to continue to hire,
train, motivate, and manage a growing number of employees. The future success of
Actel will also depend on its ability to attract and retain qualified technical,
marketing, and management personnel. In particular, the current availability of
qualified design, process, and test engineers is limited, and competition among
companies for skilled and experienced engineering personnel is very strong. The
Company has been attempting to hire a number of engineering personnel and has
experienced delays in filling such positions. During strong business cycles,
Actel expects to experience continued difficulty in filling its needs for
qualified engineers and other personnel. No assurance can be given that the
Company will be able to achieve or manage effectively any such growth, and
failure to do so could delay product development and introductions or otherwise
have a materially adverse effect on Actel's business, financial condition, or
results of operations.
Volatility of Stock
The price of the Company's Common Stock can fluctuate substantially on the
basis of factors such as announcements of new products by Actel or its
competitors, quarterly fluctuations in the Company's financial results or the
financial results of other semiconductor companies, or general conditions in the
semiconductor industry or in the financial markets. In addition, stock markets
have recently experienced extreme price and volume volatility. This volatility
has had a substantial effect on the market prices of the securities issued by
high technology companies, at times for reasons unrelated to the operating
performance of the specific companies.
"Blank Check" Preferred Stock; Change in Control Arrangements
Actel's Articles of Incorporation authorize the issuance of up to 5,000,000
shares of "blank check" Preferred Stock (of which 4,000,000 shares remain
available for issuance), with such designations, rights, and preferences as may
be determined from time to time by the Board of Directors. Accordingly, the
Board is empowered, without approval by holders of the Company's Common Stock,
to issue Preferred Stock with dividend, liquidation, redemption, conversion,
voting, or other rights that could adversely affect the voting power or other
rights of the holders of the Common Stock. Issuance of the Preferred Stock could
be used as a method of discouraging, delaying, or preventing a change in control
of Actel. In addition, such issuance could adversely affect the market price of
the Common Stock. Although the Company does not currently intend to issue any
additional shares of its Preferred Stock, there can be no assurance that Actel
will not do so in the future.
The Company has adopted an Employee Retention Plan that provides for
payment of stock to Actel's employees who hold unvested stock options in the
event of a change of control of the Company. Payment is contingent upon the
employee remaining with Actel for six months after the change of control. The
Company has also entered into Management Continuity Agreements with each of its
executive officers, which provide for the acceleration of unvested stock options
in the event an executive officer's employment is actually or constructively
terminated other than for cause following a change of control.
Dividend Policy
Actel has never declared or paid any cash dividends on its capital stock.
The Company currently intends to retain any earnings for use in its business and
does not anticipate paying any cash dividends in the future.
Executive Officers of the Registrant
The following table identifies each executive officer of Actel as of March
12, 1997:
<TABLE>
<CAPTION>
Name Age Position
- ----------------------------------------- ----- -----------------------------------------------------------
<S> <C> <C>
John C. East............................. 52 President and Chief Executive Officer
David M. Sugishita....................... 49 Senior Vice President of Finance & Administration and Chief
Financial Officer
Esmat Z. Hamdy........................... 47 Senior Vice President of Technology & Operations
Jeffrey M. Schlageter.................... 53 Senior Vice President of Engineering
Michelle A. Begun........................ 40 Vice President of Human Resources
Douglas D. Goodyear...................... 42 Vice President of Worldwide Sales
Dennis F. Nye............................ 44 Vice President of Marketing
David L. Van De Hey...................... 41 Vice President & General Counsel and Secretary
</TABLE>
Mr. East has served as President and Chief Executive Officer of the Company
since December 1988. From April 1979 until joining Actel, Mr. East served in
various positions with Advanced Micro Devices, a semiconductor manufacturer,
including Senior Vice President of Logic Products from November 1986 to November
1988. From December 1976 to March 1979, he served as Operations Manager for
Raytheon Semiconductor. From September 1968 to December 1976, he served in
various marketing, manufacturing, and engineering positions for Fairchild Camera
and Instrument Corporation, a semiconductor manufacturer.
Mr. Sugishita has served as Senior Vice President of Finance &
Administration and Chief Financial Officer since August 1995. From April 1994 to
July 1995, he was Senior Vice President of Finance and Administration, Chief
Financial Officer, and Treasurer for Micro Component Technology, a semiconductor
automated test equipment company. From October 1991 to March 1994, Mr. Sugishita
was Vice President-Corporate Controller and Chief Accounting Officer for Applied
Materials, the world's largest semiconductor wafer fabrication equipment
company. From February 1982 to September 1991, he was Vice President of Finance,
Semiconductor Group, for National Semiconductor, a semiconductor manufacturing
company.
Dr. Hamdy, a founder of the Company, has been Vice President of Technology
of Actel since August 1991 and was promoted to Senior Vice President in March
1997 and to Senior Vice President of Operations in September 1997. From November
1985 to July 1991, he held a number of management positions with the Company's
technology and development group. From January 1981 to November 1985, Dr. Hamdy
held various positions at Intel Corporation, a semiconductor manufacturer,
lastly as project manager.
Mr. Schlageter joined the Company in February 1989 as Vice President of
Engineering and was promoted to Senior Vice President of Engineering in November
1992. From July 1985 to January 1989, he held various positions at Advanced
Micro Devices, a semiconductor manufacturer, where he last served as Managing
Director of Peripheral Products. From February 1981 to July 1985, he was Vice
President of Semicustom Products at Mostek Corporation, a semiconductor
manufacturer.
Ms. Begun joined Actel in May 1989 as Director of Human Resources, and has
been Vice President of Human Resources since August 1991. From May 1984 to May
1989, she held various human resources management positions at Intel
Corporation, a semiconductor manufacturer, her last position being Human
Resources Manager. From October 1977 to May 1984, she held various human
resources management positions at Synertek, Inc., a subsidiary of Honeywell, a
semiconductor manufacturer.
Mr. Goodyear joined the Company in February 1997 as Vice President of
Worldwide Sales. From November 1991 until joining the Company, he served as Vice
President of Sales for the components division of Sharp Electronics Corporation,
a semiconductor manufacturer. From January 1987 to November 1991, Mr. Goodyear
held various sales management positions at Hitachi America, a semiconductor
manufacturer, lastly as Western Area Sales Manager. From June 1983 to January
1987, he held various sales and sales management. positions at Advanced Micro
Devices, a semiconductor manufacturer.
Mr. Nye has been Vice President of Marketing since January 1994. From
October 1990 to December 1993, he served as European Business Manager with Actel
Europe Ltd., the Company's United Kingdom subsidiary. From January 1990 to
October 1990, Mr. Nye served as Director of Sales of Genrad Corporation, a
software company. From November 1986 to January 1990, he served as European
Sales Manager of Viewlogic Corporation, a software company.
Mr. Van De Hey joined Actel in July 1993 as Corporate Counsel, became
Secretary in May 1994, and has been Vice President & General Counsel since
August 1995. From November 1988 to September 1993, he was an associate with
Wilson, Sonsini, Goodrich & Rosati, Professional Corporation, a law firm in Palo
Alto, California, and the Company's outside legal counsel. From August 1985
until October 1988, he was an associate with the Cleveland office of Jones, Day,
Reavis & Pogue, a law firm. Mr. Van De Hey received his Juris Doctor degree from
the University of Pennsylvania in 1985.
Executive officers serve at the discretion of the Board of Directors.
ITEM 2. PROPERTIES
Actel's principal administrative, marketing, sales, customer support,
design, research and development, and testing facilities are located in
Sunnyvale, California, in three buildings that comprise approximately 138,000
square feet. These buildings are leased through June 1998, and the Company has
two renewal options for consecutive five-year terms. Actel also leases sales
offices in the metropolitan areas of Atlanta, Baltimore, Basingstoke (England),
Boston, Chicago, Dallas, Denver, Destin (Florida), Los Angeles, Munich
(Germany), Ottawa (Canada), and Paris (France). The Company believes its
facilities will be adequate for its needs in 1997.
ITEM 3. LEGAL
Actel commenced a patent infringement lawsuit against QuickLogic
Corporation ("QuickLogic") in the United States District Court for the Northern
District of California on January 20, 1994. The Complaint asserted four claims
for infringement of Actel patents nos. 4,758,745, 4,873,459, 5,055,718, and
5,198,705 (the "'705 Patent"), respectively, each relating to FPGA technology.
The Complaint sought injunctive relief, treble damages in an unspecified amount,
and attorneys' fees.
On February 10, 1994, QuickLogic filed an Answer and Counterclaim, denying
infringement, asserting invalidity defenses, and seeking declaratory relief.
On November 15, 1994, the Company moved for summary judgment of
infringement of its `705 Patent. On October 4, 1996, after extensive discovery
and briefing, the Special Master, to whom all pretrial matters have been
referred, filed a recommendation with the Court that Actel's motion be granted.
QuickLogic moved the Court to reject the Special Master's recommendation.
Hearings on that motion were held on January 27, 1997, and February 3, 1997. The
Court has not yet acted on that motion.
On March 15, 1995, the Company filed an Amended and Supplemental Complaint
against QuickLogic asserting, in addition to claims previously asserted, a claim
for infringement of Actel patent no. 5,367,208. The Company's Supplemental
Complaint sought injunctive relief, treble damages in an unspecified amount, and
attorneys' fees.
On April 14, 1995, QuickLogic filed an Answer and Counterclaim denying
infringement, asserting invalidity defenses, and asserting two claims against
Actel for alleged infringement of QuickLogic patents Nos. 5,220,213 and
5,396,127. QuickLogic's Counterclaim sought declaratory and injunctive relief,
and treble damages in an unspecified amount. On May 25, 1995, QuickLogic filed
an Amended Answer and Counterclaim, adding allegations of inequitable conduct.
In response to QuickLogic's counterclaims, on June 11, 1995, the Company
filed a Reply and Counterclaim, denying infringement, asserting invalidity
defenses, naming John Birkner as an individual defendant, and asserting causes
of action for trade secret misappropriation, breach of contract, breach of
confidential business relationship, and unfair competition. Actel's Counterclaim
sought declaratory and injunctive relief, damages in an unspecified amount, and
an assignment to the Company of QuickLogic's two patents-in-suit. In response,
both QuickLogic and Birkner denied all allegations.
On January 18, 1996, Actel filed a motion seeking summary judgment of
invalidity of the two QuickLogic patents-in-suit.
On February 5, 1996, QuickLogic filed a motion for summary judgment of
infringement of QuickLogic patent no. 5,520,213.
On February 26, 1996, QuickLogic filed a motion to disqualify the Company's
counsel, the law firm of Lyon & Lyon, on the ground that a Lyon & Lyon attorney,
in previous employment with QuickLogic counsel, Skjerven, Morrill, MacPherson,
Franklin & Friel, had access to confidential QuickLogic information and attorney
work product. The Special Master issued a recommendation in favor of
QuickLogic's motion, and on May 29, 1996, the Court entered an Order
disqualifying Lyon & Lyon. On June 19, 1996, O'Melveny & Myers was substituted
as counsel of record on behalf of Actel.
On March 7, 1996, the Company filed a Second Supplemental Complaint, adding
a claim against QuickLogic for infringement of Actel patent no. 5,479,113.
On November 25, 1996, QuickLogic moved for Summary Judgment of invalidity
with respect to Claim 1 of the `705 Patent.
On February 14, 1997, Actel filed a motion for separate trial of its claim
that QuickLogic's patents are invalid because the invention disclosed in those
patents was being sold by the Company more than one year prior to the date on
which QuickLogic first applied for patent rights. No decision has been made on
that motion.
On February 28, 1997, QuickLogic filed a motion with the Special Master in
which it seeks leave to amend its counterclaims in the action to assert that
Actel integrated circuits infringe newly-issued U.S. Patent No. 5,594,364. The
Company will oppose that motion. If the opposition is successful, it is probable
that QuickLogic will assert claims for infringement of Patent 5,594,364 in a
separate action. Actel believes that it has substantial defenses to these
claims.
In opposing QuickLogic's motion to add new patent claims, the Company will
advise the Court that it intends to assert additional claims of patent
infringement against QuickLogic, including claims on newly-issued U.S. Patent
No. 5,610,534. Actel will state that it recommends that such claims be filed as
a separate action, but that the Company should have the right to assert its own
new claims if QuickLogic is allowed to assert new claims.
By order entered March 19, 1997, the Court reserved September 8, 1997, for
trial of Actel's "on-sale" defense should its motion for separate trial be
granted. It has set September 8, 1998, for trial of all remaining issues.
After considering the facts currently known, management does not believe
that the ultimate outcome of the litigation will have a materially adverse
effect on the Company's business, financial condition, or operating results,
although no assurance can be given to that effect.
There are no other pending legal proceedings of a material nature to which
Actel is a party or of which any of its property is the subject. There are no
such legal proceedings known by the Company to be contemplated by any
governmental authority.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS
The information appearing under the caption "Stock Listing" in the
Registrant's annual report to security holders for the fiscal year ended
December 31, 1996 (the "1996 Annual Report"), is incorporated herein by this
reference.
ITEM 6. SELECTED FINANCIAL DATA
The information appearing under the caption "Selected Consolidated
Financial Data" in the 1996 Annual Report is incorporated herein by this
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information appearing under the caption "Management's Discussion and
Analysis of Financial Conditions and Results of Operations" of the 1996 Annual
Report is incorporated herein by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information appearing under the captions "Consolidated Balance Sheets,"
"Consolidated Statements of Operations," "Consolidated Statements of
Shareholders' Equity," "Consolidated Statements of Cash Flows," "Notes to
Consolidated Financial Statements," and "Report of Ernst & Young LLP,
Independent Auditors" in the 1996 Annual Report is incorporated herein by this
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
Except for the information specifically incorporated by reference from
Actel's definitive Proxy Statement for the Annual Meeting of Shareholders to be
held on May 2, 1997, as filed on or about April 2, 1997, with the Securities and
Exchange Commission (the "1997 Proxy Statement") in Part III of this Annual
Report on Form 10-K, the 1997 Proxy Statement shall not be deemed to be filed as
part of this Report. Without limiting the foregoing, the information under the
captions "Compensation Committee Report" and "Company Stock Performance" under
the main caption "OTHER INFORMATION" in the 1997 Proxy Statement are not
incorporated by reference in this Annual Report on Form 10-K.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the identification and business experience of
Actel's directors under the caption "Nominees" under the main caption "PROPOSAL
NO. 1 -- ELECTION OF DIRECTORS" in the 1997 Proxy Statement and the information
under the main caption "COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE
ACT OF 1934" in the 1997 Proxy Statement are incorporated herein by this
reference. For information regarding the identification and business experience
of Actel's executive officers, see "Executive Officers of the Registrant" at the
end of Item 1 in Part I of this Annual Report on Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information under the caption "Director Compensation" under the main
caption "PROPOSAL NO. 1 -- ELECTION OF DIRECTORS" in the 1997 Proxy Statement
and the information under the caption "Executive Compensation" under the main
caption `OTHER INFORMATION" in the 1997 Proxy Statement are incorporated herein
by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information under the caption "Share Ownership" under the main caption
"INFORMATION CONCERNING SOLICITATION AND VOTING" in the 1997 Proxy Statement and
the information under the caption "Security Ownership of Management" under the
main caption "OTHER INFORMATION" in the 1997 Proxy Statement are incorporated
herein by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
(1) Financial Statements. The following consolidated financial
statements of Actel Corporation included in Actel's 1996 Annual Report to
Shareholders for the year ended December 31, 1996, are incorporated by
reference in Item 8 of this Annual Report on Form 10-K:
Consolidated balance sheets at December 31, 1996 and 1995
Consolidated statements of operations for each of the three years
in the period ended December 31, 1996
Consolidated statements of shareholders' equity for each of the
three years in the period ended December 31, 1996
Consolidated statements of cash flows for each of the three years
in the period ended December 31, 1996
Notes to consolidated financial statements
(2) Financial Statement Schedule. The financial statement schedule
listed under 14(d) hereof is filed with this Annual Report on Form 10-K.
(3) Exhibits. The exhibits listed under Item 14(c) hereof are filed
with, or incorporated by reference into, this Annual Report on Form 10-K.
(b) Reports on Form 8-K. No reports on Form 8-K were filed by Actel during
the quarter ended December 31, 1996.
(c) Exhibits. The following exhibits are filed as part of, or incorporated
by reference into, this Report on Form 10-K:
Exhibit Number Description
- ------------------------ -------------------------------------------------------
2.1 (1) Asset Purchase Agreement dated as of February 12, 1995,
between the Registrant and Texas Instruments
Incorporated (filed as Exhibit 2.1 to the Registrant's
Current Report on Form 8-K (File No. 0-21970) filed
with the Securities and Exchange Commission on April
17, 1995).
2.2 Amendment No. 1 to the Asset Purchase Agreement dated
as of March 31, 1995, between the Registrant and Texas
Instruments Incorporated (filed as Exhibit 2.2 to the
Registrant's Current Report on Form 8-K (File No.
0-21970) filed with the Securities and Exchange
Commission on April 17, 1995).
3.1 Restated Articles of Incorporation (filed as Exhibit
3.2 to the Registrant's Registration Statement on Form
S-1 (File No. 33-64704), declared effective on August
2, 1993).
3.2 Restated Bylaws of the Registrant (filed as Exhibit 3.3
to the Registrant's Registration Statement on Form S-1
(File No. 33-64704), declared effective on August 2,
1993).
3.3 Certificate of Determination of Rights, Preferences and
Privileges of Series A Preferred Stock of the
Registrant (filed as Exhibit 3.3 to the Registrant's
Current Report on Form 8-K (File No. 0-21970) filed
with the Securities and Exchange Commission on April
17, 1995).
10.1 (2) Form of Indemnification Agreement for directors and
officers (filed as Exhibit 10.1 to the Registrant's
Registration Statement on Form S-1 (File No. 33-64704),
declared effective on August 2, 1993).
10.2 (2) 1986 Incentive Stock Option Plan, as amended and
restated.
10.3 (2) 1993 Directors' Stock Option Plan, as amended and
restated.
10.4 (2) 1993 Employee Stock Purchase Plan, as amended and
restated.
10.5 (2) 1995 Employee and Consultant Stock Plan, as amended and
restated.
10.6 Form of Distribution Agreement (filed as Exhibit 10.13
to the Registrant's Registration Statement on Form S-1
(File No. 33-64704), declared effective on August 2,
1993).
10.7 (1) Patent Cross License Agreement dated April 22, 1993
between the Registrant and Xilinx, Inc. (filed as
Exhibit 10.14 to the Registrant's Registration
Statement on Form S-1 (File No. 33-64704), declared
effective on August 2, 1993).
10.8 Subscription and Participation Agreement dated February
3, 1994 between the Registrant, Singapore Technologies
Ventures Pte Ltd and Chartered Semiconductor
Manufacturing Pte Ltd (filed as Exhibit 10.16 to the
Registrant's Annual Report on Form 10-K (File No.
0-21970) for the fiscal year ended January 2, 1994).
10.9 Manufacturing Agreement dated February 3, 1994 between
the Registrant and Chartered Semiconductor
Manufacturing Pte Ltd (filed as Exhibit 10.17 to the
Registrant's Annual Report on Form 10-K (File No.
0-21970) for the fiscal year ended January 2, 1994).
10.10 Distribution Agreement dated June 1, 1994, between the
Registrant and Arrow Electronics, Inc. (filed as
Exhibit 10.18 to the Registrant's Quarterly Report on
Form 10-Q (File No. 0-21970) for the quarterly period
ended July 3, 1994).
10.11 (1) Product Development and Marketing Agreement dated
August 1, 1994, between the Registrant and Loral
Federal Systems Company (filed as Exhibit 10.19 to the
Registrant's Quarterly Report on Form 10-Q (File No.
0-21970) for the quarterly period ended October 2,
1994).
10.12 (1) M2M Joint Development and Marketing Agreement dated
August 1, 1994, between the Registrant and Loral
Federal Systems Company (filed as Exhibit 10.20 to the
Registrant's Quarterly Report on Form 10-Q (File No.
0-21970) for the quarterly period ended October 2,
1994).
10.13 (1) Investor Agreement dated as of April 1, 1995, between
the Registrant and Texas Instruments Incorporated
(filed as Exhibit 10.21 to the Registrant's Current
Report on Form 8-K (File No. 0-21970) filed with the
Securities and Exchange Commission on April 17, 1995).
10.14 (1) License Agreement dated as of April 1, 1995, between
the Registrant and Texas Instruments Incorporated
(filed as Exhibit 10.22 to the Registrant's Current
Report on Form 8-K (File No. 0-21970) filed with the
Securities and Exchange Commission on April 17, 1995).
10.15 (1) Supply Agreement dated as of April 1, 1995, between the
Registrant and Texas Instruments Incorporated. (filed
as Exhibit 10.23 to Amendment No. 2 to the Registrant's
Current Report on Form 8-K (File No. 0-21970) filed
with the Securities and Exchange Commission on August
23, 1995).
10.16 (1) Development Agreement dated as of April 1, 1995,
between the Registrant and Texas Instruments
Incorporated (filed as Exhibit 10.24 to the
Registrant's Current Report on Form 8-K (File No.
0-21970) filed with the Securities and Exchange
Commission on April 17, 1995).
10.17 (1) Foundry Agreement dated as of June 29, 1995, between
the Registrant and Matsushita Electric Industrial Co.,
Ltd and Matsushita Electronics Corporation (filed as
Exhibit 10.25 to the Registrant's Quarterly Report on
Form 10-Q (File No. 0-21970) for the quarterly period
ended July 2, 1995).
10.18 (1) Distribution Agreement dated as of June 29, 1995,
between the Registrant and Matsushita Electric
Industrial Co., Ltd and Matsushita Electronics
Corporation (filed as Exhibit 10.26 to the Registrant's
Quarterly Report on Form 10-Q (File No. 0-21970) for
the quarterly period ended July 2, 1995).
10.19 Lease Agreement for the Registrant's offices in
Sunnyvale, California, dated May 10, 1995 (filed as
Exhibit 10.19 to the Registrant's Annual Report on Form
10-K (File No. 0-21970) for the fiscal year ended
December 31, 1995).
10.20 (1) License Agreement dated as of March 6, 1995, between
the Registrant and BTR, Inc.
11 Statement re computation of per share earnings (see
page 38).
13 Portions of Registrant's Annual Report to Shareholders
for the fiscal year ended December 31, 1996,
incorporated by reference into this Report on Form
10-K.
21 Subsidiaries of Registrant (filed as Exhibit 10.21 to
the Registrant's Annual Report on Form 10-K (File No.
0-21970) for the fiscal year ended December 31, 1995).
23 Consent of Ernst & Young LLP, Independent Auditors (see
page 36).
24 Power of Attorney (see page 35)
27 Financial Data Schedule.
- ---------------------------------------
(1) Confidential treatment requested as to a portion of
this Exhibit.
(2) This Exhibit is a management contract or compensatory
plan or arrangement.
Pursuant to Item 601(b)(2) of Regulation S-K, the schedules to Exhibit 2.1
have been omitted. The Registrant hereby agrees to furnish supplementally a copy
of any omitted schedule to the Securities and Exchange Commission upon request.
The omitted schedules are listed below:
Schedule 1.1(a) Capital Equipment
Schedule 1.1(b) Expensed Assets
Schedule 1.1(d) Contracts
Schedule 1.1(f) Software
Schedule 1.1(h) Testing Hardware and Software
Schedule 1.1(i) Research and Development Projects
Schedule 2.2 Calculation of Net Revenues of the Business
Schedule 2.5 Inventory Transfer Pricing
Schedule 5.2(a) Seller Consents
Schedule 5.16 Seller's Knowledge
Schedule 6.2(a) Buyer Consents
Schedule 6.2(b) Buyer Violations
Schedule 6.4 Capitalization of Buyer
Schedule 6.7 Registration Rights
Schedule 12.3(d) Buyer's Knowledge
(d) Financial Statement Schedule. The following financial statement
schedule of Actel Corporation is filed as part of this Report on Form 10-K and
should be read in conjunction with the Consolidated Financial Statements of
Actel Corporation, including the notes thereto, and the Report of Independent
Auditors with respect thereto:
Schedule Description Page
- --------------- ----------------------------------------------------- ---------
II Valuation and qualifying accounts 37
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable and therefore have
been omitted.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ACTEL CORPORATION
March 28, 1997 By: /s/ John C. East
-------------------------------------------
John C. East
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ------------------------------------------------ ----------------------
<S> <C> <C>
/s/ John C. East President and Chief Executive Officer (Principal March 28, 1997
- ----------------------------------------- Executive Officer) and Director
(John C. East)
/s/ David M. Sugishita Senior Vice President of Finance & Administration March 28, 1997
- ----------------------------------------- and Chief Financial Officer (Principal Financial
(David M. Sugishita) and Accounting Officer)
/s/ Keith B. Geeslin Director March 28, 1997
- -----------------------------------------
(Keith B. Geeslin)
/s/ Jos C. Henkens Director March 28, 1997
- -----------------------------------------
(Jos C. Henkens)
/s/ Frederic N. Schwettmann Director March 28, 1997
- -----------------------------------------
(Frederic N. Schwettmann)
/s/ Robert G. Spencer Director March 28, 1997
- -----------------------------------------
(Robert G. Spencer)
</TABLE>
SCHEDULE II
ACTEL CORPORATION
--------------------------------------
Valuation and Qualifying Accounts
(in thousands)
<TABLE>
<CAPTION>
Balance at
beginning of Balance at end
period Provisions Write-Offs of period
---------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1994............. 600 -- 3 597
Year ended December 31, 1995............. 597 -- 30 567
Year ended December 31, 1996............. 567 81 15 633
</TABLE>
ACTEL CORPORATION
1986 INCENTIVE STOCK OPTION PLAN
Amended and Restated Effective January 24, 1997
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either "incentive stock options", as
defined in Section 422 of the Internal Revenue Code of 1986, as amended, or
"non-statutory stock options", at the discretion of the Administrator and as
reflected in the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" shall mean the legal requirements relating to
the administration of stock option plans under California corporate and
securities laws and the Code.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Actel Corporation, a California corporation.
(f) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed.
(g) "Consultant" shall mean any person, including an advisor, engaged
by the Company or a Parent or Subsidiary to render services and who is
compensated for such services, provided that the term "Consultant" shall
not include Directors who are paid only a director's fee by the Company or
who are not compensated by the Company for their services as Directors.
(h) "Continuous Status as an Employee or Consultant" shall mean that
the employment or consulting relationship is not interrupted or terminated
by the Company, any Parent or Subsidiary. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of: (i) any
leave of absence approved by the Board, including sick leave, military
leave, or any other personal leave; provided, however, that for purposes of
Incentive Stock Options, any such leave may not exceed ninety (90) days,
unless reemployment upon the expiration of such leave is guaranteed by
contract (including certain Company policies) or statute; or (ii) transfers
between locations of the Company or between the Company, its Parent, its
Subsidiaries or its successor.
(i) "Employee" shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(k) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
(l) "Officer" shall mean a person who is an officer of the Company
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(m) "Option" shall mean a stock option granted pursuant to the Plan.
(n) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(o) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(p) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Internal Revenue
Code of 1986, as amended.
(q) "Plan" shall mean this 1986 Incentive Stock Option Plan, as
amended.
(r) "Rule 16b-3" shall mean Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
(s) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(t) "Subsidiary" shall mean a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 5,497,897 shares of Common Stock, increased annually on the
first day of each of the Company's fiscal years during the term of the Plan (and
subsequent to the May 2, 1996 amendment to and restatement of the Plan) in an
amount equal to 5% of the Company's common stock issued and outstanding at the
close of business on the last day of the immediately preceding fiscal year (the
"Annual Replenishment"), with only the initial 5,497,897 shares and subsequent
annual increases in an amount equal to the lesser of (i) 885,931 shares, or (ii)
the number of shares subject to the Annual Replenishment to be available for
issuance as "incentive stock options" qualified under Section 422 of the
Internal Revenue Code. All of the shares issuable under the Plan may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are
neither Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
Subject to Section 16(b). With respect to Option grants made to
Employees who are also Officers or Directors subject to Section 16(b)
of the Exchange Act, the Plan shall be administered by (A) the Board,
if the Board may administer the Plan in compliance with the rules
governing a plan intended to qualify as a discretionary plan under
Rule 16b-3, or (B) a committee designated by the Board to administer
the Plan, which committee shall be constituted to comply with the
rules governing a plan intended to qualify as a discretionary plan
under Rule 16b-3. Once appointed, such Committee shall continue to
serve in its designated capacity until otherwise directed by the
Board. From time to time the Board may increase the size of the
Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by the rules
governing a plan intended to qualify as a discretionary plan under
Rule 16b-3.
(iii) Administration With Respect to Other Persons. With respect
to Option grants made to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered
by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted to satisfy Applicable Laws. Once
appointed, such Committee shall serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of
the Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter
directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 9(b) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding
any Option or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option
was granted;
(viii) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan;
(ix) to prescribe, amend and rescind rules and regulations
relating to the Plan;
(x) to modify or amend each Option (subject to Section 14(c) of
the Plan);
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to determine the terms and restrictions applicable to
Options; and
(xiii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options granted under the Plan.
5. Eligibility. Options may be granted only to Employees and Consultants.
Incentive Stock Options may be granted only to Employees. An Employee or
Consultant who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as either
an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair
Market Value of Shares subject to an Optionee's incentive stock options
granted by the Company, any Parent or Subsidiary, that become exercisable
for the first time during any calendar year (under all plans of the Company
or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be
treated as Nonstatutory Stock Options. For purposes of this Section 6(a),
incentive stock options shall be taken into account in the order in which
they were granted, and the Fair Market Value of the Shares shall be
determined as of the time of grant.
(b) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with his or her right or the
Company's right to terminate his or her employment or consulting
relationship at any time.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than five hundred thousand Shares.
(ii) The foregoing limitation shall be adjusted proportionately
in connection with any change in the Company's capitalization as
described in Section 12(a).
(iii) If an Option is canceled (other than in connection with a
transaction described in Section 12), the canceled Option will be
counted against the limit set forth in Section 6(c)(i). For this
purpose, if the exercise price of an Option is reduced, the
transaction will be treated as a cancellation of the Option and the
grant of a new Option.
7. Term of Plan. The Plan shall continue in effect until March 14, 2004.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant. Moreover, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
the Incentive Stock Option shall be five (5) years from the date of grant or
such shorter term as may be provided in the Notice of Grant.
9. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the Incentive
Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the per Share exercise price
shall be no less than 110% of the Fair Market Value per Share on
the date of grant.
(B) granted to any Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant, unless expressly granted in lieu of salary
or a cash bonus, in which case the per Share exercise price shall be
no less than 85% of the Fair Market Value per Share on the date of
grant; provided, however, that the Administrator may grant in any
fiscal year Nonstatutory Stock Options at per Share exercise prices
less than that provided herein covering, in the aggregate, shares of
Common Stock equal to or less than 0.5% of the number of shares of
Common Stock issued and outstanding at the beginning of such fiscal
year.
(b) The fair market value shall be determined by the Administrator in
its discretion; provided, however, that where there is a public market for
the Common Stock, the fair market value per Share shall be the mean of the
bid and asked prices, or closing price in the event quotations for the
Common Stock are reported on the National Market System, of the Common
Stock on the date of grant, as reported in the Wall Street Journal (or, if
not so reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotation (NASDAQ) System) or, in the event
the Common Stock is listed on a stock exchange, the fair market value per
Share shall be the closing price on such exchange on the date of grant of
the Option, as reported in the Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Administrator and may consist entirely of cash; check; promissory
note; other Shares which (A) in the case of Shares acquired upon exercise
of an option, have been owned by the Optionee for more than six months on
the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised; for options granted subsequent to the
effective date of the 1993 amendments to the Plan, delivery of a properly
executed exercise notice together with such other documentation as the
Committee and the broker, if applicable, shall require to effect an
exercise of the option and delivery to the Company of the sale or loan
proceeds required; or any combination of such methods of payment, or such
other consideration and method of payment for the issuance of Shares to the
extent permitted under Applicable Law.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, including performance
criteria with respect to the Company and/or the Optionee, and as shall be
permissible under the terms of the Plan; provided, however, that an
Incentive Stock Option granted prior to January 1, 1987 shall not be
exercisable while there is outstanding any incentive stock option which was
granted, before the granting of such Incentive Stock Option, to the same
Optionee to purchase stock of the Company, any Parent or Subsidiary, or any
predecessor corporation of such corporations. For purposes of this
provision, an incentive stock option shall be treated as outstanding until
such option is exercised in full or expires by reason of lapse of time.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the
Administrator, consist of any consideration and method of payment allowable
under Section 9(c) of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such
Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding
the exercise of the Option. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Status as an Employee or Consultant. If an
Employee or Consultant ceases to serve as an Employee or Consultant, he or
she may, but only within 30 days (or such other period of time not
exceeding three months as is determined by the Administrator at the time of
grant of the Option) after the date he or she ceases to be an Employee or
Consultant (as dthe case may be) of the Company, exercise his or her Option
to the extent that he or she was entitled to exercise it at the date of
such termination. To the extent that he or she was not entitled to exercise
the Option at the date of such termination, or if he or she does not
exercise such Option (which he or she was entitled to exercise) within the
time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
10(b) above, in the event an Employee or Consultant is unable to continue
his or her employment or consulting relationship with the Company as a
result of his or her total and permanent disability (as defined in Section
22(e)(3) of the Internal Revenue Code), he or she may, but only within six
(6) months (or such other period of time not exceeding 12 months as is
determined by the Administrator at the time of grant of the Option) from
the date of termination, exercise his or her Option to the extent he or she
was entitled to exercise it at the date of such termination (or to such
greater extent as the Administrator may provide). To the extent that he or
she was not entitled to exercise the Option at the date of termination, or
if he or she does not exercise such Option (which he or she was entitled to
exercise) within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the
date of death (but in no event later than the expiration of the term of
such Option as set forth in the Notice of Grant), by the Optionee's estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee was entitled to
exercise the Option at the date of death. If, at the time of death, the
Optionee was not entitled to exercise his or her entire Option, the Shares
covered by the unexercisable portion of the Option shall immediately revert
to the Plan. If, after death, the Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does
not exercise the Option within the time specified herein, the Option shall
terminate, and the Shares covered by such Option shall revert to the Plan.
11. Non-Transferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued shares of Common
Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall
not be deemed to have been "effected without receipt of consideration."
Such adjustment shall be made by the Board, whose determination in that
respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate
as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the
assets of the Company, each outstanding Option shall be assumed or an
equivalent option shall be substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event that such
successor corporation refuses to assume such Option or to substitute an
equivalent option, such Options shall become fully vested and exercisable
as to all of the Optioned Stock, including the Shares as to which the
Options would not otherwise be vested and exercisable. If Options become
fully vested and exercisable in lieu of assumption or substitution in the
event of a merger or sale of assets, the Administrator shall notify the
Optionee that the Option shall be fully exercisable for a period of thirty
(30) days from the date of such notice, and the Option will terminate upon
the expiration of such period.
13. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Administrator makes the determination
granting such Option. Notice of the determination shall be given to each
Employee or Consultant to whom an Option is so granted within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with Rule 16b-3 or with Section 422 of the Code (or any successor
rule or statute or other applicable law, rule or regulation, including the
requirements of any exchange or quotation system on which the Common Stock
is listed or quoted). Such shareholder approval, if required, shall be
obtained in such a manner and to such a degree as is required by the
applicable law, rule or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, state
securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance. As a condition to the
exercise of an Option, the Company may require the person exercising such Option
to render to the Company a written statement containing such representations and
warranties as, in the opinion of counsel for the Company, may be required to
ensure compliance with any of the aforementioned relevant provisions of law,
including a representation that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares,
if, in the opinion of counsel for the Company, such a representation is
required.
16. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
17. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Administrator shall approve.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within 12 months before or after the
date the Plan is adopted.
ACTEL CORPORATION
1993 DIRECTORS' STOCK OPTION PLAN
Amended and Restated as of January 24, 1997
1. Purposes of the Plan. The purposes of this Directors' Stock Option
Plan are to attract and retain the best available personnel for service as
Directors of the Company, to provide additional incentive to the Outside
Directors of the Company to serve as Directors, and to encourage their continued
service on the Board.
All options granted hereunder shall be "nonstatutory stock options".
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Actel Corporation, a California corporation.
(e) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
(f) "Director" shall mean a member of the Board.
(g) "Effective Date" shall have the meaning as set forth in Section 6
below.
(h) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
(i) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(j) "First Option" shall have the meaning as set forth in Section
4(b)(ii) below.
(k) "Option" shall mean a stock option granted pursuant to the Plan.
(l) "Optioned Stock" shall mean the Common Stock subject to an
Option.
(m) "Optionee" shall mean an Outside Director who receives an Option.
(n) "Outside Director" shall mean a Director who is not an Employee.
(o) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(p) "Plan" shall mean this 1993 Directors' Stock Option Plan.
(q) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(r) "Subsequent Option" shall have the meaning as set forth in
Section 4(b)(iii) below.
(s) "Subsidiary" shall mean a "subsidiary corporation", whether now
or hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, become available for
future grant under the Plan. If Shares which were acquired upon exercise of an
Option are subsequently repurchased by the Company, such Shares shall not in any
event be returned to the Plan and shall not become available for future grant
under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants. The Board may grant Options to Outside
Directors hereunder, and on such terms, as are decided in its discretion.
Additionally, Options shall automatically be granted hereunder in
accordance with the following provisions:
(i) After August 1, 1997, each person who first becomes an
Outside Director shall be automatically granted an Option to purchase
20,000 Shares (the "First Option") on the date on which such person
first becomes an Outside Director, whether through election by the
shareholders of the Company or appointment by the Board of Directors
to fill a vacancy.
(ii) Beginning on August 1, 1997, each Outside Director shall be
automatically granted an Option to purchase 5,000 Shares (a
"Subsequent Option") on August 1 of each year if, on such date, he or
she shall have served on the Board for at least six (6) months.
(iii) Notwithstanding the provisions of subsections (i) and (ii)
hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously
purchased upon exercise of Options to exceed the Pool, then each such
automatic grant shall be for that number of Shares determined by
dividing the total number of Shares remaining available for grant by
the number of Outside Directors on the automatic grant date. Any
further grants shall then be deferred until such time, if any, as
additional Shares become available for grant under the Plan through
action of the shareholders to increase the number of Shares which may
be issued under the Plan or through cancellation or expiration of
Options previously granted hereunder.
(iv) Notwithstanding the provisions of subsections (i) and (ii)
hereof, any grant of an Option made before the Company has obtained
shareholder approval of the Plan in accordance with Section 17 hereof
shall be conditioned upon obtaining such shareholder approval of the
Plan in accordance with Section 17 hereof.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the First Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set
forth in Section 9 hereof.
(B) the exercise price per Share shall be 100% of the fair
market value (as defined in Section 8(b) hereunder) per Share on
the date of grant of the First Option.
(C) the First Option shall vest and become exercisable as
to 25% of the Shares subject to the First Option on the first
anniversary of the date of the Company's annual shareholder
meeting occurring in each of the first, second, third, and fourth
calendar year following the calendar year in which the date of
grant occurred, subject to the provisions set forth in Section 9
below.
(vi) The terms of a Subsequent Option granted hereunder shall be
as follows:
(A) the Subsequent Option shall be exercisable only while
the Outside Director remains a Director of the Company, except as
set forth in Section 9 hereof.
(B) the exercise price per Share shall be 100% of the fair
market value per Share on the date of grant of the Subsequent
Option.
(C) the Subsequent Option shall become exercisable as to
one hundred percent (100%) of the Shares subject to the
Subsequent Option on the date of the Company's annual shareholder
meeting occurring in the fourth calendar year following the
calendar year in which the date of grant occurred, subject to the
provisions set forth in Section 9 below.
(c) Powers of the Board. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
grant discretionary stock options to Outside Directors, upon such terms as
are determined by the Board in its discretion, (ii) to determine, upon
review of relevant information and in accordance with Section 8(b) of the
Plan, the fair market value of the Common Stock; (iii) to determine the
exercise price per share of Options to be granted, which exercise price
shall be determined in accordance with Section 8(a) of the Plan; (iv) to
interpret the Plan and to prescribe, amend and rescind rules and
regulations relating to the Plan; (v) to authorize any person to execute on
behalf of the Company any instrument required to effectuate the grant of an
Option previously granted hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his or
her designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the
Outside Director accused of such misconduct). If the Board of Directors
(excluding the Outside Director accused of such misconduct) determines an
Optionee has committed an act of embezzlement, fraud, dishonesty,
nonpayment of an obligation owed to the Company, breach of fiduciary duty
or deliberate disregard of the Company rules resulting in loss, damage or
injury to the Company, or if an Optionee makes an unauthorized disclosure
of any Company trade secret or confidential information, engages in any
conduct constituting unfair competition, induces any Company customer to
breach a contract with the Company or induces any principal for whom the
Company acts as agent to terminate such agency relationship, neither the
Optionee nor his or her estate shall be entitled to exercise any option
whatsoever. In making such determination, the Board of Directors (excluding
the Outside Director accused of such misconduct) shall act fairly and shall
give the Optionee an opportunity to appear and present evidence on
Optionee's behalf at a hearing before the Board or a committee of the
Board.
5. Eligibility. Options may be granted only to Outside Directors. An
Outside Director who has been granted an Option may, if he or she is otherwise
eligible, be granted an additional Option or Options.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his or her directorship at any time.
6. Term of Plan; Effective Date. The Plan shall become effective on the
date on which the Company's registration statement on Form S-1 (or any successor
form thereof) is declared effective by the Securities and Exchange Commission
(the "Effective Date"). It shall continue in effect for a term of ten (10) years
unless sooner terminated under Section 13 of the Plan, subject to the
limitations set forth in this Plan.
7. Term of Option. The term of each Option shall be ten (10) years from
the date of grant thereof.
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value per Share shall be the
mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in The Wall
Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event that the Common Stock is traded on the NASDAQ
National Market System or listed on a stock exchange, the fair market value
per Share shall be the closing price on such system or exchange on the date
of grant of the Option, as reported in The Wall Street Journal, provided,
however, that if such market or exchange is closed on the date of the grant
of the Option then the fair market value per Share shall be based on the
most recent date on which such trading occurred immediately prior to the
date of the grant of the Option; provided, further, that for purposes of
First Options granted on the Effective Date, the fair market value per
share shall be the initial public offering price as set forth in the final
prospectus filed with the Securities and Exchange Commission pursuant to
Rule 424 under the Securities Act of 1933, as amended.
(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised (which, if acquired from the Company, shall
have been held for at least six months), delivery of a properly executed
exercise notice together with instructions to a broker to deliver promptly
to the Company the amount of sale proceeds required to pay the exercise
price, or any combination of such methods of payment and/or any other
consideration or method of payment as shall be permitted under applicable
corporate law.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof or, with respect to a discretionary grant, as decided
by the Board in its discretion; provided, however, that no Options shall be
exercisable until shareholder approval of the Plan in accordance with
Section 17 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment
for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may consist of any consideration and
method of payment allowable under Section 8(c) of the Plan. Until the
issuance (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends
or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. A share
certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
will be made for a dividend or other right for which the record date is
prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes
of the Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) Termination of Status as a Director. If an Outside Director
ceases to serve as a Director, he or she may, but only within three (3)
months (or such other period of time not exceeding six (6) months as is
determined by the Board) after the date he or she ceases to be a Director
of the Company, exercise his or her Option to the extent that he or she was
entitled to exercise it at the date of such termination. Notwithstanding
the foregoing, in no event may the Option be exercised after its term set
forth in Section 7 has expired. To the extent that such Outside Director
was not entitled to exercise an Option at the date of such termination, or
does not exercise such Option (which he or she was entitled to exercise)
within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event a Director is unable to continue his or her
service as a Director with the Company as a result of his or her total and
permanent disability (as defined in Section 22(e)(3) of the Internal
Revenue Code), he or she may, but only within six (6) months (or such other
period of time not exceeding twelve (12) months as is determined by the
Board) from the date of such termination, exercise his or her Option to the
extent he or she was entitled to exercise it at the date of such
termination. Notwithstanding the foregoing, in no event may the Option be
exercised after its term set forth in Section 7 has expired. To the extent
that he or she was not entitled to exercise the Option at the date of
termination, or if he or she does not exercise such Option (which he or she
was entitled to exercise) within the time specified herein, the Option
shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is, at the time of his or
her death, a Director of the Company and who shall have been in
Continuous Status as a Director since the date of grant of the Option,
the Option may be exercised, at any time within six (6) months (or
such lesser period of time as is determined by the Board) following
the date of death, by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance,
but only to the extent of the right to exercise that would have
accrued had the Optionee continued living and remained in Continuous
Status as Director for six (6) months (or such lesser period of time
as is determined by the Board) after the date of death.
Notwithstanding the foregoing, in no event may the Option be exercised
after its term set forth in Section 7 has expired.
(ii) within three (3) months (or such lesser period of time as is
determined by the Board) after the termination of Continuous Status as
a Director, the Option may be exercised, at any time within six (6)
months following the date of death, by the Optionee's estate or by a
person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination. Notwithstanding the foregoing, in
no event may the option be exercised after its term set forth in
Section 7 has expired.
10. Nontransferability of Options. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution. The designation of a beneficiary
by an Optionee does not constitute a transfer. An Option may be exercised during
the lifetime of an Optionee only by the Optionee or a transferee permitted by
this Section.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. The Board may, in the
exercise of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company with or into another
corporation, each outstanding Option shall be assumed or an equivalent option
shall be substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that such successor corporation refuses
to assume such Option or to substitute an equivalent option, such Options shall
become fully vested and exercisable as to all of the Optioned Stock, including
the Shares as to which the Options would not otherwise be vested and
exercisable. If Options become fully vested and exercisable in lieu of
assumption or substitution in the event of a merger or sale of assets, the Board
shall notify the Optionee that the Option shall be fully exercisable for a
period of thirty (30) days from the date of such notice, and the Option will
terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, to the extent necessary and desirable to comply with Rule
16b-3 under the Exchange Act (or any other applicable law or regulation),
the Company shall obtain approval of the shareholders of the Company to
Plan amendments to the extent and in the manner required by such law or
regulation.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan that would impair the rights of any Optionee shall
not affect Options already granted to such Optionee and such Options shall
remain in full force and effect as if this Plan had not been amended or
terminated, unless mutually agreed otherwise between the Optionee and the
Board, which agreement must be in writing and signed by the Optionee and
the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares, if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company at or prior to the first annual meeting of
shareholders held subsequent to the granting of an Option hereunder. If
such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of
the outstanding shares of the Company present or represented and entitled
to vote thereon. If such shareholder approval is obtained by written
consent, it may be obtained by the written consent of the holders of a
majority of the outstanding shares of the Company.
(b) Any required approval of the shareholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange
Act and the rules and regulations promulgated thereunder.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports to shareholders, proxy statements and other
information provided to all shareholders of the Company.
ACTEL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
Amended and Restated as of January 24, 1997
The following constitute the provisions of the 1993 Employee Stock Purchase
Plan of Actel Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock of the Company.
(d) "Company" shall mean Actel Corporation, a California corporation.
(e) "Compensation" shall mean all base straight time gross earnings
including commissions, overtime and shift premiums, and all incentive
compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(g) "Employee" shall mean any individual who is an employee of the
Company or any Designated Subsidiary for tax purposes whose employment with
the Company or any Designated Subsidiary averages at least twenty (20)
hours per week and more than five (5) months in any calendar year. For
purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days
and the individual's right to reemployment is not guaranteed either by
statute or by contract, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(h) "Enrollment Date" shall mean the first day of each Offering
Period.
(i) "Exercise Date" shall mean the last day of each Purchase Period.
(j) "Fair Market Value" shall mean, as of any date, the value of
Common Stock determined as follows:
(1) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market
Value shall be the closing sale price for the Common Stock (or the
mean of the closing bid and asked prices, if no sales were reported),
as quoted on such exchange (or the exchange with the greatest volume
of trading in Common Stock) or system on the date of such
determination, as reported in the Wall Street Journal or such other
source as the Board deems reliable, or;
(2) If the Common Stock is quoted on the NASDAQ system (but not
on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, its
Fair Market Value shall be the mean of the closing bid and asked
prices for the Common Stock on the date of such determination, as
reported in the Wall Street Journal or such other source as the Board
deems reliable, or;
(3) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith
by the Board.
(4) For purposes of the Enrollment Date under the first Offering
Period under the Plan, the Fair Market Value of the Common Stock shall
be the Price to Public as set forth in the final prospectus filed with
the Securities and Exchange Commission pursuant to Rule 424 under the
Securities Act of 1933, as amended.
(k) "Offering Period" shall mean the period of approximately
twenty-four (24) months during which an option granted pursuant to the Plan
may be exercised. The first offering period shall commence with the date on
which the Company's registration statement on Form S-1 (or any successor
form thereof) is declared effective by the Securities and Exchange
Commission. This first offering period shall terminate on the last Trading
Day in the period ending August 1 or February 1 approximately 24 months
later. Subsequent offering periods shall commence on the first Trading Day
on or after August 1 and February 1 of each year and terminate on the last
Trading Day of the periods ending twenty-four months later. The duration
and timing of Offering Periods may be changed pursuant to Section 4 of this
Plan.
(l) "Plan" shall mean this Employee Stock Purchase Plan.
(m) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(n) "Purchase Period" shall mean the approximately six month period
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence
on the Enrollment Date and end with the next Exercise Date. However, the
first Purchase Period of the first Offering Period under the Plan may be
more or less than six months in duration.
(o) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and
the number of shares of Common Stock which have been authorized for
issuance under the Plan but not yet placed under options.
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter
organized or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
and the National Association of Securities Dealers Automated Quotation
(NASDAQ) System are open for trading.
3. Eligibility.
(a) Any Employee (as defined in Section 2(g)), who shall be employed
by the Company on a given Enrollment Date shall be eligible to participate
in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if immediately after
the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 424(d) of the Code) would
own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of the capital stock of the
Company or of any Subsidiary, or (ii) which permits his or her rights to
purchase stock under all employee stock purchase plans of the Company and
its subsidiaries to accrue at a rate which exceeds twenty-five thousand
dollars ($25,000) of Fair Market Value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by consecutive,
overlapping Offering Periods with the first Offering Period commencing with the
date on which the Company's registration statement on Form S-1 (or any successor
form thereof) is declared effective by the Securities and Exchange Commission.
The Board shall have the power to change the duration of Offering Periods
(including the commencement dates thereof) with respect to future offerings
without shareholder approval if such change is announced at least five (5) days
prior to the scheduled beginning of the first Offering Period to be affected.
Absent action by the Board, each Offering Period shall be for a period of
approximately twenty-four months (24) and new Offering Periods shall commence on
the first Trading Day of February and August of each year. The first Offering
Period under the Plan may be more or less than twenty-four (24) months in
duration.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions (in the
form of Exhibit A to this Plan) and filing it with the Company's payroll
office prior to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in
the Offering Period to which such authorization is applicable, unless
sooner terminated by the participant as provided in Section 10 hereof.
6. Payroll Deductions.
(a) At the time a participant files his or her subscription
agreement, he or she shall elect to have payroll deductions made on each
pay day during the Offering Period in an amount not exceeding ten percent
(10%) of the Compensation which he or she receives on each pay day during
the Offering Period, and the aggregate of such payroll deductions during
the Offering Period shall not exceed ten percent (10%) of the participant's
Compensation during said Offering Period.
(b) All payroll deductions made for a participant shall be credited
to his or her account under the Plan and will be withheld in whole
percentages only. A participant may not make any additional payments into
such account.
(c) A participant may discontinue his or her participation in the
Plan as provided in Section 10 hereof, or may increase or decrease the rate
of his or her payroll deductions during the Offering Period by filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate
shall be effective with the first full payroll period following five (5)
business days after the Company's receipt of the new subscription agreement
unless the Company elects to process a given change in participation more
quickly. A participant's subscription agreement shall remain in effect for
successive Offering Periods unless terminated as provided in Section 10
hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to 0% if the following should occur:
For the Purchase Periods that end during a single calendar year, the sum of
all payroll deductions that have been used to purchase stock under the Plan
plus all payroll deductions accumulated for the purchase of stock equals
$21,250. Payroll deductions shall recommence at the rate provided in such
participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the subsequent calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise
upon the exercise of the option or the disposition of the Common Stock. At
any time, the Company may, but will not be obligated to, withhold from the
participant's compensation the amount necessary for the Company to meet
applicable withholding obligations, including any withholding required to
make available to the Company any tax deductions or benefits attributable
to sale or early disposition of Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on the Exercise Date of such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that such purchase
shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.
Exercise of the option shall occur as provided in Section 8 hereof, unless the
participant has withdrawn pursuant to Section 10 hereof, and the option shall
expire on the last day of the Offering Period.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in Section 10 hereof, his or her option for the purchase of shares will
be exercised automatically on the Exercise Date, and the maximum number of full
shares subject to the option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period, subject to earlier withdrawal by the participant as provided in
Section 10 hereof. Any other monies left over in a participant's account after
the Exercise Date shall be returned to the participant. During a participant's
lifetime, a participant's option to purchase shares hereunder is exercisable
only by him or her.
9. Delivery. As promptly as practicable after each Exercise Date on which
a purchase of shares occurs, the Company shall arrange the delivery to each
participant, as appropriate, of a certificate representing the shares purchased
upon exercise of his or her option.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his
or her option under the Plan at any time by giving written notice to the
Company in the form of Exhibit B to this Plan. All of the participant's
payroll deductions credited to his or her account will be paid to such
participant promptly after receipt of notice of withdrawal and such
participant's option for the Offering Period will be automatically
terminated, and no further payroll deductions for the purchase of shares
will be made during the Offering Period. If a participant withdraws from an
Offering Period, payroll deductions will not resume at the beginning of the
succeeding Offering Period unless the participant delivers to the Company a
new subscription agreement.
(b) Upon a participant's ceasing to be an Employee (as defined in
Section 2(g) hereof), for any reason, including by virtue of him or her
having failed to remain an Employee of the Company for at least twenty (20)
hours per week during a Purchase Period in which the Employee is a
participant, he or she will be deemed to have elected to withdraw from the
Plan and the payroll deductions credited to such participant's account
during the Offering Period but not yet used to exercise the option will be
returned to such participant or, in the case of his or her death, to the
person or persons entitled thereto under Section 14 hereof, and such
participant's option will be automatically terminated.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be four hundred
thousand (1,150,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in Section 18 hereof. If on a
given Exercise Date the number of shares with respect to which options are
to be exercised exceeds the number of shares then available under the Plan,
the Company shall make a pro rata allocation of the shares remaining
available for purchase in as uniform a manner as shall be practicable and
as it shall determine to be equitable.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant
and his or her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board
or a committee of members of the Board appointed by the Board. The Board or
its committee shall have full and exclusive discretionary authority to
construe, interpret and apply the terms of the Plan, to determine
eligibility and to adjudicate all disputed claims filed under the Plan.
Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding
upon all parties. Members of the Board who are eligible Employees are
permitted to participate in the Plan, provided that:
(1) Members of the Board who are eligible to participate in the
Plan may not vote on any matter affecting the administration of the
Plan or the grant of any option pursuant to the Plan.
(2) If a Committee is established to administer the Plan, no
member of the Board who is eligible to participate in the Plan may be
a member of the Committee.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
Subsection (a) of this Section 13, in the event that Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
or any successor provision ("Rule 16b-3") provides specific requirements
for the administrators of plans of this type, the Plan shall be only
administered by such a body and in such a manner as shall comply with the
applicable requirements of Rule 16b-3. Unless permitted by Rule 16b-3, no
discretion concerning decisions regarding the Plan shall be afforded to any
committee or person that is not "disinterested" as that term is used in
Rule 16b-3.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to an
Exercise Date on which the option is exercised but prior to delivery to
such participant of such shares and cash. In addition, a participant may
file a written designation of a beneficiary who is to receive any cash from
the participant's account under the Plan in the event of such participant's
death prior to exercise of the option. If a participant is married and the
designated beneficiary is not the spouse, spousal consent shall be required
for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant
and in the absence of a beneficiary validly designated under the Plan who
is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant, or if no such executor or administrator has been
appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised shall be proportionately adjusted for any increase or decrease in
the number of issued shares of Common Stock resulting from a stock split,
reverse stock split, stock dividend, combination or reclassification of the
Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration". Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to
an option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Offering Periods will
terminate immediately prior to the consummation of such proposed action,
unless otherwise provided by the Board.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the
Company with or into another corporation, each option under the Plan shall
be assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless
the Board determines, in the exercise of its sole discretion and in lieu of
such assumption or substitution, to shorten the Offering Periods then in
progress by setting a new Exercise Date (the "New Exercise Date") or to
cancel each outstanding option to purchase and refund all sums collected
from participants during the Offering Period then in progress. If the Board
shortens the Offering Periods then in progress in lieu of assumption or
substitution in the event of a merger or sale of assets, the Board shall
notify each participant in writing, at least ten (10) business days prior
to the New Exercise Date, that the Exercise Date for his option has been
changed to the New Exercise Date and that his option will be exercised
automatically on the New Exercise Date, unless prior to such date he has
withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be
deemed to be assumed if, following the sale of assets or merger, the option
confers the right to purchase, for each share of stock subject to the
option immediately prior to the sale of assets or merger, the consideration
(whether stock, cash or other securities or property) received in the sale
of assets or merger by holders of Common Stock for each share of Common
Stock held on the effective date of the transaction (and if such holders
were offered a choice of consideration, the type of consideration chosen by
the holders of a majority of the outstanding shares of Common Stock);
provided, however, that if such consideration received in the sale of
assets or merger was not solely common stock of the successor corporation
or its parent (as defined in Section 424(e) of the Code), the Board may,
with the consent of the successor corporation and the participant, provide
for the consideration to be received upon exercise of the option to be
solely common stock of the successor corporation or its parent equal in
fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.
The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the
price per share of Common Stock covered by each outstanding option, in the
event the Company effects one or more reorganizations, recapitalizations,
rights offerings or other increases or reductions of shares of its
outstanding Common Stock, and in the event of the Company being
consolidated with or merged into any other corporation.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 18
hereof, no such termination can affect options previously granted, provided
that an Offering Period may be terminated by the Board of Directors on any
Exercise Date if the Board determines that the termination of the Plan is
in the best interests of the Company and its shareholders. Except as
provided in Section 18 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Rule 16b-3 or under
Section 423 of the Code (or any successor rule or provision or any other
applicable law or regulation), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Offering Periods,
limit the frequency and/or number of changes in the amount withheld during
an Offering Period, establish the exchange ratio applicable to amounts
withheld in a currency other than U.S. dollars, permit payroll withholding
in excess of the amount designated by a participant in order to adjust for
delays or mistakes in the Company's processing of properly completed
withholding elections, establish reasonable waiting and adjustment periods
and/or accounting and crediting procedures to ensure that amounts applied
toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant's Compensation, and
establish such other limitations or procedures as the Board (or its
committee) determines in its sole discretion advisable which are consistent
with the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 19 hereof.
23. Additional Restrictions of Rule 16b-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
24. Automatic Transfer to Low Price Offering Period. To the extent
permitted by Rule 16b-3 of the Securities Exchange Act of 1934, as amended, if
the Fair Market Value of the Common Stock on any Exercise Date in an Offering
Period is lower than the Fair Market Value of the Common Stock on the Enrollment
Date of such Offering Period, then all participants in such Offering Period
shall be automatically withdrawn from such Offering Period immediately after the
exercise of their options on such Exercise Date and automatically re-enrolled in
the immediately following Offering Period as of the first day thereof.
EXHIBIT A
ACTEL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
__________ Original Application Enrollment Date: ______________________
__________ Change in Payroll Deduction Rate
__________ Change of Beneficiary(ies)
1. ____________________________________________________ hereby elects to
participate in the Actel Corporation 1993 Employee Stock Purchase Plan (the
"Employee Stock Purchase Plan") and subscribes to purchase shares of the
Company's Common Stock in accordance with this Subscription Agreement and the
Employee Stock Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount
of _________% of my Compensation on each payday (not to exceed 10%) during the
Offering Period in accordance with the Employee Stock Purchase Plan. (Please
note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price determined
in accordance with the Employee Stock Purchase Plan. I understand that if I do
not withdraw from an Offering Period, any accumulated payroll deductions will be
used to automatically exercise my option.
4. I have received a copy of the complete "Actel Corporation 1993
Employee Stock Purchase Plan." I understand that my participation in the
Employee Stock Purchase Plan is in all respects subject to the terms of the
Plan. I understand that the grant of the option by the Company under this
Subscription Agreement is subject to obtaining shareholder approval of the
Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should
be issued in the name(s) of (Employee or Employee and Spouse Only):
_______________________________________________________________________________.
6. I understand that if I dispose of any shares received by me pursuant
to the Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal to
the excess of the fair market value of the shares at the time such shares were
purchased over the price which I paid for the shares. I hereby agree to notify
the Company in writing within 30 days after the date of any disposition of my
shares and I will make adequate provision for Federal, state or other tax
withholding obligations, if any, which arise upon the disposition of the Common
Stock. The Company may, but will not be obligated to, withhold from my
compensation the amount necessary to meet any applicable withholding obligation
including any withholding necessary to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common Stock
by me. If I dispose of such shares at any time after the expiration of the
2-year and 1-year holding periods, I understand that I will be treated for
federal income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to the
extent of an amount equal to the lesser of (1) the excess of the fair market
value of the shares at the time of such disposition over the purchase price
which I paid for the shares, or (2) 15% of the fair market value of the shares
on the first day of the Offering Period. The remainder of the gain, if any,
recognized on such disposition will be taxed as capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary to receive all payments and shares due me under the Employee Stock
Purchase Plan (if you wish to designate more than one beneficiary, execute and
deliver copies of this page):
PLEASE PRINT!
NAME:___________________________________________________________________________
(First) (Middle) (Last)
_______________________________________
Relationship
________________________________________
________________________________________
________________________________________
(Address)
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT
THROUGHOUT SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
Dated:_________________________________ ________________________________________
Signature of Employee
________________________________________
Spouse's Signature
(If beneficiary other than spouse)
EXHIBIT B
ACTEL CORPORATION
1993 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Actel Corporation
1993 Employee Stock Purchase Plan which began on __________________________,
19_____ (the "Enrollment Date") hereby notifies the Company that he or she
hereby withdraws from the Offering Period. He or she hereby directs the Company
to pay to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
________________________________________
________________________________________
________________________________________
________________________________________
(Name and Address of Participant)
________________________________________
(Signature)
________________________________________
(Date)
ACTEL CORPORATION
1995 EMPLOYEE AND CONSULTANT STOCK PLAN
Amended and Restated as of October 18, 1996
1. Purposes of the Plan. The purposes of this Stock Plan are to attract
and retain the best available personnel for employee and consultant positions,
to provide additional incentive to such persons, and to thereby promote the
success of the Company's business.
All options granted hereunder shall be Nonstatutory Stock Options.
Stock bonuses may also be granted hereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of its Committees as shall
be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under state corporate and securities
laws and the Code.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) Committee" means a Committee appointed by the Board in accordance
with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Actel Corporation, a California corporation.
(h) "Consultant" means any person or entity who renders services to
the Company or any Parent or Subsidiary of the Company in exchange for
compensation and in a capacity other than as an Employee.
(i) "Continuous Status as an Employee or Consultant" means that the
consulting relationship is not interrupted or terminated by the Company,
any Parent or Subsidiary. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of: (i) any leave of
absence approved by the Administrator, including sick leave, military
leave, or any other personal leave; or (ii) transfers between locations of
the Company or between the Company, its Parent, its Subsidiaries, or its
successor.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall
be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation ("NASDAQ") System, the Fair Market
Value of a Share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted
on such system or exchange (or the exchange with the greatest volume
of trading in Common Stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or
such other source as the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market System thereof) or is regularly quoted by a
recognized securities dealer but selling prices are not reported, the
Fair Market Value of a Share of Common Stock shall be the mean between
the high bid and low asked prices for the Common Stock on the last
market trading day prior to the day of determination, as reported in
The Wall Street Journal or such other source as the Administrator
deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option within the meaning of Section 422 of
the Code and the regulations promulgated thereunder.
(p) "Notice of Grant" means a written notice evidencing certain terms
and conditions of an individual Option. The Notice of Grant is part of the
Option Agreement.
(q) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "Option" means a stock option or a stock bonus granted pursuant
to the Plan.
(s) "Option Agreement" means a written agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the terms and
conditions of the Plan.
(t) "Option Exchange Program" means a program whereby outstanding
options are surrendered in exchange for options with a lower exercise
price.
(u) "Optioned Stock" means the Common Stock subject to an Option.
(v) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(w) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(x) "Plan" means this 1995 Employee and Consultant Stock Plan.
(y) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(z) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is one million (1,000,000) Shares. The Shares may be authorized,
but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option Exchange Program, or
if reacquired, the unpurchased or reacquired Shares shall become available for
future grant or sale under the Plan (unless the Plan has terminated).
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by (i) the Board or
(ii) a committee designated by the Board, which committee shall be
constituted to satisfy Applicable Laws. Once appointed, such Committee
shall serve in its designated capacity until otherwise directed by the
Board. The Board may increase the size of the Committee and appoint
additional members, remove members (with or without cause) and substitute
new members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a committee, subject to the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(n) of the Plan;
(ii) to select the Employees and Consultants to whom Options may
be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding
any Option or the shares of Common Stock relating thereto, based in
each case on such factors as the Administrator, in its sole
discretion, shall determine;
(vii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option
was granted;
(viii) to construe and interpret the terms of the Plan;
(ix) to prescribe, amend, and rescind rules and regulations
relating to the Plan;
(x) to modify or amend each Option (subject to Section 14(c) of
the Plan);
(xi) to authorize any person to execute on behalf of the Company
any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xii) to institute an Option Exchange Program;
(xiii) to determine the terms and restrictions applicable to
Options; and
(xiv) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations, and interpretations shall be final and binding
on all Optionees and any other holders of Options.
5. Eligibility. Options under the Plan may be granted only to Employees
or Consultants who are not Directors or Officers. An Employee or Consultant who
has been granted an Option may, if he or she is otherwise eligible, be granted
additional Options.
6. Limitations.
(a) Each Option shall be designated in the Notice of Grant as a
Nonstatutory Stock Option.
(b) Neither the Plan nor any Option shall confer upon an Optionee any
right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
7. Term of Plan. The Plan shall become effective upon adoption by the
Board. It shall continue in effect for a term of ten (10) years unless
terminated earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price (which in the event
of a stock bonus shall be zero) for the Shares to be issued pursuant to
exercise of an Option shall be determined by the Administrator.
(b) Waiting Period and Exercise Dates. At the time an Option
is granted, the Administrator shall fix the period within which the
Option may be exercised and shall determine any conditions which must
be satisfied before the Option may be exercised.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the
method of payment. Such consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares that have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised and, in the case of Shares
acquired upon exercise of an option, have been owned by the Optionee
for more than six months on the date of surrender;
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay
the exercise price;
(vi) any combination of the foregoing methods of payment; or
(vii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan
and at such times and under such conditions as determined by the
Administrator and set forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement)
from the person entitled to exercise the Option, and (ii) full payment for
the Shares with respect to which the Option is exercised. Full payment may
consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares
issued upon exercise of an Option shall be issued in the name of the
Optionee or, if requested by the Optionee, in the name of the Optionee and
his or her spouse. Until the stock certificate evidencing such Shares is
issued (as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly after the Option is exercised. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 12 hereof.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is
exercised.
(b) Termination of Consulting Relationship. In the event that an
Optionee's Continuous Status as an Employee or Consultant terminates, the
Optionee may exercise his or her Option, but only within such period of
time as is determined by the Administrator, and only to the extent that the
Optionee was entitled to exercise it at the date of termination (but in no
event later than the expiration of the term of such Option as set forth in
the Notice of Grant). If, at the date of termination, the Optionee is not
entitled to exercise his or her entire Option, the Shares covered by the
unexercisable portion of the Option shall revert to the Plan. If, after
termination, the Optionee (or, after Optionee's death, the Optionee's
estate or a person who acquires the right to exercise the Option by bequest
or inheritance) does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution, and may not be exercised, during
the lifetime of the Optionee, by any person except the Optionee, without the
prior written consent of the Administrator.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger, Asset
Sale. or Change of Control.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option, and the number of shares of Common Stock which
have been authorized for issuance under the Plan but as to which no Options
have yet been granted or which have been returned to the Plan upon
cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be
proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock
split, stock dividend, combination, or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company;
provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose
determination in that respect shall be final, binding, and conclusive.
Except as expressly provided herein, no issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to
an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it will terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate
as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock,
including Shares as to which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. Except as otherwise specified in individual
option agreements, in the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent option
or right shall be substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation does not agree to assume the Option or to substitute an
equivalent option or right, the Option shall become fully vested and
exercisable as to all of the Optioned Stock, including Shares as to which
it would not otherwise be exercisable. If an Option becomes fully vested
and exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Administrator shall notify the Optionee that
the Option shall be fully exercisable for a period of fifteen (15) days
from the date of such notice, and the Option will terminate upon the
expiration of such period.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such option, or such later date as is determined by the Administrator. Notice of
the determination shall be provided to each Optionee within a reasonable time
after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to
comply with any applicable law, rule, or regulation, including the
requirements of any exchange or quotation system on which the Common Stock
is listed or quoted. Such shareholder approval, if required, shall be
obtained in such a manner and to such a degree as is required by the
applicable law, rule, or regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension, or termination of the Plan shall impair the rights of any
Optionee, unless mutually agreed otherwise between the Optionee and the
Administrator, which agreement must be in writing and signed by the
Optionee and the Company.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares shall comply with all relevant provisions of
law, including, without limitation, the Securities Act of 1933, as amended,
the Exchange Act, the rules and regulations promulgated thereunder,
Applicable Laws, and the requirements of any stock exchange or quotation
system upon which the Shares may then be listed or quoted, and shall be
further subject to the approval of counsel for the Company with respect to
such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are
being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the
Company, such a representation is required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to
which such requisite authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
by an Option exceeds, as of the date of grant, the number of Shares which
may be issued under the Plan without additional shareholder approval, such
Option shall be void with respect to such excess Optioned Stock, unless
shareholder approval of an amendment sufficiently increasing the number of
Shares subject to the Plan is timely obtained in accordance with Section
14(b) of the Plan.
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
LICENSE AGREEMENT
This License Agreement (the "Agreement") is entered into as of March 6,
1995 (the "Effective Date") by and between BTR, Inc., a Nevada Corporation (the
"Licensor"), and Actel Corporation, a California corporation (the "Licensee").
Recitals
(a) Licensor has developed a proprietary architecture for FPGAs and
Multichip Modules. (Unless otherwise defined in this Agreement, capitalized
terms herein are as defined in Exhibit A to this Agreement).
(b) Licensee desires: (i) to develop such architecture for use in such
FPGAs and Multichip Modules, and (ii) to license such proprietary technology for
use in FPGAs and Multichip Modules and in other integrated circuits.
(c) Licensor is willing to license such proprietary technology to Licensee
for such development and use, upon the terms and subject to the conditions set
forth in this Agreement.
Agreement
In consideration of the foregoing and the covenants contained in this
Agreement, the parties agree as follows:
1. License.
1.1 Grant of License. Licensor hereby grants to Licensee under all
intellectual property rights of Licensor, now owned or, to the extent it is
not prohibited from licensing such right, hereafter acquired (a) an
exclusive (except as it may subsequently become non-exclusive as provided
in Section 6 below), worldwide, perpetual license to develop, make, have
made, use, offer for sale and sell, design, modify and create derivative
works of Licensed Devices, and (b) a non-exclusive, worldwide, perpetual
license to develop, make, have made, use, offer for sale and sell, design,
modify and create derivative works of Products (such licenses shall be
hereinafter referred to, collectively, as the "License").
1.2 Improvements. If Licensor makes any Improvements to any of the
Technology, Licensor shall promptly thereafter (so long as the License is
in effect) provide to Licensee such information, in reasonable detail, with
respect to such Improvements as is reasonably necessary to permit Licensee
to incorporate such Improvements in Licensed Devices or Products.
1.3 Assignment and Sublicensing. Licensee shall not sell, assign, or
transfer any of its rights or obligations under this Agreement without the
prior written consent of Licensor, except for any such sale, assignment or
transfer that occurs as a result of a Change of Control of Licensee.
Licensee shall have the right to grant one or more sublicenses of its
rights under the License, other than with respect to the development,
making, use, offer for sale or sale of any Emulation/Simulation Device;
provided, however, (a) that the sublicensee under each such sublicense, as
a condition to the effectiveness of such sublicense, shall agree, in the
written agreement memorializing such sublicense, to be bound by the terms
and conditions of Section 4 of Exhibit "A" hereto as it relates to the
Technology, and (b) Licensee shall be obligated to pay royalties to
Licensor with respect to the sale of any Licensed Devices or Products
permitted by any such sublicense equal to the product of (i) the Net
Receipts received by the third party which sells such Licensed Devices or
Products to the user thereof, and (ii) the applicable exclusive royalty
rate under this Agreement. Each such sublicense shall be memorialized in a
written agreement with the sublicensee, a copy of which agreement shall be
delivered to Licensor promptly after it becoming effective, which provides
that (x) such sublicensee has no right to further sublicense or assign or
otherwise transfer such sublicense, and (y) the pricing of all Licensed
Devices and Products subject to such sublicense shall be determined on an
"arms' length basis."
2. Development of Licensed Device.
2.1 Delivery of Technology. Promptly after the Effective Date, and
from time-to-time thereafter, Licensor shall deliver to Licensee such
tangible information concerning the Technology as Licensee may reasonably
require to understand the Technology and implement the Technology in the
design of Licensed Devices. Such tangible information shall include
schematics of the FPGA Architecture and a portion of the layout for a
device employing the FPGA Architecture.
2.2 Development Activities. Licensee shall be responsible for the
development of Licensed Devices, and will engage in good faith efforts to
develop, manufacture and sell Licensed Devices. Such responsibilities shall
include the management and direction of such development program. So long
as the License with respect to Licensed Devices remains exclusive, Licensor
shall use good faith efforts to support such development program.
3. Initial Payments for License.
3.1 Advance Minimum Royalties. As consideration for the grant of the
License, Licensee shall pay to Licensor the following non-refundable
advance minimum royalties from the Effective Date until Tapeout.
[CONFIDENTIAL TREATMENT REQUESTED]
The first of the above-described monthly advance royalty payments
shall be made on the Effective Date, and each subsequent payment shall be
made on the first Business Day of each of the succeeding months.
3.2 Termination of Agreement. At any time, beginning three months
after the Effective Date and prior to Tapeout, Licensee may terminate this
Agreement, and its obligation to make the advance minimum royalty payments
described above, effective 30 days after it gives Licensor written notice
of such termination.
4. Royalties.
4.1 Additional Advance Minimum Royalties. As consideration for the
grant of the License, after Tapeout (and subject to Section 4.3 hereof),
Licensee shall pay Licensor, as non-refundable advance minimum royalties,
the amount, if any, by which (i) the amount due under Section 4.2 below for
each month exceeds (ii) [CONFIDENTIAL TREATMENT REQUESTED] beginning with
the [CONFIDENTIAL TREATMENT REQUESTED] anniversary of Product Introduction,
so long as the License with respect to Licensed Devices is exclusive). The
first of such payments shall be made on the first Business Day of the month
immediately succeeding the last month during which the advance minimum
royalty payments under Section 3.1 are made, and each subsequent payment
shall be made on the first Business Day of each of the succeeding months.
Each of the advance minimum royalty payments under Section 3.1 above or
under this Section 4.1 (collectively, the "Advance Payments") and the
lesser of (a) [CONFIDENTIAL TREATMENT REQUESTED] and (b) the direct
expenditures of Licensee for the development of two Product Families (but
no more than [CONFIDENTIAL TREATMENT REQUESTED] with respect to the first
Product Family and [CONFIDENTIAL TREATMENT REQUESTED] with respect to the
second Product Family) (collectively, with the Advance Payments, the
"Recoupable Payments"), shall be creditable against royalties payable under
Section 4.2 below. Notwithstanding the foregoing, (y) prior to the
[CONFIDENTIAL TREATMENT REQUESTED] anniversary of Product Introduction,
Licensee may only credit Recoupable Payments in an amount not in excess of
[CONFIDENTIAL TREATMENT REQUESTED] of the royalty payments, pursuant to
Section 4.2 below, in excess of [CONFIDENTIAL TREATMENT REQUESTED] in any
quarter, payable with respect to the applicable royalty period, and (z)
subsequent to the [CONFIDENTIAL TREATMENT REQUESTED] anniversary of Product
Introduction, Licensee may only credit [CONFIDENTIAL TREATMENT REQUESTED]
of the royalty payments, pursuant to Section 4.2 below, in excess of
[CONFIDENTIAL TREATMENT REQUESTED] in any quarter, payable with respect to
the applicable royalty period.
4.2 Current Royalties. As partial consideration for the grant of the
License, Licensee shall pay to Licensor a royalty on each sale of a
Licensed Device or Product by Licensee or any of its sublicensees (under
clause (a) of Section 1.3 above) in an amount equal to the following
applicable percentage (based on whether the License applicable thereto is
exclusive or non-exclusive on the date of sale thereof) of the Net Receipts
from the sale of such Licensed Device or Product (the "Royalty"). Each
Royalty (a) so long as the License with respect to Licensed Devices is
exclusive, shall be paid quarterly, within 45 days after the last day of
the quarter during which the sale giving rise to such Royalty occurred, or
(b) upon such license becoming non-exclusive, shall be paid monthly, within
15 days after the last day of each month, based on Licensee's reasonable
estimate of the sales giving rise to a Royalty during such month.
Notwithstanding the foregoing, the monthly royalties payable pursuant to
clause (b) above with respect to a successive three month period may not be
less than the actual average monthly royalties paid (after adjustment, as
described below) with respect to the immediately preceding successive three
month period. Licensee shall calculate the actual royalties payable
pursuant to clause (b) above for each successive three month period during
which such Royalties are payable, and shall pay such Royalties, less the
estimated Royalties paid with respect to such period, to Licensor within 45
days after the end of such period. In the event Licensee overpays Royalties
with respect to any period and gives Licensor written notice of such
overpayment, and a calculation, in reasonable detail, of such overpayment,
Licensee shall have the right to credit such overpayment against subsequent
payments of Royalties. Each payment of Royalties (after any such crediting)
hereunder shall be reduced by the amounts creditable against such
Royalties, as provided in Section 4.1 above.
[CONFIDENTIAL TREATMENT REQUESTED]
4.3 Cancellation of Exclusivity. At any time after the [CONFIDENTIAL
TREATMENT REQUESTED] anniversary of the Effective Date, Licensee may cause
the License with respect to Licensed Devices to become non-exclusive, by
giving Licensor written notice of its cancellation of the exclusive nature
of such license, 15 months after Licensor's receipt of such written notice.
Upon Licensor's receipt of such written notice, the minimum advance monthly
royalty payment described in Sections 4.1 above shall be reduced to
[CONFIDENTIAL TREATMENT REQUESTED]. After such 15 month period has run,
Licensor shall no longer be obligated to pay any such advance royalties and
shall no longer be entitled to credit any Recoupable Payments not then
credited.
4.4 Set-Off. In the event Licensor does not timely pay any amount it
is obligated to pay to Licensee under this Agreement and fails to cure such
failure within 20 days of receiving written notice, in reasonable detail,
of such failure, Licensee shall have the right to set-off against such past
due amount any royalty payment it is obligated to pay to Licensor, up to
the amount of such past due amount. Notwithstanding any implication to the
contrary herein, Licensee's set-off rights shall not permit it to avoid its
obligations to pay advance minimum monthly royalties pursuant to Section
3.1 and 4.1 above.
4.5 Deferral. In the event a Third Party Claim, in the form of the
filing and serving of a complaint instituting a legal proceeding, is
initiated, Licensee shall have the right to defer the payment to Licensor
of Royalties otherwise payable under Section 4.2 above after such
initiation (up to the aggregate damages claimed in such complaint, if a
specific amount of damages is claimed in such complaint) until such legal
proceedings are dismissed, the defendant(s) therein is granted a judgment
in its favor (including, without limitation, summary judgment) on all
claims therein, or such legal proceedings are settled (collectively, a
"Terminating Event"). All such deferred Royalty payments shall be paid into
an escrow account, in the name of Licensor and Licensee, at a bank
reasonably acceptable to Licensor and shall be invested in a succession of
90-day certificate of deposits until payable under this Section 4.5 to
Licensor and/or Licensee. Upon the occurrence of a Terminating Event, all
funds in such account shall be paid to Licensor within 30 days thereafter.
Licensee shall grant Licensor a first priority perfecting security interest
in the funds in such account, pursuant to a security agreement and other
required documentation reasonably acceptable to Licensor. Licensee shall be
entitled to draw upon the funds in such account to the extent necessary to
reimburse it for any amounts to which it is entitled under Section 3.2 of
Exhibit "A" hereto in connection with such legal proceedings if Licensor
fails to pay such amounts within 30 days of receiving a written notice, in
reasonable detail, setting forth the components, by dollar amount and
description, of such amounts. Notwithstanding any implication to the
contrary herein, Licensee's deferral rights shall not permit it to avoid
its obligations to pay advance minimum monthly royalties pursuant to
Section 3.1 and 4.1 above.
4.6 Most Favored Nations Pricing. In the event Licensor enters into a
written agreement to license any of the Technology with respect to any
Product pursuant to a grant substantially the same as the grant in Section
1.1(b) above, but with a royalty rate with respect to such Product which is
lower than the royalty rate for Products hereunder during the period of
exclusivity for Licensed Devices, the royalty rate hereunder for any
Product sold by Licensee which would be covered by the terms and conditions
of such grant (a "Comparable Product") shall be decreased to the royalty
rate for such Product under such written agreement with respect to sales of
such Comparable Product during the period commencing with the first month
with respect to which Licensor is required to pay a royalty on a sale of
such Product and ending with the month immediately succeeding the month in
which the exclusive License with respect to Licensed Devices ceases to be
in effect.
5. Cancellation. After Tapeout, but prior to Product Introduction,
Licensee shall have the right to cancel this Agreement by giving Licensor
written notice, received by Licensor during such period, of such cancellation.
Such cancellation shall be effective three months after Licensor receives such
written notice (the "Cancellation Date"). In the event Licensee cancels this
Agreement in this manner, (a) the License shall terminate, and Licensee (subject
to Section 8 hereof) shall have no right to develop, manufacture or sell any
Licensed Device or any Product or to use the FPGA Architecture after the
Cancellation Date, (b) no further Advance Royalties shall be payable by Licensee
hereunder, (c) Licensee shall have no right to recover any Recoupable Payments,
and (d) Licensor, as a condition to the effectiveness of such cancellation,
shall be granted the licenses described below. Prior to the Cancellation Date,
and as a condition to its effectiveness, Licensee shall provide Licensor with a
written license (to become effective on the Cancellation Date), in a form
reasonably acceptable to Licensor and Licensee, granting Licensor a perpetual,
royalty-free, worldwide, non-exclusive license, for all uses and purposes
(except as noted below), with a right to sublicense, to the Joint Technology,
and Licensee's object code (for internal use only, with no right to sublicense)
with respect to the FPGA Architecture. Notwithstanding any termination of this
Agreement and the License, the rights and licenses of Licensee's sublicensees
shall survive, subject to the continued payment by Licensee of the royalties
specified in Section 1.3 hereof; provided, however, Licensor shall cooperate
with Licensee, at Licensee's request, and Licensee shall cooperate with
Licensor, at Licensor's request, to convert any sublicensee of Licensee to a
direct licensee of Licensor and the terms of Licensee's sublicenses shall
provide for such conversion.
6. Exclusivity of License. The License with respect to Licensed Devices
shall be exclusive so long as each of the following conditions to exclusivity
are met by Licensee. In the event any of such conditions are not met, such
license shall become non-exclusive at the election of the Licensor, notice of
which change has been given to Licensee.
(a) The following minimum annual Net Receipts from sales of Licensed
Devices and Products must be achieved during each of the 12-month periods,
described below, beginning with the first day of the month immediately
subsequent to the month in which the [CONFIDENTIAL TREATMENT REQUESTED] and
each subsequent anniversary of the date of Product Introduction occurs;
provided, however, in the event any of such minimum annual Net Receipts are
not achieved during any such 12-month period, Licensee may retain
exclusivity with respect to Licensed Devices if it pays Licensor percentage
royalties on the short-fall from the amount of such minimum annual Net
Receipts in such period, at the applicable exclusive rate in Section 4.2
above, within 45 days after the end of such period.
[CONFIDENTIAL TREATMENT REQUESTED]
(b) The minimum advance royalty payments paid pursuant to Section 4.1
above (after all applicable crediting of Recoupable Payments) shall be
[CONFIDENTIAL TREATMENT REQUESTED] per month ([CONFIDENTIAL TREATMENT
REQUESTED] per month, beginning with the [CONFIDENTIAL TREATMENT REQUESTED]
year after Product Introduction).
7. Termination for Breach. Either party shall have the right to terminate
this Agreement in its entirety in the event of a material breach by the other
party of any of its obligations hereunder. In the event a party does materially
breach any of its obligations hereunder, the other party may effect such
termination by giving the breaching party written notice of its intent to
terminate this Agreement, which notice shall specify, in reasonable detail, the
nature of such breach. Such termination shall occur 30 days following the
effectiveness of such notice, unless the breaching party cures such breach prior
to the expiration of such 30-day period; provided, however, that (a) if such
breach is not curable, such termination shall occur upon the effectiveness of
such notice, and (b) if such breach is curable, but does not relate to the
payment of any sum of money or to Section 1.3 above, is not capable of being
cured within such 30-day period, and the breaching party commences engaging in
all reasonable efforts to cure it after receiving such notice and continues to
engage in such efforts until it is cured, a termination of the Agreement with
respect to such breach many not occur unless the breaching party fails to cure
such breach within 90 days following the effectiveness of such notice.
Notwithstanding the foregoing, in the event Licensor gives Licensee written
notice, claiming that Licensee has failed to pay royalties hereunder on products
sold by Licensee, and Licensee gives Licensor written notice that it does not
believe that it is obligated to pay such royalties and the reasons, in
reasonable detail, for such belief, within the 30-day period after the
effectiveness of such notice from Licensor, such dispute shall be submitted to
arbitration pursuant to Section 7.18 of Exhibit "A" hereto. This Agreement may
not be terminated during the pendency of such arbitration as a result of the
claimed breach to be resolved in such arbitration.
8. Sell-Off Period. Any Licensed Devices manufactured pursuant to the
License prior to the termination of this Agreement may be sold pursuant to the
terms and conditions of this Agreement within 18 months from the date of such
termination.
9. Sale of Licensor. During the period that the License with respect to
Licensed Devices is exclusive, (a) Licensor shall not solicit a purchase of the
Technology, all or substantially all of its assets or all of its outstanding
voting securities, (collectively, a "Purchase"), and (b) Licensee shall have a
right-of-first-refusal with respect to any Purchase, as described below. In the
event Licensor receives a written offer with respect to a Purchase that it is
willing to accept, it shall give Licensee written notice of the material terms
and conditions of such offer (the "Offer Notice"). Licensee shall have the right
to make such Purchase in the event it (x) gives Licensor written notice that it
is willing to make such Purchase, on such material terms and conditions, within
ten days of receiving the Offer Notice, (y) enters into a definitive agreement
with respect to such Purchase, which includes such material terms and conditions
and such other terms and conditions as are normal with respect to such a
transaction, within 20 days of receiving such agreement from Licensor, and (z)
consummates such transaction pursuant to the terms and conditions of such
agreement. If Licensee fails to timely meet any of such conditions, Licensor
shall have the right to consummate such Purchase on such material terms and
conditions, taken as a whole.
10. Confidentiality of Agreement. The terms and conditions of this
Agreement shall be deemed to constitute Confidential Information, as defined in
Section 4 of Exhibit "A" hereto, of each of the parties, and shall be subject to
all of the terms and conditions of such section; provided, however, Licensee may
disclose any such terms and conditions, as permitted by such section or with the
approval of Licensor, which shall not be unreasonably withheld or delayed.
11. Continuation of Business. So long as the License with respect to
Licensed Devices is exclusive and Licensor does not have the right to terminate
this Agreement pursuant to Section 7 above, Licensor shall not wind up its
affairs, liquidate or dissolve without Licensee's written consent, which shall
not be unreasonably withheld or delayed.
12. Additional Covenant. Licensee shall not unilaterally terminate its
consulting relationship with Ben Ting, Peter Pani or Richard Abraham until the
last to occur of (a) the License with respect to Licensed Devices ceasing to be
exclusive, and (b) an aggregate of 267,772 shares of Licensee's Common Stock
subject to options granted under the consulting agreements between Licensee and
Ben Ting, Peter Pani and Richard Abraham having vested. Licensee shall not
unilaterally terminate its employment relationship with Ben Ting, Peter Pani or
Richard Abraham unless and until the License with respect to Licensed Devices
ceases to be exclusive.
13. Other Terms and Conditions. Exhibit "A" attached hereto, which
contains additional definitions, terms and conditions, is hereby incorporated
in, and made a part of, this Agreement.
Each of the parties has caused this Agreement to be executed and delivered
by its duly authorized representative as of the date first written above.
LICENSOR LICENSEE
BTR, Inc. Actel Corporation
By: /s/ Richard P. Abraham By: /s/ Jeff Schlageter
Its: President Its: Sr. VP Engineering
EXHIBIT "A"
ADDITIONAL TERMS AND CONDITIONS
OF LICENSE AGREEMENT
This Exhibit "A" contains additional definitions, terms and conditions
which are an integral part of the License Agreement, dated as of March 6, 1995,
between BTR Inc. and Actel Corporation (the "Agreement").
1. Definitions. As used in the Agreement, the following terms shall have
the following meanings:
1.1 "Affiliate" shall mean, as to a party to the Agreement, any
corporation or other entity directly or indirectly controlling, controlled
by, or under common control with such party.
1.2 "Business Day" shall mean any day other than a Saturday, Sunday
or any national holiday in the United States of America or in the states of
Nevada or California.
1.3 "Change of Control: means the occurrence of any of the following
events:
(a) Any "person" or "group of persons" (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended) is or becomes the "beneficial owner" (as defined in Rule
13d-3 under said Act), directly or indirectly, of securities of the
Company representing 50% or more of the total voting power represented
by the Company's then-outstanding voting securities; or
(b) A change in the composition of the Company's Board of
Directors occurring within a two-year period as a result of which
fewer than a majority of the directors are Incumbent Directors.
"Incumbent Directors" shall mean directors who either (i) are
directors of the Company as of the date hereof or (ii) are elected, or
nominated for election, to the Board with the affirmative votes of at
least a majority of the Incumbent Directors at the time of such
election or nomination (but shall not include an individual whose
election or nomination is in connection with an actual or threatened
proxy contest relating to the election of directors of the Company);
or
(c) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation that would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) at least 50% of the total
voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the
Company's assets.
1.4 "Contributing Consultants" shall mean Ben Ting, Peter Pani and
Richard Abraham.
1.5 "Emulation/Simulation Device" shall mean a combination of one or
more Multichip Modules using the FPGA Architecture, together with
supporting software, the principal function of which is as a development
and/or diagnostic tool.
1.6 "Field Programmable Gate Array" or "FPGA" shall mean an
integrated circuit comprised, in whole or in part, of an array of logic or
analog elements, interconnects and programmable switches, the principal
function of which is to perform logic or analog functions.
1.7 "FPGA Architecture" shall mean the FPGA architecture covered by
claims in US Patent # 5457410 and augmented by US Patent Application
#08/229,923, all foreign counterparts of such U.S. patent or patent
application (whether or not the foreign counterparts claim priority from
such U.S. patent or patent application), any and all revisions,
continuations, divisions, substitutions, reissues, renewals, continuations
in part, parents, counterparts and extensions thereof, and all patents and
patent applications, whether filed in or granted by the United States or
another country, claiming, in whole or in part, the benefit of the filing
date of such U.S. patent or patent application.
1.8 "Improvements", with respect to technology, know-how or any
product, whether hardware, firmware or software, shall mean any
modifications, alterations or improvements made thereto by, or for the
benefit of, the owner thereof or licensed with a right to sublicense
(subject to any restrictions which are a part of such right).
1.9 "Joint Technology" shall mean any Technology developed through
the joint efforts of Licensee and one or more Contributing Consultants
which is an Improvement to the FPGA Architecture.
1.10 "License" shall mean the License to the Technology granted to
Licensee by Licensor in Section 1.1 of the Agreement.
1.11 "Licensed Device" shall mean any device, including an integrated
circuit, constituting a Field Programmable Gate Array or Multichip Module
designed with, or utilizing, in whole or in part, any of the Technology,
other than Emulation/ Simulation Devices.
1.12 "Multichip Module" shall mean a device containing multiple
integrated circuits, including one or more FPGAs.
1.13 "Net Receipts" shall mean the gross amount recognized as income
on Licensee's books (pursuant to generally accepted accounting principles
consistently applied) in connection with the sale of a Licensed Device or
Product, less deductions for payment of sales, value added or any similar
taxes, and shipping and insurance charges, with respect to such Licensed
Device or Product.
1.14 "Product" shall mean any integrated circuit, or any device
containing several integrated circuits, designed with or utilizing, in
whole or in part, any of the Technology that is not a Licensed Device.
1.15 "Product Introduction" shall mean the date on which Licensee has
sold, in the aggregate, Licensed Devices with respect to which it is
entitled to Net Receipts aggregating in excess of [CONFIDENTIAL TREATMENT
REQUESTED].
1.16 "Product Families" shall mean a series of products that have
different capacities, but are based on a common FPGA architecture and a
common process technology.
1.17 "Tapeout" shall mean the completion of the physical
specifications, including without limitation, fractured data ready for mask
making, of the first integrated circuit using the FPGA Architecture.
1.18 "Technology" shall mean the FPGA Architecture and any and all
know-how and engineering data related to the FPGA Architecture and any
Improvements thereto, and all related patents, copyrights, trade secrets
and other intellectual or industrial property rights; provided, however,
Technology shall not include any Improvement thereto which is developed at
the specific request of, and pursuant to a written agreement with, a third
party that is not an Affiliate of Licensor unless Licensor has a license
with respect to such Improvement with a right to sublicense (subject to any
restrictions which are a part of such right).
2. Reports, Records, Audits and Inspections
2.1 Reports. Licensee shall deliver to Licensor as soon as
practicable, but in any event within 60 days following the last day of each
calendar quarter during the term hereof, a written report showing, in
reasonable detail, sales of Licensed Devices by Licensee in such quarter,
including, without limitation, the Net Receipts attributable thereto and
any credits given by Licensee on previous sales.
2.2 Records. During the term of the Agreement, and for a period of at
least three years thereafter, Licensee shall maintain true and complete
books and records related to all sales of Licensed Devices; provided,
however, notwithstanding the foregoing, Licensee shall not be required to
maintain any of such books and records more than ten years after it is
first prepared.
2.3 Audits and Inspections
(a) During the term of the Agreement and for a period of one year
thereafter, Licensor shall have the right, at its expense and upon
reasonable notice to Licensee, to have examined by an independent
auditor with a national reputation, reasonably acceptable to Licensee,
Licensee's books and records in order to determine or verify the Net
Receipts and sales of the Licensed Devices. Licensor shall not make
any such examination more than twice in any calendar year.
(b) If an error in the reported Net Receipts or the reported
number of Licensed Devices sold by Licensee is discovered as a result
of such an examination and the reported Net Receipts or the reported
number of Licensed Devices sold by Licensee during the period(s)
examined were in excess of 5% less than the actual Net Receipts or
number of Licensed Devices sold by Licensee, as the case may be,
during such period(s), Licensee (i) shall pay all of Licensor's
out-of-pocket expenses related to such examination, and (ii) shall pay
Licensor interest on the amount of such underpayment, at the rate of
12% per annum, from the date such amount was due and payable until
such amount is actually paid.
3. Protection of Proprietary Information and Rights
3.1 Third Party Infringement and Misappropriation. Licensee shall
give Licensor prompt notice of any activities or threatened activities of
any third party of which it becomes aware that infringe any patent,
copyright or other intellectual or industrial property right subsisting in
or related to any of the Technology or that constitute a misappropriation
of trade secrets or act of unfair competition which may dilute, damage or
destroy rights subsisting in or related to any of the Technology
(collectively, the "Infringing Activities"). Licensor shall give Licensee
prompt notice of any Infringing Activities of which it becomes aware so
long as the license granted to Licensee pursuant to the Agreement is
exclusive. Licensor shall have the right, in its sole discretion, to take
whatever action, whether in the nature of legal proceedings or otherwise,
it deems necessary to remedy or prevent Infringing Activities. Licensee
shall not be permitted to take any action to remedy or prevent any
Infringing Activities without Licensor's prior written consent, which, so
long as the License with respect to Licensed Devices is exclusive, shall
not be unreasonably withheld or delayed. In the event Licensee takes any
such action, it shall be obligated to pay all expenses it incurs in doing
so and shall be entitled to retain all damages and reimbursement of fees
and expenses it receives as a result of doing so.
3.2 Third Party Claims
(a) Each party shall promptly notify the other party in writing
of any legal proceeding instituted or claim or demand asserted by any
third party, of which such party becomes aware, with respect to the
infringement of any patent, copyright or other intellectual or
industrial property right, or misappropriation of any trade secret or
act of unfair competition, which is alleged to result from Licensee's
use of any of the Technology as licensed under the Agreement (a "Third
Party Claim").
(b) In the event of a Third Party Claim, Licensor may elect at
its own cost and expense to be represented by counsel, which is
reasonably acceptable to Licensee, and to participate in, or, at its
option, take exclusive control of, the defense, negotiation or
settlement of such Third Party Claim, including, if it so elects, by
bringing counterclaims, in its own name or in Licensee's name (if such
counterclaim may only be brought in Licensee's name and Licensor
obtains Licensee's approval to bring such counterclaim, which approval
shall not be unreasonably withheld or delayed), as to the validity of
any alleged patents, copyrights, trade secrets or other intellectual
or industrial property rights involved in such Third Party Claim;
provided, however, that Licensor shall not have the right to agree to
settle such Third Party Claim without Licensee's consent, which shall
not be unreasonably withheld or delayed, unless (i) the terms and
conditions of such settlement require only the payment of money, and
do not require Licensee to admit any wrongdoing or take or refrain
from taking any action, (ii) the full amount of the settlement is paid
by Licensor, and (iii) such settlement does not materially and
adversely affect Licensee's rights under the Agreement. In the event
that Licensor elects to take such control, Licensee may participate in
such defense, negotiation or settlement with counsel of its own choice
and at its own expense.
(c) If Licensor elects not to control the defense, negotiation or
settlement of any such Third Party Claim, or fails to pursue such
defense, negotiation or settlement, Licensee may defend, negotiate or
settle such Third Party Claim provided, however, that Licensee shall
not have the right to agree to settle such Third Party Claim upon the
License ceasing to be exclusive in any respect without Licensor's
consent, which shall not be unreasonably withheld or delayed, unless
(i) the terms and conditions of such settlement require only the
payment of money, and do not require Licensor to admit any wrongdoing
or take or refrain from taking any action, (ii) the full amount of the
settlement is paid by Licensee, and (iii) such settlement does not
materially and adversely affect Licensor's rights to any of the
Technology. Licensee may be represented by counsel in any such
defense, negotiation or settlement which is reasonably acceptable to
Licensor.
(d) Notwithstanding any implication to the contrary herein,
Licensee shall make such modifications to the design of a Licensed
Device as may be reasonably requested by Licensor in order to reduce
the exposure to Licensor or Licensee of any Third Party Claim with
respect to such Licensed Device if such modifications may not
reasonably be expected to materially and adversely affect the costs of
producing such Licensed Device or the reasonably projected sales
volume of such Licensed Device.
(e) Licensor shall pay any reasonable out-of-pocket costs or
expenses Licensee incurs with respect to any Third Party Claim if
Licensee controls the defense, negotiation or settlement of such Third
Party Claim, any damages awarded against Licensee as a result of any
Third Party Claim, and the amount of any settlement of any Third Party
Claim (other than a settlement by Licensee which Licensee is required
to pay pursuant to subsection (c)). Licensor's obligations in this
subsection (e) with respect to any Third Party Claim are conditioned
on the following: (i) Licensor being notified in writing of such Third
Party Claim (provided, however, that any failure to provide such
notice on a prompt basis shall not affect any of Licensor's
obligations hereunder unless such failure materially and adversely
affects its ability to defend such Third Party Claim) promptly after
Licensee becomes aware of such Third Party Claim; and (ii) should any
Licensed Device become, or, in Licensor's opinion, is likely to
become, the subject of a Third Party Claim, Licensee shall permit
Licensor, at Licensor's option and expense, to do one of the
following: (A) procure for Licensee the right to continuing using the
Technology and to make, use, offer to sell and sell the Licensed
Device subject to the Third Party Claim; or (B) modify the Technology
so that its use is non-infringing but the Technology continues to have
the same material benefits with respect to the development process for
such Licensed Device as it possessed prior to such modification.
Licensor shall have no obligation under this subsection (e) with
respect to any Third Party Claim, to the extent such Claim involves
modifications of the Technology by Licensee.
4. Confidential Information
4.1 Protection of Confidential Information. Licensor and Licensee
each acknowledge that, during the term of the Agreement, it will have
access to proprietary or confidential information, including, without
limitation, documents or other items which have been marked or otherwise
identified as confidential or proprietary in nature, of the other party,
including, without limitation, information related to the Technology, the
Licensed Devices and the business or business practices of the other party
related to the Technology or the Licensed Devices. Each party shall use its
best efforts to protect such proprietary or confidential information of the
other party in the same manner in which it would protect its own
proprietary or confidential information, and shall not use proprietary or
confidential information of the other party for its own benefit or the
benefit of any other person or entity, except as may be specifically
permitted hereunder.
4.2 Exceptions to Confidential Treatment. The obligations of
confidentiality and non-use shall not apply to any confidential or
proprietary information of one party which:
(a) was known by the other party prior to the date of the
Agreement and not obtained or derived, directly or indirectly, from
such party or any of its Affiliates;
(b) is or becomes public or available to the general public or
generally to the computer or semiconductor manufacturing industry, or
generally to any other industry in which the Licensed Devices are used
or sold, otherwise than through (i) any act or default of a party that
has an obligation of confidentiality and non-use with respect to such
information, or (ii) the disclosure of such confidential or
proprietary information by such party, subject to an obligation of
confidentiality and non-use;
(c) is obtained or derived prior or subsequent to the date of the
Agreement from a third party which is lawfully in possession of such
information and does not hold such information subject to any
confidentiality or non-use obligations; or
(d) is required to be disclosed by the other party pursuant to
applicable law, or under a government or court order; provided,
however, that (i) the obligations of confidentiality and non-use shall
continue to the fullest extent not in conflict with such law or order,
and (ii) if and when the other party is required to disclose such
confidential or proprietary information pursuant to any such law or
order, such party shall use its best efforts to obtain a protective
order or take such other actions as will prevent or limit, to the
fullest extent possible, public access to, or disclosure of, such
information.
5. Indemnification
5.1 Protection of Parties. Subject to the limitations in this Section
5, each party agrees to indemnify and hold the other party harmless from
any and all damages, liabilities, losses, and costs or expenses suffered or
incurred by the other party arising out of, or resulting from, any breach
of its representations, warranties or covenants in the Agreement.
5.2 Procedure For Indemnification
(a) In the event that any legal proceedings are instituted, or
any claim or demand is asserted, by any third party which may give
rise to any damage, liability, loss, or cost or expense in respect of
which either party has indemnified the other party under Section 5.1
above, the indemnified party shall give the indemnifying party written
notice of the institution of such proceeding, or the assertion of such
claim or demand, promptly after the indemnified party first becomes
aware thereof; provided, however, that any failure by the indemnified
party to give such notice on such prompt basis shall not affect any of
its rights to indemnification hereunder unless such failure materially
and adversely affects the ability of the indemnifying party to defend
such proceeding.
(b) The indemnifying party shall have the right, at its option
and at its own expense, to be represented by counsel of its choice,
subject to the approval of the indemnified party, which approval shall
not be unreasonably withheld or delayed, and to defend against,
negotiate with respect to, settle or otherwise deal with such
proceeding, claim or demand; provided, however, that no settlement of
such proceeding, claim or demand shall be made without the prior
written consent of the indemnified party, which consent shall not be
unreasonably withheld or delayed, unless, pursuant to the terms and
conditions of such settlement, the indemnified party shall be released
from any liability or other exposure with respect to such proceeding,
claim or demand; and provided, further, that the indemnified party may
participate in any such proceeding with counsel of its choice and at
its own expense. In the event, or to the extent, the indemnifying
party elects not to, or fails to, defend such proceeding, claim or
demand and the indemnified party defends against, settles or otherwise
deals with any such proceeding, claim or demand, any settlement
thereof may be made without the consent of the indemnifying party if
it is given written notice of the material terms and conditions of
such settlement at least ten Business Days prior to a binding
agreement with respect to such settlement being reached. Each of the
parties agrees to cooperate fully with each other in connection with
the defense, negotiation or settlement of any such proceeding, claim
or demand.
6. Representations and Warranties.
(a) Licensor and Licensee each represents and warrants to the other
that:
(i) it is organized, validly existing and in good standing under
the laws of the country or state in which it is incorporated;
(ii) its execution and delivery of the Agreement, and the
performance of its obligations under the Agreement, have been duly
authorized by all necessary corporate action on its part, and it has
full corporate power, right and authority to enter into the Agreement,
to grant the license it has granted thereunder and to perform its
obligations thereunder;
(iii) neither the execution and delivery of the Agreement by it,
nor the performance by it of any of its obligations under the
Agreement, violates any applicable law or regulation of any country,
state or other governmental unit, or its Articles of Certificate of
Incorporation or Bylaws or other charter documents, or constitutes a
violation of, or a breach or default under, any agreement or
instrument, or judgment or order of any court or governmental
authority, to which it is a party or to which it is subject or to
which any of the Technology or the Licensed Devices is subject;
(iv) the Agreement is a valid and binding obligation of it,
enforceable against it in accordance with its terms, except as such
enforceability may be limited by equitable principles or by bankruptcy
or other laws affecting creditors' rights generally; and
(v) no consent, approval, order or authorization of any person,
entity, court or governmental authority is required on its part in
connection with the execution and delivery of the Agreement or the
performance by it of its obligations thereunder.
(b) Licensor represents and warrants to Licensee that it has title
to, or a license with a right to sublicense, the Technology, in the form in
which it is delivered to Licensee, free and clear of any liens, claims or
encumbrances or interests of any third party or any license which is in
conflict with the License. As of the Effective Date, no part of the
Technology has been licensed to Licensor and Licensor has not granted any
license with respect to any part of the Technology.
(c) Licensor shall (i) file such patent applications covering the
FPGA Architecture as may be reasonably requested by Licensee, (ii)
prosecute in good faith each patent application covering the FPGA
Architecture, and (iii) maintain in force all patents covering the FPGA
Architecture; provided, however, upon the License becoming non-exclusive,
Licensee shall be obligated to reimburse Licensor for all of its costs and
expenses (promptly after it receives written notice of any such
expenditure) incurred in preparing, filing, prosecuting and maintaining any
patent application which Licensee thereafter requests Licensor to file.
7. Miscellaneous
7.1 Acknowledgments. Licensee acknowledges that it has no ownership
rights, and will not, pursuant to the Agreement, acquire any ownership
rights, in the Technology. Each party acknowledges that a breach of any of
its obligations under the Agreement would cause the other party irreparable
harm and, in the event such party breaches or threatens to breach its
obligations under the Agreement, the other party shall be entitled to
injunctive and other appropriate equitable relief.
7.2 Warranties. LICENSOR HAS GRANTED THE LICENSE ON AN "AS-IS" BASIS.
EXCEPT AS SET FORTH IN SECTIONS 6 AND 7.1 ABOVE, LICENSOR MAKES NO WARRANTY
WITH RESPECT TO ANY OF THE TECHNOLOGY. LICENSOR MAKES NO IMPLIED WARRANTIES
WITH RESPECT TO THE TECHNOLOGY, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED
WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
7.3 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE FOR ANY
SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED BY THE OTHER PARTY,
ANY OF ITS AFFILIATES, ANY OF ITS SUBLICENSEES OR ANY THIRD PARTY ARISING
OUT OF, OR IN CONNECTION WITH, THE LICENSE OR USE OF THE TECHNOLOGY OR SALE
OR USE OF ANY LICENSED DEVICE. IN ADDITION TO THE FOREGOING, NEITHER
LICENSOR NOR LICENSEE SHALL BE LIABLE TO THE OTHER FOR ANY SPECIAL,
INCIDENTAL OR CONSEQUENTIAL DAMAGES SUFFERED BY THE OTHER PARTY, ANY
AFFILIATE OR SUBLICENSE OF THE OTHER OR ANY THIRD PARTY ARISING OUT OF, OR
IN CONNECTION WITH, THIS AGREEMENT, THE PERFORMANCE BY EITHER PARTY OF ANY
OF ITS OBLIGATIONS HEREUNDER, ANY REPRESENTATION OR WARRANTY OF EITHER
PARTY HEREUNDER OR OTHERWISE, EXCEPT ANY SUCH DAMAGES WHICH ARISE OUT OF,
OR RESULT FROM, ANY INTENTIONAL AND KNOWING BREACH OF THIS AGREEMENT. THE
FOREGOING LIMITATIONS APPLY TO ALL CLAIMS, INCLUDING, WITHOUT LIMITATION,
BREACH OF CONTRACT, BREACH OF WARRANTY, NEGLIGENCE, STRICT LIABILITY,
MISREPRESENTATION OR OTHER TORTS.
7.4 Compliance With Applicable Law. Licensee shall comply with all
applicable laws and regulations of any country, state or government unit
relating to the use of any of the Technology or the manufacture or sale of
Licensed Devices, including, but not limited to, the Export Administration
Act and Export Administration Regulations of the United States of America.
Licensee shall obtain and maintain in effect all licenses, permits and
authorizations required for the performance of its obligations hereunder.
7.5 Relationship of Licensor and Licensee. Nothing in the Agreement
shall create a joint venture, partnership or principal-agent relationship
between Licensor and Licensee.
7.6 Notices. Whenever any matter in the Agreement provides for notice
or other written communication to be given to Licensor or Licensee, such
notice shall be given at the address of such party set forth below, or such
other address as such party shall provide, in writing, to the other party.
All notices may be given by being personally delivered, by being sent by
prepaid air freight, delivery of which, within one Business Day of receipt
by the air freight company, is guaranteed, or by being sent by facsimile,
the receipt of which is acknowledged, addressed to the party hereto to whom
notice is to be given at the above-described address. Each such notice
shall be deemed to be effective upon receipt, if personally delivered, one
Business Day after receipt by the airfreight company, if sent by
airfreight, and one Business Day after being sent by facsimile.
If to Licensor: If to Licensee:
BTR, Inc. Actel Corporation
c/o Corporate Trust Company of Nevada 955 East Arques Avenue
One East First Street Sunnyvale, California 94086
Reno, Nevada 89501 Attn.: Jeff Schlageter
Attn.: Richard Abraham Fax: (408) 522-8041
Fax: (415) 948-7652
7.7 Attorneys' Fees.Should any litigation or arbitration be commenced
between the parties hereto concerning the Agreement, or the rights and
duties of the parties in relation to the Agreement, the party prevailing in
such litigation or arbitration shall be entitled, in addition to such other
relief as may be granted, to a reasonable sum for attorneys' fees in
connection with such litigation or arbitration, which sum shall be
determined by the trier of fact in such litigation or arbitration or in a
separate action brought for that purpose.
7.8 Assignment. The Agreement shall be binding upon, and inure to the
benefit of, the respective legal representatives, successors and permitted
assigns of the parties hereto. Notwithstanding the foregoing, except as
otherwise provided herein, neither party may assign the Agreement, or any
of its rights or obligations under the Agreement, without the prior written
consent of the other party, which consent shall not be unreasonably
withheld or delayed. So long as any portion of the License is exclusive,
Licensor shall not assign (directly or indirectly, by operation of law or
otherwise) or sell any of the Technology without the prior written consent
of Licensee, which consent shall not be unreasonably withheld or delayed.
Any such sale or assignment not permitted hereunder shall be deemed to be
null and void and of no effect.
7.9 Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive, but shall, wherever possible, be cumulative with all
other remedies at law or in equity.
7.10 Severability. Should any portion or provision of the Agreement be
declared invalid or unenforceable in any jurisdiction by a court of
competent jurisdiction, then such portion or provision shall be deemed to
be severable, to the extent invalid or unenforceable, from the Agreement as
to such jurisdiction (but, to the extent permitted by law, not elsewhere)
and shall not affect the remainder thereof. Notwithstanding the foregoing,
(a) such provision of the Agreement shall be interpreted by the parties and
by any such court, to the extent possible, in such a manner that such
provision shall be deemed to be valid and enforceable, and (b) such court
shall have the right to make such modifications to any provision of this
Agreement as do not materially affect the rights or obligations of the
parties under the Agreement and as may be necessary in order for such
provision to be valid and enforceable.
7.11 Waiver. No waiver of any right or obligation of Licensor or
Licensee under the Agreement shall be effective unless in a writing,
specifying such waiver, executed by the party against which such waiver is
being enforced. A waiver by either party hereto of any of its rights under
the Agreement on any occasion shall not be a bar to the exercise of the
same right on any subsequent occasion or of any other right at any time.
7.12 Other Terms. The terms and provisions set forth in the Agreement
shall control over any terms and provisions set forth in any purchase order
or other document or instrument submitted to Licensor by Licensee, and no
such purchase order or other document or instrument or course of conduct or
trade practice may be used to modify, vary or supplement any terms set
forth herein unless Licensor expressly agrees in writing to such
modification, variation or supplement.
7.13 Headings and Titles. The designation of a title, or a caption or
a heading, for each section of the Agreement is for the purpose of
convenience only and shall not be used to limit, interpret or modify the
provisions of the Agreement.
7.14 Presumptions. Because each of the parties hereto have
participated in drafting the Agreement, there shall be no presumption
against any party on the ground that such party was responsible for
preparing the Agreement or any part thereof.
7.15 Amendment or Modification. The Agreement may be amended, altered,
or modified only by a writing, specifying such amendment, alteration or
modification, executed by Licensor and Licensee.
7.16 Counterparts. The Agreement may be executed in two counterparts,
each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
7.17 Governing Law; Jurisdiction. This Agreement, and the rights and
obligations of the parties hereunder, shall be governed by and construed in
accordance with the laws of the State of California. Any action with
respect to the Agreement filed by one party against the other may only be
brought in the Federal District Court for the Northern District of
California or the Superior Court of the State of California located in
Santa Clara County.
7.18 Arbitration. Any controversy or claim arising out of or relating
to this Agreement or its breach shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association then in effect. In any arbitration hereunder,
Licensor and Licensee may agree on the selection of a single arbitrator,
but if they cannot so agree, each such party shall select an arbitrator and
the two selected arbitrators shall select a third arbitrator. No arbitrator
may be affiliated, whether directly or indirectly, with any of the parties,
including, without limitation, as an employee, consultant, partner or
shareholder. The arbitrator(s) shall permit each of the parties to the
arbitration to engage in a reasonable amount of discovery. In the event
either party requests such an arbitration, the arbitration shall be held in
Santa Clara County, California. The award by the arbitrator or arbitrators
shall be final, and judgment upon the award rendered may be entered in any
court having jurisdiction thereof. Notwithstanding the foregoing, neither
party shall be prevented from seeking injunctive relief, including, without
limitation, a temporary restraining order, as contemplated by Section 7.1,
from the courts specified in Section 7.17.
7.19 Survival. Sections 4.2, 4.4, 4.5, 5, 8, 10 and 12 of the
Agreement and each section of this Exhibit "A" shall survive the
termination or cancellation of the Agreement.
7.20 Complete Agreement. The Agreement constitutes the complete
understanding of the parties hereto regarding the subject matter thereof
and supersedes all prior or contemporaneous agreements of the parties,
whether written or oral, with respect to such subject matter.
EXHIBIT 11
ACTEL CORPORATION
--------------------------------------
Statement Re Computation of Per Share Earnings
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Primary:
Average common shares outstanding........................................ 17,826 17,367 16,995
Net effect of dilutive stock options, warrants, and convertible
preferred stock - based on the treasury stock method
using average market price............................................ 3,659 -- 584
------------ ------------ ------------
Shares used in computing net income (loss) per share..................... 21,485 17,367 17,579
============ ============ ============
Net income (loss)........................................................ $ 14,938 $ (1,132) $ 7,867
============ ============ ============
Net income (loss) per share.............................................. $ 0.70 $ (0.07) $ 0.45
============ ============ ============
Fully diluted:
Average common shares outstanding........................................ 17,826 17,367 16,995
Net effect of dilutive stock options, warrants, and convertible
preferred stock - based on the treasury stock method.................. 4,057 -- 584
------------ ------------ ------------
Shares used in computing net income (loss) per share..................... 21,883 17,367 17,579
============ ============ ============
Net income (loss)........................................................ $ 14,938 $ (1,132) $ 7,867
============ ============ ============
Net income (loss) per share.............................................. $ 0.68 $ (0.07) $ 0.45
============ ============ ============
</TABLE>
ACTEL CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net revenues................................. $ 148,779 $ 108,516 $ 76,007 $ 59,598 $ 44,049
Costs and expenses:
Cost of revenues.......................... 64,420 52,517 33,349 26,389 19,269
Research and development.................. 23,934 20,560 14,406 10,953 8,868
Selling, general, and administrative...... 38,395 27,364 19,699 16,708 13,567
Patent litigation settlement (1).......... -- -- -- -- 2,000
In-process research and development (2)...
-- 16,600 -- -- --
------------ ------------ ------------ ------------ ------------
Total costs and expenses............ 126,749 117,041 67,454 54,050 43,704
------------ ------------ ------------ ------------ ------------
Income (loss) from operations................ 22,030 (8,525) 8,553 5,548 345
Interest expense............................. (13) (93) (232) (559) (718)
Interest income and other, net............... 1,068 846 935 569 221
------------ ------------ ------------ ------------ ------------
Income (loss) before taxes................... 23,085 (7,772) 9,256 5,558 (152)
Tax provision (benefit)...................... 8,147 (6,640) 1,389 555 148
------------ ------------ ------------ ------------ ------------
Net income (loss)............................ $ 14,938 $ (1,132) $ 7,867 $ 5,003 $ (300)
============ ============ ============ ============ ============
Net income (loss) per share.................. $ 0.70 $ (0.07) $ 0.45 $ 0.32 $ (0.11)
============ ============ ============ ============ ============
Shares used in computing net income (loss)
per share................................. 21,485 17,367 17,579 15,811 2,740
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Working capital............................. $ 55,397 $ 39,867 $ 35,971 $ 32,330 $ 11,912
Total assets................................ 136,712 107,119 67,855 61,130 29,357
Long-term obligations (3)................... -- -- 72 926 4,142
Redeemable convertible preferred stock...... 18,147 18,147 -- -- 33,359
Total shareholders' equity (deficit)........ 69,357 50,920 49,311 40,223 (20,166)
- -----------------------------------------------------------
<FN>
(1) Represents a charge incurred in the fourth quarter of 1992 in
connection with the settlement of patent litigation.
(2) Represents a charge incurred in the first quarter of 1995 in
connection with the Company's acquisition of the field programmable
gate array business of Texas Instruments Incorporated.
(3) Includes the long-term portion of notes payable, capital lease
obligations, and settlement payable.
</FN>
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Actel Corporation is the world's leading supplier of antifuse-based field
programmable gate arrays ("FPGAs") and associated software development tools.
FPGAs are used by designers of communication, computer, industrial control,
military/aerospace, and other electronic systems to differentiate their products
and get them to market faster.
Results of Operations
The following table sets forth certain financial data from the Consolidated
Statements of Operations expressed as a percentage of net revenues:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues............................................................. 100.0% 100.0% 100.0%
Cost of revenues......................................................... 43.3 48.4 43.9
------------ ------------ ------------
Gross margin............................................................. 56.7 51.6 56.1
Research and development................................................. 16.1 19.0 19.0
Selling, general, and administrative..................................... 25.8 25.2 25.9
In-process research and development...................................... -- 15.3 --
------------ ------------ ------------
Income (loss) from operations............................................ 14.8 (7.9) 11.2
Interest and other income, net........................................... 0.7 0.7 1.0
------------ ------------ ------------
Income (loss) before taxes............................................... 15.5 (7.2) 12.2
Tax provision (benefit).................................................. 5.5 (6.2) 1.8
------------ ------------ ------------
Net income (loss)........................................................ 10.0% (1.0)% 10.4%
============ ============ ============
</TABLE>
Acquisition of TI Antifuse FPGA Business
On March 31, 1995, the Company completed its acquisition of the antifuse
FPGA business of Texas Instruments Incorporated ("TI"), the only second-source
supplier of the Company's products, in a transaction accounted for using the
purchase method. As consideration for the business acquired, the Company paid
$10.0 million in cash and issued 1,000,000 shares of Series A Preferred Stock.
The Preferred Stock was valued for purposes of the transaction at $18.9 million
and is convertible into 2,631,578 shares of Common Stock. The Company expensed
the in-process research and development acquired in the transaction, taking a
pretax charge of $16.6 million against income in the first quarter of 1995. See
Note 13 of Notes to Consolidated Financial Statements. The Company allocated
$4.4 million of the purchase price to intangible assets (i.e., the customer base
and goodwill acquired), which are being amortized over five years. Amortization
expense for the year ended December 31, 1996, was $0.9 million.
As a result of the acquisition, the revenues of the business acquired from
TI are included (beginning with the second quarter of 1995) in the net revenues
of the Company. The Company assumed and subsequently fulfilled TI's backlog,
which consisted primarily of lower-margin ACT 1 and ACT 2 products with average
selling prices generally lower than those charged by the Company for comparable
products. These product mix and average selling price influences negatively
affected the Company's gross margin for 1995 and the absence of these influences
positively affected the Company's gross margin for 1996. In addition, the
Company ceased receiving royalties (which had no associated costs) from TI on
sales of FPGAs following the acquisition. See Notes 3 and 13 of Notes to
Consolidated Financial Statements.
Net Revenues
Net revenues for fiscal 1996 were $148.8 million, increasing 37% over net
revenues for fiscal 1995. This compares with an increase in net revenues of 43%
for fiscal 1995 over fiscal 1994. The Company's acquisition of TI's antifuse
FPGA business had a negative influence on net revenues for the first quarter of
1995 and a positive effect on net revenues for subsequent quarters. Accordingly,
the year-over-year growth rates in net revenues for both 1996 and 1995 are not
indicative of future results.
The Company derives its revenues primarily from the sale of FPGAs, which
accounted for 97% of net revenues for 1996, compared with 95% for 1995 and 91%
for 1994. The Company also derives revenues from the sale of development systems
and receipt of royalties.
Net revenues from the sale of FPGAs for 1996 increased 41% over net
revenues from the sale of FPGAs for 1995. This compares with an increase of 50%
in net revenues from the sale of FPGAs for 1995 over 1994. The growth in net
revenues from the sale of FPGAs for 1996 over 1995 was due primarily to a 39%
increase in unit sales coupled with a 7% increase in the overall average selling
price of FPGAs. The increase in the overall average selling price of FPGAs for
1996 was due principally to proportionately greater unit sales of the Company's
newer ACT 3, XL, DX, and RH product families, which generally command higher
average selling prices than the Company's older ACT 1 and ACT 2 product
families. The growth in net revenues from the sale of FPGAs for 1995 over 1994
was due primarily to a 67% increase in unit sales, which was offset in part by a
decline of 10% in the overall average selling price of FPGAs. The decline in the
overall average selling price of FPGAs for 1995 was due principally to TI's
aggressive second-source pricing in the first quarter of 1995 and the subsequent
fulfillment by the Company of TI's backlog of products with lower average
selling prices.
As is typical in the semiconductor industry, the average selling prices of
the Company's products generally decline over the lives of such products. To
increase revenues, the Company seeks to increase unit sales of existing
products, principally by reducing prices, and to introduce and sell new
products. No assurance can be given that these efforts will be successful.
Over the last three fiscal years, sales to distributors have increased as a
percentage of the Company's net revenues. The Company's principal distributors
for 1996 were Wyle Electronics Marketing Group and Pioneer-Standard Electronics,
Inc. in North America and Arrow Electronics, Inc. and Zeus Electronics
(collectively, "Arrow") worldwide. The following table sets forth, for each of
the last three years, the percentage of revenues derived from all customers
accounting for 10% or more of net revenues in any of such years:
1996 1995 1994
------------ ------------ ------------
Wyle................................. 14% 14% 15%
Arrow................................ 14 12 3
Pioneer.............................. 11 11 15
Arrow was added as a distributor in June 1994. The Company generally does
not recognize revenue on a sale to a distributor until the distributor resells
the product to its customer.
Sales to customers outside the United States for 1996, 1995, and 1994
accounted for 33%, 38%, and 32% of net revenues, respectively. Of these export
sales, the largest portion was derived from European customers.
Gross Margin
Gross margin for 1996 was 57% of net revenues, compared with 52% of net
revenues for 1995 and 56% of net revenues for 1994. The improvement in gross
margin for 1996 over 1995 resulted primarily from the Company's acquisition of
TI's FPGA business, which has positively influenced the Company's net revenues
and overall average selling price. The Company's gross margin for 1996 also
benefited from improved manufacturing yields; the generation of an increased
percentage of net revenues from sales of the Company's newer product families,
which command higher margins; and appreciation in the value of the United States
dollar versus the Japanese yen, in which some of the Company's wafer purchases
are denominated.
The decline in gross margin for 1995 compared with 1994 resulted
principally from reduced average selling prices, due principally to TI's
aggressive second-source pricing before the acquisition and the fulfillment by
the Company of TI's backlog after the acquisition; increased costs for a
significant portion of the Company's wafer supplies attributable to depreciation
in the value of the United States dollar versus the Japanese yen; and reduced
royalty revenue following the Company's acquisition of TI's FPGA business.
The Company's gross margin for 1994 was adversely affected by stiff
second-source competition from TI and a sharp drop in royalties, which have no
associated costs.
As is typical in the semiconductor industry, margins on the Company's
products generally decline as the average selling prices of such products
decline. The Company seeks to offset margin erosion by selling a higher
percentage of new products, which tend to have higher margins than more mature
products, and by reducing costs. The Company seeks to reduce costs by improving
wafer yields, negotiating price reductions with suppliers, increasing the level
and efficiency of its testing and packaging operations, achieving economies of
scale by means of higher production levels, and increasing the number of die
produced per wafer by shrinking the die size of its products. No assurance can
be given that these efforts will be successful. The capability of the Company to
shrink the die size of its FPGAs is dependent on the availability of more
advanced manufacturing processes. Due to the custom steps involved in
manufacturing antifuse FPGAs, the Company typically obtains access to new
manufacturing processes later than its competitors using standard manufacturing
processes.
Research and Development
Research and development expenditures for 1996 were $23.9 million, or 16%
of net revenues, compared with $20.6 million, or 19% of net revenues, for 1995
and $14.4 million, or 19% of net revenues, for 1994. While research and
development expenditures for 1996 increased by 16% compared with 1995,
expenditures declined as a percentage of net revenues due to economies of scale
resulting from the expanded scope of the Company's operations. The Company
currently intends to boost the level of its expenditures to accelerate the
introduction of new products. As a result, research and development expenditures
may increase as a percentage of net revenues.
The Company's research and development consists of circuit design, software
development, and process technology activities. The Company believes that
continued substantial investment in research and development is critical to
maintaining a strong technological position in the industry and, therefore,
expects to continue increasing its research and development expenditures. Since
the Company's antifuse FPGAs are manufactured using a customized process, the
Company's research and development expenditures will probably always be higher
as a percentage of net revenues than that of its major competitors.
Selling, General, and Administrative
Selling, general, and administrative expenses for 1996 were $38.4 million,
or 26% of net revenues, compared with $27.4 million, or 25% of net revenues, for
1995 and $19.7 million, or 26% of net revenues, for 1994. The increase in the
rate of selling, general, and administrative spending for 1996 compared with
1995 resulted primarily from an increased level of sales and marketing
activities in support of new products. The Company currently intends to continue
its heightened level of sales and marketing activity in support of new products.
In addition, the Company believes that its legal expenses will increase as a
percentage of net revenues, principally because of the Company's continuing
litigation with QuickLogic Corporation. See Note 12 of Notes to Consolidated
Financial Statements. As a result, selling, general, and administrative
expenditures may continue to increase as a percentage of net revenues.
In-Process Research and Development
The $16.6 million pretax charge for in-process research and development for
1995 resulted from a write-off taken in the first quarter of 1995 in connection
with the Company's acquisition of TI's antifuse FPGA business. The value of the
in-process research and development was established by an independent valuation
specialist.
Tax Provision
The Company's effective tax rate for 1996 was 35%. Significant components
affecting the effective tax rate include benefits of federal research and
development credits, and the recognition of certain deferred tax assets subject
to valuation allowances as of December 31, 1995.
The Company recorded a credit for income taxes for 1995 due to the
realization of deferred tax assets previously subject to valuation allowances.
The Company recorded additional deferred tax assets of approximately $3.0
million related to the 1995 charge for acquired in-process research and
development, the realization of which is dependent upon the generation of future
taxable income.
For 1994, the Company's provision for taxes was less than the U.S.
statutory rate due primarily to the realization of tax net operating losses and
tax credit carryforwards.
Financial Condition, Liquidity, and Capital Resources
The Company's total assets were $136.7 million at the end of 1996, compared
with $107.1 million at the end of 1995. The increase in total assets was
attributable principally to the expanded scope of the Company's operations. The
following table sets forth certain financial data from the Consolidated Balance
Sheets expressed as the percentage change from the end of fiscal 1995 to the end
of fiscal 1996:
<TABLE>
<CAPTION>
Percentage Change
From 1995 to 1996
--------------------------
<S> <C>
Cash, cash equivalents, and short-term investments..................................... 45.9%
Accounts receivable, net............................................................... 65.7
Inventories............................................................................ (3.2)
Property and equipment, net............................................................ 1.9
Total assets........................................................................... 27.6
Total current liabilities.............................................................. 29.3
Shareholders' equity................................................................... 36.2
</TABLE>
Cash, Cash Equivalents, and Short-Term Investments
The Company's cash, cash equivalents, and short-term investments were $29.2
million at the end of 1996, compared with $20.0 million at the end of 1995. The
amount of cash, cash equivalents, and short-term investments increased
principally because of cash provided by operations, including net income of
$14.9 million for 1996.
In 1996, the Company made a final payment of approximately $2.9 million for
an equity interest in Chartered Semiconductor Manufacturing Ltd ("Chartered
Semiconductor"), a semiconductor manufacturer located in Singapore, and
purchased an additional equity interest in Chartered Semiconductor, pursuant to
a contractual right of first refusal, for approximately $0.7 million. See Note 5
of Notes to Consolidated Financial Statements. The Company presently has no
material financial obligations to its current wafer suppliers. However, wafer
manufacturers are increasingly demanding financial support from customers in the
form of equity investments and advance purchase price deposits, which in some
cases are substantial. Should the Company require additional capacity, it may be
required to incur significant expenditures to secure such capacity.
The Company believes that the availability of adequate financial resources
is a substantial competitive factor. To take advantage of opportunities as they
arise, or to withstand adverse business conditions should they occur, it may
become prudent or necessary for the Company to raise additional capital. The
Company intends to monitor the availability and cost of potential capital
resources, including equity, debt, and off-balance sheet financing arrangements,
with a view toward raising additional capital on terms that are acceptable to
the Company. No assurance can be given that additional capital will become
available on acceptable terms.
Notwithstanding the foregoing, the Company believes that existing cash,
cash equivalents, and short-term investments, together with cash from
operations, will be sufficient to meet its cash requirements for 1997. A portion
of available cash may be used for investment in or acquisition of complementary
businesses, products, or technologies.
Accounts Receivable
The Company's net accounts receivable were $29.5 million at the end of
1996, compared with $17.8 million at the end of 1995. This increase of 66% in
net accounts receivable compares unfavorably with the 37% increase in net
revenues for 1996 compared with 1995. The Company believes that its net accounts
receivable for 1996 increased more than net revenues principally because of a
greater concentration of shipments at the end of 1996. In addition, the Company
transitioned to a new management information system in the fourth quarter of
1996 and experienced difficulties in reconciling data between the old and the
new systems during the transition, which resulted in some loss of collection
efforts of accounts receivable.
Inventories
The Company's inventories were $26.8 million at the end of 1996, compared
with $27.7 million at the end of 1995. Although inventories declined in 1996,
they were still higher than desired at the end of 1996. Since the Company's
FPGAs are manufactured using customized steps that are added to the standard
manufacturing processes of its independent wafer suppliers, the Company's
manufacturing cycle is longer and hence more difficult to adjust in response to
changing demands or delivery schedules. The Company believes that it will take
several more quarters to bring inventories back to a desired level, and no
assurance can be given that its efforts will be successful. Excess inventories
increase the risk of obsolescence, represent a non-productive use of capital
resources, increase handling costs, and delay realization of the price and
performance benefits associated with more advanced manufacturing processes.
Property and Equipment
The Company's net property and equipment was $16.0 million at the end of
1996, compared with $15.7 million at the end of 1995. The Company invested $7.8
million in property and equipment in 1996, compared with $10.1 million in 1995.
Depreciation and amortization of property and equipment were $5.9 million for
1996, compared with $3.8 million for 1995. Capital expenditures during the past
two years have been primarily for leasehold improvements and for engineering,
manufacturing, and office equipment. The Company anticipates that capital
expenditures will increase in 1997 due to increased levels of operations.
Current Liabilities
The Company's total current liabilities were $49.2 million at the end of
1996, compared with $38.1 million at the end of 1995. The increase in current
liabilities was attributable principally to an increase of $8.2 million in
deferred income on shipments to distributors, which in turn was due to the
Company's increased level of operations.
Shareholders' Equity
Shareholders' equity was $69.4 million at the end of 1996, compared with
$50.9 million at the end of 1995. The increase included net cash of $17.6
million from operating activities and net proceeds of $3.0 million from the sale
of common stock under employee stock plans.
Employees
At the end of 1996, the Company had 356 full-time employees, including 113
in marketing, sales, and customer support; 122 in research and development; 94
in operations; and 27 in administration and finance. This compares with 297
full-time employees at the end of 1995, an increase of 20%. Net revenues per
employee was approximately $418,000 for 1996, compared with approximately
$365,000 for 1995.
Impact of Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"). The Company has elected to account for employee stock options in
accordance with Accounting Principles Board Opinion No. 25 and to adopt the
"disclosure only" alternative described in FAS 123. See Note 9 of Notes to
Consolidated Financial Statements.
Quarterly Information
The following table presents certain unaudited quarterly results for each
of the eight quarters in the period ended December 31, 1996. In the opinion of
management, this information has been presented on the same basis as the audited
consolidated financial statements appearing elsewhere in this Annual Report and
all necessary adjustments (consisting only of normal recurring accruals) have
been included in the amounts stated below to present fairly the unaudited
quarterly results when read in conjunction with the audited consolidated
financial statements of the Company and notes thereto. These quarterly operating
results, however, are not necessarily indicative of the results for any future
period.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
1996 1996 1996 1996 1995 1995 1995 1995
--------- -------- ---------- --------- ---------- --------- ---------- ---------
(in thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Net revenues........................... $ 39,027 $ 38,014 $ 36,694 $ 35,043 $ 32,553 $ 29,834 $ 26,611 $ 19,518
Cost of revenues....................... 16,381 16,164 16,105 15,769 15,234 14,416 13,243 9,624
--------- -------- ---------- --------- ---------- --------- ---------- ---------
Gross profit........................... 22,646 21,850 20,589 19,274 17,319 15,418 13,368 9,894
Research and development............... 5,855 6,417 5,650 6,011 5,802 5,430 4,885 4,443
Selling, general, and administrative... 10,651 9,854 9,582 8,308 7,849 7,244 6,904 5,367
In-process research and development (1) -- -- -- -- -- -- -- 16,600
--------- -------- ---------- --------- ---------- --------- ---------- ---------
Income (loss) from operations.......... 6,140 5,579 5,357 4,955 3,668 2,744 1,579 (16,516)
Net income (loss)...................... $ 4,153 $ 3,905 $ 3,606 $ 3,277 $ 3,878 $ 2,935 $ 1,683 $ (9,628)
Net income (loss) per share............ $ 0.19 $ 0.18 $ 0.17 $ 0.16 $ 0.19 $ 0.14 $ 0.08 $ (0.56)
========= ======== ========== ========= ========== ========= ========== =========
Shares used in computing net income
(loss) per share..................... 21,893 21,475 21,467 21,068 20,808 21,082 20,581 17,200
========= ======== ========== ========= ========== ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------------------
Dec. 31, Sept. 30, June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
1996 1996 1996 1996 1995 1995 1995 1995
--------- -------- ---------- --------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
As a Percentage of Net Revenues:
Net revenues........................... 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues....................... 42.0 42.5 43.9 45.0 46.8 48.3 49.8 49.3
--------- -------- ---------- --------- ---------- --------- ---------- ---------
Gross margin........................... 58.0 57.5 56.1 55.0 53.2 51.7 50.2 50.7
Research and development............... 15.0 16.9 15.4 17.2 17.8 18.2 18.4 22.8
Selling, general, and administrative... 27.3 25.9 26.1 23.7 24.1 24.3 25.9 27.5
In-process research and development (1) -- -- -- -- -- -- -- 85.0
--------- -------- ---------- --------- ---------- --------- ---------- ---------
Income (loss) from operations.......... 15.7 14.7 14.6 14.1 11.3 9.2 5.9 (84.6)
Net income (loss)...................... 10.6 10.3 9.8 9.4 11.9 9.8 6.3 (49.3)
- ------------------------------------------------------------------
<FN>
(1) Represents a charge incurred in connection with the Company's
acquisition of TI's FPGA business.
</FN>
</TABLE>
ACTEL CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share amounts)
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 3,543 $ 17,691
Short-term investments.............................................................. 25,626 2,296
Accounts receivable, net............................................................ 29,495 17,805
Inventories......................................................................... 26,848 27,726
Deferred income taxes............................................................... 16,677 10,304
Other current assets................................................................ 2,416 2,097
------------ ------------
Total current assets.......................................................... 104,605 77,919
Property and equipment, net............................................................ 15,973 15,674
Investment in Chartered Semiconductor.................................................. 10,680 7,069
Other assets........................................................................... 5,454 6,457
------------ ------------
$ 136,712 $ 107,119
============ ============
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable.................................................................... $ 9,933 $ 11,995
Accrued salaries and employee benefits.............................................. 5,967 3,108
Other accrued liabilities........................................................... 5,922 3,735
Deferred income..................................................................... 27,386 19,148
Capital lease obligations........................................................... -- 66
------------ ------------
Total current liabilities..................................................... 49,208 38,052
Commitments and contingencies
Redeemable convertible preferred stock (Series A), $.001 par value, $25.00 liquidation
preference; 1,000,000 shares authorized; 1,000,000 shares issued and outstanding.... 18,147 18,147
Shareholders' equity:
Preferred stock, $.001 par value; 4,000,000 shares authorized; none issued and
outstanding....................................................................... -- --
Common stock, $.001 par value; 30,000,000 shares authorized; 17,991,503 and
17,561,758 shares issued and outstanding at December 31, 1996 and 1995,
respectively...................................................................... 18 18
Additional paid-in capital.......................................................... 63,133 59,638
Accumulated earnings (deficit)...................................................... 6,206 (8,736)
------------ ------------
Total shareholders' equity.................................................... 69,357 50,920
------------ ------------
$ 136,712 $ 107,119
============ ============
</TABLE>
ACTEL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Net revenues............................................................. $ 148,779 $ 108,516 $ 76,007
Costs and expenses:
Cost of revenues...................................................... 64,420 52,517 33,349
Research and development.............................................. 23,934 20,560 14,406
Selling, general, and administrative.................................. 38,395 27,364 19,699
In-process research and development................................... -- 16,600 --
------------ ------------ ------------
Total costs and expenses........................................ 126,749 117,041 67,454
------------ ------------ ------------
Income (loss) from operations............................................ 22,030 (8,525) 8,553
Interest expense......................................................... (13) (93) (232)
Interest income and other, net........................................... 1,068 846 935
------------ ------------ ------------
Income (loss) before taxes............................................... 23,085 (7,772) 9,256
Tax provision (benefit).................................................. 8,147 (6,640) 1,389
------------ ------------ ------------
Net income (loss)........................................................ $ 14,938 $ (1,132) $ 7,867
============ ============ ============
Net income (loss) per share.............................................. $ 0.70 $ (0.07) $ 0.45
============ ============ ============
Shares used in computing net income (loss) per share..................... 21,485 17,367 17,579
============ ============ ============
</TABLE>
ACTEL CORPORATION
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands, except share amounts)
<TABLE>
<CAPTION>
Additional Note Accumulated Total
Paid-In Receivable Earnings/ Shareholders'
Common Stock Capital from Officer (Deficit) Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1993................. $ 17 $ 55,794 $ (113) $ (15,475) $ 40,223
Issuance of 306,313 common shares under
employee stock plans and exercise of
warrants, net of repurchases.............. -- 1,344 -- -- 1,344
Repayment of note receivable from officer.... -- -- 113 -- 113
Securities valuation adjustment.............. -- -- -- (404) (404)
Tax benefit from exercise of stock options... -- 168 -- -- 168
Net income................................... -- -- -- 7,867 7,867
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1994................. 17 57,306 -- (8,012) 49,311
Issuance of 455,393 common shares under
employee stock plans...................... 1 1,894 -- -- 1,895
Securities valuation adjustment.............. -- -- -- 408 408
Tax benefit from exercise of stock options... -- 438 -- -- 438
Net loss..................................... -- -- -- (1,132) (1,132)
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1995................. 18 59,638 -- (8,736) 50,920
Issuance of 429,745 common shares under
employee stock plans...................... -- 2,955 -- -- 2,955
Securities valuation adjustment.............. -- -- -- 4 4
Tax benefit from exercise of stock options... -- 540 -- -- 540
Net income................................... -- -- -- 14,938 14,938
------------ ------------ ------------ ------------ ------------
Balance at December 31, 1996................. $ 18 $ 63,133 $ -- $ 6,206 $ 69,357
============ ============ ============ ============ ============
</TABLE>
ACTEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Operating activities:
Net income (loss)..................................................... $ 14,938 $ (1,132) $ 7,867
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization....................................... 6,755 4,412 3,696
In-process research and development................................. -- 16,600 --
Changes in operating assets and liabilities:
Accounts receivable............................................... (11,690) (4,973) (3,658)
Inventories....................................................... 878 (9,095) (6,139)
Deferred income taxes............................................. (6,373) (9,394) (583)
Other current assets.............................................. (319) 2,710 (93)
Accounts payable and accrued liabilities.......................... 5,140 8,058 438
Deferred income................................................... 8,238 10,802 2,335
Settlement payable................................................ -- -- (2,000)
------------ ------------ ------------
Net cash provided by operating activities............................. 17,567 17,988 1,863
Investing activities:
Purchase of TI FGPA business.......................................... -- (10,000) --
Purchases of property and equipment................................... (7,786) (10,111) (5,638)
Purchases of short-term investments................................... (49,429) -- (21,285)
Sales and maturities of short-term investments........................ 26,096 16,761 30,304
Investment in Chartered Semiconductor................................. (3,611) (3,033) (4,036)
Other assets.......................................................... 126 (2,629) (10)
------------ ------------ ------------
Net cash used in investing activities................................. (34,604) (9,012) (665)
Financing activities:
Sale of common stock, net of repurchases.............................. 2,955 1,895 1,383
Proceeds from line of credit.......................................... -- 4,500 --
Payments on line of credit............................................ -- (4,500) --
Repayment of note receivable from officer............................. -- -- 113
Principal payments under notes payable and capital lease obligations.. (66) (494) (1,612)
------------ ------------ ------------
Net cash provided by (used in) financing activities................... 2,889 1,401 (116)
Net increase (decrease) in cash and cash equivalents..................... (14,148) 10,377 1,082
Cash and cash equivalents, beginning of year............................. 17,691 7,314 6,232
------------ ------------ ------------
Cash and cash equivalents, end of year................................... $ 3,543 $ 17,691 $ 7,314
============ ============ ============
Supplemental disclosures of cash flows information and non-cash
investing and financing activities:
Cash paid during the year for interest................................ $ 2 $ 88 $ 225
Cash paid during the year for taxes................................... 12,370 4,593 1,066
Tax benefits from exercise of stock options.............................. 540 438 168
Preferred stock issued as partial consideration for the TI FPGA
Business, net of estimated future issuance costs...................... -- 18,147 --
</TABLE>
ACTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Actel Corporation (the "Company") was incorporated under the laws of
California on October 17, 1985. The Company designs, develops, and markets field
programmable gate arrays ("FPGAs") and associated development system software
and programming hardware. Net revenues from the sale of FPGAs accounted for 97%
of the Company's net revenues for 1996, compared with 95% for 1995 and 91% for
1994. FPGAs are logic integrated circuits, which adapt the microprocessing and
memory capabilities of electronic systems to specific applications. The
Company's operating results are therefore subject to a variety of risks
characteristic of the semiconductor industry, including booking and shipment
uncertainties, wafer yield fluctuations, and price erosion, as well as general
economic conditions. FPGAs are used by designers of communication, computer,
industrial control, military/aerospace, and other electronic systems to
differentiate their products and get them to market faster. Information on the
Company's sales by geographic area is included in Note 11.
Advertising and Promotion Costs
The Company's policy is to expense advertising and promotion costs as they
are incurred. The Company's advertising and promotion expenses were
approximately $3,595,000, $2,736,000, and $2,498,000 for 1996, 1995, and 1994,
respectively.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The Company's fiscal year ends on the Sunday closest to December 31. Fiscal
1996, 1995, and 1994 ended on December 29, 1996, December 31, 1995, and January
1, 1995, respectively. For ease of presentation, December 31 has been utilized
as the fiscal year-end in the consolidated financial statements and accompanying
notes.
Cash Equivalents, Short-Term Investments, and Fair Value of Financial
Instruments
For financial statement purposes, the Company considers all highly liquid
debt instruments purchased with a maturity of three months or less when
purchased to be cash equivalents. Short-term investments consisted principally
of municipal obligations in 1996 and principally of commercial paper, U.S.
government obligations, and corporate obligations in 1995. Cash equivalents and
short-term investments are recorded at fair value, with unrealized gains and
losses reported in a separate component of shareholders' equity. Fair values are
estimated based on quoted market prices or pricing models using current market
rates.
The Company enters into foreign exchange forward contracts with financial
institutions primarily to protect against currency exchange risks associated
with certain firmly committed transactions. The fair value of foreign exchange
forward contracts are based on quoted market prices. At December 31, 1996, a
total of approximately $1,200,000 of foreign exchange forward contracts were
outstanding. The difference between the fair value and cost of such foreign
currency exchange forward contracts is not material. The Company does not hedge
for speculative purposes.
The Company believes that the dividend, redemption, and liquidation
preferences of its outstanding shares of Series A Preferred Stock (which are
described in Note 3) have nominal value and, therefore, that the shares of
Series A Preferred Stock have a fair value that approximates the market value of
the Common Stock into which the Series A Preferred Stock is convertible. The
1,000,000 shares of Series A Preferred Stock outstanding are convertible into an
aggregate of 2,631,578 shares of Common Stock. The fair value of the Series A
Preferred Stock is based on the underlying value of the Common Stock and
discounted for the voting, registration, and marketability restrictions. At
December 31, 1996, the fair value of the Series A Preferred Stock was
approximately $49,474,000. See Note 13.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to
concentrations of credit risk consist principally of cash investments and trade
receivables. The Company invests in securities of A, A1, or P1 grade. The
Company manufactures and sells its products to customers in diversified
industries. The Company performs ongoing credit evaluations of its customers'
financial condition and generally requires no collateral. Three of the Company's
domestic distributors accounted for approximately 14%, 14%, and 11% of the
Company's net revenues for 1996. The same three domestic distributors accounted
in the aggregate for approximately 37% of the Company's net revenues for 1995
and 33% for 1994.
Impact of Recently Issued Accounting Standards
In October 1995, the Financial Accounting Standards Board issued Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("FAS
123"). The Company has elected to account for employee stock options in
accordance with Accounting Principles Board Opinion No. 25 and to adopt the
"disclosure only" alternative described in FAS 123.
Inventories
Inventories are stated at the lower of cost (first-in, first-out) or market
(net realizable value). Given the volatility of the market for the Company's
products, the Company makes inventory provisions for potentially excess and
obsolete inventory based on backlog and forecast demand. However, such backlog
demand is subject to revisions, cancellations, and rescheduling. Actual demand
will inevitably differ from such backlog and forecast demand, and such
differences may be material to the financial statements. Excess inventories
increase the risk of obsolescence, represent a non-productive use of capital
resources, increase handling costs, and delay realization of the price and
performance benefits associated with more advanced manufacturing processes.
Long-Lived Assets
In the first quarter of 1996, the Company adopted Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets Disposed Of" ("FAS 121"). FAS 121 requires impairment losses
to be recorded on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. The Company
evaluates the net realizable value of long-lived assets each quarter on the
basis of discounted cash flows in accordance with FAS 121 and to date has found
no impairment.
Net Income (Loss) Per Share
Net income (loss) per share is computed using the weighted average number
of common and dilutive common equivalent shares from redeemable convertible
preferred stock (using the if-converted method) and from stock options and
warrants (using the treasury stock method). Shares used in computing net loss
per share for 1995 excludes common equivalent shares because the effect of their
inclusion would be anti-dilutive. Fully diluted shares have not been presented
as part of the consolidated financial statements because the difference is
insignificant.
Off-Balance-Sheet Risk
The Company enters into foreign exchange contracts to hedge firm purchase
commitments denominated in foreign currencies. Gains and losses on the contracts
adjust the cost basis in the goods purchased. At December 31, 1996, the Company
had foreign exchange contracts maturing in January and February 1997 to purchase
Japanese yen for approximately $1,200,000 at an average rate of 109 yen per
dollar.
In addition, the Company had approximately $883,000 outstanding under a
standby letter of credit at December 31, 1996.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation.
Depreciation and amortization have been provided on a straight-line basis over
the following estimated useful lives:
Equipment...................................... 2 to 5 years
Furniture and fixtures......................... 3 to 5 years
Leasehold improvements......................... Estimated useful life or lease
term, whichever is shorter
Revenue Recognition
Revenue from product shipped to customers is generally recorded at the time
of shipment. Revenue related to products shipped subject to customers'
evaluation is recognized upon final acceptance. Shipments to distributors are
made under agreements allowing certain rights of return and price protection on
unsold merchandise. For that reason, the Company defers recognition of revenues
and related cost of revenues on sales of products to distributors until such
products are sold by the distributor. Royalty income is recognized upon the sale
of products subject to royalties.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimated.
2. Balance Sheet Detail
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Accounts receivable:
Trade accounts receivable.......................................................... $ 30,128 $ 18,372
Allowance for doubtful accounts.................................................... (633) (567)
------------ ------------
$ 29,495 $ 17,805
============ ============
Inventories:
Purchased parts and raw materials.................................................. $ 1,792 $ 1,357
Work-in-process.................................................................... 17,080 18,326
Finished goods..................................................................... 7,976 8,043
------------ ------------
$ 26,848 $ 27,726
============ ============
Property and equipment:
Equipment.......................................................................... $ 27,539 $ 25,512
Furniture and fixtures............................................................. 2,088 1,603
Leasehold improvements............................................................. 4,210 2,402
------------ ------------
33,837 29,517
Accumulated depreciation and amortization.......................................... (17,864) (13,843)
------------ ------------
$ 15,973 $ 15,674
============ ============
</TABLE>
Depreciation expense was approximately $5,879,000, $3,755,000, and
$3,696,000 for 1996, 1995, and 1994, respectively.
3. Purchase of TI FPGA Business
On February 12, 1995, the Company entered into an Asset Purchase Agreement
with Texas Instruments Incorporated ("TI") under which TI agreed to convey to
the Company all tangible and intangible assets and intellectual property rights
necessary to operate TI's antifuse FPGA business (the "TI FPGA Business"). The
acquisition was completed on March 31, 1995, in a transaction accounted for as a
purchase. The Company acquired approximately $9,100,000 of inventory, prepaid
research and development, and other credits receivable. The Company also
acquired certain fixed assets used in the TI FPGA Business. Beginning with the
second quarter of 1995, the Company's net revenues included the revenues of the
TI FPGA Business, but no longer included royalties from TI.
As consideration for the TI FPGA Business, the Company assumed certain
liabilities, paid $10,000,000 in cash, and issued 1,000,000 shares of Series A
Preferred Stock (valued at approximately $18,947,000 for purposes of the
transaction), which are convertible into 2,631,578 shares of Common Stock. See
Note 13. The total purchase price booked by the Company was approximately
$28,947,000, of which approximately $16,600,000 of in-process research and
development was charged against income in the first quarter of 1995. The amount
was established by an independent valuation specialist. The remaining amount of
consideration, approximately $4,400,000, represents the valuation of the
customer base and goodwill acquired, was allocated to intangible assets, and is
being amortized over a five-year period. Amortization expense for the year ended
December 31, 1996, was $876,000.
The following unaudited pro forma results of operations for 1995 are as if
the acquisition of the TI FPGA Business had occurred as of the beginning of
1995, and includes certain estimated adjustments, including amortization of
intangibles, lost interest income, and utilization of prepaid research and
development. The pro forma information excludes the one-time write-off of
approximately $16,600,000 of in-process research and development and tax
benefits. The pro forma information has been prepared for comparative purposes
only and does not purport to be indicative of what operating results would have
been if the acquisition had actually taken place at the beginning of 1995 or of
future operating results.
Year Ended
December 31, 1995
-----------------
Net revenues..... .......................................... $ 115,555,000
Net income.................................................. 11,039,000
Earnings per share.......................................... 0.53
Foundry Credit
Under the Asset Purchase Agreement, TI agreed to provide the Company with
$5,375,000 of inventory and $6,000,000 of credit toward the purchase of
additional inventory (the "Foundry Credit"). The Foundry Credit was first to be
applied to any inventory transferred by TI in excess of $5,375,000. Any balance
was then to be applied as a 10% reduction against the Company's future payment
obligations under the Supply Agreement between the parties dated April 1, 1995,
pursuant to which TI agreed to provide foundry services to the Company for three
years. After applying the Foundry Credit to the inventory received from TI, the
Company recorded approximately $2,400,000 as "Other Current Assets" to be
applied as a 10% reduction against the cash due on future inventory purchases
under the Supply Agreement. As of December 31, 1996, the Foundry Credit balance
was approximately $500,000.
Research and Development Credit
In connection with the Company's acquisition of the TI FPGA Business, the
parties entered into a Development Agreement dated April 1, 1995, under which TI
agreed to perform certain development work for the Company and granted to the
Company a credit (the "R&D Credit") to fund the development activities. The
Company estimated that the value of the R&D Credit to the Company at the time of
the acquisition was $1,000,000, which the Company recorded as prepaid Research
and Development. As of December 31, 1996, the R&D Credit was zero.
Rights, Preferences, and Privileges of Series A Preferred Stock
Currently, TI is the only holder of Series A Preferred Stock. Holders of
Series A Preferred Stock are entitled to receive, when, as, and if declared by
the Board of Directors and subject to the rights of outstanding shares of any
other series of Preferred Stock, non-cumulative dividends at a rate determined
by the Board, prior to any payment of dividends to the holders of Common Stock;
provided, however, that dividends may be paid on shares of the Common Stock if
dividends shall have been concurrently paid on all shares of Series A Preferred
Stock in an amount per share equal to the aggregate dividends that would be then
payable in respect of the number of shares of Common Stock into which a share of
Series A Preferred Stock is then convertible. The Series A Preferred Stock may
be converted into Common Stock at any time at the option of the holder. Each
share of Series A Preferred Stock may be converted into 2.631578 shares of
Common Stock. Shares of Series A Preferred Stock must be redeemed by the
Company, in whole or in part, at the election of the holder thereof, in the
event of certain mergers or change in control transactions occurring prior to
April 1, 1997, for $25 per share (which is equal to $9.50 per share of
underlying Common Stock) plus any accrued or declared and unpaid dividends.
Holders of Series A Preferred Stock have a liquidation preference of $25 per
share plus any accrued or declared and unpaid dividends. In the event of the
liquidation, dissolution, or winding up of the Company, the holders of Series A
Preferred Stock are entitled to receive such amount before any payment may be
made to the holders of Common Stock. The approval of the holders of a majority
of the Series A Preferred Stock is required for any amendment to the Company's
Articles of Incorporation or Bylaws that would adversely change or alter the
rights, preferences, or privileges of the Series A Preferred Stock, increase or
decrease the authorized number of shares of Series A Preferred Stock, or provide
for the creation of any new class or series of shares with dividend or
liquidation rights superior to or on parity with the Series A Preferred Stock.
On all other matters submitted for a vote of the Company's shareholders, and
except as otherwise required by law, the holders of Series A Preferred Stock
shall not be entitled to vote. See Note 13.
4. Investments
Management determines the appropriate classification of debt securities at
the time of purchase and re-evaluates such designation as of each balance sheet
date. At December 31, 1996, all debt securities are designated as
available-for-sale. Available-for-sale securities are carried at fair value,
with the unrealized gains and losses reported in shareholders' equity. The
amortized cost of debt securities in this category is adjusted for amortization
of premiums and accretion of discounts to maturity. Such amortization is
included in interest and other income. Realized gains and losses and declines in
value judged to be other than temporary on available-for-sale securities are
included in interest income and other. The cost of securities sold is based on
the specific identification method. Interest and dividends on securities
classified as available-for-sale are included in interest income and other.
The following is a summary of available-for-sale securities at December 31,
1996 and 1995:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Estimated
Cost Gains Losses Fair Values
------------ ------------ ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
December 31, 1996
Municipal obligations included in short-term
investments and cash equivalents...................... $ 25,618 $ 8 $ -- $ 25,626
============ ============ ============ ============
December 31, 1995
U.S. government obligations............................. $ 8,422 $ 5 $ (1) $ 8,426
Commercial paper........................................ 3,978 -- -- 3,978
Other................................................... 3,000 -- -- 3,000
------------ ------------ ------------ ------------
Amounts included in short-term investments and cash
equivalents........................................... $ 5 $ (1) $ 15,404 $ 15,400
============ ============ ============ ============
</TABLE>
There were no realized gains or losses in 1996. Gross realized gains and
(losses) were approximately $4,000 and ($8,000), respectively, for 1995.
The adjustments to net unrealized gains and (losses) on investments
included as a separate component of shareholders' equity totaled approximately
$4,000 and $408,000 for 1996 and 1995, respectively.
The expected maturities of the Company's investments at December 31, 1996,
are shown below. Expected maturities may differ from contractual maturities
because the issuers of the securities may have the right to prepay obligations
without prepayment penalties.
Available-for-sale (in thousands):
Due in one year or less...................................... $ 3,921
Due after one year........................................... 21,705
------------
$ 25,626
============
5. Investment in Chartered Semiconductor
In February 1994, the Company entered into an agreement to invest
approximately $10,000,000 in Chartered Semiconductor Manufacturing Ltd
("Chartered Semiconductor"), a semiconductor company located in Singapore. Under
the terms of the agreement, the Company has acquired an equity interest in
Chartered Semiconductor of less than 2%. The investment was payable in Singapore
dollars, with the initial installment of approximately $2,000,000 paid in March
1994, the second installment of approximately $2,000,000 paid in September 1994,
the third installment of approximately $3,000,000 paid in March 1995, and the
last installment of approximately $2,900,000 paid in January 1996. In 1996, the
Company purchased an additional equity interest in Chartered Semiconductor,
pursuant to a contractual right of first refusal, for approximately $698,000.
6. Line of Credit
The Company has a line of credit with a bank that provides for borrowings
not to exceed $10,000,000. The agreement contains covenants that require the
Company to maintain certain financial ratios and levels of net worth. As of
December 31, 1996, the Company was in compliance with the covenants for the line
of credit. Borrowing against the line of credit bear interest at the bank's
prime rate. There were no borrowings against the line of credit at December 31,
1996. The line of credit, which expires in May 1997, may be terminated by either
party upon not less than thirty days' prior written notice.
7. Commitments
The Company leases its facilities and certain equipment under
non-cancellable lease agreements. The principal facility lease expires in June
1998, and provides for two consecutive five-year renewal options. The equipment
leases are accounted for as operating leases. The lease terms expire at various
dates through September 2001. All of these leases require the Company to pay
property taxes, insurance, and maintenance and repair costs. During 1996, the
Company satisfied all of its capital lease obligations. Assets recorded under
capital leases as of December 31, 1995, were as follows:
Equipment, furniture, and fixtures............................... $ 1,260
Accumulated depreciation and amortization....................... (1,113)
------------
$ 147
============
Future minimum lease payments under all non-cancellable leases are as
follows:
Operating
Leases
------------
1997............................................................. $ 1,988
1998............................................................. 1,373
1999............................................................. 804
2000............................................................. 682
2001............................................................. 455
------------
Total minimum lease payments..................................... $ 5,302
============
Rental expense under operating leases was approximately $1,615,000,
$1,193,000, and $967,000 for 1996, 1995, and 1994, respectively.
8. Retirement Plan
Effective December 10, 1987, the Company adopted a tax deferred savings
plan for the benefit of qualified employees. The plan is designed to provide
employees with an accumulation of funds at retirement. Qualified employees may
elect each quarter to have salary reduction contributions made to the plan. The
Company may make contributions to the plan at the discretion of the Board of
Directors. To date, no contributions have been made by the Company.
9. Stock-Based Compensation
The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25"), and related
Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under FASB
Statement No. 123, "Accounting for Stock Based Compensation" ("FAS 123"),
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under APB 25, when the exercise price of the
Company's employee stock options equals the market price of the underlying stock
on the date of grant, no compensation is recognized.
Stock Option Plans
The Company has adopted stock options plans under which officers and
employees may be granted either incentive stock options or nonqualified options
to purchase the Company's common shares. As of December 31, 1996, 6,497,747
shares of common stock were reserved for issuance under these plans. On January
5, 1996, the Compensation Committee of the Board of Directors authorized the
Company to exchange stock options granted under these plans and having an
exercise price greater than $10.625 for options with an exercise price of
$10.625 (the fair market value of the Company's stock on January 5, 1996). Under
the terms of this stock option repricing, no portion of any repriced option was
exercisable until July 5, 1996. Options representing the right to purchase a
total of 1,093,639 shares of common stock were repriced.
The Company has also adopted a Directors' Stock Option Plan, under which
directors who are not employees of the Company may be granted nonqualified
options to purchase the Company's common shares. As of December 31, 1996,
110,000 shares of common stock were reserved for issuance under such plan.
The Company grants stock options under its plans at a price equal to the
fair value of the Company's common stock on the date of grant. Subject to
continued service, options generally vest over a period of four years and expire
ten years from the date of grant.
The following table summarizes the Company's stock option activity and
related information for the three years ended December 31, 1996:
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------- -------------------------- --------------------------
Weighted Weighted Weighted
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
Shares Price Shares Price Shares Price
------------- ----------- -------------- ---------- -------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at January 1....... 2,506,331 $ 10.17 1,588,565 $ 6.42 1,222,864 $ 4.79
Granted........................ 2,633,911 14.24 1,315,860 12.96 603,209 8.34
Exercised...................... (204,344) 6.60 (270,365) 2.25 (149,530) 1.32
Cancelled...................... (1,393,062) 12.79 (127,729) 8.99 (87,978) 5.64
------------- ----------- -------------- ---------- -------------- ----------
Outstanding at December 31..... 3,542,836 12.38 2,506,331 10.17 1,588,565 6.42
============= =========== ============== ========== ============== ==========
</TABLE>
The following table summarizes information about stock options outstanding
at December 31, 1996:
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------------------------------
Options Outstanding Options Exercisable
---------------------------------------- -------------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Number of Contract Exercise Number of Exercise
Range of Exercise Prices Shares Life Price Shares Price
- --------------------------------------------- ----------- ---------- ------------ ----------- ------------
<C> <C> <C> <C> <C> <C>
$ 1.80 - $ 7.63..................... 485,160 6.75 years $ 6.06 236,139 $ 4.51
8.00 - 10.50..................... 534,794 7.32 8.69 190,342 8.61
10.63..................... 1,023,910 9.01 10.63 246,687 10.63
11.75 - 14.88..................... 803,052 9.42 14.51 15,520 14.01
15.00 - 22.50..................... 695,920 9.40 19.74 3,256 15.80
1.80 - 22.50..................... 3,542,836 8.61 12.38 691,944 8.09
</TABLE>
The weighted-average grant-date fair value of options granted during 1996 and
1995 were $4.92 and $6.11, respectively.
Employee Stock Purchase Plan
The Company has adopted an Employee Stock Purchase Plan (the "ESPP"), under
which eligible employees may designate not more than 10% of their cash
compensation to be deducted each pay period for the purchase of common stock (up
to a maximum of $25,000 worth of common stock in any year). As of December 31,
1996, 900,000 shares of common stock were reserved for issuance under the ESPP.
The ESPP is administered over offering periods of up to 24 months each, with
each offering period divided into four consecutive six-month purchase periods
beginning August 1 and February 1 of each year. On the last business day of each
purchase period, shares of common stock are purchased with employees' payroll
deductions accumulated during the six months at a price per share equal to 85%
of the market price of the common stock on the first day of the applicable
offering period or the last day of the purchase period, whichever is lower.
There were 225,401 and 185,028 shares issued under the ESPP in 1996 and 1995,
respectively, and 346,284 remained available for issuance as of December 31,
1996.
Pro Forma Disclosures
Pro forma information regarding net income/(loss) and net income/(loss) per
share is required by FAS 123, which also requires that the information be
determined as if the Company has accounted for its employee stock options
granted subsequent to December 31, 1994 under the fair value method. The fair
value for these options was estimated at the date of grant using the
Black-Scholes pricing model with the following weighted-average assumptions for
1996 and 1995, respectively: risk-free interest rates of 5.84% and 6.55%; no
dividend yield; volatility factor of the expected market price of the Company's
common stock of 50%; and a weighted average expected life of the options of four
years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options, which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions, including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
pro forma information is as follows:
Year Ended December 31,
--------------------------
1996 1995
------------ ------------
(in thousands, except per
share amounts)
Pro forma net income (loss)....................... $ 10,452 $ (2,780)
Pro forma earnings (loss) per share............... 0.50 (0.16)
Because FAS 123 is applicable only to options granted subsequent to December 31,
1994, its pro forma effect will not be fully reflected until subsequent years.
The effects on pro forma disclosures of applying FAS 123 are not likely to be
representative of the effects on pro forma disclosures in future years.
10. Tax Provision (Benefit)
The tax provision (benefit) consists of:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Federal - current........................................................ $ 12,150 $ 4,113 $ 1,480
Federal - deferred....................................................... (5,571) (8,977) (910)
State - current.......................................................... 2,460 1,149 694
State - deferred......................................................... (1,089) (3,044) --
Foreign - current........................................................ 197 119 125
------------ ------------ ------------
$ 8,147 $ (6,640) $ 1,389
============ ============ ============
</TABLE>
The tax provision (benefit) reconciles to the amount computed by
multiplying income (loss) before tax by the U.S. statutory rate as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1996 1995 1994
------------ ------------ ------------
(in thousands)
<S> <C> <C> <C>
Provision (benefit) at statutory rate.................................... $ 8,079 $ (2,719) $ 3,147
Benefit of operating loss carryforward................................... -- -- (1,620)
Change in valuation allowance............................................ (432) (2,396) (679)
Federal research credits................................................. (425) (937) (300)
State taxes, net of federal benefit...................................... 891 (813) 459
Other.................................................................... 34 225 382
------------ ------------ ------------
Tax provision (benefit).................................................. $ 8,147 $ (6,640) $ 1,389
============ ============ ============
</TABLE>
Significant components of the Company's deferred tax assets and liabilities
for federal and state income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
------------ ------------
(in thousands)
<S> <C> <C>
Deferred tax assets:
Distributor reserve............................................................ $ 11,033 $ 7,682
Charge for in-process research expenses........................................ 5,962 6,411
Inventories.................................................................... 3,293 1,716
Other, net..................................................................... 2,453 1,170
------------ ------------
22,741 16,979
Valuation allowance............................................................ (3,046) (3,478)
------------ ------------
Net deferred tax assets................................................ $ 19,695 $ 13,501
============ ============
Deferred tax liabilities:
Depreciation................................................................... $ 104 $ 570
------------ ------------
Net deferred tax liabilities........................................... $ 104 $ 570
============ ============
</TABLE>
The valuation allowance decreased by approximately $2,396,000 during 1995.
11. Industry and Geographic Information
The Company operates in a single industry segment. The Company markets its
products in the United States and in foreign countries through its sales
personnel, independent sales representatives, and distributors. The Company's
geographic sales are as follows:
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1996 1995 1994
-------------------------- -------------------------- --------------------------
(in thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C>
United States.................. $ 99,131 67% $ 67,156 62% $ 51,951 68%
Export:
Europe.................... 26,105 18 18,706 17 10,626 14
Japan..................... 15,340 10 13,238 12 9,070 12
Other international....... 8,203 5 9,416 9 4,360 6
------------ ------------ ------------ ------------ ------------ ------------
$ 148,779 100% $ 108,516 100% $ 76,007 100%
============ ============ ============ ============ ============ ============
</TABLE>
12. Patent Infringement
In January 1994, the Company brought a patent infringement lawsuit against
QuickLogic Corporation ("QuickLogic"), which in turn brought a patent
infringement counterclaim against the Company in May 1995. The parties are
currently engaged in discovery and motion proceedings. Although the Company
believes that it has meritorious claims and defenses in this matter, and that
its resolution will not have a materially adverse effect on the Company's
business, financial position, or results of operations, no assurance can be
given to that effect.
As is typical in the semiconductor industry, the Company has been and
expects to be from time to time notified of claims that it may be infringing
patents owned by others. No assurance can be given that such claims against the
Company will not result in litigation. All litigation, whether or not determined
in favor of the Company, can result in significant expense to the Company and
can divert the efforts of the Company's technical and management personnel from
productive tasks.
Although the Company has obtained patents covering elements of its circuit
architecture and certain techniques for manufacturing its antifuse, no assurance
can be given that the Company's patents will be determined to be valid or that
the claims of QuickLogic or any assertions of infringement by other parties (or
claims for indemnity from customers resulting from any infringement claims) will
not succeed. In the event of an adverse ruling in the QuickLogic case or any
other litigation involving intellectual property, the Company could suffer
significant (and possibly treble) monetary damages. The Company may also be
required to discontinue the use of certain processes; cease the manufacture,
use, and sale of infringing products; expend significant resources to develop
non-infringing technology; or obtain licenses under patents that it is
infringing. Any of these outcomes could have a materially adverse effect on the
Company's business, financial condition, and/or results of operations.
12. Subsequent Event
On March 12, 1997, TI converted all of the outstanding shares of Series A
Preferred Stock into 2,631,578 shares of Common Stock.
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOLDERS
ACTEL CORPORATION
We have audited the accompanying consolidated balance sheets of Actel
Corporation as of December 31, 1996 and 1995, and the related consolidated
statements of operations, cash flows, and shareholders' equity for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Actel
Corporation at December 31, 1996 and 1995 and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
San Jose, California
March 14, 1997
STOCK LISTING
Actel's common stock has been traded on the over-the-counter market since
the Company's initial public offering (IPO) on August 2, 1993, and is quoted on
the NASDAQ National Market System under the symbol "ACTL." The Company has never
paid cash dividends on its common stock and has no present plans to do so.
On March 12, 1997, there were 317 shareholders of record. Since many
shareholders have their shares held of record in the name of their brokerage
firm, the actual number of shareholders is estimated by the Company to be about
4,800.
During the last two years, the quarterly high and low sale prices for the
common stock were:
1996 High Low
- --------------------------------------------------- ------------ ------------
First Quarter...................................... $ 17.125 $ 9.00
Second Quarter..................................... 21.875 14.50
Third Quarter...................................... 20.25 12.375
Fourth Quarter..................................... 24.625 16.25
1997 High Low
- --------------------------------------------------- ------------ ------------
First Quarter...................................... $ 13.875 $ 8.00
Second Quarter..................................... 14.875 10.125
Third Quarter...................................... 21.00 12.375
Fourth Quarter..................................... 18.375 10.25
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Actel Corporation of our report dated March 14, 1997, included in the 1996
Annual Report to Shareholders of Actel Corporation.
Our audits also included the financial statement schedule of Actel Corporation
listed in Item 14(a). This schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, the financial statement schedule referred to above, when considered
in relation to the basic financial statements as a whole, presents fairly in all
material respects the information set forth therein.
We also consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-74492) pertaining to the 1986 Incentive Stock Option Plan, the
1993 Employee Stock Purchase Plan, and the 1993 Directors' Stock Option Plan,
and in the Registration Statement (Form S-8 No. 333-3398) pertaining to the 1986
Incentive Stock Option Plan, the 1993 Employee Stock Purchase Plan, and the 1995
Consultant Stock Plan, of our report dated March 14, 1997, with respect to the
consolidated financial statements incorporated herein by reference, and our
report included in the preceding paragraph with respect to the financial
statement schedule included in this Annual Report (Form 10-K) of Actel
Corporation.
/s/ Ernst & Young LLP
San Jose, California
March 28, 1997
EXHIBIT 24
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints John C. East, David M. Sugishita,
and David L. Van De Hey, and each of them acting individually, as his
attorney-in-fact, each with full power of substitution, for him in any and all
capacities, to sign any and all amendments to this Annual Report on Form 10-K
and to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, hereby ratifying and
confirming all that each of said attorneys-in-fact, or his substitute or
substitutes, may do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report on Form 10-K has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ------------------------------------------ ------------------------------------------------ ----------------------
<S> <C> <C>
/s/ John C. East President and Chief Executive Officer (Principal March 28, 1997
- ----------------------------------------- Executive Officer) and Director
(John C. East)
/s/ David M. Sugishita Senior Vice President of Finance & Administration March 28, 1997
- ----------------------------------------- and Chief Financial Officer (Principal Financial
(David M. Sugishita) and Accounting Officer)
/s/ Keith B. Geeslin Director March 28, 1997
- -----------------------------------------
(Keith B. Geeslin)
/s/ Jos C. Henkens Director March 28, 1997
- -----------------------------------------
(Jos C. Henkens)
/s/ Frederic N. Schwettmann Director March 28, 1997
- -----------------------------------------
(Frederic N. Schwettmann)
/s/ Robert G. Spencer Director March 28, 1997
- -----------------------------------------
(Robert G. Spencer)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-29-1996
<CASH> 3,543
<SECURITIES> 25,626
<RECEIVABLES> 30,917
<ALLOWANCES> 1,422
<INVENTORY> 26,848
<CURRENT-ASSETS> 104,605
<PP&E> 33,837
<DEPRECIATION> 17,864
<TOTAL-ASSETS> 136,712
<CURRENT-LIABILITIES> 49,208
<BONDS> 0
<COMMON> 63,151
0
18,147
<OTHER-SE> 6,206
<TOTAL-LIABILITY-AND-EQUITY> 136,712
<SALES> 148,779
<TOTAL-REVENUES> 148,779
<CGS> 64,420
<TOTAL-COSTS> 126,749
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,055
<INCOME-PRETAX> 23,085
<INCOME-TAX> 8,147
<INCOME-CONTINUING> 14,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,938
<EPS-PRIMARY> .70
<EPS-DILUTED> .68
</TABLE>
