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EXHIBIT 4.3
CONFIDENTIAL
February 7, 1997
QuickLogic Corporation
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000-1138
Attention: X. Xxxxxx Xxxx, President and Chief Executive Officer
LETTER OF INTENT
Dear Xx. Xxxx:
This Letter of Intent, when executed by Cypress Semiconductor
Corporation, a Delaware corporation ("Cypress") and QuickLogic Corporation, a
California corporation ("QuickLogic") will constitute a binding letter of
intent which sets forth the terms in which the parties propose to terminate the
Technical Transfer, Joint Development License and Foundry Supply Agreement
dated October 2, 1992 (the "Existing Agreement") and enter into a new foundry
agreement and license agreement (collectively, the "Transaction"). The rights
and obligations of the parties with respect to the Transaction will be set
forth in definitive agreements to be negotiated in good faith by the parties
and will include customary terms and conditions as further specified in Section
18.
1. Agreement Termination. At the closing (the "Closing"), the
Existing Agreement will terminate and in connection therewith Cypress will
relinquish to QuickLogic all of the tangible and intangible rights and
intellectual property rights (collectively, the "Rights") to QuickLogic's
antifuse field programmable gate array ("FPGA") technology. In connection with
the Transaction, QuickLogic will acquire all inventories of FPGA products and
the other assets as listed on Exhibit A. Cypress will use its reasonable best
efforts to transfer to QuickLogic all purchase orders from customers for FPGA
products as expeditiously as possible and will submit a plan to effect such
transition, which plan must be approved by QuickLogic prior to the Closing.
QuickLogic will assume as of the closing date (the "Closing Date") the
obligations set forth in Exhibit B (the "Obligations") (i) of Cypress under
purchase orders to sell FPGA products to Cypress' customers which are unfilled
as of the Closing to the extent transferable and (ii) which arise after the
Closing Date in connection with the performance by QuickLogic of such
transferred purchase orders; provided, that all
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such orders shall not include any responsibility for any returns of product
shipped by Cypress, and provided further, if Cypress has received payment for
the Obligations, it shall remit such payments to QuickLogic. Cypress will pay
the reasonable costs, approved in advance by Cypress, incurred for test and
finish rework required on the inventory transferred to QuickLogic to make it
salable by QuickLogic. QuickLogic will sell to Cypress FPGA products to the
extent needed by Cypress to fill purchase orders received by Cypress and which
cannot be transferred to QuickLogic because of customer demands. For such
sales, Cypress will receive a handling fee for the six-month period following
the Closing Date equal to a percentage of the sales price (22.5% for the first
three months, 10% for the second three months), plus reimbursement of any test
and finish costs incurred by Cypress.
2. Consideration. The consideration for the Transaction will
comprise: (i) $4.5 million in cash, which is already in Cypress's possession
(ii) a promissory note (the "Promissory Note") for certain inventory as set
forth below in paragraph 3, (iii) the issuance of 18,226,716 shares (the
"Shares") of Common Stock of QuickLogic as set forth below in paragraph 4 below
and (iv) the assumption of the Obligations.
3. Promissory Note. QuickLogic shall issue Cypress a Promissory
Note in the amount of $___________ for all of the finished and work-in-process
inventory related to FPGA products, which represents in the aggregate
QuickLogic's standard cost of such finished and work-in-process inventory.
The Promissory Note shall be non-interest bearing and shall be repayable in
nine (9) equal monthly installments beginning one (1) month following the
Closing. The Promissory Note may be prepaid at any time without penalty.
4. Delivery of Capital Stock. QuickLogic shall represent that the
Shares after delivery equal twenty percent (20%) of the outstanding capital
stock of QuickLogic on a fully-diluted basis, which shall include all options,
warrants and other rights to acquire QuickLogic's capital stock outstanding on
the date hereof (other than any issuances to Cypress hereunder). The Shares
shall be delivered to Cypress by QuickLogic as follows: (a) in the event
QuickLogic does not complete an initial public offering ("IPO") by July 1,
1997, QuickLogic shall deliver all of the Shares to Cypress as Common Stock; or
(b) in the event QuickLogic completes an IPO by July 1, 1997, QuickLogic shall
deliver to Cypress in connection with the IPO such number of Shares that may be
registered for resale on behalf of Cypress in the IPO, and the balance of the
Shares shall be delivered upon the lapse of the Lockup Period (defined below)
following the effective date of the IPO of QuickLogic; provided, in the event
QuickLogic undertakes a registered public offering of its Common Stock
following an IPO (a "Follow-on Offering") prior to the lapse of the lockup
period
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agreed to by QuickLogic's directors, officers and more than 1% shareholders for
the IPO (the "Lockup Period"), QuickLogic shall deliver such number of Shares
that may be registered for resale on behalf of Cypress in the Follow-on
Offering, and the remaining balance of Shares shall be delivered to Cypress
upon the expiration of the lock-up agreements executed in connection with such
Follow-on Offering. In the event that the Lockup Period provides for a set
number of days where the Lockup Period would expire in a period where the
Company's directors and officers are prevented from trading because of the set
"blackout" period between earnings releases provided in QuickLogic's xxxxxxx
xxxxxxx policy, then the directors, officers and more than 1% shareholders
shall agree to a Lockup Period that does not expire until the date that trading
can commence under QuickLogic's xxxxxxx xxxxxxx policy. Any early releases of
any lockup shall include the pro-rata release of Shares on based on the total
number of shares that are locked-up, and such early-released Shares shall not,
at the time of such early release, be subject to any blackout provision on
Cypress's released Shares, which shall be registered as provided in Section 5.
5. Registration Rights. The Fifth Amended and Restated
Registration Rights Agreement of QuickLogic dated November 27, 1996 (the
"Registration Rights Agreement") shall be amended to provided that the Shares
will be deemed "Registrable Securities" (as defined in the Registration
Agreement), the effect of which includes the grant to Cypress of piggyback
registration rights with respect to the Shares in the same manner as the other
parties to the agreement, such that Cypress shall have the right to sell the
Shares as part of any public equity stock offering undertaken by QuickLogic.
In addition, in connection with any public equity stock offering undertaken by
QuickLogic, Cypress will have the right to include such number of shares as
shall represent one-third (1/3) of the total number of shares to be registered
in such offering. In addition, in any Follow-on Offering Cypress shall be
entitled to cause such number of Shares as shall represent one-third (1/3) of
the total number of shares to be registered in such offering. QuickLogic shall
use its best efforts to promptly register all of the issuable or issued but
unsold Shares of Cypress pursuant to a shelf registration statement to be filed
at least forty-five (45) days before, and to be effective concurrent with, the
expiration of the Lockup Period (including any extension to such period in the
event of a Follow-on Offering). QuickLogic shall instruct its transfer agent
to deliver the Shares deliverable at the expiration of the Lockup Period at
least sixty (60) days prior to such date. QuickLogic shall maintain the
effectiveness of such registration statement until the earlier of the date all
Shares are sold or three (3) years following the date of the Closing or such
date as Cypress is able to sell all of its Shares it holds pursuant to Rule 144
in a three-month period. QuickLogic may suspend Cypress' ability to sell under
such registration statement (i) during the period from expiration of the Lockup
Period until one year from the
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effective date of the IPO for the last four weeks of each fiscal quarter until
the day after the end of the set "blackout" period with respect to such fiscal
quarter's earnings release provided in QuickLogic's xxxxxxx xxxxxxx policy and
(ii) beginning one year after the effective date of the IPO for up to
forty-five (45) days if such registration would be detrimental to QuickLogic
based upon the good faith determination of its Board of Directors; provided,
QuickLogic's right to suspend use of such registration (a) shall terminate
earlier upon the public disclosure of such material information (by a party
other than Cypress) underlying the need for suspension, and (b) once exercised,
may not be again exercised for one hundred twenty (120) days. Cypress shall
also have the right to an additional demand registration that is in addition to
the demand registration rights provided for in the Registration Rights
Agreement, which demand may include any or all of the Shares and any or all of
other shares of QuickLogic common stock owned by Cypress. QuickLogic shall pay
the "Registration Expenses" (as defined in the Registration Rights Agreements),
and Cypress shall be responsible for its "Selling Expenses" (as defined in the
Registration Rights Agreements) in connection with any piggyback or demand
registration other than underwriting discounts and commissions.
6. Shareholders Agreement. Cypress is currently a party to the
Fifth Amended and Restated Shareholders Agreement of QuickLogic dated November
27, 1996 (the "Shareholders Agreement"). The Shareholders Agreement provides
for the right to participate in future financings of QuickLogic (subject to
certain exceptions) based upon a party's holdings of Capital Stock (as defined
in the Shareholders Agreement, and which includes both Preferred Stock and
Common Stock), a right of co-sale with respect to transfers by Founders (as
defined in the Shareholders Agreement) and the obligation to vote for certain
designees to the Board. The delivery of the Shares shall be assumed for
purposes of all calculations of the right of participation and the co-sale
right in the Shareholders Agreement.
7. Closing Conditions. The Transaction will be subject to
certain closing conditions including (i) entering into a definitive agreement
(the "Transaction Agreement") as to all of the essential terms of the
Transaction, (ii) entering into a definitive Wafer Foundry Agreement, based
upon the term sheet attached here to as Exhibit B, and a License Agreement
based upon the term sheet attached hereto as Exhibit C, (iii) terminating the
Technical Transfer, Joint Development License and Foundry Supply Agreement
dated October 2, 1992, (iv) entering into the Registration Rights Agreement and
any appropriate ancillary agreements, and (v) any necessary board and
shareholder approvals and (vi) third party or governmental consents have been
obtained, including Xxxx-Xxxxx-Xxxxxx clearance if required.
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8. Due Diligence. Each party agrees to cooperate with the other
party's due diligence investigation and to provide the other party and its
representatives with prompt and reasonable access to key employees and to
books, records, contracts and other information (the "Diligence Information").
9. Confidentiality. Each party will use the Due Diligence
Information solely for the purpose of their respective due diligence
investigation, and each party and its affiliates, directors, officers,
employees, advisors, and agents (the "Representatives") will keep the Due
Diligence Information strictly confidential. Each party will disclose the Due
Diligence Information only to those Representatives who need to know such
information for the purpose of consummating the Transaction. Each party agrees
to be responsible for any breach of this paragraph by any of its
Representatives. In the event the Transaction is not consummated, each party
will return to the other any materials containing Due Diligence Information, or
will certify in writing that all such materials or copies of such materials
have been destroyed. Neither party will use any due Diligence Information to
compete with the other party as their businesses are constituted after the
Transaction has been consummated.
10. Non-solicitation. Each party agrees not to solicit or recruit
the employees of the other party's business for twelve (12) months following
the Closing Date or the date the parties terminate negotiations, as applicable.
11. Non-competition. Cypress shall not compete with QuickLogic in
the manufacturing, marketing or selling of antifuse FPGAs or pin-compatible
XXXXX 1 or XXXXX 2 products (specifically, 1K, 2K, 3K, 4K, 5K, 7K, 8K and 9K)
for a period of ten (10) years following the Closing Date; provided that the
Transaction Agreement will provide that Cypress may continue to sell antifuse
FPGA products to certain customers until QuickLogic has been qualified to
manufacture and sell products to such customers in accordance with Section 1 of
this Letter of Intent.
12. Public Announcement. All press releases and public
announcements relating to the transaction contemplated by this letter of intent
will be mutually agreed to by Cypress and QuickLogic, provided that either
party may make any public announcement if required by law including, without
limitation, pursuant to the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, in connection with QuickLogic's
initial public offering.
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13. Expenses. Each party will pay all of its expenses, including
legal fees, incurred in connection with the Transaction, whether or not the
Transaction is consummated.
14. Notices. All notices and other communications hereunder shall
be in writing and shall be furnished by hand delivery or by facsimile with a
confirming copy by mail or registered or certified mail to the parties at the
addresses set forth below. Any such notice shall be deemed duly given upon the
date it is delivered to the address shown below, addressed as follows:
If to QuickLogic:
0000 Xxxxxxx Xxxxx
Xxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Attention: X. Xxxxxx Xxxx
If to Cypress:
0000 X. Xxxxx Xxxxxx
Xxx Xxxx, XX 00000-0000
Fax: (000) 000-0000
Attention X.X. Xxxxxxx
The addresses set forth above may be changed by either party
upon furnishing to the other party a notice of change of address in accordance
with the terms of this paragraph.
15. Counterparts. This letter of intent may be executed in
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
16. Severability. If any term, provision, covenant or restriction
of this letter of intent is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this letter of intent shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
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17. Entire Agreement. This letter of intent constitutes the
entire agreement between QuickLogic and Cypress, with respect to the matters
covered herein and supersedes any prior negotiations, understandings or
agreements with respect to the matters contemplated hereby, specifically
including all prior versions of this letter of intent.
18. Binding Effect; Definitive Documentation. The purpose of this
letter of intent is to set forth the agreements reached by the parties
regarding the Transaction. This letter of intent is intended to create binding
obligations of the parties as to the matters set forth herein. The parties
shall negotiate in good faith to complete and sign definitive agreements
including those identified in paragraph 8 hereof (collectively, "Definitive
Agreements") based on the terms set forth in this letter of intent. The
Definitive Agreements shall include such representations, warranties and
covenants as are customary in a transaction of this nature, including, without
limitation, representations regarding the status of the assets and the
inventory to be transferred hereunder, the provisions for returns and/or
warranties and appropriate cross-indemnities regarding the conduct of the
business before and after the Closing. In this regard, Xxxxxxx agrees in good
faith to use its reasonable best efforts to maintain intact all of its current
business relationships relating to the FPGA technology including, without
limitation, all customer relationships prior to the Closing. Xxxxxxx also
agrees not to make any material changes to its FPGA business without the prior
written consent of Quicklogic. To the extent a party fails to act in good
faith and consummate the transaction, the non-breaching party shall be entitled
to obtain injunctive relief to enforce the terms of this letter of intent.
19. Termination. This letter of intent may be terminated by a
party in the event the other party fails to negotiate in good faith and the
parties have failed to enter into the Definitive Agreements by March 1, 1997.
Notwithstanding a termination pursuant to this paragraph, the provisions of
paragraphs 9, 10, 12, 13, 17, 18 and 20 herein shall survive such termination
and each party shall remain liable for any breach prior to termination of this
letter of intent.
21. Governing Law. This letter of intent shall be governed by and
construed under the laws of the State of California as applied to contracts
entered into solely between residents of and to be performed entirely in such
state.
22. Joint Preparation. This letter of intent has been jointly
prepared by the parties and the provisions hereof shall not be construed more
strictly against either party hereto as a result of its participation in such
preparation.
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If you are in agreement with the terms of this letter of intent,
please sign in the space provided below and return a signed copy to me. If we
do not receive a signed copy of this letter on or before February 9, 1997, we
will assume that you have no further interest in pursuing this transaction.
Upon receipt of a signed copy of this letter of intent, we will proceed with
our plans for consummating the Transaction in a timely manner.
Sincerely,
CYPRESS SEMICONDUCTOR CORPORATION
By: ____________________________
QUICKLOGIC CORPORATION
By: _____________________
Dated: February __, 1997
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EXHIBIT A
Asset List
All product inventory including work in process and finished goods excluding
wafers in process and PCI bus devises. The purchase price for this inventory
will be based on QuickLogic standards as of 12/31/96. The aggregated cost will
be discounted by $1,000,000. Such inventory will be transferred to QuickLogic
in accordance with the customer transition plan agreed upon between QuickLogic
and Cypress, and in any event two weeks after the Closing Date. Cypress will
hold inventory to the extent necessary to fulfill purchase orders that can't be
transferred to QuickLogic. Remaining inventory shall be transferred 90 and 180
days after the Closing Date.
All raw materials related to FPGA products at the price paid by Cypress.
Equipment utilized for FPGA products at book value if capitalized and at a
negotiated price for items that were expensed.
