As filed with the Securities and Exchange Commission on February 10, 1997
Registration No. 333-__________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
Form S-3
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
---------------
PARADIGM TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 770140882-5
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
71 Vista Montana
San Jose, CA 95134
(408) 954-0500
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
MICHAEL GULETT
President and Chief Executive Officer
PARADIGM TECHNOLOGY, INC.
71 Vista Montana
San Jose, CA 95134
(408) 954-0500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
JORGE DEL CALVO
Pillsbury Madison & Sutro LLP
2700 Sand Hill Road
Menlo Park, CA 94025
---------------
Approximate date of commencement of proposed sale to
the public: From time to time after this Registration
Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / ------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / ______
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
======================================================================================================================
Proposed Proposed
maximum maximum
Title of each class of securities Amount to be offering price aggregate Amount of
to be registered registered per share(1) offering price(1) registration fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value.......... 2,554,300 shares $1.97 $5,031,971.00 $1,524.84
======================================================================================================================
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) based upon the average of the high and low sales
prices of the Company's Common Stock on the Nasdaq National Market on
February 5, 1997.
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ The information contained herein is subject to completion or +
+ amendment. A registration statement relating to these +
+ securities has been filed with the Securities and Exchange +
+ Commission. These securities may not be sold nor may offers +
+ to buy be accepted prior to the time the registration +
+ statement becomes effective. This prospectus shall not +
+ constitute an offer to sell or the solicitation of any offer +
+ to buy nor shall there be any sale of these securities in +
+ any State in which such offer, solicitation or sale would be +
+ unlawful prior to registration or qualification under the +
+ securities laws of any such State. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1997
PROSPECTUS
- ----------
2,554,300 Shares
PARADIGM TECHNOLOGY, INC.
Common Stock
--------------
This Prospectus covers 2,554,300 shares (the "Shares") of Common Stock,
$.01 par value (the "Common Stock"), of Paradigm Technology, Inc. ("Paradigm" or
the "Company") offered for the account of certain stockholders of the Company
(the "Selling Stockholders"). The Shares may be offered by the Selling
Stockholders from time to time in transactions (which may include block
transactions) on the Nasdaq National Market, in negotiated transactions, through
a combination of such methods of sale, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale, or at negotiated
prices. The Selling Stockholders may effect such transactions by selling the
Shares to or through broker-dealers, who may receive compensation in the form of
discounts, concessions or commissions from the Selling Stockholders and/or the
purchasers of the Shares for whom such broker-dealers may act as agents or to
whom they may sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Company will not
receive any of the proceeds from the sale of the Shares by the Selling
Stockholders. The Company has agreed to bear all expenses of registration of the
Shares, but all selling and other expenses incurred by a Selling Stockholder
will be borne by that Selling Stockholder.
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, as amended (the "Securities Act"), and any commissions paid or any
discounts or concessions allowed to any such persons, and any profits received
on the resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. See "Selling Stockholders"
and "Plan of Distribution."
The Common Stock is traded on the Nasdaq National Market under the symbol
"PRDM." On February 5, 1997, the last reported sales price of the Common Stock
on the Nasdaq National Market was $2.00 per share.
---------------
The Common Stock offered hereby involves a
high degree of risk. See "Risk Factors"
beginning on page 4.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------
No person has been authorized to give any information or to make any
representations other than those contained or incorporated by reference in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company. This Prospectus does
not constitute an offer to sell or a solicitation of any offer to buy any
security other than the Shares of Common Stock offered by this Prospectus, nor
does it constitute an offer to sell or solicitation of any offer to buy the
Shares of Common Stock by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making such offer or
solicitation is not qualified to do so or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall, under any circumstances, create any implication
that the information contained herein is correct as of any time subsequent to
the date hereof.
The date of this Prospectus is _________, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements, and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy and information statements, and other information filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C., as well as the regional
offices of the Commission located at Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois, and 7 World Trade Center, Suite 1300, New York,
New York. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. The Commission maintains a World Wide Web site that contains
reports, proxy and information statements, and other information that are filed
through the Commission's Electronic Data Gathering, Analysis and Retrieval
System. This Web site can be accessed at http://www.sec.gov. The Common Stock of
the Company is quoted on the Nasdaq National Market. Reports, proxy statements
and other information concerning the Company may be inspected at the offices of
the National Association of Securities Dealers, Inc. at 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (together with all amendments and exhibits thereto, the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities Act"),
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, certain parts of which are omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and the Common Stock, reference is made to the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete and, in each instance, reference is made
to the copy of such contract or document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. Copies of the Registration Statement, including all exhibits thereto,
may be obtained from the Commission's principal office in Washington, D.C. upon
payment of the fees prescribed by the Commission, or may be examined without
charge at the offices of the Commission described above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus: (i) the Company's Annual Report
on Form 10-K for the year ended December 31, 1995, (ii) the Company's Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996, June 30, 1996 and
September 30, 1996, (iii) the Company's Current Reports on Form 8-K dated
December 2, 1996 and February 6, 1997 and (iv) the description of the Common
Stock contained in the Company's Registration Statement on Form 8-A filed under
the Exchange Act on May 18, 1995. All documents subsequently filed by the
Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior
to the termination of the offering to which this Prospectus relates shall be
deemed to be incorporated by reference into this Prospectus and to be part of
this Prospectus from the date of filing thereof.
Any statement contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes of this Prospectus and
the Registration Statement of which it is a part to the extent that a statement
contained herein or in any other subsequently filed document which also is
incorporated herein modifies or replaces such statement. Any statement so
modified or superseded shall not be deemed, in its unmodified form, to
constitute a part of this Prospectus or such Registration Statement. The Company
will provide without charge to each person to whom a copy of the Prospectus has
been delivered, and who makes a written or oral request, a copy of any and all
of the foregoing documents incorporated by reference in the Registration
Statement (other than exhibits unless such exhibits are specifically
incorporated by reference into such documents). Requests should be submitted in
writing or by telephone to Paradigm Technology, Inc., 71 Vista Montana, San
Jose, California 95134, telephone (408) 954-0500.
2
<PAGE>
THE COMPANY
Paradigm Technology, Inc. ("Paradigm" or the "Company") designs and markets
high speed, high density SRAM semiconductor devices to meet the needs of
advanced telecommunications devices, networks, workstations, high performance
PCs, advanced modems and complex military/aerospace applications. The Company
focuses on high performance, 10 nanosecond ("ns") and faster SRAMs where its
technology leadership in high speed and high density semiconductors can best be
utilized. For the year ended December 31, 1996, 10ns and faster SRAMs accounted
for approximately 36% of the Company's sales. Paradigm believes its proprietary
CMOS process and design technologies enable it to offer SRAMs with high speeds
and small die sizes, providing the Company with a competitive advantage in its
targeted markets. Using a combination of innovative process architecture and
design know-how, the Company was one of the first companies to introduce high
speed CMOS SRAMs for three successive generations of product densities: 256
kilobit ("K"), one megabit ("M"), and 4M. Paradigm's customers include Hughes
Network Systems, Motorola and US Robotics.
Recent Developments
Sale of Manufacturing Operations. On November 15, 1996, Paradigm sold its
wafer fabrication facility (the "Fab") to Orbit Semiconductor, Inc., a wholly
owned subsidiary of DII Group, Inc. ("Orbit"). The Company received aggregate
consideration of $20 million consisting of $6.6 million in cash, $7.6 million in
debt assumption, and promissory notes in the aggregate principal amount of $5.8
million. The sale of the Fab resulted in a loss of $4.6 million, which was
recorded in the fourth quarter of 1996.
As a result of the sale of the Fab, Paradigm's future needs for wafers will
need to be supplied by third parties. Orbit has agreed to supply the Company a
specified quantity of wafers in exchange for specified credits against the
promissory notes delivered in connection with the sale. The Company is also in
the process of seeking wafer supply from offshore foundries who would provide
8-inch wafers using 0.35 micron process technology. See "Risk Factors-
Dependence on Foundries and Other Third Parties."
Sale of Preferred Stock. On January 23, 1997, Paradigm sold a total of 200
shares of 5% Series A Convertible Redeemable Preferred Stock (the "Preferred
Stock") in a private placement to Vintage Products, Inc. at a price of $10,000
per share, for total proceeds (net of payments to third parties) of
approximately $1,880,000. The Preferred Stock is convertible at the option of
the holder into the number of fully paid and nonassessable shares of Common
Stock as is determined by dividing (A) the sum of (1) $10,000 plus (2) the
amount of all accrued but unpaid or accumulated dividends on the shares of
Preferred Stock being converted by (B) the Conversion Price in effect at the
time of conversion. The "Conversion Price" will be equal to the lower of (i) the
closing sale price of the Common Stock as quoted on the Nasdaq National Market
on the day prior to the date of initial issuance of the Preferred Stock or (ii)
eighty-two percent (82%) of the average closing bid price of a share of Common
Stock as quoted on the Nasdaq National Market over the five (5) consecutive
trading days immediately preceding the date of notice of conversion of the
Preferred Stock. The Preferred Stock is redeemable by the Company under certain
limited circumstances. The Company is registering the maximum number of shares
of Common Stock issuable upon conversion of the Preferred Stock pursuant to the
Registration Statement of which this Prospectus is a part.
The Company was incorporated in California in 1987 and reincorporated in
Delaware in 1995. The Company's executive offices are located at 71 Vista
Montana, San Jose, California 95134 and its telephone number is (408) 954-0500.
3
<PAGE>
When used in this Prospectus, the words "expects," "anticipates,"
"estimates" and similar expressions are intended to identify forward-looking
statements. Such statements, which include statements contained in "Risk
Factors" concerning the timing of availability and functionality of products
under development, product mix, trends in average selling prices, the percentage
of export sales and sales to strategic customers, the adoption or retention of
industry standards, and the availability and cost of products from the Company's
suppliers, are subject to risks and uncertainties, including those set forth
under "Risk Factors" and elsewhere in this Prospectus, that could cause actual
results to differ materially from those projected. These forward-looking
statements speak only as of the date of this Prospectus. The Company expressly
disclaims any obligation or undertaking to release publicly any updates or
revisions to any forward-looking statement contained herein to reflect any
change in the Company's expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
RISK FACTORS
The securities offered hereby involve a high degree of risk. The following
factors should be considered carefully in evaluating an investment in the Shares
of Common Stock offered hereby.
Uncertainty of Future Profitability; Need for Additional Funds. For the
year ended December 31, 1996 the Company reported a net loss of $36.4 million.
The sale of the Company's fabrication facility in November 1996, resulted in a
loss of $4.6 million, which was recorded in the fourth quarter of 1996.
The Company's recent operations have consumed substantial amounts of cash.
The Company believes that cash flow from operations and other existing and
potential sources of liquidity will be sufficient to meet its projected working
capital and other cash requirements through at least the remainder of 1997.
However, there can be no assurance that the Company will not need additional
capital and if so that such capital can be successfully obtained on terms
acceptable to the Company or at all. The sale or issuance of additional equity
or convertible debt securities could result in additional dilution to the
Company's stockholders. There can be no assurance that additional financing, if
required, will be available when needed or, if available, will be on terms
acceptable to the Company.
Fluctuations in Quarterly Results. The Company has experienced significant
quarterly fluctuations in operating results and anticipates that these
fluctuations will continue. These fluctuations have been caused by a number of
factors, including changes in manufacturing yields by contracted manufacturers,
changes in the mix of products sold, the timing of new product introductions by
the Company or its competitors, cancellation or delays of purchases of the
Company's products, the gain or loss of significant customers, the cyclical
nature of the semiconductor industry and the consequent fluctuations in customer
demand for the Company's devices and the products into which they are
incorporated, and competitive pressures on prices. A decline in demand in the
markets served by the Company, lack of success in developing new markets or new
products, or increased research and development expenses relating to new product
introductions could have a material adverse effect on the Company. Moreover,
because the Company sets spending levels in advance of each quarter based, in
part, on expectations of product orders and shipments during that quarter, a
shortfall in revenue in any particular quarter as compared to the Company's plan
could have a material adverse effect on the Company. During 1996, the market for
certain SRAM devices experienced a significant excess supply relative to demand,
which resulted in a significant downward trend in prices. The market for the
Company's products could continue to experience a downward trend in pricing
which could adversely affect the Company's operating results. The Company's
ability to maintain or increase revenues in light of the current downward trend
in product prices will be highly dependent upon its ability to increase unit
sales volumes of existing products and to introduce and sell new products in
quantities sufficient to compensate for the anticipated declines in average
selling prices of existing products. Declining average selling prices will also
adversely affect the Company's gross margins unless the Company is able to
reduce its costs per unit to offset such declines. There can be no assurance
that the Company will be able to increase unit sales volumes, introduce and sell
new products, or reduce its costs per unit.
Dependence on New Products and Technologies. The market for the Company's
products is characterized by rapidly changing technology, short product life
cycles, cyclical oversupply and rapid price erosion. Average selling prices for
many of the Company's products have generally decreased over the products' life
cycles in the past and
4
<PAGE>
are expected to decrease in the future. Accordingly, the Company's future
success will depend, in part, on its ability to develop and introduce on a
timely basis new products and enhanced versions of its existing products which
incorporate advanced features and command higher prices. The success of new
product introductions and enhancements to existing products depends on several
factors, including the Company's ability to develop and implement new product
designs, achievement of acceptable production yields, and market acceptance of
customers' end products. In the past, the Company has experienced delays in the
development of certain new and enhanced products. Based upon the increasing
complexity of both modified versions of existing products and planned new
products, such delays could occur again in the future. Further, the cost of
development can be significant and is difficult to forecast. In addition, there
can be no assurance that any new or enhanced products will achieve or maintain
market acceptance. If the Company is unable to design, develop and introduce
competitive products or to develop new or modified designs on a timely basis,
the Company's operating results will be materially adversely affected.
Dependence on Foundries and Other Third Parties. On November 15, 1996, the
Company sold its wafer fabrication facility (the "Fab") to Orbit Semiconductor,
Inc., a wholly owned subsidiary of DII Group, Inc. ("Orbit"). Following the sale
of the Fab, the Company and Orbit entered into a Wafer Manufacturing Agreement
whereby Orbit will supply a quantity of wafers to the Company over a specified
period of time. The Company is also in the process of seeking wafer supply from
other offshore foundries, and anticipates that it will conduct business with
other foundries by delivering written purchase orders specifying the particular
product ordered, quantity, price, delivery date and shipping terms and,
therefore, such foundries will not be obligated to supply products to the
Company for any specific period, in any specific quantity or at any specified
price, except as may be provided in a particular purchase order. Reliance on
outside foundries involves several risks, including constraints or delays in
timely delivery of the Company's products, reduced control over delivery
schedules, quality assurance, potential costs and loss of production due to
seismic activity, weather conditions and other factors. To the extent a foundry
terminates its relationship with the Company, or should the Company's supply
from a foundry be interrupted or terminated for any other reason, the Company
may not have a sufficient amount of time to replace the supply of products
manufactured by the foundry. Should the Company be unable to obtain a sufficient
supply of products to enable it to meet demand, it could be required to allocate
available supply of its products among its customers. Until recently, there has
been a worldwide shortage of advanced process technology foundry capacity and
there can be no assurance that the Company will obtain sufficient foundry
capacity to meet customer demand in the future, particularly if that demand
should increase. The Company is continuously evaluating potential new sources of
supply. However, the qualification process and the production ramp-up for
additional foundries could take longer than anticipated, and there can be no
assurance that such sources will be able or willing to satisfy the Company's
requirements on a timely basis or at acceptable quality or per unit prices.
Constraints or delays in the supply of the Company's products, whether
because of capacity constraints, unexpected disruptions at the current or future
foundries or assembly houses, delays in obtaining additional production at the
existing foundry or in obtaining production from new foundries, shortages of raw
materials, or other reasons, could result in the loss of customers and other
material adverse effects on the Company's operating results, including effects
that may result should the Company be forced to purchase products from higher
cost foundries or pay expediting charges to obtain additional supply.
Semiconductor Industry; SRAM Market. The semiconductor industry is highly
cyclical and has been subject to significant economic downturns at various
times, characterized by diminished product demand, production overcapacity and
accelerated erosion of average selling prices. During 1996, the market for
certain SRAM devices experienced an excess supply relative to demand which
resulted in a significant downward trend in prices. The Company could continue
to experience a downward trend in pricing which could adversely affect the
Company's operating margins. The selling prices that the Company is able to
command for its products are highly dependent on industry-wide production
capacity and demand, and as a consequence the Company could experience rapid
erosion in product pricing which is not within the control of the Company and
which could adversely effect the Company's operating results. The Company
expects that additional SRAM production capacity will become increasingly
available in the foreseeable future, and such additional capacity may adversely
affect the Company's margins and competitive position. In addition, the Company
may experience period-to-period fluctuations in operating results because of
general semiconductor industry conditions, overall economic conditions, or other
factors. The Company's business
5
<PAGE>
is also subject to the risks associated with the imposition of legislation
and regulations relating to the import or export of semiconductor products.
Litigation. On August 12, 1996, a securities class action lawsuit was filed
in Santa Clara Superior Court against the Company and certain of its officers
and directors (the "Paradigm Defendants"). The class alleged by plaintiffs
consists of purchasers of the Company's common stock from November 20, 1995 to
March 22, 1996, inclusive. The complaint alleges negligent misrepresentation,
fraud and deceit, breach of fiduciary duty, and violations of certain provisions
of the California Corporate Securities Law and Civil Code. The plaintiffs seek
an unspecified amount of compensatory and punitive damages. Plaintiffs allege,
among other things, that the Paradigm Defendants wrongfully represented that the
Company would have protection against adverse market conditions in the
semiconductor market based on the Company's focus on high speed, high
performance semiconductor products. The Paradigm Defendants intend to vigorously
defend the action. On September 30, 1996, the Paradigm Defendants filed a
demurrer seeking to have plaintiffs' entire complaint dismissed with prejudice.
The Paradigm Defendants responded to the complaint by filing a demurrer which
challenged the legal sufficiency of all causes of action. On December 12, 1996,
the Court sustained the demurrer as to all of the causes of action except for
violation of certain provisions of the California Corporate Securities Law and
Civil Code. The Court, however, granted plaintiffs leave to amend the complaint
to attempt to cure the defects which caused the Court to sustain the demurrer.
Plaintiffs failed to amend within the allotted time and independently expressed
an intent to prosecute only the fourth cause of action. On January 8, 1997, the
Paradigm Defendants filed an answer to the complaint denying any liability for
the acts and damages alleged by the plaintiffs. Plaintiffs have served the
Paradigm Defendants with a first set of requests to produce documents, to which
the Paradigm Defendants are currently responding. Plaintiffs have also filed a
motion for class certification which is set for hearing on April 15, 1997. No
other motions have been filed with the court by plaintiffs or defendants, and no
discovery has yet been conducted. There can be no assurance that the Company
will be successful in such defense. Even if Paradigm is successful in such
defense, it may incur substantial legal fees and other expenses related to this
claim. If unsuccessful in the defense of any such claim, the Company's business,
operating results and cash flows could be materially adversely affected.
Product and Customer Concentration; Dependence on Telecommunications and
Computer Industries. Currently, substantially all of the Company's sales are
derived from the sale of SRAM products. Additionally, a substantial portion of
the Company's sales is derived from a relatively small number of customers. For
the year ended December 31, 1995, Motorola accounted for 28% of the Company's
sales, and for the year ended December 31, 1996, Motorola, All American
Semiconductor and Micron Technology accounted for 25%, 13% and 13%,
respectively, of the Company's sales. Substantially all of the Company's
products are incorporated into telecommunications and computer-related products.
The telecommunications and computer industries have recently experienced strong
unit sales growth, which has increased demand for integrated circuits, including
the memory products offered by the Company. However, these industries have from
time to time experienced cyclical, depressed business conditions. Such industry
downturns have historically resulted in reduced product demand and declining
average selling prices. The Company's business and operating results could be
materially and adversely affected by a downturn in the telecommunications or
computer industries in the future.
Competition. The semiconductor industry is intensely competitive and is
characterized by rapidly changing technology, short product life cycles,
cyclical oversupply and rapid price erosion. The Company competes with large
domestic and international semiconductor companies, most of which have
substantially greater financial, technical, marketing, distribution, and other
resources than the Company. The Company's principal competitors in the high
performance SRAM market include Motorola and Micron Technology. Other
competitors in the SRAM market include Alliance Semiconductor, Cypress
Semiconductor, Integrated Device Technology, Integrated Silicon Solution,
Samsung and numerous other large and emerging semiconductor companies. In
addition, other manufacturers can be expected to enter the high speed, high
density SRAM market. The Company has also licensed the design and process
technology for substantially all of its current products, including certain of
its 256K, 1M and 4M products, to NKK Corporation ("NKK") and in the future may
compete with NKK with respect to all of such products in certain Pacific Rim
countries, North America and Europe and, as to certain of its 256K and 1M
products, in the rest of the world. NKK has recently commenced production of
products using the Company's design and process technologies, and therefore may
become a more significant competitor of the Company. Paradigm has also licensed
to Atmel Corporation ("Atmel") the right to produce certain of its SRAM
products, and as a result is likely to compete with
6
<PAGE>
Atmel with respect to such products. Because Atmel has greater resources
than the Company and has foundry capacity, any such competition could adversely
affect the Company. To the extent that the Company enters into similar
arrangements with other companies, it may compete with such companies as well.
The ability of the Company to compete successfully depends on elements
outside its control, including the rate at which customers incorporate the
Company's products into their systems, the success of such customers in selling
those systems, the Company's protection of its intellectual property, the
number, nature, and success of its competitors and their product introductions,
and general market and economic conditions. In addition, the Company's success
will depend in large part on its ability to develop, introduce, and manufacture
in a timely manner products that compete effectively on the basis of product
features (including speed, density, die size, and packaging), availability,
quality, reliability, and price, together with other factors including the
availability of sufficient manufacturing capacity and the adequacy of production
yields. There is no assurance that the Company will be able to compete
successfully in the future.
Dependence on Patents, Licenses and Intellectual Property; Potential
Litigation. The Company intends to continue to pursue patent, trade secret, and
mask work protection for its semiconductor process technologies and designs. To
that end, the Company has obtained certain patents and patent licenses and
intends to continue to seek patents on its inventions and manufacturing
processes, as appropriate. The process of seeking patent protection can be long
and expensive, and there is no assurance that patents will be issued from
currently pending or future applications or that, if patents are issued, they
will be of sufficient scope or strength to provide meaningful protection or any
commercial advantage to the Company. In particular, there can be no assurance
that any patents held by the Company will not be challenged, invalidated, or
circumvented, or that the rights granted thereunder will provide competitive
advantage to the Company. The Company also relies on trade secret protection for
its technology, in part through confidentiality agreements with its employees,
consultants and third parties. There can be no assurance that these agreements
will not be breached, that the Company will have adequate remedies for any
breach, or that the Company's trade secrets will not otherwise become known to
or independently developed by others. In addition, the laws of certain
territories in which the Company's products are or may be developed,
manufactured, or sold may not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States.
There has been substantial litigation regarding patent and other
intellectual property rights in the semiconductor industry. In the future,
litigation may be necessary to enforce patents issued to the Company, to protect
trade secrets or know-how owned by the Company, or to defend the Company against
claimed infringement of the rights of others and to determine the scope and
validity of the proprietary rights of others. The Company has from time to time
received, and may in the future receive, communications alleging possible
infringement of patents or other intellectual property rights of others. Any
such litigation could result in substantial cost to and diversion of effort by
the Company, which could have a material adverse effect on the Company. Further,
adverse determinations in such litigation could result in the Company's loss of
proprietary rights, subject the Company to significant liabilities to third
parties, require the Company to seek licenses from third parties, or prevent the
Company from manufacturing or selling its products, any of which could have a
material adverse effect on the Company.
International Operations. Approximately 28% and 25% of the Company's sales
in the years ended December 31, 1995 and 1996, respectively, were attributable
to sales outside the United States, primarily in Asia and Europe, and the
Company expects that international sales will continue to represent a
significant portion of its sales. In addition, the Company expects that a
significant portion of its products will be manufactured by independent third
parties in Asia. Therefore, the Company is subject to the risks of conducting
business internationally, and both manufacturing and sales of the Company's
products may be adversely affected by political and economic conditions abroad.
Protectionist trade legislation in either the United States or foreign
countries, such as a change in the current tariff structures, export compliance
laws, or other trade policies, could adversely affect the Company's ability to
have products manufactured or sell products in foreign markets. The Company
cannot predict whether quotas, duties, taxes, or other charges or restrictions
will be imposed by the United States, Hong Kong, Japan, Taiwan, or other
countries upon the importation or exportation of the Company's products in the
future, or what effect any such actions would have on its relationship with NKK
or other manufacturing sources, or its general business, financial condition and
results of operations. In addition, there can be no assurance that the Company
will not be adversely affected by
7
<PAGE>
currency fluctuations in the future. The prices for the Company's products
are denominated in dollars. Accordingly, any increase in the value of the dollar
as compared to currencies in the Company's principal overseas markets would
increase the foreign currency-denominated sales prices of the Company's
products, which may negatively affect the Company's sales in those markets.
Currency fluctuations in the future may also increase the manufacturing costs of
the Company's products. Although the Company has not to date experienced any
material adverse effect on its operations as a result of such international
risks, there can be no assurance that such factors will not adversely impact the
Company's general business, financial condition and results of operations.
Employees; Management of Growth. The Company's future success will be
heavily dependent upon its ability to attract and retain qualified technical,
managerial, marketing and financial personnel. The Company has experienced a
high degree of turnover in personnel, including at the senior and middle
management levels. The competition for such personnel is intense and includes
companies with substantially greater financial and other resources to offer such
personnel. There can be no assurance that the Company will be able to attract
and retain the necessary personnel, or successfully manage its expansion, and
any failure to do so could have a material adverse effect on the Company.
Potential Volatility of Stock Price. The trading price of the Company's
Common Stock is subject to wide fluctuations in response to variations in
operating results of the Company and other semiconductor companies, actual or
anticipated announcements of technical innovations or new products by the
Company or its competitors, general conditions in the semiconductor industry and
the worldwide economy, and other events or factors. The Company's stock traded
from a high of $37.25 in August 1995 to a low of $1.94 in February 1997. In
addition, the stock market has in the past experienced extreme price and volume
fluctuations, particularly affecting the market prices for many high technology
companies, and these fluctuations have often been unrelated to the operating
performance of the specific companies. These market fluctuations may adversely
affect the market price of the Company's Common Stock.
Antitakeover Effect of Certain Charter Provisions. Certain provisions of
the Company's Certificate of Incorporation and Bylaws and of Delaware law could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers at a
price above the then current market value of the Common Stock. Such provisions
may also inhibit fluctuations in the market price of the Common Stock that could
result from takeover attempts. In addition, the Board of Directors, without
further stockholder approval, may issue Preferred Stock that could have the
effect of delaying or preventing a change in control of the Company. The
issuance of Preferred Stock could also adversely affect the voting power of the
holders of Common Stock, including the loss of voting control to others.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares by
the Selling Stockholders.
8
<PAGE>
SELLING STOCKHOLDERS
<TABLE>
The following table sets forth certain information as of February 1,
1997 regarding the beneficial ownership of Common Stock by each of the Selling
Stockholders and the Shares offered hereby by such Selling Stockholders.
<CAPTION>
Shares Shares
Beneficially Number of Beneficially
Owned Prior Shares Owned After
to Offering(1) Being Offered Offering(1)
------------------- ------------- -------------------
Number Percent Number Percent
------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
Vintage Products, Inc............... 1,600,000 22.1% 1,600,000 -- --%
Arlozorv Street
Telaviv, Israel
Atmel Corporation................... 853,050 11.8% 853,050 -- --
2125 O'Nel Drive
San Jose, CA 95731
Angeliki Perlegos................... 14,000 * 14,000 -- --
Kris Chellam........................ 12,000 * 12,000 -- --
Tsung-Ching Wu...................... 12,000 * 12,000 -- --
Michael Ross........................ 10,000 * 10,000 -- --
Krish Panu.......................... 5,000 * 5,000 -- --
Jack Peckham........................ 5,000 * 5,000 -- --
Steve Schumann...................... 5,000 * 5,000 -- --
Mike Sisois......................... 5,000 * 5,000 -- --
Graham Turner....................... 5,000 * 5,000 -- --
Gust Perlegos....................... 3,000 * 3,000 -- --
Mary Perlegos....................... 3,000 * 3,000 -- --
Peter Babalis....................... 2,500 * 2,500 -- --
Ralph Bohannon...................... 2,500 * 2,500 -- --
Gladwyn D'Souza..................... 2,500 * 2,500 -- --
James Hu............................ 2,500 * 2,500 -- --
Saroj Pathak........................ 2,500 * 2,500 -- --
Charles Schleich.................... 2,500 * 2,500 -- --
Gust Perlegos as Custodian.......... 2,000 * 2,000 -- --
for Archie Perlegos
Gust Perlegos as Custodian.......... 2,000 * 2,000 -- --
for Nick Perlegos
Gust Perlegos as Custodian.......... 2,000 * 2,000 -- --
for Pete Perlegos
Norman Hall......................... 1,250 * 1,250 -- --
--------- ---------
Total......................... 2,554,300 2,554,300
- -------------
* Less than 1%.
(1) Information with respect to beneficial ownership is based upon
information obtained from the Selling Stockholders.
</TABLE>
9
<PAGE>
Because a Selling Stockholder may offer by this Prospectus all or some part
of the Common Stock which he or she holds, no estimate can be given as of the
date hereof as to the amount of Common Stock actually to be offered for sale by
a Selling Stockholder or as to the amount of Common Stock that will be held by a
Selling Stockholder upon the termination of such offering. See "Plan of
Distribution."
PLAN OF DISTRIBUTION
Sales of the Shares may be effected by or for the account of the Selling
Stockholders from time to time in transactions (which may include block
transactions) on the Nasdaq National Market, in negotiated transactions, through
a combination of such methods of sale, or otherwise, at fixed prices that may be
changed, at market prices prevailing at the time of sale or at negotiated
prices. The Selling Stockholders may effect such transactions by selling the
Shares directly to purchasers, through broker-dealers acting as agents for the
Selling Stockholders, or to broker-dealers who may purchase Shares as principals
and thereafter sell the Shares from time to time in transactions (which may
include block transactions) on the Nasdaq National Market, in negotiated
transactions, through a combination of such methods of sale, or otherwise. In
effecting sales, broker-dealers engaged by a Selling Stockholder may arrange for
other broker-dealers to participate. Such broker-dealers, if any, may receive
compensation in the form of discounts, concessions or commissions from the
Selling Stockholders and/or the purchasers of the Shares for whom such
broker-dealers may act as agents or to whom they may sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of
customary commissions).
The Selling Stockholders and any broker-dealers, agents or underwriters
that participate with the Selling Stockholders in the distribution of the Shares
may be deemed to be "underwriters" within the meaning of the Securities Act. Any
commissions paid or any discounts or concessions allowed to any such persons,
and any profits received on the resale of the Shares purchased by them may be
deemed to be underwriting commissions or discounts under the Securities Act.
The Company has agreed to bear all expenses of registration of the Shares
(other than fees and expenses, if any, of counsel or other advisors to the
Selling Stockholders). Any commissions, discounts, concessions or other fees, if
any, payable to broker-dealers in connection with any sale of the Shares will be
borne by the Selling Stockholder selling such Shares.
LEGAL MATTERS
Certain legal matters with respect to the validity of Common Stock offered
hereby are being passed upon for the Company by Pillsbury Madison & Sutro LLP,
Menlo Park, California.
EXPERTS
The financial statements incorporated in this Prospectus by reference to
the Annual Report on Form 10-K of Paradigm Technology, Inc. for the year ended
December 31, 1995, have been so incorporated in reliance on the report (which
contains an explanatory paragraph related to the Company's reorganization on
June 21, 1994) of Price Waterhouse LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
10
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses payable by the
Registrant in connection with the sale and distribution of the securities being
registered hereby. Normal commission expenses and brokerage fees are payable
individually by the Selling Stockholders. All amounts are estimated except the
Securities and Exchange Commission registration fee.
<TABLE>
<CAPTION>
Amount
------
<S> <C>
SEC registration fee................................ $ 1,524.84
Accounting fees and expenses........................ 6,000.00
Legal fees and expenses............................. 15,000.00
Miscellaneous fees and expenses..................... 1,475.16
-----------
Total....................................... $ 24,000.00
===========
</TABLE>
Item 15. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Act"). Article VII of the Registrant's
Amended and Restated Certificate of Incorporation (Exhibit 3.1 to the
Registrant's Annual Report on Form 10-K for the year ended December 31, 1995)
provides for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
Delaware General Corporation Law. The Registrant has also entered into
agreements with its directors and officers that will require the Registrant,
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors or officers to the fullest
extent not prohibited by law.
Item 16. Exhibits
Exhibit
Number Description of Document
------- -----------------------
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Pillsbury Madison & Sutro
LLP (included in its opinion filed
as Exhibit 5.1 to this Registration
Statement).
24.1 Power of Attorney (see page II-3).
Item 17. Undertakings
Insofar as indemnification for liabilities arising under the Act, may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy
II-1
<PAGE>
as expressed in the Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in this
Registration Statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act") that are incorporated by reference in
this Registration Statement.
(2) That, for the purpose of determining any liability under the Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the Act,
each filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Exchange Act that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3, and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Jose, State of California, on February 10, 1997.
PARADIGM TECHNOLOGY, INC.
By /s/ MICHAEL GULETT
---------------------------------------
Michael Gulett
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Michael Gulett and Douglas Schirle, and each of
them, his true and lawful attorneys-in-fact and agents, each with full power of
substitution and resubstitution, for him and in his or her name, place and
stead, in any and all capacities, to sign any and all amendments, including
post-effective amendments, to this Registration Statement and any registration
statement relating to the offering covered by this Registration Statement and
filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, and
to file the same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that each of said attorneys-in-fact and agents or
their substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ MICHAEL GULETT President and Chief Executive
- ------------------------- Officer (Principal Executive Officer) February 10, 1997
Michael Gulett and Director
/s/ DOUGLAS SCHIRLE Vice President of Finance and Chief February 10, 1997
- ------------------------- Financial Officer (Principal Financial
Douglas Schirle Officer)
/s/ ATIQ RAZA Director February 10, 1997
- -------------------------
Atiq Raza
/s/ GEORGE COLLINS Director February 10, 1997
- -------------------------
George Collins
/s/ JAMES KOCHMAN Director February 10, 1997
- --------------------------
James Kochman
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
Exhibit
- -------
Number Description of Document
- ------- -----------------------
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in its
opinion filed as Exhibit 5.1 to this Registration
Statement).
24.1 Power of Attorney (see page II-3).
EXHIBIT 5.1
LAW OFFICES OF
PILLSBURY MADISON & SUTRO LLP
LOS ANGELES POST OFFICE BOX 7880 MENLO PARK
NEW YORK SAN FRANCISCO, CALIFORNIA 94120 ORANGE COUNTY
SACRAMENTO TELEPHONE (415) 983-1000 SAN DIEGO
SAN FRANCISCO TELECOPIER (415) 983-1200 SAN JOSE
WASHINGTON, D.C.
TOKYO
February 10, 1997
Paradigm Technology, Inc.
71 Vista Montana
San Jose, CA 95134
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Paradigm Technology, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended, of 2,554,300 shares of Common Stock, $.01
par value (the "Common Stock"), of the Company, to be offered and sold by
certain stockholders of the Company (the "Selling Stockholders"). In this regard
we have participated in the preparation of a Registration Statement on Form S-3
relating to such 2,554,300 shares of Common Stock. (Such Registration Statement,
as amended, is herein referred to as the "Registration Statement.")
We are of the opinion that the shares of Common Stock to be offered and
sold by the Selling Stockholders have been duly authorized and legally issued
and are fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the use of our name under the caption "Legal
Matters" in the Registration Statement and in the Prospectus included therein.
Very truly yours,
PILLSBURY MADISON & SUTRO LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of our report dated
January 19, 1996, which appears on Page 19 of the 1995 Annual Report to
Stockholders of Paradigm Technology, Inc., which is incorporated by reference in
Paradigm Technology, Inc.'s Annual Report on Form 10-K for the year ended
December 31, 1995. We also consent to the reference to us under the heading
"Experts" in such Prospectus.
PRICE WATERHOUSE LLP
San Jose, California
February 6, 1997
