AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 9, 1998
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
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
694 Tasman Drive
Milpitas, CA 95035
(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.
694 Tasman Drive
Milpitas, CA 95035
(408) 954-0500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPY TO:
JORGE DEL CALVO
Pillsbury Madison & Sutro LLP
2550 Hanover Street
Palo Alto, CA 94304
---------------
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>
CALCULATION OF REGISTRATION FEE
<CAPTION>
===================================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER SHARE OFFERING PRICE REGISTRATION FEE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par value 1,600,000 shares(1) $1.3564(2) $2,170,240(2) $640.22
===================================================================================================================
(1) Includes up to a maximum of 500,000, 550,000 and 550,000 shares of Common
Stock, issuable upon conversion of or otherwise with respect to the
Registrant's 5% Series A Convertible Redeemable Preferred Stock, 5% Series
B Convertible Redeemable Preferred Stock and 5% Series C Convertible
Preferred Stock, respectively.
(2) 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 SmallCap Market on June
4, 1998.
</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 JUNE 9, 1998
PROSPECTUS
- ---------- PARADIGM TECHNOLOGY, INC.
1,600,000 Shares of Common Stock
--------------
This Prospectus covers 1,600,000 shares (the "Shares") of Common Stock,
par value $.01 per share (the "Common Stock"), of Paradigm Technology, Inc.
("Paradigm" or the "Company") offered for the account of stockholders of the
Company (the "Selling Stockholders").
The Shares offered hereby by a Selling Stockholder consists of up to a
maximum of 500,000 shares of Common Stock issuable upon conversion of the
Company's 5% Series A Convertible Redeemable Preferred Stock (the "Series A
Preferred Stock"), 550,000 shares of Common Stock issuable upon conversion of
the Company's 5% Series B Convertible Redeemable Preferred Stock (the "Series B
Preferred Stock") and 550,000 shares of Common Stock issuable upon conversion of
the Company's 5% Series C Convertible Preferred Stock (the "Series C Preferred
Stock"). For purposes of determining the number of Shares to be offered by such
Selling Stockholder for this Prospectus, the number of shares of Common Stock
calculated to be issuable upon conversion of the Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock is based on an extremely
low conversion price as required by each of the Stock Purchase Agreements with
Vintage Products, Inc. and Lyford Ltd. Such conversion price is used merely for
the purposes of setting forth a number for this Prospectus and is less than the
average closing bid price over the five consecutive trading days preceding June
4, 1998 which was $1.3564. The number of shares of Common Stock issuable upon
conversion of the Series A Preferred Stock, Series B Preferred Stock and Series
C Preferred Stock is subject to adjustment depending on the date of the
conversion thereof and could be materially less or more than such estimated
amount depending on factors which cannot be predicted by the Company including,
among other things, the future market price of the Common Stock. See "The
Company--Recent Developments" and "Risk Factors--Potential Volatility of Stock
Price."
The Shares may be offered by the Selling Stockholders from time to time
in transactions (which may include block transactions) on the Nasdaq SmallCap
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 the Selling Stockholders will be borne by
the Selling Stockholders.
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 SmallCap Market under the
symbol "PRDM." On June 4, 1998, the last reported sale price of the Common Stock
reported on the Nasdaq SmallCap Market was $1.344 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 June 9, 1998
<PAGE>
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION............................................ 2
DOCUMENTS INCORPORATED BY REFERENCE.............................. 3
RISK FACTORS..................................................... 4
THE COMPANY...................................................... 12
PRICE RANGE OF COMMON STOCK...................................... 15
USE OF PROCEEDS.................................................. 15
SELLING STOCKHOLDERS............................................. 16
PLAN OF DISTRIBUTION............................................. 17
LEGAL MATTERS.................................................... 17
EXPERTS.......................................................... 17
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 statements and other information with
the Securities and Exchange Commission (the "SEC" or the "Commission"). Such
reports, proxy statements and other information filed by the Company with the
Commission may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
as well as at the following regional offices of the Commission: Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661; and New York Regional Office, 7 World Trade Center, Suite 1300, New York,
New York 10048. Copies of such material may also be obtained from the Commission
at prescribed rates by writing to the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a World Wide Web site that contains reports, proxy statements and
other information regarding registrants that file electronically with the
Commission and the address of such site is http://www.sec.gov. The Company's
Common Stock is listed on the Nasdaq SmallCap Market and reports and other
information concerning the Company may be inspected at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits thereto, referred to
as 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 of which this Prospectus is a part, certain portions of which have
been omitted pursuant to the rules and regulations of the Commission, and to
which portions reference is hereby made. 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 or in any document incorporated by reference in this Prospectus as to
the contents of any contract or other document referred to herein or therein 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.
-2-
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents previously filed with the Commission are hereby
incorporated by reference into this Prospectus:
(1) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 as amended by Form 10-K Amendment No. 1 filed
on June 3, 1998;
(2) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 29, 1998;
(3) the Company's Current Report on Form 8-K, dated March 9, 1998 and
filed with the Commission on March 10, 1998;
(4) the Company's Current Report on Form 8-K filed with the
Commission on May 5, 1998; and
(5) the description of the Company's Common Stock contained in its
Registration Statement on Form 8-A.
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., 694 Tasman Drive,
Milpitas, California 95035, telephone (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. The
Company's recent operations have consumed substantial amounts of cash and have
generated net losses. The Company believes that it will require additional cash
infusions from private placements or other equity financings to meet the
Company's projected working capital and other cash requirements in 1998. 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.
CONTINUING LOSSES AND DOUBTFUL ABILITY TO CONTINUE AS A GOING CONCERN.
As a result of the Company's net losses, and the Company's dependance on
additional financing, the Company's independent accountants' report on the
Company's December 31, 1997 financial statements includes an explanatory
paragraph indicating that these matters raise a substantial doubt about the
Company's ability to continue as a going concern. The Company is seeking to
raise additional equity. However, there can be no assurance that the Company's
efforts will be successful.
DILUTION OF COMMON STOCK. The issuance of additional shares of Common
Stock upon conversion of the Series A Preferred Stock, Series B Preferred Stock
and Series C Preferred Stock (collectively, the "Preferred Stock") will have a
dilutive effect on the Common Stock outstanding prior to such issuances.
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.
DECLINING SRAM PRICES. Beginning in late 1995 and continuing into 1996,
1997 and 1998, 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
-4-
<PAGE>
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.
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 and throughout 1997, the market for certain SRAM
devices experienced an excess supply relative to demand which resulted in a
significant downward trend in prices. The Company expects to 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 is also subject to the risks associated with the
imposition of legislation and regulations relating to the import or export of
semiconductor products.
RISKS RELATING TO LOW-PRICED STOCKS. Prior to August 22, 1997, the
Company's Common Stock was listed on the Nasdaq National Market (the "NNM"). In
order for continued listing on the NNM, however, the Company was required to,
maintain (1) $4,000,000 in net tangible assets because it has sustained losses
from continuing operations and/or net losses in three of its four most recent
fiscal years, (2) a $2,000,000 market value of the public float, (3) $1,000,000
in total capital and surplus, (4) a minimum bid price of $1.00 per share and (5)
two marketmakers. As of June 30, 1997, the Company was not in compliance with
items (1) and (4) above.
On July 15, 1997, the Nasdaq Stock Market ("Nasdaq") staff notified the
Company of a bid price deficiency and provided a 90-day grace period within
which to regain compliance with this requirement. On August 8, 1997, Nasdaq,
based on a review of the Company's trading history from July 8 to August 8,
1997, indicated that the Company had regained compliance with the minimum
closing bid price requirement of $1.00. On August 20, 1997, Nasdaq informed the
Company that due to its failure to comply with the terms of the maintenance
qualifications exception granted to the Company, the Company's Common Stock
would be removed from the NNM and listed on the SCM effective August 22, 1997,
pursuant to a waiver to the initial inclusion bid price requirement.
On August 22, 1997, the Company announced that effective on such date
the Company's Common Stock, formerly listed on the NNM, would be listed on the
SmallCap Market ("SCM"), pursuant to a waiver to the initial inclusion bid price
requirement. The Company's continued listing on the SCM is contingent upon the
Company meeting the maintenance requirements.
Substantial changes in Nasdaq initial listing and maintenance
requirements became effective on February 23, 1998. These changes materially
enhance the quantitative threshold criteria necessary to qualify for initial
entry and continued listing on Nasdaq. In addition, corporate governance
requirements, formerly applicable to the NNM for the first time, have been
extended to the SCM. These changes require that companies listed on the SCM
maintain (i) $2,000,000 in net tangible assets (total assets less total
liabilities and goodwill), a market capitalization of $35,000,000, or $500,000
in net income for two of the last three years, (ii) a $1,000,000 market value
for the public float, (iii) two market-makers, and (iv) a minimum bid price of
$1.00 per share.
After the new maintenance requirements became effective, the Company was
notified that it was not in compliance with the new minimum bid price
requirement and that the Company would have 90-calendar days, which expire May
28, 1998, in order to regain compliance. The Company may regain compliance if
its securities trade at or above the minimum bid price requirement for at least
10-consecutive trade days. If after 90 days the Company has not regained
compliance, Nasdaq will issue a delisting letter and the Company may request a
hearing at that time, which will generally stay delisting until the hearing has
been completed. The Company's stockholders, at a Special
-5-
<PAGE>
Meeting of Stockholders held on May 1, 1998, approved a ten-for-one reverse
stock split of the Company's Common Stock such that every ten shares were
combined into one share of Common Stock (par value $0.01 per share). The stock
split increased the price per share of the Company's Common Stock sufficiently
to bring such price over $1.00 per share for a period of more than ten trading
days. Although the Company's Common Stock has traded above $1.00 per share since
the reverse stock split was effectuated, no assurances can be made that such
stock will continue to trade above $1.00 per share or that the Company will be
in compliance with the Nasdaq listing requirements.
If the Company's securities are delisted from Nasdaq, trading, if any,
of the Company's securities would thereafter have to be conducted in the
non-Nasdaq over-the-counter market. In such event, an investor could find it
more difficult to dispose of, or to obtain accurate quotations as to the market
value of, the Company's securities. In addition, if the Common Stock were to
become delisted from trading on Nasdaq and the trading price of the Common Stock
were to remain below $5.00 per share, trading in the Company's Common Stock
would also be subject to the requirements of certain rules promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require
additional disclosure by broker-dealers in connection with any trades involving
a stock defined as a penny stock (generally, any non-Nasdaq equity security that
has a market price of less than $5.00 per share, subject to certain exceptions.)
The additional burdens imposed upon broker-dealers by such requirements could
discourage broker-dealers from effecting transactions in the Common Stock, which
could severely limit the market liquidity of the Common Stock and the ability of
investors to trade the Company's Common Stock. See "--Risks Relating to
Low-Priced Stock; Possible Effect of "Penny Stock" Rules on Liquidity for the
Company's Securities." The Company's Common Stock continues to be below the
$1.00 minimum bid price requirement. If the Company's securities remain below
the minimum bid price requirement, it could result in the Company's securities
being delisted from Nasdaq. There can be no assurances that the Company's
securities will meet the minimum bid price requirements or any of the other
continued listing requirements in the future.
RISKS RELATING TO LOW-PRICED STOCK; POSSIBLE EFFECT OF "PENNY STOCK"
RULES ON LIQUIDITY FOR THE COMPANY'S SECURITIES. If the Company's securities
were not listed on a national securities exchange nor listed on a qualified
automated quotation system, they may become subject to Rule 15g-9 under the
Exchange Act, which imposes additional sales practice requirements on
broker-dealers that sell such securities to persons other than established
customers and "accredited investors" (generally, individuals with a net worth in
excess of $1,000,000 or annual incomes exceeding $200,000 or $300,000 together
with their spouse). For transactions covered by Rule 15g-9, a broker-dealer must
make a special suitability determination for the purchaser and have received the
purchaser's written consent to the transaction prior to sale. Consequently, such
Rule may affect the ability of broker-dealers to sell the Company's securities
and may affect the ability of purchasers to sell any of the Company's securities
in the secondary market.
The Commission has adopted regulations that define a "penny stock" to be
any equity security that has a market price (as therein defined) of less than
$5.00 per share or with an exercise price of less than $5.00 per share, subject
to certain exceptions. For any transaction involving a penny stock, unless
exempt, the rules require delivery, prior to any transaction in a penny stock,
of a disclosure schedule prepared by the Commission relating to the penny stock
market. Disclosure is also required to be made about sales commissions payable
to both the broker-dealer and the registered representative and current
quotations for the securities. Finally, monthly statements are required to be
sent disclosing recent price information for the penny stock held in the account
and information on the limited market in penny stock.
The foregoing required penny stock restrictions will not apply to the
Company's securities if the Company meets certain minimum net tangible assets or
average revenue criteria. If applicable, there can be no assurance that the
Company's securities will qualify for exemption from the penny stock
restrictions. In any event, even if the Company's securities were exempt from
such restrictions, the Company would remain subject to Section 15(b)(6) of the
Exchange Act, which gives the Commission the authority to restrict any person
from participating in a distribution of penny stock, if the Commission finds
that such a restriction would be in the public interest.
If the Company's securities were subject to the rules on penny stocks,
the market liquidity for the Company's securities could be materially adversely
affected.
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<PAGE>
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 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. The Company is 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.
LITIGATION. On August 12, 1996, a securities class action lawsuit was
filed in Santa Clara County Superior Court against the Company and Michael
Gulett, Robert McClelland, Richard A. Veldhouse and Chiang Lam (the "Paradigm
Defendants") and PaineWebber, Inc. The class alleged by Plaintiffs consisted of
purchasers of the Company's Common Stock from November 20, 1995 to March 22,
1996, inclusive (the "Class Period"). 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.
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. Plaintiffs allege that the
Paradigm Defendants made these alleged misrepresentations to enable: (i)
insiders to sell their shares at a profit, (ii) Paradigm's stock price to be
positioned for a secondary offering of 243,250 shares of stock (which was later
withdrawn) and (iii) Paradigm to acquire NewLogic (which acquisition was later
accomplished in exchange for
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31,439 shares of Paradigm's Common Stock and cash). Plaintiffs allege defendants
McClelland, McDonald and Veldhouse respectively acquired 55, 54 and 63 shares of
the Company's stock on January 2, 1996 at a price of $114.80 per share and sold
all of the stock on the same day at a price of $135.00 per share. Plaintiffs
further allege (i) defendant McClelland sold 700 shares of Paradigm's stock on
or about February 22, 1996 at a price of $145.00 per share, (ii) defendant Lam
sold 313 shares of Paradigm's stock on or about February 23, 1996 at a price of
$150.00 per share, which Shares were acquired by exercise of options on January
2, 1996 at a price of $5.00 per share and (iii) defendant McClelland sold 100
share of the Company's stock on February 26, 1996 at a price of $165.00. 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. On December 12, 1996, the Court
sustained the demurrer as to all of the causes of action against Michael Gulett
and as to all causes of actions, except for violation of certain provisions of
the California Corporate Securities Law, against the remaining Paradigm
Defendants. 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. On January 8, 1997, the
Paradigm Defendants filed an answer to the complaint denying any liability for
the acts and damages alleged by Plaintiffs. Plaintiffs have since served the
Paradigm Defendants with discovery requests for production of documents and
interrogatories, to which the Paradigm Defendants have responded. Plaintiffs
have also subpoenaed documents from various third parties. The Paradigm
Defendants have served Plaintiffs with an initial set of discovery requests, to
which Plaintiffs have responded. The Paradigm Defendants also took the
depositions of the named Plaintiffs on April 9, 1997. On January 15, 1997,
Plaintiffs filed a motion to certify the matter as a class action. Plaintiffs
sought by their motion to certify a nationwide class of those who purchased the
Company's stock during the Class Period. After several hearings and
continuances, on February 9, 1998 the Court certified a class consisting only of
California purchasers of the Company's stock during the Class Period. On April
9, 1998, the Court granted Plaintiffs' motion to amend their complaint to
incorporate factual allegations derived from the May 19, 1997 action described
below. The Paradigm Defendants' response to the amended complaint is due to be
filed on June 17, 1998. There can be no assurance that the Company will be
successful in the defense of this action. Even if the Company 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.
On February 21, 1997, an additional purported class action lawsuit was
filed in Santa Clara County Superior Court against the Company and Michael
Gulett, Robert McClelland, Richard A. Veldhouse, Chiang Lam, PaineWebber, Inc.
and Smith Barney (the "Paradigm Defendants"), with causes of action and factual
allegations essentially identical to those of the August 12, 1996 class action
lawsuit. Prior to the hearing on the Paradigm Defendants' demurrer to the
initial complaint, Plaintiff amended his complaint to incorporate factual
allegations derived from the May 19, 1997 lawsuit described below. The Paradigm
Defendants filed a demurrer to the amended complaint, which was heard on
September 9, 1997. On September 10, 1997, the Court issued an order sustaining
the Paradigm Defendants' demurrer as to all causes of action without leave to
amend. A judgment in favor of the Paradigm Defendants dismissing the entire
complaint was entered by the Court on September 23, 1997. Plaintiff has appealed
the decision and filed a brief in support of his appeal. The Paradigm
Defendants' responsive brief was filed March 30, 1998. There can be no
assurances that the Company will be successful in defeating the appeal. Even if
the Company is successful in defeating the appeal, it may incur substantial
legal fees and other expenses related to this appeal. If unsuccessful in
defeating the appeal, the Company's business, operating results and cash flows
could be materially adversely affected.
On May 19, 1997, three former employees of the Company, Thomas Campbell,
James Zulliger and Mark Wagenhals, filed an action in Santa Clara County
Superior Court. The complaint names as defendants the Company, Michael Gulett,
Richard Veldhouse, Dennis McDonald and Chiang Lam. Plaintiffs filed with the
complaint a notice that they consider their case related legally and factually
to the August 12, 1996 class action lawsuit described above. The complaint
alleges fraud, breach of fiduciary duty and violations of certain provisions of
the California Corporate Securities Law and Civil Code. Plaintiffs allege that
they purchased the Company's stock at allegedly inflated prices and were damaged
thereby. Plaintiffs seek an unspecified amount of compensatory, rescissory
and/or punitive damages. Defendants responded to the complaint on September 12,
1997 by filing a demurrer as to all causes of action. Prior to the hearing on
the demurrer, Plaintiffs amended their complaint to identify two allegedly
fraudulent sale transactions. In particular, Plaintiffs allege that Paradigm
reported a sale of $1,650,000 worth of products to
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NexGen, Inc., one of Paradigm's customers, that was not a legitimate sale.
Plaintiffs allege that the order was sent to the shipping floor during the
evening shift on December 31, 1995, to be out before midnight, was included in
year-end sales and was returned, apparently untouched, in April 1996. In
addition, Plaintiffs allege that on March 31, 1996, Paradigm shipped $1,440,080
worth of products to Arco, one of Paradigm's distributors, that was not a
legitimate order. Plaintiffs allege this shipment was later returned untouched
for full credit. Defendants filed a demurrer as to all causes of action in the
amended complaint, which was heard on April 2, 1998. That same day, the Court
issued its order sustaining the demurrer on multiple grounds, but granted
Plaintiffs leave to amend the complaint by May 15, 1998. Defendants' response to
the second amended complaint is due to be filed on June 18, 1998. Plaintiffs
have served the Company and two of the individual defendants with requests for
production of documents, to which the Company and the individual defendants have
responded. Plaintiffs also took the deposition of a third party on April 23,
1998. The Company has served plaintiff with form interrogatories, to which they
have responded. The Company also took Plaintiffs' depositions on April 20-22,
1998. The deposition of one of Plaintiffs is continuing. There can be no
assurance that the Company will be successful in defense of this action. Even if
the Company 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.
On May 19, 1998, an additional securities class action lawsuit was filed
in the United States District Court for the Northern District of California
against Paradigm and Michael Gulett, Robert McClelland, Richard A. Veldhouse and
Chiang Lam. The complaint alleges violations of section 10(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), Securities and Exchange
Commission Rule 10b-5 and section 20(a) of the Exchange Act. Plaintiff alleges
the same class and the same substantive factual allegations that are contained
in the August 12, 1996 action as amended. The Paradigm Defendants intend to
vigorously defend the action. None of the defendants has yet been served with
process. There can be no assurances that Paradigm will be successful in the
defense of this action. 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, Paradigm's business, operating
results and cash flows could be materially adversely affected.
The Company is involved in various other litigation and potential
claims. Due to the inherent uncertainty of litigation, management is not able to
reasonably estimate losses that may be incurred in relation to this litigation.
However, based on the facts presently known, management believes that the
resolution of these matters will not have a material adverse impact on the
results of operations or the financial position of the Company.
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. 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 ability of the Company to compete successfully depends on many
elements outside its control, including the rate at which customers incorporate
the Company's products into their systems, the success of such customers
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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.
STRATEGIC RELATIONSHIPS; POTENTIAL COMPETITION. The Company, pursuant to
certain licenses of its technology, has entered into strategic relationships
with NKK. The Company has had a long-standing business relationship with NKK
which began in October 1992. The Company, NKK and affiliates of NKK entered into
several equity and debt transactions which provided start-up and development
funding to the Company. Given the long-standing relationship, the Company and
NKK entered into three technology license and development agreements which
provide for NKK to supply the Company a specified number of 1M SRAMs for three
years. These Agreements provided funding to the Company.
The Company's business relationship with Atmel began in April 1995 when
pursuant to certain agreements, Atmel purchased a substantial number of shares
of the Company's capital stock from the Company, certain stockholders of the
Company who had been unsecured creditors of the Company as of the reorganization
and from the Company's equipment lessors. Atmel also acquired certain warrants
to purchase shares of the Company's Common Stock. In 1995, the Company and Atmel
entered into a five-year License and Manufacturing Agreement pursuant to which
Atmel would provide the capacity to manufacture wafers at its wafer
manufacturing facility. The Company entered into such agreement with Atmel
because Atmel provided the Company with significant wafer manufacturing capacity
when such capacity was in short supply.
The Company previously licensed the design and process technology for
substantially all of its products at such time, including certain of its 256K,
1M and 4M products, to NKK as a source of revenue. The Company has not licensed
any of its current products to NKK. In the future, the Company 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. In 1995, NKK commenced production of products using the Company's
design and process technologies, and therefore may become a more significant
competitor of the Company. Any such competition with NKK could adversely affect
the Company. Paradigm has also licensed to Atmel the right to produce certain of
its SRAM products which provided significant wafer manufacturing capacity. As a
result, the Company is likely to compete with 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.
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.
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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; CURRENCY FLUCTUATIONS. A significant portion
of the Company's sales are attributable to sales outside the United States,
primarily in Asia and Europe. In fiscal 1997, Asia and Europe accounted for
approximately 7% and 5%, respectively, of the Company's revenues. The Company
expects that international sales will continue to represent a significant
portion of its sales. The Company currently conducts business in Singapore,
Japan, Taiwan, Hong Kong, United Kingdom, Belgium, Sweden, France, Germany and
Israel. 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 currency
fluctuations in the future. The prices for the Company's products are
denominated in U.S. dollars and all of Paradigm's business transactions are in
U.S. 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 currencydenominated sales prices of the Company's products, which may
negatively affect the Company's sales in those markets. The Company has not
entered into any agreements or instruments to hedge the risk of foreign currency
fluctuations. 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. 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. Recently, the Company has
had to significantly reduce its work staff. There can be no assurance that the
Company will be able to attract and retain the necessary personnel, 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 $372.50 in August 1995 to a low of $1.25 in December 1997 (after
giving effect to the ten-for-one reverse stock split). 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.
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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.
YEAR 2000. The Year 2000 issue arises because most computer hardware and
software was developed without considering the impact of the upcoming change in
the century. The hardware and software were originally designed to accept
two-digit entries rather than four-digit entries in the date code field. As a
result, certain computer systems and software packages will not be able to
correctly interpret dates beyond December 31, 1999 and thus, will interpret
dates beginning January 1, 2000 to represent January 1, 1900. This could
potentially result in computer failure or miscalculations, causing operating
disruptions, including among other things, a temporary inability to process
transactions, send invoices or engage in other ordinary activities.
The Company has evaluated all of its computer software and database
software to identify modifications, if any, that may be required to address Year
2000 issues. The Company does not believe there is significant risk associated
with the Year 2000 problem. The Company primarily uses third-party software
programs written and updated by outside firms. The Company intends to test all
of its software programs during 1998 to ensure that each will work in
conjunction with the other after December 31, 1999. If unforeseeable problems
arise during the testing phase, the Company intends to have them corrected prior
to the end of the 1998 calendar year. The Company does not expect the financial
cost associated with any required modifications to have a material adverse
impact on the Company's results, operations or financial condition. Paradigm
also relies on third parties to ship its products. Paradigm is investigating
whether such third parties are Year 2000 compliant. Even if these third parties
are not Year 2000 compliant, Paradigm does not expect such non-compliance to
have a material adverse impact on its results, operations or financial
condition.
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THE COMPANY
The Company designs and markets high speed, high density static random
access memory ("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. For the year ended
December 31, 1997, 10ns and faster SRAMs accounted for approximately 49% of the
Company's sales. Paradigm believes its proprietary Complimentary Metal Oxide
Semiconductor ("CMOS") process and design technologies enable it to offer SRAMs
with high speeds and small die sizes. 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 in
1997 included Iomega, IKOS, Samsung and Motorola.
RECENT DEVELOPMENTS
The SRAM business is highly cyclical and has been subject to significant
downturns at various times that have been characterized by diminished product
demand, production overcapacity, and accelerated erosion of average selling
prices. During the latter part of 1995 continuing into 1996, 1997 and the first
three months of 1998, the market for certain SRAM devices experienced an excess
supply relative to demand which resulted in a significant downward trend in
prices.
The selling prices that Paradigm is able to command for its products are
highly dependent on industry-wide production capacity and demand. In this
regard, paradigm did experience rapid erosion in product pricing in 1996, 1997
and during the first three months of 1998 which was not within the control of
Paradigm. Paradigm could continue to experience a downward trend in pricing
which could adversely affect Paradigm's operating results.
Paradigm's recent operations have consumed substantial amounts of cash.
During 1997, Paradigm completed the private placement of Series A Preferred
Stock, Series B Preferred Stock and Series C Preferred Stock for aggregate net
proceeds of approximately $4,673,000. Paradigm believes that it will require
additional cash infusion from similar private placements of equity or other
sources of liquidity, such as asset sales and equipment financing to meet
Paradigm's projected working capital and other cash requirements. The sale of
additional equity or other securities could result in additional dilution to
Paradigm's stockholders. There can be no assurance that such additional
financing, if required, can be obtained on acceptable terms, if at all.
As a result of these circumstances, the Company's independent
accountants' report on the Company's December 31, 1997 financial statements
includes an explanatory paragraph indicating that these matters raise a
substantial doubt about the Company's ability to continue as a going concern.
On March 6, 1998, the Company entered into a definitive merger agreement
providing for the acquisition of all of the outstanding capital stock of IXYS
Corporation ("IXYS") in exchange for Common Stock of the Company. The exchange
ratio in the Merger for the IXYS equity securities will be the greater of two
ratios. The first ratio provides that upon the Merger the holders of equity
securities of IXYS will hold approximately 95.4% of the fully diluted
capitalization of the combined company and that the holders of equity securities
of the Company will hold approximately 4.6% of the fully diluted capitalization
of the combined company. (As used herein, fully diluted capitalization means the
sum of the number of shares of common stock outstanding and issuable upon
exercise or conversion of all outstanding preferred stock, warrants, options and
other rights.) The second ratio provides that the value associated with the
fully diluted capitalization of IXYS, at the time of consummation of the Merger,
be at least $150 million, based upon an average of the closing prices of the
Company's Common Stock prior to the Company's stockholders meeting. Consummation
of the merger requires the approval of the Company's and IXYS' stockholders and
various regulatory approvals. If approved, the transaction is anticipated to be
accounted for as a purchase of the Company by IXYS for financial reporting
purposes.
LISTING OF THE COMPANY'S COMMON STOCK. Prior to August 22, 1997, the
Company's Common Stock was listed on the Nasdaq National Market (the "NNM"). In
order for continued listing on the NNM, however, the
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Company was required to, maintain (1) $4,000,000 in net tangible assets because
it has sustained losses from continuing operations and/or net losses in three of
its four most recent fiscal years, (2) a $2,000,000 market value of the public
float, (3) $1,000,000 in total capital and surplus, (4) a minimum bid price of
$1.00 per share and (5) two market-makers. As of June 30, 1997, the Company was
not in compliance with items (1) and (4) above.
On July 15, 1997, the Nasdaq Stock Market ("Nasdaq") staff notified the
Company of a bid price deficiency and provided a 90-day grace period within
which to regain compliance with this requirement. On August 8, 1997, Nasdaq,
based on a review of the Company's trading history from July 8 to August 8,
1997, indicated that the Company had regained compliance with the minimum
closing bid price requirement of $1.00. On August 20, 1997, Nasdaq informed the
Company that due to its failure to comply with the terms of the maintenance
qualifications exception granted to the Company, the Company's Common Stock
would be removed from the NNM and listed on the SCM effective August 22, 1997,
pursuant to a waiver to the initial inclusion bid price requirement.
On August 22, 1997, the Company announced that effective on such date
the Company's Common Stock, formerly listed on the NNM, would be listed on the
SCM, pursuant to a waiver to the initial inclusion bid price requirement. The
Company's continued listing on the SCM is contingent upon the Company meeting
the maintenance requirements.
Substantial changes in Nasdaq initial listing and maintenance
requirements became effective on February 23, 1998. These changes materially
enhance the quantitative threshold criteria necessary to qualify for initial
entry and continued listing on Nasdaq. In addition, corporate governance
requirements, formerly applicable to the NNM for the first time, have been
extended to the SCM. These changes require that companies listed on the SCM
maintain (i) $2,000,000 in net tangible assets (total assets less total
liabilities and goodwill), a market capitalization of $35,000,000, or $500,000
in net income for two of the last three years, (ii) a $1,000,000 market value
for the public float, (iii) two market-makers, and (iv) a minimum bid price of
$1.00 per share.
After the new maintenance requirements became effective, the Company was
notified that it was not in compliance with the new minimum bid price
requirement and that the Company would have 90-calendar days, which expire May
28, 1998, in order to regain compliance. The Company may regain compliance if
its securities trade at or above the minimum bid price requirement for at least
10-consecutive trade days. If after 90 days the Company has not regained
compliance, Nasdaq will issue a delisting letter and the Company may request a
hearing at that time, which will generally stay delisting until the hearing has
been completed. The Company's stockholders, at a Special Meeting of Stockholders
held on May 1, 1998, approved a ten-for-one reverse stock split of the Company's
Common Stock such that every ten shares were combined into one share of Common
Stock, par value $0.01 per share. The stock split increased the price per share
of the Company's Common Stock sufficiently to bring such price over $1.00 per
share for a period of more than ten trading days. Although Paradigm's Common
Stock has traded above $1.00 per share since the reverse stock split was
effectuated, no assurances can be made that the Company will be in compliance
with the Nasdaq listing requirements.
The Company was incorporated in California in 1987 and reincorporated in
Delaware in 1995. The Company's executive offices are located at 694 Tasman
Drive, Milpitas, California 95035 and its telephone number is (408) 954-0500.
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PRICE RANGE OF COMMON STOCK
The Common Stock, formerly traded on the Nasdaq National Market until
August 21, 1997, is traded in the over-the-counter market on the Nasdaq SmallCap
Market under the symbol "PRDM." The following table sets forth, for the
Company's fiscal years indicated, the high and low last sale prices of the
Common Stock as reported by the Nasdaq National Market prior to August 22, 1997
and on the Nasdaq SmallCap Market subsequent to August 22, 1997.
<TABLE>
<CAPTION>
High Low
---- ---
<S> <C> <C>
1995
Second Quarter (from June 28, 1995)........ $232.50 $172.50
Third Quarter.............................. 372.50 222.50
Fourth Quarter............................. 302.50 120.00
1996
First Quarter.............................. $190.00 $82.50
Second Quarter............................. 120.00 62.50
Third Quarter.............................. 73.80 38.80
Fourth Quarter............................. 55.00 20.60
1997
First Quarter.............................. $31.30 $11.30
Second Quarter............................. 18.80 6.90
Third Quarter.............................. 22.20 6.90
Fourth Quarter............................. 15.00 1.25
1998
First Quarter.............................. $ 1.22 $ .25
Second Quarter (through June 4, 1998)...... 2.50 1.18
</TABLE>
On June 4, 1998, there were approximately 247 holders of record of the
Common Stock. See the cover page of this Prospectus for the last sales price of
the Common Stock reported on the Nasdaq SmallCap Market as of a recent date.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the Shares.
All proceeds from the sale of the Shares will be for the account of the Selling
Stockholders, as described below. See "Selling Stockholders" and "Plan of
Distribution" below.
-15-
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of June 4, 1998
regarding the beneficial ownership of Common Stock by the Selling Stockholders
and the Shares offered hereby by such Selling Stockholders.
<TABLE>
<CAPTION>
Shares Beneficially Shares Beneficially
Owned Prior Owned After
to Offering(1) Number of Offering(1)
---------------------------- Shares -----------------------
Number Percent Being Offered Number Percent
---------- --------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Lyford Ltd.(3)
28 Hagvura
Karni-Shomron, Israel............. 550,000 30.9% 550,000 -- --
Vintage Products, Inc.(3)
Arlozorv Street
Telaviv, Israel................. 1,050,000 59.0% 1,050,000 -- --
Total........................... 1,600,000 1,600,000
- -------------
(1) Information with respect to beneficial ownership is based upon
information obtained from the Selling Stockholders.
(2) Represents up to a maximum of 550,000 shares of Common Stock issuable
upon conversion of the Series B Preferred Stock (the "Series B Preferred
Stock"). For purposes of determining the number of Shares to be offered
by Lyford Ltd. for this Prospectus, the number of shares of Common Stock
calculated to be issuable upon conversion of the Series B Preferred
Stock is based on an extremely low conversion price as required by the
Stock Purchase Agreement with Lyford Ltd. Such conversion price is used
merely for the purposes of setting forth a number for this Prospectus
and is less than the average closing bid price over the five consecutive
trading days preceding June 4, 1998 which was $1.3564. The number of
shares of Common Stock issuable upon conversion of the Series B
Preferred Stock is subject to adjustment depending on the date of the
conversion thereof and could be materially less or more than such
estimated amount depending on factors which cannot be predicted by the
Company including, among other things, the future market price of the
Common Stock. See "The Company--Recent Developments" and "Risk
Factors--Potential Volatility of Stock Price."
John Gainsford is a director of Lyford Ltd. who has voting and
investment power with respect to the Shares of Common Stock held by
Lyford Ltd.
(3) Represents up to a maximum of 500,000 shares of Common Stock issuable
upon conversion of the Series A Preferred Stock and up to a maximum of
550,000 shares of Common Stock issuable upon conversion of the Series C
Preferred Stock (the Series A Preferred Stock and Series C Preferred
Stock are referred to collectively as the "Preferred Stock"). For
purposes of determining the number of Shares to be offered by Vintage
Products, Inc. for this Prospectus, the number of shares of Common Stock
calculated to be issuable upon conversion of the Preferred Stock is
based on an extremely low conversion price as required by the Stock
Purchase Agreements with Vintage Products, Inc. Such conversion price is
used merely for the purposes of setting forth a number for this
Prospectus and is less than the average closing bid price over the five
consecutive trading days preceding June 4, 1998 which was $1.3564. The
number of shares of Common Stock issuable upon conversion of the
Preferred Stock is subject to adjustment depending on the date of the
conversion thereof and could be materially less or more than such
estimated amount depending on factors which cannot be predicted by the
Company including, among other things, the future market price of the
-16-
<PAGE>
Common Stock. See "The Company--Recent Developments" and "Risk
Factors--Potential Volatility of Stock Price."
John Gainsford and Brian Bell are the directors of Vintage Products,
Inc. who share voting and investment power with respect to the shares of
Common Stock held by Vintage Products, Inc.
</TABLE>
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 SmallCap 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 SmallCap Market, in negotiated
transactions, through a combination of such methods of sale, or otherwise. In
effecting sales, broker-dealers engaged by the Selling Stockholders 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, Palo Alto, 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, 1997, as amended by Form 10-K Amendment No. 1, have been so
incorporated in reliance on the report of Price Waterhouse LLP, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
-17-
<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................................. $ 640.22
NASDAQ SmallCap Market listing fee................... 7,500.00
Accounting fees and expenses......................... 5,000.00
Legal fees and expenses.............................. 2,500.00
Miscellaneous fees and expenses...................... 109.78
------------------
Total........................................ $ 15,750.00
==================
</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, 1997)
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).
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities 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. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective 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 Exchange Act
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities 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
Securities Act, the information omitted from the form of prospectus
filed as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be
deemed to be part of this Registration Statement as of the time it was
declared effective.
(5) That, for purposes of determining any liability under the
Securities Act, each filing of the Registrant's annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act that is
incorporated by reference in 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.
Insofar as indemnification for liabilities arising under the Securities
Act, may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to
II-2
<PAGE>
a court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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 Milpitas, State of California, on June 9, 1998.
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 David G. Campbell, 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, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Name Title Date
/s/ MICHAEL GULETT President and Chief Executive
- --------------------- Officer (Principal Executive Officer) June 9, 1998
Michael Gulett and Director
/s/ DAVID G. CAMPBELL Chief Financial Officer (Principal June 9, 1998
- --------------------- Financial Officer)
David G. Campbell
*/s/ GEORGE COLLINS Director June 9, 1998
- ---------------------
George Collins
*/s/ JAMES KOCHMAN Director June 5, 1998
- ---------------------
James Kochman
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. HONG KONG
TOKYO
June 9, 1998
Paradigm Technology, Inc.
694 Tasman Drive
Milpitas, CA 95035
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 1,600,000 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 1,600,000 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,
/s/ 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
February 21, 1998, except as to Note 13, which is as of March 9, 1998, and
except as to the first paragraph of Note 2, which is as of May 1, 1998, which
appears on page 39 of the Annual Report on Form 10-K Amendment No. 1 for the
year ended December 31, 1997. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICE WATERHOUSE LLP
San Jose, California
June 8, 1998
