IXYS CORP /DE/
10-Q, 1999-02-16
SEMICONDUCTORS & RELATED DEVICES
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<PAGE>
 
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-Q

          [X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                 SECURITIES EXCHANGE ACT OF 1934 FOR THE PERIOD
                            ENDED DECEMBER 31, 1998

                                       OR

          [_]  SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
                                  FROM      TO
               
                       COMMISSION FILE NUMBER 000-26124

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

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

                              3540 BASSETT STREET
                       SANTA CLARA, CALIFORNIA 95054-2704
                    (Address of principal executive offices)

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

Indicate by check mark whether the Registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter periods 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  [_]

The number of shares of the Registrant's Common Stock outstanding as of December
31, 1998 was 11,959,354.
<PAGE>
 
                                     INDEX
<TABLE>
<CAPTION>
<S>                                                                                            <C>
PART I             FINANCIAL INFORMATION

          ITEM 1.  FINANCIAL STATEMENTS
                   Condensed Consolidated Balance Sheets...................................     3
                   Condensed Consolidated Statements of Operations.........................     4
                   Condensed Consolidated Statements of Comprehensive Income (Loss)........     5
                   Condensed Consolidated Statements of Cash Flows.........................     6
                   Notes to Condensed Consolidated Financial Statements....................     7

          ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                   RESULTS OF OPERATIONS...................................................     10

PART II            OTHER INFORMATION

          ITEM 1.  LEGAL PROCEEDINGS.......................................................     14

          ITEM 2.  CHANGES IN SECURITIES...................................................     15

          ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.........................................     15

          ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................     15

          ITEM 5.  OTHER INFORMATION.......................................................     16

          ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K........................................     16

          SIGNATURES.......................................................................     17
</TABLE>

                                       2
<PAGE>
 
                        PART I.   FINANCIAL INFORMATION



Item 1.   Financial Statements


                                IXYS CORPORATION
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                       (in thousands, except share data)
<TABLE>
<CAPTION>
 
                 ASSETS                         March 31,         December 31, 
                                                  1998                1998   
                                                --------            --------
                                                                   (unaudited)
<S>                                       <C>              <C>
Cash and cash equivalents                       $ 10,594            $ 10,182
Trade accounts receivable, net of
 allowance for doubtful accounts of $588 
 in 1998 and $613 in 1999                         10,009              10,713
Inventories                                       17,103              18,453
Other                                                                    370
Deferred income taxes                              1,617               1,617
                                                --------            --------
                   Total current assets           39,323              41,335
 
Property and equipment, net                       10,602              12,162
Goodwill and other tangible assets                                     4,863
Other                                              1,143               1,425
Deferred income taxes                              3,272               2,672
                                                --------            --------
          Total assets                          $ 54,340            $ 62,457
                                                ========            ======== 

                   LIABILITIES AND STOCKHOLDERS' EQUITY

Current portion, capital leases                 $    428            $  1,065
Current portion, long term debt                    4,168               3,775
Current portion, mandatorily redeemable
 convertible preferred stock                       9,300    
Accounts payable                                   4,474               4,807
Other accrued liabilities                          7,119               8,746
                                                --------            --------
          Total current liabilities               25,489              18,393
 
Long term capital leases, net                        814               2,302
Long term debt, net                                6,624               7,815
Pension obligations, net                           5,113               5,842
                                                --------            --------
          Total liabilities                       38,040              34,352
                                                --------            -------- 
Mandatorily redeemable convertible                       
 preferred stock, net                             28,256 
Common stock, $0.01 par value:
  Issued and outstanding:  4,176,879 in               
   1998 and 11,959,354 in 1999                        42                 120
Additional paid-in capital                         1,031              43,281
Notes receivable from employees                     (936)               (936)
Cumulative translation adjustment                   (734)                274
Accumulated deficit                              (11,359)            (14,634)
                                                --------            --------
          Total mandatorily redeemable
           convertible preferred stock            
           and stockholders' equity               16,300              28,105
                                                --------            -------- 
 
          Total liabilities and                 
           stockholders' equity                 $ 54,340            $ 62,457
                                                ========            ======== 
</TABLE>


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

                                       3
<PAGE>
 
                                IXYS CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 (amounts in thousands, except per share data)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                           Three Months Ended   Nine Months Ended
                                               December 31,         December 31,
                                           ------------------    ------------------
                                            1997       1998       1997       1998               
                                           -------    -------    -------    -------             
<S>                                       <C>        <C>        <C>                             
Net revenues...........................    $14,233    $16,890    $41,444    $49,607             
Cost of goods sold.....................      9,032     12,123     26,414     34,198             
                                           -------    -------    -------    -------             
   Gross profit........................      5,201      4,767     15,030     15,409             
                                           -------    -------    -------    -------             
Operating expenses:                                                                             
   Research, development and engineering       782      1,008      2,276      3,101             
   Selling, general and administrative       2,316      2,772      6,699      7,464             
   Acquisition of in-process research and                                     
    development........................                                       5,807
   Amortization of goodwill and                                                                   
    intangibles                                           695                   695             
                                           -------    -------    -------    -------             
      Total operating expenses..........     3,098      4,475      8,975     17,067             
                                           -------    -------    -------    -------             
      Operating income..................     2,103        292      6,055     (1,658)            
 Other income (expense), net............       (83)       (93)       (96)         4             
                                           -------    -------    -------    -------             
 Income (loss) before income tax                                                                
  provision.............................     2,020        199      5,959     (1,654)            
 Income tax provision...................       711        128      2,633      1,621             
                                           -------    -------    -------    -------             
                                                                                                
 Net income (loss)......................   $ 1,309    $    71    $ 3,326    $(3,275)            
                                           =======    =======    =======    =======             
                                                                                                
 Net income (loss) per share - basic....   $  0.33    $  0.01    $  0.88    $ (0.48)            
                                           =======    =======    =======    =======             
                                                                                                
 Number of shares used in per share                                                             
  calculation - basic...................     3,955     11,841      3,772      6,845             
                                           =======    =======    =======    =======             
                                                                                                
 Net income (loss) per share - diluted..   $  0.11    $  0.01    $  0.28    $ (0.48)            
                                           =======    =======    =======    =======             
                                                                                                
 Number of shares used in per share                                                             
  calculation - diluted.................    11,861     12,146     11,825      6,845             
                                           =======    =======    =======    =======             
</TABLE>

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

                                       4
<PAGE>
 
                                IXYS CORPORATION
        CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
                             (amounts in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
 
 
                                          Three Months Ended    Nine Months Ended
                                              December 31,         December 31,
                                           ----------------      ------------------           
                                            1997      1998       1997        1998             
                                           ------     -----      ------     -------           
<S>                                       <C>       <C>       <C>         <C> 
Net income (loss)                          $1,309     $  71      $3,326     $(3,275)          
Other comprehensive income, net of tax:                                                       
    Foreign currency translation                                                              
     adjustments                              (46)       (6)       (128)        605           
                                           ------     -----      ------     -------    
Comprehensive income (loss)                $1,263     $  65      $3,198     $(2,670)          
                                           ======     =====      ======     =======           
 
</TABLE>

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

                                       5
<PAGE>
 
                                IXYS CORPORATION
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (in thousands)
                                  (unaudited)
<TABLE>
<CAPTION>
 
                                                  Nine Months Ended
                                                     December 31,
                                                ----------------------
                                                 1997            1998           
                                                -------        -------
<S>                                             <C>           <C> 
Cash flows from operating activities:                                        
  Net income (loss)                               3,326        $(3,275)   
  Adjustments to reconcile net income                                          
   (loss) to net cash provided by                                              
   operating activities:                                                       
      Depreciation and amortization                 820          2,791        
      Other                                          49           (682)        
      Provision for excess and obsolete                          
        inventory                                   272          1,556        
      Loss on foreign currency translation          186            876          
      Amortization of goodwill and intangibles                     695          
      Acquisition of in-process research and                     
       development                                               5,807        
      Changes in operating assets and                            
       liabilities:                                              
          Accounts receivable                      (779)           802          
          Inventories                            (2,816)        (1,719)      
          Prepaid expenses and other                                         
           current assets                          (231)          (965)        
          Other assets                              (90)          (154)        
          Accounts payable                        1,705         (2,308)      
          Accrued expenses and other                                         
           liabilities                            1,951         (1,363)      
          Pension liabilities                        90           (182)        
                                                -------        -------
                 Net cash provided by                                        
                  operating activities            4,483          1,879        
                                                -------        -------
Cash flows used in investing activities:                                     
      Acquisition of Paradigm                                           
      Technology, Inc., net of                                          
        cash acquired                                             (606)        
      Purchase of plant and                                              
        equipment                                (1,443)        (3,171)      
                                                -------        -------
                 Net cash used in                                            
                  investing activities           (1,443)        (3,777)      
                                                -------        -------
Cash flows from financing activities:                                        
      Proceeds from capital lease                                        
      obligations                                                2,166        
      Proceeds from bank loan                       300  
      Principal payments on capital                                      
      lease obligations                            (228)          (400)        
      Repayment of notes payable to                                      
      bank                                                        (836)        
      Other, net                                                     4  
                                                -------        -------       
                 Net cash provided by                                        
                  financing activities               72            934   
                                                -------        -------       
Effect of foreign exchange rate                                              
 fluctuations on cash and cash                                               
 equivalents                                       (349)           552   
                                                -------        -------       
                 Net increase in cash                                        
                  and cash equivalents            2,773           (412)        
Cash and cash equivalents at beginning                                       
 of period                                        8,231         10,594       
                                                -------        -------
Cash and cash equivalents at end of                                          
 period                                         $11,004        $10,182       
                                                =======        =======

</TABLE>

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

                                       6
<PAGE>
 
                                IXYS CORPORATION
              Notes to Condensed Consolidated Financial Statements
      (Information as of December 31, 1998 and for the three month and
nine month periods ended December 31, 1997 and 1998 and thereafter is unaudited)
                                        
1. Interim Financial Data (Unaudited):

     The unaudited financial statements for the quarter and nine month periods
     ended December 31, 1997 and 1998 have been prepared on the same basis as
     the audited financial statements and, in the opinion of management, include
     all material adjustments, consisting of normal recurring adjustments,
     necessary for a fair presentation of financial position and results of
     operations in accordance with generally accepted accounting principles.
     Although certain information and footnote disclosures normally included in
     financial statements prepared in accordance with generally accepted
     accounting principles have been omitted pursuant to the rules and
     regulations of the Securities and Exchange Commission (the "Commission"),
     the Company believes the disclosures made are adequate to make the
     information presented not misleading.  It is suggested that the
     accompanying financial statements be read in conjunction with the Company's
     annual financial statements for the year ended March 31, 1998 which have
     been included in Paradigm Technologies, Inc. Form S-4 filed with the
     Commission  (see Note 7).

     The Company's balance sheet as of March 31, 1998 was derived from the
     Company's audited financial statements, but does not include all
     disclosures necessary for the presentation to be in accordance with
     generally accepted accounting principles.

2. Foreign Currency Translation:

     The local currency is considered to be the functional currency of the
     operations of 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' equity.  Foreign currency transaction gains and
     losses are included as a component of other income and expense.

3. Earnings Per Share:

     The Company has adopted Statement of Financial Accounting Standards No. 128
     ("SFAS 128"), "Earnings per Share," which is effective for all periods
     ending after December 15, 1997.  SFAS 128 requires dual presentation of
     basic and diluted earnings per share ("EPS") for complex capital structures
     on the face of the Statement of Income.  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.  For the nine months
     ended December 31, 1998, common equivalent shares from restricted stock,
     stock options, warrants and preferred stock have been excluded from the
     computation as their effect is antidilutive.

4. Recent Accounting Pronouncements:

     In June 1997, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 131 ("SFAS 131"), "Disclosures about
     Segments of an Enterprise and Related Information".  This Statement
     establishes standards for disclosure about operating segments in annual
     financial statements and selected information in interim financial reports.
     It also establishes standards for related disclosures about products and
     services, geographic areas and major customers.  This Statement supersedes
     Statement of Financial Accounting Standards No. 14, "Financial Reporting
     for Segments of a Business Enterprise."  The new standard becomes effective
     for the Company's fiscal year 1999 and requires that comparative

                                       7
<PAGE>
 
     information from earlier years be restated to conform to the requirements
     of this standard.  The Company is evaluating the requirements of SFAS 131
     and the effects, if any, on the Company's current reporting and
     disclosures.

     In June 1998, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards No. 133, "Accounting for Derivative
     Instruments and Hedging Activities" ("SFAS 133"), 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 December 15, 1999.  The Company is
     evaluating the requirements of SFAS 133 and the effects, if any, on the
     Company's current reporting and disclosures.

5. Comprehensive Income (Loss):

     Effective in the first quarter of fiscal year 1999, the Company has adopted
     Statement of Financial Accounting Standard No. 130, "Reporting
     Comprehensive Income" ("SFAS 130").  Comprehensive income generally
     represents all changes in stockholders' equity except those resulting from
     investments or contributions by stockholders.  The Company has reclassified
     earlier financial statements for comparative purposes.  The only component
     of comprehensive income for the three months and nine months ended December
     31, 1997 and 1998 was the change in the cumulative translation adjustment.

6. Inventories:


     Inventories consist of the following (in thousands):

<TABLE> 
<CAPTION>
                                    March 31,    December 31,
                                     1998           1998
                                    -------        -------  
<S>                       <C>         <C>
        Raw materials               $ 3,789        $ 3,802
        Work in process              12,059         13,236
        Finished goods                5,765          7,874
                                     21,613         24,912
        Less inventory reserve       (4,510)        (6,459)
                                    -------        ------- 
                                    $17,103        $18,453
                                    =======        =======
</TABLE>
7. Acquisition and Merger:

     Effective September 23, 1998, the Company acquired and merged into a 
     subsidiary of Paradigm Technology, Inc. ("Paradigm"), a company that
     designs and markets fast SRAM products. The acquisition was structured as a
     reverse merger whereby Paradigm issued 11,513,821 shares of its common
     stock in exchange for all outstanding shares of IXYS stock. At the
     conclusion of the merger, IXYS stockholders held approximately 96% of the
     combined company. For financial accounting purposes, IXYS is the surviving
     company and the historic financial information is that of IXYS.

     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:

        Current assets                          $   484
        Fixed assets                                810
        In-process research and development       5,807
        Other intangibles                         1,463

                                       8
<PAGE>
 
        Goodwill                                  4,094
                                                -------
                                                $12,658
                                                =======

     The goodwill and other intangible assets recorded as part of the purchase
     price allocation, in the total amount of approximately $5.6 million, will
     be amortized over twenty-four months. The value of the in-process research
     development acquired in the transaction, in the amount of $5.8 million, 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.


     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.

8. 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>
                                          Three Months Ended   Nine Months Ended
                                              December 31,        December 31,
                                          -----------------   -------------------
                                           1997      1998      1997        1998
                                          -------   -------   -------     -------          
<S>                                       <C>      <C>       <C>       <C>
Basic:
    Weighted-average shares                 3,955    11,841     3,772       6,845          
                                          =======   =======   =======     =======          
    Net income (loss)                     $ 1,309   $    71   $ 3,326     $(3,275)         
                                          =======   =======   =======     =======          
    Net income (loss) per share           $  0.33   $  0.01   $  0.88     $ (0.48)         
                                          =======   =======   =======     =======          
Diluted:                                                                                   
    Weighted-average shares                 3,955    11,841     3,772       6,845          
    Restricted stock subject to                                                                
      repurchase                              241       115       424                      
    Common equivalent shares from                                                          
    stock options and warrants              1,221       190     1,185                      
    Common equivalent shares from                                                          
     preferred stock                        6,444               6,444                      
                                          -------   -------   -------     -------          
    Shares used in per share                                                               
    calculation                            11,861    12,146    11,825       6,845          
                                          -------   -------   -------     -------          
    Net income (loss)                     $ 1,309   $    71   $ 3,326     $(3,275)         
                                          =======   =======   =======     =======          
    Net income (loss) per share           $  0.11   $  0.01   $  0.28     $ (0.48)         
                                          =======   =======   =======     =======          
</TABLE>

The calculation of diluted shares outstanding for the nine months ended December
31, 1998 excludes 1,843 shares of restricted stock, 4,753 stock options, and
warrants to issue 4,399 shares of common stock as their effect was antidilutive
for this period.

                                       9
<PAGE>
 
Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

          This Discussion contains forward looking statements, which are subject
          to certain risks and uncertainties, including without limitation as
          detailed and included in the report of Paradigm (Registration no. 333-
          57003) on Form S-4 (the "Form S-4"), as filed with the Commission,
          which includes the IXYS financial statements as of March 31, 1998 and
          1997 and the three years in the period ended March 31, 1998.

          Actual results may differ materially from the results discussed in the
          forward-looking statements. Important factors affecting the Company's
          ability to achieve future revenue growth include whether, and the
          extent to which, demand for the Company's products increases and
          reflects real end-user demand; whether customer cancellations and
          delays of outstanding orders increase; and whether the Company is able
          to manufacture in a correct mix to respond to orders on hand and new
          orders received in the future; whether the Company is able to achieve
          its new product development and introduction goals, including, without
          limitation, goals for recruiting, retaining, training, and motivating
          engineers, particularly design engineers, and goals for conceiving and
          introducing timely new products that are well received in the
          marketplace; and whether the Company is able to successfully
          commercialize its new technologies, which it has been investing in by
          designing and introducing new products based on these new
          technologies.

          Other important factors that could cause actual results to differ
          materially from those predicted include overall economic conditions,
          such as the economic issues affecting Asian countries; fluctuations in
          currency exchange ratios as the Company sells products in currencies
          other than the U.S. dollar; demand for electronic products and
          semiconductors generally; demand for the end-user products for which
          the Company's semiconductors are suited; the availability of
          alternative products from competitors and the impact of competition on
          pricing of the Company's products; the level of utilization of the
          Company's production capacity; timely availability of, and changes in
          the cost of, raw materials, equipment, supplies and services;
          unanticipated manufacturing problems; problems in obtaining products
          from outside foundries that manufacture for the Company; increases in
          production and engineering costs associated with initial manufacture
          of new products; technological and product development risks;
          competitors' actions; and other risk factors described in the
          Company's filings with the Commission and in particular the risk
          factors described in the Form S-4 regarding "Risks Relating to the
          Business of IXYS" and "Risks Relating to the Business of Paradigm -
          Litigation" and "- Declining SRAM Prices."

          The impact of these and other factors on the Company's revenues and
          operating results in any future period cannot be forecasted with
          certainty. The Company's expense levels are based, in part, on its
          expectations as to future revenues. Because the Company's sales are
          generally made pursuant to purchase orders that are subject to
          cancellation, modification, quantity reduction or rescheduling on
          short notice and without significant penalties, the Company's backlog
          as of any particular date may not be indicative of sales for any
          future period, and such changes could cause the Company's net sales to
          fall below expected levels. If revenue levels are below expectations,
          operating results are likely to be materially adversely effected. Net
          income, if any, and gross margins may be disproportionately affected
          by a reduction in net sales because a proportionately smaller amount
          of the Company's expenses varies with its revenues.

          All forward-looking statements included in this document are made as
          of the date hereof, based on the information available to the Company
          as of the date hereof, and the Company assumes no obligation to update
          any forward-looking statement.

Overview

          On September 23, 1998, IXYS merged with Paradigm in a transaction
accounted for as a reverse merger. In the merger, the historic accounting
records of IXYS became those of the combined company, and, accordingly, Paradigm
formally changed its name to "IXYS Corporation."

          The Company 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. The Company's power semiconductors convert electricity
at relatively high 

                                       10
<PAGE>
 
voltage and current levels to create efficient power as required by a specific
application. The Company's 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 the Company considers
to be those capable of processing greater than 500 watts of power. The Company
offers a broad line of power semiconductors, including power MOSFETs, insulated
gate bipolar transistors ("IGBTs"), thyristors, silicon controlled rectifiers
("SCRs") and rectifiers, including fast recovery epitaxial diodes ("FREDs"). In
addition, the Company also designs and markets high speed, high density static
random access memory ("SRAM") semiconductor devices to meet the needs of
advanced telecommunications devices, networks, workstations, high performance
PCs, advanced modems and complex military/aerospace applications.

Results of Operations

          Net Sales.  Net sales for the three months ended December 31, 1998
were $16.9 million, an increase of 18.7% from the $14.2 million reported in the
three months ended December 31, 1997. For the first nine months of fiscal 1999,
net sales of $49.6 million were $8.2 million, or 20% higher than the same period
in fiscal 1998. Unit sales volume for the three months ended December 31, 1998
and for the year to date period increased over the same periods in the prior
year and the effect on revenue was offset partially by declines in average
selling prices.

          Gross Profit.  Gross margin was 28.2% of net sales for the three
months ended December 31, 1998 as compared with 36.5% for the three months ended
December 31, 1997. Gross margin was 31.1% of net sales for the nine months ended
December 31, 1998 as compared to 36.3% for the nine-month period ended December
31, 1997. The decline in gross margin for the nine-month period ended December
31, 1998 as compared to the same period in 1997 was due to lower average selling
prices per unit.  For the three months ended December 31, 1998 as compared to
the same period of 1997, the decline in gross margin was, in addition, the
result of production inefficiencies caused by the Company's traditional holiday
shutdown in Europe which was longer in 1998 than the prior year.

          Research and Development.  Research and development expenses increased
$226,000 in the three months ended December 31, 1998, compared to the same
period in 1997. Research and development expenses increased $825,000 in the nine
months ended December 31, 1998, compared to the same period in 1997. Research
and development expenses increased primarily due to the acquisition of Paradigm
and the expanded efforts in research development to support the Company's
overall plan.

          Selling, General and Administrative.  Selling, general and
administrative  expenses increased $456,000 in the three months ended December
31, 1998, compared to the same period in the prior fiscal year. Selling, general
and administrative  expenses increased $765,000 in the nine months ended
December 31, 1998, compared to the same period in the prior fiscal year. The
increase in selling, general and administrative  expenses was primarily related
to increased selling costs on higher revenues and increased expenses as a
consequence of acquiring Paradigm.

          Acquisition of in-process research and development. The nine month
period ended December 31, 1998 includes a one-time charge of $5.8 million in
connection with the acquisition of Paradigm.

          Amortization of Goodwill and Intangibles.  For the three month period
ended December 31, 1998, the Company recorded a charge of $695,000 in connection
with the amortization of goodwill and intangibles arising from the acquisition
of Paradigm.

          Other Income and Expense, Net.  Net other expense increased $10,000
during the three months ended December 31, 1998, compared to the same period in
the prior fiscal year. Net other income increased $100,000 during the nine
months ended December 31, 1998, compared to the same period in the prior fiscal
year.

          Provision for Income Taxes.  For the three months ended December 31,
1998, the Company recorded an income tax provision of $128,000 on income of
$199,000 (64%), after giving effect to the charge of $695,000 for amortization
of goodwill and intangibles arising from the acquisition of Paradigm, as
compared to an effective income tax rate of 35% for the three months ended
December 31, 1997 and 44% for the nine months ended December 31, 1997.  The tax
provision for the three months ended December 31, 1998 gives effect to the non-

                                       11
<PAGE>
 
deductible tax items relating to the acquisition of Paradigm.  The income tax
provision for the nine months ended December 31, 1998 reflects the Company's
expected effective tax rate for fiscal year 1999, prior to the effect of the
write-off of the one-time non-deductible charge of $5.8 million in connection
with the reverse merger acquisition of Paradigm, of approximately 39%.

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 December 31, 1998,
the cash and cash equivalents were $10.2 million, a decrease of $412,000 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 in operations.

          Line of credit facilities available to the Company are as follows: A
line of  credit with a U.S. bank that as of December 31, 1998 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 December 31, 1998). 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
December 31, 1998, the Company had drawn $2.1 million against such line of
credit.

          The accounts receivable at December 31, 1998 were $10.7 million, an
increase of 7.0% as compared to March 31, 1998. The inventories at December 31,
1998 were $18.5 million, an increase of 7.9% as compared to March 31, 1998. Net
plant and equipment at December 31, 1998 were $12.2 million, an increase of
14.7% 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 1999. 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, "Disclosures about Segment
of an Enterprise and Related Information". This Statement establishes standards
for disclosures about operating segments in annual financial statements and
selected information in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas and major
customers. This Statement supersedes Statement of Financial Accounting Standards
No. 14, "Financial Reporting for Segments of a Business Enterprise". The new
standard becomes effective for the Company's fiscal year 1999 and requires that
comparative information from earlier years be restated to conform to the
requirements of this standard. The Company is evaluating the requirements of
SFAS 131 and the effects, if any, on the Company's current reporting and
disclosures.

          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 December 15,
1999. The Company is evaluating the requirements of SFAS 133 and the effects, if
any, on the Company's current reporting and disclosures.

                                       12
<PAGE>
 
          Effective in the first quarter of 1998, the Company has adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" . Comprehensive income generally represents all changes in stockholders'
equity except those resulting from investments or contributions by stockholders.
The Company has reclassified earlier financial statements for comparative
purposes. The only component of comprehensive income for the three months and
nine months ended December 31, 1998 and 1997 was the change in the cumulative
translation adjustment.

Year 2000 Compliance

          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 and testing efforts, will be completed on or about March
31, 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. The
Company anticipates completion of this effort by June 1999; however, there can
be no assurance that any such effort will be successful.

          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.  However, the Company intends to create such a
contingency plan by July 1999 based on the outcome of its communications with
its suppliers.

                                       13
<PAGE>
 
                          PART II.  OTHER INFORMATION


Item 1.  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.

          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. Plaintiffs sought by their motion to certify a nationwide
class of those who purchased the Company's stock during the Class Period. After
several hearings and continuances, on February 9, 1998 the Court certified a
class consisting only of California purchasers of the Company's stock during the
Class Period.  Plantiffs have expressed their intent to move to amend the class
certification order.

          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.

          Defendant McDonald's motion for summary judgment on plaintiffs' claims
is set for hearing on March 16, 1999.  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 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 is
entitled Chai, et al. v. Paradigm Technology Inc. et al. (Case No. CV764259),
and is 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.

                                       14
<PAGE>
 
          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.

          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.

          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.
          .
Item 2.   Changes in Securities and Use of Proceeds

               None.

Item 3.   Defaults Upon Senior Securities.

               None.

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

               None.

                                       15
<PAGE>
 
Item 5.  Other Information

          The Board of Directors of the Company approved the Amended and
Restated Bylaws of the Company and a form of Indemnity Agreement to be entered
into by the Company and its directors. Both documents are attached as exhibits
to this Form 10-Q. Also attached to this Form 10-Q is the Company's 1994 Stock
Option Plan, amended to reflect the reverse stock split approved at the Annual
Meeting of Stockholders (the "Annual Meeting") held on August 4, 1998 and
adjourned to August 26, 1998, September 3, 1998 and September 10, 1998. Such
Annual Meeting is more fully described in the Company's Form 10-Q filed with the
Securities and Exchange Commission on November 16, 1998.

Item 6.  Exhibits and Reports on Form 8-K

(a)       Exhibits.

          3.1       Amended and Restated Bylaws of the Company.

          10.1      Form of Indemnity Agreement between the Company and its
                    directors.

          10.2      The Company 1994 Stock Option Plan, as amended.

          11        Computation of Per Share Earnings as set forth in Note 8 of
                    the Notes to Condensed Consolidated Financial Statements in
                    Part I of the Form 10-Q.

          27        Financial Data Schedule.

(b)  The Company did not file a Current Report on Form 8-K during this fiscal
     period.

                                       16
<PAGE>
 
                                   SIGNATURES


Pursuant to the requirements 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.

                              IXYS CORPORATION
 
                              By: /s/ ARNOLD AGBAYANI
                                  --------------------------
                                  Arnold Agbayani, Vice President,
                                  Finance and Administration
                                  (Principal Financial Officer)

Date:  February 12, 1999

                                       17
<PAGE>
 
                                 Exhibit Index
                                 -------------

3.1       Amended and Restated Bylaws of the Company.

10.1      Form of Indemnity Agreement between the Company and its directors.

10.2      The Company 1994 Stock Option Plan, as amended.

11        Computation of Per Share Earnings as set forth in Note 8 of the Notes
          to Condensed Consolidated Financial Statements in Part I of the Form
          10-Q.

27        Financial Data Schedule.

                                       18

<PAGE>
 
                                                                     Exhibit 3.1



                            AMENDED AND RESTATED
                                   BYLAWS
                                     OF
                              IXYS CORPORATION
                          (A DELAWARE CORPORATION)
<PAGE>
 
                            AMENDED AND RESTATED

                                   BYLAWS

                                     OF

                              IXYS CORPORATION

                          (A DELAWARE CORPORATION)


                                   Offices

Section 1.      Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Dover, County of Kent. (Del.
Code Ann., tit. 8, (S) 131

Section 2.      Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the
Board of Directors, and may also have offices at such other places, both
within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require. (Del.
Code Ann., tit. 8, (S) 122(8))


                               Corporate Seal

Section 3.      Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise. (Del. Code Ann., tit. 8, (S)
122(3))


                           Stockholders' Meetings

Section 4.      Place Of Meetings.  Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors,
or, if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof. (Del. Code Ann., tit. 8, (S) 211(a))

Section 5.      Annual Meetings.

          (a)   The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may
lawfully come before it, shall be held on such date and at such time as may be
designated from time to time by the Board of Directors.

                                       1.
<PAGE>
 
Nominations of persons for election to the Board of Directors of the
corporation and the proposal of business to be considered by the stockholders
may be made at an annual meeting of stockholders: (i) pursuant to the
corporation's notice of meeting of stockholders; (ii) by or at the direction
of the Board of Directors; or (iii) by any stockholder of the corporation who
was a stockholder of record at the time of giving of notice provided for in
the following paragraph, who is entitled to vote at the meeting and who
complied with the notice procedures set forth in Section 5. (Del. Code Ann.,
tit. 8, (S) 211(b)).

          (b)   At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting
by a stockholder pursuant to clause (c) of Section 5(a) of these Amended and
Restated Bylaws (these "Bylaws"), (i) the stockholder must have given timely
notice thereof in writing to the Secretary of the corporation, (ii) such other
business must be a proper matter for stockholder action under the General
Corporation Law of Delaware, (iii) if the stockholder, or the beneficial owner
on whose behalf any such proposal or nomination is made, has provided the
corporation with a Solicitation Notice (as defined in this Section 5(b)), such
stockholder or beneficial owner must, in the case of a proposal, have
delivered a proxy statement and form of proxy to holders of at least the
percentage of the corporation's voting shares required under applicable law to
carry any such proposal, or, in the case of a nomination or nominations, have
delivered a proxy statement and form of proxy to holders of a percentage of
the corporation's voting shares reasonably believed by such stockholder or
beneficial owner to be sufficient to elect the nominee or nominees proposed to
be nominated by such stockholder, and must, in either case, have included in
such materials the Solicitation Notice, and (iv) if no Solicitation Notice
relating thereto has been timely provided pursuant to this section, the
stockholder or beneficial owner proposing such business or nomination must not
have solicited a number of proxies sufficient to have required the delivery of
such a Solicitation Notice under this Section 5. To be timely, a stockholder's
notice shall be delivered to the Secretary at the principal executive offices
of the Corporation not later than the close of business on the ninetieth
(90/th/) day nor earlier than the close of business on the one hundred
twentieth (120/th/) day prior to the first anniversary of the preceding year's
annual meeting; provided, however, that in the event that the date of the
annual meeting is advanced more than thirty (30) days prior to or delayed by
more than thirty (30) days after the anniversary of the preceding year's
annual meeting, notice by the stockholder to be timely must be so delivered
not earlier than the close of business on the one hundred twentieth (120/th/)
day prior to such annual meeting and not later than the close of business on
the later of the ninetieth (90/th/) day prior to such annual meeting or the
tenth (10/th/) day following the day on which public announcement of the date
of such meeting is first made. In no event shall the public announcement of an
adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "1934 Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (B) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business 

                                       2.
<PAGE>
 
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (C) as to the stockholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (i) the name
and address of such stockholder, as they appear on the corporation's books,
and of such beneficial owner, (ii) the class and number of shares of the
corporation which are owned beneficially and of record by such stockholder and
such beneficial owner, and (iii) whether either such stockholder or beneficial
owner intends to deliver a proxy statement and form of proxy to holders of, in
the case of the proposal, at least the percentage of the corporation's voting
shares required under applicable law to carry the proposal or, in the case of
a nomination or nominations, a sufficient number of holders of the
corporation's voting shares to elect such nominee or nominees (an affirmative
statement of such intent, a "Solicitation Notice").

          (c)   Notwithstanding anything in the second sentence of Section
5(b) of these Bylaws to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the Corporation is
increased and there is no public announcement naming all of the nominees for
director or specifying the size of the increased Board of Directors made by
the corporation at least one hundred (100) days prior to the first anniversary
of the preceding year's annual meeting, a stockholder's notice required by
this Section 5 shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if it shall be
delivered to the Secretary at the principal executive offices of the
corporation not later than the close of business on the tenth (10/th/) day
following the day on which such public announcement is first made by the
corporation.

          (d)   Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as
shall have been brought before the meeting in accordance with the procedures
set forth in this Section 5. Except as otherwise provided by law, the Chairman
of the meeting shall have the power and duty to determine whether a nomination
or any business proposed to be brought before the meeting was made, or
proposed, as the case may be, in accordance with the procedures set forth in
these Bylaws and, if any proposed nomination or business is not in compliance
with these Bylaws, to declare that such defective proposal or nomination shall
not be presented for stockholder action at the meeting and shall be
disregarded.

          (e)   Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the
proxy statement and form of proxy for a stockholder's meeting, stockholders
must provide notice as required by the regulations promulgated under the 1934
Act. Nothing in these Bylaws shall be deemed to affect any rights of
stockholders to request inclusion of proposals in the corporation proxy
statement pursuant to Rule 14a-8 under the 1934 Act.

          (f)   For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant
to Section 13, 14 or 15(d) of the 1934 Act.

                                       3.
<PAGE>
 
Section 6.      Special Meetings.

          (a)   Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of
authorized directors (whether or not there exist any vacancies in previously
authorized directorships at the time any such resolution is presented to the
Board of Directors for adoption), and shall be held at such place, on such
date, and at such time as the Board of Directors, shall fix.

          (b)   If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may
be transacted at such special meeting otherwise than specified in such notice.
The Board of Directors shall determine the time and place of such special
meeting, which shall be held not less than thirty-five (35) nor more than one
hundred twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote,
in accordance with the provisions of Section 7 of these Bylaws. If the notice
is not given within one hundred (100) days after the receipt of the request,
the person or persons properly requesting the meeting may set the time and
place of the meeting and give the notice. Nothing contained in this paragraph
(b) shall be construed as limiting, fixing, or affecting the time when a
meeting of stockholders called by action of the Board of Directors may be
held.

          (c)   Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice
provided for in these Bylaws who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this Section 6(c). In the
event the corporation calls a special meeting of stockholders for the purpose
of electing one or more directors to the Board of Directors, any such
stockholder may nominate a person or persons (as the case may be), for
election to such position(s) as specified in the corporation's notice of
meeting, if the stockholder's notice required by Section 5(b) of these Bylaws
shall be delivered to the Secretary at the principal executive offices of the
corporation not earlier than the close of business on the one hundred
twentieth (120/th/) day prior to such special meeting and not later than the
close of business on the later of the ninetieth (90/th/) day prior to such
meeting or the tenth (10/th/) day following the day on which public
announcement is first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In
no event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as
described above.

Section 7.      Notice Of Meetings.  Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and

                                       4.
<PAGE>
 
purpose or purposes of the meeting. Notice of the time, place and purpose of
any meeting of stockholders may be waived in writing, signed by the person
entitled to notice thereof, either before or after such meeting, and will be
waived by any stockholder by his attendance thereat in person or by proxy,
except when the stockholder attends a meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Any stockholder so
waiving notice of such meeting shall be bound by the proceedings of any such
meeting in all respects as if due notice thereof had been given. (Del. Code
Ann., tit. 8, (S)(S) 222, 229)

Section 8.      Quorum.  At all meetings of stockholders, except where otherwise
provided by statute or by the Certificate of Incorporation, or by these Bylaws,
the presence, in person or by proxy duly authorized, of the holders of a
majority of the outstanding shares of stock entitled to vote shall constitute a
quorum for the transaction of business.  In the absence of a quorum, any meeting
of stockholders may be adjourned, from time to time, either by the chairman of
the meeting or by vote of the holders of a majority of the shares represented
thereat, but no other business shall be transacted at such meeting.  The
stockholders present at a duly called or convened meeting, at which a quorum is
present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum.  Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors.  Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.  (Del. Code Ann., tit. 8, (S) 216)

Section 9.      Adjournment And Notice Of Adjourned Meetings.  Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes.  When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken.  At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting.  If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.  (Del. Code Ann., tit. 8,
(S) 222(c))

Section 10.      Voting Rights.  For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the
stock records of the corporation on the record date, 

                                       5.
<PAGE>
 
as provided in Section 12 of these Bylaws, shall be entitled to vote at any
meeting of stockholders. Every person entitled to vote shall have the right to
do so either in person or by an agent or agents authorized by a proxy granted
in accordance with Delaware law. An agent so appointed need not be a
stockholder. No proxy shall be voted after three (3) years from its date of
creation unless the proxy provides for a longer period. (Del. Code Ann., tit.
8, (S)(S) 211(e), 212(b))

Section 11.     Joint Owners Of Stock.  If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety, or otherwise, or if two (2) or more persons have the
same fiduciary relationship respecting the same shares, unless the Secretary
is given written notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, their acts with respect to voting shall have the following
effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1)
votes, the act of the majority so voting binds all; (c) if more than one (1)
votes, but the vote is evenly split on any particular matter, each faction may
vote the securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the Delaware General Corporation
Law, Section 217(b). If the instrument filed with the Secretary shows that any
such tenancy is held in unequal interests, a majority or even-split for the
purpose of subsection (c) shall be a majority or even-split in interest. (Del.
Code Ann., tit. 8, (S) 217(b))

Section 12.     List Of Stockholders. The Secretary shall prepare and make, at
least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time
thereof and may be inspected by any stockholder who is present. (Del. Code
Ann., tit. 8, (S) 219(a))

Section 13.     Action Without Meeting.  No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.

Section 14.     Organization.

          (a)   At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the
President, or, if the President is absent, a chairman of the meeting chosen by
a majority in interest of the stockholders entitled to vote, present in person
or by proxy, shall act as chairman. The Secretary, or, in his absence, an
Assistant Secretary directed to do so by the President, shall act as secretary
of the meeting.

          (b)   The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as
it shall deem necessary,

                                       6.
<PAGE>
 
appropriate or convenient. Subject to such rules and regulations of the Board
of Directors, if any, the chairman of the meeting shall have the right and
authority to prescribe such rules, regulations and procedures and to do all
such acts as, in the judgment of such chairman, are necessary, appropriate or
convenient for the proper conduct of the meeting, including, without
limitation, establishing an agenda or order of business for the meeting, rules
and procedures for maintaining order at the meeting and the safety of those
present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies
and such other persons as the chairman shall permit, restrictions on entry to
the meeting after the time fixed for the commencement thereof, limitations on
the time allotted to questions or comments by participants and regulation of
the opening and closing of the polls for balloting on matters which are to be
voted on by ballot. Unless and to the extent determined by the Board of
Directors or the chairman of the meeting, meetings of stockholders shall not
be required to be held in accordance with rules of parliamentary procedure.


                                   Directors

Section 15.     Number And Term Of Office.  The authorized number of directors
of the corporation shall be fixed by resolution of the Board of Directors. Any
such resolution shall be superseded by any successive resolution of the Board
of Directors fixing the authorized number of directors. Directors need not be
stockholders unless so required by the Certificate of Incorporation. If for
any cause, the directors shall not have been elected at an annual meeting,
they may be elected as soon thereafter as convenient at a special meeting of
the stockholders called for that purpose in the manner provided in these
Bylaws. (Del. Code Ann., tit. 8, (S)(S) 141(b), 211(b), (c))

Section 16.     Powers.  The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
(Del. Code Ann., tit. 8, (S) 141(a))

Section 17.     Board of Directors.  Subject to the rights of the holders of any
series of Preferred Stock to elect additional directors under specified
circumstances, directors shall be elected at each annual meeting of stockholders
for a term of one year.  Each director shall serve until his successor is duly
elected and qualified or until his death, resignation or removal.  No decrease
in the number of directors constituting the Board of Directors shall shorten the
term of any incumbent director.

Section 18.     Vacancies.

          (a)   Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the
affirmative vote of a majority of the directors then in office, even though
less than a quorum of the Board of Directors. Any director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the director for which the vacancy was created or occurred
and 

                                       7.
<PAGE>
 
until such director's successor shall have been elected and qualified. A
vacancy in the Board of Directors shall be deemed to exist under this Bylaw in
the case of the death, removal or resignation of any director. (Del. Code
Ann., tit. 8, (S) 223(a), (b))

          (b)   If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for such
directors, summarily order an election to be held to fill any such vacancies
or newly created directorships, or to replace the directors chosen by the
directors then in offices as aforesaid, which election shall be governed by
Section 211 of the Delaware General Corporation Law. (Del. Code Ann., tit. 8,
(S) 223(c)).

Section 19.     Resignation.  Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to
specify whether it will be effective at a particular time, upon receipt by the
Secretary or at the pleasure of the Board of Directors. If no such
specification is made, it shall be deemed effective at the pleasure of the
Board of Directors. When one or more directors shall resign from the Board of
Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each Director so chosen shall hold
office for the unexpired portion of the term of the Director whose place shall
be vacated and until his successor shall have been duly elected and qualified.
(Del. Code Ann., tit. 8, (S)(S) 141(b), 223(d))

Section 20.     Removal.  The Board of Directors or any individual director
may be removed from office at any time (a) with cause by the affirmative vote
of the holders of a majority of the voting power of all the then-outstanding
shares of voting stock of the corporation, entitled to vote at an election of
directors or (b) without cause by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of all
the then-outstanding shares of the voting stock of the corporation entitled to
vote at an election of directors.

Section 21.     Meetings.

          (a)   Annual Meetings.  The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders
and at the place where such meeting is held. No notice of an annual meeting of
the Board of Directors shall be necessary and such meeting shall be held for
the purpose of electing officers and transacting such other business as may
lawfully come before it.

          (b)   Regular Meetings. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may
be held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of Directors and publicized
among all directors. No formal notice shall be required for regular meetings
of the Board of Directors. (Del. Code Ann., tit. 8, (S) 141(g))

                                       8.
<PAGE>
 
          (c)   Special Meetings.  Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may
be held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(Del. Code Ann., tit. 8, (S) 141(g))

          (d)   Telephone Meetings.  Any member of the Board of Directors, or
of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a
meeting by such means shall constitute presence in person at such meeting.
(Del. Code Ann., tit. 8, (S) 141(I))

          (e)   Notice of Meetings.  Notice of the time and place of all special
meetings of the Board of Directors shall be orally or in writing, by telephone,
including a voice messaging system or other system or technology designed to
record and communicate messages, facsimile, telegraph or telex, or by electronic
mail or other electronic means, during normal business hours, at least twenty-
four (24) hours before the date and time of the meeting, or sent in writing to
each director by first class mail, charges prepaid, at least three (3) days
before the date of the meeting.  Notice of any meeting may be waived in writing
at any time before or after the meeting and will be waived by any director by
attendance thereat, except when the director attends the meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened.  (Del. Code
Ann., tit. 8, (S) 229)

          (f)   Waiver of Notice.  The transaction of all business at any
meeting of the Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either
before or after the meeting, each of the directors not present shall sign a
written waiver of notice. All such waivers shall be filed with the corporate
records or made a part of the minutes of the meeting. (Del. Code Ann., tit. 8,
(S) 229)

Section 22.     Quorum And Voting.

          (a)   Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number
of directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority
of the exact number of directors fixed from time to time by the Board of
Directors in accordance with the Certificate of Incorporation; provided,
however, at any meeting whether a quorum be present or otherwise, a majority
of the directors present may adjourn from time to time until the time fixed
for the next regular meeting of the Board of Directors, without notice other
than by announcement at the meeting. (Del. Code Ann., tit. 8, (S) 141(b))

          (b)   At each meeting of the Board of Directors at which a quorum is
present, all questions and business shall be determined by the affirmative
vote of a majority of the directors present, unless a different vote be
required by law, the Certificate of Incorporation or these Bylaws. (Del. Code
Ann., tit. 8, (S) 141(b))

                                       9.
<PAGE>
 
Section 23.     Action Without Meeting.  Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.  (Del. Code Ann., tit. 8, (S) 141(f))

Section 24.     Fees And Compensation.  Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors.  Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.  (Del. Code
Ann., tit. 8, (S) 141(h))

Section 25.     Committees.

          (a)   Executive Committee.  The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and
provided in the resolution of the Board of Directors shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize
the seal of the corporation to be affixed to all papers which may require it;
but no such committee shall have the power or authority in reference to (i)
approving or adopting, or recommending to the stockholders, any action or
matter expressly required by the Delaware General Corporation Law to be
submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation. (Del. Code Ann., tit. 8, (S) 141(c))

          (b)   Other Committees.  The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or
more members of the Board of Directors and shall have such powers and perform
such duties as may be prescribed by the resolution or resolutions creating
such committees, but in no event shall any such committee have the powers
denied to the Executive Committee in these Bylaws. (Del. Code Ann., tit. 8,
(S) 141(c))

          (c)   Term.  Each member of a committee of the Board of Directors 
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate members of
any committee, who may replace any absent or disqualified member at any meeting
of the committee, and, in addition, in the absence or disqualification of any
member of a

                                      10.
<PAGE>
 
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. (Del. Code
Ann., tit. 8, (S)141(c))

          (d)   Meetings.  Unless the Board of Directors shall otherwise 
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee. (Del. Code Ann., tit. 8,
(S)(S) 141(c), 229)

Section 26.     Organization.  At every meeting of the directors, the Chairman
of the Board of Directors, or, if a Chairman has not been appointed or is
absent, the President (if a director), or if the President is absent, the most
senior Vice President (if a director), or, in the absence of any such person,
a chairman of the meeting chosen by a majority of the directors present, shall
preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.


                                  Officers

Section 27.     Officers Designated.  The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more
Vice Presidents, the Secretary, the Chief Financial Officer, the Treasurer and
the Controller, all of whom shall be elected at the annual organizational
meeting of the Board of Directors. The Board of Directors may also appoint one
or more Assistant Secretaries, Assistant Treasurers, Assistant Controllers and
such other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by
the Board of Directors. (Del. Code Ann., tit. 8, (S)(S) 122(5), 142(a), (b))

                                      11.
<PAGE>
 
Section 28.     Tenure And Duties Of Officers.

          (a)   General.  All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If
the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Board of Directors. (Del. Code Ann., tit. 8, (S) 141(b), (e))

          (b)   Duties of Chairman of the Board of Directors.  The Chairman of
the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of
Directors shall perform other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time. If there is no President, then
the Chairman of the Board of Directors shall also serve as the Chief Executive
Officer of the corporation and shall have the powers and duties prescribed in
paragraph (c) of this Section 28. (Del. Code Ann., tit. 8, (S) 142(a))

          (c)   Duties of President.  The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is
present. Unless some other officer has been elected Chief Executive Officer of
the corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time. (Del. Code Ann.,
tit. 8, (S) 142(a))

          (d)   Duties of Vice Presidents.  The Vice Presidents may assume and
perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time. (Del. Code Ann., tit. 8,
(S) 142(a))

          (e)   Duties of Secretary.  The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts
and proceedings thereof in the minute book of the corporation. The Secretary
shall give notice in conformity with these Bylaws of all meetings of the
stockholders and of all meetings of the Board of Directors and any committee
thereof requiring notice. The Secretary shall perform all other duties given
him in these Bylaws and other duties commonly incident to his office and shall
also perform such other duties and have such other powers, as the Board of
Directors shall designate from time to time. The President may direct any
Assistant Secretary to assume and perform the duties of the Secretary in the
absence or disability of the Secretary, and each Assistant Secretary shall
perform other duties commonly incident to his office and shall also perform
such other duties and have such other powers as the Board of Directors or the
President shall designate from time to time. (Del. Code Ann., tit. 8, (S)
142(a))

                                      12.
<PAGE>
 
          (f)   Duties of Chief Financial Officer.  The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board
of Directors or the President. The Chief Financial Officer, subject to the
order of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall perform other
duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time. The President may direct the Treasurer or
any Assistant Treasurer, or the Controller or any Assistant Controller to
assume and perform the duties of the Chief Financial Officer in the absence or
disability of the Chief Financial Officer, and each Treasurer and Assistant
Treasurer and each Controller and Assistant Controller shall perform other
duties commonly incident to his office and shall also perform such other
duties and have such other powers as the Board of Directors or the President
shall designate from time to time. (Del. Code Ann., tit. 8, (S) 142(a))

Section 29.     Delegation Of Authority.  The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.

Section 30.     Resignations.  Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer. (Del. Code Ann., tit. 8, (S) 142(b))

Section 31.     Removal.  Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.


  Execution Of Corporate Instruments And Voting Of Securities Owned By The
                                 Corporation

Section 32.     Execution Of Corporate Instruments.  The Board of Directors
may, in its discretion, determine the method and designate the signatory
officer or officers, or other person or persons, to execute on behalf of the
corporation any corporate instrument or document, or to sign on behalf of the
corporation the corporate name without limitation, or to enter into contracts
on behalf of the corporation, except where otherwise provided by law or these
Bylaws, and such execution or signature shall be binding upon the corporation.
(Del. Code Ann., tit. 8, (S)(S) 103(a), 142(a), 158)

                                      13.
<PAGE>
 
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.

Unless authorized or ratified by the Board of Directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.  (Del. Code
Ann., tit. 8, (S)(S) 103(a), 142(a), 158).

Section 33.     Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such
authorization, by the Chairman of the Board of Directors, the Chief Executive
Officer, the President, or any Vice President. (Del. Code Ann., tit. 8, (S)
123)


                               Shares Of Stock

Section 34.     Form And Execution Of Certificates.  Certificates for the
shares of stock of the corporation shall be in such form as is consistent with
the Certificate of Incorporation and applicable law. Every holder of stock in
the corporation shall be entitled to have a certificate signed by or in the
name of the corporation by the Chairman of the Board of Directors, or the
President or any Vice President and by the Treasurer or Assistant Treasurer or
the Secretary or Assistant Secretary, certifying the number of shares owned by
him in the corporation. Any or all of the signatures on the certificate may be
facsimiles. In case any officer, transfer agent, or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such
certificate is issued, it may be issued with the same effect as if he were
such officer, transfer agent, or registrar at the date of issue. Each
certificate shall state upon the face or back thereof, in full or in summary,
all of the powers, designations, preferences, and rights, and the limitations
or restrictions of the shares authorized to be issued or shall, except as
otherwise required by law, set forth on the face or back a statement that the
corporation will furnish without charge to each stockholder who so requests
the powers, designations, preferences and relative, participating, optional,
or other special rights of each class of stock or series thereof and the
qualifications, limitations or restrictions of such preferences and/or rights.
Within a reasonable time after the issuance or transfer of uncertificated
stock, the corporation shall send to the registered owner thereof a written
notice containing the information required to be set forth or stated on
certificates pursuant to this section or otherwise required by law or with
respect to this section a statement that the corporation will furnish without
charge to each stockholder who so requests the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Except as otherwise expressly
provided by law, the rights and obligations of the holders of certificates
representing stock of the same class and series shall be identical. (Del. Code
Ann., tit. 8, (S) 158)

                                      14.
<PAGE>
 
Section 35.     Lost Certificates.  A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock
to be lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it
shall require or to give the corporation a surety bond in such form and amount
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost, stolen,
or destroyed. (Del. Code Ann., tit. 8, (S) 167)

Section 36.     Transfers.

          (a)   Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares. (Del. Code Ann., tit.
8, (S) 201, tit. 6, (S) 8- 401(1))

          (b)   The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the Delaware General Corporation Law.  (Del. Code Ann., tit. 8,
(S) 160 (a))

Section 37.     Fixing Record Dates.

          (a) In order that the corporation may determine the stockholders 
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the Board of Directors, and which record
date shall, subject to applicable law, not be more than sixty (60) nor less
than ten (10) days before the date of such meeting. If no record date is fixed
by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of Directors
may fix a new record date for the adjourned meeting.

          (b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect
of any change, conversion or exchange of stock, or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted, and which record date shall be not more
than sixty (60) days prior to such action. If no record date is fixed, the
record date for determining stockholders for any such 

                                      15.
<PAGE>
 
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto. (Del. Code Ann., tit. 8, (S)
213)

Section 38.     Registered Stockholders.  The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
(Del. Code Ann., tit. 8, (S)(S) 213(a), 219)


                      Other Securities Of The Corporation

Section 39.     Execution Of Other Securities.  All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 34), may be signed by the Chairman of the Board of Directors, the
President or any Vice President, or such other person as may be authorized by
the Board of Directors, and the corporate seal impressed thereon or a facsimile
of such seal imprinted thereon and attested by the signature of the Secretary or
an Assistant Secretary, or the Chief Financial Officer or Treasurer or an
Assistant Treasurer; provided, however, that where any such bond, debenture or
other corporate security shall be authenticated by the manual signature, or
where permissible facsimile signature, of a trustee under an indenture pursuant
to which such bond, debenture or other corporate security shall be issued, the
signatures of the persons signing and attesting the corporate seal on such bond,
debenture or other corporate security may be the imprinted facsimile of the
signatures of such persons.  Interest coupons appertaining to any such bond,
debenture or other corporate security, authenticated by a trustee as aforesaid,
shall be signed by the Treasurer or an Assistant Treasurer of the corporation or
such other person as may be authorized by the Board of Directors, or bear
imprinted thereon the facsimile signature of such person.  In case any officer
who shall have signed or attested any bond, debenture or other corporate
security, or whose facsimile signature shall appear thereon or on any such
interest coupon, shall have ceased to be such officer before the bond, debenture
or other corporate security so signed or attested shall have been delivered,
such bond, debenture or other corporate security nevertheless may be adopted by
the corporation and issued and delivered as though the person who signed the
same or whose facsimile signature shall have been used thereon had not ceased to
be such officer of the corporation.


                                   Dividends

Section 40.     Declaration Of Dividends.  Dividends upon the capital stock of 
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law. (Del. Code Ann., tit. 8,
(S)(S) 170, 173)

                                      16.
<PAGE>
 
Section 41.     Dividend Reserve.  Before payment of any dividend, there may be 
set aside out of any funds of the corporation available for dividends such sum
or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or
for equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
(Del. Code Ann., tit. 8, (S) 171)
 
                                  Fiscal Year

Section 42.     Fiscal Year.  The fiscal year of the corporation shall be fixed 
by resolution of the Board of Directors.

                                Indemnification

Section 43.     Indemnification Of Directors, Executive Officers, Other 
Officers, Employees And Other Agents.

          (a) Directors.  The corporation shall indemnify its directors to the
fullest extent not prohibited by the Delaware General Corporation Law or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors; and,
provided, further, that the corporation shall not be required to indemnify any
director in connection with any proceeding (or part thereof) initiated by such
person unless (i) such indemnification is expressly required to be made by law,
(ii) the proceeding was authorized by the Board of Directors of the corporation,
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the Delaware
General Corporation Law or any other applicable law or (iv) such indemnification
is required to be made under subsection (d).

          (b) Officers, Employees and Other Agents.  The corporation shall have
power to indemnify its officers, employees and other agents as set forth in the
Delaware General Corporation Law or any other applicable law. The Board of
Directors shall have the power to delegate the determination of whether
indemnification shall be given to any such person to such officers or other
persons as the Board of Directors shall determine.

          (c) Expenses.  The corporation shall advance to any person who was 
or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or was a
director of the corporation, or is or was serving at the request of the
corporation as a director of another corporation, partnership, joint venture,
trust or other enterprise, prior to the final disposition of the proceeding,
promptly following request therefor, all expenses incurred by 

                                      17.
<PAGE>
 
any director in connection with such proceeding upon receipt of an undertaking
by or on behalf of such person to repay said amounts if it should be
determined ultimately that such person is not entitled to be indemnified under
this Bylaw or otherwise.

          Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, no advance shall be made by the corporation to an
officer of the corporation (except by reason of the fact that such officer is or
was a director of the corporation in which event this paragraph shall not apply)
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative, if a determination is reasonably and promptly made (i) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to the proceeding, or (ii) if such quorum is not obtainable,
or, even if obtainable, a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, that the facts known to the
decision-making party at the time such determination is made demonstrate clearly
and convincingly that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation.

          (d) Enforcement.  Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors under this
Bylaw shall be deemed to be contractual rights and be effective to the same
extent and as if provided for in a contract between the corporation and the
director.  Any right to indemnification or advances granted by this Bylaw to a
director shall be enforceable by or on behalf of the person holding such right
in any court of competent jurisdiction if (i) the claim for indemnification or
advances is denied, in whole or in part, or (ii) no disposition of such claim is
made within ninety (90) days of request therefor.  The claimant in such
enforcement action, if successful in whole or in part, shall be entitled to be
paid also the expense of prosecuting his claim.  In connection with any claim
for indemnification, the corporation shall be entitled to raise as a defense to
any such action that the claimant has not met the standards of conduct that make
it permissible under the Delaware General Corporation Law or any other
applicable law for the corporation to indemnify the claimant for the amount
claimed.  Neither the failure of the corporation (including its Board of
Directors, independent legal counsel or its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant is proper in the circumstances because he has met the applicable
standard of conduct set forth in the Delaware General Corporation Law or any
other applicable law, nor an actual determination by the corporation (including
its Board of Directors, independent legal counsel or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the action or create a presumption that claimant has not met the applicable
standard of conduct.  In any suit brought by a director to enforce a right to
indemnification or to an advancement of expenses hereunder, the burden of
proving that the director is not entitled to be indemnified, or to such
advancement of expenses, under this Article XI or otherwise shall be on the
corporation.

          (e) Non-Exclusivity of Rights. The rights conferred on any person by
this Bylaw shall not be exclusive of any other right which such person may
have or hereafter acquire under any applicable statute, provision of the
Certificate of Incorporation, Bylaws, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official
capacity and as to action in another capacity while holding office. The
corporation is specifically authorized to enter into individual contracts with
any or all of its directors, officers, employees or 

                                      18.
<PAGE>
 
agents respecting indemnification and advances, to the fullest extent not
prohibited by the Delaware General Corporation Law, or by any other applicable
law.

          (f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.

          (g) Insurance. To the fullest extent permitted by the Delaware
General Corporation Law or any other applicable law, the corporation, upon
approval by the Board of Directors, may purchase insurance on behalf of any
person required or permitted to be indemnified pursuant to this Bylaw.

          (h) Amendments. Any repeal or modification of this Bylaw shall only
be prospective and shall not affect the rights under this Bylaw in effect at
the time of the alleged occurrence of any action or omission to act that is
the cause of any proceeding against any agent of the corporation.

          (i) Saving Clause.  If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and to the full extent
not prohibited by any applicable portion of this Bylaw that shall not have been
invalidated, or by any other applicable law. If this Section 43 shall be invalid
due to the application of the indemnification provisions of another
jurisdiction, then the corporation shall indemnify each director and to the full
to the full extent under any other applicable law.

          (j) Certain Definitions. For the purposes of this Bylaw, the
following definitions shall apply:

              (1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony
in, any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative.

              (2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees,
fines, amounts paid in settlement or judgment and any other costs and expenses
of any nature or kind incurred in connection with any proceeding.

              (3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was
a director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the
provisions of this Bylaw with respect to the resulting or surviving

                                      19.
<PAGE>
 
corporation as he would have with respect to such constituent corporation if
its separate existence had continued.

                (4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.

                (5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed
on a person with respect to an employee benefit plan; and references to
"serving at the request of the corporation" shall include any service as a
director, officer, employee or agent of the corporation which imposes duties
on, or involves services by, such director, officer, employee, or agent with
respect to an employee benefit plan, its participants, or beneficiaries; and a
person who acted in good faith and in a manner he reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit plan
shall be deemed to have acted in a manner "not opposed to the best interests
of the corporation" as referred to in this Bylaw.


                                    Notices
Section 44.   Notices.

          (a) Notice To Stockholders.  Whenever, under any provisions of these
Bylaws, notice is required to be given to any stockholder, it shall be given in
writing, timely and duly deposited in the United States mail, postage prepaid,
and addressed to his last known post office address as shown by the stock record
of the corporation or its transfer agent.  (Del. Code Ann., tit. 8, (S) 222)

          (b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.

          (c) Affidavit Of Mailing.  An affidavit of mailing, executed by a duly
authorized and competent employee of the corporation or its transfer agent
appointed with respect to the class of stock affected, specifying the name and
address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.  (Del. Code Ann., tit. 8, (S)
222)

          (d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of 

                                      20.
<PAGE>
 
mailing, and all notices given by facsimile, telex or telegram shall be deemed
to have been given as of the sending time recorded at time of transmission.

          (e) Methods of Notice. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be employed in respect of any one or more, and any
other permissible method or methods may be employed in respect of any other or
others.

          (f) Failure To Receive Notice. The period or limitation of time
within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice
sent him in the manner above provided, shall not be affected or extended in
any manner by the failure of such stockholder or such director to receive such
notice.

          (g) Notice To Person With Whom Communication Is Unlawful. Whenever
notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such
person. Any action or meeting which shall be taken or held without notice to
any such person with whom communication is unlawful shall have the same force
and effect as if such notice had been duly given. In the event that the action
taken by the corporation is such as to require the filing of a certificate
under any provision of the Delaware General Corporation Law, the certificate
shall state, if such is the fact and if notice is required, that notice was
given to all persons entitled to receive notice except such persons with whom
communication is unlawful.

          (h) Notice To Person With Undeliverable Address.  Whenever notice is
required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required.  Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given.  If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated.  In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the Delaware General Corporation Law, the certificate need not
state that notice was not given to persons to whom notice was not required to be
given pursuant to this paragraph.  (Del. Code Ann, tit. 8, (S) 230)

                                      21.
<PAGE>
 
                                   Amendments
                                        
          Section 45.  Amendments.  Subject to paragraph (h) of Section 43 of
the Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote.  The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.


                               Loans To Officers

Section 45.     Loans To Officers.  The corporation may lend money to, or 
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute. (Del. Code Ann., tit. 8, (S)143)

                                      22.
<PAGE>
 
<TABLE>
<CAPTION>
                                               TABLE OF CONTENTS

                                                                                                                 PAGE
<S>                                                                                                              <C>
ARTICLE I  Offices
     Section 1  Registered Office..............................................................................   1
     Section 2  Other Offices..................................................................................   1

ARTICLE II  Corporate Seal.....................................................................................   1
     Section 3  Corporate Seal.................................................................................   1

ARTICLE III  Stockholders' Meetings............................................................................   1
     Section 4  Place Of Meetings..............................................................................   1
     Section 5  Annual Meetings................................................................................   1
     Section 6  Special Meetings...............................................................................   4
     Section 7  Notice Of Meetings.............................................................................   5
     Section 8  Quorum.........................................................................................   5
     Section 9  Adjournment And Notice Of Adjourned Meetings...................................................   5
     Section 10  Voting Rights.................................................................................   6
     Section 11  Joint Owners Of Stock.........................................................................   6
     Section 12  List Of Stockholders..........................................................................   6
     Section 13  Action Without Meeting........................................................................   7
     Section 14  Organization..................................................................................   7

ARTICLE IV  Directors..........................................................................................   7
     Section 15  Number And Term Of Office.....................................................................   7
     Section 16  Powers........................................................................................   7
     Section 17  Board of Directors............................................................................   7
     Section 18  Vacancies.....................................................................................   8
     Section 19  Resignation...................................................................................   8
     Section 20  Removal.......................................................................................   8
     Section 21  Meetings......................................................................................   9
     Section 22  Quorum And Voting.............................................................................  10
     Section 23  Action Without Meeting........................................................................  10
     Section 24  Fees And Compensation.........................................................................  10
     Section 25  Committees....................................................................................  10
     Section 26  Organization..................................................................................  12

ARTICLE V  Officers............................................................................................  12
     Section 27  Officers Designated...........................................................................  12
     Section 28  Tenure And Duties Of Officers.................................................................  12
     Section 29  Delegation Of Authority.......................................................................  13
     Section 30  Resignations..................................................................................  14
     Section 31  Removal.......................................................................................  14

ARTICLE VI  Execution Of Corporate Instruments And Voting Of Securities Owned By The Corporation...............  14
</TABLE> 

                                      i.
<PAGE>
 
<TABLE>
<CAPTION>
                              TABLE OF CONTENTS

                                                                                                                 PAGE
<S>                                                                                                              <C>
     Section 32  Execution Of Corporate Instruments............................................................  14
     Section 33  Voting Of Securities Owned By The Corporation.................................................  14

ARTICLE VII  Shares Of Stock...................................................................................  15
     Section 34  Form And Execution Of Certificates............................................................  15
     Section 35  Lost Certificates.............................................................................  15
     Section 36  Transfers.....................................................................................  16
     Section 37  Fixing Record Dates...........................................................................  16
     Section 38  Registered Stockholders.......................................................................  16

ARTICLE VIII  Other Securities Of The Corporation..............................................................  17
     Section 39  Execution Of Other Securities.................................................................  17

ARTICLE IX  Dividends..........................................................................................  17
     Section 40  Declaration Of Dividends......................................................................  17
     Section 41  Dividend Reserve..............................................................................  17

ARTICLE X  Fiscal Year.........................................................................................  18
     Section 42  Fiscal Year...................................................................................  18

ARTICLE XI  Indemnification....................................................................................  18
     Section 43  Indemnification Of Directors, Executive Officers, Other Officers, Employees And Other Agents..  18

ARTICLE XII  Notices...........................................................................................  21
     Section 44  Notices.......................................................................................  21

ARTICLE XIII  Amendments.......................................................................................  23
     Section 45  Amendments....................................................................................  23

ARTICLE XIV  Loans To Officers.................................................................................  23
     Section 45  Loans To Officers.............................................................................  23
</TABLE>

                                      ii.

<PAGE>
 
                                                                    Exhibit 10.1

                              INDEMNITY AGREEMENT

     This Agreement is made and entered into this __________ day of November,
1998 by and between IXYS Corporation,  a Delaware corporation (the
"Corporation"), and _____________ ("Agent").

                                    Recitals

     Whereas, Agent performs a valuable service to the Corporation in his
capacity as a director of the Corporation;

     Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");

     Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and

     Whereas, in order to induce Agent to continue to serve as a director of the
Corporation, the Corporation has determined and agreed to enter into this
Agreement with Agent;

     Now, Therefore, in consideration of Agent's continued service as a director
after the date hereof, the parties hereto agree as follows:

                                   Agreement

        1.  Services to the Corporation.  Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as a
director of the Corporation or as a director, officer or other fiduciary of an
affiliate of the Corporation (including any employee benefit plan of the
Corporation) faithfully and to the best of his ability so long as he is duly
elected and qualified in accordance with the provisions of the Bylaws or other
applicable charter documents of the Corporation or such affiliate; provided,
however, that Agent may at any time and for any reason resign from such position
(subject to any contractual obligation that Agent may have assumed apart from
this Agreement) and that the Corporation or any affiliate shall have no
obligation under this Agreement to continue Agent in any such position.

        2.  Indemnity of Agent.  The Corporation hereby agrees to hold harmless
and indemnify Agent to the fullest extent authorized or permitted by the
provisions of the Bylaws and the Code, as the same may be amended from time to
time (but, only to the extent that such amendment permits the Corporation to
provide broader indemnification rights than the Bylaws or the Code permitted
prior to adoption of such amendment).

                                       1.
<PAGE>
 
        3.  Additional Indemnity.  In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:

            (a)  against any and all expenses (including attorneys' fees),
witness fees, damages, judgments, fines and amounts paid in settlement and any
other amounts that Agent becomes legally obligated to pay because of any claim
or claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and

            (b)  otherwise to the fullest extent as may be provided to Agent by
the Corporation under the non-exclusivity provisions of the Code and Section 41
of the Bylaws.

        4.  Limitations on Additional Indemnity.  No indemnity pursuant to
Section 3 hereof shall be paid by the Corporation:

            (a)  on account of any claim against Agent solely for an accounting
of profits made from the purchase or sale by Agent of securities of the
Corporation pursuant to the provisions of Section 16(b) of the Securities
Exchange Act of 1934 and amendments thereto or similar provisions of any
federal, state or local statutory law;

            (b)  on account of Agent's conduct that is established by a final
judgment as knowingly fraudulent or deliberately dishonest or that constituted
willful misconduct;

            (c)  on account of Agent's conduct that is established by a final
judgment as constituting a breach of Agent's duty of loyalty to the Corporation
or resulting in any personal profit or advantage to which Agent was not legally
entitled;

            (d)  for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;

            (e)  if indemnification is not lawful (and, in this respect, both
the Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or

            (f)  in connection with any proceeding (or part thereof) initiated
by Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the 

                                       2.
<PAGE>
 
proceeding was authorized by the Board of Directors of the Corporation, (iii)
such indemnification is provided by the Corporation, in its sole discretion,
pursuant to the powers vested in the Corporation under the Code, or (iv) the
proceeding is initiated pursuant to Section 9 hereof.

        5.  Continuation of Indemnity.  All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.

        6.  Partial Indemnification.  Agent shall be entitled under this
Agreement to indemnification by the Corporation for a portion of the expenses
(including attorneys' fees), witness fees, damages, judgments, fines and amounts
paid in settlement and any other amounts that Agent becomes legally obligated to
pay in connection with any action, suit or proceeding referred to in Section 3
hereof even if not entitled hereunder to indemnification for the total amount
thereof, and the Corporation shall indemnify Agent for the portion thereof to
which Agent is entitled.

        7.  Notification and Defense of Claim.  Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:

            (a)  the Corporation will be entitled to participate therein at its
own expense;

            (b)  except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded, and so notified the Corporation, that
there is an actual conflict of interest between the Corporation and Agent in the
conduct of the defense of such action or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such 

                                       3.
<PAGE>
 
action, in each of which cases the fees and expenses of Agent's separate counsel
shall be at the expense of the Corporation. The Corporation shall not be
entitled to assume the defense of any action, suit or proceeding brought by or
on behalf of the Corporation or as to which Agent shall have made the conclusion
provided for in clause (ii) above; and

            (c)  the Corporation shall not be liable to indemnify Agent under
this Agreement for any amounts paid in settlement of any action or claim
effected without its written consent, which shall not be unreasonably withheld.
The Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.

        8.  Expenses.  The Corporation shall advance, prior to the final
disposition of any proceeding, promptly following request therefor, all expenses
incurred by Agent in connection with such proceeding upon receipt of an
undertaking by or on behalf of Agent to repay said amounts if it shall be
determined ultimately that Agent is not entitled to be indemnified under the
provisions of this Agreement, the Bylaws, the Code or otherwise.

        9.  Enforcement.  Any right to indemnification or advances granted by
this Agreement to Agent shall be enforceable by or on behalf of Agent in any
court of competent jurisdiction if (i) the claim for indemnification or advances
is denied, in whole or in part, or (ii) no disposition of such claim is made
within ninety (90) days of request therefor. Agent, in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. It shall be a defense to any action for which a claim
for indemnification is made under Section 3 hereof (other than an action brought
to enforce a claim for expenses pursuant to Section 8 hereof, provided that the
required undertaking has been tendered to the Corporation) that Agent is not
entitled to indemnification because of the limitations set forth in Section 4
hereof. Neither the failure of the Corporation (including its Board of Directors
or its stockholders) to have made a determination prior to the commencement of
such enforcement action that indemnification of Agent is proper in the
circumstances, nor an actual determination by the Corporation (including its
Board of Directors or its stockholders) that such indemnification is improper
shall be a defense to the action or create a presumption that Agent is not
entitled to indemnification under this Agreement or otherwise.

        10.  Subrogation.  In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.

        11.  Non-Exclusivity of Rights.  The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.

                                       4.
<PAGE>
 
        12.  Survival of Rights.

             (a)  The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.

             (b)  The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.

        13.  Separability.  Each of the provisions of this Agreement is a
separate and distinct agreement and independent of the others, so that if any
provision hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.

        14.  Governing Law.  This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.

        15.  Amendment and Termination.  No amendment, modification, termination
or cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.

        16.  Identical Counterparts.  This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original but all of which together shall constitute but one and the same
Agreement. Only one such counterpart need be produced to evidence the existence
of this Agreement.

        17.  Headings.  The headings of the sections of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.

        18.  Notices.  All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:

             (a)  If to Agent, at the address indicated on the signature page
hereof.

                                       5.
<PAGE>
 
             (b)  If to the Corporation, to:

                  IXYS Corporation
                  3540 Bassett Street
                  Santa Clara, CA  95054-2704

or to such other address as may have been furnished to Agent by the Corporation.

     In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.

                              IXYS Corporation

                              By:
                                 ---------------------------------

                              Title:
                                 ---------------------------------

                              Agent

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

                              Address:


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

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

                                       6.

<PAGE>
 
                                                                    Exhibit 10.2

                           PARADIGM TECHNOLOGY, INC.
                             1994 STOCK OPTION PLAN
<PAGE>
 
                           PARADIGM TECHNOLOGY, INC.
                             1994 STOCK OPTION PLAN
                                        

SECTION 1.  ESTABLISHMENT AND PURPOSE  .

     The Plan was established in 1994 to offer selected employees and
consultants an opportunity to acquire a proprietary interest in the success of
the Company, or to increase such interest, by purchasing Shares of the Company's
Common Stock.  The Plan provides for the grant of Options to purchase Shares.
Options granted under the Plan may include Nonstatutory Options as well as ISOs
intended to qualify under Code section 422.

          The Plan is being amended and restated effective as of the merger of
Paradigm Enterprises, Inc. with and into IXYS Corporation (the "Merger") to
reserve an additional 225,000 Shares (15,000 Shares after the reverse stock
splits occurring prior to and at the time of the Merger) for the grant of
options to Outside Directors and an additional 1,500,000 Shares (100,000 Shares
after the reverse stock splits occurring prior to and at the time of the Merger)
for the grant of options to persons other than Outside Directors and to increase
the number of shares that can be made subject to options in any fiscal year to
35,000 (after the reverse stock splits occurring prior to and at the time of the
Merger).

 
SECTION 2. DEFINITIONS                                                 .

     (a)  "Board of Directors" shall mean the Board of Directors of the
Company, as constituted from time to time.

     (b)  "Change in Control" means the occurrence of either of the following
events:

          (i)  A change in the composition of the Board of Directors, as a
     result of which fewer than onehalf of the incumbent directors are directors
     who either:

               (A)  Had been directors of the Company 24 months prior to such
          change; or

               (B)  Were elected, or nominated for election, to the Board of
          Directors with the affirmative votes of at least a majority of the
          directors who had been directors of the Company 24 months prior to
          such change and who were still in office at the time of the election
          or nomination; or

          (ii) Any "person" (as such term is used in sections 13(d) and 14(d) of
     the Exchange Act) by the acquisition or aggregation of securities is or
     becomes the beneficial owner, directly or indirectly, of securities of the
     Company representing 20% or more of the combined voting power of the
     Company's then outstanding securities ordinarily (and apart from rights
     accruing under special circumstances) having the right to vote at elections
     of directors (the "Base Capital Stock"); except that any change in the
     relative beneficial ownership of the Company's securities by any person
     resulting solely from a reduction in the aggregate number of outstanding
     shares of Base Capital Stock, and any decrease thereafter in such person's
     ownership of securities, shall be disregarded until 

                                       1
<PAGE>
 
     such person increases in any manner, directly or indirectly, such person's
     beneficial ownership of any securities of the Company. For purposes of this
     Subsection (ii), the term "person" shall not include an employee benefit
     plan maintained by the Company.

     (c) "Code" shall mean the Internal Revenue Code of 1986, as amended.

     (d) "Committee" shall mean the committee designated by the Board of
Directors, which is authorized to administer the Plan under Section 3 hereof.
The Committee shall have membership composition which enables the Plan to
qualify under Rule 16b3 with regard to the grant of Options or other rights
under the Plan to persons who are subject to Section 16 of the Exchange Act.

     (e) "Company" shall mean Paradigm Technology, Inc., a Delaware corporation.

     (f) "Employee" shall mean (i) any individual who is a commonlaw employee of
the Company or of a Subsidiary, (ii) a member of the Board of Directors and
(iii) an independent contractor or advisor who performs services for the Company
or a Subsidiary. Service as a member of the Board of Directors or as an
independent contractor or advisor shall be considered employment for all
purposes of the Plan except the second sentence of Section 4(a).

     (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

     (h) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.

     (i) "Fair Market Value" shall mean (i) the closing price of a Share on the
principal exchange which the Shares are trading, on the first trading day
immediately preceding the date on which the Fair Market Value is determined, or
(ii) if the Shares are not traded on an exchange but are quoted on the Nasdaq
National Market or a successor quotation system, the closing price on the first
trading day immediately preceding the date on which the Fair Market Value is
determined, or (iii) if the Shares are not traded on an exchange or quoted on
the Nasdaq National Market or a successor quotation system, the fair market
value of a Share, as determined by the Committee in good faith. Such
determination shall be conclusive and binding on all persons.

     (j) "ISO" shall mean an employee incentive stock option described in Code
section 422.

     (k) "Nonstatutory Option" shall mean an employee stock option that is not
an ISO.

     (l) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.

     (m) "Optionee" shall mean an individual who holds an Option.

     (n) "Outside Director" shall mean a member of the Board of Directors who is
not a commonlaw employee of the Company or of a Subsidiary and who is not an
employee of an owner of five percent (5%) or more of the Common Stock of the
Company.

                                       2
<PAGE>
 
     (o) "Plan" shall mean this Paradigm Technology, Inc. 1994 Stock Plan, as
amended from time to time.

     (p) "Service" shall mean service as an Employee.

     (q) "Share" shall mean one share of Stock, as adjusted in accordance with
Section 8 (if applicable).

     (r) "Stock" shall mean the Common Stock of the Company.

     (s) "Stock Option Agreement" shall mean the agreement between the Company
and an Optionee which contains the terms, conditions and restrictions pertaining
to his Option.

     (t) "Subsidiary" shall mean any corporation, if the Company and/or one or
more other Subsidiaries own not less than 50 percent of the total combined
voting power of all classes of outstanding stock of such corporation. A
corporation that attains the status of a Subsidiary on a date after the adoption
of the Plan shall be considered a Subsidiary commencing as of such date.

     (u) "Total and Permanent Disability" shall mean that the Optionee is unable
to work. Total and Permanent Disability shall be determined by the Company in
accordance with its Long Term Disability Plan.

SECTION 3. ADMINISTRATION                    .

     (a) Committee Procedures.  The Board of Directors shall designate one of
the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The acts of a majority of the
Committee members present at meetings at which a quorum exists, or acts reduced
to or approved in writing by all Committee members, shall be valid acts of the
Committee.

     (b) Committee Responsibilities.  Subject to the provisions of the Plan, the
Committee shall have full authority and discretion to take the following 
actions:

         (i)   To interpret the Plan and to apply its provisions;

         (ii)  To adopt, amend or rescind rules, procedures and forms relating
     to the Plan;

         (iii) To authorize any person to execute, on behalf of the Company, any
     instrument required to carry out the purposes of the Plan;

         (iv)  To determine when Options are to be granted under the Plan;

         (v)   To select the Optionees;

         (vi)  To determine the number of Shares to be made subject to each
     Option;

         (vii) To prescribe the terms and conditions of each Option, including
     (without limitation) the Exercise Price, the vesting or duration of the
     Option (including 

                                       3
<PAGE>
 
     accelerating the vesting of the Option), to determine whether such Option
     is to be classified as an ISO or as a Nonstatutory Option, and to specify
     the provisions of the Stock Option Agreement relating to such Option;

         (viii)  To amend any outstanding Stock Option Agreement, subject to
     applicable legal restrictions and to the consent of the Optionee who
     entered into such agreement;

          (ix)   To prescribe the consideration for the grant of each Option
     under the Plan and to determine the sufficiency of such consideration;

          (x)    To determine the disposition of each Option under the Plan in
     the event of an Optionee's divorce or dissolution of marriage;

          (xi)   To determine whether Options under the Plan will be granted in
     replacement of other grants under an incentive or other compensation plan
     of an acquired business;

          (xii)  To correct any defect, supply any omission, or reconcile any
     inconsistency in the Plan or any Stock Option Agreement; and

          (xiii) To take any other actions deemed necessary or advisable for the
     administration of the Plan.

Subject to the requirements of applicable law, the Committee may designate
persons other than members of the Committee to carry out its responsibilities
and may prescribe such conditions and limitations as it may deem appropriate,
except that the Committee may not delegate its authority with regard to the
selection for participation of or the granting of Options under the Plan to
persons subject to Section 16 of the Exchange Act.  All decisions,
interpretations and other actions of the Committee shall be final and binding on
all Optionees and all persons deriving their rights from an Optionee.  No member
of the Committee shall be liable for any action that he has taken or has failed
to take in good faith with respect to the Plan or any Option to acquire Shares
under the Plan.

SECTION 4. ELIGIBILITY.

     (a) General Rule.  Only Employees shall be eligible for designation as
Optionees by the Committee. In addition, only individuals who are employed as
commonlaw employees by the Company or a Subsidiary shall be eligible for the
grant of ISOs.

     (b) Outside Directors.  Any other provision of the Plan notwithstanding,
the participation of Outside Directors in the Plan shall be subject to the
following restrictions:

         (i)  Outside Directors shall only be eligible for the grant of
     Nonstatutory Options as described in this Section 4(b).

         (ii) Upon the conclusion of each regular annual meeting of the
     Company's shareholders following the initial public offering, each Outside
     Director who will continue serving as a member of the Board thereafter
     shall receive a Nonstatutory Option to purchase 3,125 Shares (after the
     reverse stock split occurring at the time of the Merger) (subject to
     adjustment under Section 8). All such Nonstatutory Options shall vest and

                                       4
<PAGE>
 
     become exercisable at the rate of 25% upon each oneyear anniversary of the
     date the option is granted to the Outside Director.

         (iii)  Each Outside Director who is appointed an Outside Director
     following the initial public offering shall automatically be granted a
     Nonstatutory Option to purchase 12,500 Shares (after the reverse stock
     split occurring at the time of the Merger) (subject to adjustment under
     Section 8) as a result of their appointment as an Outside Director. Upon
     the conclusion of each regular annual meeting of the Company's shareholders
     following the annual meeting at which they were appointed, each Outside
     Director who will continue serving as a member of the Board thereafter
     shall receive a Nonstatutory Option to purchase 3,125 Shares (after the
     reverse stock split occurring at the time of the Merger) (subject to
     adjustment under Section 8). All such Nonstatutory Options shall vest and
     become exercisable at the rate of 25% upon each oneyear anniversary of the
     date the option is granted to the Outside Director.

         (iv)   All Nonstatutory Options granted to an Outside Director under
     this Section 4(b) shall also become exercisable in full in the event of (A)
     the termination of such Outside Director's service because of death or
     Total and Permanent Disability or (B) a Change in Control of the Company.

         (v)    Subject to (ii) above, the Exercise Price of all Nonstatutory
     Options granted to an Outside Director under this Section 4(b) shall be
     equal to 100% of the Fair Market Value of a Share on the date of grant,
     payable in one of the forms described in Sections 7(a), (b) and (c).

         (vi)   All Nonstatutory Options granted to an Outside Director under
     this Section 4(b) shall terminate on the earliest of (A) the 10th
     anniversary of the date of grant of such Nonstatutory Options, (B) the date
     90 days after the termination of such Outside Director's service for any
     reason other than death, Total and Permanent Disability or voluntary
     retirement as an Outside Director at or after the age of 60, or (C) the
     date 12 months after the termination of such Outside Director's service
     because of death, Total and Permanent Disability or voluntary retirement as
     an Outside Director at or after the age of 60.


     (c) Limitation On Grants.  No Employee shall be granted Options to purchase
in excess of 35,000 Shares during any fiscal year (after the reverse stock
splits occurring prior to and at the time of the Merger).

     (d) TenPercent Shareholders.  An Employee who owns more than 10 percent of
the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an ISO
unless such grant satisfies the requirements of Code section 422(c)(5).

     (e) Attribution Rules.  For purposes of Subsection (d) above, in
determining stock ownership, an Employee shall be deemed to own the stock owned,
directly or indirectly, by or for his brothers, sisters, spouse, ancestors and
lineal descendants. Stock owned, directly or indirectly, by or for a
corporation, partnership, estate or trust shall be deemed to be owned
proportionately by or for its shareholders, partners or beneficiaries.

                                       5
<PAGE>
 
     (f) Outstanding Stock.  For purposes of Subsection (d) above, "outstanding
stock" shall include all stock actually issued and outstanding immediately after
the grant. "Outstanding stock" shall not include shares authorized for issuance
under outstanding options held by the Employee or by any other person.

SECTION 5. STOCK SUBJECT TO PLAN    .

     (a) Basic Limitation.  Shares offered under the Plan shall be authorized
but unissued Shares or treasury Shares. The aggregate number of Shares which may
be issued under the Plan upon exercise of Options shall not exceed 264,800
Shares, of which 149,800 Shares are reserved for issuance prior to the Merger
and prior to the reverse stock splits occurring prior to and at the time of the
Merger (9,987 post-split Shares) and 115,000 additional post-split Shares are
reserved for issuance effective as of the Merger, for a total of 124,987 Shares
after the reverse stock splits occurring prior to and at the time of the Merger.
Of that, an aggregate of 26,250 Shares are reserved for issuance exclusively for
grants to Outside Directors, as hereinafter defined, (the "Director Shares"), of
which 11,250 Shares are reserved for issuance prior to the Merger and prior to
the reverse stock splits occurring prior to and at the time of the Merger (750
post-split Shares) and 15,000 additional post-split Shares are reserved for
issuance effective as of the Merger, for a total of 15,750 Shares after the
reverse stock splits occurring prior to and at the time of the Merger. The
Director Shares shall be reserved exclusively for grants of Options to Outside
Directors described in Section 4(b), and such Options to Outside Directors
described in Section 4(b) shall be limited to such Shares. On each January 1 for
the remaining term of the Plan, and as of the closing of the Merger, the
aggregate number of Shares which may be issued under the Plan to individuals
other than Outside Directors shall be increased by a number of Shares equal to
3.0 percent of the total number of Shares of the Common Stock of the Company
outstanding at the end of the most recently effected increase in the number of
Shares available for issuance under the Plan. Any Shares that have been reserved
but not issued as Shares or Options during any calendar year shall remain
available for grant during any subsequent calendar year. Notwithstanding the
foregoing, no more than 238,550 Shares (109,237 Shares after the reverse stock
split occurring at the time of the Merger) shall be available for the grant of
ISOs for the remaining term of the Plan. The aggregate number of Shares which
may be issued under the Plan shall at all times be subject to adjustment
pursuant to Section 8. The number of Shares which are subject to Options
outstanding at any time under the Plan shall not exceed the number of Shares
which then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.

     (b) Additional Shares.  In the event that any outstanding Option for any
reason expires or is canceled or otherwise terminated, the Shares allocable to
the unexercised portion of such Option shall again be available for the purposes
of the Plan.

SECTION 6. TERMS AND CONDITIONS OF OPTIONS.

     (a) Stock Option Agreement.  Each grant of an Option under the Plan shall
be evidenced by a Stock Option Agreement between the Optionee and the Company.
Such Option shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not inconsistent
with the Plan and which the Committee deems appropriate for inclusion in a Stock
Option Agreement. The provisions of the various Stock Option Agreements entered
into under the Plan need not be identical.

                                       6
<PAGE>
 
     (b) Number of Shares.  Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option and shall provide for the adjustment of
such number in accordance with Section 8. The Stock Option Agreement shall also
specify whether the Option is an ISO or a Nonstatutory Option.

     (c) Exercise Price.  Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price of an ISO shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant, except as otherwise provided
in Section 4(d). Subject to the preceding sentence, the Exercise Price under any
Option shall be determined by the Committee at its sole discretion. The Exercise
Price shall be payable in one of the forms described in Sections 7(a), (b) and
(c).

     (d) Withholding Taxes.  As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state or local withholding tax obligations that may
arise in connection with such exercise. The Optionee shall also make such
arrangements as the Committee may require for the satisfaction of any federal,
state or local withholding tax obligations that may arise in connection with the
disposition of Shares acquired by exercising an Option.

     (e) Exercisability and Term.  Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option. The term shall
not exceed 10 years from the date of grant, except as otherwise provided in
Section 4(d). Subject to the preceding three sentences, the Committee at its
sole discretion shall determine when all or any installment of an Option is to
become exercisable and when an Option is to expire.

     (f) Nontransferability.  During an Optionee's lifetime, his Option(s) shall
be exercisable only by him and shall not be transferable, unless the Option
agreement otherwise provides. In the event of an Optionee's death, his Option(s)
shall not be transferable other than by will, beneficiary designation or by the
laws of descent and distribution.

     (g) Exercise of Options Upon Termination of Service.  Each Stock Option
Agreement shall set forth the extent to which the Optionee shall have the right
to exercise the Option following termination of the Optionee's Service with the
Company and its Subsidiaries, and the right to exercise the Option of any
executors or administrators of the Optionee's estate or any person who has
acquired such Option(s) directly from the Optionee by beneficiary designation,
bequest or inheritance. Such provisions shall be determined in the sole
discretion of the Committee, need not be uniform among all Options issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination of Service.

     (h) No Rights as a Stockholder.  An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by his Option until the date of the issuance of a stock certificate for
such Shares. No adjustments shall be made, except as provided in Section 8.

     (i) Modification, Extension and Renewal of Options.  Within the limitations
of the Plan, the Committee may cancel, modify, extend or renew outstanding
Options or may accept the cancellation of outstanding Options (to the extent not
previously exercised) in return for the grant of new Options at the same or a
different price. The foregoing notwithstanding, no modification 

                                       7
<PAGE>
 
of an Option shall, without the consent of the Optionee, impair his rights or
increase his obligations under such Option.

     (j) Restrictions on Transfer of Shares.  Any Shares issued upon exercise of
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the applicable
Stock Option Agreement and shall apply in addition to any general restrictions
that may apply to all holders of Shares.

SECTION 7. PAYMENT FOR SHARES.

     (a) General Rule.  The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such options are exercised, except as provided in Subsections (b) and
(c) below.

     (b) Surrender of Stock.  To the extent that a Stock Option Agreement so
provides, payment may be made all or in part with Shares which have already been
owned by the Optionee or his representative for more than the maximum number of
months required by the Committee and which are surrendered to the Company in
good form for transfer. Such Shares shall be valued at their Fair Market Value
on the date when the new Shares are purchased under the Plan.

     (c) Cashless Exercise.  To the extent that a Stock Option Agreement so
provides, payment may be made all or in part by delivery (on a form prescribed
by the Committee) of an irrevocable direction to a securities broker to sell
Shares and to deliver all or part of the sale proceeds to the Company in payment
of the aggregate Exercise Price.

SECTION 8. ADJUSTMENT OF SHARES.

     (a) General.  In the event of a subdivision of the outstanding Stock, a
declaration of a dividend payable in Shares, a declaration of a dividend payable
in a form other than Shares in an amount that has a material effect on the value
of Shares, a combination or consolidation of the outstanding Stock (by
reclassification or otherwise) into a lesser number of Shares, a
recapitalization or a similar occurrence, the Committee shall make appropriate
adjustments in one or more of (i) the number of Shares available for future
grants under Section 5, (ii) the number of Shares covered by each outstanding
Option or (iii) the Exercise Price under each outstanding Option.

     (b) Reorganizations.  In the event that the Company is a party to a merger
or other reorganization, outstanding Options shall be subject to the agreement
of merger or reorganization. Such agreement may provide for the assumption of
outstanding Options by the surviving corporation or its parent or for their
continuation by the Company (if the Company is a surviving corporation);
provided, however, that if assumption or continuation of the outstanding Options
is not provided by such agreement then the Committee shall have the option of
offering the payment of a cash settlement equal to the difference between the
amount to be paid for one Share under such agreement and the Exercise Price, in
all cases without the Optionees' consent.

     (c) Reservation of Rights.  Except as provided in this Section 8, an
Optionee shall have no rights by reason of any subdivision or consolidation of
shares of stock of any class, the payment of any dividend or any other increase
or decrease in the number of shares of stock of any class. Any issue by the
Company of shares of stock of any class, or securities convertible 

                                       8
<PAGE>
 
into shares of stock of any class, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or Exercise Price of Shares
subject to an Option. The grant of an Option pursuant to the Plan shall not
affect in any way the right or power of the Company to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or transfer
all or any part of its business or assets.

SECTION 9. LEGAL AND REGULATORY REQUIREMENTS.

        Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of 1933,
as amended, the rules and regulations promulgated thereunder, state securities
laws and regulations and the regulations of any stock exchange on which the
Company's securities may then be listed, and the Company has obtained the
approval or favorable ruling from any governmental agency which the Company
determines is necessary or advisable.

SECTION 10. NO EMPLOYMENT RIGHTS.

        No provision of the Plan, nor any Option granted under the Plan, shall
be construed to give any person any right to become, to be treated as, or to
remain an Employee.  The Company and its Subsidiaries reserve the right to
terminate any person's Service at any time and for any reason.

SECTION 11. DURATION AND AMENDMENTS.

     (a) Term of the Plan.  The amended and restated Plan, as set forth herein,
shall become effective as of the date first set forth above, subject to the
approval of the Company's stockholders.  In the event that the stockholders fail
to approve this amended and restated Plan within 12 months of its adoption by
the Board of Directors, the Plan as in effect prior to this amendment and
restatement shall continue in effect, and any additional Option grants shall be
deemed made pursuant to the terms of the Plan as in effect prior to this
amendment and restatement.  The Plan shall terminate automatically 10 years
after its original adoption by the Board of Directors and may be terminated on
any earlier date pursuant to Subsection (b) below.

     (b) Right to Amend or Terminate the Plan.  The Board of Directors may amend
the Plan at any time and from time to time except that the provisions of Section
4(b) relating to the amount, price and timing of the Option grants to Outside
Directors shall not be amended more than once in any six-month period after the
Plan becomes effective, except as may be required by the Code or ERISA.  Rights
and obligations under any Option granted before amendment of the Plan shall not
be materially altered, or impaired adversely, by such amendment, except with
consent of the person to whom the Option was granted.  An amendment of the Plan
shall be subject to the approval of the Company's stockholders only to the
extent required by applicable laws, regulations or rules.

     (c)  Effect of Amendment or Termination.  No Shares shall be issued or sold
under the Plan after the termination thereof, except upon exercise of an Option
granted prior to such termination.  The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.

                                       9
<PAGE>
 
SECTION 12. EXECUTION.

          To record the adoption of the amended and restated Plan by the Board
of Directors effective as of the date first set forth above, the Company has
caused its authorized officer to execute the same.


                                         PARADIGM TECHNOLOGY, INC.


                                         By
                                            ---------------------------

                                         Its
                                            ---------------------------

                                       10
<PAGE>
 
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                PAGE
<S>                                                             <C>
SECTION 1. ESTABLISHMENT AND PURPOSE...........................  1

SECTION 2. DEFINITIONS.........................................  1
    (a)       "Board of Directors".............................  1
    (b)       "Change in Control"..............................  1
    (c)       "Code"...........................................  2
    (d)       "Committee"......................................  2
    (e)       "Company"........................................  2
    (f)       "Employee".......................................  2
    (g)       "Exchange Act"...................................  2
    (h)       "Exercise Price".................................  2
    (i)       "Fair Market Value"..............................  2
    (j)       "ISO"............................................  2
    (k)       "Nonstatutory Option"............................  2
    (l)       "Option".........................................  2
    (m)       "Optionee".......................................  2
    (n)       "Outside Director"...............................  2
    (o)       "Plan"...........................................  3
    (p)       "Service"........................................  3
    (q)       "Share"..........................................  3
    (r)       "Stock"..........................................  3
    (s)       "Stock Option Agreement".........................  3
    (t)       "Subsidiary".....................................  3
    (u)       "Total and Permanent Disability".................  3

SECTION 3.    ADMINISTRATION...................................  3
    (a)       Committee Procedures.............................  3
    (b)       Committee Responsibilities.......................  3

SECTION 4.    ELIGIBILITY......................................  4
    (a)       General Rule.....................................  4
    (b)       Outside Directors................................  4
    (c)       Limitation On Grants.............................  5
</TABLE>

                                       i.
<PAGE>
 
                               TABLE OF CONTENTS
                                 (CONTINUED)

<TABLE>
<CAPTION>

                                                                PAGE
<S>                                                             <C>
     (d)      TenPercent Shareholders..........................  5
     (e)      Attribution Rules................................  6
     (f)      Outstanding Stock................................  6

SECTION 5.    STOCK SUBJECT TO PLAN............................  6
     (a)      Basic Limitation.................................  6
     (b)      Additional Shares................................  6

SECTION 6.    TERMS AND CONDITIONS OF OPTIONS..................  6
     (a)      Stock Option Agreement...........................  7
     (b)      Number of Shares.................................  7
     (c)      Exercise Price...................................  7
     (d)      Withholding Taxes................................  7
     (e)      Exercisability and Term..........................  7
     (f)      Nontransferability...............................  7
     (g)      Exercise of Options Upon Termination of Service..  7
     (h)      No Rights as a Stockholder.......................  8
     (i)      Modification, Extension and Renewal of Options...  8
     (j)      Restrictions on Transfer of Shares...............  8

SECTION 7. PAYMENT FOR SHARES..................................  8
     (a)      General Rule.....................................  8
     (b)      Surrender of Stock...............................  8
     (c)      Cashless Exercise................................  8

SECTION 8.    ADJUSTMENT OF SHARES.............................  8
     (a)      General..........................................  8
     (b)      Reorganizations..................................  8
     (c)      Reservation of Rights............................  9

SECTION 9.    LEGAL AND REGULATORY REQUIREMENTS................  9

SECTION 10.   NO EMPLOYMENT RIGHTS.............................  9

SECTION 11.   DURATION AND AMENDMENTS..........................  9
     (a)      Term of the Plan.................................  9
     (b)      Right to Amend or Terminate the Plan.............  9
</TABLE>

                                      ii.
<PAGE>
 
                               TABLE OF CONTENTS
                                 (CONTINUED)
<TABLE>
<CAPTION>

                                                                PAGE
<S>                                                             <C>
     (c)      Effect of Amendment or Termination...............  10

SECTION 12.   EXECUTION  10
</TABLE> 

                                     iii.

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDING DECEMBER 31,
1998 INCLUDED IN THE COMPANY'S FORM 10-Q FILED FEBRUARY 15, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   9-MOS
<FISCAL-YEAR-END>                          MAR-31-1999
<PERIOD-START>                             MAR-31-1998
<PERIOD-END>                               DEC-31-1998
<CASH>                                          10,182
<SECURITIES>                                         0
<RECEIVABLES>                                   11,515
<ALLOWANCES>                                      (802)
<INVENTORY>                                     18,453
<CURRENT-ASSETS>                                41,335
<PP&E>                                          28,894
<DEPRECIATION>                                 (16,732)
<TOTAL-ASSETS>                                  62,457
<CURRENT-LIABILITIES>                           18,393
<BONDS>                                              0
                                0
                                          0
<COMMON>                                           120
<OTHER-SE>                                      27,985
<TOTAL-LIABILITY-AND-EQUITY>                    62,457
<SALES>                                         49,607
<TOTAL-REVENUES>                                49,607
<CGS>                                           34,198
<TOTAL-COSTS>                                   34,198
<OTHER-EXPENSES>                                17,067
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                (113)
<INCOME-PRETAX>                                 (1,654)
<INCOME-TAX>                                    (1,621)
<INCOME-CONTINUING>                             (3,275)
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                    (3,275)
<EPS-PRIMARY>                                    (0.48)
<EPS-DILUTED>                                    (0.48)
        

</TABLE>


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