IXYS CORP /DE/, 10-K405, 1999-07-08

IXYS CORP /DE/
10-K405, 1999-07-08
SEMICONDUCTORS & RELATED DEVICES

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<PAGE>

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

----------------

FORM 10-K

----------------

(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended March 31, 1999.

[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number 001-14165

IXYS CORPORATION
(Exact name of registrant as specified in its charter)

Delaware 770140882-5
(I.R.S. Employer
(State or other jurisdiction of identification No.)
incorporation or organization)

3540 Bassett Street
Santa Clara, California 95054-2704
(Address of principal executive offices and zip code)

(408) 982-0700
(Registrant's telephone number, including area code)

----------------

Securities registered pursuant to Section 12(b) of the Act:

<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
------------------- ----------------------
<S> <C>
Common stock, par value $.01 per
share Nasdaq SmallCap Market
</TABLE>

Securities registered pursuant to Section 12(g) of the Act:

(Title of class)
None

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 of 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendments to this Form 10-K. Yes [X] No [_]

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of May 31, 1999, was approximately $10,503,652*. The number of
shares of the Registrant's Common Stock outstanding as of May 31, 1999 is
11,986,661.
- --------
* Based on a closing price of $4.00 per share of the Registrants' Common Stock
on May 28, 1999 held by executive officers, directors and stockholders whose
ownership exceeds 5% of the Common Stock outstanding at May 31, 1999.
Exclusion of such shares should not be construed to indicate that any such
person possesses the power, direct or indirect, to direct or cause the
direction of the management or policies of the registrant or that such
person is controlled by or under common control with the Registrant.
<PAGE>

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31, 1999

TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
PART I

Item 1. Business................................................... 1

Item 2. Properties................................................. 21

Item 3. Legal Proceedings.......................................... 21

Item 4. Submission of Matters of a Vote of Security Holders........ 23

PART II

Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters....................................... 24

Item 6. Selected Financial Data.................................... 24

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 25

Item 8. Financial Statements and Supplementary Data................ 31

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 53

PART III

Item 10. Directors and Executive Officers of the Registrant......... 53

Item 11. Executive Compensation..................................... 53

Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 53

Item 13. Certain Relationships and Related Transactions............. 53

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 53

</TABLE>
<PAGE>

Except for the historical information contained herein, this report contains
forward-looking statements that involve risks and uncertainties. IXYS' actual
results could differ materially from those discussed here. Factors that could
cause or contribute to such differences include, but are not limited to, those
discussed under the heading "Risk Factors" at the end of Item 1 IXYS Business.

PART I

ITEM 1. IXYS Business

Overview

General

IXYS Corporation, a Delaware corporation ("IXYS") designs, develops and
markets power semiconductors used primarily in controlling energy in motor
drives, power conversion (including uninterruptible power supplies ("UPS") and
switch mode power supplies ("SMPS")) and medical electronics. IXYS' power
semiconductors convert electricity at relatively high voltage and current
levels to create efficient power as required by a specific application. IXYS'
target market includes segments of the power semiconductor market that require
medium to high power semiconductors, with a particular emphasis on higher
power semiconductors, which IXYS considers to be those capable of processing
greater than 500 watts of power. IXYS offers a broad line of power
semiconductors, including power MOSFETs, insulated gate bipolar transistors
("IGBTs"), thyristors (silicon controlled rectifiers or "SCRs") and
rectifiers, including fast recovery epitaxial diodes ("FREDs").

In addition, IXYS also sells a broad range of static random access memory
("SRAM") products with various density, speed, configuration, temperature
range and packaging options for a wide range of commercial, industrial and
military applications. IXYS' products range in density from 256 kilobytes to 4
megabytes.

IXYS' major customers include Still GmbH, Rockwell International
Corporation, Emerson Electric Company, Eurotherm Ltd. (U.K.), Medtronics Inc.,
ABB, Guidant Corporation, General Signal, Alpha Technology and Siemens AG.

IXYS has not declared or paid any cash dividends on any series of its
capital stock during any period for which information is provided in this
Report on Form 10-K.

IXYS Corporation was founded in April 1983. In December 1995, IXYS was
reincorporated as a Delaware corporation. On September 23, 1998, IXYS
Corporation merged with Paradigm Technology, Inc., a Delaware corporation that
designs and markets fast SRAM products ("Paradigm"), in a transaction
accounted for as a reverse merger. In the merger, Paradigm issued 11,513,821
shares of its common stock in exchange for all outstanding shares of IXYS
Corporation capital stock. At the conclusion of the merger, IXYS Corporation
stockholders held approximately 96% of the combined company, and the historic
accounting records of IXYS Corporation became those of the combined company.
Accordingly, Paradigm formally changed its name to "IXYS Corporation" (the
combined company of which is referred to in this report as "IXYS," the
"Company" or the "Registrant").

Industry Background

As the world enters the 21st century, demand for electricity is forecasted
to increase faster than demand for other forms of energy. Electrical energy is
demanded worldwide at an increasing rate due to (i) the introduction of new
technologies that require electricity, including computers, telecommunications
equipment, industrial machinery and automation and transportation, (ii) the
increased use of electrical processes in industry and transportation, (iii)
the increasing energy demands of electrical products requiring greater power
than more traditional electrical products because of the additional features
provided by these products and (iv) the economic development of emerging third
world countries. As a result of these and other factors, the U.S. Department
of

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Energy reports that worldwide electrical power consumption is expected to
increase from approximately 11.7 trillion kilowatt hours in 1995 to
approximately 20 trillion kilowatt hours in 2015.

The increasing demand for electrical energy, government regulation requiring
energy efficiency and social and environmental concerns have caused an
increased demand for energy efficiency. Government regulations are also
imposing efficiency requirements on products and equipment. For example, the
European Community has adopted the IEC-555 standard that regulates the
efficiency of certain power supplies and has effectively required SMPS
manufacturers to incorporate power factor correction ("PFC") circuits, which
require power semiconductors, in their higher power supplies. Finally,
environmental concerns related to pollution and the depletion of natural
resources further support the demand for energy efficiency.

In addition to the demand for energy efficiency, electrical products in all
markets are becoming increasingly sophisticated, offering "intelligence"
through the use of microprocessors and additional components. The integration
of microprocessors into such products as home appliances, office equipment and
industrial controls will continue as products gain "intelligence." As a result
of the introduction of microprocessors and integrated circuits, products
require increasingly sophisticated power supplies that are capable of
providing precisely regulated power (free of spikes and surges) as required by
a specific application. This must be done without adding to the existing size
of the product or equipment, thereby putting pressure on power supply
designers to improve efficiency in size (i.e., increase the power output of
power supplies without increasing their size). Additionally, uninterruptible
power operation is a requirement for such applications as intranet and
internet servers, telecommunications, hospitals and financial institution
equipment.

Today, virtually all digital electronic systems, including cellular
telephones, workstations, PCs and modems, contain memory devices. Over the
past decade, the drive to reduce the size and increase the speed and
functionality of electronic systems has required concurrent increases in the
density and speed of memory devices used in these systems. The most widely
used memory devices are dynamic random access memories ("DRAMs") and SRAMs.

Role of Power Semiconductors

Power semiconductors address the demand for energy efficiency and are
essential for providing the precisely regulated power required by
sophisticated electrical products and equipment. Power semiconductors process
and control the electrical energy generated by electrical utilities to provide
efficient power systems and precisely regulated power as required by a
specific application. Most equipment needs to process the voltage level and
frequency delivered by the utility to derive the required power at specific
voltage, current and frequency levels, and power semiconductors help provide
this function. Power semiconductors (i) convert or "rectify" alternating
current ("AC") power delivered by electrical utilities to direct current
("DC") power which is useable by most equipment; (ii) convert DC power at a
certain voltage level to DC power at a different voltage level to meet the
specific voltage requirement for an application; (iii) invert DC power to high
frequency alternating current electricity ("AC") power to permit the
processing of power using substantially smaller electronic components and (iv)
rectify high frequency AC power from SMPS to meet the specific DC voltage
required by an application. Energy efficiency is obtained in part through
efficient power control designs. As a result, the power semiconductors that
perform the task of controlling and regulating the power in equipment are
required to perform with a high degree of efficiency, with minimal wasting of
energy.

Power Semiconductor Applications

Power semiconductors are used in controlling energy in motor drives and
power conversion systems, including SMPS and UPS. Motor drive controls
regulate the voltage, current and frequency of power to a motor to control the
speed, torque, position, efficiency and other features of a motor. A SMPS
efficiently converts power as provided by electrical utilities to meet the
specific voltage requirements of an application. A UPS provides a short term
backup of electricity to the power supply in the case of an interruption of
power from the primary source of electricity.

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Power semiconductors can be classified based upon the amount of power that
they are capable of handling. Generally, IXYS views lower power semiconductors
as those capable of handling less than 500 watts of power. Lower power
semiconductors are used in small motor drives, UPS and SMPS for personal
computers, telephones, automotive electronics, stereo equipment and battery
operated tools and equipment.

IXYS views higher power semiconductors as those capable of handling power in
excess of 500 watts. Industrial and commercial motor drive control
applications for higher power semiconductors include robotics, machine tools,
pumps, heating, ventilation and air conditioning systems ("HVAC"), appliances
and transportation systems. Applications for higher power semiconductors in
SMPS include mainframe and workstation computers, instrumentation and
telecommunications. Applications for higher power semiconductors in UPS
include power back-up for hospitals, financial institutions, mainframes,
workstations, local area networks, communications systems and industrial
equipment.

Power Semiconductor Market

The power semiconductor market consists of power transistors (including
IGBTs and power MOSFETs), rectifiers and thyristors. According to World
Semiconductor Trade Statistics ("WSTS"), the worldwide market for power
semiconductors in 1998 was $7.4 billion and is projected to increase to $8.5
billion in 2000. IXYS believes that growth in the power semiconductor market
is driven in part by the need for an increased number of power semiconductors
for a given application as power control requirements become more
sophisticated, the increased number of end-user applications for power
semiconductors and the resulting higher dollar value of power semiconductors
included in products and equipment.

WSTS indicate that worldwide sales of IGBTs, substantially all of which are
higher power semiconductors, and power MOSFETs, a substantial portion of which
are higher power semiconductors, were projected to grow from approximately
$2.7 billion in 1998 to $2.9 billion in 1999 to $3.2 billion in 2000. Sales of
power MOSFETs and IGBTs are experiencing stronger growth than other segments
of the power semiconductor market as these products are used to replace
traditional bipolar transistors, such as rectifiers and thyristors. In
addition to the relatively fast rate of growth for power MOSFETs and IGBTs,
IXYS believes that FREDs will grow at higher growth rates than standard diodes
since they are required in the same faster switching circuits in which power
MOSFETs and IGBTs are included. In fact, almost all IGBTs included in motor
drives require a FRED, and SMPS with PFCs require a FRED as a boost diode or
as an output rectifier.

IXYS Approach

Since its inception, IXYS has focused on the higher power segment of the
power semiconductor market and has focused its product development and
marketing efforts on the specific needs of customers in this segment of the
market. In contrast to most other competitors in the power semiconductor
market, including large international companies, IXYS is focused on the
design, manufacture and marketing of power semiconductors, with a particular
emphasis on higher power semiconductors. Approximately 90% of the IXYS' sales
in fiscal 1999 were of higher power products. Through its broad product line
and range of packaging options, its ability to mobilize its focused
organization (which includes a wide range of technical capabilities) quickly
to bring new products to the market and its ability to collaborate with its
customers in the development of products designed to meet their needs, IXYS
has become a leader in the higher power semiconductor market.

IXYS Strategy

IXYS intends to build a leadership position within its targeted higher power
segment of the power semiconductor market by pursuing the following business
strategies:

Maintain Technological Leadership Within Higher Power Market

IXYS intends to maintain its technological leadership with respect to higher
power semiconductors by focusing its scientific expertise on the development
of these semiconductors. This expertise encompasses a wide

3
<PAGE>

range of technical capabilities, including physics, mechanical engineering,
chemistry, circuit design and material science capabilities. IXYS also intends
to use its expertise with respect to semiconductor packaging and assembly to
develop technologically advanced packaging of its higher power semiconductors.

Target Rapid Growth Applications Within the Higher Power Market

IXYS' strategy is to target markets by evaluating the growth of those
markets and IXYS' ability to establish a leadership position in them based
upon its technological capabilities, the level of competition in the markets
and the overall performance of the products offered by competitors. For
example, IXYS has targeted the market for power supplies used in servers,
which IXYS believes represents an attractive market, and has focused its
efforts on providing power semiconductors for this application. IXYS intends
to pursue this element of its strategy through the development of new
technology and products for high growth markets and the packaging of its
existing technology into products tailored to new high growth applications.

Offer Broad Range of Higher Power Products

IXYS' product line is targeted at the higher power segment of the power
semiconductor market across a broad range of functionality and price. IXYS
offers a comprehensive range of power semiconductors that allows it to provide
an appropriate solution to its customers' power semiconductor needs from its
range of standard products. IXYS' product line allows its customers to
purchase a substantial portion of their power semiconductor needs from a
single supplier. IXYS intends to continue to offer a wide array of products by
developing additional products that offer improvements over current products
or address new applications.

Promote Product Development Collaborations

IXYS seeks to enter into collaborative arrangements with leaders in
attractive end-user markets in order to optimize IXYS products for use by
these customers in their products. IXYS' strategy is to leverage these
collaborative arrangements into sales to other manufacturers of end-user
products in these markets. For example, in 1988 IXYS targeted the
defibrillator market and continues to be the leading supplier of IGBTs for
this application. IXYS has leveraged its relationships with the two
implantable defibrillator market leaders to include other IXYS products,
including power MOSFETs and thyristors, in their products. IXYS believes that
its ability to provide technical assistance with respect to the design of
hardware and software systems by its customers encourages the incorporation of
its devices in products manufactured by its customers. IXYS believes that it
has gained a reputation for strong product development collaborations, which
has contributed to the inclusion of its semiconductors in products designed by
its customers, and intends to expand its efforts in this area.

Maintain Balance Between Internal and External Manufacturing

IXYS intends to take advantage of its combination of in-house wafer
fabrication facilities and its foundry relationships to maximize its
manufacturing efficiency and flexibility. IXYS believes that its in-house
manufacturing capabilities enable it to lower its manufacturing cost with
respect to certain products, bring products to the market more quickly than
would be possible if IXYS were required to rely exclusively on outside
foundries, retain certain proprietary aspects of its process technology and
more quickly introduce new process innovations. In particular, IXYS continues
to fabricate its 1,600 volt and greater power MOS devices at its Lampertheim
facility to better protect its process technologies with respect to the
fabrication of these products. IXYS also believes that its in-house wafer
fabrication facilities provide it with a significant competitive advantage
because the fabrication facilities permit close collaborations between design
and process engineers in the development of new products. In addition to
maintaining its own fabrication facilities, IXYS establishes alliances with
selected foundries for wafer fabrication. This approach allows IXYS to reduce
substantial capital spending and manufacturing overhead expenses, obtain
competitive pricing and technologies and optimize production schedules while
retaining the flexibility to shift the production of its products to a
different or additional foundries for cost or performance reasons. IXYS'
product designs enable the production of its devices at multiple foundries
using well-established and cost-effective processes. IXYS intends to continue
to

4
<PAGE>

strategically expand its in-house manufacturing capabilities while continuing
its significant reliance on outside foundries which permit IXYS to reduce its
exposure to the large capital expenditures required for increasing in-house
manufacturing capacity.

Products and Applications

IXYS' power semiconductor products perform any of the four functions
performed by power semiconductors:

. Conversion or "rectification" of power delivered by electrical utilities
to DC power which is useable by most equipment ("input rectification")

. Conversion of DC power at a certain voltage level to DC power at a
different voltage level to meet the specific voltage requirement for an
application

. Inversion of DC power to high frequency AC power to permit the
processing of power using substantially smaller electronic components

. Rectification of high frequency AC power from SMPS to meet the specific
DC voltage required by an application ("output rectification")

IXYS designs, develops and markets power semiconductors used primarily in
controlling energy in motor drives, power conversion (including UPS and SMPS)
and medical devices, sales of which represented 37%, 33% and 9% of IXYS'
revenues in fiscal 1999, respectively.

An SMPS converts AC power to regulated DC power. AC power is converted to
high voltage DC power through input rectifiers and is then switched to a very
high frequency AC. The AC power is then stepped down to a different voltage
and converted through output rectification to produce the required DC power.

A UPS continues to supply AC power to electronic equipment in the event of
an electrical utility power failure. A UPS consists of an SMPS, battery
chargers, a semiconductor transfer switch to activate the UPS and an inverter
to invert DC battery power to AC power.

IXYS' principal products are power MOSFETs, IGBTs, thyristors and other
rectifiers. During fiscal 1999, power MOS products (including MOSFETs and
IGBTs), rectifiers, and thyristors constituted approximately 43%, 15%, and 21%
of IXYS' revenues, respectively. IXYS also markets DCB substrates for use with
power semiconductors and integrated circuits. IXYS' power semiconductors are
sold separately and are also packaged in high power modules that frequently
consist of multiple semiconductor die. IXYS believes that the packaging of its
modules constitutes an important element of IXYS' products, as packaging
determines how much power can be controlled and the reliability of the module.

5
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The following table summarizes the primary categories of uses for power
semiconductors, the IXYS products used in each category, the end-user
applications served by these products and representative customers of IXYS for
each application.

<TABLE>
<CAPTION>
IXYS Selected
Category Products Application Customers
- -------- ----------------------- ------------------------------- --------------------------------
<S> <C> <C> <C>
Motor Drive Control Thyristor/diode modules HVAC, pumps, hoists, Emerson Electric Company
Diode bridges cranes, machine tools, Siemens AG
Discrete diodes and fork lift trucks, Still GmbH
thyristors IGBTs electric vehicles, Rockwell International Corp.
MOSFETs traction, elevators, robotics Eurotherm Ltd.
FREDs industrial and process controls

Power Conversion Thyristor/diode modules SMPS, UPS General Signal
Diode bridges communications, Alpha Technologies Incorporated
IGBTs battery chargers, HC Power, Incorporated
MOSFETs welding, plasma cutting, Transistor Devices, Incorporated
FREDs radio frequency generators, ABB Power Supplies
power generation GmbH
Siemens-AG
Delta Electronics, Inc.
Astec International

Medical Electronics IGBTs Implantable and external Medtronics Incorporated
MOSFETs defribillators, laser power Guidant Corporation
Thyristors supplies Hewlett Packard
</TABLE>

Power MOS Transistors

Power MOS transistors offer significant benefits over traditional bipolar
transistors. Power MOS transistors operate at much greater switching speed,
which allows the design of smaller and less costly end products, due primarily
to the smaller and less expensive additional peripheral components required at
higher switching frequencies. Power MOS transistors are activated by voltage
rather than current (compared to bipolar transistors), so they require less
external circuitry to operate, making them more compatible with IC controls.
They also offer more reliable long-term performance and are more rugged,
permitting them to better withstand adverse operating conditions. In addition,
power MOSFETs and IGBTs compare favorably to bipolar power transistors on a
system price/performance basis.

Power MOSFETs. A power MOSFET (metal oxide silicon field effect transistor)
is a switch controlled by voltage at its gate. Power MOSFETs are used in
combination with passive components to vary the amperage and frequency of
electricity by switching on and off at high frequency.

IXYS' power MOSFETs are focused on higher voltage applications (ranging from
60 to 1,100 volts) and have on-state resistance among the lowest available for
a given die size and voltage. Lower on-state resistance results in increased
efficiency of a power semiconductor device. IXYS believes that as the power
requirements of workstations, servers and other computers increase as the
result of larger and more powerful microprocessors, disk drives and CD/ROMs,
the designers of power supplies will increasingly demand higher power MOSFETs,
particularly to address the greater power requirements of the equipment
without increasing the physical size of the power supply incorporated into the
equipment.

Power MOSFETs have improved the volumetric efficiency of SMPS by allowing
faster switching frequencies (in some cases into the megahertz range),
dramatically reducing the size of associated components such as power
transformers and capacitors. IXYS' power MOSFETs are used primarily in SMPS
and UPS. The prices of IXYS' power MOSFETs vary depending on the quantity
ordered and the packaging of the semiconductors and generally range for
moderate quantities from $3 to $150.

6
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IGBTs. IGBTs (insulated gate bipolar transistors) also are used as switches.
IGBTs have achieved many of the advantages of power MOSFETs and of traditional
bipolar technology by combining the voltage controlled switching features of
power MOSFETs with the superior conductivity and energy efficiency of bipolar
transistors. IGBTs serve the same functions as power MOSFETs, but have
different features, which make their use preferable in certain applications.
For a given semiconductor die size, IGBTs can operate at higher currents and
voltages, making them a more cost effective device compared to power MOSFETs
for high energy applications. The principal tradeoff of IGBTs compared to
power MOSFETs is the switching speed of IGBTs, which is slower than that of
power MOSFETs. IGBTs are seldom used in applications where very fast switching
is required, including SMPS operating at speeds over 150 kilohertz.

An IGBT is the most cost-effective technology used in AC variable speed
motor drives due to its ability to efficiently switch higher power. IGBTs
allow drives to operate at faster frequencies, thereby reducing system cost,
simplifying drive electronics, increasing efficiency and reducing noise. IXYS'
IGBTs are used principally in AC motor drives and defibrillators. The prices
of IXYS' IGBTs vary depending on the quantity ordered and the packaging of the
semiconductors and generally range for moderate quantities from $1 to $120.

Bipolar Products

Rectifiers. Rectifiers convert AC power to DC power and are used primarily
in input and output rectification and inverters. IXYS' rectifiers are used in
DC and AC motor drives, power supplies, lighting and heating controls and
welding. The prices of IXYS' rectifiers vary depending on the quantity ordered
and the packaging of the semiconductors and generally range for moderate
quantities from $1 to $120.

A newer subset of IXYS' rectifier product group is a very fast switching
device known as a FRED (fast recovery epitaxial diode). FREDs limit spikes in
voltage across the power switch to reduce power dissipation and
electromagnetic interference. Because most IGBTs require a FRED to address its
output, FRED sales are expected to move in concert with IGBTs. IXYS' FREDs are
used principally in AC motor drives and power supplies. The prices of IXYS'
FREDs vary depending on the quantity ordered and the packaging of the
semiconductors and generally range for moderate quantities from $0.50 to $55.

Thyristors. Thyristors are switches that can be turned on by a controlled
signal and are turned off only when the output current is reduced to zero,
which occurs in the flow of AC power. Thyristors are preferred over power
MOSFETs and IGBTs in high-voltage, low-frequency AC applications because their
on-state resistance is lower than the on-state resistance of power MOSFETs and
IGBTs. Thyristors also represent the most cost-effective solution in many AC
motor control and amplifier applications.

IXYS' thyristors are used in motor drives, power supplies, lighting and
heating controls and welding. The prices of IXYS' thyristors vary depending on
the quantity ordered and the packaging of the semiconductors and generally
range for moderate quantities from $1 to $250.

Other Products

IXYS markets its patented DCB (direct copper bond) substrates to a variety
of customers, including those in the power semiconductor industry, and uses
DCB in the manufacturing of its modules. DCB technology cost-effectively
provides excellent thermal transfer while maintaining high electrical
isolation. It addresses thermal fatigue and die cracking problems encountered
by manufacturers of power semiconductor modules utilizing traditional copper
base plates. The prices of IXYS' DCB products vary and generally range for
moderate quantities from $1.00 to $5.50.

IXYS also markets integrated circuits that have applications associated with
power semiconductors, such as high voltage current regulators, motion
controllers, digital pulse width modulators and power MOSFET/IGBT drivers.

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<PAGE>

IXYS also sells synchronous and asynchronous SRAM products which include
high speed 256 kilobyte, 1 megabyte and 4 megabyte CMOS SRAMs. They are
available in a variety of configurations and commercial and industrial
temperature range versions, as well as military versions manufactured to
comply with the most recent military specifications.

Sales and Marketing

IXYS sells its products by means of a worldwide selling organization that
includes direct sales personnel, independent representatives and distributors
managed through IXYS' California and Germany offices. IXYS employs 26 people
in its sales and marketing efforts, including 5 in marketing, 10 in sales and
11 in customer support and service. IXYS currently uses 28 independent sales
representative organizations and 7 distributors in North America. IXYS
currently uses 19 independent sales representative organizations and 42
distributors and stocking representatives in the rest of the world. In fiscal
1999, net revenues derived from North American and international sales
represented approximately 35% and 65%, respectively, of IXYS' net revenues,
with approximately 54% of IXYS' net revenues derived from sales to Europe and
the Middle East and 11% of IXYS' net revenues derived from sales to Asia. No
single customer accounted for more than 10% of IXYS' net revenues in fiscal
1999.

In addition to new products developed for general use in target markets,
IXYS custom designs and manufactures products in which product design efforts
are coordinated with manufacturers. Custom products are achieved through IXYS'
wide selection of products and packaging options. IXYS provides product
samples and works directly with manufacturers in designing end-user products
using IXYS' semiconductors. Specific products are then delivered to the
manufacturers.

IXYS markets its services and programs through advertisements, technical
articles and press releases that appear regularly in a variety of trade
publications, as well as through the dissemination of Company brochures, data
sheets and technical manuals. Additionally, IXYS participates in industry
trade shows on a regular basis. IXYS has also initiated a presence on the
Internet with a worldwide web page enabling engineers to access and download
technical information and data sheets.

The majority of IXYS' revenues are derived from international sales.
International sales are subject to certain risks, including unexpected changes
in regulatory requirements, fluctuations in exchange rates, tariffs and other
barriers, political and economic instability, difficulties in staffing and
managing foreign subsidiary operations and potentially adverse tax
consequences.

During fiscal 1997, 1998 and 1999, sales to independent distributors and
stocking representatives accounted for approximately 46%, 46% and 41% of net
revenues, respectively. Some of these distributors and stocking
representatives have a limited right to return unsold products to IXYS, and
there can be no assurance that such returns will not have a material adverse
effect on IXYS. These independent distributors and stocking representatives
generally are not subject to any minimum purchase requirements and can
discontinue marketing IXYS' products at any time upon proper notice.
Accordingly, IXYS must compete for the focus and sales efforts of its
distributors and stocking representatives. There can be no assurance that
IXYS' distributors and stocking representatives will continue to distribute
IXYS' products or do so successfully. Although IXYS believes that other
channels of distribution would be available if IXYS were to lose the services
of one or more of its independent distributors or stock representatives, there
can be no assurance that such loss would not have an adverse effect on its
results of operations.

Research and Development

The ability of IXYS to successfully compete in the power semiconductor
market will be substantially dependent on its ability to design, develop and
introduce to the market on a timely basis new products offering technological
improvements. IXYS is a pioneer in technology with respect to higher power
IGBTs, IGBT modules and DCB and introduced the power semiconductor industry's
first 800 volt, 50 ampere IGBT and an

8
<PAGE>

IGBT and FRED combination high power discrete device. (A discrete device is an
electrical or electronic component that performs a single function). While the
time from sampling to volume production of new power semiconductors products
can take up to 18 months, power semiconductors also have a product lifetime
exceeding an average of 10 years. In fiscal 1999, sales of products introduced
within the last 4 years constituted approximately 20% of total net revenues.
In fiscal 1999, IXYS introduced over 200 new part types. During fiscal 1998
and 1999, IXYS' research and development expenses were approximately $3.3
million and $4.2 million, respectively, and, at March 31, 1999, IXYS employed
22 people in engineering and research and development activities. IXYS expects
that it will continue to spend substantial funds on research and development
activities.

IXYS is engaged in ongoing research and development efforts focused on
enhancements to existing products and the development of new products.
Currently, IXYS is pursuing research and development projects with respect to
increasing the voltage operating range of its MOS products beyond 1,800 volts,
improving the thermal conductivity of its DCB products, increasing the voltage
ratings of its bipolar products beyond 2,200 volts, developing 500 kilowatt
IGBT modules, developing a complete range of bipolar MOS products capable of
handling 1,400 to 2,000 volts, improving its multiple die module assembly
technology and beginning its development of another line of integrated circuit
("IC") products. Research and development activities are conducted in
collaboration with manufacturing activities to help expedite new products from
the development phase to manufacturing and more quickly implement new process
technologies.

From time to time, IXYS has entered into agreements with customers to
develop specific products for inclusion in the customer's end product.
Pursuant to such agreements, the non-recurring engineering cost associated
with such development work, which is treated by IXYS as research, development
and engineering expense, is generally reimbursed by the customer. IXYS'
research and development efforts also include participation in technology
joint ventures with universities and research institutions. These joint
ventures allow research and development activities that would otherwise
require potentially cost prohibitive capital expenditures since the necessary
capital equipment is often available at research institutes and universities.
Through these joint ventures, IXYS is able to maximize its range of research
and development activities without defusing the focus of its in-house research
and development work and reduce its research and development costs. Research
and development projects currently being pursued through research institutes
or universities include MOS process simplification, new starting silicon wafer
development and new "higher power" semiconductor packaging and process
simplification.

There can be no assurance that IXYS will be able to identify new products
successfully and develop and bring to market such new products or that IXYS
will be able to respond effectively to new technological changes or new
product announcements by others. There also can be no assurance that IXYS' new
products will be accepted by the market. Moreover, the end markets for IXYS'
products are subject to rapid technological change and there can be no
assurance that as such markets change IXYS' product offerings will remain
current and suitable for them.

Patents and Licenses

IXYS holds 68 patents, including 49 which have been filed in the U.S. and 19
that have been filed in international jurisdictions. IXYS relies on a
combination of patent rights, copyrights and trade secrets to protect the
proprietary elements of its products. IXYS' policy is to file patent
applications to protect technology, inventions and improvements that are
important to its business. There can be no assurance that patents will issue
from any of IXYS' pending applications or that any claims allowed from
existing or pending patents will be sufficiently broad to protect IXYS'
technology. While IXYS intends to protect its intellectual property rights
vigorously, there can be no assurance that any patents held by IXYS will not
be challenged, invalidated or circumvented, or that the rights granted
thereunder will provide competitive advantages to IXYS.

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otherwise become known to or independently developed by others. In addition,
the laws of some foreign countries do not protect IXYS' proprietary rights to
the same extent as the laws of the United States.

While IXYS believes that its intellectual property rights are valuable, IXYS
also believes that, because of the rapid pace of technological change in the
industry, factors such as innovative skills, technical expertise, the ability
to adapt quickly to new technologies and evolving customer requirements,
product support and customer relations are of greater competitive
significance.

Manufacturing

The production of IXYS' products is a highly complex and precise process.
IXYS manufactures its products in manufacturing facilities which are owned and
operated by IXYS and by utilizing outside wafer foundries and subcontract
assembly facilities. IXYS divides its manufacturing operations into two key
areas: wafer fabrication and assembly.

Wafer Fabrication. IXYS owns an approximately 170,000 square foot
manufacturing facility in Lampertheim, Germany at which it fabricates
rectifiers and thyristors. IXYS has also retained the fabrication of its 1,600
volt and higher power MOS devices at this facility in order to protect its
process technologies with respect to the fabrication of these products. In
addition to the Lampertheim facility, IXYS has an approximately 20,000 square
foot facility in Santa Clara. IXYS designs and tests substantially all of its
IGBT, power MOSFET wafers and SRAM devices in Santa Clara, California and
designs and tests its bipolar and custom MOS modules in Lampertheim, Germany.
IXYS believes that its in-house fabrication capabilities enable it to lower
its manufacturing cost with respect to certain products, bring products to the
market more quickly than would be possible if IXYS were required to rely
exclusively on outside foundries, retain certain proprietary aspects of its
process technology and more quickly introduce new process innovations.

In addition to maintaining its own fabrication facility, IXYS establishes
alliances with selected foundries for wafer fabrication. This approach allows
IXYS to reduce substantial capital spending and manufacturing overhead
expenses, obtain competitive pricing and technologies and optimize production
schedules while retaining the flexibility to shift the production of its
products to a different or additional foundries for cost or performance
reasons. IXYS' product designs enable the production of its devices at
multiple foundries using well-established and cost-effective processes.

IXYS relied on outside foundries for 47% of its wafer fabrication
requirements in fiscal 1999, and dependency on outside foundries is expected
to grow. IXYS has arrangements with five wafer foundries, of which two
foundries provide approximately 90% of the wafers provided to IXYS by outside
foundries. IXYS has a supply agreement with one foundry, Samsung. Other than
the commitment with respect to the next two months' demand to be delivered
monthly, there are no obligations on the part of IXYS to order any minimum
quantities. See "Risk Factors--Risks Relating to the Business of IXYS--
Dependence on Third Parties for Wafer Fabrication and Assembly."

Wafer fabrication of power semiconductors generally employs process
technology and equipment already proven in IC manufacturing. Power
semiconductors are manufactured using fabrication equipment that is one or
more generations behind the equipment used to fabricate state-of-the-art ICs.
Used fabrication equipment can be obtained at prices substantially less than
the original cost of such equipment or than the cost of current, state-of-the-
art equipment. Consequently, the fabrication of power semiconductors is less
capital intensive than the fabrication of ICs.

Minute levels of contaminants in the manufacturing environment, difficulties
in the fabrication process, defects in the masks used to print circuits on a
wafer, manufacturing equipment failure, wafer breakage or other factors can
cause a substantial percentage of wafers to be rejected or numerous die on
each wafer to be nonfunctional. In the event that IXYS increases its
manufacturing output, there can be no assurance that IXYS will not experience
a decrease in manufacturing yields. Moreover, there can be no assurance that
IXYS in general

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will be able to maintain acceptable manufacturing yields in the future. To the
extent IXYS does not achieve acceptable manufacturing yields or experiences
product shipment delays, its business, financial condition and results of
operations would be materially and adversely affected.

There are significant risks associated with IXYS' reliance on outside
foundries, including the lack of assured supply of an adequate quantity of
semiconductor devices, control over delivery schedules and limited control
over quality assurance, manufacturing yields and production costs. IXYS'
foundries may from time to time experience lower than anticipated
manufacturing yields, particularly in connection with the introduction of new
products and the installation and start-up of new process technologies. There
can be no assurance that IXYS' foundries will not experience lower than
expected manufacturing yields in the future, which could materially and
adversely affect IXYS' business, financial condition and results of
operations.

Although from time to time certain materials, including silicon wafers, have
been in short supply, to date IXYS has not experienced substantial delays in
obtaining raw materials which have materially adversely affected production.
There can be no assurance that IXYS will not experience such delays in the
future. As is typical in the industry, IXYS must allow for significant lead
time in delivery of its materials. See "Risk Factors--Dependence on
Suppliers."

Assembly. Generally, each die on IXYS' wafers is electrically tested for
performance, and most of the wafers are subsequently sent to independent
subcontract assembly facilities. Packaging or assembly is the sequence of
production steps that divide the wafer into individual chips and enclose the
chips in external structures (termed packages) that make them useable in a
circuit. Discrete manufacturing involves the assembly and packaging of single
die devices. Module manufacturing involves the assembly of multiple devices
within a single package. The resulting packages vary in configuration, but all
have leads which are used to mount the package through holes in the customer's
printed circuit boards.

IXYS has equipment at, or manufacturing supply agreements with, assembly
subcontractors located in the Philippines, Portugal and Thailand in order to
take advantage of low assembly costs. Approximately 40% of IXYS' products are
assembled at these assembly facilities. Following assembly, IXYS' products are
returned to Santa Clara or Germany for testing and final inspection prior to
shipment to customers. IXYS' reliance on independent assemblers may subject
IXYS to supply constraints and longer manufacturing cycle times. IXYS from
time to time has experienced competition with respect to these contractors
from other manufacturers seeking assembly of circuits by independent
contractors. Although IXYS currently believes that alternative assembly
sources could be obtained, there can be no assurance that such alternative
sources could be quickly obtained. Foreign assembly is subject to risks
normally associated with foreign operations, including changes in local
governmental policies and the imposition of export controls or increased
import tariffs. See "Risk Factors".

Competition

The power semiconductor industry is intensely competitive and is
characterized by price competition, technological change, limited fabrication
capacity, international competition and manufacturing yield problems. The
ability of IXYS to compete successfully in its evolving industry depends on
factors both within and outside its control, including success in designing
and subcontracting the manufacture of new products that implement new
technologies, protection of Company products by effective utilization of
intellectual property laws, product quality, reliability, price, efficiency of
production, the pace at which customers incorporate IXYS' power semiconductors
into their products, success of competitors' products and general economic
conditions.

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IXYS believes that it is able to effectively compete in the power
semiconductor market, and in the higher power segment of this market in
particular, because of (i) its broad product line in the higher power segment,
(ii) its ability to focus its technical resources on the development of higher
power semiconductors, (iii) its ability to target new market opportunities and
extensions of existing power semiconductor applications more quickly than may
be possible by a larger, more diversified organization and (iv) its ability
and willingness to collaborate with customers to provide custom products. IXYS
believes that it is one of only a few companies focused on the development and
marketing of higher power semiconductors capable of performing all of the
basic functions of power semiconductors.

In the power MOSFET market, IXYS' competitors include Advanced Power
Technology, Inc. ("APT"), International Rectifier Corporation ("I.R."), Harris
Corporation ("Harris"), Motorola, Inc. ("Motorola") and SGS-Thomson
Microelectronics ("SGS"). IXYS targets the higher power segment of the MOSFET
market rather than the lower voltage, lower current segment of the market
dominated by IXYS' larger competitors. Currently, IXYS competes most directly
in this market with APT. IXYS believes that it is able to effectively compete
against APT by offering a wider range of products, improved body diode
performance at voltages over 500 volts and a greater number of high current
module packaging options.

With respect to the IGBT market, IXYS competes primarily with Toshiba
Corporation, I.R., Harris, Siemens AG, Fuji Electric Company and Powerex, Inc.
("Powerex"). IXYS believes that its relatively quick time to market and its
package and product enhancements provide it with a competitive advantage over
most of its competitors.

With respect to the FRED market, IXYS competes primarily with I.R., Harris,
Motorola and SGS. IXYS believes that FRED product performance is circuit
dependent but that in many chases, competitive products can be virtually
interchangeable. FREDs are necessary components of IGBT-based systems, and
IXYS' ability to package FREDs with IGBTs in one package without compromising
the performance of the IGBT allows it to be competitive with other larger
suppliers.

IXYS' thyristors, standard diodes and thyristor/diode modules compete
primarily with the products of I.R., Eupec GmbH, Semikron International and
Powerex. As opposed to the market for IXYS' other products, this market tends
to be driven primarily by price and product availability. Therefore, IXYS
competes in this market through guaranteed inventory programs, custom
products, custom module capability and selective competitive pricing. See
"Risk Factors".

Backlog

As of March 31, 1999, IXYS' backlog of orders was approximately $18.2
million, as compared with $24.2 million as of March 31, 1998. Backlog
represents firm orders anticipated to be shipped within the next 12 months.
IXYS' business and, to a large extent, that of the entire semiconductor
industry is characterized by short-term order and shipment schedules. Since
orders constituting IXYS' current backlog are subject to changes in delivery
schedules or to cancellation at the option of the purchaser without
significant penalty, backlog is not necessarily an indication of future
revenue.

Employees

As of March 31, 1999, IXYS employed 290 full-time employees, of whom 22 were
primarily engaged in engineering and research and development activities, 26
in marketing, sales and customer support, 219 in manufacturing and 23 in
administration and finance. A high percentage of the employees have advanced
degrees, including 13 Ph.D.s. IXYS' future success will be greatly dependent
upon its ability to attract, motivate and retain technical, marketing, sales
and management personnel who are in great demand in the semiconductor
industry. Certain employees at IXYS' Lampertheim facility are subject to
collective bargaining agreements. IXYS believes that its employee relations
are good.

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Environmental Matters

IXYS is subject to a variety of federal, state and local laws, rules and
regulations, and IXYS GmbH is subject to laws, rules and regulations in
Germany, related to the use, storage, handling, discharge and disposal of
certain chemicals and gases used in IXYS' manufacturing process. Any of those
regulations could require IXYS to acquire equipment or to incur substantial
other expenses to comply with environmental regulations. If substantial
additional expenses were incurred by IXYS, product costs could significantly
increase, thus materially adversely affecting IXYS' business, financial
condition and results of operations. IXYS believes that its activities conform
to present environmental regulations. Increasing public attention has,
however, been focused on the environmental impact of semiconductor operations.
While IXYS has not experienced any materially adverse effects on its
operations from environmental regulations, there can be no assurance that
changes in such regulations will not impose the need for additional capital
equipment or other requirements or restrict IXYS' ability to expand its
operations. Any failure by IXYS to comply with present or future environmental
laws rules and regulations could result in fines being imposed on IXYS,
suspension of production or cessation of operations, any of which could have a
material adverse effect on IXYS' business, financial condition and results of
operations. IXYS' business, financial condition and results of operations
would be subject to similar effects as a result of comparable laws and
regulations in Germany. See "Risk Factors--Risks Related to the Business of
IXYS."

IXYS' Lampertheim facility is located in an industrial area in which there
is known environmental contamination. In connection with the purchase of the
Lampertheim facility, IXYS conducted an environmental assessment of the site,
and no material contamination under German law was found on the Lampertheim
facility premises. There can be no assurance that IXYS' business, financial
condition and results of operations will not be materially adversely affected
by this situation. See "Risk Factors--Risks Related to the Business of IXYS."

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RISK FACTORS

In addition to the other information in this Annual Report on Form 10-K, the
following risk factors should be considered carefully in evaluating the
Company and its business. This Annual Report on Form 10-K contains forward-
looking statements which involve risks and uncertainties. The Company's actual
results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such a difference include, but
are not limited to, those discussed below.

Factors Affecting Operating Results. IXYS' quarterly and annual operating
results are affected by a wide variety of factors that could materially
adversely affect revenues and profitability, including IXYS' ability to
introduce new products and technologies on a timely basis; the level of orders
received which can be shipped in a quarter; availability of foundry capacity
and raw materials; the timing of investments in research and development,
including tooling expenses associated with product development and pre-
production; competitive pressures on selling prices; the timing and
cancellation of customer orders; the timing and provision of pricing
projections and returns from certain distributors; fluctuations in yields;
changes in product mix; introduction of products and technologies by IXYS'
competitors; foreign currency fluctuations; cyclicality of the semiconductor
industry; seasonality; and whether IXYS' customers buy from a distributor or
directly from IXYS. IXYS markets its products to various industries including
the computers and peripherals, industrial machinery and equipment,
telecommunications, transportation, medical and other industries. A downturn
in any of IXYS' markets could materially adversely affect IXYS' business,
financial condition and results of operations. Sudden shortages of raw
materials or production capacity constraints can lead producers to allocate
available supplies or capacity to customers with resources greater than those
of IXYS, which could interrupt IXYS' ability to meet its production
obligations. Historically, average selling prices in the IC and power
semiconductor industries have decreased over the life of a product, and as a
result, the average selling prices of IXYS' products may be subject to
significant pricing pressures in the future.

Customer orders typically can be canceled or rescheduled without significant
penalty to the customer. As a result, backlog may not be indicative of sales
for any future period. IXYS typically plans its production and inventory
levels based on forecasts of customer demand, which are highly unpredictable
and can fluctuate substantially. Because IXYS is continuing to increase its
operating expenses for personnel and new product development and for inventory
in anticipation of increasing sales levels, operating results would be
adversely affected if increased sales are not achieved. In addition, a large
part of IXYS' expenses are fixed and difficult to reduce in response to any
revenue shortfalls. From time to time, in response to anticipated long lead
times to obtain inventory and materials from its foundries, IXYS may order in
advance of anticipated customer demand, which might result in excess inventory
levels if expected orders fail to materialize or other factors render the
customer's product less marketable.

As a result of the foregoing or other factors, IXYS may experience material
fluctuations in future operating results on a quarterly or annual basis which
could materially and adversely affect its business, financial condition and
results of operations. Due to the foregoing factors, it is likely that in some
period, IXYS' revenues or operating results will be below the expectations of
public market analysts and investors. In such event, the price of the IXYS
Common Stock would likely be materially adversely affected.

Manufacturing. IXYS manufactures its products in manufacturing facilities
which are owned and operated by IXYS and by utilizing outside wafer foundries
and independent subcontract assembly facilities. The fabrication of discrete
and integrated circuits is a highly complex and precise process. Minute levels
of contaminants in the manufacturing environment, difficulties in the
fabrication process, defects in the masks used to print circuits on a wafer,
manufacturing equipment failure, wafer breakage or other factors can cause a
substantial percentage of wafers to be rejected or numerous die on each wafer
to be nonfunctional. In the event that IXYS increases its manufacturing
output, there can be no assurance that IXYS will not experience a decrease in
manufacturing yields. Moreover, there can be no assurance that IXYS in general
will be able to maintain acceptable manufacturing yields in the future. To the
extent IXYS does not achieve acceptable manufacturing

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<PAGE>

yields or experiences product shipment delays, its business, financial
condition and results of operations would be materially and adversely
affected. To achieve adequate production yields, IXYS may need to expand its
existing facilities. There can be no assurance that IXYS will be able to cost-
effectively expand its existing facilities in a timely manner, if at all, or
achieve adequate production yields from such expanded facilities. If IXYS
fails to cost-effectively expand its existing facility in a timely manner, its
business, financial condition and results of operations may be adversely
affected. See "IXYS Business--Manufacturing."

Dependence on Third Parties for Wafer Fabrication and Assembly. Forty-seven
percent (47%) of the revenue in fiscal year 1999 came from wafers acquired
from outside foundries. Dependency on outside foundries is expected to grow.
IXYS has arrangements with five wafer foundries, of which two foundries
provide 90% of the wafers provided to IXYS by outside foundries. IXYS has a
supply agreement with one of these foundries, Samsung Electronics Co.
("Samsung"). There can be no assurance that this agreement will be extended
beyond its current terms. IXYS expects that it will continue to rely
significantly on outside foundries in the future. There are significant risks
associated with IXYS' reliance on outside foundries, including the lack of
assured supply of an adequate quantity of semiconductor devices, control over
delivery schedules and limited control over quality assurance, manufacturing
yields and production costs. IXYS' foundries may from time to time experience
lower than anticipated manufacturing yields, particularly in connection with
the introduction of new products and the installation and start-up of new
process technologies. There can be no assurance that IXYS' foundries will not
experience lower than expected manufacturing yields in the future which could
materially and adversely affect IXYS' business, financial condition and
results of operations.

The ability of each foundry to provide semiconductor devices to IXYS is
limited by the foundry's available capacity. Therefore, IXYS' foundry
suppliers could choose to prioritize capacity for other customers or uses or
reduce or eliminate deliveries to IXYS on short notice. Accordingly, there is
no assurance that IXYS' foundries will allocate sufficient capacity to satisfy
IXYS' requirements. In addition, IXYS has been, and expects in the future to
be, particularly dependent upon a limited number of foundries for its power
MOSFET requirements. To address foundry capacity constraints, other
semiconductor suppliers that rely on third-party foundries have utilized
various arrangements, including equity investments in or loans to independent
wafer manufacturers in exchange for guaranteed production capacity, joint
ventures to own and operate foundries or take or pay contracts that commit a
company to purchase specified quantities of wafers over extended periods.
While IXYS is not currently a party to any such arrangements, it may be
required to enter into such arrangements in the future, and there can be no
assurance that it will be successful in this regard. Any such arrangements
could require IXYS to commit substantial capital and grant licenses to its
technology. The need to commit substantial capital may require IXYS to obtain
additional debt or equity financing, which could result in dilution to IXYS'
stockholders. There can be no assurance that such additional financing, if
required, will be available when needed or, if available, will be obtained on
terms acceptable to IXYS.

There can be no assurance that material disruptions in supply will not occur
in the future. In such event, IXYS may have to identify and secure additional
foundry capacity and may be unable to identify or secure additional foundry
capacity from another manufacturer, particularly at the levels that IXYS
currently anticipates such foundries to provide. Even if such capacity is
available from another manufacturer, the qualification process could take six
months or longer. If IXYS were unable to qualify alternative manufacturing
sources for existing or new products in a timely manner or if such sources
were unable to produce semiconductor devices with acceptable manufacturing
yields and at acceptable prices, IXYS' business, financial condition and
results of operations would be materially and adversely affected.

IXYS relies on independent subcontract assembly facilities for its discrete
and IC product requirements. IXYS' reliance on independent assemblers may
subject IXYS to supply constraints and longer manufacturing cycle times, which
could delay deliveries of IXYS' products to its customers. IXYS has from time
to time experienced competition from other manufacturers seeking assembly of
circuits by independent contractors, which could further constrain supply.
Such constraints or delays might result in the loss of customers, limitations
or reductions in IXYS' revenues or other material adverse effects on IXYS'
business, financial condition or

15
<PAGE>

results of operations. Although IXYS currently believes that alternative
assembly sources could be obtained, there can be no assurance that such
alternative sources could be quickly obtained or obtained at acceptable
prices. Failure to obtain such alternative assembly sources in a timely
manner, or at all, would have a material adverse effect on IXYS' business,
financial condition and results of operations. IXYS' reliance on independent
assemblers involves a number of other risks, including reduced control over
quality assurance and costs. The inability of such third parties to deliver
products of acceptable quality and at an acceptable cost could have a material
adverse effect on IXYS' business, financial condition and results of
operations. See "IXYS Business--Manufacturing."

Dependence on Suppliers. IXYS purchases silicon wafers from Sumitomo Sitix
Silicon, Inc., Epitech and Wacker AG, with whom IXYS does not have long term
supply agreements. Any of these suppliers could eliminate or terminate IXYS'
supply of wafers at any time. IXYS' reliance on a limited number of suppliers
involves several risks, including potential inability to obtain an adequate
supply of silicon wafers and reduced control over the price, timely delivery,
reliability and quality of the silicon wafers. There can be no assurance that
problems will not occur in the future with suppliers.

The silicon wafers used as starting material for power semiconductors are
different from the type of silicon wafers used for ICs. Power semiconductors
require silicon wafers with thicker layers for higher voltage blocking
capability. In addition, the IC industry has been moving toward the use of 8"
and larger diameter wafers, which require large capital equipment expenditures
from silicon wafer suppliers and IC manufacturers. Currently, the power
semiconductor industry generally uses 4" and 5" wafers, although IXYS
anticipates that the power semiconductor industry will move toward 6" wafers
for at least some applications. To the extent the power semiconductor industry
moves toward the use of larger wafer sizes, IXYS or its suppliers will be
required to invest in the processing equipment necessary for these larger
diameter wafers. Power semiconductor manufacturers currently rely on the
availability of smaller diameter silicon wafers for their needs, and there is
a risk that silicon wafer suppliers will move to larger diameter wafers to
cater to the IC industry, thus limiting the supply of the more economical 4"
and 5" wafers and forcing IXYS to make the large capital expenditures
necessary for processing the larger diameter wafers. The unavailability of 4"
and 5" silicon wafers in sufficient quantities to meet IXYS' manufacturing
needs, or an increase in the price of such wafers as a result of shortages in
their supply, would have a material adverse effect on IXYS' business,
financial condition and results of operations.

Because of IXYS' limited inventory of raw materials and tight manufacturing
cycles, unanticipated interruptions of supply, which have occurred
periodically in the past, could have a material adverse effect on IXYS'
business, financial condition and results of operations.

Competition. The power semiconductor industry is intensely competitive and
is characterized by price competition, technological change, limited
fabrication capacity, international competition and manufacturing yield
problems. The ability of IXYS to compete successfully in this evolving
industry depends on factors both within and outside its control, including
success in designing and subcontracting the manufacture of new products that
implement new technologies, protection of Company products by effective
utilization of intellectual property laws, product quality, reliability,
price, efficiency of production, the pace at which customers incorporate IXYS'
power semiconductors into their products, success of competitors' products and
general economic conditions.

IXYS encounters differing degrees of competition for its various products,
depending upon the type of product and the particular market served. Many of
IXYS' competitors are larger companies with greater financial, technical and
marketing resources than IXYS. The competitive factors in the market for IXYS'
products include overall functional performance of the products, quality,
price, reliability, breadth and availability of products, delivery time to the
customer and service. IXYS' primary competitors include Advanced Power
Technology, Fuji, International Rectifier, Harris Corporation, Motorola, Inc.,
Powerex, Inc., SGS-Thomson Microelectronics, Siemens AG and Toshiba
Corporation. Certain of these competitors may benefit from established
customer

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<PAGE>

relationships that provide them with a competitive advantage. New entrants
could also attempt to obtain a share of the market for IXYS' current and
future products. There can be no assurance that IXYS will continue to be able
to compete successfully against current or new competitors or new technologies
in the future. See "IXYS Business--Competition."

Management of International Operations; Fluctuation in Exchange Ratios. IXYS
operates a manufacturing facility in Lampertheim, Germany, relies on foundry
and assembly facilities in Asia and Europe and conducts a substantial portion
of its operations outside the United States. In fiscal 1997, 1998 and 1999,
foreign sales accounted for approximately 62%, 63% and 65% respectively, of
IXYS' total revenues. IXYS anticipates that foreign sales will continue to
account for a significant percentage of its revenues. A significant portion of
IXYS' total revenues will therefore be subject to risks associated with
foreign operations, including unexpected changes in, and the burden of
complying with, a wide variety of legal and regulatory requirements and policy
changes, changes in tariffs, exchange rates and other barriers, political and
economic instability, difficulties in accounts receivable collection,
difficulties in managing distributors or representatives, difficulties in
staffing and managing foreign operations, difficulties in protecting IXYS'
intellectual property overseas, seasonality of sales and potentially adverse
tax consequences. IXYS is also subject to risks associated with regulations
relating to the import and export of high technology products. IXYS cannot
predict whether quotas, duties, taxes or other charges or restrictions upon
the importation or exportation of IXYS' products in the future will be
implemented by the United States or any other country. IXYS' sales of products
manufactured in, and salaries of its personnel at, its Lampertheim facility
are denominated in German marks. Fluctuations in the German mark against the
United States dollar have had, and could in the future have, a significant
impact on the Company's balance sheet and results of operations. The Company's
net income has in the past and could in the future vary significantly
depending on fluctuations in the German mark against the United States dollar.
IXYS currently does not enter into foreign currency hedging transactions.
Fluctuations in currency exchange rates has caused, and could in the future
cause, IXYS' products to become relatively more expensive to customers in a
particular country, leading to a reduction in sales or profitability in that
country. To the extent that IXYS expands its international operations or
changes its pricing practices to denominate prices in other foreign
currencies, IXYS will be exposed to even greater risks of currency
fluctuations. There can be no assurance that any of these factors will not
have a material adverse effect on IXYS' business, financial condition and
results of operations. See "IXYS Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "IXYS Business--
Environmental Matters."

Management of Growth. To effectively manage its future growth, if any, IXYS
will need to implement a variety of new or expanded business and financial
systems, procedures and controls, including the improvement of its accounting,
manufacturing and other internal management systems. Currently, IXYS is in the
process of implementing a new comprehensive management information system
addressing all operational functions, including, sales, inventory, and
engineering functions. There can be no assurance that the implementation of
such systems, procedures and controls can be completed successfully, or
without disruption of IXYS' operations. Expansion of IXYS could significantly
strain IXYS' management, financial and other resources. In particular, if IXYS
seeks to increase its manufacturing capacity, it may be necessary for IXYS to
efficiently allocate any increased capacity among its products and to react to
changing market conditions, and the failure to do so would have a material
adverse effect on IXYS' business, financial condition and results of
operations. See "IXYS Business--Manufacturing."

In addition, IXYS has hired and will be required to hire in the future
substantial numbers of new employees, particularly additional management
personnel. The market for such personnel has become increasingly competitive,
and the inability of IXYS to recruit, train and retain adequate numbers of
qualified personnel would adversely affect IXYS' ability to manufacture and
sell its products.

As IXYS may be required to design and manufacture its products in larger
volumes, it may become more difficult for IXYS to maintain its standards of
quality and reliability, and delivery times for its products may grow longer.
Further, if IXYS is unable to expand its manufacturing capacity to meet
demand, the placement of

17
<PAGE>

a large order requiring the delivery of products during a particular period
might deter other customers from placing orders with IXYS that would require
development and delivery of products during the same period.

There can be no assurance that IXYS' systems, procedures, controls and
personnel will be adequate to support IXYS' operations. Failure to manage
IXYS' growth effectively could have a material adverse effect on IXYS'
business, financial condition and results of operations. See "IXYS Business--
Employees" and "--Management."

Dependence on Patents and Proprietary Technology. IXYS relies on a
combination of patent rights, copyrights and trade secrets to protect the
proprietary elements of its products. However, there can be no assurance that
such measures will provide adequate protection for IXYS' trade secrets or
other proprietary information, that disputes with respect to the ownership of
its intellectual property rights will not arise, that IXYS' trade secrets or
proprietary technology will not otherwise become known or be independently
developed by competitors or that IXYS can otherwise meaningfully protect its
intellectual property rights. IXYS' policy is to file patent applications to
protect technology, inventions and improvements that are important to its
business. There can be no assurance that patents will issue from any of IXYS'
pending applications or that any claims allowed from existing or pending
patents will be sufficiently broad to protect IXYS' technology. While IXYS
intends to protect its intellectual property rights vigorously, there can be
no assurance that any patents held by IXYS will not be challenged, invalidated
or circumvented, or that the rights granted thereunder will provide
competitive advantages to IXYS. Furthermore, there can be no assurance that
others will not develop similar products, duplicate IXYS' products or design
around the patents owned by IXYS.

IXYS also seeks to protect its trade secrets and proprietary technology, in
part, through confidentiality agreements with employees, consultants and other
parties. There can be no assurance that these agreements will not be breached,
that IXYS will have adequate remedies for any breach, or that IXYS' trade
secrets will not otherwise become known to or independently developed by
others. In addition, there can be no assurance that foreign intellectual
property laws will adequately protect IXYS' proprietary rights abroad.

The assertion of claims for infringement of intellectual property rights is
common in the semiconductor industry. There can be no assurance that any
infringement claims (or claims for indemnification resulting from infringement
claims against third parties, such as customers) or claims that IXYS' patents
are invalid will not be asserted against IXYS. If infringement claims are
asserted against IXYS, IXYS may seek to obtain a license of such third party's
intellectual property rights, which may not be available under reasonable
terms or at all. If an IXYS product is found to infringe a patent, a court may
grant an injunction to prevent making, selling or using the product in the
applicable country. Litigation may be necessary to defend against claims made
by third parties, enforce patents issued to IXYS, protect trade secrets or
know-how owned by IXYS. Any such litigation could result in substantial costs
and diversion of resources and could have a material adverse effect on IXYS'
business, financial condition and results of operations. See "IXYS Business--
Patents and Licenses."

Effect of Government Regulations. Power semiconductors with operating
voltages above 40 volts are subject, in some applications, to industry
regulations intended to address the safety, reliability and quality of the
products and to address environmental considerations. These regulations relate
to processes, design, materials and assembly. For example, in the United
States some high voltage products are required to pass Underwriters Laboratory
("UL") recognition for voltage isolation and fire hazard tests. Sales of power
semiconductors outside of the United States are subject to international
regulatory requirements that vary from country to country. Products used in
Europe may be required to be qualified under the Verband Deutscher
Elektrotechniker ("VDE") regulations. The process of obtaining and maintaining
required regulatory clearances can be lengthy, expensive and uncertain. The
time required to obtain approval for sale internationally may be longer or
shorter than that required for U.S. approval, and the requirements may differ.
In addition, 9% of IXYS' revenues in fiscal 1999 were derived from the sale of
products included in medical devices that are subject to extensive regulation
by numerous governmental authorities in the United States and internationally,
including the U.S. Food and Drug Administration (the "FDA"). The FDA and
certain foreign regulatory authorities impose

18
<PAGE>

numerous requirements with which medical device manufacturers must comply,
including adherence to Good Manufacturing Practices ("GMP") regulations and
similar regulations in other countries, which include testing, control and
documentation requirements. Ongoing compliance with GMP and other applicable
regulatory requirements is monitored through periodic inspections by federal
and state agencies, including the FDA, and by comparable agencies in other
countries. Failure to comply with applicable regulatory requirements could
result in, among other things, the inability to include IXYS' products in
approved medical devices. Delays in receipt of or failure to receive required
approvals or clearances, the loss of previously obtained approvals or
clearances, or failure to comply with existing or future regulatory
requirements would have a material adverse effect on IXYS' business, financial
condition and results of operations.

Technological Change. The power semiconductor industry is subject to
technological change and evolving industry standards. To remain competitive,
IXYS must continue to devote significant resources to the development of new
products and new process technologies. In addition, new product announcements,
introductions or enhancements by IXYS' competitors could cause a decline in
sales or loss of market acceptance of IXYS' existing products. Because new
product development commitments must be made well in advance of sales, new
product decisions must anticipate advances in power semiconductor
manufacturing. There can be no assurance that IXYS will be able to identify
new product opportunities successfully and develop and bring to market such
new products, that IXYS will be able to respond effectively to new
technological changes or new product announcements by others or that IXYS' new
products will be accepted by the market.

The markets for products incorporating power semiconductors are subject to
technological change, and there can be no assurance that as such markets
change IXYS' product offerings will remain current and suitable for them.
Certain of IXYS' new products are incorporated into a customer's products or
systems in the design stage. The value of any design win largely depends upon
the commercial success of the customer's product and on the extent to which
the design of the customer's electronic system accommodates incorporation of
components manufactured by IXYS' competitors. In addition, products or systems
may be subsequently redesigned so that they no longer require IXYS' products.
No assurance can be given that IXYS will achieve design wins or that any
design win will result in future revenues. The failure of IXYS to achieve
design wins could materially and adversely affect IXYS' business, financial
condition and results of operations. In addition, there can be no assurance
that IXYS' competitors will not develop new technologies that are
substantially equivalent or superior to IXYS' technologies or that IXYS will
be successful in enhancing existing processes or developing new technologies.
See "IXYS Business--Research and Development" and "--Competition."

Dependence on Key Personnel. IXYS is dependent upon a limited number of key
management, sales and technical personnel. IXYS' future success will depend in
part upon its ability to attract and retain highly qualified personnel. IXYS
faces competition for such personnel from other companies and other
organizations. As a result, there can be no assurance that IXYS will be
successful in hiring or retaining qualified personnel. Subject to the terms of
certain employment agreements, officers and other key personnel could leave
the employ of IXYS with little or no prior notice. Loss of key personnel, such
as Dr. Zommer, Chief Executive Officer, and Mr. Agbayani, Vice President of
Finance and Administration, especially if such loss is without advance notice,
or the inability to hire or retain qualified personnel could have a material
adverse effect on IXYS' business, financial condition and results of
operations. See "IXYS Business--Employees," "--Management."

Environmental Regulations. IXYS is subject to a variety of federal, state
and local laws, rules and regulations, and IXYS GmbH is subject to laws, rules
and regulations in Germany, related to the use, storage, handling, discharge
and disposal of certain chemicals and gases used in IXYS' manufacturing
process. Any of those regulations could require IXYS to acquire equipment or
to incur substantial other expenses to comply with environmental regulations.
If substantial additional expenses were incurred by IXYS, product costs could
significantly increase, thus materially adversely affecting IXYS' business,
financial condition and results of operations. IXYS believes that its
activities conform to present environmental regulations. Increasing public
attention has, however, been focused on the environmental impact of
semiconductor operations. While IXYS has not experienced any materially
adverse effects on its operations from environmental regulations, there can be
no

19
<PAGE>

assurance that changes in such regulations will not impose the need for
additional capital equipment or other requirements or restrict IXYS' ability
to expand its operations. Although IXYS believes it is currently in compliance
with applicable environmental laws, any failure by IXYS to comply with present
or future environmental laws rules and regulations could result in fines being
imposed on IXYS, suspension of production or cessation of operations, any of
which could have a material adverse effect on IXYS' business, financial
condition and results of operations. IXYS' business, financial condition and
results of operations would be subject to similar effects as a result of
comparable laws and regulations in Germany. See "IXYS Business--Environmental
Matters."

IXYS' Lampertheim facility is located in an industrial area in which there
is known environmental contamination. Although IXYS is not aware of any soil
or groundwater contamination at its facility, there can be no assurance that
IXYS' business, financial condition and results of operations will not be
materially adversely affected by this situation.

Litigation. IXYS is involved in various 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 its litigation
matters. However, if unsuccessful in the defense of any of the claims
currently made against it, IXYS' business, operating results and cash flows
could be materially and adversely affected. 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 IXYS. See "Item 3. Legal Proceedings" for a discussion
regarding certain litigation.

Financial Exposure to Product Liability Claims. IXYS faces the risk of
financial exposure to product liability claims alleging that the use of
devices which incorporate IXYS' products resulted in adverse effects.
Approximately 9% of IXYS' net revenues in fiscal 1999 were derived from sales
of products used in medical devices. Product liability risks may exist with
respect to these medical devices even with respect to those medical devices
that have received, or in the future may receive, regulatory approval for
commercial sale. See "Effect of Regulations." IXYS does not currently carry
product liability insurance, and there can be no assurance that IXYS will
avoid significant product liability claims. A successful claim brought against
IXYS could have a material adverse effect on IXYS' business, financial
condition and results of operations.

Potential Volatility of Stock Price. The trading price of IXYS' Common Stock
is subject to wide fluctuations in response to variations in operating results
of IXYS and other companies in the same industry, actual or anticipated
announcements of technical innovations or new products by IXYS or its
competitors and general market conditions. In addition, in recent years, the
stock market in general, and the market for shares of small capitalization and
high technology stocks in particular, have experienced extreme price
fluctuations, which have often been unrelated to the operating performance of
affected companies.

Impact of Year 2000. The Year 2000 will impact computer programs written
using two digits rather than four digits to define the applicable year. Any
programs with time-sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operation, including a temporary
inability to process transactions, send invoices or engage in other ordinary
activities. This problem largely affects software programs written years ago,
before the issue came to prominence.

IXYS has reviewed both its internal computer systems and its products that
could be affected by the "Year 2000" issue and has identified certain minor
software applications that will be affected. In the ordinary course of
replacing computer equipment and software, IXYS attempts to obtain
replacements that are Year 2000 compliant. Utilizing both internal and
external resources to identify and assess needed Year 2000 remediation, IXYS
currently anticipates that its internal Year 2000 identification, assessment,
remediation and testing efforts, will be completed during calendar, 1999, and
that such efforts will be completed prior to any currently anticipated impact
on its internal computer equipment and software.

20
<PAGE>

IXYS presently believes, with modification to existing software and
conversion to new software, the "Year 2000" issues relating to internal
computer systems and products will not cause significant operational problems
or computer problems. Furthermore, the cost of implementing these solutions is
not anticipated to be material to the financial position or results of
operations. The plan is currently expected to result in non-recurring expenses
through calendar 1999 of approximately $750,000. However, if such
modifications and conversions are not made, or not completed, IXYS does not
expect the "Year 2000" issue to have a material adverse impact on the
operations of the Company, as there are inexpensive alternatives available.
Although IXYS has completed its internal assessment of the Year 2000 issue and
believes that it is substantially compliant, there can be no assurance that
all potential problem areas have been identified and the Year 2000 risks
assessed. Should there be systems that were not included in the assessment and
which are not Year 2000 compliant, IXYS may be unable to conduct business or
manufacture its products, which could cause a material adverse effect on IXYS'
results of operations.

IXYS has initiated formal communications with all of its significant
suppliers and large customers during fiscal 1999 to determine the extent to
which IXYS is vulnerable to those third parties failure to remediate their own
"Year 2000" issues. There can be no guarantee that the systems or products of
other companies or significant suppliers will be converted. A failure to
convert by another company, or a conversion that is incompatible with IXYS'
systems may have a material adverse impact on IXYS.

IXYS' suppliers and customers may be adversely affected by their respective
failure to address the Year 2000 problem. Should any of IXYS' suppliers
encounter Year 2000 problems that cause them to delay manufacturing or
shipments of key components, IXYS may be forced to delay or cancel shipments
of its products, which would have a material adverse effect on IXYS' results
of operations. IXYS is currently working with its suppliers to address their
Year 2000 compliance in a timely manner. IXYS anticipates completion of this
effort by June 1999; however, there can be no assurance that any such effort
will be successful.

Currently, IXYS does not have a Year 2000 contingency plan in place as it
has completed its internal assessment and believes that it is substantially
compliant.

ITEM 2. Properties

IXYS' administrative, marketing, development and manufacturing facilities
are located in Santa Clara, California and Lampertheim, Germany. The Santa
Clara facility consists of approximately 20,000 square feet under a lease
which expires in January 31, 2004. IXYS has an option to extend the lease for
five years. The base rent under this lease is approximately $323,575 per year.
The Lampertheim facility, which is owned by IXYS, consists of approximately
170,000 square feet. IXYS also holds a lease for a 20,000 square foot
principal facility in Milpitas, California that expires in January 2002. IXYS
is currently subletting such Milpitas facility to 2Wire, a Delaware
corporation. IXYS believes that its current facilities will be adequate
through at least fiscal 2000 and that suitable additional space will be
available in the future as needed on commercially reasonably terms.

ITEM 3. Legal Proceedings

On August 12, 1996, the Company and Michael Gulett, Robert McClelland,
Richard A. Veldhouse, Dennis McDonald and Chiang Lam (the "Paradigm
Defendants") were named, along with PaineWebber, Inc., as defendants in a
purported class action (entitled Bulwa et al. v. Paradigm Technology, Inc. et
al., Santa Clara County Superior Court Case No. CV759991) brought on behalf of
stockholders who purchased the Company's stock between November 20, 1995 and
March 22, 1996 (the "Class Period").

The complaint asserted six causes of action against the Paradigm Defendants:
negligent misrepresentation, fraud, breach of fiduciary duty, violations of
California Corporations Code sections 25400 and 25500 ("Sections 25400 and
25500"), violation of Corporations Code section 1507, and violation of
California Civil Code sections 1709 and 1710.

21
<PAGE>

The Paradigm Defendants responded to the complaint by filing a demurrer
which challenged the legal sufficiency of all six causes of action. On
December 12, 1996, the Court sustained the demurrer as to all of the causes of
action except for the fourth cause of action for violation of Sections 25400
and 25500 (and as to all causes of action for defendant Michael Gulett). 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, with the exception of Michael Gulett (who by virtue of the ruling
on the demurrer has obtained a dismissal with prejudice as to all causes of
action asserted against him), filed an answer to the complaint denying any
liability for the acts and damages alleged by the 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 the 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. 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. Following the California Supreme
Court decision in Diamond Multimedia Systems, Inc. v. Superior Court, 19 Cal.
4th 1036 (1999), plaintiffs moved to modify the prior class certification
ruling to include also non-California purchaser. The Court granted this motion
on April 28, 1999.

On April 9, 1998, the court granted plaintiffs' motion to amend their
complaint to incorporate factual allegations derived from the Campbell, et al.
action described below. The court overruled the Paradigm Defendants' demurrer
to the amended complaint on August 6, 1998. The Paradigm Defendants filed an
answer to the amended complaint on August 27, 1998. There can be no assurance
that the Company will be successful in the defense of this action. If
unsuccessful in the defense of any such claim, the Company's business,
operating results and cash flows could be materially adversely affected.

On December 4, 1998, defendant Dennis McDonald, Paradigm's former Vice
President of Human Resources, filed a motion for summary judgment on the
amended complaint. Following his deposition, and prior to the hearing on the
motion, plaintiffs agreed to dismiss the defendant McDonald from the action
with prejudice in exchange for a waiver of costs. Defendant McDonald has since
obtained a judgment of dismissal.

On February 21, 1997, an additional purported class action, with causes of
action and factual allegations essentially identical to those of the Bulwa, et
al. action, was filed by the law firm of Stull, Stull & Brody in the Santa
Clara County Superior Court on behalf of stockholders who held the Company's
stock between November 20, 1995 and March 22, 1996. The action was entitled
Chai, et al. v. Paradigm Technology Inc. et al. (Case No. CV764259), and was
asserted against the same Paradigm Defendants as in the Bulwa, et al. action,
PaineWebber, Inc. and Smith Barney. Prior to the hearing on the Paradigm
Defendants' demurrer to the initial complaint, plaintiff amended his complaint
to incorporate factual allegations derived from the Campbell, et al. action
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 appealed the
decision, but on November 13, 1998 the Court of Appeal affirmed the judgment.
Plaintiff's petition for rehearing was denied. The time for filing a petition
for review by the Supreme Court has expired.

22
<PAGE>

Veldhouse, Dennis McDonald and Chiang Lam. The Campbell plaintiffs filed with
the complaint a notice that they considered their case related legally and
factually to the Bulwa action discussed above. The Campbell complaint
contained causes of action for fraud, breach of fiduciary duty, violations of
California Corporations Code sections 25400-25402, 25500-25502 and 25504 and
violation of California Civil Code sections 1709-1710. The Campbell complaint
alleged that the defendants misled them and committed fraud by allegedly
overstating the Company's back orders in the fourth quarter of 1995 and
inflated reported sales in the fourth quarter of 1995 and the first quarter of
1996, which allegedly resulted in distorting the Company's financial
condition, which allegedly inflated its stock price. Plaintiffs alleged that
they purchased the Company's stock at the allegedly inflated prices and were
damaged thereby. The complaint sought 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. 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 filed a demurrer in response to the second amended
complaint, which was heard on September 3, 1998. That same day, the Court
sustained the demurrer but granted plaintiffs leave to file a third amended
complaint by September 30, 1998. Plaintiffs then filed a third amended
complaint. Following defendants' filing of a demurrer to the third amended
complaint, plaintiffs agreed to dismiss their claims with prejudice in
exchange for defendants' agreement not to seek to recover defendants' costs
incurred in defending against the action. The third amended complaint was
dismissed with prejudice on December 11, 1998 and the defendants agreed not to
pursue any action against the plaintiffs for having filed the action.

On May 19, 1998, the law firm that filed the Bulwa, et al. action described
above filed an additional securities class action lawsuit against the Company,
Michael Gulett, Robert McClelland, Richard A. Veldhouse and Chiang Lam, this
time in the United States District Court for the Northern District of
California. The complaint alleged violations of section 10(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the
Commission Rule 10b-5 and section 20(a) of the Exchange Act. Plaintiff alleged
the same class and the same substantive factual allegations that are contained
in the Bulwa, et al. action as amended. Defendants responded to the complaint
on July 27, 1998 by filing a motion to dismiss the complaint for failure to
state claims upon which relief can be granted and for various pleading
inadequacies. In lieu of opposing the motion, plaintiff filed a first amended
complaint. Defendants renewed their motion to dismiss, and on January 20, 1999
the Court issued an order granting the motion and dismissing plaintiff's
action and entered judgment thereon. On February 3, 1999, the Court entered an
amended judgment clarifying that the judgment is with prejudice. On March 12,
1999, plaintiffs filed a notice of appeal.

ITEM 4. Submission of Matters of a Vote of Security Holders.

None.

23
<PAGE>

PART II

ITEM 5. Market For Registrant's Common Stock and Related Stockholder Matters

The Common Stock of the Company began trading publicly on the Nasdaq
National Market on June 28, 1995 under the symbol PRDM. As of August 22, 1997,
the Company's stock has been trading publicly on the Nasdaq SmallCap Market.
Prior to June 28, 1995, there was no public market for the Common Stock. In
September 1998, following the merger transaction between Paradigm and IXYS,
the Company commenced trading on the Nasdaq SmallCap Market under the symbol
SYXI. The Company has never paid cash dividends and does not anticipate paying
cash dividends in the foreseeable future. The following table sets forth for
the periods indicated the high and low sale prices of the Common Stock of the
Company on the Nasdaq National Market prior to August 22, 1997 and the Nasdaq
SmallCap Market subsequent to August 22, 1997. As of May 31, 1999, there were
approximately 159 holders of record of the Company's Common Stock.

<TABLE>
<CAPTION>
Fiscal Year ended March 31, 1999* High Low
- --------------------------------- ------ ------
<S> <C> <C>
First Quarter..................................................... 2 1/2 1/4
Second Quarter.................................................... 10 1/2 3/16
Third Quarter..................................................... 6 1/2 1 1/4
Fourth Quarter.................................................... 3 3/4 2 3/4
</TABLE>

- --------
* Note that several reverse splits were implemented by IXYS Corporation during
fiscal 1999.

<TABLE>
<CAPTION>
Fiscal Year ended March 31, 1998 High Low
- -------------------------------- ------ -----
<S> <C> <C>
First Quarter...................................................... 2 11/16
Second Quarter..................................................... 2 7/32 11/16
Third Quarter...................................................... 1 1/2 1/8
Fourth Quarter..................................................... 1 7/32 1/4
</TABLE>

ITEM 6. Selected Financial Data

The selected consolidated financial data set forth below have been derived
from the audited financial statements of IXYS. The audited financial
statements of IXYS as of March 31, 1998 and 1999 and for each of the three
years in the period ended March 31, 1999, together with the notes thereto and
the related report of PricewaterhouseCoopers llp, independent auditors, are
included elsewhere herein. The selected financial data set forth below should
be read in conjunction with the Financial Statements of IXYS and related Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations." IXYS has not declared or paid cash dividends on its
Common Stock since inception and does not intend to pay any cash dividends in
the foreseeable future.

24
<PAGE>

IXYS Selected Financial Data
(in thousands, except per share amount)

<TABLE>
<CAPTION>
1995 1996 1997 1998 1999
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues................ $ 42,489 $ 57,436 $ 55,322 $ 56,856 $ 66,523
Cost of goods sold.......... 28,488 35,629 34,158 38,048 44,939
-------- -------- -------- -------- --------
Gross profit................ 14,001 21,807 21,164 18,808 21,584
-------- -------- -------- -------- --------
Operating expenses:
Research, development and
engineering.............. 2,848 3,423 3,015 3,329 4,196
Selling, general and
administrative........... 7,118 9,430 8,950 8,384 20,256
-------- -------- -------- -------- --------
Total operating
expenses............... 9,966 12,853 11,965 11,713 24,452
-------- -------- -------- -------- --------
Operating income (loss)..... 4,035 8,954 9,199 7,095 (2,868)
Interest expense............ (715) (78) (116) (431) (993)
Gain (loss) on foreign
currency transactions...... (2,246) (32) (246) 183 37
Other income (expense),
net........................ (79) (1,578) (484) 3,466 669
-------- -------- -------- -------- --------
Income (loss) before
(provision) benefit for
income taxes............... 995 7,266 8,353 10,313 (3,155)
(Provision) benefit for
income taxes............... 6,267 4,327 (3,946) (4,229) (2,083)
-------- -------- -------- -------- --------
Net income (loss)........... $ 7,262 $ 11,593 $ 4,407 $ 6,084 $ (5,238)
======== ======== ======== ======== ========
Net income (loss) per
share--basic............... $ 2.99 $ 0.45 $ 0.08 $ 0.09 $ (0.56)
======== ======== ======== ======== ========
Shares used in per share
calculation--basic......... 2,426 25,709 53,478 65,501 9,373
======== ======== ======== ======== ========
Net income (loss) per
share--diluted............. $ 0.11 $ 0.09 $ 0.02 $ 0.03 $ (0.56)
======== ======== ======== ======== ========
Shares used in per share
calculation--diluted....... 67,139 124,093 208,280 201,866 9,373
======== ======== ======== ======== ========
Balance Sheet Data:
Cash and cash equivalents... $ 2,154 $ 4,968 $ 6,640 $ 9,644 $ 7,087
Working capital (2)......... 3,256 12,025 19,660 13,834 23,104
Total assets................ 26,943 39,626 39,410 54,340 58,733
Total debt, capital lease
and pension obligations.... 16,438 6,767 8,931 17,147 19,264
Mandatorily redeemable
convertible preferred
stock (1).................. 27,107 37,556 37,556 37,556
Accumulated deficit......... (33,443) (21,850) (17,443) (11,359) (16,597)
Total stockholders'
(deficit), equity.......... (32,823) (21,022) (17,129) (11,956) 25,720
</TABLE>

ITEM 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations

Overview

IXYS was founded in 1983 to design, develop and market power semiconductors
used primarily in controlling energy in motor drives and power conversion.
IXYS' target market includes segments of the power semiconductor market that
require medium to higher power semiconductors, with a particular emphasis on
higher power semiconductors, which are those capable of processing greater
than 500 watts of power.

IXYS has been an innovator in power MOS semiconductor products and
technologies since its inception. IXYS pioneered the high voltage, high
current MOSFET and IGBT technologies and was the industry's first developer
and manufacturer of a 1,000 volt, 100 amp IGBT, which has proven to be
superior in reliability and performance to traditional bipolar Darlington
transistors.

In 1989, IXYS acquired the ABB AG power semiconductor operation in
Lampertheim, Germany from Zurich-based ABB, a world leader in power
generation, transmission, distribution equipment, industrial controls

25
<PAGE>

and motor drives. Now called IXYS Semiconductor GmbH, the power semiconductor
operation in Lampertheim is recognized for pioneering work in DCB packaging
technology. The group also developed a line of FREDs that significantly reduce
energy losses in motor control and UPS applications. IXYS Semiconductor GmbH
provides IXYS with a strong foothold in the European Community ("EC") and
positions IXYS to take advantage of tariff and import incentives to EC-based
entities.

In January 1993, in answer to continuing operational losses, IXYS underwent
a reorganization of its upper level management structure. Subsequent cost
cutting in its US operations as well as in its Lampertheim facility allowed
IXYS to operate more efficiently and achieve profitability.

In 1995, IXYS reincorporated in Delaware. Also in 1995, ABB AG converted
approximately $10.5 million in debt owed to it by IXYS into IXYS Series B
Preferred Stock.

In January 1998, IXYS completed the purchase of the Lampertheim facility
previously leased from ABB AG. This facility is approximately 170,000 square
feet and houses IXYS' Lampertheim offices and manufacturing operations. ABB AG
leases some office space in this facility. IXYS feels that the Lampertheim
facility is sufficient to serve its needs in the module and bipolar product
lines for the foreseeable future.

On September 23, 1998, IXYS Corporation merged with Paradigm, a Delaware
corporation that designs and markets fast SRAM products, in a transaction
accounted for as a reverse merger. In the merger, Paradigm issued 11,513,821
shares of its common stock in exchange for all outstanding shares of IXYS
Corporation capital stock. At the conclusion of the merger, IXYS Corporation
stockholders held approximately 96% of the combined company, and the historic
accounting records of IXYS Corporation became those of the combined company.
Accordingly, Paradigm formally changed its name to "IXYS Corporation."

Results of Operations--Years Ended March 31, 1999 and March 31, 1998

Net Revenue. IXYS' net revenues for fiscal 1999 were $66.5 million, a 17.0%
increase from revenues of $56.9 million in 1998. The increase is primarily
related to approximately a 39% increase in units shipped in 1999 as compared
to 1998, offset by approximately 16% decrease in average selling prices.
International net revenue represents $42.8 million for fiscal 1999 or 65% of
total net revenue as compared to $35.8 million for fiscal 1998 or 63% of net
revenue.

Gross Margin. IXYS' gross margin for 1999 was 32% in 1999 as compared to 33%
in 1998. The decrease in gross margin is due to average selling prices which,
in response to competition, declined at a somewhat faster rate than IXYS'
ability to reduce its cost of goods sold. International gross margin for 1999
was 22% as compared to 25% in 1998. Domestic gross margin for 1999 was 34% as
compared to 42% 1998.

Research, Development and Engineering ("R&D"). For the fiscal year ended
1999 R&D was $4.2 million or 6.3% of net revenues as compared to $3.3 million
or 5.8% of net revenues, for fiscal year 1998. R&D expenses increase was due
to higher engineering headcount in 1999.

Selling, General, Administrative Expenses ("SG&A"). For the fiscal year
1999, SG&A was $20.3 million (30.4% of net sales) as compared to $8.4 million
(14.7% of net sales) in fiscal year 1998. The increase reflects $10.4 million,
amortization and writeoff of goodwill related to the acquisition of Paradigm
or 15.6% of net sales. SG&A excluding the amortization and writeoff of
goodwill related to the acquisition of Paradigm was $9.9 million, or 14.8% of
net sales.

Interest Expense. During 1999, interest expense was $993,000 as compared to
$431,000 compared to in 1998. The increase in interest expense is due to
higher average borrowings in 1999 as compared to 1998.

Other Income (Expense), Net. Other income (expense) in fiscal in 1999 was
$669,000 as compared to $3.5 million in 1998, which included $3.7 million
attributable to the settlement of the patent claim made by Harris Corporation.

26
<PAGE>

Provision/Benefit For Income Taxes. The 1999 provision for income taxes
reflects an effective tax rate of 29% in 1999, prior to the effect of the
write-off of the one-time non-deductible charge of $10.4 million in connection
with the reverse merger acquisition of Paradigm as compared with a 1998
provision for income tax rate of 41.0%. Including the one-time non-deductible
charge of $10.4 million, the effective tax rate is 66% in 1999.

Results of Operations--Years Ended March 31, 1998 and March 31, 1997

Net Revenue. IXYS' net revenues for fiscal 1998 were $56.9 million, a 2.9%
increase from revenue of $55.3 million in 1997. The increase is primarily
related to an increase of approximately 12% in units shipped in 1998 as
compared to 1997, offset by a 10% decrease in average selling prices.
International net revenue represents $35.8 million for fiscal 1998 or 63% of
total net revenue as compared to $34.3 million for fiscal 1997 or 62% of net
revenue.

Gross Margin. IXYS' gross margin for 1998 was 33% as compared to 38% in
1997. The decrease in gross margin is due to average selling prices which, in
response to competition, declined at a faster rate than IXYS' ability to
reduce its costs. International gross margin for 1998 was 25% as compared to
35% in 1997. Domestic gross margin for 1998 was 42% as compared 44% in 1997.

Research, Development and Engineering ("R&D"). For the fiscal year ended
1998 R&D was $3.3 million or 5.8% of net revenues, as compared to $3.0
million, or 5.4%, for fiscal year 1997. R&D expenses increase was due to
higher engineering headcount in 1998.

Selling, General, Administrative Expenses ("SG&A"). For the fiscal year
1998, SG&A was $8.4 million (14.8% of net sales) as compared to $9.0 million
(16.3% of net sales) in fiscal year 1997. In absolute dollars, SG&A decreased
by $600,000 reflecting significantly lower costs associated with IXYS' defense
of a patent claim made by Harris, which was settled in fiscal 1998.

Interest Expense. During 1998, interest expense was $431,000 compared to
$116,000 in 1997. The increase in interest expense is due to higher average
borrowings in 1998 as compared to 1997.

Other Income (Expense), Net. Other income in fiscal 1998 includes $3.7
million attributable to the settlement of the Harris litigation.

Provision/Benefit For Income Taxes. The 1998 provision for income taxes
reflected an effective tax rate of 41.0% in 1998 compared to 47.2% in 1997.
IXYS' effective tax rate approximates statutory foreign and US federal and
state rates.

Liquidity and Capital Resources

The Company has financed its operations to date through the private sale of
equity, lease financing and bank borrowings. As of March 31, 1999, the cash
and cash equivalents were $8.5 million, a decrease of $2.1 million from cash
and cash equivalents of $10.6 million at March 31, 1998. The decrease in cash
and cash equivalents was primarily due to usage of cash to fund Paradigm
operations.

Line of credit facilities available to the Company are as follows: A line of
credit with a U.S. bank that as of March 31, 1999 consists of a $5.0 million
commitment amount which is available through August 1999. The line bears
interest at the bank's prime rate (7.75% at March 31, 1999). The line is
collateralized by certain assets and contains certain general and financial
covenants, which include provisions stating that the Company cannot incur
additional debt or pledge assets without the prior approval of such bank. At
March 31, 1999, the Company had drawn $2.1 million against such line of
credit.

The accounts receivable at March 31, 1999 were $11.7 million, an increase of
17.0% as compared to March 31, 1998. The inventories at March 31, 1999 were
$20.2 million, an increase of 17.9% as compared to March 31,

27
<PAGE>

1998. Net plant and equipment at March 31, 1999 were $11.3 million, an
increase of 6.8% as compared to March 31, 1998.

The Company evaluates the acquisition of businesses, products or
technologies that complement the Company's business. Any such transactions, if
consummated, may use a portion of the Company's working capital or require the
issuance of equity securities, which may result in further dilution to the
Company's stockholders.

The Company believes that cash generated from operations, if any, and
banking facilities will be sufficient to meet its cash requirements through
fiscal 2000. To the extent that funds generated from operations, together with
bank facilities are insufficient to meet its capital requirements, the Company
will be required to raise additional funds. No assurance can be given that
additional financing will be available on acceptable terms. The lack of such
financing if needed, would have a material adverse effect on the Company's
business, financial condition and results of operations.

Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosure about Segments of an
Enterprise and Related Information" (SFAS 131). SFAS 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to stockholders. SFAS 131 generally supersedes
Statement of Financial Accounting Standards No.14, "Financial Reporting for
Segments of Business Enterprise." Under SFAS 131, operating segments are
components of an enterprise about which separate financial information is
available that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. Generally,
financial information is required to be reported on the basis it is used
internally. SFAS 131 is effective for financial statements for periods
beginning after December 15, 1997, and restatement of comparative information
for earlier years is required. However, SFAS 131 is not required to be applied
to interim financial statements in the initial year of application. Based upon
the criteria of SFAS 131, the Company has a single operating segment.
Accordingly, the financial statements provided herein satisfy the standard for
reporting. Geographic information about revenues, operating income and
identifiable assets are provided in the notes to the financial statements.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities", which establishes accounting and reporting standards
for derivative instruments and hedging activities. SFAS 133 requires that an
entity recognize all derivatives as either assets or liabilities in the
balance sheets and measure those instruments at fair value. This Statement
becomes effective for the Company for fiscal years beginning after June 15,
1999. The company does not currently hold derivative instruments or engage in
hedging activities.

In March 1998, the Accounting Standards Executive Committee, or AcSEC,
released Statement of Position 98-1, or SOP 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1 requires
companies to capitalize certain costs of computer software developed or
obtained for internal use, provided that those costs are not research and
development. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. The Company is evaluating the requirements of SOP 98-1 and the
effects, if any, on the Company's current policies on accounting for software
costs.

Year 2000 Conversion--See "Risk Factors."

The Company has reviewed both its internal computer systems and its products
that could be affected by the "Year 2000" issue and has identified certain
minor software applications that will be affected. In the ordinary course of
replacing computer equipment and software, the Company attempts to obtain
replacements that are Year 2000 compliant. Utilizing both internal and
external resources to identify and assess needed Year 2000 remediation, the
Company currently anticipates that its internal Year 2000 identification,
assessment, remediation

28
<PAGE>

and testing efforts, will be completed,during calendar 1999, and that such
efforts will be completed prior to any currently anticipated impact on its
internal computer equipment and software.

The Company presently believes, with modification to existing software and
conversion to new software, the "Year 2000" issues relating to internal
computer systems and products will not cause significant operational problems
or computer problems. Furthermore, the cost of implementing these solutions is
not anticipated to be material to the financial position or results of
operations. The plan is currently expected to result in non-recurring expenses
through calendar 1999 of approximately $750,000. However, if such
modifications and conversions are not made, or not completed, the Company does
not expect the "Year 2000" issue to have a material adverse impact on the
operations of the Company, as there are inexpensive alternatives available.
Although the Company has completed its internal assessment of the Year 2000
issue and believes that it is substantially compliant, there can be no
assurance that all potential problem areas have been identified and the Year
2000 risks assessed. Should there be systems that were not included in the
assessment and which are not Year 2000 compliant, the Company may be unable to
conduct business or manufacture its products, which could cause a material
adverse effect on the Company's results of operations.

The Company has initiated formal communications with all of its significant
suppliers and large customers during fiscal 1999 to determine the extent to
which the Company is vulnerable to those third parties failure to remediate
their own "Year 2000" issues. There can be no guarantee that the systems or
products of other companies or significant suppliers will be converted. A
failure to convert by another company, or a conversion that is incompatible
with the Company's systems may have a material adverse impact on the Company.

The Company's suppliers and customers may be adversely affected by their
respective failure to address the Year 2000 problem. Should any of the
Company's suppliers encounter Year 2000 problems that cause them to delay
manufacturing or shipments of key components, the Company may be forced to
delay or cancel shipments of its products, which would have a material adverse
effect on the Company's results of operations. The Company is currently
working with its suppliers to address their Year 2000 compliance in a timely
manner.

Currently, the Company does not have a Year 2000 contingency plan in place
as it has completed its internal assessment and believes that it is
substantially compliant.

ITEM. 7(a) Quantitative and Qualitative Disclosures about Market Risk

The Company is exposed to the impact of interest rate changes, foreign
currency fluctuations, and change in the market values of its investments.

Interest Rate Risk. The Company's exposure to market rate risk for changes
in interest rates relates primarily to the Company's investment portfolio. The
Company has not used derivative financial instruments in its investment
portfolio. The Company invests its excess cash in debt instruments of the U.S.
Government and its agencies, and in high-quality corporate issuers and, by
policy, limits the amount of credit exposure to any one issuer. The Company
protects and preserves its invested funds by limiting default, market and
reinvestment risk.

Investments in both fixed rate and floating rate interest-earning
instruments carries a degree of interest rate risk. Fixed rate securities may
have their fair market value adversely impacted due to a rise in interest
rates, while floating rate securities may produce less income than expected if
interest rates fall. Due in part to these factors, the Company's future
investment income may fall short of expectations due to changes in interest
rates or the Company may suffer losses in principal if forced to sell
securities which have declined in market value due to changes in interest
rates.

Foreign Currency Risk. International revenues from the Company's foreign
subsidiary were approximately 55% of total revenues. International sales are
made mostly from the Company's German subsidiary and are typically denominated
in the local currency of Germany. This subsidiary also incurs most of its
expenses in the local currency. Accordingly, IXYS' foreign subsidiary uses the
local currency as its functional currency.

29
<PAGE>

The Company's international business is subject to risks typical of an
international business including, but not limited to, differing economic
conditions, changes in political climate, differing tax structures, other
regulations and restrictions, and foreign exchange rate volatility.
Accordingly, the Company's future results could be materially adversely
impacted by changes in these or other factors.

The Company's exposure to foreign exchange rate fluctuations arises in part
from intercompany accounts in which costs incurred in the United States are
charged to the Company's foreign subsidiary. These intercompany accounts are
typically denominated in the functional currency of its foreign subsidiary in
order to centralize foreign exchange risk with the parent company in the
United States. The Company is also exposed to foreign exchange rate
fluctuations as the financial results of its foreign subsidiary are translated
into U.S. dollars in consolidation. As exchange rates vary, these results,
when translated, may vary from expectations and adversely impact overall
expected profitability. The effect of foreign exchange rate fluctuations on
the Company in 1999 was not material.

30
<PAGE>

ITEM 8. Financial Statements

IXYS CORPORATION

INDEX TO FINANCIAL STATEMENTS

CONTENTS

<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of PricewaterhouseCoopers LLP, Independent Accountants.............. 32
Audited Financial Statements
Consolidated Balance Sheets.............................................. 33
Consolidated Statement of Operations..................................... 34
Consolidated Statement of Stockholders' Deficit.......................... 35
Consolidated Statements of Cash Flows.................................... 36
Notes to Consolidated Financial Statements............................... 37
</TABLE>

31
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Stockholders and Board of Directors IXYS Corporation

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity (deficit), and
cash flows, present fairly, in all material respects, the financial position
of IXYS Corporation and its subsidiaries at March 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended March 31, 1999, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards, which
require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.

/s/ PricewaterhouseCoopers LLP

San Jose, California
May 10, 1999

32
<PAGE>

IXYS CORPORATION

CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)

<TABLE>
<CAPTION>
March 31,
------------------
1998 1999
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ 9,644 $ 7,087
Restricted cash.......................................... 950 1,393
Accounts receivable, less allowance for doubtful accounts
of $588 in 1998 and $600 in 1999, respectively.......... 10,009 11,731
Inventories.............................................. 17,103 20,167
Deferred income taxes.................................... 1,617 1,617
-------- --------
Total current assets................................... 39,323 41,995
Plant and equipment, net................................. 10,602 11,323
Other assets............................................. 1,143 2,743
Deferred income taxes.................................... 3,272 1,039
-------- --------
Total.................................................. $ 54,340 $ 57,100
======== ========
LIABILITIES
Current liabilities:
Current portion of capitalized lease obligations......... $ 428 $ 1, 102
Current portion of notes payable to bank................. 4,168 4,369
Current portion of mandatorily redeemable preferred
stock................................................... 9,300
Accounts payable......................................... 4,474 5,161
Accrued expenses and other liabilities................... 7,119 6,954
-------- --------
Total current liabilities.............................. 25,489 17,586
Notes payable to bank, net of current portion.............. 6,624 6,211
Capitalized lease obligations, net of current portion...... 814 2,195
Pension liabilities........................................ 5,113 5,388
Commitments and contingencies (Note 8)
Series A and B mandatorily redeemable convertible preferred
stock, $.001 par value: Authorized: 116,000 shares in 1998
and 0 shares in 1999
Issued and outstanding: 111,409,671 shares in 1998 and 0
shares in 1999 (Aggregate liquidation value of $37,589 in
1998), net................................................ 28,256
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $0.01 par value; 5,000,000 shares
authorized, No shares issued and outstanding
Common stock, $.01 par value:
Authorized: 250,000,000 shares in 1998 and 40,000,000
shares in 1999
Issued and outstanding: 72,211,873 shares in 1998 and
11,986,661 shares in 1999............................... 72 120
Additional paid-in capital................................. 1,001 43,297
Notes receivable from stockholders......................... (936) (936)
Accumulated deficit........................................ (11,359) (16,597)
Cumulative translation adjustment.......................... (734) (164)
-------- --------
Total common stock, additional paid-in capital, notes
receivable from stockholders, accumulated deficit, and
accumulated translation adjustment.................... (11,956) 25,720
-------- --------
Total................................................ $ 54,340 $ 57,100
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

33
<PAGE>

IXYS CORPORATION

CONSOLIDATED STATEMENT OF OPERATIONS
(in thousands, except share data)

<TABLE>
<CAPTION>
Year Ended March 31,
----------------------------
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Net revenues.................................... $ 55,322 $ 56,856 $ 66,523
Cost of goods sold.............................. 34,158 38,048 44,939
-------- -------- --------
Gross profit................................ 21,164 18,808 21,584
-------- -------- --------
Operating expenses:
Research, development and engineering......... 3,015 3,329 4,196
Selling, general and administrative........... 8,950 8,384 20,256
-------- -------- --------
Total operating expenses.................... 11,965 11,713 24,452
-------- -------- --------
Operating income (loss)......................... 9,199 7,095 (2,868)
Interest expense................................ (116) (431) (993)
Gain (loss) on foreign currency transactions.... (246) 183 37
Other income (expense).......................... (484) 3,466 669
-------- -------- --------
Income before income tax provision.............. 8,353 10,313 (3,155)
Income tax provision............................ (3,946) (4,229) (2,083)
-------- -------- --------
Net income (loss)............................... $ 4,407 $ 6,084 $ (5,238)
======== ======== ========
Net income (loss) per share--basic.............. $ 0.08 $ 0.09 $ (0.56)
======== ======== ========
Number of shares used in per share calculation--
basic.......................................... 53,478 65,501 9,373
======== ======== ========
Net income (loss) per share--diluted............ $ 0.02 $ 0.03 $ (0.56)
======== ======== ========
Number of shares used in per share calculation--
diluted........................................ 208,280 201,866 9,373
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

34
<PAGE>

IXYS CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

FOR THE YEARS ENDED MARCH 31, 1997, 1998 and 1999
(in thousands)

<TABLE>
<CAPTION>
Notes
Additional Receivable Cumulative Total
Paid-In from Accumulated Translation Stockholder's
Shares Amount Capital Stockholders Deficit Adjustment Deficit
------ ------ ---------- ------------ ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances, March 31,
1996................... 4,191 $ 42 $ 1,022 $(936) $(21,850) $ 700 $(21,022)
Exercise of stock
options................ 2 4 4
Exercise of stock
warrants............... 1 1 1
Issuance of note
receivable for common
stock.................. 2
Foreign currency
translation
adjustments............ (519) (519)
Net income.............. 4,407 4,407
------ ---- ------- ----- -------- ----- --------
Balances, March 31,
1997................... 4,196 42 1,027 (936) (17,443) 181 (17,129)
Exercise of stock
options................ 2 2 2
Repurchase of common
stock.................. (21) (4) (4)
Payment on notes
receivable from
stockholders...........
Exercise of warrants....
Foreign currency
translation
adjustments............ (915) (915)
Net income.............. 6,084 6,084
------ ---- ------- ----- -------- ----- --------
Balance, March 31,
1998................... 4,177 42 1,025 (936) (11,359) (734) (11,962)
Exercise of stock
options................ 6 17 17
Exercise of warrants.... 893 9 9
Conversion of preferred
stock.................. 6,469 65 37,491 37,556
Issuance of common
stock.................. 442 4 4,764 4,768
Foreign currency
translation
adjustment............. 570 570
Net loss................ (5,238) (5,238)
------ ---- ------- ----- -------- ----- --------
Balances, March 31,
1999................... 11,987 $120 $43,297 $(936) $(16,597) $(164) $ 25,720
====== ==== ======= ===== ======== ===== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

35
<PAGE>

IXYS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)................................. $ 4,407 $ 6,084 $ (5,238)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 969 1,525 2,614
Other............................................ (262) 1,018
Provision for excess and obsolete inventories.... 730 708 1,367
Writeoff of goodwill and in-process research and
development..................................... 10,401
Loss (gain) on foreign currency translation...... 246 (317) 297
Deferred income taxes............................ 3,366 4,369 600
Changes in operating assets and liabilities:
Accounts receivable.............................. (401) (3,447) (2,290)
Inventories...................................... (2,735) (6,907) (5,657)
Prepaid expenses and other current assets........ (5) (514)
Other assets..................................... (264) (754) (1,213)
Accounts payable................................. (812) 2,446 (178)
Accrued expenses and other liabilities........... (4,255) (1,741) 151
Pension liabilities.............................. 379 353 275
------- ------- --------
Net cash provided by operating activities....... 1,368 3,332 615
------- ------- --------
Cash flows used in investing activities:
Purchases of plant and equipment.................. (1,400) (9,311) (3,116)
Purchase of goodwill.............................. -- -- (606)
------- ------- --------
Net cash used in investing activities........... (1,400) (9,311) (3,722)
------- ------- --------
Cash flows used in financing activities:
Proceeds from capital lease obligations........... 996 350 2,143
Restricted cash (increase)........................ (187) 641 (443)
Principal payments on capital lease obligations... (268) (209) (303)
Repayment of notes payable to bank................ (645) (2,500)
Proceeds from bank Loan........................... 2,500 11,148
Other ............................................ 5 5 (977)
------- ------- --------
Net cash provided by financing activities....... 2,401 9,435 420
------- ------- --------
Effect of foreign exchange rate fluctuations on
cash and cash equivalents......................... (697) (452) 130
------- ------- --------
Net increase in cash and cash equivalents.......... 1,672 3,004 (2,557)
Cash and cash equivalents at beginning of year..... 4,968 6,640 9,644
------- ------- --------
Cash and cash equivalents at end of year........... $ 6,640 $ 9,644 $ 7,087
======= ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest.......... $ 36 $ 501 $ 979
Cash paid during the period for income taxes...... 1,615 326 2,739
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Purchase of fixed assets under capital lease...... 129
Purchase of common stock through issuance of notes
receivable....................................... 6
Conversion of mandatorily convertible preferred
stock............................................ 37,556
Common stock issued for Paradigm assets........... 4,740
</TABLE>

The accompanying notes are an integral part of these financial statements.

36
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. FORMATION AND BUSINESS OF IXYS:

Effective September 23, 1998, IXYS Corporation ("IXYS") merged with Paradigm
Technology, Inc. ("Paradigm"), a company that designs and markets fast SRAM
products, in a transaction accounted for as a reverse merger. In the merger,
Paradigm issued 11,513,821 shares of its common stock in exchange for all
outstanding shares of IXYS capital stock. At the conclusion of the merger,
IXYS stockholders held approximately 96% of the combined company. After the
merger, the historic accounting records of IXYS became those of the combined
company and, accordingly, Paradigm changed its name to IXYS (the combined
company of which is referred to in this filing as the "Company" or the
"Registrant").

IXYS Corporation designs, develops and markets power semiconductors, Digital
and Analog Integrated Circuits (IC), and high speed, high density Static
Random Access Memory (SRAM). Power semiconductors are used primarily in
controlling energy in motor drives, power conversion (including
uninterruptible power supplies (UPS) and switch mode power supplies (SMPS))
and medical electronics. IXYS' power semiconductors convert electricity at
relatively high voltage and current levels to create efficient power as
required by a specific application. IXYS' target market includes segments of
the power semiconductor market that require medium to high power
semiconductors, with a particular emphasis on higher power semiconductors.
IXYS sells power semiconductors, including power MOSFETs, insulated gate
bipolar transistors (IGBTs), thyristors (silicon controlled rectifiers or
"SCRs") and rectifiers, including fast recovery epitaxial diodes (FREDs). SRAM
products are for uses in telecommunication devices, workstations and high
performance PCs to OEMs and distributors in the United States, Europe and the
Far East.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation:

The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after elimination of all significant
intercompany balances and transactions.

Use of Estimates:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could materially differ from IXYS' estimates.

Foreign Currency Translation:

The local currency is considered to be the functional currency of the
Company's wholly owned subsidiary IXYS Semiconductor GmbH ("IXYS GmbH").
Accordingly, assets and liabilities are translated at the exchange rate in
effect at year-end and revenues and expenses are translated at average rates
during the year. Adjustments resulting from the translation of the accounts of
IXYS GmbH into U.S. dollars are included in cumulative translation adjustment,
a separate component of stockholders' deficit. Foreign currency transaction
gains and losses are included as a component of other income and expense.

Cash Equivalents:

IXYS considers all highly liquid investments with original or remaining
maturities of three months or less at the time of purchase to be cash
equivalents.

37
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Inventories:

Inventories, consisting primarily of bipolar devices, transistors, diodes
and integrated circuits, are stated at the lower of cost or market. Cost is
determined on a standard cost basis which approximates actual costs determined
on a first-in, first-out (FIFO) method.

Plant and Equipment:

Plant and equipment, including equipment under capital leases, is stated at
cost less accumulated depreciation and amortization. Depreciation or
amortization is computed using the straight-line method over estimated useful
lives of three to five years for equipment and twenty years for buildings.
Upon disposal, the assets and related accumulated depreciation are removed
from IXYS' accounts and the resulting gains or losses are reflected in the
statements of income. The Company's policy is to regularly review the carrying
value of specialized assets to evaluate the remaining life and recoverability
of such equipment in light of current market conditions.

Product Warranty:

Expected future product warranty expense is recorded when the product is
sold.

Revenue Recognition:

Revenue from power semiconductor product sales is recognized upon shipment
and is reflected net of an allowance for estimated returns and discounts. In
general, the Company's sales to distributors are made under agreements
allowing certain rights of return and price protection on products unsold by
the distributors.

Advertising:

IXYS expenses advertising as the costs are incurred. Advertising expense for
the years ended March 31, 1997, 1998 and 1999 was $268,000, $408,000, and
$413,000 respectively.

Research and Development:

Research and development costs are charged to operations as incurred.

Income Taxes:

The Company's provision for income taxes is comprised of its current tax
liability and the change in deferred tax assets and liabilities. Deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities and are measured using the
enacted tax rates and laws that will be in effect when the differences are
expected to reverse.

Other Assets--Goodwill and Other Intangible Assets:

Goodwill and other intangible assets arose from the Paradigm merger in the
amount of approximately $9,908,000. The company assesses the recoverability of
intangible assets by determining whether the amortization of the asset's net
book value over its remaining life can be recovered through projected
undiscounted future cash flows. Accordingly, the company wrote off
approximately $1,463,000 of intangible assets and $7,752,000 of goodwill in
the fourth quarter of fiscal year 1999 to reflect an impairment in the value
of intangible assets and goodwill associated with the acquisition. The
anticipated cash flows related to the related products indicated that the
recoverability of those assets was not reasonably assured.

38
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Net Income Per Share:

Basic EPS is computed by dividing net income by the weighted-average number
of common shares outstanding for the period. Diluted EPS reflects the
potential dilution from the exercise or conversion of other securities into
common stock.

Recent Accounting Pronouncements:

In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, or SFAS 133, Accounting for Derivative Instruments and Hedging
Activities. SFAS 133 establishes new standards of accounting and reporting for
derivative instruments and hedging activities. SFAS 133 requires that all
derivatives be recognized at fair value in the balance sheet, and that the
corresponding gains or losses be reported either in the statement of
operations or as a component of comprehensive income, depending on the type of
hedging relationship that exists. SFAS 133 will be effective for fiscal years
beginning after June 15, 1999. The Company does not currently hold derivative
instruments or engage in hedging activities.

Comprehensive Income:

The Company adopted Statement of Financial Accounting Standards No. 130, or
SFAS 130, Accounting for Comprehensive Income, during the fiscal year ended
1998. This statement establishes standards for reporting and display of
comprehensive income and its components (including revenues, expenses, gains
and losses) in a full set of general-purpose financial statements. The
Company's change in the cumulative translation adjustment represent the only
component of comprehensive income which is excluded from net income for 1999
and prior years. The Company's comprehensive income has been presented in the
consolidated financial statements.

Business Risks:

Dependence on Third Parties for Wafer Fabrication and Assembly: IXYS
manufactures approximately 53% of its wafers, an integral component of its
products, in its wholly owned facility in Germany. IXYS

39
<PAGE>

purchases the remaining 47% of its wafers from other suppliers. There can be
no assurance that material disruptions in supply will not occur in the future.
In such event, IXYS may have to identify and secure additional foundry
capacity and may be unable to identify or secure additional foundry capacity
from another manufacturer, particularly at the levels that IXYS currently
anticipates such foundries to provide. Even if such capacity is available from
another manufacturer, the qualification process could take six months or
longer. If IXYS were unable to qualify alternative manufacturing sources for
existing or new products in a timely manner or if such sources were unable to
produce semiconductor devices with acceptable manufacturing yields and at
acceptable prices, IXYS' business, financial condition and results of
operations would be materially and adversely affected.

Dependence on Suppliers: IXYS purchases silicon wafers from three vendors
with whom IXYS does not have long term supply agreements. Any of these
suppliers could eliminate or terminate IXYS' supply of wafers at any time.
IXYS' reliance on a limited number of suppliers involves several risks,
including potential inability to obtain an adequate supply of silicon wafers
and reduced control over the price, timely delivery, reliability and quality
of the silicon wafers. There can be no assurance that problems will not occur
in the future with suppliers.

Included in IXYS' consolidated balance sheet at March 31, 1999 are the net
assets, at book value, of IXYS' manufacturing operation in Germany, which
total approximately $5.67 million.

40
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Concentration of Credit Risk:

IXYS invests its excess cash primarily in short-term time deposit accounts
with a major German bank and money market accounts with a U.S. bank. These
securities typically mature within ninety days and bear minimal credit risk.
IXYS has not experienced any losses on such investments.

IXYS sells its products primarily to distributors and original equipment
manufacturers in the United States and in Europe. IXYS performs ongoing credit
evaluations of its customers and generally does not require collateral. An
allowance for potential credit losses is maintained by IXYS and such losses
have not been material.

Fair Value of Financial Instruments:

Carrying amounts of certain of IXYS' financial instruments including cash
and cash equivalents, accounts receivable, other assets, accounts payable and
other accrued liabilities approximate fair value due to their short
maturities. Based on borrowing rates currently available to IXYS for loans
with similar terms, the carrying value of notes payable to bank and notes
receivable from shareholders approximate fair value.

The amounts reported for cash equivalents, receivables and other financial
instruments are considered to approximate fair values based upon comparable
market information available at the respective balance sheet dates. Financial
instruments that potentially subject the Company to concentrations of credit
risks comprise principally cash, investments and trade accounts receivable.
The Company invests its excess cash in accordance with its investment policy
that has been approved by the Board of Directors and is reviewed periodically
to minimize credit risk. The policy authorizes the investment of excess cash
in government securities, tax exempt municipal securities, Eurodollar notes
and bonds, time deposits, certificates of deposit, commercial paper rated Aa
or better and other specific money market and corporate instruments of similar
liquidity and credit quality.

Stock--Based Compensation Plans

The Company accounts for stock-based compensation using the intrinsic value
method prescribed in Accounting Principles Board Opinion (APB) No. 25,
"Accounting for Stock Issued to Employees." Under APB No. 25, compensation
cost is measured as the excess, if any, of the quoted market price of the
Company's stock at the date of grant over the exercise price of the option
granted. Compensation cost for stock options, if any, is recognized ratably
over the vesting period. The Company's policy is to grant options with an
exercise price equal to the quoted market price of the Company's stock on the
grant date. Accordingly, no compensation has been recognized for its stock
option plans. The Company provides additional pro forma disclosures as
required under SFAS No. 123, "Accounting for Stock-Based Compensation."

3. ACQUISITION AND MERGER:

The purchase price for Paradigm, consisting of the value of Paradigm common
stock outstanding at the date of the merger, costs incurred by IXYS and the
Paradigm liabilities assumed, has been allocated to Paradigm's tangible and
intangible assets based on relative fair values as follows:

<TABLE>
<S> <C>
Current assets...................................................... $ 484
Fixed assets........................................................ 810
In-process research and development................................. 1,186
Other intangibles................................................... 1,463
Goodwill............................................................ 8,445
-------
$12,388
=======
</TABLE>

41
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The amounts allocated to intangible assets, including in-process research
and development, were based on results of an independent appraisal. Acquired
in-process research and development represented development projects in areas
that had not reached technological feasibility and had no alternative future
use and were valued using the "stage of completion" methodology prescribed by
the Securities and Exchange Commission, and were charged to operations at the
date of the acquisition.

Intangible amortization of $1,463,000 and the writeoff of goodwill in the
amount of $7,752,000 was recorded as expense in fiscal 1999. The value of the
in-process research development acquired in the transaction, in the amount of
$1,186,000, was recorded as an expense immediately following the transaction
as the products under development had not reached technological feasibility
and there was no other alternative future use for the costs incurred. The
aforementioned items are included within the operating statement caption
"Sales, general and administrative."

In conjunction with the merger, all outstanding shares of mandatorily
redeemable convertible preferred stock were converted to common stock and the
carrying value of $37,556,000 has been reclassified as stockholders' equity.

The following unaudited proforma consolidated statement of operations
assumes Paradigm had been purchased at the beginning of fiscal 1998.

<TABLE>
<CAPTION>
Years Ended March
31,
------------------
1999 1998
-------- --------
Dollars in
thousands
<S> <C> <C>
Net sales................................................ $ 67,983 $ 67,697
Net loss................................................. (13,006) (2,061)
======== ========
Net loss per share:
Basic.................................................. $ (1.39) $ (0.03)
======== ========
Diluted................................................ $ (1.39) $ (0.03)
======== ========
Shares used in per share calculations:
Basic.................................................. 9,373 65,501
Diluted................................................ 9,373 65,501
</TABLE>

4. INVENTORIES:

Inventories consist of the following (in thousands):

<TABLE>
<CAPTION>
March 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Raw materials............................................. $ 3,789 $ 3,368
Work in process........................................... 12,059 13,654
Finished goods............................................ 5,765 9,172

------- -------
21,613 26,194
Less inventory reserve.................................... (4,510) (6,027)
------- -------
$17,103 $20,167
======= =======
</TABLE>

42
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5. PLANT AND EQUIPMENT:

Plant and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
March 31,
-----------------
1998 1999
------- --------
<S> <C> <C>
Buildings
Equipment--owned...................................... $13,825 $ 20,055
Equipment--capital leases............................. 4,635 7,400
Leasehold improvements................................ 38 38
------- --------
23,624 27,493
Accumulated depreciation and amortization--owned plant
and equipment.......................................... (9,449) (11,662)
Accumulated amortization--capital leases................ (3,573) (4,508)
------- --------
$10,602 $ 11,323
======= ========
</TABLE>

6. ACCRUED EXPENSES AND OTHER LIABILITIES:

Accrued expenses and other liabilities consist of the following (in
thousands):

<TABLE>
<CAPTION>
March 31,
-------------
1998 1999
------ ------
<S> <C> <C>
Accrued patent and licenses................................... $ 800 $ 16
Personnel accruals............................................ 1,837 1,610
Warranty and loss accrual..................................... 715 957
Income taxes.................................................. 1,602 737
Other......................................................... 2,165 3,634
------ ------
$7,119 $6,954
====== ======
</TABLE>

7. BORROWING AND CAPITAL LEASE ARRANGEMENTS:

Borrowings and capital lease arrangements consist of the following (in
thousands):

<TABLE>
<CAPTION>
March 31,
----------------
1998 1999
------- -------
<S> <C> <C>
Notes payable to banks..................................... $10,792 $10,580
Capitalized lease obligations.............................. 1,242 3,297
------- -------
12,034 13,877
Less current portion..................................... (2,496) (5,471)
------- -------
$ 9,538 $ 8,406
======= =======
</TABLE>

IXYS entered into a loan and security agreement with a U.S. bank to borrow
up to an aggregate amount not to exceed $5 million. The loan bears interest at
the bank's prime rate (7.75% at March 31, 1999), payable monthly, and matures
in August 1999. The loan is collateralized by certain assets and contains
certain general and financial covenants, including a requirement that IXYS
remain solvent and able to pay its debts as they become due. At March 31,
1999, IXYS has drawn $2.1 million against the loan.

43
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company entered into a loan agreement with a German bank to finance the
acquisition of the Lampertheim facility (the "Facility") from Asea Brown
Boveri Aktiengesellschaft (ABB), a stockholder. The loan was for the total
amount of DM 13,250,000 ($7,175,000), payable in monthly installments of DM
125,226 ($67,800 at March 31, 1999) and is due no later than October 31, 2009.
The loan, which is collateralized by the Facility, bears interest at the
annual rate of 5.40% through August 2001, at which time the interest rate will
be adjusted to market rates in accordance with the terms of the loan
agreement. The acquisition of the Facility closed in January 1998, at which
time the proceeds were drawn against the loan. At March 31, 1999, the amount
outstanding under the loan agreement was DM 12,234,000 ($6,681,000).

IXYS leases certain equipment under capital lease arrangements expiring
through fiscal 2001 at interest rates of 4.9% to 6.3%.

Future minimum payments under capital lease obligations and notes payable
are (in thousands):

<TABLE>
<CAPTION>
Capital Notes
Leases Payable
------- -------
<S> <C> <C>
Fiscal year ending March 31,
2000...................................................... $1,102 $ 4,369
2001...................................................... 890 499
2002...................................................... 720 525
2003...................................................... 585 554
2004...................................................... 585
Thereafter................................................ 4,048
------ -------
$3,297 $10,580
====== =======
</TABLE>

8. COMMITMENTS AND CONTINGENCIES:

Commitments:

IXYS rents certain of its facilities under operating leases which expire in
January 2002 and March 2004. IXYS is responsible for insurance and property
taxes. Future minimum lease payments are as follows (in thousands):

<TABLE>
<S> <C>
Fiscal year ending March 31,
2000............................................................... $ 413
2001............................................................... 329
2002............................................................... 338
2003 and thereafter................................................ 685
------
$1,765
======
</TABLE>

Rent expense, for fiscal years ended March 31, 1997, 1998 and 1999 amounted
to $410,000, $571,000, and $358,000 respectively.

As of March 31, 1998 and 1999, IXYS had cash deposits with a financial
institution of $950,000, and $1,393,00 respectively, which were restricted as
to use and represent compensating balances for current or future Discounted
Acceptances and letters of credit.

44
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Litigation

In February 1997, in U.S. District Court, a judgment was entered against
IXYS for $3.65 million related to the sale of products that infringed certain
patents. IXYS paid $3.13 million of the $3.65 million judgment in 1997 and
filed an appeal in U.S. Federal Court. Through the appeal process, IXYS
accrued the unpaid portion of the judgment and was accruing royalty expense in
accordance with the Court's judgment. At March 31, 1997, IXYS was holding
approximately $575,000 in an escrow account for payment of the balance of the
judgment.

In December 1997, IXYS entered into a settlement agreement with the
plaintiff, whereby there would be no liability to IXYS. The agreement is
subject to ratification by the U.S. District Court, and during 1998, the
plaintiff returned the $3.13 million payment plus interest which is included
in other income on the consolidated statements of income.

45
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

in the defense of this action. 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, 1997, Thomas Campbell, James Zulliger and Mark Wagenhals, former
employees of the Company, filed an action (Campbell, et al. v. Paradigm
Technology, Inc., et al., Case No. CV766271) in Santa Clara County Superior
Court. The complaint named as defendants the Company, Michael Gulett, Richard
Veldhouse, Dennis McDonald and Chiang Lam. The Campbell plaintiffs filed with
the complaint a notice that they considered their case related legally and
factually to the Bulwa action discussed above. The Campbell complaint
contained causes of action for fraud, breach of fiduciary duty, violations of
California Corporations Code sections 25400-25402, 25500-25502 and 25504 and
violation of California Civil Code sections 1709-1710. The Campbell complaint
alleged that the defendants misled them and committed fraud by allegedly
overstating the Company's back orders in the fourth quarter of 1995 and
inflated reported sales in the fourth quarter of 1995 and the first quarter of
1996, which allegedly resulted in distorting the Company's financial
condition, which allegedly inflated its stock price. Plaintiffs alleged that
they purchased the Company's stock at the allegedly inflated prices and were
damaged thereby. The complaint sought 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. 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 filed a demurrer in response to the second amended
complaint, which was heard on September 3, 1998. That same day, the Court
sustained the demurrer but granted plaintiffs leave to file a third amended
complaint by September 30, 1998. Plaintiffs then filed a third amended
complaint. Following defendants' filing of a demurrer to the third amended
complaint, plaintiffs agreed to dismiss their claims with prejudice in
exchange for defendants' agreement not to seek to recover defendants' costs
incurred in defending against the action. The third amended complaint was
dismissed with prejudice on December 11, 1998 and the defendants agreed not to
pursue any action against the plaintiffs for having filed the action.

46
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

IXYS 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. Although
no assurance can be given as to the results of these cases, based on the
present status, management does not believe that results of the aforementioned
actions will have a material adverse effect on the Company's financial
condition or results of operations.

9. COMMON STOCK AND PREFERRED STOCK:

Preferred Stock under the terms of the Company's Articles of Incorporation,
the Board of Directors may determine the rights, preferences, and terms of the
Company's authorized but unissued shares of preferred stock.

Warrants:

IXYS has outstanding warrants as follows:

<TABLE>
<CAPTION>
Number
of Shares
Under The
Expiration Date Warrants Exercise Price
--------------- --------- ----------------
<S> <C> <C> <C>
None............... Convertible into common stock 8,031 $14.70 per share
April 2001......... Convertible into common stock 181,847 $ 0.86 per share
</TABLE>

Stock Purchase and Incentive Stock Option Plans:

IXYS has a 1994 Stock Option Plan (the Plan) under which incentive stock
options may be granted not less than 85% of fair market value at the time of
grant. The options once granted expire ten years from the date of grant. The
Board of Directors has the full power to determine the provisions of each
option issued under both plans.

47
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Stock option activity under the Plan is summarized below (in thousands,
except share data):

<TABLE>
<CAPTION>
Shares Options Outstanding Weighted-
Available ------------------------------- Average
for Number Exercise
Grant of Shares Exercise Price Total Price
--------- --------- --------------- ----- ---------
<S> <C> <C> <C> <C> <C>
Balances, March 31,
1996................... 206,361 115,849 $ 0.017--$4.32 $ 13 $ 0.12
Options granted......... (206,496) 206,496 $ 6.91--$7.61 87 $ 0.42
Options exercised....... -- (2,314) $ 1.73 -- $ 0.10
Options canceled........ 289 (289) $ 0.017--$2.59 -- $ 0.06
-------- ------- --------------- ---- ------
Balances, March 31,
1997................... 154 319,742 $ 0.017--$7.61 100 $ 0.31
Options exercised....... (2,024) $ 0.86--$2.59 -- $ 0.13
Options canceled........ 42,803 (42,803) $ 6.92 (17) $ 0.40
-------- ------- --------------- ---- ------
Balances, March 31,
1998................... 42,957 274,915 $ 0.017--$7.61 83 $ 0.30
New authorized.......... 115,260 $ 1 $ 0.15
Options granted......... (99,900) 106,566 $3.7125--3.3750 348 $3.481
Options exercised....... -- (25,129) $ 0.017--$0.86 (2) $0.075
Options canceled........ 3,905 (3,905) $ 0.017--$4.32 (1) $0.157
Options expired......... (46,841) -- $ -- --
-------- ------- --------------- ---- ------
Balances, March 31,
1999................... 15,381 352,447 $ 0.017-$3.7125 $429 $ 1.22
</TABLE>

Expired options in 1999 represents options under the pre-merger IXYS plan
established in 1989 which ceased in fiscal year 1999.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123 (SFAS 123), "Accounting for Stock-
Based Compensation," which was effective for IXYS' fiscal year 1997. SFAS 123
allows companies to either account for stock-based compensation under the new
provisions of SFAS 123 or under the provisions of Accounting Principles Board
Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees," but
requires pro forma disclosure in the footnotes to the financial statements as
if the measurement provisions of SFAS 123 had been adopted.

IXYS has continued to account for its stock based compensation under the
Plan in accordance with APB 25. Accordingly, no compensation expense has been
recognized for stock options granted under the Plan. Had compensation cost for
the Plan been determined based on the fair value at the grant date for awards
in fiscal years 1996, 1997 and 1998 consistent with the provisions of SFAS No.
123, IXYS' net income and net income per share for fiscal years 1996, 1997 and
1998 would have decreased to the pro forma amounts indicated below (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
Year Ended March 31,
---------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Net income (loss)--as reported....................... $4,407 $6,084 $(5,238)
====== ====== =======
Net income (loss)--pro forma......................... $4,388 $5,996 $(5,285)
====== ====== =======
Net income (loss) per share--basic--as reported...... $ 0.08 $ 0.09 $ (0.56)
====== ====== =======
Net income (loss) per share--basic--pro forma........ $ 0.08 $ 0.09 $ (0.56)
====== ====== =======
Net income (loss) per share--diluted--as reported.... $ 0.02 $ 0.03 $ (0.56)
====== ====== =======
Net income (loss) per share--diluted--pro forma...... $ 0.02 $ 0.03 $ (0.56)
====== ====== =======
</TABLE>

48
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

In future years, annual compensation expense will vary relative to the
vesting of options granted in those future years.

In accordance with the provisions of SFAS 123, the fair value of each option
is estimated using the Black- Scholes model using the following assumptions
used for grants for the year ended March 31, 1999; dividend yield of 0%,
volatility of 83%, risk-free interest rates of between 4.33% to 5.67% at the
date of grant and an expected term of four years. The weighted-average fair
value of options granted during 1998 and 1999 was $1.625 and $3.481 per share,
respectively.

IXYS has sold 3,908,095 shares of common stock to certain members of IXYS'
management under a restricted stock purchase agreement subject to IXYS' right
of repurchase, which lapses ratably over five years. The shares were purchased
through recourse promissory notes at a purchase price of $0.22 per share.
Interest is due on the notes at a rate of 5% per annum, with the balance
outstanding due in full November 2000. At March 31, 1998 and 1999, 187,077
shares and 72,550 shares of common stock are subject to IXYS' right of
repurchase, respectively.

Reverse Stock Split

On May 1, 1998, the Company's stockholders approved a 10-for-1 reverse stock
split of the Company's common stock, such that every 10 shares shall be
combined into one share of common stock. Common share and per share data for
1999 have been restated to reflect this stock split.

A Stock Split was effected in September 1998 by the Company's Board of
Directors which approved a 1-for-15 reverse split of the Company's common
stock that was applicable to shareholders of record on June 16, 1998 and
effective on September 23, 1998. References to share and per-share data for
1999 have been adjusted to give effect to this stock split.

10. EMPLOYEE SAVINGS AND RETIREMENT PLAN:

IXYS has a 401K plan, known as the "IXYS Corporation and Subsidiary Employee
Savings and Retirement Plan." Eligibility to participate in the plan is
subject to certain minimum service requirements. Employees may voluntarily
contribute up to 20% of yearly compensation and IXYS may make matching
contributions as determined by the Board of Directors in a resolution on or
before the end of the fiscal year. Employees are 100% vested immediately. For
the years ended March 31, 1997, 1998 and 1999, IXYS contributed $76,000,
$96,000 and $113,000, respectively.

11. PENSION PLANS:

Employees of IXYS GmbH participate in a number of employee retirement plans,
including a defined benefit pension plan, the benefits for which will be paid
out of the general assets of IXYS GmbH, as well as other government sponsored
retirement plans to which IXYS GmbH and eligible employees are required to
contribute.

In addition to providing income at retirement, many of these plans also
provide survivor, termination and disability benefits. The defined benefits
pension plan covers substantially all employees and benefits are based on
years of service and the employees' compensation.

49
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Pension expense for the defined benefit pension plan was as follows at March
31, (in thousands):

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Service cost of the current period........................... $111 $ 94 $111
Interest cost on the projected benefit obligation............ 408 337 312
---- ---- ----
Pension expense.............................................. $519 $431 $423
==== ==== ====
</TABLE>

In Germany there are no legal requirements to fund the pension obligation by
transferring cash to an outside funding agency. Consequently, the defined
benefit pension plan is unfunded.

The following table sets forth the actuarial present value of benefit
obligations and funded status for the defined benefit pension plan (in
thousands):

<TABLE>
<CAPTION>
March 31,
-------------
1998 1999
------ ------
<S> <C> <C>
Actuarial present value of benefit obligation:
Vested benefit obligation................................... $5,007 $5,248
Nonvested benefit obligation................................ 71 104
------ ------
5,078 5,352
Additional benefits related to future compensation levels..... 35 36
------ ------
Projected benefit obligation.................................. $5,113 $5,388
====== ======
</TABLE>

The actuarial computations calculated at March 31, 1998 and 1999 assume a
discount rate used to measure the projected benefit obligation of 3%, and the
rate of increase in future compensation levels of 3%.

12. INCOME TAXES:

Income (loss) before income tax provision consists of the following (in
thousands):

<TABLE>
<CAPTION>
Year Ended March 31,
----------------------
1997 1998 1999
------ ------- -------
<S> <C> <C> <C>
Domestic............................................. $3,866 $ 8,250 $(3,260)
International........................................ 4,487 2,063 105
------ ------- -------
$8,353 $10,313 $(3,155)
====== ======= =======
</TABLE>

IXYS' provision for income taxes consists of the following (in thousands):

<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Current:
Federal........................................ $ (63) $ (175) $ (234)
State.......................................... (188) (398) (40)
Foreign........................................ (329) (904) (44)
------- ------- -------
(580) (1,477) 150
------- ------- -------
Deferred:
Federal........................................ (1,289) (2,590) (2,042)
State.......................................... 109 (147) (191)
Foreign........................................ (2,186) (15)
------- ------- -------
(3,366) (2,752) (2,233)
------- ------- -------
Total income tax provision................... $(3,946) $(4,229) $(2,083)
======= ======= =======
</TABLE>

50
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

IXYS' effective tax rate differs from the statutory federal income tax rate
for the years ended March 31, as shown in the following table:

<TABLE>
<CAPTION>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate........................... 34% 34% (34)%
State taxes, net of federal tax benefit..................... 3 4 4
Foreign taxes at higher rates............................... 9 2 1
Acquired technology......................................... 94
Other items................................................. 1 1 1
--- --- ---
Effective tax rate ....................................... 47% 41% 66%
=== === ===
</TABLE>

The effective tax rate of 66% in fiscal year 1999 includes the one-time non-
tax deductible write-off of $10.4 million in connection with the reverse
acquisition of Paradigm. Without the write-off, tax rate would approximate
29%.

The components of net deferred income tax assets are as follows (in
thousands):

<TABLE>
<CAPTION>
March 31,
-------------
1998 1999
------ ------
<S> <C> <C>
Deferred tax assets:
Other liabilities and accruals.............................. $1,562 $1,117
Depreciable assets.......................................... 72 538
Net operating loss carryforwards............................ 2,519 4,283
Research and development tax credit carryforward............ 504 504
Alternative minimum tax carryforward........................ 232 342
Less valuation on allowance................................... (4,128)
------ ------
Net deferred tax asset........................................ $4,889 $2,656
====== ======
</TABLE>

At March 31, 1999, the Company had approximately $12 million and $8 million
of federal and state net operating loss carryforwards, respectively. The
Company also has federal research and development tax credit carryforwards of
approximately $500,000 and federal alternative minimum tax credit
carryforwards of approximately $342,000. The net operating loss and research
and development tax credit carryforwards expire in varying amounts from 2008
to 2018. The alternative minimum tax credit carryforwards can be carried
forward indefinitely.

The Tax Reform Act of 1986 limits the utilization of net operating loss and
tax credit carryforwards in certain situations where changes occur in the
stock ownership of a company. Due to the merger of the Company with Paradigm
Technology, Inc. ("Paradigm") in September of 1998, a change in ownership of
Paradigm took place. As a result of the change in ownership, a portion of the
Company's net operating losses and tax credit carryforwards will be subject to
an annual limitation of approximately $400,000.

Due to the uncertainty of the realization of certain tax carryforwards
related to the Paradigm transaction, the Company has established a valuation
allowance against these carryforward benefits in the amount of $4,128,000.

51
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

13. FOREIGN OPERATIONS:

IXYS' foreign operations consist of those of its subsidiary IXYS GmbH in
Germany. The following table summarizes the sales, income and total assets of
IXYS' U.S. and German operations (in thousands):

<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Sales:
IXYS GmbH......................................... $34,262 $35,722 $36,534
IXYS U.S.......................................... 21,060 21,134 29,989
------- ------- -------
$55,322 $56,856 66,523
======= ======= =======
Net Income (Loss):
IXYS GmbH......................................... $ 2,157 $ 2,010 (1,438)
IXYS U.S.......................................... 2,250 4,074 (3,800)
------- ------- -------
$ 4,407 $ 6,084 (5,238)
======= ======= =======
Total Assets:
IXYS Gmbh......................................... $21,724 $27,008 26,503
IXYS U.S.......................................... 17,686 27,332 32,229
------- ------- -------
$39,410 $54,340 $58,732
======= ======= =======
</TABLE>

There were no significant export sales from the U.S. during the years ended
March 31, 1997, 1998 or 1999.

14. COMPUTATION OF NET INCOME (LOSS) PER SHARE:

Basic and diluted earnings per share are calculated as follows (in
thousands, except per share amounts):

<TABLE>
<CAPTION>
Year Ended March 31,
-------------------------
1997 1998 1999
-------- -------- -------
<S> <C> <C> <C>
BASIC:
Weighted-average shares....................... 53,478 65,501 9,373
-------- -------- -------
Net income (loss)............................. $ 4,407 $ 6,084 $(5,238)
======== ======== =======
Net income (loss) per share................... $ 0.08 $ 0.09 $ (0.56)
======== ======== =======
DILUTED:
Weighted-average shares....................... 53,478 65,501 9,373
Restricted stock subject to repurchase........ 19,041 3,234
Common equivalent shares from stock options
and warrants................................. 24,351 21,721
Common equivalent shares from preferred
stock........................................ 111,410 111,410
-------- -------- -------
Shares used in per share calculation.......... 208,280 201,866 9,373
======== ======== =======
Net income (loss)............................. $ 4,407 $ 6,084 $(5,238)
======== ======== =======
Net income (loss) per share................... $ 0.02 $ 0.03 $ (0.56)
======== ======== =======
</TABLE>

52
<PAGE>

IXYS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

15. SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates in a single industry segment comprising power
semiconductors used primarily in controlling energy in motor drives, power
conversion (including uninterruptible power supplies (UPS) and switch mode
power supplies (SMPS)) and medical electronics. The Company's sales by major
geographic area (based on destination) were as follows:

<TABLE>
<CAPTION>
Year Ended March 31,
-----------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
North America:
United States...................................... $21,060 $21,134 $23,734
------- ------- -------
Total North America.............................. $21,060 $21,134 $23,734
Europe............................................... 28,625 29,239 36,054
Japan................................................ 580 953 480
Asia Pacific......................................... 5,057 5,530 6,255
------- ------- -------
Total............................................ $55,322 $56,856 $66,523
======= ======= =======
</TABLE>

There was no single end customer providing more than 10% of the Company's
sales for years ended March 31, 1997, 1998, and 1999.

ITEM. 9 Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure

Not Applicable.
PART III

ITEM 10. Directors and Executive Officers of the Registrant

The information required is hereby incorporated by reference from the
information contained in the Company's definitive Proxy Statement with respect
to the Company's Annual Meeting of Stockholders, filed with the Commission
pursuant to Regulation 14A (the "Proxy Statement") under the headings
"Nominees" and "Executive Officers".

ITEM 11. Executive Compensation

The information required by this item is hereby incorporated by reference
from information contained in the Proxy Statement under the heading "Executive
Compensation."

ITEM 12. Security Ownership of Certain Beneficial Owners and Management

The information required by this item is hereby incorporated by reference
contained in the Proxy Statement under the heading of "Security Ownership of
Certain Beneficial Owners and Management."

ITEM 13. Certain Relationships and Related Transactions

The information required by this item is hereby incorporated by reference
from information contained in the Proxy Statement under the heading "Certain
Transactions" and "Executive Compensation".

PART IV

ITEM 14. Exhibits, Financial Statement Schedules, and Reports On Form 8-K

(a) The following documents are filed as part of this Report on Form 10-K:

(1) Financial Statements:

53
<PAGE>

Report of PricewaterhouseCoopers LLP, Independent Accountants
Consolidated Balance Sheets
Consolidated Statement of Operations
Consolidated Statement of Stockholders' Deficit
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements

(2) Financial Statements schedules have been omitted from this report
because the information is provided in the Financial Statements or is not
applicable.

(3) Exhibits

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger and Reorganization, dated as of March
6, 1998 and amended April 10, 1998 and May 29, 1998, among
Paradigm Technology, Inc., Paradigm Enterprises, Inc. and IXYS
Corporation. (1)

3.1 Amended and Restated Certificate of Incorporation of the
Registrant. (1)

3.2 Certificate of Amendment to Amended and Restated Certificate of
Incorporation (regarding increased authorization and reverse stock
split). (3)

3.3 Certificate of Amendment to Amended and Restated Certificate of
Incorporation (regarding name change). (3)

4.2 Amended and Restated Bylaws of the Registrant. (2)

10.1 First Amended Executive Employment Agreement, dated as of July 1,
1998, by and between IXYS and Nathan Zommer. (1)

10.2 First Amended Executive Employment Agreement, dated as of July 1,
1998, by and between IXYS and Arnold Agbayani. (1)

10.3 Wafer Foundry Agreement, dated as of June 21, 1995, as amended on
March 28, 1996 and March 13, 1998, by and between IXYS and Samsung
Electronics Co. (1)

10.4 Lampertheim Contractual Purchase Deed and Conveyance, dated as of
February 26, 1997. (1)

10.5 Loan Agreement, dated as of February 27, 1997, by and between IXYS
and Commerzbank, Aktiengesellschaft, Mannheim Branch. (1)

10.6 Loan and Security Agreement, dated as of December 24, 1997, by and
between IXYS and Bank of the West. (1)

10.7 Registration and Stockholder Rights Agreement, by and between the
Company, Asea Brown Boveri AG, and Asea Brown Boveri, Inc., dated
September 23, 1998. (3)

10.8 Form of Indemnity Agreement between the Company and its directors.
(2)

10.9 The Paradigm 1994 Stock Option Plan, as amended. (2)

10.10 The IXYS 1999 Equity Incentive Plan.

10.11 The IXYS 1999 Employee Stock Purchase Plan.

10.12 The IXYS 1999 Non-Employee Directors' Equity Incentive Plan.

10.13 Amendment of Lease by and between Mission West Properties, L.P.
and IXYS Corporation, dated as of September 30, 1998.
</TABLE>

54
<PAGE>

<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
23.3 Consent of PricewaterhouseCoopers LLP.

24.1 Power of Attorney. (4)

27.1 Financial Data Schedule.
</TABLE>

(b) Financial Statement Schedules.

(c) IXYS has filed no reports on Form 8-K during the last quarter of this
fiscal year.
- --------
(1) Filed as an Annex or Exhibit to the Joint Proxy Statement/Prospectus
forming part of the Registration Statement on Form S-4 of Paradigm
Technology, Inc., as amended (333-57003) and incorporated herein by
reference.
(2) Filed as an Exhibit to the Quarterly Report on Form 10-Q (000-26124) for
the period ended December 31, 1998 and incorporated herein by reference.
(3) Filed as an Exhibit to the Quarterly Report on Form 10-Q (000-26124) for
the period ended September 30, 1998 and incorporated herein by reference.
(4) Included in the signature page of this Report on Form 10-K.

55
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

Dated: July 7, 1999

IXYS CORPORATION

/s/ Nathan Zommer
By: _________________________________
Nathan Zommer
President, Chief Executive Officer
and Chairman

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Nathan Zommer and Arnold P. Agbayani, and each
or any one of them, his true and lawful attorney-in-fact and agent, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments (including
post-effective amendments) to this Report, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature Title Date

<S> <C> <C>
/s/ Nathan Zommer President, Chief Executive June 29, 1999
______________________________________ Officer and Chairman
Nathan Zommer (Principal Executive
Officer) and Director

/s/ Arnold P. Agbayani Vice President, Finance & June 29, 1999
______________________________________ Administration and Chief
Arnold P. Agbayani Financial Officer
(Principal Financial
Officer)

/s/ James Kochman Director June 29, 1999
______________________________________
James Kochman

/s/ Andreas Hartmann Director June 29, 1999
______________________________________
Andreas Hartmann
</TABLE>

<PAGE>

EXHIBIT 10.10

IXYS CORPORATION

1999 EQUITY INCENTIVE PLAN

Adopted May 7, 1999
Approved By Stockholders _______________, 1999
Termination Date: May 6, 2009

1. Purposes.

(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.

(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock appreciation rights, (iv) stock bonuses and (v) rights to
acquire restricted stock.

(c) General Purpose. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.

2. Definitions.

(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c).

(e) "Common Stock" means the common stock of the Company.

(f) "Company" means IXYS Corporation, a Delaware corporation.

(g) "Consultant" means any person, including an advisor, (1) engaged by
the Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (2) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated

1
<PAGE>

by the Company for their services as Directors or Directors of the Company who
are merely paid a director's fee by the Company for their services as Directors.

(h) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.

(i) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.

(j) "Director" means a member of the Board of Directors of the Company.

(k) "Disability" means the inability of a person, in the opinion of a
qualified physician acceptable to the Company, to perform the major duties of
that person's position with the Company or an Affiliate of the Company because
of the sickness or injury of the person.

(l) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.

(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(n) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:

(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable.

(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

2
<PAGE>

(o) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.

(p) "Non-Employee Director" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.

(q) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.

(r) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(s) "Option" means an Incentive Stock Option or a Nonstatutory Stock
Option granted pursuant to the Plan.

(t) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(u) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

(v) "Outside Director" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury Regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.

(w) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.

(x) "Plan" means this IXYS Corporation 1999 Equity Incentive Plan.

3
<PAGE>

(y) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

(z) "Securities Act" means the Securities Act of 1933, as amended.

(aa) "Stock Award" means any right granted under the Plan, including an
Option, a stock appreciation right, a stock bonus and a right to acquire
restricted stock.

(bb) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

(cc) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.

3. Administration.

(a) Administration by Board. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).

(b) Powers of Board. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be permitted to
receive stock pursuant to a Stock Award; and the number of shares with respect
to which a Stock Award shall be granted to each such person.

(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.

(iii) To amend the Plan or a Stock Award as provided in Section 12.

(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.

(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee"

4
<PAGE>

shall apply to any person or persons to whom such authority has been delegated.
If administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or subcommittee),
subject, however, to such resolutions, not inconsistent with the provisions of
the Plan, as may be adopted from time to time by the Board. The Board may
abolish the Committee at any time and revest in the Board the administration of
the Plan.

(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two or more Non-
Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one or
more members of the Board who are not Outside Directors, the authority to grant
Stock Awards to eligible persons who are either (a) not then Covered Employees
and are not expected to be Covered Employees at the time of recognition of
income resulting from such Stock Award or (b) not persons with respect to whom
the Company wishes to comply with Section 162(m) of the Code and/or (ii)
delegate to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.

4. Shares Subject to the Plan.

(a) Share Reserve. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate two million (2,000,000) shares of
Common Stock plus an annual increase to be added on the first day of the
Company's fiscal year beginning in 2000 equal to the least of the following
amounts (i) 500,000 shares; (ii) three percent (3)% of the Company's outstanding
shares on such date (rounded to the nearest whole share and calculated on a
fully diluted basis, that is assuming the exercise of all outstanding stock
options and warrants to purchase common stock) or (iii) an amount determined by
the Board.

(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full (or vested in the case of Restricted Stock), the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan. Shares subject to stock appreciation rights
exercised in accordance with the Plan shall not be available for subsequent
issuance under the Plan. If any Common Stock acquired pursuant to the exercise
of an Option shall for any reason be repurchased by the Company under an
unvested share repurchase option provided under the Plan, the stock repurchased
by the Company under such repurchase option shall not revert to and again become
available for issuance under the Plan.

(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

5
<PAGE>

(d) Share Reserve Limitation. To the extent required by Section 260.140.45
of Title 10 of the California Code of Regulations, the total number of shares of
Common Stock issuable upon exercise of all outstanding Options and the total
number of shares of Common Stock provided for under any stock bonus or similar
plan of the Company shall not exceed the applicable percentage as calculated in
accordance with the conditions and exclusions of Section 260.140.45 of Title 10
of the California Code of Regulations, based on the shares of Common Stock of
the Company that are outstanding at the time the calculation is made.

5. Eligibility.

(a) Eligibility for Specific Stock Awards. Incentive Stock Options may be
granted only to Employees. Stock Awards other than Incentive Stock Options may
be granted to Employees, Directors and Consultants.

(b) Ten Percent Stockholders.

(i) No Ten Percent Stockholder shall be eligible for the grant of an
Incentive Stock Option unless the exercise price of such Option is at least one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant and the Option is not exercisable after the expiration of five (5)
years from the date of grant.

(ii) A Ten Percent Stockholder shall not be granted a Nonstatutory
Stock Option unless the exercise price of such Option is at least (i) one
hundred ten percent (110%) of the Fair Market Value of the Common Stock at the
date of grant or (ii) such lower percentage of the Fair Market Value of the
Common Stock at the date of grant as is permitted by Section 260.140.41 of Title
10 of the California Code of Regulations at the time of the grant of the Option.

(iii) A Ten Percent Stockholder shall not be granted a restricted
stock award unless the purchase price of the restricted stock is at least (i)
one hundred percent (100%) of the Fair Market Value of the Common Stock at the
date of grant or (ii) such lower percentage of the Fair Market Value of the
Common Stock at the date of grant as is permitted by Section 260.140.41 of Title
10 of the California Code of Regulations at the time of the grant of the
restricted stock award.

(c) Section 162(m) Limitation. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options and/or stock appreciation rights covering more than one
million five hundred thousand (1,500,000) shares of the Common Stock during any
calendar year.

(d) Consultants. A Consultant shall not be eligible for the grant of a
Stock Award if, at the time of grant, a Form S-8 Registration Statement under
the Securities Act ("Form S-8") is not available to register either the offer or
the sale of the Company's securities to such Consultant because of the nature of
the services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be

6
<PAGE>

registered in another manner under the Securities Act (e.g., on a Form S-3
Registration Statement) or (B) does not require registration under the
Securities Act in order to comply with the requirements of the Securities Act,
if applicable, and (ii) that such grant complies with the securities laws of all
other relevant jurisdiction.

6. Option Provisions.

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock Options or Nonstatutory Stock Options at the time of
grant, and a separate certificate or certificates will be issued for shares
purchased on exercise of each type of Option. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.

(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

(c) Exercise Price of a Nonstatutory Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Nonstatutory Stock Option shall be not less than eighty-five
percent (85%) of the Fair Market Value of the stock subject to the Option on the
date the Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock
Option may be granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an assumption or
substitution for another option in a manner satisfying the provisions of Section
424(a) of the Code.

(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment.

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In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.

(e) Transferability of an Incentive Stock Option. An Incentive Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written notice to the
Company, in a form satisfactory to the Company, designate a third party who, in
the event of the death of the Optionholder, shall thereafter be entitled to
exercise the Option.

(f) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall not be transferable except by will or by the laws of descent and
distribution and, to such further extent as provided in the Option Agreement;
provided, however, that in no event shall a Nonstatutory Stock Option be
transferable except as permitted by Section 260.140.41(d) of Title 10 of the
California Code of Regulations (as and if applicable) at the time of the grant
of the Option, and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. If the Nonstatutory Stock Option does not provide for
transferability, then the Nonstatutory Stock Option shall not be transferable
except by will or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Optionholder only by the Optionholder.
Notwithstanding the foregoing provisions of this subsection 6(f), the
Optionholder may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionholder, shall thereafter be entitled to exercise the Option.

(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.

(h) Minimum Vesting. Notwithstanding the foregoing subsection 6(g), to the
extent that the following restrictions on vesting are required by Section
260.140.41(f) of Title 10 of the California Code of Regulations at the time of
the grant of the Option, then:

(i) Options granted to an Employee who is not an Officer, Director or
Consultant shall provide for vesting of the total number of shares of Common
Stock at a rate of at least twenty percent (20%) per year over five (5) years
from the date the Option was granted, subject to reasonable conditions such as
continued employment; and

(ii) Options granted to Officers, Directors or Consultants may be made
fully exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the Company.

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<PAGE>

(i) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement, which period
shall not be less than thirty (30) days for Options unless such termination is
for cause), or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, after termination, the Optionholder does not exercise his
or her Option within the time specified in the Option Agreement, the Option
shall terminate.

(j) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.

(k) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement, which period shall not be less than six (6) months) or (ii)
the expiration of the term of the Option as set forth in the Option Agreement.
If, after termination, the Optionholder does not exercise his or her Option
within the time specified herein, the Option shall terminate.

(l) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(e) or 6(f), but only within
the period ending on the earlier of (1) the date eighteen (18) months following
the date of death (or such longer or shorter period specified in the Option
Agreement, which period shall not be less than six (6) months) or (2) the
expiration of the term of such Option as set forth in the Option Agreement. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate.

(m) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full

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<PAGE>

vesting of the Option. Any unvested shares so purchased may be subject to an
unvested share repurchase option in favor of the Company or to any other
restriction the Board determines to be appropriate.

(n) Re-Load Options. Without in any way limiting the authority of the
Board to make or not to make grants of Options hereunder, the Board shall have
the authority (but not an obligation) to include as part of any Option Agreement
a provision entitling the Optionholder to a further Option (a "Re-Load Option")
in the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.

Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollar ($100,000) annual limitation on exercisability of Incentive Stock Options
described in subsection 10(d) and in Section 422(d) of the Code. There shall be
no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall be
subject to the availability of sufficient shares under subsection 4(a) and the
"Section 162(m) Limitation" on the grants of Options under subsection 5(c) and
shall be subject to such other terms and conditions as the Board may determine
which are not inconsistent with the express provisions of the Plan regarding the
terms of Options.

7. Provisions Of Stock Awards Other Than Options.

(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:

(i) Consideration. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company for its benefit.

(ii) Vesting. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase option in favor of
the Company in accordance with a vesting schedule to be determined by the Board.

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<PAGE>

(iii) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.

(iv) Transferability. Rights to acquire shares of Common Stock under
the stock bonus agreement shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Participant only by the Participant.

(b) Restricted Stock Awards. Each restricted stock purchase agreement
shall be in such form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of the restricted stock
purchase agreements may change from time to time, and the terms and conditions
of separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:

(i) Purchase Price. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each restricted
stock purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. For restricted stock
awards, the purchase price shall not be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award is made or at the time the
purchase is consummated.

(ii) Consideration. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid either: (i) in cash at the
time of purchase; (ii) at the discretion of the Board, according to a deferred
payment or other arrangement with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.

(iii) Vesting. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.

(iv) Termination of Participant's Continuous Service. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.

(v) Transferability. Rights to acquire shares of Common Stock under
the restricted stock purchase agreement shall not be transferable except by will
or by the laws of descent and distribution and shall be exercisable during the
lifetime of the Participant only by the Participant.

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<PAGE>

(i) Authorized Rights. The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:

(1) Tandem Rights. A "Tandem Right" means a stock appreciation
right granted appurtenant to an Option which is subject to the same terms and
conditions applicable to the particular Option grant to which it pertains with
the following exceptions: The Tandem Right shall require the holder to elect
between the exercise of the underlying Option for shares of Common Stock and the
surrender, in whole or in part, of such Option for an appreciation distribution.
The appreciation distribution payable on the exercised Tandem Right shall be in
cash (or, if so provided, in an equivalent number of shares of Common Stock
based on Fair Market Value on the date of the Option surrender) in an amount up
to the excess of (A) the Fair Market Value (on the date of the Option surrender)
of the number of shares of Common Stock covered by that portion of the
surrendered Option in which the Optionholder is vested over (B) the aggregate
exercise price payable for such vested shares.

(2) Concurrent Rights. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on the
exercised Concurrent Right shall be in cash (or, if so provided, in an
equivalent number of shares of Common Stock based on Fair Market Value on the
date of the exercise of the Concurrent Right) in an amount equal to such portion
as determined by the Board at the time of the grant of the excess of (A) the
aggregate Fair Market Value (on the date of the exercise of the Concurrent
Right) of the vested shares of Common Stock purchased -under the underlying
Option which have Concurrent Rights appurtenant to them over (B) the aggregate
exercise price paid for such shares.

(3) Independent Rights. An "Independent Right" means a stock
appreciation right granted independently of any Option but which is subject to
the same terms and conditions applicable to a Nonstatutory Stock Option with the
following exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution payable on the exercised Independent
Right shall be not greater than an amount equal to the excess of (a) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (b) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of Common Stock based on Fair
Market Value on the date of the exercise of the Independent Right.

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<PAGE>

(ii) Relationship to Options. Stock appreciation rights appurtenant
to Incentive Stock Options may be granted only to Employees. The "Section 162(m)
Limitation" provided in subsection 5(c) and any authority to reprice Options
shall apply as well to the grant of stock appreciation rights.

(iii) Exercise. To exercise any outstanding stock appreciation right,
the holder shall provide written notice of exercise to the Company in compliance
with the provisions of the Stock Award Agreement evidencing such right. Except
as provided in subsection 5(c) regarding the "Section 162(m) Limitation," no
limitation shall exist on the aggregate amount of cash payments that the Company
may make under the Plan in connection with the exercise of a stock appreciation
right.

8. Covenants of the Company.

(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award. If, after reasonable efforts, the Company is unable to obtain from
any such regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under the
Plan, the Company shall be relieved from any liability for failure to issue and
sell stock upon exercise of such Stock Awards unless and until such authority is
obtained.

9. Use of Proceeds from Stock.

Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.

10. Miscellaneous.

(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.

(b) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

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<PAGE>

(c) No Employment or other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the service of
a Director pursuant to the Bylaws of the Company or an Affiliate, and any
applicable provisions of the corporate law of the state in which the Company or
the Affiliate is incorporated, as the case may be.

(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.

(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.

(f) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the Participant as a result of the exercise or acquisition
of stock under the Stock

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Award; or (iii) delivering to the Company owned and unencumbered shares of the
Common Stock.

(g) Information Obligation. The Company shall deliver copies of any
publicly available material to any Participant who requests such material.

11. Adjustments Upon Changes in Stock.

(a) Capitalization Adjustments. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock Awards. Such adjustments shall
be made by the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)

(b) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.

(c) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (1) a sale of substantially all of the assets of the
Company, (2) a merger or consolidation in which the Company is not the surviving
corporation or (3) a reverse merger in which the Company is the surviving
corporation but the shares of Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise, then any surviving corporation or
acquiring corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 11(c)) for those outstanding under the Plan. In the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards held by Participants whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.

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<PAGE>

sponsored or maintained by the Company or an Affiliate) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors, then with respect to Stock Awards held by Participants
whose Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated in full; provided, however, that such acceleration shall
not occur if the acquisition described in this subsection 11(d) is the result of
or constitutes a transaction of the sort described in subsection 11(c) above, in
which case the provisions of subsection 11(c) shall apply.

(e) Change in Control--Change in Incumbent Board. In the event that the
individuals who, as of the date of the adoption of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board, then with respect to Stock Awards held by persons
whose Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated in full; provided, however, that such acceleration shall
not occur if such change in the Incumbent Board occurs solely as a result of
and/or following a transaction of the sort described in subsection 11(c) above,
in which case the provisions of subsection 11(c) shall apply. If the election,
or nomination for election, by the Company's stockholders of any new director
was approved by a vote of at least fifty percent (50%) of the Incumbent Board,
such new director shall be considered as a member of the Incumbent Board.

12. Amendment of the Plan and Stock Awards.

(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.

(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval, including, but not
limited to, amendments to the Plan intended to satisfy the requirements of
Section 162(m) of the Code and the regulations thereunder regarding the
exclusion of performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive officers.

(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.

(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

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(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13. Termination or Suspension of the Plan.

(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before the tenth
(10th) anniversary of the date the Plan is adopted by the Board or approved by
the stockholders of the Company, whichever is earlier. No Stock Awards may be
granted under the Plan while the Plan is suspended or after it is terminated.

(b) No Impairment of Rights. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.

14. Effective Date of Plan.

The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be granted)
unless and until the Plan has been approved by the stockholders of the Company,
which approval shall be within twelve (12) months before or after the date the
Plan is adopted by the Board.

<PAGE>

EXHIBIT 10.11

IXYS CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN

Adopted May 7, 1999
Approved by the Stockholders on _____________, 1999
Effective Date: August 1, 1999

1. Purpose.

(a) The purpose of this 1999 Employee Stock Purchase Plan (the "Plan") is
to provide a means by which employees of IXYS Corporation, a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.

(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").

(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.

(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.

2. Administration.

(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
committee as provided in subparagraph 2(c). Whether or not the Board has
delegated administration the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.

(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:

(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical).

(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.

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<PAGE>

(iii) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.

(iv) to amend the Plan as provided in paragraph 13.

(v) Generally, to exercise such powers and to perform such acts as
the Board or the Committee deems necessary or expedient to promote the best
interests of the Company and its Affiliates and to carry out the intent that the
Plan be treated as an "employee stock purchase plan" within the meaning of
Section 423 of the Code.

(c) The Board may delegate administration of the Plan to a committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.

3. Shares Subject to the Plan.

(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate two hundred fifty thousand (250,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.

(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.

4. Grant of Rights; Offering.

(a) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.

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<PAGE>

(b) If an employee has more than one right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder: (1) each agreement or notice delivered by that employee will be
deemed to apply to all of his or her rights under the Plan, and (2) a right with
a lower exercise price (or an earlier-granted right, if two rights have
identical exercise prices), will be exercised to the fullest possible extent
before a right with a higher exercise price (or a later-granted right, if two
rights have identical exercise prices) will be exercised.

5. Eligibility.

(a) Rights may be granted only to employees of the Company or, as the
Board or the Committee may designate as provided in subparagraph 2(b), to
employees of any Affiliate of the Company. Except as provided in subparagraph
5(b), an employee of the Company or any Affiliate shall not be eligible to be
granted rights under the Plan unless, on the Offering Date, such employee has
been in the employ of the Company or any Affiliate for such continuous period
preceding such grant as the Board or the Committee may require, but in no event
shall the required period of continuous employment be equal to or greater than
two (2) years. In addition, unless otherwise determined by the Board or the
Committee and set forth in the terms of the applicable Offering, no employee of
the Company or any Affiliate shall be eligible to be granted rights under the
Plan unless, on the Offering Date, such employee's customary employment with the
Company or such Affiliate is for at least twenty (20) hours per week and at
least five (5) months per calendar year.

(b) The Board or the Committee may provide that each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:

(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;

(ii) the period of the Offering with respect to such right shall
begin on its Offering Date and end coincident with the end of such Offering; and

(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.

(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such

3
<PAGE>

employee may purchase under all outstanding rights and options shall be treated
as stock owned by such employee.

(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.

(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board or
the Committee may provide in an Offering that certain employees who are highly
compensated employees within the meaning of Section 423(b)(4)(D) of the Code
shall not be eligible to participate.

6. Rights; Purchase Price.

(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined by the Board for each Offering) during the
period which begins on the Offering Date (or such later date as the Board or the
Committee determines for a particular Offering) and ends on the date stated in
the Offering, which date shall be no later than the end of the Offering. The
Board or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.

(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.

(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or

(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.

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<PAGE>

7. Participation; Withdrawal; Termination.

(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings (as defined
by the Board for each Offering) during the Offering. The payroll deductions made
for each participant shall be credited to an account for such participant under
the Plan and shall be deposited with the general funds of the Company. A
participant may reduce (including to zero) or increase such payroll deductions,
and an eligible employee may begin such payroll deductions, after the beginning
of any Offering only as provided for in the Offering. A participant may make
additional payments into his or her account only if specifically provided for in
the Offering and only if the participant has not had the maximum amount withheld
during the Offering.

(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's right
to acquire Common Stock under that Offering shall be automatically terminated.
A participant's withdrawal from an Offering will have no effect upon such
participant's eligibility to participate in any other Offerings under the Plan
but such participant will be required to deliver a new participation agreement
in order to participate in subsequent Offerings under the Plan.

(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of a participant's employment with the Company and
any designated Affiliate, for any reason, and the Company shall distribute to
such terminated employee all of his or her accumulated payroll deductions
(reduced to the extent, if any, such deductions have been used to acquire stock
for the terminated employee), under the Offering, without interest.

(d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.

8. Exercise.

(a) On each date specified therefor in the relevant Offering ("Purchase
Date"), each participant's accumulated payroll deductions and other additional
payments specifically provided for in the Offering (without any increase for
interest) will be applied to the purchase of whole shares of stock of the
Company, up to the maximum number of shares permitted pursuant to the terms of
the Plan and the applicable Offering, at the purchase price specified in the
Offering. Unless otherwise provided for in the applicable Offering, no
fractional shares shall be issued

5
<PAGE>

upon the exercise of rights granted under the Plan. The amount, if any, of
accumulated payroll deductions remaining in each participant's account after the
purchase of shares which is less than the amount required to purchase one share
of stock on the final Purchase Date of an Offering shall be held in each such
participant's account for the purchase of shares under the next Offering under
the Plan, unless such participant withdraws from such next Offering, as provided
in subparagraph 7(b), or is no longer eligible to be granted rights under the
Plan, as provided in paragraph 5, in which case such amount shall be distributed
to the participant after such final Purchase Date, without interest. The amount,
if any, of accumulated payroll deductions remaining in any participant's account
after the purchase of shares which is equal to the amount required to purchase
whole shares of stock on the final Purchase Date of an Offering shall be
distributed in full to the participant after such Purchase Date, without
interest.

(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised then all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.

9. Covenants of the Company.

(a) During the terms of the rights granted under the Plan, the Company
shall at all times keep available the number of shares of stock required to
satisfy such rights.

(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.

10. Use of Proceeds from Stock.

Proceeds from the sale of stock to participants pursuant to rights granted
under the Plan shall constitute general funds of the Company.

6
<PAGE>

11. Rights as a Stockholder.

A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shares acquired upon exercise
of rights hereunder are recorded in the books of the Company (or its transfer
agent).

12. Adjustments Upon Changes in Stock.

(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")

(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of Common Stock outstanding immediately preceding the merger are
converted by virtue of the merger into other property, whether in the form of
securities, cash or otherwise; or (4) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act,
or comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors, then, as determined by the Board in its sole discretion
(i) any surviving or acquiring corporation may assume outstanding rights or
substitute similar rights for those under the Plan, (ii) such rights may
continue in full force and effect, or (iii) participants' accumulated payroll
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.

13. Amendment of the Plan.

(a) The Board or the Committee at any time, and from time to time, may
amend the Plan. However, except as provided in paragraph 12 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company within twelve (12) months before or
after the adoption of the amendment if such amendment requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act.

7
<PAGE>

(b) The Board or the Committee may amend the Plan in any respect the Board
or the Committee deems necessary or advisable to provide eligible employees with
the maximum benefits provided or to be provided under the provisions of the Code
and the regulations promulgated thereunder relating to employee stock purchase
plans and/or to bring the Plan and/or rights granted under it into compliance
therewith.

(c) Rights and obligations under any rights granted before amendment of
the Plan shall not be altered or impaired by any amendment of the Plan, except
with the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or governmental regulations, or except as
necessary to ensure that the Plan and/or rights granted under the Plan comply
with the requirements of Section 423 of the Code.

14. Designation of Beneficiary.

(a) A participant may file a written designation of a beneficiary who is
to receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.

(b) Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its sole discretion, may deliver such shares and/or cash to the spouse or to
any one or more dependents or relatives of the participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.

15. Termination or Suspension of the Plan.

(a) The Board or the Committee in its discretion, may suspend or terminate
the Plan at any time. No rights may be granted under the Plan while the Plan is
suspended or after it is terminated.

(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.

8
<PAGE>

16. Effective Date of Plan.

The Plan shall become effective on August 1, 1999 (the "Effective Date"),
provided that the Plan has been approved by the stockholders of the Company
prior to the Effective Date.

<PAGE>

Exhibit 10.12
IXYS Corporation

1999 Non-Employee directors' Equity Incentive Plan

Adopted May 7, 1999
Approved By Stockholders _______________, 1999
Termination Date: May 6, 2009

1. Purposes.

(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Non-Employee Directors of the Company and its Affiliates.

(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Nonstatutory Stock Options, (ii) stock bonuses and
(iii) rights to acquire restricted stock.

2. Definitions.

(b) "Board" means the Board of Directors of the Company.

(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c).

(e) "Common Stock" means the common stock of the Company.

(f) "Company" means IXYS Corporation, a Delaware corporation.

(g) "Consultant" means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (2) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated
<PAGE>

by the Company for their services as Directors or Directors of the Company who
are merely paid a director's fee by the Company for their services as Directors.

(i) "Director" means a member of the Board of Directors of the Company or
an Affiliate.

(j) "Disability" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.

(k) "Employee" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.

(l) "Exchange Act" means the Securities Exchange Act of 1934, as amended.

(m) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:

(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.

(n) "Non-Employee Director" means a Director who at the time of grant is
not an Employee.

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<PAGE>

(o) "Nonstatutory Stock Option" means an Option not intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated therewith.

(p) "Officer" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(q) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan.

(r) "Option Agreement" means a written agreement between the Company and
an Optionholder evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.

(s) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.

(t) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.

(u) "Plan" means this IXYS Corporation 1999 Non-Employee Directors' Equity
Incentive Plan.

(v) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.

(w) "Securities Act" means the Securities Act of 1933, as amended.

(x) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus and a right to acquire restricted stock.

(y) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.

3. Administration.

(a) Administration by Board. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).

(b) Powers of Board. The board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:

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<PAGE>

permitted to receive stock pursuant to a Stock Award; and the number of shares
with respect to which a Stock Award shall be granted to each such person.

(iii) To amend the Plan or a Stock Award as provided in Section 12.

(c) Delegation to Committee. The Board may delegate administration of the
Plan to a Committee or Committees of one or more members of the Board, and the
term "Committee" shall apply to any person or persons to whom such authority has
been delegated. If administration is delegated to a Committee, the Committee
shall have, in connection with the administration of the Plan, the powers
theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan.

4. Shares Subject to the Plan.

(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full (or vested in the case of Restricted Stock), the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan. If any Common Stock acquired pursuant to the
exercise of an Option shall for any reason be repurchased by the Company under
an unvested share repurchase option provided under the Plan, the stock
repurchased by the Company under such repurchase option shall not revert to and
again become available for issuance under the Plan.

(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.

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<PAGE>

5. Eligibility.

Stock Awards may be granted only to Non- Employee Directors.

6. Option Provisions.

Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:

(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted, or such longer or shorter term as may be
provided in the Option Agreement.

(b) Exercise Price of a Nonstatutory Stock Option. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.

(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option, or
subsequently, by delivery to the Company of other Common Stock, according to a
deferred payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock) with the Participant
or in any other form of legal consideration that may be acceptable to the Board;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.

In the case of any deferred payment arrangement, interest shall be paid at
least annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code, of
any amounts other than amounts stated to be interest under the deferred payment
arrangement.

(d) Transferability of a Nonstatutory Stock Option. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection, the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.

5
<PAGE>

(e) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection are subject to any Option provisions governing the
minimum number of shares as to which an Option may be exercised.

(f) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.

(g) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service (other than upon the Optionholder's death or
Disability) would be prohibited at any time solely because the issuance of
shares would violate the registration requirements under the Securities Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in subsection 6(a) or (ii) the expiration of a period of
three (3) months after the termination of the Optionholder's Continuous Service
during which the exercise of the Option would not be in violation of such
registration requirements.

(h) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.

(i) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death pursuant to subsection 6(d), but only within the period
ending on the earlier of (1) the date eighteen (18) months following the date of
death (or such longer or shorter period specified in

6
<PAGE>

the Option Agreement) or (2) the expiration of the term of such Option as set
forth in the Option Agreement. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate.

(j) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.

7. Provisions of Stock Awards other than Options.

(i) Consideration. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company for its benefit.

(iv) Transferability. Rights to acquire shares under the stock bonus
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus agreement.

(b) Restricted Stock Awards. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and conditions as
the Board shall deem appropriate. The terms and conditions of the restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions:

7
<PAGE>

(i) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated.

(v) Transferability. Rights to acquire shares under the restricted
stock purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.

8. Covenants of the Company.

(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.

8
<PAGE>

9. Use of Proceeds from Stock.

Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.

10. Miscellaneous.

(a) Stockholder Rights. No Participant shall be deemed to be the holder
of, or to have any of the rights of a holder with respect to, any shares subject
to such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.

(d) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (iii) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (iv) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or

9
<PAGE>

appropriate in order to comply with applicable securities laws, including, but
not limited to, legends restricting the transfer of the stock.

(e) Withholding Obligations. To the extent provided by the terms of a
Stock Award Agreement, the Participant may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means (in addition to the Company's
right to withhold from any compensation paid to the Participant by the Company)
or by a combination of such means: (i) tendering a cash payment; (ii)
authorizing the Company to withhold shares from the shares of the Common Stock
otherwise issuable to the participant as a result of the exercise or acquisition
of stock under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.

11. Adjustments upon Changes in Stock.

10
<PAGE>

(d) Change in Control--Securities Acquisition. In the event of an
acquisition by any person, entity or group within the meaning of Section 13(d)
or 14(d) of the Exchange Act, or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or maintained by the
Company or an Affiliate) of the beneficial ownership (within the meaning of Rule
13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Company representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors, then with
respect to Stock Awards held by Participants whose Continuous Service has not
terminated, the vesting of such Stock Awards (and, if applicable, the time
during which such Stock Awards may be exercised) shall be accelerated in full.

(e) Change in Control--Change in Incumbent Board. In the event that the
individuals who, as of the date of the adoption of this Plan, are members of the
Board (the "Incumbent Board"), cease for any reason to constitute at least fifty
percent (50%) of the Board, then with respect to Stock Awards held by persons
whose Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be exercised)
shall be accelerated in full. If the election, or nomination for election, by
the Company's stockholders of any new director was approved by a vote of at
least fifty percent (50%) of the Incumbent Board, such new director shall be
considered as a member of the Incumbent Board.

12. Amendment of the Plan and Stock Awards.

(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Rule 16b-3 or any Nasdaq or
securities exchange listing requirements.

(b) Stockholder Approval. The Board may, in its sole discretion, submit
any other amendment to the Plan for stockholder approval.

(c) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.

(d) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.

13. Termination or Suspension of the Plan.

(a) Plan Term. The Board may suspend or terminate the Plan at any time. No
Stock Awards may be granted under the Plan while the Plan is suspended or after
it is terminated.

11
<PAGE>

(b) No Impairment of Rights. Rights and obligations under any Stock
Award granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.

14. Effective Date of Plan.

<PAGE>

Exhibit 10.13
MISSION WEST PROPERTIES

This first Amendment Of Lease, entered into as of September 30, 1998
("Effective Date") by and between Mission West Properties, L.P. III (formerly
known as Kontrabecki Associates I), a Delaware limited partnership ("Lessor")
and Ixys Corporation, a California corporation ("Lessee").

Whereas, Lessee currently leases from Lessor approximately 19,600 square
feet of space located at 3540 Bassett Street, Santa Clara, California
("Premises") pursuant to that certain lease and related addendum dated July 26,
1993 ("Lease") (unless otherwise defined, all terms used herein shall have the
same meanings as are set forth in the Lease);

Whereas, the term of the Lease expires on January 14, 1999; and

Whereas, Lessee has elected and Lessor has agreed to extend the Lease
pursuant to certain addendum to Lease dated July 26, 1993 until January 31, 2004
subject to the terms and conditions set forth herein.

Now, Therefore, in consideration of the mutual covenants and promises of
the parties provided for in the Agreement, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:

1. Term.

1.1 The term of the Lease is hereby extended for five (5) years and
seventeen (17) days until January 31, 2004.

1.2 If in the future the parties mutually agree upon another lease wherein
Lessee leases from Lessor premises that are greater in size than the Premises
and thereafter Lessee no longer desires to lease the Premises, then Lessor
agrees to cancel this Lease for the Premises upon execution of such new lease.
Lessee and Lessor hereby acknowledge that this paragraph will not create any
obligation on either party to negotiate or enter into any future leases.

2. Base Rent and CAC.

2.1 The base rent and CAC (as defined below) shall be adjusted to and
payable at the following monthly rates during this extended term:

<TABLE>
<CAPTION>
Months Base Rent Estimated CAC* Total
--------------------------- ----------------- ----------------- --------------
<S> <C> <C> <C>
1/1/1999 through 1/31/1999 $20,363.00 $3,430.00 $23,793.00
2/1/1999 through 1/31/2000 $24,892.00 $3,430.00 $28,322.00
</TABLE>

---------------------------
* CAC charges to be adjusted per Common Area Charges Section below.

1
<PAGE>

2.2 Monthly base rent shall increase by four percent (4%) each year during
the lease term over the prior year's monthly rent with the first such rent
increase to occur on February 1, 2000.

3. Common Area Charges.

3.1 Sections 6.4 and 6.5(c) of the Lease are hereby superceded by this
section 3 of this First Amendment.

3.2 Lessee shall pay to Lessor, as additional rent, an amount equal to
Lessee's pro-rata share of the total common area charges of the Premises,
Building, Property, Outside Areas, and Common Areas, as defined below (the
common area charges for the Premises, Building, Property, Outside Areas, and
Common Areas are referred to herein as "CAC"). Lessee shall pay to Lessor as
Rent, on or before the first day of each calendar month during the Lease Term,
subject to adjustment and reconciliation as provided hereinbelow, the sum of
three thousand four hundred thirty dollars ($3,430.00), said sum representing
Lessee's estimated monthly payment of Lessee's share of CAC.

3.3 Lessee's estimated monthly payment of CAC payable by Lessee during the
calendar year in which this Amendment commences is set forth above. At or prior
to the commencement of each succeeding calendar year term (or as soon as
practical thereafter), Lessor shall provide Lessee with Lessee's estimated
monthly payment for CAC which Lessee shall pay to Lessor. Within one hundred
twenty (120) days of the end of the calendar year and the end of the Lease Term,
Lessor shall provide Lessee a statement of actual CAC incurred including capital
reserves for the preceding year or other applicable period in the case of a
termination year. If such statement shows that Lessee has paid less than its
actual percentage, then Lessee shall on demand pay to Lessor the amount of such
deficiency. If such statement shows that Lessee has paid more than its actual
percentage, then Lessor shall, at its option, promptly refund such excess to
Lessee or credit the amount thereof to the Rent next becoming due from Lessee.
Lessor reserves the right to revise any estimate of CAC if the actual or
projected CAC show an increase or decrease in excess of ten percent (10%) from
an earlier estimate for the same period. In such event, Lessor shall provide a
revised estimate to Lessee, together with an explanation of the reasons
therefor, and Lessee shall revise its monthly payments accordingly. Lessor's and
Lessee's obligation with respect to adjustments at the end of the lease term or
earlier expiration of this Lease shall survive the Expiration Date of the
Lease.

3.4 As used in this Lease, CAC shall include but is not limited to: (i)
items as specified in Sections 5.2, 5.3, 6.2, 6.3, 6.5(a) and 6.5(b) of the
Lease; (ii) all costs and expenses including but not limited to supplies,
materials, equipment and tools used or required in connection with the operation
and maintenance of the Premises, Building, Property, Outside Areas, and Common
Areas; (iii) licenses, permits and inspection fees; (iv) all other costs
incurred by Lessor in maintaining and operating the Premises, Building,
Property, Outside Areas, and Common Areas; (v) all reserves for capital
replacements and government regulations imposed on the Premises, Building,
Property, Outside Areas, and Common Areas not related to Lessee's use and
occupancy of the Premises; and (vi) an amount equal to one percent (1%) of the
aggregate of the Base Rent and CAC, as compensation for Lessor's accounting and
processing

2
<PAGE>

services. Lessee shall have the right to review the basis and computation
analysis used to derive the CAC applicable to this Lease annually.

3.5 Notwithstanding the provisions of Section 6.1 of the Lease, Lessor
shall assume maintenance responsibility for the HVAC system serving the Premises
effective January 1, 1999. Although Lessor is assuming maintenance
responsibility, Lessee shall remain responsible for any and all costs incurred
by Lessor in maintaining, repairing, and replacing the HVAC system as provided
in the Lease. Lessee's estimated share of the costs associated with the repair,
maintenance, and replacement of the HVAC system has been estimated in Lessee's
monthly CAC.

4. Improvements.

4.1 In connection with the execution of this Amendment, Lessor shall cause
a new roof cap sheet to be installed over the Premises.

4.2 In connection with the execution of this Amendment, Lessor shall
provide Lessee with an allowance of eighteen thousand dollars ($18,000.00) for
the replacement of the carpet at the Premises. Any cost for replacement of the
carpet in excess of the eighteen thousand dollars ($18,000.00) allowance shall
be borne solely by the Lessee. Lessee shall use a carpeting contractor selected
by Lessor.

4.3 Other than the above referenced improvements, Lessor shall not cause
any other improvements to the Premises and Lessee is accepting the Premises in
an "AS IS" physical condition and in an "AS IS" state of repair.

In Witness Whereof, the parties hereby have executed this First Amendment
to Lease as of the Effective Date.

<TABLE>
<CAPTION>
Lessor Lessee
<S> <C>
By: ______________________________________ By: ______________________________________
Signature of Authorized Representative Signature of Authorized Representative

__________________________________________ __________________________________________
Printed Name Printed Name

__________________________________________ __________________________________________
Title Title
</TABLE>

<PAGE>

Exhibit 23.3

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 333-66289 and No. 333-4412) and Form S-3 (No. 333-
63745, No. 333-21505, No. 333-34247, and No. 333-39793) of IXYS Corporation of
our report dated May 10, 1999 as it appears on page 32 of this Annual Report
on Form 10-K.

/s/ PricewaterhouseCoopers LLP
San Jose, California
July 7, 1999

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> MAR-31-1999 MAR-31-1999
<PERIOD-START> APR-01-1998 APR-01-1997
<PERIOD-END> MAR-31-1999 MAR-31-1998
<CASH> 8,480 10,594
<SECURITIES> 0 0
<RECEIVABLES> 12,331 10,597
<ALLOWANCES> 600 588
<INVENTORY> 20,167 17,103
<CURRENT-ASSETS> 41,995 39,323
<PP&E> 27,493 23,624
<DEPRECIATION> 16,170 (13,022)
<TOTAL-ASSETS> 57,100 54,340
<CURRENT-LIABILITIES> 17,586 25,489
<BONDS> 0 0
0 28,256
0 0
<COMMON> 120 72
<OTHER-SE> 42,197 669
<TOTAL-LIABILITY-AND-EQUITY> 57,100 54,340
<SALES> 66,523 56,856
<TOTAL-REVENUES> 66,523 56,856
<CGS> (44,939) (38,048)
<TOTAL-COSTS> (44,939) (38,048)
<OTHER-EXPENSES> (24,452) (11,713)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (993) (431)
<INCOME-PRETAX> (3,155) 10,313
<INCOME-TAX> (2,083) (4,229)
<INCOME-CONTINUING> (5,238) 6,084
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (5,238) 6,084
<EPS-BASIC> (0.56) 0.09
<EPS-DILUTED> (0.56) 0.03

</TABLE>